Subscribe for 17¢ / day

The Associated Press

GREAT FALLS (AP) — Federal prosecutors ended their long-running case against Shelby’s Dr. Patsy Vargo this week with an out-of-court settlement.

Federal investigators accused Vargo of over-billing the military medical system during five years when she worked at Malmstrom Air Force Base in Great Falls 1991 to 1995.

The settlement came after nearly eight hours of talks Monday with the U.S. attorney’s office in Billings, Vargo’s attorney, Michael Cotter of Great Falls, said.

He would not disclose the terms of the agreement, and federal prosecutors did not return calls from reporters.

Vargo did not return a phone call to her office at Marias Healthcare in Shelby, where she now works.

Her trial on civil complaints was scheduled to begin July 23rd in Great Falls federal court. She could have faced millions of dollars in fines if convicted.

Vargo said she was the target of a vendetta because she had to testify when one of her supervisors at Malmstrom was accused of sexual harassment.

Federal prosecutors filed criminal charges against Vargo in June 1997, but dismissed them six months later when the government’s own outside medical expert, Dr. Glenn Littenberg, said he found no abuses in Vargo’s billing.

Littenberg, of Pasadena, Calif., a nationally known expert on government health-care coding, later agreed to testify for Vargo.

However, federal prosecutors filed new charges — this time civil instead of criminal — in December 1999. Her lawyer said the government offered twice to settle the case if Vargo would pay $300,000, but she refused.

She accused the government of harassment that wrecked her marriage and jeopardized her health. She developed a blood clot last summer that destroyed half of her lung capacity.

That harassment, she said, included a military helicopter that hovered over the back yard of her ranch, and more than one instance of cars with darkened windows parking at the top of her driveway.

It began the night of Feb. 28, 1996, when two military investigators knocked on the door at her ranch, handed her a subpoena and demanded her medical records.

They wore trench coats, guns and badges and had “basically snuck up to the house, no headlights or anything,” Vargo said. “Our dog didn’t even bark.”

Copyright 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.