Kaiser fraud claims investigator accused of embezzling $7 million

Years ago, Michael Albert Quinn ruined his budding career as a Bay Area police officer. But rather than switching paths, he adjusted. He went into security.

He became senior supervisor in charge of investigating fraudulent insurance claims at Kaiser Foundation Health Plan in Oakland. But in a twist, he is now accused of being a fraudster himself — of swiping some $7 million over 16 years until he was eventually caught and canned, according to a civil lawsuit filed in Alameda County Superior Court.

Before Quinn, who is also being investigated by the FBI, got fired at Kaiser, he had been convicted of two felonies, public records show, including one for falsifying evidence in a criminal case and another for allegedly embezzling nearly $80,000 from a Nordstrom in Pleasanton.

His case exposes flaws in the vetting system for many major companies like Kaiser.

“It’s easy for people to hide this stuff,” said white-collar crime expert Jeff Harp, a retired FBI assistant special agent in charge in San Francisco. “People can slip between the cracks, and unless they were to do an expensive audit, a place like Kaiser doesn’t do these investigations.”

Officials at Kaiser Foundation Health Plan, a subsidiary of Kaiser Permanente, said they could not discuss the lawsuit. But a company spokesman, John Nelson, said in a statement, “Kaiser Permanente maintains high standards of conduct for its employees and seeks to recover assets that it believes have been improperly diverted.”

Young man’s trouble

Quinn, 45, has not returned several phone calls, messages left at his listed addresses or emails. He was dropped by his attorney, Terry Duree, after failing to show up for a deposition in the Kaiser suit.

His story begins more than two decades before the Kaiser case, when an extraordinary flash of courtroom drama exposed that Quinn — then a young Raley’s security guard — had cooked evidence in a criminal case.

On Nov. 22, 1994 — Quinn’s 24th birthday — 47-year-old Richmond resident Wilma Baxter allegedly tried to sneak out of a San Pablo Raley’s with $87 worth of booze in a shopping cart. At her May 1995 trial in Contra Costa County Superior Court, she said she was drunk and never intended to take the bottles of gin, brandy and blended scotch.

The key evidence that then-Deputy District Attorney McGregor Scott used to show intent, a requirement for conviction, was a photo taken by Quinn. The picture showed a newspaper covering the bottles, which prosecutors said was an attempt to conceal the booze and proved Baxter knowingly shoplifted.

But after jurors began deliberating and examining the evidence, a keen-eyed member of the panel spotted an unusually low-priced ad for strawberries in the newspaper in the photo. They soon discovered the ad had been published at a time of year when strawberries were cheaper, almost six months after Baxter was accused of stealing the liquor.

The case against Baxter was scrapped, and Quinn made headlines at the time after he was charged by the state attorney general with two felonies of offering and preparing false evidence.

“It was extremely frustrating,” said Scott, who went on to head the U.S. Attorney’s Office in Sacramento and now has a private white-collar criminal defense law firm. “When something like that happens, it undermines the whole process.”

At the time, Quinn had just graduated from the police academy at Los Medanos College in Pittsburg and had gone to work for the Pleasant Hill Police Department. He resigned from the force on May 29, 1995, after the criminal charges.

Baxter later filed a civil lawsuit against Raley’s and won a modest settlement of less than $25,000, said her attorney, Michael German.

“She was a tough cookie,” said German, who in 2014 retired after working for years at the attorney general’s office, prosecuting business crooks. “She wanted a lot more money than she got, and the judge and I tried to educate her that this was not the kind of case that merited a windfall.”

Forced career shift

Baxter later turned her life around, found Jesus, and reconnected with her estranged family in Richmond. She died in 2003 at age 56 of cancer, said her daughter, Wendy Baxter.

Quinn, meanwhile, cut a deal with prosecutors, pleading guilty to a felony count of offering false evidence and a misdemeanor count of deceiving a witness to affect testimony. He was sentenced to 90 days in jail, plus probation and a fine.

Part of the deal was that if Quinn successfully completed a year of probation, the felony would be dismissed — and in 1996, it was. That killed any easy-to-find criminal paper trail future employers might be looking for.

With no hope of continuing a career in law enforcement, Quinn embarked on a path through the world of private security and landed top positions at major companies, including Kaiser, where he was hired on June 15, 1998.

While on the Kaiser payroll, he took a part-time job working in loss prevention at Nordstrom in Pleasanton, where in 2002 he was arrested on charges of embezzling $79,536, records show.

On multiple occasions while employed by the department store, Quinn credited himself large amounts of money on store gift cards and then cashed them out, police said. When his bosses checked security video after noticing the suspicious activity, they found the tapes had been stopped during many of the transactions.

One videotape, though, showed Quinn pulling off the scam, according to a police report. He was arrested in December 2002, and court documents show he spent 302 days in custody.

Quinn pleaded guilty in 2004 to felony embezzlement. He was sentenced on Aug. 6, 2004, to three years of probation.

It’s unclear how, or if, he kept the episode secret from his bosses at Kaiser, but Quinn continued his employment with the health care giant.

For 16 years, he worked there as a senior claims manager, hiring outside private investigators to do surveillance on people who were suspected of filing fraudulent claims. He was authorized to approve charges from investigators up to $50,000.

But attorneys for Kaiser said much of the work was never done.

“Quinn regularly directed Kaiser to pay invoices for investigative services that were not in fact performed, as well as invoices for work that was performed but nonetheless was not in fact justified,” Kaiser attorney Mark Palley wrote in the lawsuit the company filed against Quinn last year in Alameda County Superior Court.

The Bay Area investigators Quinn is said to have hired — Ronald Davis, Kelly Ryan and Keith Barna — are named as co-defendants in the civil case.

“Despite representations he lacked any conflict of interest, Quinn regularly purported to work for and regularly accepted payment from Davis, Barna, and Ryan,” Palley wrote.

Hundreds of invoices

Attorneys for the co-defendants said the three had no idea Quinn was allegedly doing anything crooked. They added that the FBI has seized computers and files and is conducting a criminal probe.

A spokeswoman for the FBI would not confirm or deny whether the agency was investigating the case.

By the time Kaiser learned about the alleged racket, Quinn had processed 718 suspicious invoices, totaling just over $7 million, according to Palley. Quinn was fired from Kaiser on July 19, 2014.

Even so, he was later hired by Save Mart Supermarkets as director of risk management and loss prevention. A spokeswoman for Save Mart said Quinn is no longer an employee at the company and would not comment on the circumstances of his departure.

The Kaiser civil case is set for trial in October.

Evan Sernoffsky is a San Francisco Chronicle staff writer. Email: esernoffsky@sfchronicle.com Twitter: @EvanSernoffsky