Source: http://vertumnus.courts.state.ny.us/claims/html/2007-036-103.html
Timestamp: 2018-11-17 13:13:13
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MAIN EVALUATIONS, INC. v. THE STATE OF NEW YORK, 107214
MAIN EVALUATIONS, INC. V. THE STATE OF NEW YORK, #2007-036-103, Claim No. 107214
2007-036-103
MAIN EVALUATIONS, INC.
BRIAN P. FITZGERALD, P.C.By:	Brian P. Fitzgerald, Esq.
This is the court’s decision following a three-day bifurcated trial on the issue of liability in a breach of contract action by claimant, Main Evaluations, Inc. (“MEI”) against defendant, the State of New York. The two contracts at issue each required MEI to perform consultative medical examinations for the State’s federally funded Office of Temporary Disability Assistance (“OTDA”) as part of the agency’s adjudication of applicant eligibility for federal Social Security disability programs. The contracts encompassed the high-volume Buffalo and Rochester areas, respectively, for a two-year period commencing January 1, 2002 through December 31, 2004, and were awarded to MEI on August 9, 2001 following a highly competitive bid process.
MEI, a closely-held corporation, and its predecessor, a professional service corporation, had been an OTDA contractor since 1998. MEI’s founder, Dr. Arvinder J. Sachdev, had maintained a professional relationship with OTDA since 1987, as an employee of the agency, then as an individual contractor for the agency, and then as principal of another corporate contractor before he formed his own company.
Three weeks following commencement of MEI’s performance under the 2002-2004 contracts, the State terminated them after it learned Dr. Sachdev had pled no contest to charges of professional medical misconduct involving his private medical practice in gastroenterology which had been brought against him by the State Department of Health-Office of Professional Medical Conduct (“OPMC”). The multiple charges leveled against the doctor were the culmination of a multi-year investigation of his patient care since he began practicing in 1976. MEI never informed OTDA of the OPMC proceeding which had been commenced five days before OTDA issued its Request for Proposals (“RFP”) for the contracts.
As part of Dr. Sachdev’s no contest plea, he executed a consent agreement and order providing for a suspension of his medical license for two years, stayed on condition that he complete a clinical competency assessment and personalized medical education program, and that he practice during those two years only when monitored by a board certified specialist. The agreement permitted the doctor to conduct disability examinations and quality reviews of them during that time.
MEI’s suit for breach of the contracts alleges that neither the charges against Dr. Sachdev nor the sanctions imposed on him were grounds for the State to terminate the contracts, and that nothing in the RFP process or in the contracts required MEI to disclose this information to the State. MEI argues that, at the time of the RFP and thereafter, the doctor was not a shareholder, director or officer of the company, and that his role with the company, at most, was limited to that of contact person with the State through December 31, 2001, before the term of the new contracts began. The State responds that the doctor remained in control of MEI throughout, even though he had transferred his shares to his wife and that he asserts he had relinquished all offices with the company. The State argues that a Contractor’s Background Questionnaire which the company was required to answer as part of the RFP process (and which became part of the contracts when the parties entered into them), as well as other provisions of the contracts, required MEI to disclose the charges and thereafter the consent agreement and order, and that MEI’s failure to make these disclosures was ground for the State to terminate the contracts.[1]
A narrative of the testimony and exhibits which the court deems pertinent to its decision follows.[2]
The Predecessor Contract
Dr. Sachdev’s relationship with OTDA’s Division of Disability Determinations originated with his employment at the agency’s Buffalo office from 1987-92 as a “quality assurance person.”[3] After leaving the agency’s employ, he continued to work for OTDA while in private practice, performing what he described as “major” examinations on a non-contract, volume basis.
The doctor ultimately joined a company started by two doctors called Independent Medical Opinions, P.C. (“IMO”) which conducted medical examinations for insurance companies and workers’ compensation claims. Dr. Sachdev became the company’s Vice-President and Chief Medical Officer in charge of supervising doctors performing the consultative examinations under a three-year OTDA contract for the Buffalo area from January 1997 to December 1999. He also did examinations himself. IMO performed this contract in an operation separate and apart from the company’s other work.
Sometime in 1997, the year the IMO contract commenced, Dr. Sachdev learned he had become the subject of an OPMC confidential investigation regarding his entire private gastroenterology practice. OPMC began looking at quality reviews of the doctor which had been conducted by peer review committees at seven different hospitals where he had seen patients since he began practicing. Apparently the doctor’s files contained an inordinate number of procedures or practices which had been questioned as improperly performed when compared with the number questioned of his colleagues.
Meanwhile, OTDA had become dissatisfied with IMO’s performance. Dr. Sachdev was having differences with his business colleagues over how the operation should be run and financed. According to the affidavit of John Bishop, Principal Administrative Analyst for OTDA’s Division of Disability Determinations (now deceased), OTDA even told IMO the agency might terminate IMO’s contract if Dr. Sachdev were to leave the company.
The doctor felt he needed better administrative support, so he contacted his brother-in-law in India, Subhash Batra. He had run his own manufacturing business in that country for more than 20 years. For family reasons, Mr. Batra decided to come to the U.S. in March 1998 to work with the doctor. After several months, Dr. Sachdev became convinced that, given free reign, he could turn the situation around working with Mr. Batra. He reached an agreement with his partners at IMO to take over the OTDA contract, and in December 1998, the doctor formed a wholly-owned professional services corporation, Main Medical Evaluations, P.C. (“Main Medical”) for this purpose. Dr. Sachdev’s corporate attorney, Bennett Leader, prepared the Certificate of Incorporation which identified the doctor as the corporation’s sole shareholder, director and officer (Ex. 16). IMO assigned its contract to the new company for the remainder of its term with the State’s approval. Dr. Sachdev was the new company’s Chief Executive Officer and Chief Medical Officer, and also was a roster physician performing consultative examinations.
Despite OTDA having agreed to the assignment, the agency had not planned on extending the assumed contract past December 31, 1999 and tentatively had decided to go out for bids. But Dr. Sachdev met with the agency in May or June 1999 and presented an action plan to the agency for further administrative changes. With Mr. Batra helping the doctor, performance improved and the agency ultimately agreed to extend Main Medical’s contract for another two years.
Formation of MEI and Assignment of the Buffalo Contract
Barely ten months after Dr. Sachdev formed Main Medical and soon after OTDA agreed to extend Main Medical’s contract, the doctor decided in October 1999 that he wanted to change the corporate form in which the business was conducted from a professional corporation to a business corporation. At trial, when asked why, he said he wanted to transfer the business to non-medical people, specifically to his wife, Yogendra (a medical doctor educated and trained in India, but unlicensed in the U.S. who then owned and operated a dry cleaning business) and to Mr. Batra. He explained he wanted to resume his gastroenterology practice where he had earned a great deal of money because he did not feel well-suited to running this kind of business.
Dr. Sachdev’s corporate attorney, Bennett Leader, thus organized another new company, MEI, at the request of his client. He filed a certificate of incorporation on October 12, 1999 and faxed a copy to OTDA on October 19. In support of the doctor’s request to OTDA that the agency allow Main Medical to further assign the contract to MEI, on October 29 the attorney wrote a letter to OTDA (Ex. 19) purporting to provide the agency with details of the new entity.[4] In his letter, Mr. Leader told OTDA that MEI was “formed to provide for greater flexibility and avoid the necessity for stockholders and directors being medical personnel.” He assured OTDA the company’s personnel would be the same and there would be “no change in the operation . . . . [t]his corporation will have one officer, one director and one stockholder, all of whom will be Dr. Arvinder Sachdev.” The doctor testified this latter statement was “not accurate.” Although the doctor is shown as having been copied on the letter to OTDA, he did nothing to correct what his corporate attorney told the agency. At trial, he said he had not noticed misstatements.
The new company had effected its initial issuance of 100 shares of stock, 96 shares to Mrs. Sachdev and four shares to Dr. Sachdev on the same day Mr. Leader had faxed a copy of the new certificate of incorporation to OTDA. So there were two shareholders when Mr. Leader wrote his letter. Dr. Sachdev signed those stock certificates as secretary of the corporation and his wife also signed as MEI’s president. But Mrs. Sachdev testified at trial that she was not president at the time and did not become president until January 2001 when her husband transferred his four shares of stock to her, making her the sole shareholder.[5] The doctor did acknowledge occasionally referring to himself as president and communicating in writing to others as such “[t]o get the leases and all that.” In fact, just three weeks after Mrs. Sachdev had signed the stock certificates indicating she was the president, Dr. Sachdev, as president, signed MEI’s acceptance of the further assignment from Main Medical, and Mr. Leader notarized his signature as being that of the president (Ex. 20). The signed acceptance then was sent to OTDA which approved the assignment and thereafter the agency wrote to Dr. Sachdev, addressing the letter to him as president, to inform him of the agency’s approval.[6]
From OTDA’s perspective, regardless of who held what title at any given time, Dr. Sachdev always was MEI. John Bishop said the doctor’s name was “synonymous with that of Main Evaluations, Inc.” David Avenius, OTDA Deputy Commissioner, said that to his knowledge “Dr. Sachdev was at all times the man in control of MEI and the person we looked to as the individual that ran MEI . . . the principal. . . . [w]e had great respect for Dr. Sachdev.” David Kellogg, former OTDA Assistant Counsel (now a Senior Attorney), testified his client viewed Dr. Sachdev to be “the real brains behind – the operation. . . . a substantial ongoing presence in the operation of MEI.”
Dr. Sachdev’s trial testimony sought to portray a different picture. While acknowledging he had been “everything” in MEI at the start, he said Mr. Batra since had taken over the operation as the company evolved. He credited his brother-in-law with the company’s administrative turnaround and asserted that OTDA fully understood this is what had happened.
The year 2001 began with the knowledge that OTDA would be issuing RFPs for new, two-year contracts covering Buffalo and Rochester. OPMC’s investigation of Dr. Sachdev was entering its fourth year.
On January 16, 2001, Dr. Sachdev divested himself of his remaining four shares of MEI, transferring them to his wife. The new share certificate in Mrs. Sachdev’s name (Ex. X) was signed by her as president (as she had signed the initial certificates issued on October 19, 1999) and by Dr. Sachdev as secretary. According to Mrs. Sachdev’s trial testimony supra, this is when she, in fact, became president and Dr. Sachdev “resigned” as secretary after surrendering his shares.[7]
Despite Mrs. Sachdev becoming the sole shareholder of MEI and assuming the title of president, Dr. Sachdev remained instrumental in the company, as with its corporate finances. “I was authorized as check signer I think predominantly. . . .We never changed actually that,” he said at his deposition. The doctor and his wife both were authorized corporate signatories. Mr. Batra was not.[8] Dr. Sachdev acknowledged that if either the State or Mr. Batra (“because he’s the CEO”) had problems or questions they still reached out and would call him directly.
OPMC Charges
Two and one-half months after Dr. Sachdev divested himself of his remaining MEI shares, OPMC brought its charges against him on March 29, 2001. There were eight specifications of medical misconduct, two for “gross negligence,” two for “gross incompetence,” one for “negligence on more than one occasion,” one for “incompetence on more than one occasion,” one for “ordering excessive tests,” and one for “inadequate records.” The charges pertained to the doctor’s treatment of six patients between 1991-96, four of them at Buffalo’s Sisters Hospital which was part of the same building complex where MEI’s examination facility for the OTDA contract was located.[9]
The doctor told his wife about the charges immediately. He waited until May to mention them to his brother-in-law when the two were writing MEI’s proposals. When he did, he told Mr. Batra the Health Department had asked for records and that “there is a case going . . . I have some hearings coming.”
The RFP and the Award
OTDA issued its RFPs on April 4, 2001 for the 2002-2004 Buffalo (and a Town of Cuba satellite) and Rochester1[0] (and a Dansville satellite) contracts. According to Mr. Bishop, Dr. Sachdev “spearheaded” MEI’s attempts to procure each of the two contracts, beginning with his attendance at the kick-off conference for offerors in Albany on April 18. Dr. Sachdev and Mr. Batra prepared MEI’s responses to the RFPs. When Dr. Sachdev was asked on cross-examination who was the “final decision maker” on things that went into MEI’s proposal, first he identified Mr. Batra. When pressed whether it was true that Mr. Batra did not have authority to bind MEI unless he [Dr. Sachdev] gave him authority, he responded, “Mrs. Sachdev and I – I mean not I, but Mrs. Sachdev was the president, so officially yes. But this was a business which we had employees and all together and made a decision. We’re working together.”
The required “Business Affiliations Form” of MEI’s proposal identified Mrs. Sachdev as having a 100 percent financial interest in each facility being bid on. In a “Relationship” column of that form, MEI described Mrs. Sachdev as “president.”
RFP Appendix L was the Contractor Background Questionnaire (Exs. 8 and 9), where Question 2 asked, in relevant part, whether “the firm . . ., any owner of 5.0% or more of the firm’s shares, any director, [or] officer” had been the subject of
(v)	any citations, Notices, violation orders, pending administrative
hearings or proceedings or determinations for violations of:
- federal, state or local health laws, rules or regulations....?1[1]
Mr. Batra, as Chief Administrative Officer of MEI, marked “No” in response to the question. Mr. Batra signed his name under the certification.1[2]
The questionnaire concluded with a certification which states, in relevant part, that the offeror recognizes its responses are for the “express purpose of inducing” [OTDA] to award a contract; that OTDA, in its discretion, may determine the truth and accuracy of all statements made; and that intentional submission of false or misleading information may constitute a crime. The certification also states that the offeror represents the information submitted as “true, accurate and complete” and that submission of false or misleading information will constitute “grounds for the Office [OTDA] to terminate its contract.” (Appendix I infra)
MEI submitted its proposals on May 16. Mr. Batra signed them on behalf of the company, thereby agreeing to be bound by their terms. Two authorizations for him to do this bear signatures purporting to be those of Mrs. Sachdev in her capacity as president. But Mrs. Sachdev testified it was the doctor who signed her name to these corporate authorizations because “he always used to sign on my behalf.”
One month after MEI submitted its bid, on June 14, 2001, OPMC held a formal hearing on its charges against Dr. Sachdev.1[3] At trial, the doctor testified that from the time MEI submitted its proposals in response to the RFPs through OTDA’s award of the contracts to the company in August, he had “no idea” how the OPMC charges were going to turn out.
OTDA Inquires of MEI Concerning Dr. Sachdev’s Role
In mid-July, Mr. Batra received a call from Mr. Bishop seeking some clarification of the company’s proposal which had identified him as MEI’s Chief Administrator and liaison. According to Mr. Batra, Mr. Bishop told him he was going to write him a letter and asked that he respond to it. Mr. Bishop’s letter dated July 16, 2001 (Ex. 21) noted that the MEI proposals reflected a change of ownership to Mrs. Sachdev as sole owner and that she also was shown as president (presumably referencing the changes from what Mr. Leader had informed the agency on behalf of the corporation in his October 29, 1999 letter supra). Mr. Bishop’s letter then noted that Mr. Batra was identified as the Chief Administrative Officer and “contract liaison,” and so Mr. Bishop then asked:
In the past, the contact has been Dr. Arvinder Sachdev. [Illegible] would like to confirm that for any future issues DDD [the OTDA division with jurisdiction over the contracts] staff should contact you and not Dr. Sachdev. If such is not the case, and Dr. Sachdev’s role requires clarification, please let me know as soon as possible. Please feel free to contact me . . . if you have any questions.
Mr. Batra called. He testified he did so because he was concerned he did not know what Mr. Bishop really was asking. Mr. Batra acknowledged that he appreciated this inquiry was being made at a “crucial time” when OTDA was evaluating MEI’s performance under its existing contract to determine whether the agency would award the new contracts to the company. According to Mr. Batra’s testimony, Mr. Bishop explained to him on the phone that, based on MEI’s proposals, it appeared Dr. Sachdev already was gone from the company just when MEI was about to open a new Watertown facility, and that were the agency to award the new contracts to the company for Rochester and Buffalo, new facilities also would have to be readied there by January 1. Mr. Batra testified Mr. Bishop then asked him “can we talk to him [Dr. Sachdev] and can we call and ask him things?” Mr. Batra said he replied that, under MEI’s existing OTDA contract, the doctor would be there until December 31 [2001] and could be asked about anything.
Notwithstanding Mr. Bishop’s request that any necessary clarification of Dr. Sachdev’s role be made “as soon as possible,” it apparently took Mr. Batra until July 30 – two weeks later – to formally respond in writing to Mr. Bishop’s inquiry (Ex. 22). His letter first corrected the record regarding Dr. Sachdev’s shareholdings which previously had been reported to the agency by Mr. Leader in his letter. He explained that Mrs. Sachdev actually had owned 96% of the shares since MEI’s inception and that she only recently had increased her holdings in “simply restructuring the family owned business.” Mr. Batra then did see fit to clarify Dr. Sachdev’s role in response to Mr. Bishop’s question:
Dr. A.J, Sachdev is the primary contact person for the present as well as for the upcoming Rochester/Buffalo 2002-2004. As stated in the Liaison Staff RFP 2002-2004 as submitted by Main Evaluation Inc., I will also be available in addition to Dr. A.J. Sachdev as a contact person.
Dr. Sachdev was asked on cross-examination whether what Mr. Batra said in his letter to Mr. Bishop was true. Ultimately, the doctor responded, “I had no objection, no. Yes it is true.” But when the doctor was asked by the court whether he had any conversations with Mr. Batra concerning this exchange of correspondence with Mr. Bishop, he responded, “I do not recall. It was between Mr. Batra and administration of the Disability.”1[4] Neither Mr. Batra nor Dr. Sachdev was asked why, after Mr. Bishop had explained to Mr. Batra what he wanted to know, it still had taken two weeks for Mr. Batra to compose and then send MEI’s response to Mr. Bishop’s inquiry at such a critical moment in the RFP process.
OTDA’s Selection Committee met one day after Mr. Batra’s July 30 letter responding to Mr. Bishop. It voted to award both contracts to MEI based on the company’s combined scores which accounted for the company’s qualifications and for its low bid in each locale. In so acting, the agency decided to replace its existing contractor in Rochester, Industrial Medicine Associates, with MEI. In the bidding, that company had finished a close second to MEI in the scoring for each of the areas up for bid (Ex. 73). OTDA’s John Zalucki called Dr. Sachdev to inform him of MEI’s selection, and followed up with a confirming letter to the doctor, dated August 9, 2001, addressed to him as “Contract Liaison” (Ex. 23). He said, “I look forward to a positive relationship with your firm over the upcoming term of the contracts.” On August 29, Mrs. Sachdev executed the 2002-2004 contracts as president and OTDA’s execution followed on September 19. The RFP and its appendices were attached to each of the contracts and were made a part of the agreements. The contracts then received final approval from the State Comptroller on October 5, 2001.
Less than a month after OTDA had awarded the contracts to MEI, Dr. Sachdev and Mr. Batra immediately began looking ahead to another potential agency contract for the company, covering the Albany area. Both men attended an OTDA offerors’ conference for this new RFP on September 12.
The Consent Order and Termination of MEI
In the month following MEI’s receipt of the State Comptroller’s approval of the new contracts, Dr. Sachdev executed the OPMC Consent Agreement and Order on November 28 (Ex. 33) in the presence of his attorney, Mr. Fitzgerald.1[5] The doctor pled no contest to three allegations of “negligence” pertaining to two patients and one allegation of inadequate records pertaining to a third. He agreed to a two-year suspension of his medical license, “stayed on the condition of my compliance with the monitoring terms,” which were, a clinical competency assessment and personalized continuing medical education program for not less than three months; practice for two years only when monitored by a board certified gastroenterologist; and preapproval by the monitor of the first 200 gastroenterology procedures the doctor would perform following completion of his education program.
No one at MEI ever told OTDA of this consent agreement despite Dr. Sachdev and Mr. Batra having met face-to-face with OTDA representatives on a number of occasions following its execution. The agency learned for the first time on December 20, 2001 that the doctor had been the subject of professional misconduct charges, and learned of the consent order from its Medical Relations Officer on January 2, 2002.
OTDA officials then met with Mr. Avenius, OTDA’s Deputy Commissioner, who convened a series of staff meetings. Mr. Avenius’ view was that, just as the agency could decide not to let an individual with a “defective medical cloud” perform consultative examinations because it could bring “disrepute” to the disability adjudications,1[6] “on a more grand basis of a bulk provider” the agency should do everything in its legal power to stop MEI “from working on the process.” Mr. Avenius explained that two thirds of all applicants for disability are rejected and half of them appeal to the courts. MEI “put our process under threat,” he asserted, because Dr. Sachdev’s professional issues could be cited by appellants to question MEI’s medical decisions. “In our knowledge . . . throughout the Buffalo area, MEI was Dr. Sachdev . . . my impression .. . is he was in charge of the company and he did not do consultative exams.” Mr. Bishop articulated a somewhat different agency perspective, focusing on the compromised integrity of the bidding process. In his affidavit defending OTDA’s termination of MEI, he stressed that MEI had procured the new contracts “only by keeping hidden from OTDA [Dr. Sachdev’s] professional misconduct difficulties,” and this had given MEI an unfair advantage over the other bidders in the tightly competitive bid process:
It is now apparent that when [MEI] or its predecessor companies wanted an award, an extension or assignment of a contract, it promoted [Dr. Sachdev] as the driving force of the company – which he always was and remains. However, because such activities support OTDA’s assertion that [the doctor’s] professional misconduct difficulties were “contract-related” and also had to be reported on the questionnaire, the company now attempts to downplay his active involvement in the company.
Mr. Avenius and his staff decided to recommend to OTDA’s commissioner that MEI be terminated: “My feeling was that the medical problems of Dr. Sachdev infected the contract process and infected the validity of his organization to an extent that, based upon collective reasoning, we decided to void the contract.” Agency attorneys then were brought in to address the legal basis to support the decision.1[7]
Several weeks later, on January 25 and then again on February 12, OTDA wrote letters notifying MEI of the termination of its contracts. The January 25 letter (Ex. 13) specified, among other grounds, violation of contract section III.11 (failure to notify OTDA of “substantial contract-related problems). The February 12 letter (Ex. 14) added section III. 32 (i) (contractor’s violation of statutes specified in paragraphs 2 (e) and 2 (u) of the Contractor/Subcontractor Background Questionnaire), and paragraph 2 (v) of the Questionnaire (failure to notify OTDA of the pendency of charges against an officer, director or employee).1[8]
Dr. Sachdev made efforts to reach Mr. Avenius by phone throughout this time period. He did not return the doctor’s calls. Ultimately, OTDA did meet with Dr. Sachdev, Mr. Batra and Mr. Fitzgerald (acting there as attorney for MEI) but the agency remained committed to its decision.
In this action for breach of contract, claimant must prove by a fair preponderance of the credible evidence, first, that it performed all terms and conditions required of it under the contracts; and then, that defendant unjustifiably failed or refused to perform its obligations under the agreements (Greene v Barrett, Nephews & Co., 238 NY 207 [1924]; Furia v Furia, 116 AD2d 694 [2nd Dept 1986]; ALJ Capital I, L.P. v David J. Joseph Co., 15 Misc 3d 1127[A], 2007 WL 1218355, 2007 Slip Op 50867[U], * 4 [Sup Ct, NY County 2007]).
The court finds that claimant failed to prove it fully performed its obligations under the contracts in that, at all times since MEI’s formation, including when the company submitted its response to the RFPs in May 2001, Dr. Sachdev was a director of the company and performed as such; as a director, he also arrogated to himself certain duties of an officer which he also performed since the company’s formation; that after Mrs. Sachdev became the company’s president, Dr. Sachdev continued to perform as an officer and is deemed by the court to have been an officer when the company submitted its response to the RFPs in May 2001; that MEI thus falsely responded to question 2 (v) of the Contractor Background Questionnaire comprising part of the contracts by not having disclosed OPMC’s administrative proceedings under Public Health Law § 230 charging the doctor with eight specifications of professional medical misconduct; that MEI thus falsely induced OTDA to award the contracts to the company when the agency justifiably relied on MEI’s answers to the questionnaire as having encompassed Dr. Sachdev as a director and officer;1[9] and that in failing to disclose the charges against Dr. Sachdev, MEI also failed to identify the proceeding to be a “substantial contract-related problem” as required by contract section III.11 when the doctor subsequently pled no contest to certain of the charges and agreed to a stayed suspension of his medical license after the State Comptroller had approved the fully executed contracts.
The court further finds that, as a result of claimant’s failure to fully perform the terms and conditions of the contracts, defendant was expressly justified in terminating the contracts pursuant to clause 5 of the questionnaire for claimant’s submission of false or misleading information; and “for cause” under section III.32.b of the contracts for failure to notify OTDA of a “substantial contract-related problem” pursuant to contract section III.11.
Central to the court’s decision are its findings that Dr. Sachdev was a director of MEI and performed as one, and that he also performed the duties of an officer such that he is deemed by the court to have held that position as well. The doctor’s own testimony provided the context for the court to weigh all the evidence in these regards. In response to a question whether he had a title at MEI when he had owned four shares of its stock, the doctor answered
We just work where the situation came. I didn’t have
any special title of anything. You know, I was the
president before in – you know, from the previous
corporation because official papers were needed
[presumably referencing the requirement for a licensed
medical officer of a “P.C.”], so I didn’t have any
[presumably referencing the “Inc.”].
When he was asked specifically whether he was president of MEI or signed anything as such, the doctor responded
I don’t recall that there was anything demarcation
made of any president or thing. There was no
demarcation made of any papers which I have any
record of or recall . . . . I might have [signed], but
this is just not any, you know, of anything. I mean,
actually giving me the presidency or anything like this.
This testimony explains why even when a signed writing exists stating that Dr. Sachdev would be MEI’s director, i.e. Mr. Leader’s October 29, 1999 letter discussed infra, or when other writings show him as having signed or been identified as an officer, no corporate minutes or other corporate records were produced documenting his election or appointment. It also explains why claimant could not produce any formal corporate records to support its own assertion herein that the doctor did not hold either of these offices at the time MEI submitted RFP responses to OTDA. Apparently, there were none.2[0] The court’s findings thus are predicated here on evidence of the conduct of the Sachdevs in running their family business, on their testimony and on whatever writings do exist regarding these questions of fact.
New York Business Corporation Law (“BCL”) requires the business of a corporation to be managed by a board of directors (BCL § 701) consisting of at least one member (id. at § 702). The only documentary evidence in the record which addressed the identity of an MEI director who fulfilled this BCL requirement for the corporation is Mr. Leader’s October 29, 1999 letter to OTDA, written by him as the company’s corporate attorney at Dr. Sachdev’s express direction. Mr. Leader represented to OTDA at the time that “[t]his corporation will have one officer, one director and one stockholder, all of whom will be Dr. Arvinder Sachdev.” Although the doctor testified Mr. Leader’s statement was “not accurate,” he was not asked, nor did he state, whether all of it was wrong or, if not, which portion(s) were.2[1] The doctor was copied on the letter but did nothing to correct it, asserting that he did not notice the statement was wrong at the time.
There is no evidence (document or testimony) of anyone else ever having been a director of the company as was required under the BCL and which would have contradicted Mr. Leader’s statement in this regard. Mrs. Sachdev, for example, offered no testimony expressly denying that her husband was a director and she never asserted that she or anyone else ever held the position. As for Mr. Batra, he only testified that the company’s president was Mrs. Sachdev. He never addressed the identity of the company’s directors. Except for Dr. Sachdev’s ipse dixit that he was not a director of the company (see infra where the court does not credit the doctor’s testimony in this regard), the portion of Mr. Leader’s statement that the company’s sole director “will be Dr. Arvinder Sachdev” thus stands uncontroverted.2[2]
Claimant did not call Mr. Leader as a witness. As MEI’s corporate attorney, presumably he could have shed light on his October 29, 1999 letter. He could have testified how, as the one who organized the corporation only ten days earlier, he came to make the statement he did; and whether he agreed with Dr. Sachdev’s characterization of the statement as “not accurate” and, if so, whether all or only some of it was wrong (and if only some, which portion(s)). He could have testified whether he concurred with the doctor’s testimony that he was not a director (n 22 supra). He also might have explained how Mrs. Sachdev came to sign MEI’s stock certificates as president when the company was organized, even though she denied being the president at the time and even though he had notarized Dr. Sachdev’s signature as being that of the president shortly thereafter. As the company’s attorney he could have confirmed Dr. Sachdev’s testimony that no corporate minutes evincing any election of directors or officers ever existed in the company, and could have confirmed the doctor’s assertions that, after January 2001, he did not hold any office in the company. And, he could have recounted how it was decided that Dr. Sachdev would take only four shares of MEI – one share less than otherwise would have triggered the questionnaire’s five percent disclosure threshold for shareholders – when the doctor directed him to form the company. (See infra regarding the credibility of Dr. Sachdev’s testimony on this matter.)
The court infers from claimant’s unexplained failure to call Mr. Leader as a witness that the testimony of the company’s attorney would not have supported claimant’s version of the facts in these respects (see e.g. Ausch v St. Paul Fire & Mar. Ins. Co., 125 AD2d 43 [2nd Dept 1987] [drawing unfavorable inference where plaintiff failed to request brother to testify at trial to establish brother was not principal and officer of company where he had personal knowledge of an alleged stock transfer from brother to plaintiff]; see also Matter of Nassau County Dept. of Social Servs. v Denise J., 87 NY2d 73, 79 [1995] [trier of fact entitled to draw strongest inference opposing evidence allows against witness who fails to testify in civil proceeding]; Brooks v Judlau Contr., Inc., 39 AD3d 447 [2nd Dept 2007] [plaintiff entitled to “missing witness” charge permitting unfavorable inference where defendant failed to call examining physician to testify at personal injury trial]; PJI 1:75 [2007]).
Contrary to claimant’s assertions, the evidence supports the court’s finding that Dr. Sachdev did hold the position of director of MEI throughout and at all times performed as such in managing the company’s business. Virtually nothing of significance at MEI ever was effected without his oversight or approval. Mr. Batra testified on cross-examination, for example, that after Mrs. Sachdev became president, he consulted “both of them, Mrs. Sachdev and doctor” about important decisions.2[3] When it came to the company’s “finances,” Mrs. Sachdev testified that mostly she and Mr. Batra together discussed them with the doctor. The doctor testified that he, Mrs. Sachdev and Mr. Batra “together” made decisions regarding MEI’s “business.”
In addition to Dr. Sachdev’s having held the position of director and performing as such, in his capacity as a director, the doctor also arrogated to himself the duties of an officer which he performed both before and after his wife became president in January 2001. The court thus deems the doctor also to have been an officer of MEI at the time the company submitted its responses to the RFP in May 2001 (see BCL § 715 [a] [officers to be elected or appointed by board of directors]).
The doctor signed as an officer. He testified that without “demarcation” of “special title or anything,” he signed stock certificates as MEI’s secretary when the shares were issued in October 1999; one month later, as president, he executed MEI’s notarized acceptance of the contract assignment from Main Medical; he signed a lease extension for the Buffalo facility as president in January 2000 (which the company included in its proposal to OTDA); and he signed his wife’s stock certificate as secretary when he relinquished his four shares in January 2001.
Just as Dr. Sachdev had been signing as an officer without “any special title of anything,”2[4] after his wife took the title of president and he apparently stopped signing as an officer, he nonetheless continued to perform as one.2[5] The doctor testified that he continued to sign the company’s checks “predominantly,” and this “never changed” after Mrs. Sachdev was president – even admitting he signed her name to checks as well. He signed the company’s tax returns after supervising their preparation; and even signed his wife’s name to the letters authorizing Mr. Batra to bind the company to the terms of the RFPs and to the company’s proposals (which were included in the company’s RFP responses).
Mr. Bishop characterized Dr. Sachdev as having “spearheaded” the company’s efforts in the RFP process.2[6] The doctor represented MEI at the kick-off conference for offerors and conducted the site inspections at the existing and proposed new facilities. It was Dr. Sachdev who received the phone call and the follow up letter addressed to him by OTDA’s John Zalucki which confirmed the agency’s award of the contracts to “your firm,” and in which the agency director also expressed the agency’s understanding that Dr. Sachdev’s role with the company would remain unchanged in 2002 - 2004, “I look forward to a positive relationship with your firm over the upcoming term of the contracts” (Ex. 23).2[7] After the award, Dr. Sachdev not only oversaw construction and actually conducted hiring at the new sites, e.g. in Rochester,2[8] he also spoke with Mr. Bishop by phone as late as January 28, 2002 regarding MEI’s proposal for a new Albany area contract – evidence of his continuing leadership of the company as it sought to further expand in the new year.
Dr. Sachdev’s denial that he held a position as an officer (as well as his denial that he was a director [referenced supra]), and his wife’s assertion that, after January 16, 2001, MEI had no officers other than the post she held as president, are the sole testimony which claimant proffered to support its claim that the doctor did not hold an office in the company. With regard to Mrs. Sachdev’s testimony, the court found it to be hardly persuasive. She testified, for example, that she was not president at the very time she had signed MEI’s stock certificates on October 19, 1999 stating that she was; and at her deposition she was unclear whether her husband was MEI’s secretary on January 16, 2001 when, in fact, he had signed in that capacity, “I don’t understand. What is the meaning of secretary here?” she asked.
The court does not credit Dr. Sachdev’s denials that he was a director or an officer in light of other of his testimony recounted infra which the court deems unworthy of credit (Ravenell v Donofrio Auto Parts, Ltd., NYLJ, July 15, 1992, at 25, col 5 [Sup Ct, Queens County] [“falsus in uno” jury charge permits rejection of witness’s entire testimony where witness is found to have testified falsely about a material fact; see PJI 7:26 (2007)]; e.g. Eastern Consol. Prop., Inc. v Lucas, 6 Misc 3d 1036[A], 2004 WL 3239517, 2004 NY Slip Op 51855[U] [Sup Ct, NY County 2004]; Sutton v Levy, NYLJ, Sept. 21, 1994, at 25, col 6 [Civ Ct, Kings County]). Several examples follow:
(i) When Dr. Sachdev was asked why he decided that four of the 100 shares of stock should be issued to him at the time MEI was formed, he asserted it was Mr. Leader who chose the number and who simply told him this was the “right way” to do it, “he just put a figure and I said okay.” The shares were issued at a time when the OPMC investigation of the doctor was in its second year. Given that OTDA’s background questionnaire required disclosure pertaining to shareholders owning five percent of stock or more, Dr. Sachdev’s account that he had no idea why he took four percent of the shares strains credulity. Although there is nothing wrong with intentionally structuring one’s stockholdings to avoid triggering a reporting requirement, it is palpably wrong to have proffered testimony essentially denying knowledge of such an obvious intent.
(ii) Similarly, the doctor testified that after Mrs. Sachdev became sole shareholder and president, and Mr. Batra became “CEO” of the company, he started to practice medicine again and “was not in the [MEI] office most of the time,” thus implying he had ceased managing the company. But he also testified that he “did not really even practice” because he first needed to go back to university “to improve my qualifications so that I could start practicing in the whole sense.” Referencing his decision to plead no contest to the OPMC charges in November 2001 so he could get his re-education out of the way to resume practicing, he said “And it has been three years that I did not really even practice.”2[9] Dr. Sachdev’s assertion that he was no longer involved at MEI because he resumed his medical practice is thus hardly convincing and suggests he was nowhere near preoccupied with running a busy private practice after his wife became president in January 2001.
(iii) Dr. Sachdev’s effort to portray himself as not having had anything to do with crafting MEI’s July 30 letter responding to Mr. Bishop’s inquiry is yet another example of testimony deemed unworthy of credit. When the court asked Dr. Sachdev whether he discussed with Mr. Batra this important agency inquiry and MEI’s response at what Mr. Batra characterized as a “crucial time” in the RFP process, Dr. Sachdev demurred, “I do not recall. It was between Mr. Batra and administration of Disability.” Yet, when the doctor was probed whether he was concerned MEI might not get the contract if his name did not appear in the letter, he responded “it’s hard to tell what they were asking. . . .[t]hey don’t tell you what is the reason for this. . . . you don’t want to, you know, why he [Mr. Bishop] asks us, maybe he had a reason. We don’t know what he had in his mind when he ask the question. . . .” Similarly, when Dr. Sachdev was asked whether Mr. Batra’s statements in his letter literally were true, before finally conceding that they were, he first responded, “I think for you to ask him. I mean that is what he answered in the letter. I mean, he was a man who was running the show. . . .” This disingenuous attempt to disassociate himself from this important MEI written response to Mr. Bishop by saying he did not recall discussing it with his brother-in-law exemplifies what Mr. Bishop, with hindsight, portrayed in his affidavit as the way the company presented itself to OTDA. According to Mr. Bishop, MEI apparently sought to “downplay” Dr. Sachdev’s involvement when the company thought his issues could be a detriment to the company, while it did not hesitate to promote the doctor’s continued involvement when the company thought his presence was needed to gain OTDA’s favor. The effort as it pertains to the July 30 letter appears to have continued right into the courtroom.3[0]
MEI’s contractual obligations to OTDA encompass the terms and conditions of the agency’s RFPs and the questionnaire, which were expressly made part of the agreement between the parties (see Preamble and I. Document Incorporation & Order of Preference). The applicant’s certification in the questionnaire provided that all responses were made for the “express purpose of inducing” an award, and that submission of “false or misleading information” was “grounds . . . to terminate [the] contract.”
The agency’s questionnaire (Appendix L) was directly related to the companion bidding requirement in paragraph L of the RFP, “Minimum Qualifications Required of Offerors,” that is, “[a] qualified Offeror must be a . . . fully responsible prime contractor” (see infra). Had MEI disclosed OPMC’s pending charges against the doctor, OTDA would have been entirely within its rights to disqualify the company from consideration because the agency believed the company could not satisfy its concerns about potential challenges to its adjudications. MEI’s failure to disclose the charges against Dr. Sachdev as it was contractually required to do thus was a ground for OTDA to terminate its contracts with the company as expressly provided in clause 5 of the certification to the questionnaire.3[1]
The required disclosure of the charges also would have served to identify them for both OTDA and MEI as a potentially “substantial contract-related problem” within the contemplation of contract section III.11. As such, even had the agency decided to exercise its discretion to allow MEI to continue as a bidder pending their final resolution, e.g. possible dismissal in their entirety while they remained non-public information, once MEI became the contractor for the new contract period, the company still would have been obligated to inform OTDA of the November 28 no contest plea. OTDA thus would have been afforded an additional opportunity before the 2002-2004 contract period actually commenced to assess whether, in the agency’s judgment, the company could meet the agency’s requirements for a “fully responsible prime contractor” in light of all that had transpired.
MEI argues that even if these contract provisions literally called for the company to have disclosed the pending charges against Dr. Sachdev and the subsequent developments which pertained to them, MEI’s failure to do so was not material to its contracts because the doctor’s involvement with MEI was not as a practicing physician who would be performing medical evaluations for the company. This is of no moment. The argument ignores the prerogative of any party to a contractual relationship to dictate the terms it deems essential for its agreement – all the more so where that contracting party is a government agency entering into a public contract:
[T]he provisions of the statutes and ordinances of this State
requiring competitive bidding in the letting of public contracts evince
a strong public policy of fostering honest competition in order to
obtain the best work or supplies at the lowest possible price. . . .
They “are enacted for the benefit of property holders and taxpayers,
and not for the benefit or enrichment of bidders, and should be so
construed and administered as to accomplish such purpose fairly
and reasonably with sole reference to the public interest.” (10
McQuillin [Municipal Corporations (3d ed)] § 29.29, p. 322).
(Matter of Fischbach & Moore v New York City Tr. Auth., 79 AD2d 14, 19 [2nd Dept 1981] [citations omitted].)
At the heart of the disclosure requirements of OTDA’s background questionnaire is the government’s responsibility to ensure it contracts with a “responsible” contractor. This word is “an elastic [one] which includes considerations of skill, judgment and integrity” (Prote Contr. Co. v New York City School Constr. Auth. [Christopher Columbus H.S.], 248 AD2d 693, 695 [2nd Dept 1998]; see also Abco Bus Co. v Macchiarola, 75 AD2d 831, 833 [2d Dept 1980] [Hopkins, J., dissenting], revd for reasons stated in dissent at App Div 52 NY2d 938 [1981]). Determining a bidder’s responsibility is a discretionary act by a government agency (see Matter of Construction Contrs. Assn. of Hudson Val. v Board of Trustees of Orange Community Coll., 149 Misc 2d 440 [Sup Ct, NY County 1991]). It was entirely within OTDA’s prerogative to decide what its concerns were in this regard, to craft RFP requirements designed to address them, and to insist that all bidders comply with them.
Mr. Avenius testified that OTDA’s concern about Dr. Sachdev’s medical issues was the potential cost to the agency of having to re-adjudicate hundreds, if not thousands, of cases because of Dr. Sachdev’s medical issues. If the agency’s decisions were viewed in MEI’s service areas3[2] as predicated on examinations conducted by a company which was so closely identified by its constituents as being run by a doctor charged with professional medical misconduct, who had agreed to a suspension of his license stayed only on condition that he undertake remedial education and be monitored professionally for two years, MEI’s low bid understandably would pale in significance. Mr. Kellogg, the agency’s attorney, testified his understanding was that Dr. Sachdev was “the mastermind for [MEI], and was the one that had been the subject of this investigation and had his judgment called into question, and had failed to advise us of this fact . . . .” OTDA thus clearly was entitled to this information to determine whether the company could meet the agency’s reasonable concern that it not contract with a company that potentially could be fodder for wholesale challenges to OTDA’s adjudications.
Mr. Bishop’s concern whether MEI was a responsible contractor was directed more at the integrity of the bidding process itself, also well-grounded in the law of responsible contractors (see Gershow Recycling Corp. v New York City Dept. of Sanitation (4 Misc 3d 1021[A], 2004 WL 2032510, 2004 NY Slip Op 50983[U] [Sup Ct, NY County 2004]). He expressed an agency view that MEI’s failure to disclose information about a director or officer who was synonymous with MEI gave the company an unfair advantage in the highly competitive bid process (see Matter of Conduit & Found. Corp. v Metropolitan Transp. Auth., 66 NY2d 144, 148 [1985] [“Dishonesty, favoritism and material or substantial irregularity in the bidding process, which undermines the fairness of the competition, impermissibly contravene th[e] public interest in the prudent and economical use of public moneys.”]; see also Matter of DeFoe Corp. v New York City Dept. of Transp., 87 NY2d 754 [1996] [upholding City’s withdrawal of contract for lack of business integrity as a specific factor in determining petitioner’s responsibility status with respect to bridge repair contract]; Matter of Ciprietti-Tolisano Assoc. v Karnovsky, 268 AD2d 234 [1st Dept 2000] [affirming rescission of contract on basis that petitioner is “nonresponsible” where it failed to disclose information about taxes and corporate status before and after award, as contractually required]; Matter of Nefesh v City of N.Y. Dept. of Empl., 254 AD2d 76 [1st Dept 1998] [finding contract withdrawn on the basis of rational considerations pertaining to petitioner’s skill, integrity and ability to perform where petitioner was investigated for possible misappropriation of public funds and suspended by other agency for violations of Health Code]).
OTDA’s questionnaire had been designed to obtain from all bidders disclosure of just the sort of information which pertained to Dr. Sachdev as a director or officer of MEI. The RFP process resulted in the agency replacing one of its other existing contractors with MEI in the Rochester area. That contractor actually had finished a close second to MEI in the bidding for both locales. Given these RFP results, OTDA was all the more justified in viewing MEI’s evasion of the agency’s disclosure requirements as a “material or substantial irregularity in the bidding process” and as evincing the company’s “lack of business integrity.”
Based on the foregoing, OTDA was entitled to terminate the contracts for MEI’s failure to comply with their respective terms and conditions. Let judgment for defendant be entered dismissing the claims herein.
Contractor/Subcontractor Background Questionnaire
Within the past five years has the firm, any affiliate (including a wholly or partially owned subsidiary), and predecessor company or entity, any owner of 5.0% or more of the firm’s shares, any director, officer, partner or proprietor or any employee alleged to have been acting on the part of the offeror been the subject of any of the following (respond to each question and describe in detail the circumstances of each affirmative answer, attach additional pages if necessary)?
(e)	a federal or state suspension or debarment?	No Yes
(u)	any suspension or revocation of any business or professional
license?	No Yes
(v)	any citations, Notices, violation orders, pending administrative hearings or proceedings or determinations for violations of:
-	federal, state or local health laws, rules or regulations
-	unemployment insurance or workers compensation coverage or claim requirements
-	ERISA (Employee Retirement Income Security Act)
-	federal, state or local human rights laws
-	federal or state security laws	No Yes
The undersigned 1) recognizes that this questionnaire is submitted for the express purpose of inducing the New York State Office of Temporary and Disability Assistance to award a contract or approve a subcontract; 2) acknowledges that the Office may in its discretion, by means which it may choose, determine the truth and accuracy of all statements made herein; 3) acknowledges that intentional submission of false or misleading information may constitute a felony under Penal Law 210.40 or a misdemeanor under Penal Law 210.35 or 210.45, and may also be punishable by a fine of up to $10,000 or imprisonment of up to five years under 18 U.S.C. 1001; 4) states that the information submitted in this questionnaire and any attached pages is true, accurate and complete and 5) acknowledges that submission of false or misleading information will constitute grounds for the Office to terminate its contract (or revoke its approval of a subcontract) with the undersigned or the organization of which s/he is an officer.
Consultative Examination Medical Provider Contract
11.	Contractor must notify the Office contract liaison staff of any substantial contract-related problems as soon as practicable. The Office reserves the right to assign Office or contracted staff at the contractor’s facility to monitor its operation.
32.	This Agreement shall be subject to the following termination provisions:
(i)	The Contractor further recognizes that an administrative or judicial finding that a Contractor has violated any of the statutes specified in the Contractor/Subcontractor Background Questionnaire completed prior to the award of this Agreement shall entitle the Office to terminate this Agreement, at its discretion, within thirty days after the Contractor notifies the Office of such finding or the Office notifies the Contractor that it has become aware of such finding.
[1].MEI also asserts the State denied the company equal protection of the laws under Const, art 11, § 1 when OTDA enforced a newly rendered interpretation by its sister State agency, the State Department of Education, requiring all corporate entities that employ doctors who perform these consultative examinations to be professional corporations under the NY Education Law.
[2].Footnotes are used in this opinion to recount portions of the testimony and the content of certain exhibits in greater detail. All italicized words in this opinion are by the court for emphasis, unless otherwise indicated.
[3].This fact of the doctor’s prior employment at OTDA, which apparently spawned the agency’s relationship of trust with him, only came to light on cross-examination and by questions from the court. Dr. Sachdev did not mention it on direct examination when, in a series to questions, claimant’s counsel walked him through what purported to be an overview of his entire career.
[4].When Dr. Sachdev was asked whether the letter was written at his request he replied, “I told him [Leader] that I wanted to change it to corporation and can he please help me . . . form an Inc. and then talk to the State and you handle the matter. And that’s what he did.”
[5].She also said her husband was not secretary when he signed in that capacity. When Mrs. Sachdev was asked to explain why she signed as president in October 2001, she responded this must have been an error: “Maybe we were just planning to give business to me . . . in future I was becoming the President.”
[6].Two months later, he also signed a lease amendment for MEI’s Buffalo facility as “President” in January 2000.
[7].There is no evidence that any formal, signed resignation was executed.
Mrs. Sachdev said that after becoming president, she devoted an hour or two a day, two or three times a week, to her duties as president in MEI’s Buffalo facility. When not at her dry cleaning business, she shared an office with Mr. Batra.
[8].Mr. Batra explained Dr. Sachdev asked him to sign too, but he declined, “I’m too busy and . . . check signing is a thing which requires very attention . . . so I said I’m not ready to do that.”
[9].When asked on cross-examination whether he knew at any time prior to the charges that they would be brought, Dr. Sachdev responded “No, I did not know there were charges would be forthcoming. I know they have my records, but I didn’t know that.”
1[0].Another company, Industrial Medicine Associates, P.C., was the existing contractor in Rochester.
[1]1.The questionnaire is preceded by a note which allowed an offeror to seek confidential treatment under FOIL for any disclosures made: “Note: Please indicate whether you believe that any of the information supplied herein is confidential and should be exempt from disclosure under the Freedom of Information Law. . . .”
1[2].Both Mr. Batra and Dr. Sachdev were asked at trial whether they discussed question 2(v) specifically. Dr. Sachdev confirmed they did “because I was the owner and administrator and everything of the previous companies,” but denied he was an officer or director of MEI on May 16, 2001. Mr. Batra acknowledged that because the certification spoke of criminal penalties and jail for false answers he was especially concerned the responses would be true and he believed they were. He said he questioned Dr. Sachdev about the nature of the inquiry and the doctor assured him no violation of laws was involved.
1[3].The fact that a hearing actually was held never was brought out at trial. Ex. 36, a letter to OTDA dated February 8, 2002 from MEI’s attorney, Brian Fitzgerald, refers to it and to Mr. Fitzgerald’s opening statement at the hearing, then made on behalf of Dr. Sachdev, with regard to each of the cases which was the subject of a charge against the doctor.
1[4].When the court asked the doctor whether he was concerned that if his name were not in the letter he might not get the contract because he had been the main person OTDA had known, he responded, in part, “I don’t think there was any concern, no, because the qualification which we give was none of Arbinder [sic] Sachdev’s qualifications was given to submit them a contract. . . .so my concern was not that they will not give it. . . . We don’t know what he had in his mind when he ask [sic] the question. . . .”
1[5]. No evidence was adduced at trial as to when negotiations pertaining to this agreement commenced, when meetings were held, or when Dr. Sachdev actually arrived at the agreement with OPMC prior to his executing it.
1[6].The OPMC consent agreement permitted Dr. Sachdev to conduct these examinations but OTDA would have had to consent to his doing so under the circumstances. The doctor’s name was not listed in MEI’s proposals as one of the roster physicians who would be performing them.
1[7].At the same time OTDA learned of Dr. Sachdev’s plea agreement, the agency also learned its sister State-agency, the Department of Education, had decided (after an inter-agency discussion over a number of months) to interpret Education Law § 6527 [sic] and Articles 130 and 131 of that law as requiring corporations engaged in performing consultative medical examinations to be professional corporations under N.Y. Business Corporation Law Art 15 or licensed under Public Health Law Art 28. OTDA lawyers disagreed with this interpretation, but acceded to the view of the agency with jurisdiction to interpret it. No regulation, formal opinion or ruling embodying the Education Department’s interpretation was introduced at trial. By virtue of OTDA’s decision to enforce the interpretation, MEI, a business corporation since 1999, was rendered noncompliant with this operating requirement, as were four other OTDA contractors. The agency decided to give the other non-compliant contractors a grace period to reorganize, but asserts it did not do this for MEI because it had other, additional reasons for terminating the company.
1[8].See Appendices I and II infra for the full text of these contract provisions.
1[9].Claimant suggests that because OPMC proceedings are confidential, and no disposition of the charges against Dr. Sachdev had yet been rendered, the company need not have disclosed them. This reasoning is fallacious. Dr. Sachdev was a principal of the company, and he also made others at MEI, i.e. his wife and Mr. Batra, aware of the charges. The company was not in a position to hide behind a shield of confidentiality intended to protect the doctor in his individual capacity. This was a bid process on a public contract (see discussion infra). By submitting a proposal, MEI agreed to be bound by the requirements of the RFP, including waiving any confidentiality protections which otherwise might apply to any of its principals. Also, the RFP contained an express provision enabling MEI to request confidential treatment of this disclosure under the Freedom of Information Law.
2[0].The court is cognizant that the absence of formal documentation can be the norm with close corporations. Nevertheless, wherever a public contract is involved, and/or where the corporation at some point understood it might be necessary to establish facts pertaining to its governance, i.e. its assertion that Dr. Sachdev held no office in MEI, it behooved the company to have ensured that documentary proof of formal, official corporate action would exist to evidence who was, and was not, the holder of corporate office at any given time.
2[1].Shares already had been issued to two shareholders, Mrs. Sachdev and Dr. Sachdev, so this portion of Mr. Leader’s statement clearly was wrong (unless it had been shown at trial that the doctor had some undisclosed relationship with his wife whereby she had acted as his nominee at that time). Although Mrs. Sachdev already had signed the stock certificates as president and Dr. Sachdev had signed them as secretary, Mrs. Sachdev testified she did not hold the office until her husband gave her his four shares in January 2001; and, as recounted supra, the evidence reflects that the doctor had signed the company’s acceptance of the assignment from Main Medical as president only three weeks after his wife signed the stock certificates upon their initial issuance (his signature as president having been notarized by Mr. Leader). He also signed a lease extension as president three months after the company was formed. Mrs. Sachdev also testified that Dr. Sachdev was not the secretary when he signed the stock certificates in that capacity on October 19, 1999. So the portion of Mr. Leader’s statement that Dr. Sachdev would be the only officer of the company appears to have been accurate at the time insofar as the doctor was acting as president at that time. He may, or may not, have held a second office, secretary, as well. Other than Mr. Leader’s statement that Dr. Sachdev would be the company’s sole director, there is no other writing in the record pertaining to the position of director, and thus no other writing to expressly refute that the doctor was MEI’s director.
[2]2.When Mr. Batra was asked about the discussion he had with Dr. Sachdev at the time they were answering the background questionnaire, he did not say he was unconcerned because he believed the questions did not apply to the doctor in that he was not a director or an officer of the company. Rather, Mr. Batra indicated he was concerned about the company’s response to the question, and that is why he closely questioned the doctor on whether the charges he was facing fell within the ambit of the information sought by question 2 pertaining to pending proceedings against a director or officer.
Claimant also makes much of the fact that nowhere in the company’s RFP response did MEI identify Dr. Sachdev as a director or officer, arguing that, as a result, OTDA had no reason to believe he was. This does not follow. Nowhere in MEI’s proposal did the company purport to list all of its directors or officers. Rather, one of the RFP’s “Management Summary” requirements sought disclosure of anyone with an interest in the facility, including the percentage of that interest, together with their “titles and other business . . . affiliations,” giving examples in a parenthetical reference “(officers, partners, shareholders)” (Exs. 39, 40, RFP III.A.1). In response, MEI prepared a page headed “Business Affiliations,” where the company responded by listing those it said had a “financial interest” (MEI’s chosen words) in the company. It listed Mrs. Sachdev as 100 percent shareholder and described her title as president under a column it labeled “Relationship.” The company did not also describe her as a director.
2[3].Perhaps realizing the significance of his admission, he amended his answer to say he “definitely” needed Mrs. Sachdev’s okay but she consulted her husband if she “needed” her husband’s okay. “It’s a family matter,” he added.
2[4].There is also a letter included in MEI’s proposal signed by Mr. Batra as Vice-President, the only reference to his ever holding that office.
2[5].He exercised this authority with his wife’s full knowledge and assent while she was MEI’s majority shareholder, and thereafter when she became the company’s sole shareholder as well as its president (cf. BCL § 715 [b] [shareholders also may elect officers where certificate of incorporation so provides]).
2[6].Dr. Sachdev’s name appeared seven different times on documents included in MEI’s responses to the RFPs. He personally signed a page in the Qualifications section pertaining to Mr. Batra’s administrative skills even though no signature was called for, as if to emphasize both the importance of his endorsement and his continuing presence in the company. The page identified the doctor only as MEI’s “founder.” Other references to the doctor in the company’s proposals were: his signature “as president” on a January 2000 amendment to the lease of MEI’s Buffalo facility; his name and initials as lease guarantor on a form of guaranty of a lease agreement for MEI’s Rochester facility prepared in May 2001; his name as the person to whom merchandise was to be shipped on an April 30, 2001 quote from a surgical supply company; his name on an April 25, 2001 quote for a reconditioned x-ray system (accepted by Mr. Batra on behalf of MEI as “Vice-President”); his name on an April 26, 2001 letter addressed to him from the CEO of Cuba Memorial Hospital responding to an April 4, 2001 letter from the doctor regarding the lease of space for a facility and related service matters; and his name as a cc: on an April 2, 2001 letter to Mr. Batra from a medical laboratory in Rochester following up on a meeting with Dr. Sachdev regarding services in Buffalo, Rochester and Cuba.
2[7].The doctor performed as an officer at the same time he was the company-designated “contract liaison” (a person required by the RFP/contract to coordinate activities and be responsible for resolving problems and questions from OTDA) and its “contact person” under MEI’s existing contract (the latter term coined by Mr. Batra in his July 30 response to Mr. Bishop). OTDA had known the doctor as the sole director and officer of Main Medical, MEI’s predecessor when the doctor was that company’s designated “contract liaison;” and the agency also knew him to be MEI’s sole officer and director until the agency was informed otherwise in the company’s responses to the RFP, i.e. that his wife had taken her husband’s title as president in January 2001. Although Mr. Batra’s July 30 letter to Mr. Bishop confirmed this ostensible change of presidents, it did not purport to address any other corporate office in the company. The July 30 letter thus gave OTDA every reason to infer that, just as Dr. Sachdev would continue as MEI’s “primary contact person for the present as well as for the upcoming Rochester/Buffalo 2002-2004," everything else regarding MEI’s corporate governance also remained the same, and would continue to be so.
2[8].Dr. Sachdev and Mr. Batra met with OTDA representatives in Rochester one day after the doctor executed the OPMC consent decree. Mr. Bishop met the doctor at the Rochester site on January 2, 2002, a day after the new contracts commenced. Dr. Sachdev accompanied Mr. Batra to Albany to meet with top agency officials in January. Although Mr. Batra testified that Dr. Sachdev allegedly told the officials Mr. Batra now was the person in charge, no one who testified for the agency referenced such a conversation as having occurred at all. Mr. Batra also testified that when someone at the meeting allegedly asked the doctor whether he would still be around, he allegedly responded, “I’ll be still in Buffalo.”
2[9].The testimony on whether Dr. Sachdev actually maintained a private practice at all during his time at IMO, Main Medical and MEI was entirely inconsistent. When initially he was asked whether he “remain[ed] in practice or in the practice of gastroenterology . . . right through [since 1976] and including the time periods . . . January, February 2002," he unequivocally answered, “yes”. But when asked to explain why he decided to organize MEI as a business corporation so that non-medical people could run it, he said he wanted to resume his medical practice “which I left.” Mr. Batra said he did not even learn of Dr. Sachdev’s intent to resume practicing until the two were writing the proposal in the spring of 2001 (“he used to tell me because he’s out of practice for quite a long time, and he wants to start a practice. So he would like to go for some education before that . . . always used to tell [me] I need lot of time before I start a practice because . . . I need some kind of more knowledge”).
3[0].The court does not credit Mr. Batra’s testimony that he verbally told Mr. Bishop the doctor would no longer be with the company nor would he be fully knowledgeable about its business after December 31, 2001 (“. . . I said he’s going out. He’s leaving – he’ll not be available. Maybe he might be around but he won’t be available, and he may not have the proper information after that.”) Mr. Batra’s July 30 letter did not say this, and no one who testified from OTDA said they were so informed. Mr. Batra’s explanation of his reference to the “upcoming” 2002-2004 contract as meaning Dr. Sachdev would remain available only through December 31, 2001 to ensure that all the company’s facilities would be ready for the start of the new contract appears tortured. Dr. Sachdev himself testified the letter, as written, was “true.” When asked whether he ever told the State he would no longer be involved after December 31, the doctor testified, “[w]e wrote in the contract . . . I don’t think I had to tell anybody else, no.” The court notes that nowhere in the company’s proposal or the contract is there any express statement or indication that Dr. Sachdev would remain with the company only through December 31, or that there had been or would be any change in the doctor’s responsibilities or authority from what he possessed as a director or officer of MEI since the company was formed. Mr. Zalucki’s letter to Dr. Sachdev informing him of OTDA’s award to MEI, written just ten days after Mr. Batra’s letter of July 30, said he looked forward to a positive relationship “with your firm over the upcoming term of the contracts,” thus evincing his understanding that the doctor’s presence as an MEI principal would continue during 2002-2004.
3[1].Other provisions cited by defendant in its termination letters are inapposite, i.e. questions 2 (e) and 2(u), respectively, “state suspension” and “suspension...of...professional license,” because there was no suspension at the time the questionnaire was answered; and section 32. (i) of the contract, because it only applies where the “Contractor” itself has been the subject of an administrative or judicial finding.
Defendant also predicated its termination of MEI on the company’s failure to fully comply with State operating requirements, i.e. it was not a professional corporation when the Department of Education decided to interpret the law (without a formal opinion, rule or regulation) to require a company employing physicians who conduct consultative examinations to be a professional corporation (contract sections III.3 and III.32.d). As noted supra, of the five business corporations that were rendered noncompliant because of the interpretation by OTDA’s sister State agency, MEI was the only one not afforded a grace period to reorganize. According to Mr. Bishop, this was because the agency determined there were independent grounds for terminating the agency. The court has so found and thus need not further address this stated agency ground.
3[2].The court notes that of eight specifications of charges against Dr. Sachdev, five pertained to his treatment of four different patients at Sisters Hospital located adjacent to MEI’s Buffalo examination facility. The charges at Sisters included gross negligence, gross incompetence, negligence, incompetence and inadequate records.