Political intrigue at San Antonio health care company WellMed

In reality, his job was anything but boring. He was the “right-hand man or political fixer” for Dr. George M. Rapier III, WellMed’s founder, chairman and CEO, said Donald H. Flanary III, a lawyer for Gutierrez.

That all came to an end last year when a San Antonio federal grand jury indicted Gutierrez for illegally using hundreds of thousands of dollars in donations Rapier and his then-wife intended for two nonprofit organizations.

Gutierrez has since pleaded guilty to two of the indictment’s 10 counts. But before he took a plea, he accused Rapier of hiding his political activity, including get-out-the-vote campaigns for conservative candidates and to stymie the Affordable Care Act, known as Obamacare.

If Gutierrez’s allegations are true, a court filing in which he spelled out his claims against Rapier is a window on the world of dark money — funds from undisclosed donors to nonprofit organizations that spend lavishly on efforts to sway public opinion and elect their favorite candidates.

Gutierrez accuses Rapier of using the nonprofit organizations to conceal his political spending, which is not illegal. He also alleges that the San Antonio physician and entrepreneur intended to take federal tax deductions for his political advocacy, which is not allowed under the tax code.

It’s unclear whether Rapier deducted the contributions from his federal taxes.

“The doctor didn’t go to the FBI and say someone’s stealing from me,” Flanary said. “If the doctor would have told the complete picture to the FBI, then I don’t know that (Gutierrez) would have been indicted.”

Rapier was not only fully aware of the political activity conducted for the benefit of WellMed but took an active role by helping design many of the political messages, Gutierrez said.

In 2009 and 2010, the owner of WellMed — a business heavily dependent on government programs such as Medicare Advantage — became “very concerned” about funding cuts Obamacare might bring.

“Dr. Rapier wanted to fund his political advocacy … for conservatives but wanted to be able to receive a tax deduction for the expenditures,” Gutierrez said in his court filing.

Despite pleading guilty to conspiracy to commit wire fraud and filing a false tax return, the plea deal doesn’t mean what Gutierrez alleged isn’t true, his attorney said.

“He pled guilty because he wanted to accept responsibility for the things that he did,” Flanary said. “Anything that we filed previously, that stuff still stands. It stands for what it is. The two aren’t mutually exclusive.”

Also indicted was Hector Barreto, a Californian and former head of the U.S. Small Business Administration under President George W. Bush. He’s fighting the charges.

The allegations

Both Gutierrez and Barreto had operational control over the nonprofits. They told the Rapiers that money donated to the Irvine, Calif.-based Latino Coalition Foundation would benefit disadvantaged youth while donations to the Hispanic Business Roundtable Institute, based in Washington, would be used for “political advocacy,” prosecutors allege.

Instead, prosecutors say, Gutierrez and Barreto diverted most of the donations to themselves to support their business ventures — including Barreto’s tequila company — and to pay personal expenses including vacations, meals and entertainment. They falsified books and records to hide their activities from the organizations’ officers, directors and employees, prosecutors add.

In preparing his defense, Gutierrez had served subpoenas on Dr. Rapier and his former wife, Kymberly Rapier, seeking their federal tax returns for 2014 through 2020. A subpoena also was served on the Rapier Family Foundation requesting tax returns dating back to 2010. The Rapiers divorced in 2020.

Gutierrez wanted to learn if Dr. Rapier took tax deductions for the charitable contributions he made to the nonprofits, because the doctor “cannot be a victim if he received a benefit for his contributions … in the form of federal tax deductions,” the filing stated.

In May, after Gutierrez served the subpoenas, prosecutors added two new charges against Gutierrez and Barreto. In addition to allegedly defrauding the Rapiers, Gutierrez and Barreto were charged with defrauding the two nonprofits. Each faced six counts, including conspiracy to commit wire fraud and conspiracy to commit money laundering. Gutierrez also was charged with four counts of filing false federal tax returns from 2015-2018.

Prosecutors intend to drop eight of the 10 charges against him as part of his plea agreement. Sentencing is scheduled for Oct. 18.

Barreto has pleaded not guilty and is set to go to trial Oct. 17. As part of his plea, Gutierrez has agreed to testify against Barreto.

On Aug. 3, Barreto filed a motion in U.S. District Court in San Antonio requesting that the case be transferred to his home turf in Orange County, California. In support of the motion, he said that “contrary to being a victim as alleged” in the indictment, “Dr. Rapier coordinated and approved the payment arrangement.”

The government is opposing the change of venue for Barreto’s trial.

Of course, Gutierrez no longer wants the Rapiers’ tax returns. Before his plea, the Rapiers had sought to quash the subpoenas, accusing him of “engaging in a fishing expedition in the hopes that something helpful turns up.”

Charles “Chad” Muller III, a lawyer for the Rapiers, declined to comment.

Flanary, though, had called it “a targeted request for relevant information” to show “the doctor was aware of what was going on.”

“I’m not accusing him of taking fraudulent tax deductions,” Flanary said before Gutierrez pleaded guilty July 19. “I’m just simply pointing out what the doctor was attempting to do, which is to conceal his political activity.”

Barreto may be taking the same tack in his defense.

In his court filing this month, Barreto said the monies he received were for political consulting services provided to Rapier. Those payments, he added, mirror Rapier’s donations to the Latino Coalition Foundation and the Hispanic Business Roundtable Institute in each successive year.

Barreto added that he coordinated meetings with state and federal political leaders to advocate for positions on health care issues “that Dr. Rapier treated as top priorities, including Medicare Advantage and the Affordable Care Act.”

Manny Medrano, Barreto’s Los Angeles-based attorney, declined to comment.

‘Dark money’

WellMed is a home-grown success story. Dr. Rapier started the business in 1990 as a handful of clinics providing care to the largest Medicare managed care firm operating in San Antonio.

“His idea was simple: deliver proactive, preventive care and build strong relationships with his senior patients,” WellMed’s website says. Rapier believed in keeping his patients healthy instead of responding to symptoms after they became ill.

WellMed sought to become the largest Medicare health maintenance organization in the country.

In 2011, it sold its HMO operations to Optum Health, part of health services conglomerate UnitedHealth Group Inc. of Minnesota.

Today, WellMed provides care for nearly 2 million older adults — half of whom are Medicare patients. It has has more than 20,000 doctors’ offices in Texas and Florida, according to its website. A WellMed spokesman said WellMed, Optum and UnitedHealth had no comment.

The Rapiers launched Rapier Family Foundation with more than $33 million in contributions the same year as the Optum deal. The foundation was started to support various causes, including at-risk students, seniors, the physically disabled and homeless animals. The foundation was just one of their charitable endeavors. They even appeared on an episode of the ABC television program “Secret Millionaire” helping out a poor community in Oregon.

In the two years prior to the sale, Rapier initiated strategies to conceal his opposition to the Affordable Care Act, Gutierrez said in a court document.

The political mood of the country at the time was rancorous.

The federal bailout of major U.S. banks — started under President George W. Bush, continued under Obama and intended to stop the collapse of global financial system — had inflamed the grassroots. Angry conservative activists, financially backed by Charles and David Koch of the industrial conglomerate Koch Industries and other libertarian-minded billionaires and millionaires, built the powerful Tea Party movement seemingly overnight.

Killing Obamacare, which became law in 2010 and was perhaps President Barack Obama’s most significant legislative achievement, became one of the Tea Party’s highest priorities.

Yet, the ACA remained largely popular with Americans who’d lacked access to health care — including many Blacks and Hispanics.

Gutierrez claimed Rapier wanted to mask his efforts to turn public opinion against the ACA.

“These strategies were borne out of the idea that such strong active political opposition to Obamacare would offend (WellMed’s) minority senior clients,” Gutierrez said in the April court filing. “Through the advice of lawyers and the assistance of Mr. Gutierrez and others, WellMed and Dr. Rapier used legal tax and election law regulations to fund their concealed political activities.”

In statements to the FBI, Rapier said that after Obama was elected, Gutierrez arranged meetings with government officials to discuss the ACA on his behalf. He also told the FBI he’d had “minimal interaction with Gutierrez” before Obama’s election, according to an FBI report known. The document is not publicly available but prosecutors provided it to Gutierrez’s counsel.

Gutierrez said Rapier’s statement to the FBI wasn’t true, adding he met with the doctor on average at least once a week in person or by phone after his hiring in 2007.

In the summer of 2010, Rapier and WellMed created the Coalition to Protect Seniors (CPS), a social welfare organization or 501(c)(4), to conceal their contributions to candidates in several states, Gutierrez said.

SourceWatch says the coalition funded “attack ads against Democrats” and claimed “the elderly are at risk from ‘Obamacare.’” It spent almost $31,000 to oppose U.S. District 23 Rep. Ciro D. Rodriguez in 2010, according to OpenSecrets, which tracks campaign spending. He lost to Republican Francisco “Quico” Canseco.

The law firm Winstead PC devised strategies for Rapier and WellMed to hide their political funding and advocacy, Gutierrez alleged.

Rapier told the FBI that Gutierrez shouldn’t have been paid by any of the nonprofits because he was “well paid” by WellMed, Gutierrez said.

But Gutierrez said Winstead advised WellMed that any political consultants, including himself, should work for the Coalition to Protect Seniors under an independent contractor agreement. WellMed should not be paying for the work, a July 2010 email written by a Winstead lawyer said.

After the Optum deal in 2011, the UnitedHealth subsidiary asked Rapier and WellMed to cease their “candidate and issue advocacy,” according to Gutierrez’s court filing.

The filing also cited a 2013 email he received from Rapier about a U.S. Senate race in Montana, where the Rapiers had a home. “I also need to keep some of things we are doing internal, especially my contributions,” Rapier wrote in the email, included as an exhibit with the court filing.

A year earlier, the court document added, Rapier instructed Gutierrez to form America Is Not Stupid Inc. to do political advocacy. ProPublica described it as a “dark money group,” The organization allowed Rapier to continue his political advocacy without Optum, UnitedHealth or the pubic knowing, Gutierrez alleged.

The advertisements

America Is Not Stupid ran television and radio advertisements supporting or attacking candidates for state and federal offices. One television spot likened President Barack Obama to Adolf Hitler for refusing to stand up to those “who want to destroy Israel,” according to a court exhibit.

“This one is tough!” Gutierrez wrote to Rapier in a 2012 email with the subject line “Jewish Spot.” “It’s gonna cause a stir in the media.”

Another 2012 election ad featured a talking baby comparing the smell of his diaper with a Montana senator, ProPublica reported.

ProPublica revealed that the IRS granted America Is Not Stupid status as a tax-exempt nonprofit in June 2013. The group said on its application — swearing under penalty of perjury — it would not spend money on elections. However, the group spent $125,000 on mailers and ads opposing Democratic candidates in Texas and Montana, ProPublica found.

To accomplish America Is Not Stupid’s “tax exempt purpose and mission” as a social welfare organization, Gutierrez — the group’s president — told the IRS it had authored several articles “regarding how underserved communities or minority populations and economically disadvantaged small businesses may be affected by certain U.S. federal rules and regulations in the coming years.” The articles were posted on the website NewsEagle360.com, he said.

Gutierrez added the group hosted a forum for the San Antonio community on Oct. 26, 2012 — just before that year’s presidential election — “to openly discuss topics affecting the Hispanic population in the U.S., including, but not limited to, healthcare, the housing market, jobs and the economy, and various education issues.”

The event featured comedian Paul Rodriguez and the Leslie Lugo Band.

Barreto, the former Bush official, gave the keynote address, Gutierrez said. But he didn’t let the IRS know Barreto also happened to be the co-chair for Juntos for Romney — Republican presidential candidate Mitt Romney’s Hispanic steering committee, ProPublica noted. Less than two weeks later, Obama defeated Romney to win a second term.

ProPublica’s October 2013 article outed Gutierrez as America Is Not Stupid’s president.

Shifting gears

America Is Not Stupid was shut down when Gutierrez no longer wanted to serve as president of a nonprofit meant to conceal Rapier’s political activity, according to Gutierrez’s April court filing.

Gutierrez recommended Rapier and WellMed approach Barreto — the SBA administrator from 2001 to 2005 — about using two nonprofits he led to conduct political advocacy.

After he left the SBA, Barreto took the helm of the Latino Coalition Inc., a 501(c)(6) membership organization based in Kansas City, Mo. It was founded in 1995 to research and develop policies relevant to Latinos. Before his indictment, Barreto was listed on the group’s website as chairman emeritus. Gutierrez served on its board for 20 years.

Barreto also was chairman of the Latino Coalition Foundation, a 501(c)(3) nonprofit that promoted initiatives to enhance business, economic and social development of Latinos, its tax filings state.

With $500,000 from Rapier in 2014, Gutierrez said, Barreto started the Hispanic Business Roundtable Institute on behalf of the Latino Coalition and became its president.

Its stated mission is to “educate and promote public awareness of issues affecting the Hispanic community and promoting the advancement of the Hispanic community.” Its real mission, Gutierrez said, was to cloak Rapier’s funding of political causes. No one other than Rapier ever donated to it.

Rapier relied on the Latino Coalition, the Latino Coalition Foundation and the Hispanic Business Roundtable Institute for advocacy work, including promoting Medicare Advantage in 2016, Gutierrez said. Even before passage of the ACA, Gutierrez said Rapier was concerned about what it might mean for Medicare Advantage plans.

Medicare Advantage is offered by private companies approved by Medicare. Private insurers say the plans provide more benefits while costing taxpayers less, though critics disagree.

Rapier’s efforts to utilize the three groups are documented in emails, including ones requesting Barreto take part in a “Digital Advocacy Campaign” to promote Medicare Advantage, Gutierrez said. Barreto wrote an opinion column for The Hill that criticized the Centers for Medicare & Medicaid Services’ proposed Medicare Advantage rates cuts.

The planned “rate cuts are compromising the access and benefits seniors have earned,” he wrote in the March 31, 2015, column. Rapier emailed Gutierrez, “Great job,” within about 3½ hours of the column appearing online.

The May charging document said Rapier, identified as “Victim 1,” donated $2.3 million to the Latino Coalition Foundation from April 2013 to April 2019 with the intent the money be used for charitable purposes. But, Gutierrez said, “Dr. Rapier clearly knew that charitable foundations could do ‘issue advocacy.’”

Dr. Rapier also donated about $1.6 million to the Hispanic Business Roundtable Institute. Gutierrez’s plea agreement stated “the majority” of Dr. Rapier’s donations to the foundation and institute “were not used for the solicited purposes but for the direct and indirect benefit of Gutierrez and Barreto.”

The Latino Coalition Foundation can conduct get-out-the-vote campaigns as a 501(c)(3). But while donors can’t direct 501(c)(3) activity, Rapier directed the foundation’s campaigns, Gutierrez said.

In a 2015 email to Gutierrez, Rapier asked if a get-out-the-vote campaign in New Hampshire could be done through the foundation. He posed the question because he wanted to take a tax deduction for his donation, Gutierrez alleged.

Citing another Rapier email included as a court exhibit, Gutierrez said Rapier sought to take tax deductions for contributions made for political advocacy by his charitable entities. In the 2013 email, Rapier said he needed a donation letter that said “no goods or services were received for the donation.”

Financial records

Rapier never alerted the FBI that he was a victim of fraud, Flanary said in April.

“The FBI saw financial records and things that made them believe that (Gutierrez) must be committing a crime,” Flanary added. “That’s what started the investigation.”

Assistant U.S. Attorney Joseph Blackwell declined to comment.

The FBI contacted Rapier in August 2019 and told him Gutierrez and Barreto had allegedly fraudulently convinced him to donate money to the foundation and the institute.

Rapier told the FBI that his donations were meant to be used to aid Hispanic-owned companies and help Hispanic entrepreneurs develop businesses. But Gutierrez, referencing the FBI report, said Rapier never mentioned that he used his personal money for political and issue advocacy.

There was “no question that there existed a quid pro quo for Dr. Rapier to fund and create HBRI for the purpose of his political activities,” Gutierrez alleged, referring to the Hispanic Business Roundtable Institute.

Gutierrez accused Rapier of lying to the FBI about how his donations were used.

Referencing a 2018 email from the doctor, Gutierrez said Rapier asked him about doing get-out-the-vote campaigns in seven states.

“Obviously, Mr. Gutierrez would only be able to execute such a large scale nationwide political campaign if he had a budget of hundreds of thousands of dollars,” he said in the April court filing. “This is precisely why, six days later, on September 26, 2018, Dr. Rapier sent his second contribution to HBRI in the amount of $500,000.”

FBI agents visited Rapier, who prosecutors say lives in the U.S. Virgin Islands, in his suite at the Grand Hotel Baglioni in Florence, Italy, where Gutierrez said “it appears” they informed the doctor that almost $4.4 million he contributed to the foundation, the Latino Coalition Inc. and HBRI wasn’t used for charitable purposes.

Gutierrez pleaded guilty before a judge could take up the issue of whether to quash the subpoenas his attorney said were needed to show Rapier was aware how the money was being spent. In his plea, Gutierrez admitted that he and Barreto had the foundation and institute make direct payments to a bank account he controlled.

“These transactions were supported by fake invoices in the name of one of Gutierrez’s family members,” his plea stated. He received almost $900,000 from the foundation and institute from 2013 to 2019. The pair also had the nonprofits make direct payments to their family member — including about $202,000 to one of Gutierrez’s relatives, the plea agreement stated. He has agreed to pay restitution an amount to be determined by a judge.

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