Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Francis Craven,
Petitioner,
- v. -
The Inspector General.
DATE: July 17, 1991
Docket No. C-275
DECISION
In this case, governed by section 1128 of the Social
Security Act (Act), the Inspector General (I.G.) of the
United States Department of Health and Human Services
(DHHS) notified Petitioner by letter dated June 4, 1990,
that he was being excluded from participating in the
Medicare and Medicaid programs for a period of five
years. 1/ Petitioner was advised that his exclusion
resulted from his conviction of a criminal offense
relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct,
within the meaning of section 1128(b)(1) of the Act.
Petitioner timely requested a hearing before an
Administrative Law Judge (ALJ) and the case was assigned
to me for a hearing and decision. During the prehearing
conference which I conducted on September 27, 1990, the
I.G. moved for summary disposition and Petitioner
responded. The I.G. filed a reply to Petitioner's
response. Subsequently, I held an in-person evidentiary
hearing in Philadelphia, Pennsylvania on March 7, 1991.
Both parties submitted posthearing briefs.
I have considered the evidence introduced by the parties
at the hearing, the arguments, and the applicable law. I
conclude that the I.G. had authority to exclude
Petitioner and that the five-year exclusion imposed and
directed against Petitioner is excessive. I conclude
that the remedial purposes of section 1128 of the Act
will be served in this case by a three-year exclusion and
I modify the exclusion accordingly. 2/
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section 1128 of the Act is codified at 42 U.S.C. 1320a-7
(West U.S.C.A., 1990 Supp.). Section 1128(b)(1) of the
Act permits the I.G. to exclude from Medicare and
Medicaid participation:
. . . any individual or entity that has been
convicted, under Federal or State law, in connection
with the delivery of a health care item or service
or with respect to any act or omission in a program
operated by or financed in whole or in part by any
Federal, State, or local government agency, of a
criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or
other financial misconduct.
II. The Federal Regulations.
The governing federal regulations are codified in
42 C.F.R. Parts 498, 1001, and 1002 (1990). Part 498
governs the procedural aspects of this exclusion case;
Parts 1001 and 1002 govern the substantive aspects.
ADMISSIONS
At the hearing and during the prehearing conference on
September 27, 1990, Petitioner admitted that he was
"convicted" of a criminal offense, within the meaning of
section 1128(i) of the Act. Tr. 7; Prehearing Order and
Schedule for Filing Motions for Summary Disposition,
dated October 2, 1990.
ISSUES
The remaining issues are:
(1) Whether Petitioner was convicted "under Federal or
State law, in connection with the delivery of a health
care item or service or with respect to any act or
omission in a program operated by or financed in whole or
in part by any Federal, State, or local agency, of a
criminal offense relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct," within the meaning of section 1128(b)(1) of
the Act; and
(2) Whether a five-year exclusion imposed and directed
against Petitioner by the I.G. is appropriate and
reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Having considered the entire record, the arguments, and
the submissions of the parties, and being advised fully
herein, I make the following Findings of Fact and
Conclusions of Law: 3/
1. At all times relevant to this case, Petitioner was
employed as the Administrator of the James C. Giuffre
Medical Center (Giuffre). I.G. Ex. 1/2. 4/
2. Giuffre is a non-profit health care institution,
located in Philadelphia, Pennsylvania. I.G. Ex. 1/1.
3. Giuffre receives a substantial portion of its annual
funding from DHHS under its Medicare and Medicaid
programs. Id.
4. The amount of reimbursement that Giuffre receives
from the Medicare and Medicaid programs is determined, in
part, by cash reports which Giuffre submits to the
Medicare and Medicaid programs. Id.
5. On June 23, 1988, as stated in Counts One and Two of
the criminal information filed against Petitioner in the
United States District Court for the Eastern District of
Pennsylvania (District Court), Petitioner was charged
with: conspiracy to defraud the United States by
attempting to impede and impair the lawful functions of
the Internal Revenue Service (IRS); and filing a false
tax return. I.G. Ex. 1.
6. Petitioner's charge of conspiracy was based partly
upon allegations that he and others caused false and
inaccurate cash reports to be generated and submitted to
DHHS and its authorized representatives. I.G. 1/2-7.
7. The charges filed against Petitioner alleged:
a. In December 1982, Petitioner signed and
distributed checks to executives of Giuffre as
automobile expense reimbursements checks when, in
actuality, those checks were retroactive lump-sum
salary increases. Petitioner then advised
recipients of these checks that these payments
represented a salary increase from July through
December 1982;
b. On December 22, 1982, Petitioner received a
check from Giuffre for $7,500 as reimbursement for
automobile expenses in the amount of $1,250 per
month for the previous six months, when, in
actuality, the expenses had not been incurred;
c. Petitioner recommended that an employee receive
$833 per month as automobile expense allowance in
lieu of a salary increase;
d. In December 1983, Petitioner signed four
checks totalling $12,580, made payable to cash to
generate monies to provide cash Christmas bonuses to
executives of Giuffre. Petitioner also signed
individual check request forms to support these
checks;
e. In 1984, Petitioner signed checks which were
falsely listed in Giuffre's accounting records as
monthly automobile and travel expenses, when, in
actuality, the checks were salary for executives of
Giuffre;
f. In December 1984, Petitioner signed and
distributed checks which were listed in Giuffre's
accounting records as hospital related insurance
premiums, when, in actuality, the checks were a
Christmas bonus for executives at Giuffre; and
g. In August 1985, Petitioner requested that a
Giuffre check be issued for $6,900. The check was
cashed and the cash was given to Petitioner, who
then distributed $2,300 each to three Giuffre
employees. This disbursement was falsely listed in
Giuffre's accounting records as a vendor payment.
I.G. Ex. 1.
8. Petitioner's charge of filing a false tax return was
based upon his failure to report taxable income on his
1984 individual income tax return. I.G. Ex. 1/8.
9. Petitioner pled guilty to, and was convicted of, the
two counts filed against him. I.G. Ex. 4; I.G. Ex. 2.
10. Petitioner and others made false entries in
Giuffre's accounting records to conceal the fact that
they were generating income for themselves and other
employees of Giuffre. I.G. Ex. 1/3-7.
11. As a result of Petitioner's and others' actions,
false and inaccurate cash reports were submitted to the
Medicare and Medicaid programs. FFCL 10.
12. Petitioner was "convicted" of a criminal offense
within the meaning of section 1128(i) of the Act. FFCL
9.
13. As a result of his conviction, Petitioner was fined
$5,000; placed on probation for a period of five years;
ordered to pay all taxes, penalties, and sums charged in
the indictment or as required by law; and sentenced to
serve 300 hours of community service. I.G. Ex. 2.
14. The Secretary of the United States Department of
Health and Human Services (the Secretary) delegated to
the I.G. the authority to determine, impose, and direct
exclusions pursuant to section 1128 of the Act. 48 Fed.
Reg. 21661 (May 13, 1983).
15. The I.G. may exclude individuals convicted of a
criminal offense relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct, within the meaning of section 1128(b)(1) of
the Act.
16. The permissive exclusion provisions of section 1128
of the Act do not establish minimum or maximum periods of
exclusion. See Act, section 1128(b)(1)-(14).
17. Petitioner was "convicted" of a criminal offense,
within the meaning of section 1128(i) of the Act. Tr. 7;
Prehearing Order and Schedule for Filing Motions for
Summary Disposition, dated October 2, 1990.
18. A remedial objective of section 1128 of the Act is
to protect program beneficiaries and recipients by
permitting the Secretary (or his delegate, the I.G.) to
impose and direct exclusions from participation in
Medicare and Medicaid of those individuals who
demonstrate by their conduct that they cannot be trusted
to provide items or services to program beneficiaries and
recipients.
19. An additional remedial objective of section 1128 of
the Act is to deter individuals from engaging in conduct
which jeopardizes the integrity of federally-funded
health care programs.
20. Petitioner's conspiracy conviction is a "criminal
offense relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct,"
within the meaning of section 1128(b)(1) of the Act.
FFCL 1-12.
21. The I.G. properly excluded Petitioner from
participation in the Medicare and Medicaid programs.
FFCL 1-20.
22. It is an aggravating factor that Petitioner's crimes
were serious in nature. FFCL 5-6, 9.
23. It is an aggravating factor that the District Court
imposed a serious penalty against Petitioner as a result
of his criminal conviction. FFCL 13.
24. The I.G. has not proved that Medicare or Medicaid
made any overpayment as a result of Petitioner's actions.
I.G. Ex. 1.
25. The length of probation imposed against Petitioner
by the District Court is not conclusive in determining an
appropriate length of exclusion.
26. The I.G. has not proved that Petitioner's criminal
offenses had an adverse impact on the Medicare or
Medicaid programs. I.G. Ex. 1.
27. The five-year exclusion imposed and directed against
Petitioner is excessive.
28. The remedial considerations of section 1128 of the
Act will be served in this case by a three-year
exclusion.
DISCUSSION
I. Petitioner was convicted, in connection with the
delivery of a health care item or service, of a criminal
offense relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct,
within the meaning of section 1128(b)(1) of the Act.
Petitioner admits that he was "convicted" of a criminal
offense within the meaning of section 1128(i) of the Act.
Further, Petitioner's conviction for conspiracy to
defraud the United States by attempting to impede and
impair the lawful functions of the IRS relates to fraud.
5/ Thus, the major issue remaining is whether
Petitioner's conviction is "under Federal or State law,
in connection with the delivery of a health care item or
service or with respect to any act or omission in a
program operated by or financed in whole or in part by
any Federal, State, or local agency, of a criminal
offense relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct,"
within the meaning of section 1128(b)(1) of the Act.
Tr. 7-8; P. Br. 2-9.
The determination of whether Petitioner's conviction fits
within the language of section 1128(b)(1) requires an
examination of: (1) the criminal offense for which
Petitioner was convicted; and (2) the actions which
formed the basis for the conviction.
Petitioner was convicted of conspiracy to defraud the
United States by attempting to impede and impair the
lawful functions of the IRS. On its face, there is no
apparent connection between the delivery of a health care
item or service and the criminal offense of conspiracy.
However, a review of the criminal offense itself is only
one part of the examination to determine whether a
criminal offense is connected with the delivery of a
health care item or service. See Charles W. Wheeler and
Joan K. Todd, DAB App. 1123 (1990).
The second part of the analysis requires a review of the
actions which formed the basis for the conviction.
Petitioner participated in a conspiracy with two other
employees of Giuffre. Petitioner and the other persons
involved generated income payments for themselves and
concealed the income by making false entries in Giuffre's
accounting records. As a result of Petitioner's and the
other person's actions, false and inaccurate cash reports
were generated and submitted to DHHS and its authorized
agents. See Joel Davids, DAB Civ. Rem. C-278 (1991);
Frank J. Haney, DAB Civ. Rem. C-156 (1990).
Petitioner argues that his offense was not connected to
the delivery of a health care item or service because his
offense was not related to the Medicare and Medicaid
programs and was merely a failure to report certain
income as taxable income. However, I conclude that
Petitioner's offense was "in connection with" the
delivery of a health care item or service within the
meaning of section 1128(b)(1) of the Act. It is not
necessary for the I.G. to prove that Petitioner's
criminal offense is connected to the Medicare and
Medicaid programs for an exclusion to be proper
pursuant to section 1128(b)(1). Davids.
Giuffre, a hospital, is in the business of providing
health care items and services. Petitioner falsified
Giuffre's accounting records. These facts alone are
sufficient to establish the necessary connection between
Petitioner's criminal offense and the delivery of health
care items or services. The connection also is shown by
the need for accurate information to determine the amount
of reimbursement that Giuffre should receive from the
Medicare and Medicaid programs. See Davids; Haney.
I conclude, that, pursuant to the provisions of section
1128(b)(1) of the Act, the I.G. properly imposed and
directed an exclusion against Petitioner.
II. Three years is a reasonable period of exclusion to
be imposed and directed against Petitioner.
The remaining issue involves the appropriate period of
exclusion imposed and directed against Petitioner. An
exclusion must be judged in light of the evidence in the
case and the intent of the exclusion law. Roderick L.
Jones, R.N., DAB Civ. Rem. C-230 (1990); Davids; Haney.
An exclusion determination will be held to be reasonable
where, given the evidence in the case, it is shown to
fairly comport with legislative intent. "The word
'reasonable' conveys the meaning that . . . [the I.G.] is
required at the hearing only to show that the length of
the [exclusion] determined . . . was not extreme or
excessive." (Emphasis added.) 48 Fed. Reg. 3744 (1983).
Thus, based on the law and the evidence, I have the
authority to modify an exclusion if I determine that the
exclusion is not reasonable. Act, section 205(b). The
hearing is, by law, de novo. Act, section 205(b). The
purpose of the hearing is not to determine how accurately
the I.G. applied the law to the facts before him, but
whether, based on all relevant evidence, the exclusion
comports with the legislative purpose of protecting the
Medicare and Medicaid programs and their beneficiaries
and recipients from untrustworthy individuals. Davids;
Haney.
By not mandating that exclusions from participation in
the Medicare and Medicaid programs be permanent, Congress
has allowed the I.G. the opportunity to give individuals
a "second chance." The placement of a limit on the
period of exclusion allows an excluded individual or
entity the opportunity to demonstrate that he or she can
and should be trusted to participate in the Medicare and
Medicaid programs as a provider of items and services to
beneficiaries and recipients. A determination of an
individual's current and future trustworthiness thus
necessitates an appraisal of the crime for which that
individual was convicted, the circumstances surrounding
it, whether and when that individual sought help to
correct the behavior which led to the criminal
conviction, and how far that individual has come toward
rehabilitation. Davids; Haney; Thomas J.DePietro, R.Ph.,
DAB Civ. Rem. C-282 (1991). See Joyce Faye Hughey, DAB
App. 1221 at 10 (1991).
The evidence in this case reveals that in November 1988
Petitioner was convicted of conspiracy to defraud the
United States by attempting to impede and impair the
lawful functions of the IRS. 6/ As part of the overt
acts in furtherance of the conspiracy, Petitioner and
others generated income payments for themselves and
concealed the income by making false entries in Giuffre's
accounting records. As a result of Petitioner's and
others' action of making false entries in Giuffre's
accounting records, false and inaccurate cash reports
were generated and submitted to DHHS and its authorized
agents. The fact that the convictions were based on
Petitioner's fraudulent activities is proof of
Petitioner's lack of trustworthiness in 1988 and will be
considered in determining an appropriate period of
exclusion. However, Petitioner's criminal conviction
in 1988 does not necessarily evidence that he will be
untrustworthy for five years. Davids; Haney.
The I.G. contends that there are several factors in this
case which warrant a five-year period of exclusion.
These factors are: (1) the serious nature of
Petitioner's criminal offenses; (2) the three-year period
over which Petitioner's criminal offenses occurred; and
(3) that the sentence imposed by the District Court
included significant periods of probation, community
service, and fines.
Petitioner argues that the following factors warrant a
reduction in the five-year period of exclusion imposed
and directed by the I.G.: (1) his remorse and shame for
the criminal offenses he committed; (2) the depression
which was the result of stress related to the criminal
offenses at issue (the record indicates that Petitioner
was admitted to the hospital in November 1987 for
clinical depression and stayed just under two months)
(Tr. 76); (3) his good character as attested to in
letters written by associates of Petitioner; (4) the lack
of program violations, thus no related offenses; (5) the
lack of adverse impact on beneficiaries or recipients;
(6) his cooperation with the government's investigation
of this matter; (7) his lack of prior Medicare or
Medicaid sanctions; and (8) the absence of damage to
Medicare, Medicaid, and the social services programs.
I conclude that the exclusion imposed and directed
against Petitioner is excessive. Given the facts of this
case, a five-year exclusion is not needed to protect the
integrity of federally-funded health care programs, or
beneficiaries and recipients. I am persuaded that a
three-year exclusion is sufficient to ensure that
Petitioner will be a trustworthy provider.
The main purpose of an exclusion from the Medicare and
Medicaid programs is to allow for a period of time
in which to ensure that Petitioner is trustworthy.
Trustworthiness is not something that is subject to exact
measurement or determination. I examined such relevant
factors as the nature of the crime for which Petitioner
was convicted, the length of the sentence imposed by the
court in Petitioner's criminal case, and Petitioner's
subsequent conduct. To ensure the protection of the
beneficiaries of the Medicare and Medicaid programs, I
also considered Petitioner's previous sanction record,
whether his criminal conviction involved program
violations or other related offenses, and whether
Petitioner's conduct resulted in damage to the Medicare
or Medicaid programs.
The absence of prior offenses by Petitioner is not a
mitigating factor. Furthermore, Petitioner's lack of a
sanction record under Medicare or Medicaid, the I.G.'s
lack of proof that there was any adverse impact on
program beneficiaries, and the fact that Petitioner's
convictions did not involve program violations, are not
mitigating in nature. Rather, their presence would be
aggravating factors that might justify an increased
sanction.
In attempting to measure Petitioner's trustworthiness,
I also gave great weight to the credibility of his
testimony during the March 7, 1991 hearing. I also
evaluated Petitioner's credibility, based on the
following factors. First, I compared Petitioner's
testimony to the other evidence introduced at the March
7, 1991 hearing. Such evidence included testimony of
other witnesses and documents. Second, my personal
observation of Petitioner was that he testified in a
forthright manner and did not appear to try to avoid
questions. For these reasons, I conclude that
Petitioner's testimony was credible and that this
reflects favorably on his trustworthiness.
In addition to Petitioner's credibility, I also
considered Petitioner's past exercise of judgment in
determining his trustworthiness. I considered
Petitioner's judgment relevant to this trustworthiness
because a mistake in judgment can be as harmful as an
intentional wrong to program beneficiaries and
recipients. Petitioner demonstrated naivete and lack of
judgment, rather than malice, in the circumstances
surrounding his case which led to his criminal offenses.
Petitioner's criminal behavior appears to have been an
aberration rather than the norm and is not likely to be
repeated.
The record establishes that Petitioner is completing his
probation without incident. He has not been implicated
in any additional misconduct. In December 1988,
Petitioner obtained employment at the Graduate Health
System (Graduate) as assistant director of subsidiary
operations. Tr. 79. Petitioner stated that Graduate was
aware of his conviction and after working there three or
four months, he became the director of subsidiary
operations. Tr. 79; P. Ex. 1. At Graduate, Petitioner
was responsible for the overall financial reporting and,
in one subsidiary, he was the signatory on the checking
account from which accounts payable and payroll checks
were issued. Tr. 79-80. When Graduate decided to reduce
its operational costs by reducing manpower, Petitioner's
employment was terminated. Tr. 79-80; P. Ex. 1.
Petitioner's employment at Graduate is just the beginning
of his road toward once again becoming a trustworthy
individual. The record shows that Petitioner was given
at least three years to complete his community service;
however, he completed it in an expedited fashion and has
voluntarily continued to render weekend service to that
charity. I.G. Ex. 2/57; Tr. 89-91; P. Br. 15.
At the hearing, Petitioner demonstrated remorse for his
actions and credibly asserted that he was sorry to have
caused so much suffering not only for himself but for
others as well. Tr. 122-123. These assertions were
underscored by the fact that Petitioner cooperated with
the government in its investigation of this matter. I.G.
Ex. 2/16; I.G. Ex. 3/6-7. See Davids; Haney. I am
persuaded by Petitioner's testimony, as well as the other
evidence of record, that there is little or no likelihood
that he will again engage in unlawful conduct. There is
therefore no need for a lengthy exclusion in this case in
order to assure Petitioner's trustworthiness. A five -
year exclusion would be punitive.
Three years is appropriate in this case because of the
serious nature of Petitioner's offense. This is shown in
large part by the trial judge's action in sentencing
Petitioner to five years' probation, 300 hours of
community service, and a $5000 fine.
CONCLUSION
Based on the material facts and the law, I conclude that
the I.G.'s determination to exclude Petitioner from
participation in the Medicare and Medicaid programs was
authorized by law. I further conclude that a three-year
period of exclusion is reasonable and appropriate in this
case.
___________________________
Charles E. Stratton
Administrative Law Judge
1. The Medicaid program is one of three types of
federally-financed State health care programs from which
Petitioner was excluded. I use the term "Medicaid" to
represent all three of these programs, which are defined
in section 1128(h) of the Act.
2. I note that at the end of that period, Petitioner
may apply for reinstatement under section 1128(g)(1) of
the Act.
3. Some of my statements in the sections preceding
these formal findings and conclusions are also findings
of fact and conclusions of law. To the extent that they
are not repeated here, they were not in controversy.
4. Citations to the record and to Board cases in this
Decision are as follows:
I.G.'s Brief I.G. Br. (page)
I.G.'s Exhibits I.G. Ex. (number/page)
I.G.'s Posthearing Brief I.G. P. Br. (page)
Petitioner's Brief P. Br. (page)
Petitioner's Exhibits P. Ex. (number/page)
Petitioner's Posthearing P. P. Br. (page)
Brief
Transcript Tr. (page)
Findings of Fact and FFCL (number)
Conclusions of Law
Departmental Appeals DAB Civ. Rem. (docket no./
Board ALJ decisions date)
Departmental Appeals DAB App. (decision no./date)
Board Appellate
decisions
5. Although Petitioner was convicted of two criminal
offenses relating to fraud, conspiracy and filing false
tax returns, the I.G. has based Petitioner's exclusion on
Petitioner's conspiracy conviction. Conviction for any
one criminal offense relating to fraud in connection with
the delivery of a health care item or service is
sufficient basis for an exclusion.
6. At the hearing and in the briefs submitted, counsel
for Petitioner argued that when Petitioner pled guilty to
the conspiracy charge, he did not plead guilty to all of
the overt acts of the conspiracy. P. Br. 6-9; Tr. 75-76,
114-117. The I.G. contends that Petitioner's argument is
without merit. A similar argument was raised by
petitioner in Davids. In Davids, I found petitioner's
argument to be without merit because petitioner was
represented by counsel when he signed the plea agreement
and that document was also signed by his attorney.
Further, in Davids, the plea agreement stated that
petitioner's counsel explained to him, and that
petitioner understood, the nature of the charges to which
he was pleading guilty. Thus, my analysis in Davids is
applicable to the instant case. I find Petitioner's
argument to be without merit in this case. The plea
agreement stated that "defendant will enter a plea of
guilty to Counts One and Two of an information to be
filed later." I.G. Ex. 4. Any concerns that Petitioner
had concerning the nature of the overt acts as stated in
the Information should have been raised at the criminal
proceeding and certainly before he signed the plea
agreement.