Gerard M. Martineau was the bag man of Blue Cross and CVS — but he was 8 million bags short.

Now, the former Rhode Island House majority leader is the second ex-legislator, after John Celona, to admit to selling his office in the federal State House corruption probe known as Operation Dollar Bill.

As part of a $900,000 corruption scheme that the longtime Woonsocket Democrat has admitted to, Martineau sold 10 million bags to Blue Cross & Blue Shield of Rhode Island — but fewer than 2 million bags were ever manufactured, according to court documents filed yesterday by federal prosecutors.

Besides inflating invoices for phantom bags, Martineau also admitted using his power to act favorably on legislation that benefited CVS and Blue Cross, most notably by thwarting pharmacy-choice legislation that both companies opposed from 1999 to 2002, when he left the General Assembly after 16 years.

While Martineau was doing the companies’ bidding at the State House, he was paid $715,000 in commissions by CVS and $175,500 by Blue Cross for paper and plastic bags, according to charges filed in federal court yesterday.

The 30-page criminal information document was filed in federal court, along with a plea agreement, signed by Martineau last Thursday, in which he agreed to plead guilty to two felony counts of using the mail to deprive Rhode Island citizens of their right to his honest services as a public official. Each count carries a maximum penalty of five years in prison and a fine of twice the amount of gain — in this case about $1.8 million. A court date for Martineau to enter his plea has not yet been set.

According to the information, Martineau used the mail to further his scheme. For instance, CVS bought plastic bags from one Martineau client, a Canadian manufacturer, which sent Martineau’s commissions to a sales representative in New York, who then mailed a check to Martineau in Woonsocket.

Martineau, who co-chaired a working group of state health officials, lawmakers and lobbyists that led to his sponsorship of landmark health-insurance reform in 2000, also admits that he failed to disclose his financial ties to Blue Cross and CVS while he sat in a position to influence hundreds of health-care bills.

Unlike former Senator Celona, who pleaded guilty to selling his office and agreed to cooperate and is serving 2½ years in prison, Martineau did not pledge to cooperate, according to his plea agreement. But the news of his plea agreement reverberated at CVS and Blue Cross, which gave The Providence Journal much more benign accounts of their business relationships with Martineau when the newspaper published a story detailing Martineau’s bag business three years ago.

The court documents, following federal guidelines, refer to Blue Cross only as “The Health Insurance Company” and CVS as “The Pharmacy.”

CVS and Blue Cross are already under investigation for their business ties to two other ex-legislators, former Senator Celona and former Senate President William V. Irons. Two former CVS government relations executives, John Kramer and Carlos Ortiz, are awaiting trial on charges that they hired Celona as a secret consultant to do the drugstore chain’s State House bidding.

CVS declined to say how much money it has paid Martineau, who has continued to do business with the company since leaving the legislature.

“As has been previously reported, CVS has had a business relationship with Mr. Martineau since the 1980s, prior to his joining the legislature, which has continued since he left the legislature,” said CVS in a statement. “The company has fully cooperated with the government in connection with its investigation of this matter since its inception.”

Blue Cross also declined comment, saying only that it is also cooperating with the investigation.

James E. O’Neil, a former Rhode Island attorney general and Martineau’s lawyer, did not return calls seeking comment.

At a news conference, U.S. Attorney Robert Clark Corrente declined to say if the current General Assembly leadership has anything to fear from Operation Dollar Bill. Among those whom the FBI has been investigating are Irons’ successor as Senate president, Joseph A. Montalbano, D-North Providence, and Senate Finance Chairman Stephen D. Alves, D-West Warwick.

“Rhode Islanders can take comfort in knowing that whatever is out there, we’re going to find it and run it down,” said Corrente. “This investigation is going to keep going. It’s active on a number of fronts.”

GERRY MARTINEAU grew up in Woonsocket’s blue-collar Globe district, one of eight children of French-Canadian immigrants from Quebec.

When he first ran for state representative in 1986, at the age of 27, he criticized “elected public officials who practice self-service rather than public service.” Not long after his elevation to majority leader in 1998 — the number-two man to Speaker John Harwood — Representative Martineau began engaging in self-service in his business dealings with Blue Cross and CVS, according to yesterday’s criminal information.

Martineau was a manufacturer’s representative, paid commissions to broker the sale of packaging materials. In 1998, he formed his own company, The Upland Group, working out of his house on Upland Street in Woonsocket.

On March 1, 1999 — weeks after the introduction of pharmacy-choice legislation opposed by CVS and Blue Cross — someone at CVS wrote Martineau that the company was examining its plastic-bag contracts and invited him to submit a contract proposal. That same day, Martineau told a newspaper reporter that he had changed his opinion on pharmacy-choice legislation, and now believed it was unnecessary.

In April, CVS invited Martineau to submit another proposal, this time for paper bags. The same day, the House Corporations Committee voted 17-0 against four pharmacy-choice bills. Martineau, the information says, “opposed that legislation and used his power, influence and authority as Majority Leader to influence the vote in the Corporations Committee to help obtain that result.”

In the following months, the information says, CVS awarded paper and plastic bag contracts to manufacturers in Canada and New Jersey. In each case, Martineau’s Upland Group received commissions.

Over the next three legislative sessions, in 2000, 2001 and 2002, Martineau thwarted pharmacy-choice legislation and also used his influence to affect several other bills of interest to CVS, including fair pricing for prescription drugs, pharmaceutical assistance for the elderly and competition from mail-order and Canadian pharmacies.

Martineau was also doing business with Blue Cross. In 1998, when he was chairman of the House Corporations Committee, Martineau solicited bag business from an unidentified Blue Cross executive who had come to the State House to lobby him on legislation. Although Blue Cross did not use bags, Martineau proposed that the insurer place advertisements on bags and distribute them for free to about 29 independent pharmacies that had become part of Blue Cross’ exclusive pharmacy network — a network administered by CVS.

The first order, Martineau proposed, should be for 1 million bags, at $19,500 per million. Blue Cross hired him, the information says, “without comparing prices, obtaining other bids, analyzing the effectiveness of the advertising approach, determining specifically where the bags were to be delivered or assessing the need for the quantity of bags proposed.”

Blue Cross issued its first purchase order, for 1 million bags, on Jan. 5, 1999 — the first day of the legislative session. On Jan. 27, about a week after the insurer issued a $19,500 check to Martineau’s company, Martineau met, as the majority leader, with lobbyists for Blue Cross and CVS to discuss pharmacy-choice and other health-care legislation.

Over the next few years, a pattern emerged. Blue Cross lobbyists would meet with Martineau to discuss legislation, he would support their agenda and he would sell them bags. In 1999, when Blue Cross was experiencing financial difficulties, Martineau was the primary sponsor of a Health Conversion Act that would have facilitated the sale of Blue Cross to a for-profit company. A Blue Cross lobbyist referred to the act as “The Martineau Conversion Bill.”

On May 1, 2000, a Blue Cross executive sent Martineau a list of “those House bills which are of significant concern.” In 2002, Martineau sponsored legislation delaying rate restrictions on small employers — “our number one priority,” according to a Blue Cross report.

After the session, Blue Cross’ legislative affairs department would publish a review of another “successful year” at the State House. On the same day as the July 25, 2000, wrap-up, Blue Cross sent Martineau’s company a check for $19,500 for another 1 million bags.

In the fall of 2001 and the fall of 2002, Martineau wrote Blue Cross to propose renewing the paper-bag promotion, each time signing someone else’s name — even though no one else worked for The Upland Group. He told the Blue Cross executive handling the contract that he needed to keep his involvement “low profile.”

“In reality, this was not a group at all,” said Corrente. “It was just Martineau.”

On Nov. 18, 2002, Martineau billed Blue Cross $58,500 for 3 million more bags, for which his company was paid the following February. But that was the last payment he would get. He left the State House at the end of 2002, explaining that his “business responsibilities have become more demanding.”

Out of office, Martineau spent several months in 2003 trying to collect another $19,500 that he claimed Blue Cross owed him. But he was never paid.

Of the 10 million bags that Martineau billed Blue Cross $195,000 for, the information says, fewer than 2 million “were ever manufactured.”

When The Journal wrote about Martineau’s bag contract three years ago, Blue Cross would not reveal how many bags it had purchased, saying that it was in the hundreds of thousands. Scott Fraser, a Blue Cross spokesman, told The Journal at the time that the company had paid “an insignificant amount,” and that politics was not a factor.

Said Fraser, “We got what we paid for.”

mstanton@projo.com