$05:Exclusion Case
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: Michael M. Bouer, R.Ph., Petitioner,
- v. -
The Inspector General.
DATE: December 5, 1994
Docket No. C-94-347
Decision No. CR345
DECISION
On March 17, 1994, the Inspector General (I.G.) notified Petitioner
that he was being excluded for a period of three years from
participation in the following programs: Medicare, Medicaid,
Maternal and Child Health Services Block Grant, and Block Grants to
States for Social Services. The I.G. told Petitioner that she had
excluded Petitioner based on his conviction of a criminal offense
related to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct, in connection with
the delivery of a health care item or service, within the meaning
of section 1128(b)(1) of the Social Security Act (Act).
Petitioner requested a hearing. The case was assigned to
Administrative Law Judge Charles Stratton for a hearing and a
decision. Judge Stratton conducted a prehearing conference at
which the parties agreed that there was no need for an in-person
hearing. The parties agreed that the case could be heard and
decided based on their submission of exhibits and arguments.
The parties submitted proposed exhibits and briefs. An oral
argument was scheduled. Then, the case was reassigned to me due to
the illness of Judge Stratton. On October 12, 1994, I heard oral
argument by telephone.
Petitioner submitted three exhibits (P. Ex. 1 - 3). The I.G. did
not object to their admission into evidence. The I.G. submitted 15
exhibits (I.G. Ex. 1 - 15). Petitioner did not object to the
admission into evidence of I.G. Ex. 1, 2, 4 - 12, and 14. He
objected to the admission into evidence of I.G. Ex. 3 on the
grounds that it is general in nature and not specific to
Petitioner. He objected to the admission into evidence of I.G. Ex.
13 on the ground that it is not legible. Petitioner objected to
the admission into evidence of I.G. Ex. 15 on the ground that it
had not been submitted timely by the I.G.
I admit into evidence P. Ex. 1 - 3 and I.G. Ex. 1 - 14. I overrule
Petitioner's objections to I.G. Ex. 3 and 13. However, I have
determined also that it is unnecessary for me to rely on either of
these exhibits in deciding this case, and I do not cite to them in
my decision. I exclude I.G. Ex. 15, because the I.G. did not
submit it timely and has not demonstrated extraordinary
circumstances justifying admission of the exhibit into evidence.
42 C.F.R. 1005.8(b)(2)(ii).
I have considered the evidence, applicable law and regulations, and
the parties' arguments. I conclude that the I.G. had authority to
exclude Petitioner pursuant to section 1128(b)(1) of the Act. I
conclude also that there exist no mitigating circumstances in this
case which justify reducing the exclusion below the three-year
period imposed by the I.G. Finally, I conclude that, because no
mitigating circumstances have been established, it is unnecessary
for me to decide whether there exist aggravating circumstances in
this case. Therefore, I sustain the three-year exclusion which the
I.G. imposed against Petitioner.
I. Issues, findings of fact, and conclusions of law
The parties have raised three issues. I make specific findings of
fact and conclusions of law in addressing and deciding these
issues. These findings and conclusions are set forth below,
beneath the relevant issues. In setting forth these findings and
conclusions, I cite to relevant portions of my decision, at which
I discuss my findings and conclusions in detail.
A. Was the I.G. authorized to exclude Petitioner based on
Petitioner's conviction of a criminal offense described in section
1128(b)(1) of the Act?
1. Petitioner was convicted of conspiring to purchase prescription
drugs at a discount from sources other than legitimate sources, and
to resell these drugs to the public for inflated profits. Pages 3
- 4.
2. An element of the conspiracy, to which Petitioner pled guilty,
was a scheme to misrepresent to the public that the drugs, which
had been obtained unlawfully, were obtained from legitimate
sources. Page 5.
3. Petitioner was convicted of a criminal offense, under federal
law, in connection with the delivery of a health care item or
service. Pages 5 - 6.
4. Petitioner was convicted of a criminal offense, under federal
law, relating to fraud. Pages 5 - 6.
5. Petitioner was convicted, in connection with the delivery of a
health care item or service, of a criminal offense related to
fraud, within the meaning of section 1128(b)(1) of the Act, and,
therefore, the I.G. was authorized to exclude him. Page 6.
B. Do there exist mitigating circumstances in this case which
justify reduction of Petitioner's exclusion to less than three
years?
6. Petitioner did not prove that the record in his criminal case
demonstrates that the court determinedthat he had a mental,
emotional, or physical condition,before or during the commission of
his offense, thatreduced his culpability. Pages 7 - 8.
7. Petitioner did not prove that there exist mitigating
circumstances in this case. Page 8.
C. Do there exist aggravating circumstances which would
offset the presence of any mitigating circumstances?
8. Regulations mandate that at least a three-year exclusion be
imposed pursuant to section 1128(b)(1) ofthe Act in the case where
there exist no mitigatingcircumstances. Pages 8 - 9.
9. There is no need to find the presence of aggravating
circumstances here, because no mitigatingcircumstances have been
proven, and because the I.G.imposed the minimum exclusion mandated
under 42 C.F.R. 1001.201(b)(1). Page 9.
II. Discussion of the issues
A. The I.G.'s authority to exclude Petitioner
Petitioner does not dispute that he was convicted of a criminal
offense. On November 12, 1992, Petitioner pled guilty, in the
United States District Court for the Southern District of New York,
to the offense of criminal conspiracy, and the court accepted that
plea. I.G. Ex. 7 at 3, 6, 12. The parties dispute whether
Petitioner's conviction is a conviction that would authorize the
I.G. to exclude Petitioner pursuant to section 1128(b)(1) of the
Act.
Section 1128(b)(1) of the Act authorizes the Secretary (or her
delegate, the I.G.) to exclude an individual who has been convicted
of a criminal offense:
[I]n 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.
The I.G. argues that in this case Petitioner's conviction meets two
necessary components of section 1128(b)(1). These are that
Petitioner's conviction was of an offense that: (1) was committed
in connection with the delivery of a health care item or service
and (2) related to fraud.
Petitioner argues that the record of this case establishes only
that he was convicted of the offense of "conspiracy." He asserts
that it cannot be concluded from his conviction that he was
convicted of an offense which was committed in connection with a
health care item or service or which relates to fraud.
Furthermore, according to Petitioner, the plain meaning of section
1128(b)(1) of the Act prohibits looking behind the conviction to
decide the nature of the conduct which resulted in the conviction.
It is not necessary for me to decide Petitioner's argument that the
plain meaning of section 1128(b)(1) prohibits looking behind a
party's conviction to decide whether the underlying facts of the
case establish that the conviction falls within that section of the
Act. In this case, the offense to which Petitioner pled guilty
explicitly encompasses facts which satisfy the criteria of section
1128(b)(1).
I disagree with Petitioner's contention that he was convicted only
of the crime of "conspiracy." Petitioner did not plead guilty only
to the undefined crime of "conspiracy." Petitioner pled guilty to
a detailed charge of conspiracy which is elaborated in 78
paragraphs as count 1 of an indictment. I.G. Ex. 5 at 1 - 35.
There is nothing in the record of this case which suggests that, in
pleading guilty, Petitioner limited his plea only to an admission
of "conspiracy" without admitting to the facts alleged in the
indictment. To the contrary, the record plainly establishes that
Petitioner pled guilty to count 1 in its entirety, including the
scheme and conduct alleged in that count.
Petitioner, who is a pharmacist, pled guilty to a criminal
conspiracy to divert prescription drugs from their lawful
distribution channels and to resell them to members of the public
at inflated profits. I.G. Ex. 5 at 7 - 10. The scheme involved
diverting drugs from various sources, including Medicaid recipients
and individuals who trafficked in physicians' samples of drugs.
Id. at 7. An object of the conspiracy was to buy drugs from
diversion sources at lower prices than were paid to legitimate
sources for the same types of drugs. Id. at 9. The plan was then
to deceive members of the public into believing that the diverted
drugs had been obtained legitimately, thus enabling the
conspirators to sell the drugs to the public at the prices they
would charge for legitimately obtained drugs. Id. at 9 - 10.
The conspirators' plan to misrepresent to consumers that the
diverted drugs had been obtained legitimately would have deceived
consumers in two respects. First, the plan would mislead members
of the public into believing that the diverted drugs had been
stored under safe and sanitary conditions in safe and sanitary
containers. Id. at 9 - 10. In fact, Petitioner did not know
whether the diverted drugs had been stored and contained safely.
Id. Second, the plan would deceive consumers into believing that
the diverted drugs had proper expiration dates. Id. at 10. In
fact, Petitioner did not know the actual expiration dates of the
diverted drugs which he conspired to sell. Id. at 10.
That Petitioner pled guilty to the specific conspiracy charged in
the indictment, and not just to the undefined charge of
"conspiracy" is evident from the transcript of the proceedings in
which Petitioner entered his guilty plea. I.G. Ex. 7. In those
proceedings, United States
District Court Judge Kevin Thomas Duffy characterized the
conspiracy as consisting of a scheme to:
receive in interstate commerce drugs that were adulterated
and misbranded with intent to defraud and mislead, and to deliver
and proffer those drugs for pay and otherwise, and to commit wire
fraud.
I.G. Ex. 7 at 3. Judge Duffy questioned Petitioner about the
conspiracy, and Petitioner admitted engaging in the conspiracy,
essentially as charged in the indictment. Id. at 9 - 11.
I have examined the conspiracy in the context of section
1128(b)(1), and I conclude that the offense to which Petitioner
pled guilty plainly falls within the meaning of that section. 1/
There are two critical elements which must be met for an offense to
fall within section 1128(b)(1) of the Act. First, the offense must
be committed in "connection with the delivery of a health care item
or service." Social Security Act, section 1128(b)(1). 2/ Second,
the offense must relate to "fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct." Id.
The conspiracy of which Petitioner was convicted meets both
critical elements. A necessary element of the conspiracy was the
sale of diverted prescription drugs. Prescription drugs are
health care items or services. "[P]rescription medications are an
integral part of health care delivery by a pharmacist." Chander
Kachoria, R.Ph., DAB 1380, at 6 (1993). Thus, the conspiracy was
committed in connection with the delivery of health care items or
services. A central objective of the conspiracy was to defraud
purchasers of prescription drugs by misrepresenting to them that
the drugs had been obtained from legitimate sources and met
packaging and labeling standards. Thus, the conspiracy related to
fraud.
B. The absence of mitigating factors
The I.G. imposed the exclusion against Petitioner pursuant to
regulations contained in 42 C.F.R. Part 1001. A section of these
regulations pertains explicitly to exclusions imposed under section
1128(b)(1) of the Act. 42 C.F.R. 1001.201. That section
provides that an exclusion imposed under section 1128(b)(1) must be
for a period of three years, unless aggravating or mitigating
factors exist which provide a basis for lengthening or shortening
the exclusion. 42 C.F.R. 1001.201(b)(1). Factors which may be
considered to be mitigating are described in 42 C.F.R.
1001.201(b)(3). The regulation states that only those factors
which are listed as possible mitigating factors may be considered
as grounds for reducing the length of an exclusion, assuming that
one or more of them is proved in a given case. Id.
Petitioner asserts that a mitigating factor exists in this case.
According to Petitioner, the record of his criminal conviction and
sentencing establish that his culpability for the conspiracy was
reduced due to his mental state.
The mitigating factor which Petitioner asserts exists here is
stated at 42 C.F.R. 1001.201(b)(3)(ii) as follows:
The record in the criminal proceedings, including
sentencing documents, demonstrates that the court determined that
the individual had a mental, emotional or physical condition,
before or during the commissiion of the offense, that reduced the
individual's culpability.
The critical elements of this section include the requirement that
the court make a "determination" of a petitioner's reduced
culpability which is evident from the record of that petitioner's
criminal case. I do not read this section as requiring that an
explicit pronouncement of reduced culpability be contained in the
record of a petitioner's criminal case. The section is written so
as to permit an inference of a determination of reduced culpability
to be made from the entire record of a petitioner's criminal case.
However, the record of the proceedings in Petitioner's criminal
case establishes neither that Judge Duffy made an explicit
determination of reduced culpablity nor does it suggest that such
determination was implicit in Judge Duffy's disposition. To the
contrary, the record establishes that Judge Duffy was not persuaded
by Petitioner's arguments that his culpability was reduced.
I have carefully reviewed the entire record of Petitioner's
criminal case, including the indictment (I.G. Ex. 5), the letter
containing the plea agreement (I.G. Ex. 6), the transcript of
Petitioner's guilty plea (I.G. Ex. 7), the presentencing report (P.
Ex. 2), and the transcript of sentencing (I.G. Ex. 8). I do not
find anything in these exhibits which states or suggests a
determination by Judge Duffy that Petitioner's culpability was
reduced. At his sentencing, Petitioner argued that his sentence
ought to be reduced because he did not intentionally distribute
drugs to customers believing that they would be harmed. I.G. Ex.
8 at 8. Judge Duffy was not swayed by this argument. Indeed,
Judge Duffy castigated Petitioner for dispensing drugs without
knowing whether they were in a condition that would cause harm to
his customers. Id. at 16 - 17.
Thus, I find no evidence in this case that Judge Duffy determined
that Petitioner's culpability was reduced. 3/ Petitioner has not
established the presence of any mitigating factor.
C. The possible existence of aggravating factors
The I.G. argues that, if a mitigating factor is established by
Petitioner, then that mitigating factor is offset by the presence
of aggravating factors. Specifically, the I.G. asserts that: (1)
Petitioner's sentence included incarceration and (2) Petitioner has
a record of a prior administrative sanction, consisting of a
directed surrender of his license to practice pharmacy. According
to the I.G., these facts prove the existence of aggravating factors
as defined by 42 C.F.R. 1001.201(b)(2)(iv) and (v). 4/
It is undisputed that Petitioner's sentence included a term of
incarceration. See Petitioner's Proposed Findings of Fact and
Conclusions of Law at 6 - 7. Nor does Petitioner deny that a State
administrative proceeding resulted in his loss of his license to
practice pharmacy. Petitioner asserts, however, that his loss of
his license to practice pharmacy is not a "prior" sanction because
it relates to and arises from the conduct that resulted in his
criminal conviction.
It is not necessary for me to decide whether aggravating factors
exist. The existence of aggravating factors would be relevant only
if there existed a mitigating factor which might otherwise serve as
a basis for reducing the length of the exclusion below the
three-year minimum period imposed by the I.G. There are no
mitigating factors present in this case and, therefore, the
possible presence of any aggravating factor is irrelevant.
III. Conclusion
I conclude that the I.G. was authorized to impose an exclusion
against Petitioner pursuant to section 1128(b)(1) of the Act. I
conclude further that there exist no mitigating factors in this
case which would justify reducing the exclusion below the
three-year minimum imposed by the I.G. The possible existence of
an aggravating factor is not relevant. Therefore, I sustain the
three-year exclusion.
Steven T. Kessel
Administrative Law Judge
1. Petitioner has not denied that the conspiracy described in
Count 1 of his indictment constitutes a criminal offense within the
purview of section 1128(b)(1).
2. Alternatively, the offense must be committed 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.
Social Security Act, section 1128(b)(1). The I.G. did not allege
that Petitioner's conviction is described by this language.
3. Petitioner argues that 42 C.F.R. 1001.201(b)(3)(ii) would
allow as evidence of mitigation any evidence that shows that the
judge in his criminal case made a determination that his
culpability was reduced. This is a very broad, and, arguably,
overly broad reading of the phrase "mental, emotional, or physical
condition." However, I do not have to address Petitioner's
interpretation of the regulation here. Inasmuch as the record of
Petitioner's criminal case establishes no determination of reduced
culpability, there is no need for me to define the circumstances
under which such determination would be a "mental, emotional, or
physicial condition" within the meaning of 42 C.F.R.
1001.201(b)(3)(ii).
4. These sections define aggravating factors to include
circumstances where:
o the sentence imposed by the court included incarceration;
or
o the convicted individual or entity has a prior criminal,
civil or administrative sanction record.
42 C.F.R. 1001.201(b)(2)(iv), (v).