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                              Marc Irwin Korn, DAB CR5786 (2020)
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Marc Irwin Korn, DAB CR5786 (2020)








  
  
    

  
      
Department of Health and Human Services 
    DEPARTMENTAL APPEALS BOARD
          Civil Remedies Division





Marc Irwin Korn,
(OI File No. H-19-41708-9),
Petitioner,

v.

The Inspector General,

Respondent.
Docket No. C-20-328Decision No. CR5786December 23, 2020

        
              
    

      DECISION

Respondent, the Inspector General of the United States Department of Health and Human Services (the IG), excluded Petitioner, Marc Irwin Korn, from participation in Medicare, Medicaid, and all other federal health care programs for 10 years based on his convictions for criminal offenses related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.  Petitioner sought review of the exclusion.  For the reasons stated below, I affirm the IG’s exclusion determination.

I.  Procedural History

By letter dated December 31, 2019, the IG notified Petitioner he was being excluded, effective 20 days from the date of the letter, from participation in Medicare, Medicaid, and all federal health programs under section 1128(b)(1) of the Social Security Act (Act)

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(42 U.S.C. § 1320a-7(b)) for 10 years.  IG Exhibit (Ex.) 1.1
  The IG explained she took this action based on Petitioner’s convictions in the U.S. District Court for the Western District of New York (District Court) for misdemeanor offenses related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service, including the performance of management or administrative services relating to the delivery of such items or services; or with respect to any act or omission in a health care program, other than Medicare and a State health care program, operated by, or financed in whole or in part by, any Federal, State or local Government agency; or of a criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct with respect to any act or omission in a program, other than a health care program, operated by or financed in whole or in part by any Federal, State or local Government agency.  *Id*. at 1.

Petitioner timely sought hearing before an Administrative Law Judge (ALJ) in the Civil Remedies Division, and I was designated to hear and decide this case.  I held a pre-hearing telephone conference on June 3, 2019, the substance of which is set forth in my June 3, 2019 Order Summarizing Pre-hearing Conference and Setting Briefing Schedule (Summary Order).  *See* 42 C.F.R. § 1005.6.  Among other things, I directed the parties to file pre-hearing briefs articulating their respective arguments as well as identifying witnesses and exhibits in support thereof.  Summary Order at 3-5.

The IG filed a brief (IG Br.) and eight exhibits (IG Exs. 1-8), while Petitioner filed a brief (P. Br.), and one exhibit.2
  The IG subsequently filed a reply brief (IG Reply).

II.  Admission of Exhibits and Decision on the Record

Neither party objected to the opposing party’s proposed exhibits.  I therefore enter IG Exs. 1 through 8 and P. Ex. 1 into the record.  Both parties indicated that a hearing is not necessary in this case and identified no witnesses.  P. Br. at 4; IG Br. at 24.  Accordingly, I will decide this case on the briefs submitted and the exhibits of record.

Page 3

III.  Issues

Whether the IG had a basis to exclude Petitioner from participating in Medicare,
Medicaid, and all other federal health care programs pursuant to section 1128(b)(1) of the Act, and whether the length of the proposed exclusion is unreasonable.  42 C.F.R. § 1001.2007(a)(1).

IV.  Applicable Law

Section 1128(f) of the Act provides Petitioner with rights to an ALJ hearing and judicial review of the final action of the Secretary of Health and Human Services (Secretary).  42 U.S.C. § 1320a-7(f).  The right to a hearing before an ALJ is set forth at 42 C.F.R. §§ 1001.2007(a) and 1005.2, and the rights of both the sanctioned party and the IG to participate in a hearing are outlined at 42 C.F.R. § 1005.3.  The parties may choose to waive appearance at an oral hearing and submit documentary evidence and written argument for my consideration to receive a decision on the record.  *See*42 C.F.R. § 1005.6(b)(5).

Section 1128(b)(1)(A) of the Act permits the Secretary to exclude from participation in any federal health care program an individual 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 a health care item or service, or with respect to any act or omission in a health care program, operated by or financed in whole or in part by any federal, state, or local government agency.  42 U.S.C. § 1320a-7(b)(1)(A); 42 C.F.R. § 1001.201(a)(1)(i)-(ii).

Under section 1128(i) of the Act, an individual is convicted of a criminal offense when: (1) a judgment of conviction has been entered against him or her in a federal, state, or local court, regardless of whether an appeal is pending or whether the record of the conviction is expunged; (2) there is a finding of guilt by a court; (3) a plea of guilty or no contest is accepted by a court; or (4) the individual has entered into any arrangement or program where judgment of conviction is withheld.  42 U.S.C. § 1320a-7(i).  Before me, a petitioner may not collaterally attack the conviction that provides the basis of the exclusion.  42 C.F.R. § 1001.2007(d).

Section 1128(c)(3)(D) of the Act provides for a three-year period of exclusion under section 1128(b)(1) of the Act unless the Secretary determines, in accordance with published regulations, that mitigating circumstances warrant a shorter period, or that aggravating circumstances warrant a longer period of exclusion.  *See*42 C.F.R. § 1001.201(b).  Authorized aggravating and mitigating factors are set forth at 42 C.F.R. § 1001.201(b)(2) and (3).  Exclusion is effective 20 days from the date of the notice of exclusion.  42 C.F.R. § 1001.2002(b).

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The standard of proof is a preponderance of the evidence.  42 C.F.R. § 1001.2007(c).  Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors, while the IG bears the burden on all other issues.  42 C.F.R. § 1005.15(b).

V.  Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold and followed by pertinent findings of fact and analysis.

**A.  Petitioner’s request for hearing was timely, and I have jurisdiction.**

Petitioner timely requested a hearing.  I have jurisdiction to hear and decide this case.  *See* 42 C.F.R. §§ 1001.2007(a)(1)-(2), 1005.2(a); *see also* 42 U.S.C. § 1320a-7(f)(1).

**B.  There is a basis for Petitioner’s exclusion pursuant to section 1128(b)(1)(A) of the Act.**

The Secretary may exclude from participation in any federal health care program an individual 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 a health care item or service.  42 U.S.C. § 1320a-7(b)(1)(A).  An individual’s criminal conviction in connection with the delivery of a health care item or service can include “the performance of management or administrative services relating to the delivery of such items or services.”  42 C.F.R. § 1001.201(a)(1)(i).  Based on the entirety of the record before me, the IG has established these elements by a preponderance of the evidence.

The Internal Revenue Service (IRS) and the Federal Bureau of Investigation (FBI) conducted a joint investigation into Petitioner that culminated in the filing of a criminal complaint against him on May 17, 2011.  *See*IG Ex. 2.  IRS Special Agent Michael K. Klimczak, the complaining agent, asserted the joint investigation demonstrated Petitioner had embezzled funds from a charitable organization3
 for which he served as a director as well as two nursing homes he owned and operated, Batavia Nursing Home (Batavia) and Fairchild Manor Nursing Home (Fairchild).  *Id.* at 2-3. Special Agent Klimczak stated that beginning in early 2006 and continuing through August 2009, Petitioner had funded “an extravagant lifestyle by embezzling monies for personal use from a number of

Page 5

sources, beginning with American Friends, and moving on to his nursing home businesses, taking money from patient trust accounts, as well as failing to remit to the IRS significant payroll taxes withheld from employee salaries.”   *Id.* at 3-4.  Special Agent Klimczak claimed his investigation revealed Petitioner “converted $900,000.00 and $1,000,000.00 of charitable or company funds to his own use.”  *Id.* at 4.

The United States subsequently charged Petitioner with four counts of wire fraud encompassing a scheme to defraud, as well making a false statement.  IG Ex. 3.  On June 28, 2012, the United States filed a superseding indictment re-alleging the previous charges against Petitioner and adding four counts for failure to pay taxes concerning Batavia and Fairchild.  IG Ex. 4 at 13-21.  On November 9, 2018, the United States filed a superseding misdemeanor information charging Petitioner with one count of Bank Theft, in violation of 18 U.S.C. § 2133(b), and one count of Willful Failure to Pay Over Tax, in violation of 26 U.S.C. § 7203.  IG Ex. 5 at 1-2.  Petitioner resolved these charges against him by entering into a written plea agreement on November 9, 2018, wherein he pleaded guilty to the superseding misdemeanor information and explicitly agreed to certain facts set forth in the plea agreement that provided the factual basis for the charges against him.

Concerning the bank theft charge, Petitioner admitted he sought to buy out his partner in his nursing home business by arranging to refinance Batavia.  IG Ex. 6 at 3-4.  Fifth Third Bank (Fifth Third) agreed to loan Petitioner $3,900,000.00 but required him to provide a personal guaranty and financial statement.  *Id.* at 4.  In order to secure the loan, Petitioner knowingly and falsely inflated the value of his home.  *Id.*  Petitioner also inflated his apparent net worth by falsely claiming ownership of certain accounts and providing documentation of balances contained within those accounts which were false.  *Id.*  As a result, Fifth Third disbursed the loan to Petitioner in June 2008.  IG Ex. 6 at 3, 4.

In October 2008, Petitioner used a Fifth Third credit card to purchase airline tickets for $429.00.  *Id.* at 3.  He admitted he did not intend to repay Fifth Third.  *Id.*  By December 2008, Petitioner owed $59,714.34 to Fifth Third on that credit account but failed to make a payment.  *Id.*Fifth Third subsequently wrote off Petitioner’s account and sustained a loss of $60,998.76.  *Id.*Petitioner ultimately defaulted on the loan, and Fifth Third suffered a loss of $2,343,107.00.  *Id.*  The total loss to Fifth Third was $2,404,105.76.  *Id.*; IG. Ex. 6 at 11; IG Ex. 7 at 6.

Concerning the willful failure to pay tax charge, Petitioner admitted he was the sole owner of both Fairchild and Batavia after reincorporating both entities as single-member limited liability corporations in January 2008.  IG Ex. 6 at 4, 5.  He admitted that he was required by law to withhold and pay over employment taxes for the staff of both facilities.  *Id.*at 5, 6.  Petitioner acknowledged that prior to his sole ownership, an outside company handled weekly payroll for both Fairchild and Batavia, but that he stopped using that company in March 2009 and claimed he would assume responsibility for the

Page 6

payment of quarterly taxes and the preparation of quarterly tax returns for both entities.  *Id.*

Petitioner admitted he failed to pay taxes for both Fairchild and Batavia in quarterly tax returns in 2009 and 2010, though both nursing homes had sufficient income for him to pay these taxes.  *Id.*  Petitioner admitted he instead used funds from the Fairchild and Batavia accounts for his personal expenses, “which included payments on a personal American Express card, for personal health insurance, for restaurants, for his children’s college tuition, for hockey tickets and for jewelry.”  *Id.* at 5.  Petitioner admitted that as a result of his conduct, the United States sustained a tax loss related to Fairchild and Batavia of $858,614.95.  *Id.* at 6.

The District Court accepted Petitioner’s plea and entered judgment against him on April 5, 2019.  IG Ex. 7.  The District Court sentenced Petitioner to 18 months of incarceration and ordered him to pay restitution totaling $3,445,273.48 to multiple entities including Fifth Third, American Friends, and the IRS.  *Id.*at 2, 6.

***1. Petitioner was convicted under Federal law of an offense that occurred after August 21, 1996 within the meaning of section 1128(i) of the Act.***

Section 1128(i)(1) of the Act provides that an individual is convicted of a criminal offense when a judgment of conviction has been entered against him or her in a federal, state, or local court, regardless of whether an appeal is pending or whether the record of the conviction is expunged.  42 U.S.C. § 1320a-7(i)(1); 42 C.F.R. § 1001.2(a).  Section 1128(i)(3) of the Act also provides that an individual is convicted “when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court.”  42 U.S.C. § 1320a-7(i)(3); 42 C.F.R. § 1001.2(c).

The record clearly establishes that Petitioner was convicted within the meaning of section 1128(i)(1) and (3) of the Act.  Petitioner pleaded guilty to one count of Bank Theft and one count of Willful Failure to Pay Over Tax on November 9, 2018.  IG Ex. 6 at 2-6.  The District Court entered judgment against him on April 8, 2019.  IG Ex. 7 at 1.  Petitioner concedes he was convicted of a criminal offense.  P. Br. at 2.  I therefore conclude that Petitioner was convicted of a criminal offense that occurred after August 21, 1996, as contemplated by 42 U.S.C. § 1320a-7(b)(1).

***2. Petitioner’s convictions were related to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct.***

There is ample evidence to conclude Petitioner’s offenses of conviction related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.  The term “related to” simply means that there must be a nexus or common-sense connection.  *See Friedman v. Sebelius*, 686 F.3d 813, 820 (D.C. Cir. 2012) (describing

Page 7

the phrase “related to” in another part of section 1320a-7 as “deliberately expansive words,” “the ordinary meaning of [which] is a broad one,” and one that is not subject to “crabbed and formalistic interpretation”) (internal quotation marks omitted); *Roberto Kutcher-Olivio, M.D.*, DAB No. 1837 (2002) (holding the petitioner’s conviction related to “financial misconduct” because he inappropriately used government funds related to a corporation that he managed and controlled.); *Richard E. Bohner*, DAB No. 2638 (2015) (“The Board has held that section 1128(b)(1) of the Act ‘does not restrict exclusions to only offenses constituting or consisting of fraud, but requires merely that the offense at issue be one ‘relating to’ fraud.’”).

It is difficult to imagine a circumstance where convictions for Bank Theft and Willful Failure to Pay Over Tax could ever fail to relate to theft, breach of fiduciary responsibility, or financial misconduct.  But under any label, Petitioner’s criminal offense conduct clearly related to the financial crimes contemplated by section 1128(b)(1) of the Act.  Petitioner falsified his personal financial statements in order to induce Fifth Third to disburse a $3,900,000.00 loan so he could secure sole ownership of two nursing homes.  Petitioner admitted to spending the credit extended to him by Fifth Third with no intention of repaying the bank.  These criminal acts cannot be described as anything but fraud and theft.  I therefore conclude that Petitioner’s convictions for Bank Theft and Willful Failure to Pay Over Tax are related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct as contemplated by 42 U.S.C. § 1320a-7(b)(1)(A).  *See also* 42 C.F.R § 1001.201(a)(1).

***3. Petitioner’s offenses of conviction were in connection with the delivery of a health care item or service, including the performance of management or administrative services relating to the delivery of such items or services.*******

The IG asserts that Petitioner’s offenses of conviction were in connection with the delivery of a health care item or service, including the performance of management or administrative services relating to the delivery of such items or services.  IG Br. at 12-15.  Petitioner argues his conviction cannot support an exclusion action because the elements of 18 U.S.C § 2113, the basis of his Bank Theft conviction, do not include the elements necessary to permit exclusion, namely that the criminal offense relate to the delivery of a health care item or service.  P. Br. at 2.

Petitioner’s belief that the criminal statute under which he was convicted must explicitly mention all the elements to warrant an exclusion action is without merit.  The Board has repeatedly held that the basis for the federal exclusion authority need not appear in the charges or associated court documents but may instead be demonstrated by extrinsic evidence of the underlying facts and circumstances of the offense.  *Narendra M. Patel, M.D.*, DAB No. 1736 at 7 (2000), *aff’d, Patel v. Thompson*, 319 F.3d 1317 (11th Cir. 2003), *cert. denied*, 539 U.S. 959 (2003); *Berton Siegel, D.O.*, DAB No. 1467 (1994); *Carolyn Westin*, DAB No. 1381 (1993); *DeWayne Franzen*, DAB No. 1165 (1990).

Page 8

Instead, the Act permits the Secretary to exclude an individual who has been “convicted for an offense which occurred . . . in connection with the delivery of a health care item or service . . . .”  42 U.S.C. § 1320a-7(b)(1).  The Board has interpreted the phrase “in connection with” to require only a “common sense connection” between the circumstances of the offense and the delivery of a health care item or service.  *W. Scott Harkonen, M.D.*,DAB No. 2485 at 7 (2012) (citing *Ellen L. Morand*, DAB No. 2436 at 9 (2012); *Charice D. Curtis*, DAB No. 2430 at 5 (2011)).

Here, it is readily apparent that Petitioner’s offenses of conviction occurred in connection to the delivery of a health care item or service, which can include “the performance of management or administrative services relating to the delivery of such items or services.”  42 C.F.R. § 1001.201(a)(1)(i).  Petitioner admitted he became the sole owner of both Fairchild and Batavia after reincorporating both entities in January 2008.  IG Ex. 6 at 4, 5.  In order to obtain the funds necessary to acquire sole ownership of these nursing homes, he admitted to defrauding Fifth Third by misrepresenting his personal financial worth.  *Id.*Committing criminal acts to obtain sole ownership of two nursing homes satisfies the Act’s requirement that such criminal conduct be related to the delivery of a health care item or service.

While it would be absurd to conclude Congress did not intend to permit the Secretary to exclude individuals who commit crimes in order to acquire health care entities, Petitioner would still be subject to exclusion because he abused his authority and committed criminal offenses after becoming the owner of Fairchild and Batavia, criminal offenses that occurred in connection to the delivery of health care items or services.

First, Petitioner’s criminal offenses occurred in connection to the delivery of health care items or services because he could not have committed the crimes for which he was convicted without an ownership interest in and sole managerial authority over two nursing homes.  As sole owner of Fairchild and Batavia, he necessarily performed management and administrative services for both nursing homes.  IG Ex. 6 at 4-6.  In that capacity, Petitioner failed to pay the requisite tax payments for both facilities and diverted facility funds for his own use.  His criminal offenses therefore occurred in connection to the performance of management or administrative services relating to the delivery of health care items or services.  *Curtis*, DAB No. 2430 at 6 (finding offenses of conviction were committed in connection with the delivery of a health care item or service because “. . . Petitioner was able to commit the offense because of her position as the administrator of a health care agency, even if she was not actually engaged in the delivery of health care items or services.”).

Petitioner’s criminal conduct otherwise occurred in connection to the delivery of health care items or services because his theft of facility funds intended to pay employment taxes left both Fairchild and Batavia exposed to tax liabilities that would have required these facilities to expend financial resources that could not be used for the care of their

Page 9

residents.  *Id.* at 5 (observing the fact of petitioner’s employment by a health care provider meant that she had “criminally appropriated money that derived from and could have otherwise been used to fund the provision of health care items or services.”).

I therefore have no difficulty concluding that Petitioner’s offenses of conviction were in connection with the delivery of a health care item or service, including the performance of management or administrative services relating to the delivery of such items or services, as contemplated by 42 U.S.C. § 1320a-7(b)(1)(A)(i).  *See* 42 C.F.R § 1001.201(a)(1)(i).

***4. The IG has proven three aggravating factors exist to support an exclusion period beyond the three-year statutory minimum.***

The regulations establish aggravating factors that the IG may consider to lengthen the period of exclusion beyond the three-year minimum period of exclusion required by section 1128(b)(1).  42 C.F.R. § 1001.201(b)(2).  Here, the IG relied on three aggravating factors to justify excluding Petitioner for 10 years, namely, that:  (1) Petitioner’s criminal conduct caused or intended to cause a financial loss to a Government agency or program or to one or more entities of $50,000 or more, (2) the sentence imposed for those acts included incarceration, and (3) Petitioner had been the subject of another adverse action by any Federal, State or local government agency or board for the same set of circumstances that served as the basis for the imposition of the exclusion.  IG Ex. 1 at 2.  42 C.F.R. §§ 1001.201(b)(2)(i),(iv), (vii).  The IG met her burden to demonstrate the presence of the three aforementioned aggravating factors, and thus appropriately relied upon them to increase Petitioner’s period of exclusion.

***a. The IG established the acts resulting in Petitioner’s conviction caused or were intended to cause a financial loss to a Government agency or program or to one or more entities of $50,000 or more.***

The IG relies on Petitioner’s court-ordered restitution totaling $3,445,273.48 to support exercising her discretion to increase his period of exclusion to 10 years.  IG Br. at 21; *see*42 C.F.R. § 1001.201(b)(2)(i).  Though he does not address this factor in his brief, Petitioner did argue in his request for hearing that the IG is “factually incorrect” because he only pleaded guilty to one count of Bank Theft involving a $429.00 JetBlue airline ticket financed by Fifth Third.  P. Req. for Hearing at 2.

Petitioner’s claim is without merit.  It is well-established that restitution, as opposed to a specific charged amount, is a valid measure of program loss.  *See,* *e.g.*,*Hussein Awada, Md.,* DAB No. 2788 at 7 (2017); *Sushil Aniruddh Sheth, Md.*, DAB No. 2491 at 10 (2012); *Craig Richard Wilder*, DAB No. 2416 at 9 (2011);*Jeremy Robinson*, DAB No. 1905 at 11 (2004).  Any restitution ordered in an amount that is “very substantially

Page 10

greater than the statutory standard” should be given “significantly more weight, [thus] characterizing it as an exceptional aggravating factor.”  *Robinson,* DAB No. 2416 at 11.

Here, Petitioner admitted that his criminal conduct had resulted in a total loss of $3,445,273.48 to various entities and government agencies.  IG Ex. 6 at 11, 13.  Even if the IG onlyconsidered the amount of restitution owed to Fifth Third and the IRS, Petitioner would still owe $3,262,720.71.  This amount *alone* is almost 65 times greater than the $50,000.00 loss amount necessary to permit application of this aggravating factor.  The IG reasonably relied on this “exceptional aggravating factor” to lengthen Petitioner’s period of exclusion.  *Robinson,* DAB No. 2416 at 11.

***b. The IG established the sentence imposed against Petitioner included a period of incarceration.***

The IG asserts, and Petitioner does not dispute, that Petitioner’s sentence included a period of incarceration.  In his hearing request, Petitioner did cite his pending motions in District Court asking for his sentence to be reduced, presumably to establish his sentence of incarceration might at some point be overturned.  P. Req. for Hearing at 2; P. Ex. 1.  But Petitioner may not collaterally attack the conviction that provides the basis of the exclusion before me.  42 C.F.R. § 1001.2007(d).  The IG has established that the District Court sentenced Petitioner to 18 months of incarceration.  IG Ex. 7 at 2.  The IG reasonably relied on Petitioner’s sentence of incarceration as an aggravating factor to lengthen the period of his exclusion.

***c. The IG established Petitioner has been the subject of any other adverse action by a Federal, State or local government agency if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion.***

The IG asserts that the New York Office of the Medicaid Inspector General also excluded Petitioner from the New York Medicaid program and notified him of the exclusion on July 17, 2019.  IG Ex. 8.  Petitioner argues the IG improperly relied on his exclusion by New York’s Medicaid program as an aggravating factor because the IG excluded him before New York’s exclusion action.  P. Br. at 2-3.  But Petitioner’s claim is erroneous; the New York Medicaid program excluded him on July 17, 2019, while the IG did not exclude him until December 31, 2019.  IG Exs. 1, 8.  The IG could therefore properly consider the prior action by the New York Medicaid program.

That program excluded Petitioner because he was convicted of a crime “which relates to or results from a) the furnishing of or billing for medical care, services or supplies; or b) participation in the performance of management or administrative services relating to furnishing medical care, services or supplies.”  IG Ex. 8 at 1; *see also*18 N.Y.C.R.R. §§ 504.1(d)(5), 515.7(c).  18 N.Y.C.R.R. § 515.7(c)(2) nearly mirrors the language

Page 11

contained in 42 C.F.R. § 1001.201(a)(1)(i), stating an individual can be excluded if his criminal conviction “was in connection with the delivery of any health care item or service, including the performance of management or administrative services relating to the delivery of such items or services.”  It is therefore clear the New York Medicaid program excluded Petitioner for the same set of circumstances that resulted in his misdemeanor convictions for Bank Theft and Willful Failure to Pay Over Tax.  The IG appropriately applied this aggravating factor to lengthen Petitioner’s period of exclusion.

***5. Petitioner did not prove any mitigating factors exist in this case upon which I may rely to reduce the exclusion period.***

Where the IG has properly exercised her discretion to increase the exclusionary period, as she has done here, I may only reduce that period based on the specific mitigating factors provided at 42 C.F.R. § 1001.201(b)(3).  Petitioner has the burden to prove by a preponderance of the evidence that there is a mitigating factor or factors for me to consider.  42 C.F.R. § 1005.15(c); *see* Summary Order at 4.

In this case, Petitioner argues for mitigation but has failed to establish the existence of a mitigating factor I am permitted to consider to reduce the period of his exclusion.  Petitioner asserts mitigation is appropriate because his convictions do not “reference any inappropriate Medicaid or Medicare receipt of funds,” and because there was no “improper disbursement of controlled substances.”  P. Br. at 4.  But these are not valid grounds for mitigation recognized by the regulations.  *See* 42 C.F.R. § 1001.201(b)(3).  I therefore cannot consider Petitioner’s arguments for mitigation, whatever their merit.  Petitioner has not met his burden to establish any mitigating factors that would justify reducing the period of exclusion.

***6. A ten-year exclusion period is not unreasonable.***

I uphold the IG’s determination as to the length of exclusion unless it is unreasonable.  42 C.F.R. § 1001.2007(a)(1)(ii).  It is important to note that it is the quality of the aggravating (or mitigating) factors that is most important when considering the length of exclusion, not the number of aggravating factors that are present in a given case.  As stated in the preamble to the final rule establishing the exclusion regulations:

We do not intend for the aggravating and mitigating factors to have specific values; rather, these factors must be evaluated based on the circumstances of a particular case.  For example, in one case many aggravating factors may exist, but the subject’s cooperation with the OIG may be so significant that it is appropriate to give that one mitigating factor more weight than all of the aggravating.  Similarly, many mitigating factors may exist in a case, but the acts could have

Page 12

had such a significant physical impact on program beneficiaries that the existence of that one aggravating factor must be given more weight than all of the mitigating.  The weight accorded to each mitigating and aggravating factor cannot be established according to a rigid formula, but must be determined in the context of the particular case at issue.

57 Fed. Reg. 3298, 3314-15 (Jan. 29, 1992).

Here, the quality of the aggravating factors proven by the IG demonstrates a longer exclusion period to be not unreasonable.  Petitioner was ordered to pay a total of $3,445,273.48 in restitution.  First, while Petitioner makes much of the fact that he was only convicted of misdemeanor crimes, P. Br. at 3, the amount of loss he caused clearly suggests he committed serious offenses that warrant an increased period of exclusion.  Petitioner was ordered to pay $2,404,105.76 to Fifth Third, $132,195.16 to American Friends, $50,357.61 to GE Capital Finance, and $858,614.95 to the IRS.  Petitioner’s crimes resulted in losses to the government, two banks, and a charity.  This does not even include the potential harm he wrought on two nursing homes and their staff members, who provide care to a vulnerable patient population.  Petitioner’s willingness to purposefully mismanage two skilled nursing facilities for his own personal gain shows him to be extraordinarily untrustworthy.  The colossal amount of court-ordered restitution Petitioner was required to pay as a condition of his sentence leads me to conclude that the IG gave reasonable weight to this aggravating factor.

Petitioner’s sentence of 18 months of incarceration similarly reflects the severity of his offenses.  As the Board has observed, the imposition of a sentence of incarceration can be viewed as a “reasonably proxy . . . for untrustworthiness in the context of deciding how much weight to give the aggravating factor for incarceration.”  *Hussein Awada, M.D.*,DAB No. 2788 at 11 (2017), quoting *Eugene Goldman, M.D., a/k/a Yevgeniy Goldman*, DAB No. 2635 at 10 (2015).Here, the fact the District Court imposed an 18-month sentence of incarceration is substantial, particularly given Petitioner’s lack of criminal history and the non-violent nature of his offenses.  By comparison, the Board determined a nine-month period of incarceration to be “relatively substantial” and sufficient to support an eight-year exclusion period.  *Jason Hollady, M.D.*, DAB No. 1855 at 12 (2002).  The imposition of a significant length of incarceration for Petitioner’s conduct leads me to conclude the IG gave reasonable weight to this aggravating factor.

Petitioner’s criminal offense conduct also resulted in his exclusion by another government body, in this case the New York state Medicaid program, which excluded Petitioner for the same conduct which resulted in the misdemeanor convictions at issue before me.  The fact that a state program, bearing a similar obligation to protect the integrity of its program and the safety of its beneficiaries, found Petitioner’s conduct to

Page 13

warrant exclusion leads me to conclude that the IG gave reasonable weight to this aggravating factor.

Given the nature of Petitioner’s offenses, I conclude that the IG has established the existence and the significant weight of the aggravating factors, and demonstrated she adequately considered those factors in imposing a 10-year period of exclusion.  As a result of his convictions, Petitioner was ordered to pay $3,445,273.48 in restitution, was sentenced to 18 months of incarceration, and was subsequently excluded by the state of New York from participating in its Medicaid program.  Under these circumstances, the length of exclusion imposed by the IG is not unreasonable.

VI.  Conclusion

For the foregoing reasons, Petitioner is excluded from participation in Medicare, Medicaid, and all federal health care programs for 10 years pursuant to section 1128(b)(1)(A) of the Act (42 U.S.C. § 1320a-7(b)(1)(A)), as of January 20, 2020.


          /s/
        Bill Thomas

                      Administrative Law Judge
      1. Document No. 6b in the official case file maintained in the DAB E-File system; for clarity and simplicity, whenever possible I will cite to the exhibits attached to the parties’ respective briefs by the exhibit numbers therein, not the document numbers assigned by the E-file system. back to note 1
                      2. With his brief, Petitioner submitted a Memorandum of Law that he filed before the District Court in support of a motion to dismiss the superseding indictment against him.  DAB E-file Dkt. C-20-328, Doc. No. 10.  This pleading is clearly not directed to me, as I have no jurisdiction over Petitioner’s criminal case, and appears to have been submitted to provide context for the arguments made by Petitioner in his informal brief.  Accordingly, I will cite to this document as P. Ex. 1. back to note 2
                      3. American Friends of Assaf Harofeh Medical Center (American Friends), a 501(c)(3) charitable organization.  IG Ex. 3 at 2.  On or about January 15, 2005, Petitioner, as the sole signatory, opened an M&T Bank account in the Western District of New York, in the name of American Friends, to receive donations to the New York chapter of the charity.  Id.  From March 29, 2006 and continuing to February 2009, Petitioner took nearly $350,000 from the M&T Bank account and deposited the funds into his personal bank account at HSBC Bank in the Western District of New York.  IG Ex. 3 at 3. back to note 3 Back to top
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