Health insurance CFO gets 1 year for embezzling $632,000

SEATTLE  — The former chief financial officer of a Washington state health insurance company that serves people on Medicare has been sentenced to a year in prison for embezzling $632,000.

Federal prosecutors said Zachary Augustus Smulski took the money from Federal Way-based Soundpath Health in an effort to finance his own startup companies — but paid it back as soon as he got caught.

In addition, as U.S. District Judge Robert Lasnik sentenced him on Friday, he paid $29,000 to cover professional fees that Soundpath had incurred as a result of his actions.

Smulski was hired as Soundpath's CFO in 2008; he made $180,000 a year, court documents indicate. In 2011, he started diverting money to himself and used fake accounting documents to conceal it, prosecutors said. The company's comptroller started asking questions in the midst of a state audit in 2012.

That's when Smulski suddenly returned the money, personally depositing a cashier's check in Soundpath's account at a bank branch, and lying to other company officials about where the money had come from, prosecutors said. He then left the company, refusing to answer questions.

Prosecutors were seeking a 2½-year sentence, saying that even though Smulski pleaded guilty to three counts of wire fraud, he attempted to minimize his responsibility at sentencing by arguing that he somehow had to divert money in secrecy to benefit the company.

"He claims that the diversion caused no harm because he always intended to return the diverted funds," Assistant U.S. Attorney Francis Franze-Nakamura wrote in a sentencing memo. "This tale is beyond belief. Zachary Smulski is not a hero; he is a thief and a conman."

Franze-Nakamura noted that Smulski spent about $24,000 of the money on his startup business and that after he left the company, he subsequently took a corporate job at the Glenns Ferry Health Center in Glenns Ferry, Idaho — without disclosing that he had been suspected of embezzlement or ever worked at Soundpath.

In a brief letter to the court, Smulski wrote that he let Soundpath down and that his career is ruined.

"I am truly sorry and regret the problems and difficulties I have caused," he wrote. "I will never do anything like this again."

Smulski's attorney asked for a sentence of probation.