Anthony Accaputo, Jr., DAB No. 1416 (1993)

DEPARTMENT OF HEALTH AND HUMAN SERVICES

DEPARTMENTAL APPEALS BOARD

Appellate Division

In the Case of:

Anthony Accaputo, Jr.,
Petitioner,
- v. -
The Inspector General.

DATE: June 3, 1993
Docket No. C-92-001
Decision No. 1416


FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE
DECISION

Anthony Accaputo, Jr. (Petitioner) appealed a January 12, 1993 decision
by Administrative Law Judge (ALJ) Charles E. Stratton upholding
Petitioner's seven-year exclusion from participation in Medicare and
state health care programs. 1/ Anthony Accaputo, Jr., DAB CR249 (1993)
(ALJ Decision). The Inspector General (I.G.) excluded Petitioner under
section 1128(a)(1) of the Social Security Act (42 U.S.C. .
1320a-7(a)(1)) based on Petitioner's conviction by a Massachusetts
criminal court of filing false cost reports in order to obtain Medicaid
reimbursement. The ALJ Decision was based on 42 findings of fact and
conclusions of law (FFCLs); Petitioner excepted to 20 of the FFCLs on
appeal.

Petitioner's appeal raised a number of issues. We accept review of the
ALJ Decision to consider the limited issue of whether the Massachusetts
Medicaid fraud control unit was an agent of the federal government so as
to preclude the federal government (specifically, the Department of
Health and Human Services (DHHS)) from exercising its mandatory
exclusion authority once Massachusetts had entered into a plea agreement
with Petitioner which did not include an exclusion. We decline to
consider Petitioner's exceptions which are related to other issues
Petitioner raised. For this reason, we accept review of Petitioner's
exceptions to FFCLs 19 and 23 only. These FFCLs state:

19. The Massachusetts Attorney General's Medicaid Fraud
Control Unit did not have the authority to make a decision on
behalf of the Secretary of DHHS that would frustrate the strong
federal interest in protecting the integrity of the
federally-funded health care programs. * * * * 23. The I.G.
properly excluded Petitioner from participation in the Medicare
and Medicaid programs for a period of at least five years as
required by the minimum mandatory exclusion provisions of
sections 1128(a)(1) and 1128(c)(3)(B) of the Act.

ALJ Decision at 7. Based on the analysis below, we affirm and adopt
FFCLs 19 and 23. We also affirm and adopt all other FFCLs in the ALJ
Decision.


ANALYSIS

Petitioner argued before both the Board and the ALJ that the I.G. was
not authorized to exclude him under section 1128(a)(1) because the
Massachusetts Medicaid fraud control unit was an agent of the federal
government and this unit, which had been involved in recommending the
plea agreement which resulted in Petitioner's conviction, did not
provide for an exclusion in the plea agreement. Petitioner based the
alleged agency relationship on the grounds that the Massachusetts
Medicaid fraud control unit 1) receives 90% of its funding from the
federal government; 2) is empowered under federal rules and regulations;
and 3) is under an agency agreement with DHHS, a federal entity.
Petitioner's Brief at 2, citing Petitioner's Post-Hearing Brief at 2-7.

States having approved Medicaid state plans may receive federal grant
funds under section 1903(q) of the Social Security Act for expenditures
for Medicaid fraud control units meeting conditions set out in the Act
and regulations at 42 C.F.R. Part 455, Subpart A, and Part 1002, Subpart
C (1986-1991). Thus, as Petitioner alleged, it is likely that
Massachusetts receives Medicaid funds for some expenditures for its
fraud control unit. However, neither the funding relationship nor the
conditions placed on those funds by federal regulations empowers the
Massachusetts fraud control unit, as part of a plea agreement, to bind
the federal government.

Contrary to what Petitioner alleged, no agency agreement existed between
the federal government and the Massachusetts Medicaid fraud control
unit. The agency relationship has been defined as follows:

Agency is the fiduciary relation which results from the
manifestation of consent by one person [or entity] to another
that the other shall act on his behalf and subject to his
control, and consent by the other so to act.

Restatement (Second) on Agency . 1(1). A person or entity can undertake
to perform a task or series of tasks for another and can receive
compensation for doing so without necessarily establishing an agency
relationship. See Restatement (Second) on Agency . 2 cmt. b. What is
critical to an agency relationship is the extent to which a fiduciary
relationship is established and control may be exercised. Id. . 1 cmt.
b.

The fact that a state receives federal funding for a Medicaid fraud
control unit and that federal regulations condition receipt of those
funds on the unit performing certain tasks is clearly insufficient to
establish an agency relationship under the definition of agency and
related comments in the Restatement. The conditions on receipt of
federal grant funds do not subject the unit to the "control" of the
federal government; the regulations are not pervasive and do not
interfere with the discretion the state Medicaid fraud control unit has
as a state entity in defining, investigating and prosecuting fraud.
Moreover, in some instances, the units may receive federal funds even if
they only refer cases of suspected fraud to another entity for
prosecution.

However, even if we were to find (which we do not) that a state Medicaid
fraud control unit was an agent of the federal government, that still
would not have authorized the Massachusetts Medicaid fraud control unit
to enter into a plea agreement which precluded the I.G. from imposing an
exclusion under the Medicare program and directing an exclusion under
Medicaid:

An agent is authorized to do, and to do only, what it is
reasonable for him to infer that the principal desires him to do
in the light of the principal's manifestations and the facts as
he knows or should know them at the time he acts.

Restatement (Second) on Agency . 33. Clearly, it would not have been
reasonable for the Massachusetts Medicaid fraud control unit to infer
the authority to preclude the I.G. from imposing an exclusion where
Congress, by enacting mandatory exclusion provisions, has delegated the
authority to and required the Secretary of DHHS (through the I.G.) to
impose exclusions. Moreover, Congress could not have intended for an
agency relationship to exist and to be exercised in such a way as to
preclude a mandatory exclusion following a program-related conviction;
otherwise, Congress would not have based the triggering of a mandatory
exclusion on a state (or federal) court conviction. Courts, as well as
the Board, have previously held that federal protection of a strong
federal interest, such as protection of federally funded health care
programs, cannot be frustrated by a state prosecution, and that an
exclusion following a state court conviction for a program-related
offense does not violate double jeopardy. See Manocchio v. Kusserow,
961 F.2d 1539 (11th Cir. 1992); Greene v. Sullivan, 731 F. Supp. 838
(E.D. Tenn. 1990); Douglas Schram, R.Ph., DAB No. 1372 (1992).

Finally, a recent court case reinforces our view that the I.G. had the
authority (as well as the duty) to exclude Petitioner under the section
1128(a)(1) mandatory exclusion provision. U.S. v. Michael Gerard
Potrocky, et. al, Medicare and Medicaid Guide (CCH) . 41,310, at 34,976
(4th Cir. March 15, 1993). In Potrocky, the defendant entered into a
plea agreement which was accepted by a United States court in which he
agreed to pay restitution to the Medicaid program for certain fraudulent
activities in exchange for pleading guilty. The plea agreement stated
that "[a]ny restitution ordered by the Court shall be a full, complete,
and final settlement of any and all claims of any nature, be they
criminal or civil for the years 1986, 1987, and 1988." Id. at 34,978.
The defendant argued that this language precluded the I.G. from
subsequently excluding him under section 1128(a)(1).

The court did not agree. The court found that 1) an exclusion is not a
"claim" covered by the plea agreement; 2) mandatory exclusion is
required by section 1128(a)(1) under certain circumstances, which exist
here; and 3) the plea agreement did not purport to address future
participation of the petitioner in Medicare. Id. at 34,978. The court
concluded by stating:

There is no merit to the claim that exclusion from the program
amounts to an additional criminal sanction or an additional
criminal penalty. Congress has simply decided that it does not
wish the United States to do business with persons such as the
appellants, who have defrauded the United States.

Id. at 34,979. Certainly, if the court upheld a mandatory exclusion
where the United States had entered into a plea agreement with a
defendant, we must uphold a mandatory exclusion where the state, a
separate entity, had entered into a plea agreement with a defendant.


CONCLUSION

For the above reasons, we conclude that there was no agency relationship
between the federal government and the Massachusetts Medicaid fraud
control unit so as to preclude the I.G. from imposing a mandatory
exclusion on Petitioner. We find that the I.G. properly excluded
Petitioner under the mandatory exclusion provisions of sections
1128(a)(1). We affirm the ALJ Decision imposing a seven-year exclusion
on Petitioner.


_______________________________ Judith
A. Ballard

_______________________________ M. Terry
Johnson


______________________________ Cecilia
Sparks Ford Presiding Board Member

1. "State health care program" is defined in section 1128(h) of the
Social Security Act and includes the Medicaid program under title XIX of
the Act. Unless the context indicates otherwise, we use the term
"Medicaid" to refer to all programs listed in section