CASE | DECISION | FINDINGS OF FACT AND CONCLUSIONS OF LAW | CONCLUSION | JUDGE | FOOTNOTES
Decision No. CR655
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
IN THE CASE OF  


SUBJECT:

Dale F. Lower,

Petitioner,

DATE: Mar. 22, 2000
                                          
             - v -
 

The Inspector General

 

Docket No.C-99-794
DECISION
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By letter dated March 21, 1994,(1) the Inspector General (I.G.), United States Department of Health and Human Services, notified Dale F. Lowe (Petitioner), that he would be excluded for a period of 15 years from participation in Medicare, Medicaid, Maternal and Child Health Services Block Grant and Block Grants to States for Social Services programs.(2) The I.G. imposed this exclusion pursuant to section 1128(a)(1) of the Social Security Act (Act), based on Petitioner's conviction in the United States District Court for the District of Maine of a criminal offense related to the delivery of an item or service under the Medicaid program.

Petitioner filed a request for review of the I.G.'s action. The I.G. moved for summary disposition. Because I have determined that there are no material and relevant factual issues in dispute (the only matter to be decided is the legal significance of the undisputed facts), I have decided the case on the basis of the parties' written submissions in lieu of an in-person hearing. The I.G. submitted a brief accompanied by eight proposed exhibits (I.G. Exs. 1 - 8). Petitioner submitted a response and one proposed exhibit (P. Ex. 1). The I.G. submitted a reply brief. Petitioner did not object to my receiving into evidence the I.G.'s proposed exhibits, and I receive into evidence I.G. Exs.1 - 8. The I.G. objected to my receiving Petitioner's proposed exhibit into evidence. I find such exhibit relevant and I receive into evidence P. Ex. 1.

I affirm the I.G.'s determination to exclude Petitioner from participating in the Medicare and Medicaid programs for a period of 15 years.

Applicable Law

Under section 1128(a)(1) of the Act, the Secretary may exclude from participation in the Medicare and Medicaid programs any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Title XVIII or under any State health care program. Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(1) of the Act shall be for a period of five years, unless specified aggravating or mitigating factors are present which form the basis for lengthening or shortening the period of exclusion. See also 42 C.F.R. § 1001.102(a) and (b)(1992).(3)

The regulation at 42 C.F.R. § 1001.102(b) provides that the following factors may be considered to be aggravating and a basis for lengthening the period of exclusion: "(1) [t]he acts resulting in the conviction, or similar acts, resulted in financial loss to Medicare and the State health care programs of $1,500 or more. (The entire amount of financial loss to such programs will be considered, including any amounts resulting from similar acts not adjudicated, regardless of whether full or partial restitution has been made to the programs); (2) [t]he acts that resulted in the conviction, or similar acts, were committed over a period of one year or more; (3) [t]he acts that resulted in the conviction, or similar acts, had a significant adverse physical, mental or financial impact on one or more program beneficiaries or other individuals; (4) [t]he sentence imposed by the court included incarceration; (5) [t]he convicted individual or entity has a prior criminal, civil or administrative sanction record; or (6) [t]he individual or entity has at any time been overpaid a total of $1,500 or more by Medicare or State health care programs as a result of improper billings."

The regulation at 42 C.F.R. § 1001.102(c) provides that only if aggravating factors have increased the period of exclusion beyond the minimum period of five years, can offsetting mitigating factors be considered. The following factors may be considered as mitigating and a basis for reducing the period of exclusion to no less than five years: "(1) [t]he individual or entity was convicted of 3 or fewer misdemeanor offenses, and the entire amount of financial loss to Medicare and the State health care programs due to the acts that resulted in the conviction, and similar acts, is less than $1,500; (2) [t]he 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 commission of the offense that reduced the individual's culpability; or (3) [t]he individual's or entity's cooperation with Federal or State officials resulted in --(i) [o]thers being convicted or excluded from Medicare or any of the State health care programs, or (ii) [t]he imposition against anyone of a civil money penalty or assessment under part 1003 of this chapter."

Petitioner's Contentions

Petitioner contends that the I.G. has not demonstrated that Petitioner's offense relates to the delivery of an item or service under Medicaid. Specifically, he maintains that the record does not establish that the embezzlement for which he was convicted involved Medicaid funds. He notes in support of this claim that the restitution in the criminal matter was paid to a private insurer and to Green Valley Association (which operates residential facilities and day care programs for the mentally retarded) and that the judgment did not provide for restitution to the Medicaid program. In support of his claim, Petitioner also notes that the acts specified in the Indictment did not involve Medicaid. Rather, such acts involved improper claims for travel reimbursement, conversion of checks made payable to Green Valley Association, improper use of Green Valley Association credit cards for Petitioner's personal use, and Petitioner's false entries in Green Valley Association records to conceal these fraudulent acts.

Petitioner also maintains that the length of his exclusion is not reasonable. He asserts that the I.G. misconstrued facts relating to aggravating circumstances in his case. He asserts that the I.G. has not proved that the acts for which he was convicted resulted in any loss to the Medicaid program. In this regard he notes that restitution was to be made to a private insurer and to Green Valley Association and that Medicaid was not mentioned in the judgment involving restitution. He also asserts that it was improper for the I.G. to cite as an aggravating factor his exclusion from the State Medicaid program, which was effective on March 25, 1994, 16 days prior to the effective date of the exclusion imposed by the I.G. Petitioner maintains that, as his State exclusion arose from the same acts as his Federal exclusion, the State exclusion should not be construed as an aggravating factor.

Petitioner also cites factors in his case which he maintains warrant mitigation of the exclusion period. He maintains that he has successfully completed a nursing program and that he has engaged in many community service activities. In support of these contentions Petitioner has provided letters from others who attest to his good character, his community involvement, and professional competence. Petitioner contends that, based on this evidence and on the time that has elapsed since his criminal conviction, he has been adequately rehabilitated and that he now poses no threat to the integrity of the Medicaid program or to its recipients.

 

FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1. During the period of time relevant to this case, Petitioner was employed as the Executive Director of Green Valley Association, a non-profit association which provides residential and day care services to mentally retarded individuals. I.G. Exs. 4 and 5.

2. Green Valley Association received the majority of its funding from Medicaid (which included approximately 65% funding from the federal government and 35percent funding from the State of Maine) pursuant to annual Provider Agreements between the State of Maine and Green Valley Association. I.G. Ex. 5.

3. On March 17, 1993, an Indictment was filed in the United States District Court for the District of Maine charging Petitioner with one count of Embezzlement from a Program Receiving More Than $10,000 in Federal Funds in violation of 18 U.S.C. § 666(a)(1)(A). I.G. Ex. 5.

4. According to the Indictment, Petitioner, from on or about July 1, 1985 until on or about June 30, 1991, embezzled funds in the amount of $210,804.93 from Green Valley Association by applying for and converting reimbursement for travel that was either not taken or was in excess of the actual cost of the travel; by converting checks to his own personal use that were made payable to Green Valley Association from a fuel company, insurance companies, and contributors; by using Green Valley Association credit cards to buy items for his own personal use; and by making false entries and causing false entries to be made in Green Valley Association's records to conceal the illegal conversions. I.G. Ex. 5.

5. On December 23, 1993, Petitioner pled guilty to the Indictment and a Judgment was entered in Petitioner's case in accord with his plea.
I.G. Ex. 6.

6. As a result of his conviction, Petitioner was sentenced to 19 months in prison; three years' probation; and payment of restitution in the amounts of $100,000 to Chubb Group of Insurance Companies and $175,000 to Green Valley Association. I.G. Ex. 6

7. On March 21, 1994, Petitioner was notified by the I.G. that he was being excluded from participation in the Medicare and Medicaid programs for a 15-year period pursuant to sections 1128(a)(1) and 1128(c)(3)(B) of the Act.

8. Under section 1128(a)(1) of the Act, the I.G. is authorized to exclude any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Medicare or Medicaid.

9. Where the I.G. determines to exclude an individual pursuant to section 1128(a)(1) of the Act, the term of exclusion will be for a period of five years, in the absence of aggravating factors that would support an exclusion in excess of than five years.

10. Petitioner's criminal conviction constitutes a conviction within the scope of section 1128(i)(3) of the Act.

11. Petitioner's conviction for Embezzlement from a Program Receiving More Than $10,000 in Federal Funds is related to the delivery of an item or service under the Medicare and/or Medicaid programs within the meaning of section 1128(a)(1) of the Act.

12. The I.G. is authorized to exclude Petitioner pursuant to section 1128(a)(1) of the Act.

13. Petitioner did not prove the presence of any mitigating factors.

14. The aggravating factors established by the I.G. prove Petitioner to be untrustworthy.

15. A 15-year exclusion of Petitioner is reasonable and appropriate.


Discussion

During the period of time relevant to this case, Petitioner was employed as the Executive Director of Green Valley Association, a non-profit association which provides residential and day care services to mentally retarded individuals. I.G. Exs. 4 and 5.

On March 17, 1993, an Indictment was filed in the United States District Court for the District of Maine charging Petitioner with one count of Embezzlement from a Program Receiving More Than $10,000 in Federal Funds in violation of 18 U.S.C. § 666(a)(1)(A). I.G. Ex. 5. On December 23, 1993, Petitioner pled guilty to the Indictment and a Judgment was entered in Petitioner's case in accord with his plea. I.G. Ex. 6. As a result of his conviction, Petitioner was sentenced to 19 months in prison; three years' probation; and payment of restitution in the amounts of $100,000 to the Chubb Group of Insurance Companies and $175,000 to Green Valley Association. I.G. Ex. 6. On March 21, 1994, Petitioner was notified by the I.G. that he was being excluded from participation in the Medicare and Medicaid programs for a 15-year period pursuant to sections 1128(a)(1) and section 1128(c)(3)(B) of the Act.

Petitioner challenges that he is subject to exclusion under section 1128(a)(1) of the Act, but I find no merit in his claim. His conviction, which was based on the court's acceptance of his guilty plea, constitutes a conviction under section 1128(i)(3) of the Act. Next, it is required under section 1128(a)(1) of the Act that the crime at issue be related to the delivery of an item or service under the Medicare and/or Medicaid program. Petitioner asserts that the record does not establish that funds from Medicaid were embezzled in his scheme. In this regard, he notes that no restitution was made in the judgment to any public program and that the Indictment does not reflect that he took funds from such program. In determining whether an offense is program-related, the Administrative Law Judge (ALJ) must analyze all the facts and circumstances surrounding a conviction to determine whether a nexus or common sense connection links Petitioner's crime with the delivery of an item or service under a covered program. Krishan Kumar Batra, M.D., DAB CR537 (1998); Berton Siegel, D.O., DAB No. 1467 (1994). Previous decisions of the Departmental Appeals Board (DAB) have found that "[f]raud directed against a federally-funded health care program is a criminal offense related to the delivery of an item or service under that program." Tito B. Trinidad, M.D., DAB CR468 (1997), at 6; Rosaly Saba Khalil, M.D., DAB CR353 (1995). This nexus can exist despite the fact that Petitioner, as Executive Director of Green Valley Association, a Medicaid provider, was not himself a designated Medicaid provider. Id.

I find that Petitioner's conviction for Embezzlement from a Program Receiving More Than $10,000 in Federal Funds was program related. The criminal Indictment in Petitioner's case shows that Green Valley Association received the majority of its funding from Medicaid (which included approximately 65 percent funding from the federal government and 35 percent funding from the State of Maine) pursuant to annual Provider Agreements between the State of Maine and Green Valley Association. I.G. Ex. 5 at 2. The Indictment also shows that the annual cost reports for the Green Valley Association provided the basis for payment of Medicaid funds to Green Valley Association. I.G. Ex. 5 at 4. The Indictment reflects that from on or about July 1, 1985 to on or about June 30, 1991, Petitioner embezzled funds in the amount of $210,804.93 from Green Valley Association by applying for and converting reimbursement for travel that was either not taken or was in excess of the actual cost of the travel; by converting checks to his own personal use that were made payable to Green Valley Association from a fuel company, insurance companies and contributors; by using Green Valley Association credit cards to buy items for his own personal use; and by making false entries and causing false entries to be made in Green Valley Association's records to conceal the illegal conversions. I. G. Ex. 5. Because Petitioner had authority over Green Valley Association check writing and credit cards, he would then pay off the credit cards using Green Valley Association funds. Petitioner then adjusted the figures and made false entries in order to conceal all of his illegal activity. These financial records were incorporated into annual cost reports which were then used to calculate the basis for payment with Medicaid funds. I.G. Ex. 5 at 4. It is therefore evident that Petitioner's false entries contributed to false cost reports, which resulted in improper Medicaid payments for Green Valley Association. On such record, I find that the nexus between Petitioner's offense and the delivery of an item or service under Medicaid is established.

Petitioner has argued in his brief that his 15-year exclusion should be reduced due to the presence of mitigating factors. In his favor, he maintains that he has successfully completed a nursing program and has received academic awards and scholarships in this endeavor; has engaged in community service; and has submitted character references to show his rehabilitation. It is Petitioner's burden to prove the existence of mitigating factors. James H. Holmes, DAB CR270 (1993). Petitioner, however, has not established any of the mitigating factors listed at 42 C.F.R § 1001.102(c). His claims on the issues of his recent conduct and character are not enumerated factors and therefore are not within the scope of the regulation. As Petitioner has the burden concerning mitigating factors, I find that he has not met such burden and conclude that Petitioner has not proved the existence of any mitigating factors.

In determining whether the length of an exclusion is reasonable, it is the responsibility of the administrative law judge to consider and evaluate all of the relevant evidence brought to bear in this case. The regulation at 42 C.F.R. § 1001.102(b) sets forth the aggravating factors which may be considered in determining the length of an exclusion. I find that the I.G. proved the presence of four aggravating factors. The four aggravating factors consist of the following:

  • The acts resulting in Petitioner's conviction, or similar acts, caused financial loss of $1,500 or more to Medicaid. 42 C.F.R. § 1001.102(b)(1). Petitioner's fraud caused very substantial losses to be incurred by Medicaid. It is undisputed that Petitioner stole at least $175,000 from Green Valley Association as that is the amount of restitution that he was ordered to pay. I.G. Ex. 6. As Green Valley Association receives the majority of its funding from Medicaid, it can be logically concluded that the majority of the $175,000 embezzled by Petitioner is Medicaid money.


  • The acts that resulted in Petitioner's conviction, or similar acts, were committed by Petitioner over a period of one year or more. 42 C.F.R. § 1001.102(b)(2). The indictment reflects that the fraudulent acts occurred over a six-year period, from on or about July 1, 1985 until on or about June 30, 1991. I.G. Ex. 5. Moreover, the amount of restitution that Petitioner was ordered to pay suggests that the illegal activity was done repeatedly.
  • The sentence imposed on Petitioner for his crimes included a period of incarceration. 42 C.F.R. § 1001.102(b)(2). Petitioner was sentenced to nineteen months in prison. I.G. Ex. 6. Petitioner's Sentencing Guidelines, as submitted to the court, included several additions to his "offense level," which is used to determine the suggested length of incarceration. Increases in base offense levels were given for both the large amount of money he embezzled from Green Valley Association and the fact that the embezzlement involved multiple occasions over a period of time. I.G. Ex. 7. He also was given another increase in his base level for abusing a position of public trust when he was in charge of large amounts of money and switching money from different accounts to conceal the missing money he took for his personal use. Id.


  • The convicted individual or entity has a prior criminal, civil, or administrative sanction record. 42 C.F.R. § 1001.102(b)(5). The record reflects that Petitioner was notified on March 19, 1994, by the Maine Department of Health and Human Services, that he was being excluded from the Maine Medicaid program for a period of five years. I.G. Ex. 8. The Maine Medicaid exclusion took effect on March 25, 1994. Petitioner was notified by the U.S. Department of Health and Human Services on March 21, 1994, that he was being excluded from Medicare and Medicaid, effective April 10, 1994. Petitioner asserts that he does not have a prior administrative sanction record because the Maine exclusion and the I.G. exclusion stem from the identical underlying facts. I find no merit in Petitioner's claim. Prior decisions have found that it is permissible to count a State exclusion as a prior exclusion even if both the federal and State exclusions emanate from the same conduct or conviction. Dionisio Lazaro, M.D., DAB CR603 (1999). In Lazaro, the ALJ found that it is sufficient to count a State exclusion as a prior exclusion as long as it occurred before the I.G.'s determination. Id. A State exclusion is based upon the premise that the petitioner is untrustworthy. It is relevant to the I.G.'s determination of the length of the exclusion that another administrative entity has previously found Petitioner to be untrustworthy, even if based on the same underlying conduct that is the basis for the I.G.'s exclusion. Because the Maine exclusion occurred before the I.G. exclusion, it constitutes a prior administrative sanction under the regulations.

Considering Petitioner's lack of evidence of mitigation and the I.G.'s evidence of aggravating factors, I find that the aggravating factors in Petitioner's case make the imposition of a 15-year exclusion reasonable. I note that in evaluating these factors, it is not the mere presence of a large number of aggravating factors which forms the basis for my decision here. As an appellate panel has previously held in Barry D. Garfinkel, M.D., DAB No. 1572 (1996), it is the quality of the circumstances, whether aggravating or mitigating, which is to be dispositive in analyzing the weight to be assigned to these factors. Garfinkel, DAB No. 1572, at 31.

In this case, the aggravating factors established by the I.G. prove Petitioner to be an untrustworthy individual. Petitioner's lack of trustworthiness is established by his almost six-year involvement in a scheme to defraud Medicaid. His fraud was persistent and deliberate, not random or impulsive. The extent to which Petitioner persisted in defrauding Medicaid is established by the large losses he caused Green Valley Association and through its funding of that entity, the Medicaid program. His high level of culpability is reflected in the lengthy prison sentence he received. I therefore find that his 15-year exclusion is reasonable and appropriate.

 

CONCLUSION
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I conclude that the I.G. was authorized to exclude Petitioner pursuant to section 1128(a)(1) of the Act. I find that his

15-year exclusion is reasonable and I sustain it.

 

JUDGE
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Joseph K. Riotto
Administrative Law Judge

 

FOOTNOTES
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1. Petitioner asserts that he did not receive the I.G.'s exclusion letter issued on March 21, 1994, because he was incarcerated and no longer residing at the location to which the letter was sent. He asserts that he only recently became aware of the exclusion. The I.G. waived any timeliness issues with respect to Petitioner's appeal.

2. In this decision, I use the term "Medicaid" to refer to all enumerated State health care programs.

3. Because Petitioner's exclusion was imposed in 1994, I use, throughout this decision, the regulations which were then governing the exclusion process.

 

 

CASE | DECISION | FINDINGS OF FACT AND CONCLUSIONS OF LAW | CONCLUSION | JUDGE | FOOTNOTES