Leawood Attorney Schultz Pleads Guilty to $1.2M Fraud Conspiracy

Leawood attorney Mark J. Schultz, 57, copped to his role in a wire and mail fraud conspiracy that bled St. Luke’s Health System of $1,224,264. In federal court in Kansas City, Mo., Schultz waived indictment and pleaded guilty to a federal information, admitting he helped funnel money from patient collections into his law firm’s coffers between January 2014 and July 2015.

Schultz’s former law partner, Alan B. Gallas, 65, of Kansas City, Mo., already took his fall. On April 13, 2016, Gallas pleaded guilty to mail fraud and on Monday was sentenced by U.S. District Judge Beth Phillips to one year and one day in federal prison—no parole. The court also ordered Gallas to repay every stolen dollar: $1,224,264 in restitution. He must report to the Bureau of Prisons by April 10, 2017.

The duo ran Gallas & Shultz, a firm that specialized in corporate debt collection. St. Luke’s Health System trusted them with tough patient accounts. Payments came in, got logged, and were supposed to be funneled back to the hospital system—monthly, like clockwork. Instead, Gallas rigged the machine. He had staff flag hundreds of payments as “on hold,” then siphoned the cash from the firm’s trust account into its operating account, where it vanished into overhead, salaries, and personal use.

Court records lay bare the theft’s escalation. In 2012, Gallas held back 601 payments—$211,391. By 2013, it jumped to 699 payments: $266,696. The pattern held—625 payments in 2014 ($227,892) and another 625 through July 2015 ($216,845). The firm’s books were a shell game, and St. Luke’s didn’t catch on until the trail went cold.

Schultz now admits he was in on it. He agreed with Gallas and others to shift trust funds illegally. While the exact amount tied directly to Schultz remains for the court to nail down at sentencing, he’s on the hook for forfeiture of all ill-gotten gains. He faces up to five years in federal prison without parole. Sentencing is pending a presentence investigation by U.S. Probation.

The case was prosecuted by Assistant U.S. Attorney Paul S. Becker and investigated by the FBI. Gallas surrendered his law license in Missouri and Kansas in November 2015. The fraud spanned from 2009 to July 2015—nearly seven years of betrayal masked as legal representation.