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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: Joseph M. Rukse, Jr., R.Ph.,

Petitioner,

DATE: October 16, 2002

             - v -
 

Inspector General

 

Docket No. A-02-97
Civil Remedies CR904
Decision No. 1851
DECISION
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FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE D
ECISION

The Inspector General (I.G.) appealed a May 17, 2002 decision by Administrative Law Judge (ALJ) Keith W. Sickendick, Joseph M. Rukse, Jr., R.Ph., DAB CR904 (2002) (ALJ Decision). The ALJ Decision modified the I.G.'s determination that Mr. Rukse (Petitioner) should be excluded from participation in Medicaid and all Federal Health Care Programs for a ten-year period. Instead, the ALJ determined that Petitioner should be excluded for seven years and six months.

The I.G. excluded Petitioner pursuant to sections 1128(a)(1) and (a)(4) of the Social Security Act (Act). The basis for the exclusion was Petitioner's November 13, 2001 conviction, in the United States District Court for the Southern District of West Virginia, of criminal offenses related to (i) the delivery of an item or service, under the Medicaid program, and (ii) unlawful manufacture, distribution, prescription or dispensing of a controlled substance.

The ALJ Decision was based on six findings of fact and on the following nine conclusions of law:

1. Summary judgment is appropriate in this case as there are no material facts in dispute.

2. Petitioner was convicted, within the meaning of the Act, of a criminal offense related to the delivery of an item or service, under the Medicaid program, Act, section 1128(a)(1) (42 U.S.C.

iption, or dispensing of a controlled substance, Act, section 1128(a)(4)(42 U.S.C.

§ 1320a-7(a)(4)).

3. Petitioner must be excluded from participation in any Federal health care program for a minimum period of five years pursuant to section 1128(c)(3)(B) of the Act (42 U.S.C.

§ 1320a-7(c)(3)(B)) due to his conviction.

4. The I.G. may increase the term of exclusion based on a finding of any of the aggravating factors specified at 42 C.F.R. § 1001.102(b).

5. If the I.G. finds any of the aggravating factors specified at 42 C.F.R. § 1001.102(b) justify a term of exclusion greater than the statutory minimum exclusion of five years, then the I.G. may consider the mitigating factors specified at 42 C.F.R.

§ 1001.102(c) to reduce the period of exclusion to no less than five years.

6. The range of exclusionary periods contemplated by the Act and the Secretary's regulations extend from a minimum of five years to permanent exclusion, in the case of a mandatory exclusion under section 1128(a). See Act, § 1128(c)(3)(B) and (G) (42 U.S.C. § 1320a-7(c)(3)(B) and (G)); 42 C.F.R. § 1001.102(a)

and (d).

7. Three aggravating factors have been established by the I.G. by a preponderance of the evidence: (a) the acts for which Petitioner was convicted resulted in financial loss to a government program of $1,500 or more; (b) the acts for which Petitioner was convicted occurred over a period of one year or more from September 1998 to December 1999; and (c) Petitioner's sentence included incarceration.

8. Petitioner has established by a preponderance of the evidence that one mitigating factor exists: [t]he record in the criminal proceedings, including sentencing documents, demonstrates that the court considered that the individual had a mental, emotional or physical condition before or during the commission of the offense that reduced the individual's culpability.

9. A seven year and six months exclusion (five years mandatory and a two year and six months extension) is within a reasonable range and is not unreasonable.

ALJ Decision at 3.

The I.G.'s appeal challenged only conclusions of law 8 and 9. We therefore affirm and adopt the ALJ's findings of fact numbered 1 through 6 and his conclusions of law numbered 1 through 7.

The I.G. argued that the ALJ's legal conclusion that a mitigating factor existed was erroneous as a matter of law because it misconstrued the applicable regulation, and further that it was not supported by substantial evidence in the record as a whole. The I.G. contended that the ALJ Decision was contrary to a Board decision as well as decisions by other ALJs. Thus, the I.G. maintained that the ALJ Decision should be reversed and the

ten-year exclusion should be reinstated. Petitioner filed a response to the I.G.'s appeal in which he contended that the ALJ Decision was supported by substantial evidence, and he submitted two additional exhibits. (1)

We conclude that the plain language of the applicable regulation at 42 C.F.R. § 1001.102(c)(2) requires that, in order for the mitigating factor to be applied, the court must make a determination that an individual had a condition before or during the commission of the offense that reduced the individual's culpability, and that there was not substantial evidence in the record that the court in this case made such a determination. (2) Consequently, we reverse the ALJ's conclusions of law 8 and 9 and reinstate the ten-year period of exclusion proposed by the I.G.

Standard of Review

The record for this case consists of the briefs filed before the Board (as well as Petitioner's exhibits submitted after the ALJ Decision, see footnote 1) and the briefs and exhibits admitted by the ALJ. Our standard of review on a disputed conclusion of law is whether the ALJ decision is erroneous. Our standard of review on a disputed finding of fact is whether the ALJ decision is supported by substantial evidence on the record as a whole. 42 C.F.R. § 1005.21(h).

The ALJ Decision

The following summary of the ALJ's findings of fact is not intended to replace or revise them. In his Decision, the ALJ found that Petitioner was, on the date of the I.G. action, a pharmacist licensed by the State of West Virginia and authorized to participate in Medicare, Medicaid and other Federal health care programs, although Petitioner was not working as a pharmacist at that time. The ALJ found that Petitioner had entered into a plea agreement and was adjudged guilty, pursuant to his pleas, of health care fraud, pursuant to 18 U.S.C. § 1347, and acquisition of a controlled substance by fraud, pursuant to 21 U.S.C. § 843(a)(3). On January 22, 2001, Petitioner was sentenced to: 15 months imprisonment; 3 years supervised release following his release from prison; and payment of an assessment of $200, a fine of $5,000, and restitution of $3,600.

The ALJ upheld the I.G.'s July 31, 2001 determination that the following three aggravating factors were present and provided a basis for lengthening the exclusion, beyond the mandatory five-year period:

(1) The acts resulting in the conviction, or similar acts, resulted in financial loss to a government program . . . of $1,500 or more. . . . ; (2) [t]he acts that resulted in the conviction, or similar acts, were committed over a period of one year or more; . . . (5) [t]he sentence imposed by the court included incarceration; . . . .

42 C.F.R. § 1001.102(b). Petitioner did not contest that these factors existed, but contended that the following mitigating factors were present in this case:

(2) 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 commission of the offense that reduced the individual's culpability.

(3) the individual's or entity's cooperation with Federal or State officials resulted in--

(i) Others being convicted or excluded from Medicare, Medicaid and all other Federal health care programs,

. . . .

42 C.F.R. § 1001.102(c). The ALJ rejected as baseless Petitioner's assertion of a mitigating factor under section 1011.102(c)(3), but he accepted Petitioner's assertion that the record in the criminal proceeding showed that "the court considered in sentencing that Petitioner had a mental, emotional or physical condition before or during the commission of the offense that reduced Petitioner's culpability." ALJ Decision

at 8. The ALJ rejected the I.G.'s position that the sentencing judge must make specific findings on Petitioner's culpability, stating that the I.G. cited no law supporting that proposition. The ALJ stated that there were several factors that led him to conclude that the sentencing court considered Petitioner's substance addiction in setting the length of Petitioner's sentence, and that therefore Petitioner had established by a preponderance of the evidence the existence of this mitigating factor. Since the I.G. had not taken into account this mitigating factor in setting the period of time to be added to the mandatory five-year exclusion, the ALJ concluded that the period of time the I.G. imposed was not within a reasonable range. The ALJ determined, based on his consideration of the three aggravating factors and one mitigating factor, that a seven year and six months exclusion (five years mandatory and a two year and six months extension) was within a reasonable range.

ANALYSIS
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On appeal to the Board, the I.G. contended that the regulation requires that, in order to establish the presence of this mitigating factor, "Petitioner must show that the court record in the case establishes that the court found that Petitioner had a mental, emotional, or physical condition and that the court found that the condition reduced Petitioner's culpability." I.G. Br. at 8. The I.G. argued that the plain language of the regulation, as well as the Board's decision in Frank R. Pennington, M.D., DAB No. 1786 (2001), supported its position. Further, the I.G. contended that, contrary to the ALJ's conclusions, there was no evidence in the record that the court determined either that this Petitioner had such a condition or that the condition reduced Petitioner's culpability. The I.G. maintained that since the ALJ's reduction of the exclusion period from ten years to seven years and six months was based on the erroneous application of the mitigating factor, the I.G.'s proposed ten-year exclusion should be reinstated.

We agree with the ALJ that it was not necessary for the record in the criminal proceedings to contain "specific findings" that Petitioner had a substance abuse condition at the time of the offense and that the condition reduced his culpability. The I.G. acknowledged in its appeal that an ALJ might be able to reasonably infer from a court record that the judge had made the determinations required by the regulation, even if the judge did not make a finding using the precise terms of the federal regulation. However, the I.G. contended, and we agree, that the record does not support a finding in this case that the court made the determinations required for application of the mitigating factor.

In Pennington the Board held that there must be evidence not just that the sentencing court was aware that an individual claimed a condition that could have potentially affected his culpability, but that the court made the requisite determinations:

Drug addiction, and its treatment, are not in themselves mitigating factors under the applicable regulations. Under 42 C.F.R. § 1001.102(c)(2), the criminal proceedings record must show that the criminal court determined that a mental, emotional or physical condition reduced culpability for the crime before mitigation is found. Before the ALJ, Dr. Pennington offered nothing to establish that the criminal court made such a determination about him.

Pennington at 6. With this guidance in mind, we proceed to review each of the items identified by the ALJ as supporting his conclusion that Petitioner had established by a preponderance of the evidence that this mitigating factor existed. (3)

The first fact cited by the ALJ was that the court's sentencing document adopted the factual findings and sentencing guideline application as presented in the Pre-Sentence Investigation Report (the Report), submitted by Petitioner as his Exhibit (Petitioner Ex.) 1. According to the ALJ, the Report "documents Petitioner's addiction." ALJ Decision at 8. The Report stated that Petitioner admitted that he had suffered from addiction to cough syrup during the period in which the offense was committed and claimed that he had since received treatment and recovered.

Petitioner Ex. 1 at ¶¶ 17, 53. The Report did not state that the probation officer obtained confirmation that Petitioner's statements about his past and present condition were true, other than to state that the probation officer's efforts to obtain treatment records were unavailing. Id. at ¶ 53. The Report does not contain any statement that could be construed as a recommendation that Petitioner's alleged addiction be considered as reducing his culpability for the offenses. Moreover, the probation officer did not list the alleged substance abuse as a factor in computing the sentence recommended under the applicable guidelines. On the other hand, the probation officer made several findings concerning Petitioner's increased culpability in committing these offenses: (a) she added two points to the base levels for each offense because Petitioner abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense; and (b) she added two points to the base level for the health care fraud offense because the offense involved (A) more than minimal planning, or (B) a scheme to defraud more than one victim. Id. at ¶¶ 25, 34; 25. The probation officer also stated under "Factors That May Warrant Departure" that "There are no factors concerning the offense or the offender that would warrant a departure from the prescribed guidelines," Id. at

¶ 73. In this context, it is not reasonable to infer that the sentence recommendation reflected any finding of reduced culpability due to Petitioner's alleged addiction. The judge's adoption of the Report therefore does not support a conclusion that the sentencing judge determined that Petitioner had a mental, emotional or physical condition at the time of the offense and that the condition affected his culpability.

The second item cited by the ALJ as support for application of the mitigating factor was that although the statutes Petitioner plead guilty to violating provided for a possible maximum combined sentence of 14 years incarceration, the court sentenced him to 15 months confinement, the lower range of the sentencing guideline for such offenses. As indicated by the ALJ, the judge's sentence was within the parameters determined by application of the United States Sentencing Guidelines, which apparently yielded a recommendation of 15 to 21 months rather than the 14 years permitted by strict application of the statutes. The sentencing judge did not state why he chose the period of incarceration at the lower bounds of the sentencing guidelines range, but did also state that "the court finds no reason to depart from the sentence called for by the application of the guidelines." I.G. Ex. 4 at 10. Since the Report produced pursuant to those guidelines did not recommend that Petitioner's alleged drug addiction be considered as having reduced his culpability, we see no basis for concluding that the judge made such a determination, absent any other evidence supporting such a conclusion.

The ALJ also concluded that it was a "further indication that the judge considered the impact of Petitioner's drug addiction, [that] the judge's sentence recommended that Petitioner be allowed to participate in a drug abuse treatment program." There was no explanation in the record (e.g., a recommendation from the probation officer or a request from Petitioner) as to why the judge made this recommendation. Moreover, that the judge made this provision a recommendation rather than a requirement in Petitioner's sentence weakens the inference that the judge regarded Petitioner's recovery from his alleged drug addiction to be an important component of the sentence. In addition, the implication that the judge considered or was aware of Petitioner's alleged drug addiction does not amount to the determinations required by the regulation -- that Petitioner had the condition before or during the commission of the offense and that the condition reduced Petitioner's culpability. As another ALJ held in David Yedidsion, M.D., DAB CR715 (2000), such a provision in a sentencing order establishes only that the sentencing judge recognized that the offender was currently suffering from substance abuse; it does not establish, in and of itself, that the judge found the offender's culpability to be reduced as a result of a condition that existed at the time of the offense.

Finally, the ALJ relied on the fact that although Petitioner faced a possible restitution amount of $35,000, the judge ordered him to pay only $3,600. The sentencing judge did not state or imply why he was reducing the amount of restitution and he certainly did not state that it was in recognition of Petitioner's having a condition before or during the commission of the offense that reduced his culpability. While Petitioner had agreed in the plea agreement to pay $35,000, the Report stated that this amount had already been refunded to Medicaid by Petitioner's former employer. The Report, which was prepared after the plea agreement was accepted by the court, therefore recommended ". . . should the court see [sic] to order restitution on the stolen drug amount and on the investigative costs, the total amount of restitution owed by Petitioner would be $17,000." Petitioner Ex. 1 at ¶ 18. (4) Thus, the reduction in restitution was not as great as indicated by the ALJ. In addition, the Report contained a section entitled "Financial Condition: Ability to Pay," which reported that Petitioner had filed for bankruptcy and had a net worth of negative $11,541 and net monthly cash flow of $242. Id. at ¶¶ 57-58. As the I.G. suggested, the court may have reduced the restitution ordered due to Petitioner's insolvency. Without any evidence in the sentencing documents to link the reduction in restitution amount to Petitioner's culpability and, given other statements in the probation officer's report and by the sentencing judge, the ALJ could not reasonably attribute the reduction in restitution amount to a determination of reduced culpability. We therefore conclude that the reduction does not support a finding that the Petitioner proved by a preponderance of the evidence that the court made the determinations required for applying the mitigating factor.

In his response to the I.G.'s appeal, Petitioner contended that the ALJ correctly determined that Petitioner's addiction existed at all relevant times and that the sentencing court determined that he had a mental, emotional, or physical condition before or during the commission of the offense that reduced his culpability. In support of his contention, Petitioner noted that the Report showed:

at the time of sentencing Petitioner was in "good physical health;" "not under a doctor's care" and "not taking any prescribed medications." Pet. Ex 1, ¶ 51. However, the documents also verifies [sic] Petitioner's active participation in the Pharmacists Recovery Organization of Ohio (PRO) "a program for professionals with drug problems." Id at ¶ 43.

Petitioner Br. at 7 (emphasis in original). Petitioner is mistaken in his analysis of the relevant issue in this case, because the regulation clearly focuses on the individual's condition at the time of the offense, not at the time of the sentencing. This mitigating factor goes to whether an individual's culpability was reduced by a condition existing before or during commission of the offense, not to whether the individual has since recovered and is presently trustworthy. Consequently, Petitioner's contentions, and the exhibits provided in support of them, do not provide a basis for application of the mitigating factor.

We therefore conclude that Petitioner did not establish by a preponderance of the evidence in the record that a mitigating factor existed.

Appropriate Period of Exclusion

The I.G. contended that if the Board held that no mitigating factor was established, we should reinstate the ten-year period of exclusion. Petitioner had agreed in the proceedings before the ALJ that the Act provided for a mandatory period of exclusion for five years for the offenses to which he pled guilty and further that the three aggravating circumstances cited by the I.G. were established by the record.

The ALJ properly stated that his role was to conduct a de novo review of the existence of aggravating and mitigating factors identified at 42 C.F.R. § 1001.102 and determine whether the length of exclusion sought to be imposed by the I.G. falls within a reasonable range. ALJ Decision at 6. The ALJ Decision further stated that the "reasonable range" of mandatory exclusions is "from the minimum of 5 years to a maximum of permanent exclusion." Id. The ALJ continued: "This is the only range I have found specified in the law and it seems to be 'reasonable.'" Id. We previously addressed a similar statement by the same ALJ and noted:

Under this reasoning, any exclusion period between five years and a permanent exclusion would be within a reasonable range and must be upheld in every case. As the Board has previously noted, however, the preamble to the regulations governing exclusions states that "[s]o long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule." See, e.g., Joann Fletcher Cash, DAB No. 1725 (2000), at 17, quoting 57 Fed. Reg. 3298, 3321 (1992). Thus, a "reasonable range" refers to a range of exclusion periods that is more limited than the full range authorized by the statute and that is tied to the circumstances of the individual case. If the ALJ determines that the length of the exclusion imposed by the I.G. is within this range under the circumstances as found by the ALJ, he may not change it even if he believes that another exclusion period is more reasonable. The same limitations apply to our consideration of the appropriate length of exclusion in this case.

Gary Alan Katz, R.Ph., DAB No. 1842 at 8, n.4 (2002).

In considering the aggravating and mitigating factors present in this case, the ALJ concluded that the I.G. established three aggravating factors; his reduction of the exclusion period was based solely on the alleged existence of a mitigating factor that the I.G. had not considered. The ALJ correctly noted that "The DAB has indicated that it is not the number of aggravating factors that is determinative rather, it is the quality of the circumstances, whether aggravating or mitigating, which is controlling in analyzing these factors. Barry D. Garfinkel, M.D., DAB No. 1572 (1996)." ALJ Decision at 6-7. The three aggravating circumstances established by the I.G. were (a) the acts for which Petitioner was convicted resulted in financial loss to a government program of $1,500 or more; (b) the acts for which Petitioner was convicted occurred over a period of one year or more from September 1998 to December 1999; and (c) Petitioner's sentence included incarceration. We have examined the exhibits provided to the ALJ by the I.G. and Petitioner and conclude for the following reasons that the I.G.'s imposition of a five-year extension to the mandatory five-year exclusion period is within a reasonable range based on the quality of the circumstances.

According to the Pre-Sentence Investigation Report submitted by Petitioner, the loss to the Medicaid program was found to be $50,000--$35,000 in fraudulent claims and $15,000 in investigative costs. Petitioner Ex. 1 at ¶ 18. That this sum was eventually restored to the Medicaid program by Petitioner's employer does not negate the applicability of this factor to Petitioner, as the regulation specifically provides, "The entire amount of financial loss to such programs or entities, including any amounts resulting from similar acts not adjudicated will be considered regardless of whether full or partial restitution has been made." 42 C.F.R. § 1001.102(b)(1). Restitution does not reduce the magnitude of the fraud perpetrated by Petitioner. Stacy Ann Battle, D.D.S., DAB No. 1843 (2002); Paul W. Williams & Grand Coteau Prescription, DAB No. 1785 (2001). The loss amount is unquestionably many times the $1,500 specified in the regulation.

In addition, the acts for which Petitioner was convicted occurred over a 16-month period. As noted by the probation officer, Petitioner repeatedly misused his position of trust as a pharmacist to defraud the Medicaid program in order to conceal recurrent thefts from his employer. The reason Petitioner's fraud stopped at that point was because the fraud was discovered. The Report noted that Petitioner was placed on administrative leave by his employer on December 10, 1999. Petitioner Ex. 1

at ¶ 8.

Moreover, Petitioner's sentence included incarceration. Petitioner was sentenced to 15 months in prison, based on the recommendation of the Report and the judgment of the judge who had accepted his guilty plea.

Under these circumstances, we conclude that the ten-year period of exclusion imposed by the I.G. is within a reasonable range.

Conclusion

We affirm conclusions of law 1 through 7. We reverse conclusions of law 8 and 9 and replace them with the following:

8. Petitioner has not established by the preponderance of the evidence the presence of any mitigating factors under 42 C.

§ 1001.102(c).

9. A ten-year exclusion is within a reasonable range and is not unreasonable.

JUDGE
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Judith A. Ballard

Marc R. Hillson

M. Terry Johnson
Presiding Panel Member

FOOTNOTES
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1. Petitioner's response to the I.G. appeal was filed five weeks late, after the Board had issued an Order to Show Cause why it should not close the record and proceed to decision without further delay. The response brief did not explain or even acknowledge the late filing, nor did it ask for an extension of time to permit the late filing. In addition, the response brief included two additional exhibits without any explanation for why the Board should accept them. See 42 C.F.R. § 1005.21(f). The I.G. filed a motion to disallow the late filing. Rather than penalize Petitioner for his counsel's errors, and in order to correct the misapprehension of the law contained in the brief, the Board has decided to exercise its discretion to accept the late submission.

2. In order to expedite the resolution of this case, we are reaching this issue rather than remanding the case to the ALJ. The Board has the option under 42 C.F.R. § 1005.21(g) of issuing a decision or remanding a case to the ALJ. The I.G. requested that the Board issue a decision, and Petitioner did not oppose that request.

3. We note that Petitioner only generally asserted the applicability of this mitigating factor before the ALJ. He did not support his assertion with citations from the sentencing documents or by urging the ALJ to draw the inferences that he ultimately drew. As we discuss below, Petitioner contended before the Board that the sentence imposed on him reflected the sentencing judge's determination that Petitioner was by that time in recovery from his substance abuse problems. Petitioner did not contend that the sentencing judge determined that Petitioner's culpability at the time of the offense was reduced by those problems.

4. Upon investigation it was determined that the $35,000 paid by Medicaid to Petitioner's employer as a result of documents submitted by him to conceal his fraud were for drugs that were invoiced to Medicaid but were never actually ordered. Consequently, following his conviction, Petitioner's employer repaid the $35,000 to Medicaid. The $17,000 restitution amount found by the probation officer consisted of $15,000 in investigative costs that Petitioner's employer had paid to the U.S. Attorney and approximately $2,000 for the estimated amount of cough syrup Petitioner stole from the company. I.G. Br. at 16; P Ex. 1 at 7-8.

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES