$05:Exclusion Case
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Joel Fass,
Petitioner,
- v. -
The Inspector General.
DATE: December 30, 1994
Docket No. C-94-388
Decision No. CR349
DECISION
By letter dated May 13, l994, Joel Fass, the Petitioner herein, was
notified by the Inspector General (I.G.) of the U.S. Department of
Health & Human Services (HHS), that it had been decided to exclude
him for a period of three years from participation in the Medicare
program and from participation in the State health care programs
described in section 1128(h) of the Social Security Act (Act),
which are referred to herein as "Medicaid." The reason given for
this action was that Petitioner had been convicted in a State court
of grand larceny in the fourth degree. The I.G. concluded that
Petitioner's crime amounted to an offense involving fraud and/or
other financial misconduct in connection with the delivery of
health care and merited exclusion pursuant to section 1128(b)(1) of
the Act.
Petitioner filed a timely request for review of the I.G.'s action
by an administrative law judge (ALJ) of the Departmental Appeals
Board (DAB).
I determined that there were no facts of decisional significance
genuinely in dispute, and that the only matters to be decided in
this case were the legal implications of the undisputed facts. In
the absence of objection, I, therefore, have decided the case on
the basis of the parties' briefs and exhibits.
42 C.F.R. 1005.4(b)(12)(1992).
I find no reason to disturb the I.G.'s determination to exclude
Petitioner from participation in the Medicare and Medicaid programs
for a period of three years.
FINDINGS OF FACT AND CONCLUSIONS OF LAW 1/
1. During the period relevant to this case, Petitioner was
employed at Brookhaven Memorial Hospital (the "Hospital"), located
on Long Island, in the State of New York. I.G. Ex. 2.
2. At the same time he was employed by the Hospital, Petitioner
was also a part owner and corporate officer of Brookhaven Clinical
Laboratories ("BCL"), located on Long Island, in the State of New
York. I.G. Br. 2. 2/
3. New York charged Petitioner, by criminal information, with
grand larceny and receiving unlawful kickbacks from a clinical
laboratory. I.G. Ex. 1.
4. The criminal information alleged that Petitioner, "acting as
secretary and high managerial agent of Brookhaven Clinical
Laboratories, Inc.," collected $104,366 in fees which should have
been paid to the Hospital for laboratory work performed for
International Clinical Labs (ICL). I.G. Ex. 1.
5. The criminal information alleged that Petitioner obtained the
$104,366 by defrauding the Hospital. I.G. Ex. 1.
6. Pursuant to a plea bargain, Petitioner pled guilty to a reduced
charge of grand larceny in the fourth degree, a class E felony.
I.G. Ex. 4.
7. In his plea colloquy, Petitioner acknowledged that, from June
1985 through August 1988, he had knowingly and wrongfully received
sums of money from ICL which were payable to the Hospital and
deposited these monies into BCL accounts. He further acknowledged
to the court that he knew the monies in question were for tests
that were performed at the Hospital, by Hospital personnel, and not
by any employees of BCL. I.G. Ex. 4.
8. Petitioner was sentenced to 5 years probation and was required
to make restitution in the amount of $104,366. A forfeiture of
$203,181 was also ordered. I.G. Ex. 5.
9. Petitioner was convicted of a criminal offense. Section
1128(i)(3) of the Act. FFCL 6- 8.
10. A criminal offense involving "the performance of management or
administrative services" is considered to be "in connection with
the delivery of any health care item or service," within the
meaning of section 1128(b)(1) of the Act. 42 C.F.R.
1001.201(a)(1).
11. Petitioner was convicted of a criminal offense relating to
fraud or financial misconduct in connection with the delivery of a
health care item or service within the meaning of section
1128(b)(1) of the Act. FFCL 9; 10.
12. Individuals convicted of offenses described in section
1128(b)(1) of the Act are required to be excluded for a period of
three years, unless certain specified aggravating or mitigating
factors are present. 42 C.F.R. 1001.201(b).
13. Petitioner's criminal acts took place over a period of three
years and are an aggravating factor. I.G. Ex. 4; 42 C.F.R.
1001.201(b)(2)(ii).
14. The I.G. was authorized to exclude Petitioner for a period of
at least three years. FFCL 11-13.
15. Petitioner may not collaterally attack the circumstances of
his conviction in this administrative proceeding. 42 C.F.R.
1001.2007(d).
16. Petitioner's allegations of inadequate counsel at his State
trial, or evidence submitted to prove that he was not guilty of the
criminal offense for which he was convicted, are not relevant in
this proceeding.
17. The permissible payment practices described at 42 C.F.R.
1001.952 are inapplicable where, as here, Petitioner's conviction
relating to fraud authorizes his exclusion under section 1128(b)(1)
of the Act.
PETITIONER'S ARGUMENT
Petitioner does not deny that he pled guilty to grand larceny in
the fourth degree and agreed to make restitution in the amount of
$104,366. Petitioner's principal argument, based on his analysis
of the law, is that his conviction fails to support a permissive
exclusion under section 1128(b)(1) of the Act. Petitioner argues
that his grand larceny conviction was not connected with the
delivery of a health care item or service, since an alleged failure
to remit the money owed to a hospital for laboratory tests did not
directly impact on the provision of health care services. P. Br.
at 5. Petitioner contends that his actions were too attenuated and
remote from actual health care delivery to be encompassed by
section 1128(b)(1). Id. Petitioner contends also that the
criminal offense of which he was convicted does not relate to
"fraud, theft, embezzlement, breach of fiduciary responsibility, or
other financial misconduct," within the meaning of section
1128(b)(1) of the Act. P. Br. at 6. Moreover, Petitioner
contended in his request for a hearing that certain mitigating
factors existed which justified reducing his period of exclusion.
Petitioner argued also that his conduct could not serve as the
basis for an exclusion because his criminal offense fell within the
exceptions listed at 42 C.F.R. 1001.952. Request for a Hearing,
July 7, 1994.
Petitioner contends further that he received inadequate assistance
of counsel since the attorney who represented him also represented
his co-defendants with whom he had conflicting interests. P. Br.
at 8. Petitioner alleges that his attorney did not explain to him
the benefits of cooperating with the authorities against the other
co-defendants or of consulting his own attorney. P. Br. at 9-10.
Petitioner asserts that his attorney did not advise him of the
collateral consequences of his guilty plea. P. Br at 10.
Petitioner argues that due to the ineffective assistance of his
counsel, he has filed a motion to have his conviction vacated.
Finally, Petitioner requests that these proceedings be stayed until
a ruling is issued on this motion. Id.
DISCUSSION
I. Petitioner was properly excluded under section
1128(b)(1) of the Act.
Pursuant to section 1128(b)(1), the I.G. may exclude any individual
or entity convicted under federal or State law of a criminal
offense relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct, in connection with
the delivery of health care items or services, including the
performance of management or administrative services relating to
the delivery of health care. 42 C.F.R. 1001.201(a)(1).
I find that Petitioner was convicted of a criminal offense as
defined by section 1128(i)(3) of the Act. Petitioner entered a
guilty plea, the court questioned him to ensure its validity, and
then imposed a sentence. This is sufficient to constitute a
conviction for purposes of imposing an exclusion under the Act. I
find also that Petitioner's conviction satisfies the criteria of
section 1128(b)(1) of the Act. Specifically, Petitioner's
conviction was for an offense: (1) in connection with the delivery
of a health care item or service; and (2) related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other
financial misconduct.
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. See Charles
W. Wheeler and Joan K. Todd, DAB 1123 (1990); Francis Craven, DAB
CR143 (1991). Petitioner was convicted of grand larceny in the
fourth degree due to his involvement in a scheme to defraud the
Hospital of $104,366. While the criminal offense of grand larceny
in the fourth degree does not necessarily relate to the delivery of
a health care item or service, the conduct which led to
Petitioner's conviction plainly related to health care items and
services.
Petitioner, an employee of the Hospital, participated in a scheme
with two other owners of BCL by which he billed one of BCL's
clients (ICL) for work that was done by the Hospital, and not by
BCL. As a result of Petitioner's and the other co-defendants'
actions, the Hospital was defrauded of $104,366. This conduct
related to the delivery of health care items and services in two
respects. First, the scheme involved billing for clinical
laboratory services, which are health care services. Second, the
Hospital was in the business of providing health care, and
Petitioner's criminal enterprise may have affected the Hospital's
ability to deliver health care services by depriving the Hospital
of funds. 3/ Criminal acts directed at a health care provider's
administration or financial management will
necessarily be indirect, but nevertheless, can have a very marked
effect on the provision of care, thus meeting the requirements of
the Act.
Petitioner argues that his conviction does not fall within section
1128(b)(1) of the Act because it is too attenuated and remote from
actual health care delivery. However, the regulations, as well as
administrative law judge decisions, demonstrate that section
1128(b)(1) does not require that Petitioner's crime involve the
direct or immediate manipulation of items or services. The
regulations clearly contemplate that administrative services may
satisfy the statutory criteria. 42 C.F.R. 1001.201(a)(1). In
addition, DAB precedent has established that even false entries in
a hospital's accounting records are deemed to be "in connection
with the delivery of a health care item or service," within the
meaning of the Act. Frank Haney, DAB CR81 (1990). Because
Petitioner's fraudulent scheme deprived the Hospital of
compensation for laboratory services, the criminal activity for
which Petitioner was convicted, was committed in connection with
the delivery of health care items and services.
Furthermore, Petitioner's misappropriation by fraud or trick of
$104,366 clearly satisfies the other criterion of section
1128(b)(1) -- that the crime upon which the exclusion is
predicated, involve fraud or other financial misconduct.
Petitioner argues that the I.G. has failed to establish that his
criminal offense was a crime involving fraud. I disagree.
Petitioner pled guilty to larceny, as charged in the criminal
information. I.G. Ex. 2; I.G. Ex. 4. By pleading guilty,
Petitioner admitted that he committed the acts charged.
Specifically, he admitted that he obtained the $104,366 by
defrauding the Hospital. Therefore, Petitioner's conviction was
related to fraud. Petitioner sought to prove that ICL, the party
from whom he wrongfully received the compensation due the Hospital,
was not misled by his actions. Any such proof is irrelevant, since
Petitioner was convicted of defrauding the Hospital.
II. The regulations require that Petitioner be excluded for
a period of at least three years.
The regulations set forth the sole factors which an ALJ may
consider in determining the appropriate length of an exclusion. In
the case of an exclusion under section 1128(b)(1) of the Act, the
governing regulation, 42 C.F.R. 1001.201(b), provides that an
exclusion imposed under 1128(b)(1) of the Act must be for a period
of three years unless specified aggravating or mitigating factors
are present.
In this case, Petitioner was excluded for three years, despite the
presence of an aggravating factor justifying the imposition of a
lengthier exclusion. The regulation, at 42 C.F.R.
1001.201(b)(2)(ii), provides that it is an aggravating factor if
the conduct which led to the conviction were committed over a
period of one year or more. The I.G. alleges, and Petitioner does
not deny, that the acts that resulted in Petitioner's conviction
occurred over a three year period from June 1985 through August
1988. Since Petitioner's scheme occurred over a period of one year
or more, the I.G. had the discretion to exclude Petitioner for more
than three years.
Petitioner argued in his request for a hearing that his three-year
exclusion should be reduced due to the presence of mitigating
factors. Petitioner did not, however, cite any of the mitigating
factors listed at 42 C.F.R. 1001.201(b)(3). It is Petitioner's
burden to prove the existence of mitigating factors. James H.
Holmes, DAB CR270 (1993). Since Petitioner has not met this
burden, I find that there are no mitigating factors present here.
Since the I.G. was justified in excluding Petitioner for more than
three years due to the existence of an aggravating factor, and
because there are no mitigating factors present, I find that the
I.G.'s imposition of a three year exclusion is reasonable.
III. Petitioner may not collaterally attack the
circumstances of his conviction in this proceeding.
Petitioner argues, in essence, that he was improperly excluded
because his conviction is invalid due to ineffective assistance of
counsel. Petitioner asserts that, due to his attorney's poor
advice, his guilty plea and his conviction are both invalid.
Petitioner contends that his attorney represented his
co-defendants, as well as himself, and did not advise him of his
right to cooperate with the authorities against these
co-defendants. Petitioner argues that his attorney failed to alert
him to the danger of this conflict of interest and of the need for
Petitioner to hire his own attorney. In addition, Petitioner
argues that his attorney did not advise him of the collateral
consequences of his plea.
The applicable regulations provide that "[w]hen the exclusion is
based on the existence of a conviction,
. . . the basis for the underlying determination is not reviewable
and the individual or entity may not collaterally attack the
underlying determination, either on substantive or procedural
grounds." 42 C.F.R. 1001.2007(d). Thus, Petitioner may not
argue either the merits of his criminal case or the ineffectiveness
of his attorney's advice in this forum. An appellate panel of the
DAB discussed the reasoning for this rule, in regards to a
mandatory exclusion taken under section 1128(a)(2) of the Act, in
Peter J. Edmonson, DAB 1330 (1992). The appellate held:
It is the fact of the conviction which causes the exclusion.
The law does not permit the Secretary to look behind the
conviction. Instead, Congress intended the Secretary to exclude
potentially untrustworthy individuals or entities based on criminal
convictions. This provides protection for federally funded
programs and their beneficiaries and recipients, without expending
program resources to duplicate existing criminal processes.
This reasoning applies in the case of exclusions taken under
section 1128(b) as well.
In addition, I must reject Petitioner's request to stay these
proceedings until a decision is rendered on his motion to vacate
the underlying conviction. If Petitioner wished to stay these
proceedings, he should have made this request at the prehearing
conference. In any event, a stay in this proceeding would have no
effect upon the I.G.'s exclusion, since the exclusion is already in
effect and an ALJ does not have the authority to review the I.G.'s
discretion in this regard. 42 C.F.R. 1005.4(c)(5). Moreover,
the regulations provide that if an individual's conviction is
vacated or overturned, the individual will be reinstated into the
Medicare program retroactive to the effective date of the
exclusion. 42 C.F.R. 1001.3005(a)(1).
IV. The payment practices described at 42 C.F.R.
1001.952 are inapplicable to Petitioner's exclusion under
section 1128(b)(1) of the Act.
In Petitioner's request for a hearing, Petitioner alleged that he
was exempt from exclusion since the actions leading up to his
conviction were the type of payment practices described at 42
C.F.R. 1001.952. Section 1001.952 lists various exemptions from
exclusions imposed under section 1128B of the Act. Since the basis
for Petitioner's exclusion was his conviction for fraud in
connection with the delivery of an item or service under section
1128(b)(1) of the Act, these exemptions do not apply in this case.
CONCLUSION
Section 1128(b)(1) of the Act permits the Secretary of HHS, in the
exercise of her discretion, to exclude any individual from
participation in the Medicare and Medicaid programs who has been
convicted of a criminal offense relating to fraud, theft,
embezzlement, or other financial misconduct, in connection with the
delivery of a health care item or service. There is no indication
that the Secretary's discretion was misused in this case.
___________________________
Joseph K. Riotto
Administrative Law Judge
1. The I.G. submitted six exhibits. I cite the I.G.'s exhibits
as "I.G. Ex(s). (number) at (page)." I admit into evidence I.G.
Exs. 1-6. The I.G. submitted a motion and brief for summary
disposition to which Petitioner responded. I cite the I.G.'s brief
for summary disposition as "I.G. Br. at (page)." I cite
Petitioner's response as "P. Br. at (page)." In addition to his
response brief, Petitioner submitted a copy of the motion to vacate
his conviction which he filed in State court. He submitted also a
memorandum of law in support of the motion, with accompanying
affidavits. I have marked Petitioner's exhibits in conformance
with my Order and Schedule for Filing Briefs and Documentary
Evidence, dated August 18, 1994. Thus, Petitioner's memorandum of
law in support of his motion to vacate his conviction is now P. Ex.
1. Petitioner's notice of motion and accompanying affirmation are
now P. Ex. 2. Ex. A is now P. Ex. 3; Ex. B is now P. Ex. 4; Ex. C
is now P. Ex. 5; and Ex. D is now P. Ex. 6. The I.G. also
submitted a reply to Petitioner's response, which I cite as "I.G.
R. Br. at (page)."
2. Petitioner did not object to the I.G.'s characterization of
Petitioner's position at BCL.
3. Petitioner asserts that the Hospital was not deprived of
money or services because a co-owner of BCL, one of Petitioner's
co-defendants, was also a contracted manager of the Hospital's
laboratory and must have authorized Petitioner to use his time or
the lab's services in connection with outside work. This argument
lacks any merit since it fails to address the fact that the
Hospital was not paid anything for the work which was done using
its equipment and perhaps other hospital services. In any event,
such an argument is a challenge to the circumstances surrounding
Petitioner's conviction, and is therefore irrelevant, as explained
in section III of this decision.