In a plea agreement to federal charges, the former state senator agrees to cooperate in a probe of three health-care companies.

09:45 AM EDT on Tuesday, June 28, 2005

BY MIKE STANTON
Journal Staff Writer

PROVIDENCE -- John A. Celona, the flamboyant former state senator from North Providence, admitted yesterday to federal criminal charges that he sold his office for personal gain.

Journal photo / Steve Szydlowski

John A. Celona has nothing to say at a news conference yesterday. At right is his lawyer William C. Dimitri.

In a plea agreement filed in U.S. District Court, Celona agreed to cooperate in an ongoing investigation of three health-care companies whom he said gave him money and gifts to influence legislation -- a total of $318,565, plus a free golf trip to San Diego, according to the charges.

The three companies are CVS, Blue Cross & Blue Shield of Rhode Island and Roger Williams Medical Center.

Among the favors Celona is accused of performing in return -- opposing the importation of prescription drugs from Canada, blocking pharmacy-choice legislation opposed by CVS, strong-arming a company that owed Roger Williams money, opposing a measure requiring Blue Cross to cover prosthetic devices, and trying to torpedo a proposed Rhode Island Cancer Council whose leader was an enemy of a Roger Williams executive.

Celona, 52, of 51 Pinewood Drive, North Providence, agreed to plead guilty to three counts of mail fraud. Each count carries a maximum prison term of five years.

He expects to go to prison, his lawyer said, but hopes that his time will be minimal because of his cooperation. The government's next step will be to convene a federal grand jury that will hear testimony from Celona and other witnesses, and weigh criminal charges against additional people and/or corporations.

Earlier this year, Celona was indicted on similar, state charges involving private financial deals that he struck with CVS, Blue Cross and Roger Williams. The details of those arrangements mirror the allegations spelled out yesterday by federal prosecutors, although the companies were not named, in accordance with U.S. Department of Justice policy.

A 22-page criminal information filed in federal court alleges that, from 1997 through 2003, Celona and "other persons known to Celona and the United States Attorney" devised a "scheme . . . to defraud the State of Rhode Island and its citizens of their intangible right to his honest services and to have those services performed free from deceit, favoritism, bias, conflict of interest and self-enrichment."

During that period, Celona served on, then chaired the powerful Senate Corporations Committee, later renamed the Committee on Commerce, Housing and Municipal Government.

Yesterday, Celona said that he used his Senate position to benefit the three companies, and that he "deceived" Rhode Islanders by concealing details of his "improper conflicts of interest."

Celona will be arraigned Thursday, July 7, at 11:30 a.m. in U.S. District Court in Providence. After that, a change of plea hearing will be scheduled and the former senator will plead guilty.

"He's a little down. This is a difficult time for him and his family," said Celona's lawyer, William C. Dimitri. "He expects that he will have to do some jail time, but he's hoping his assistance will at least get him the minimum amount of time.

YESTERDAY'S DEVELOPMENTS come 19 months after The Journal first reported on Celona's personal financial arrangements to cohost a cable access TV show financed by Blue Cross and on his $1,000-a-month consulting contract with CVS.

Subsequent stories detailed the senator's hiring as a consultant to the Village at Elmhurst, an assisted-living facility in Providence affiliated with Roger Williams Medical Center.

The disclosures led to state and federal corruption investigations, and Celona's resignation from the Senate last spring.

Another powerful figure, Senate President William V. Irons, D-East Providence, also resigned amid questions about his financial dealings as an insurance broker with CVS and Blue Cross.

In the summer of 1997, the government says, Celona asked executives at a medical center for a job. He was hired as a consultant to the hospital's affiliated assisted-living center on June 17, 1998, under a written contract that prosecutors allege was "back-dated" to Feb. 1, 1998, as part of the scheme to defraud.

The agreement, according to the charges, called for Celona to consult for and be paid by the assisted-living center, even though the senator and hospital executives knew that "a significant portion" of his activities were on behalf of the hospital itself.

The Journal reported last year that Roger Williams Medical Center's chief executive, Robert A. Urciuoli, recommended Celona's hiring. Hospital officials have defended the arrangement, saying that Celona helped recruit residents for the hospital's assisted-living center, The Village at Elmhurst.

The charges filed yesterday said that Celona tried to influence municipalities to increase their ambulance transports to the medical center and opposed legislation that would have forced the medical center to make payments in lieu of taxes. He also backed legislation sought by the medical center extending moratoriums on new nursing facilities.

Also, while publicly voting in favor of establishing a Rhode Island Cancer Council in 1999, Celona said that he privately tried to influence another lawmaker to oppose the council. Proponents of the Cancer Council included former Roger Williams doctors who had feuded with Urciuoli.

Celona also has agreed to admit that he intervened on the medical center's behalf to collect money in two instances. In 2001, he allegedly pressured a company with a financial interest in legislation before his committee to pay a debt to the medical center.

And in 2003, Celona held a meeting at his State House office with a hospital executive and officials from another company with legislation pending before his committee, and pressured the company to negotiate a favorable contract with the hospital. (During this period, Roger Williams sought higher reimbursements from Blue Cross.)

From 1998 through January 2004, when his contract at Roger Williams ended, Celona was paid $260,638, the government said.

Neither Roger Williams' spokesman or lawyer could be reached for comment.

THE SECOND COUNT in the charges filed yesterday against Celona involve "The Pharmacy Scheme."

On May 27, 1999 -- seven weeks after Celona had supported pharmacy-choice bills -- a pharmacy company executive proposed hiring him as a consultant.

In a Sept. 23, 1999, letter to pharmacy executives, Celona cited his work as a consultant for the assisted-living facility and said that he could help the pharmacy company with its "poor public relations image with senior citizens" angered by the company's opposition to pharmacy choice.

Celona wrote that the proposed consulting agreement was a "relatively inexpensive way to continue to market the Pharmacy, its products and services and provide significant positive results. And as important, it would eliminate any bad perception left over from 'freedom of choice.' "

Celona was subsequently hired as a consultant in February 2000, for $1,000 a month. About a month later, the charges say, he purposely left a Senate hearing prior to a vote on a pharmacy-choice bill.

The Journal has reported, and CVS has confirmed, that Celona worked as a $1,000-a-month consultant from February 2000 to August 2003, a period in which Celona opposed or killed pharmacy-choice legislation.

Yesterday's charges spelled out additional steps that Celona said he took on behalf of the pharmacy company. In 2003, three days after a pharmacy executive e-mailed him, asking that he sponsor legislation that would allow for "electronic prescribing," Celona introduced a bill permitting electronic prescriptions for brand-name drugs. He also opposed legislation allowing Rhode Islanders to import cheaper prescription drugs from Canada -- backed by "talking points" faxed to him by a pharmacy executive.

Celona was paid a total of $45,000 by the pharmacy company. When the consulting gig ended in August 2003, a pharmacy executive gave him a free airplane ticket, accommodations, meals and entertainment to a charity golf tournament in San Diego.

Yesterday's charges came during the celebrity-studded CVS Charity Classic golf tournament in Barrington, an event long presided over by the CVS executive who hired Celona -- longtime senior vice president John R. Kramer -- and once attended by Celona, an avid golfer.

But Kramer and another CVS government affairs executive who hired Celona, Carlos Ortiz, have been on leave since late last year. Yesterday, CVS issued a statement that Celona's consulting agreement resulted from "discussions with two individuals in our Government Relations department," and that "CVS executive management was not consulted regarding the decision to enter into this agreement."

"Pursuant to this arrangement," the statement continued, "Mr. Celona agreed to consult with CVS on senior citizen issues and to promote CVS' philanthropic activities."

THE THIRD AND FINAL count -- "The Health Insurance Scheme" -- deals with the cable access TV show that started Celona's troubles.

In May 2002, a health-insurance executive accepted Celona's proposal to finance a cable TV show that would be produced by an independent production company with which Celona was affiliated, and through which Celona was paid $13,565 from December 2002 through October 2003.

After health-insurance company executives agreed to sponsor the show, prosecutors said, Celona assisted the company at the State House. He supported 2002 bills allowing insurance carriers to design affordable health-benefit plans and reducing certain conditions placed on providers.

In 2003, he supported a bill amending health-insurance plans for small businesses and opposed a bill requiring health insurers to cover the cost of prosthetic devices and modifying limits on investments.

However, after media inquiries in November 2003 (the month that The Journal began asking questions about Celona, Blue Cross and the TV show), the charges say, Celona misled the state Ethics Commission by falsely stating that he had only been reimbursed, to date, for "out of pocket expenses."

A Blue Cross spokesman said yesterday that the insurer has been cooperating with the investigation.

Late yesterday afternoon, Celona stood uncomfortably in the heat outside his lawyer's office in Providence, his wife, Karleen, by his side. Celona, who was first elected to the Senate in 1994, had no comment, but agreed to appear to prevent camera crews from showing up at his house.

"He's obviously less than happy about what has happened," said Dimitri.

Word of the charges, and Celona's plea agreement, spread quickly through the State House, where legislators are busily nearing the end of the session.

Sen. Michael J. Damiani, D-East Providence, remembered Celona as "the

proverbial nice guy, always smiling."

"I didn't know he had a crooked side until all this came to light."

With staff reports from Karen Lee Ziner, Mark Arsenault and Katherine Gregg.

Mike Stanton can be reached at 277-7724, or mstanton [at] projo.com

Read the details of the federal charges against former state Sen. John A. Celona, his plea agreement, and a state indictment against him, at:

http://projo.com/celona