Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
DATE: June 7, 1990
Docket No. C-156
In the Case of:
Frank J. Haney,
Petitioner,
- v. -
The Inspector General.
DECISION
By letter dated June 19, 1989, the Inspector General (I.G.) notified Petitioner
that he was being excluded
from participation in the Medicare and State health care programs for a period
of five years. Petitioner was
advised that his exclusion resulted from his conviction of a criminal offense
related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct.
Petitioner was further
advised that exclusion from participation in the Medicare and Medicaid programs
of individuals convicted
of such offenses is permitted by section 1128(b)(1) of the Social Security Act
(Act).
Petitioner timely requested a hearing and the case was assigned to me for a
hearing and decision. During
the prehearing conference which I conducted on January 18, 1990, both parties
expressed their desire for
this case to be decided on the basis of briefs and written documents. Subsequently,
the I.G. moved for
summary disposition and Petitioner responded. I held oral argument, by telephone,
on April 19, 1990.
I have considered the parties' arguments, the undisputed material facts, and
the applicable law and
regulations. I conclude that there exists a basis in law and fact to impose
and direct an exclusion against
Petitioner. However, I have decided that a three year period of exclusion against
Petitioner is appropriate.
ADMISSIONS
During the prehearing conference of October 11, 1989, Petitioner admitted that
he was "convicted" of a
criminal offense within the meaning of section 1128(i) of the Act.
ISSUES
The remaining issues are whether:
1. Petitioner was convicted "in connection with" the delivery of
a health care item or service within the
meaning of section (b)(1) of the Act.
2. Petitioner was 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.
3. The length of Petitioner's exclusion is reasonable and appropriate.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. At all times relevant to this case, Petitioner was employed as the Controller
of the James C. Giuffre
Medical Center (Giuffre). I.G. Ex. 5/2.
2. Giuffre is a non-profit health care institution. I.G. Ex. 5/1.
3. Giuffre receives a substantial portion of its annual funding from the United
States Department of Health
and Human Services (DHHS) under its Medicare and Medicaid programs. Id.
4. The amount of reimbursement which 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. Giuffre's cash reports are generated based upon information contained in
its accounting records. I.G.
Ex. 4.
6. On June 23, 1988, as stated in counts one and four of the criminal information
filed against Petitioner,
Petitioner was charged with: (1) conspiracy to defraud the United States by
attempting to impede and
impair the lawful functions of the Internal Revenue Service (conspiracy); and
(2) filing false tax returns.
I.G. Ex. 5.
7. Petitioner's charge of conspiracy was based partly upon allegations that
he made false entries in
Giuffre's accounting records. I.G. Ex. 5/2-7.
8. The charges filed against Petitioner alleged:
(1) In December 1982, Petitioner issued checks toexecutives of Giuffre as
automobile expense
reimbursement checks when, in actuality, those checks were retroactive lump
sum salary increases;
(2) In December 1983, Petitioner listed checks aspayments for Giuffre's inventory
supplies,
when, in actuality, the checks were Christmas bonuses for executives of Giuffre;
(3) In 1984, Petitioner falsely listed checks inGiuffre's accounting records
as monthly automobile
and travel expenses when, in actuality, the checks were salary increases for
executives of Giuffre;
(4) In December 1984, Petitioner listed checks inGiuffre's accounting records
as hospital related
insurance premiums when, in actuality, the checks were a Christmas bonus for
executives of Giuffre; and
(5) In August 1985, Petitioner listed a check inGiuffre's accounting record
as a vendor payment
when, in actuality, the proceeds of the check once cashed by Petitioner were
given to an executive of
Giuffre.
Id.
9. Petitioner's charge of filing false tax returns was based upon his failure
to report taxable income on his
1984 individual income tax return. I.G. ex. 5/10.
10. On July 10, 1988, Petitioner pleaded guilty to the two counts filed against him. I.G. Ex. 2.
11. On November 9, 1988, a judgment of conviction was entered against Petitioner
on the two counts to
which he pleaded guilty. I.G. Ex. 2
12. Petitioner made false entries in Giuffre's accounting records to conceal
the fact that he was generating
income for himself and other employees of Giuffre. I.G. Ex. 5/2-7.
13. As a result of Petitioner's actions, false and inaccurate cash reports
were submitted to the Medicare and
Medicaid programs. Findings 5, 12.
14. Petitioner was "convicted" of a criminal offense within the meaning
of section 1128(i) of the Act.
Findings 10, 11.
15. As a result of his conviction, Petitioner was: (1) fined $10,000; (2) placed
on probation for a period of
five years; (3) sentenced to serve 50 hours of community service. I.G. Ex. 2.
16. The I.G. may exclude individuals 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. Act, section 1128(b)(1).
17. The permissive exclusion provisions of section 1128 of the Act do not establish
minimum or
maximum periods of exclusion. Act, Section 1128(b)(1) - (14).
18. Petitioner's conspiracy conviction is a criminal offense "in connection
with the delivery of a health
care item or service relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other
financial misconduct within the meaning of section 1128(b)(1) of the Act."
Findings 1-12.
19. The I.G. properly excluded Petitioner from participation in the Medicare
and Medicaid programs.
Findings 1 - 18.
20. It is an aggravating factor that Petitioner's crimes were serious in nature. Findings 7, 11.
21. It is an aggravating factor that the District Court imposed a serious penalty
against Petitioner as a result
of his criminal conviction. Finding 15.
22. The length of probation imposed against Petitioner by the District Court
is not conclusive in
determining an appropriate length of exclusion.
23. It is a mitigating factor that Petitioner is no longer employed in the
health care industry and does not
intend to obtain employment in that industry. August 13, 1989 letter to I.G..
24. It is a mitigating factor that Petitioner's mother was terminally ill and
residing with Petitioner during
the time period when Petitioner committed the criminal acts at issue in this
case. P. Br.13
25. The ALJ does not have the authority to determine the scope of Petitioner's
exclusion from participation
in the Medicare and Medicaid programs.
26. The I.G. has not proved that Medicaid made any overpayments as a result
of Petitioner's actions. I.G.
Ex. 5.
27. The I.G. has not proved that Petitioner's criminal offenses had an adverse
impact on the Medicare or
Medicaid programs. I.G. Ex.5
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 I.R.S. relates to fraud. Thus, the major
issue remaining is whether
Petitioner's conviction is "in connection with" the delivery of health
care items or services.
The determination of whether Petitioner's conviction is "in connection
with" the delivery of a health care
item or service, 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 I.R.S. 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 actions
of making false entries in
Giuffre's accounting records, false and inaccurate cash reports were generated
and submitted to DHHS and
its authorized agents.
Petitioner argues that his offense was not connected to the delivery of a health
care item or service because
his offense (1) did not relate to the Medicare and Medicaid programs; and (2)
was merely a failure to report
certain income as taxable income. Petitioner also argues that his offense would
have been the same had he
been working in a field other than health care. 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).
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 fact that
accurate information was necessary to determine the amount of reimbursement
that Giuffre should receive
from the Medicare and Medicaid programs is secondary.
Petitioner argues that his offense would have been the same if he had been
working in a field other than
health care. This is only half true and assumes that his offense should be examined
in a vacuum.
However, Petitioner committed the offense for which he was convicted while employed
as a Controller in a
field which is directly responsible for the health and well-being of members
of society. Thus, the
consequences which Petitioner must endure should and do differ accordingly.
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. 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 (January 27, 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 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.
The Secretary adopted regulations to be applied in exclusion cases. The regulations
specifically apply only
to exclusions for "program-related" offenses. However, they also express
the intent of the Secretary in
cases where a permissive exclusion is imposed. The factors require a consideration
of the seriousness of
the offense weighed against any mitigating factors. 42 C.F.R. 1001.125(b)(1)
- (7).
The I.G. argues that there are several factors in this case which warrant a
five year period of exclusion.
These factors are: (1) Petitioner's untrustworthiness as demonstrated by his
criminal offenses; (2) the
serious nature of Petitioner's criminal offense; and (3) the penalty and probation
imposed upon Petitioner
by the criminal court in which he was convicted.
The evidence in this case reveals that in November 1988, Petitioner was convicted
of two felonies, relating
to fraud. The fact that the convictions concerned Petitioner's engagement in
fraudulent activities is
demonstrative of Petitioner's untrustworthiness 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 is, at this time, an untrustworthy individual. As stated, a
purpose of the exclusion law is to
allow a sufficient period of time to ensure that an individual is trustworthy.
In addition, although Petitioner
may now be trustworthy, a period of exclusion may still be necessary to comport
with the purpose of
protecting the integrity of the programs by deterring others from similar improper
acts.
As a result of his criminal actions, Petitioner was placed on probation for
a period of five years, sentenced
to serve 50 hours of community service, and fined $10,000. The I.G. argues that
the criminal court's
determination to monitor Petitioner for a period of five years, through probation,
is an important factor to
be considered in determining an appropriate period of exclusion. I agree that
the length of probation
imposed by the criminal court is a factor to be considered in determining an
appropriate period of
exclusion. However, it is not determinative. Further, it should be noted that
the exclusion imposed and
directed by the I.G. would not run concurrently with the period of probation
imposed by the criminal court,
and, thus, would result in Petitioner being excluded longer than his probation.
The fact that the I.G. did not prove that Petitioner's actions adversely impacted
the Medicare or Medicaid
programs is a neutral factor.
Petitioner asserts that there are several mitigating factors in this case which
warrant a reduction in the five
year period of exclusion imposed and directed by the I.G. These factors include:
(1) Petitioner's good
character as attested to in letters written by friends and associates of Petitioner;
(2) the illness of Petitioner's
mother during the time period in which Petitioner committed the criminal offenses
at issue; and (3)
Petitioner's involvement in a lawsuit during the time period in which Petitioner
committed the criminal
offenses at issue; and (4) Petitioner no longer being employed, or intending
to seek employment, in the
health care field.
The regulations do not delineate which factors are mitigating. However, factors
which relate to a
petitioner's trustworthiness have been considered mitigating. See, Leonard N.
Schwartz, R. Ph., Petitioner,
v. The Inspector General, DAB Civ. Rem. No. C-62 (1989) The I.G. argues that
there are no mitigating
factors in this case.
I conclude that there are mitigating factors in this case. First, the letters
submitted on behalf of Petitioner,
by his friends and associates, regarding Petitioner's good character are mitigating
and have been viewed as
such in my determination of an appropriate period of exclusion. Second, the
illness, and resulting death, of
Petitioner's mother during part of the time period in which Petitioner committed
the criminal acts in issue is
another mitigating factor which I have considered in determining an appropriate
period of exclusion.
Third, the fact that Petitioner is no longer employed in the health care field
and does not intend to seek
employment in the health care field is a mitigating factor. As stated, the purpose
of the exclusion law is to
protect program beneficiaries and recipients from untrustworthy persons. Petitioner's
lack of employment
in the health care field coupled with his intent not to seek employment in the
health care field is analogous
to an exclusion in that he is no longer in a position in which he poses an immediate
threat to Medicare and
Medicaid beneficiaries and recipients. I have also considered as mitigating
the factor that no evidence was
presented regarding Petitioner's engagement in any fraudulent activities since
August 1985, the date of the
last incident in his 1988 conviction.
The fact that Petitioner was involved in a major lawsuit during the relevant
time period is not a mitigating
factor. Pressures, such as those faced by Petitioner as a result of the aforementioned
lawsuit, may recur
and do not excuse, justify, or mitigate criminal behavior.
III. The ALJ does not have the authority to determine the scope of Petitioner's
exclusion from participation
in the Medicare and Medicaid programs.
Petitioner has requested that I address the issue of whether the sale of printing
services to individuals or
entities in the health care industry would violate the terms of the exclusion
imposed and directed against
him. This matter was addressed during prehearing conferences which I conducted
in this case. Upon my
request, the I.G. submitted a letter dated October 27, 1989, in an attempt to
clarify the I.G.'s position with
respect to the scope of Petitioner's exclusion. The I.G. stated that the statute
does not preclude Petitioner
from selling to doctors and hospitals, but it does prevent Medicare and Medicaid
from paying for the
services which Petitioner provides. The I.G. went on to say that he would not
preclude a hospital or doctor
from receiving reimbursement for services and items provided by Petitioner because
the amount of
reimbursement attributable to these items and services would be nominal and
difficult to ascertain.
However, Petitioner requested a more definitive response to this issue.
Once I have determined that an exclusion is properly imposed and determine
the appropriate length of an
exclusion, I do not have the authority to determine the scope of the exclusion,
unless specific statutory or
regulatory language needs to be interpreted. I conclude that there is no such
endeavor called for in this
case.
CONCLUSION
In view of the mitigating factors and the factors considered by the I.G. in
determining the period of
exclusion to be imposed and directed against Petitioner, I conclude that a five
year period of exclusion is
excessive and that a three-year period of exclusion is sufficient to serve the
purpose of the exclusion law's
purpose of protecting the Medicare and Medicaid programs and their respective
beneficiaries and
recipients.
____________________________
Charles E. Stratton
Administrative Law Judge