Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Terri M. Smith a.k.a. Terri M. Clemens!
(OI File No. H-12-40574-9),
Petitioner,
v.
The Inspector General.
Docket No. C-12-1253
Decision No. CR2742

Date: April 1, 2013

DECISION

The Inspector General (1.G.) of the Department of Health and Human Services notified
Petitioner that she was being excluded from participation in Medicare, Medicaid, and all
other federal health care programs for a minimum period of five years under 42 U.S.C.
§ 1320a-7(a)(1)). I find that the I.G. has a basis for excluding Petitioner from program
participation and that the five-year exclusion is mandated by law.

I. Background

Ina June 29, 2012 letter, the I.G. notified Petitioner that she was being excluded from
Medicare, Medicaid, and all federal health care programs for the minimum statutory

' In the June 29, 2012 exclusion notice that Petitioner now appeals, the Inspector General
indicated that Petitioner is known by the alias of “Terri Bennet.” At the October 16, 2012
prehearing conference in this case, Petitioner denied ever having used the surname
“Bennet.” In response to Petitioner’s objection, the Inspector General agreed to the
removal of “Terri Bennet” from the caption. Informal Brief of the Inspector General at 7.
Therefore, the caption is amended and the alias of “Terri Bennet” is removed from it.
period of five years under 42 U.S.C. § 1320a-7(a)(1). I.G. Ex. 1. The exclusion was due
toher conviction “in the Iowa District Court for Monona County, of a criminal offense
related to the delivery of an item or service under the Medicare or a State health care
program, including the performance of management or administrative services relating to
the delivery of items or services, under any such program.” LG. Ex. 1, at 1.
Petitioner timely filed a request for hearing (RFH) and this case was assigned to me for
hearing and decision. On October 16, 2012, I convened a prehearing conference by
telephone, the substance of which is summarized in my October 17, 2012 Order and
Schedule for Filing Briefs and Documentary Evidence (Order). See 42 C.F.R.
§ 1005.6. Pursuant to the Order, the I.G. filed a brief (I.G. Br.) on November 16, 2012,
with I.G.’s exhibits (I.G. Exs.) 1 through 5. Petitioner filed a response (P. Br.), which our
office received on December 27, 2012. Petitioner submitted exhibits (P. Exs.) 1 through
14 with her brief. The I.G. filed a reply brief (I.G. Reply) on January 15, 2013, with I.G.
Ex. 6. Absent objection, I admit I.G. Exs. 1-6 and P. Exs. 1-14 into the record.
Additionally, both parties indicated that an in-person hearing was unnecessary (I.G. Br. at
6; P. Br. at 2); therefore, I issue this decision on the basis of the written record.

II. Issue

The issue before me is whether the I.G. has a basis for excluding Petitioner for five years
from participating in Medicare, Medicaid, and all other federal health care programs
pursuant to 42 U.S.C. § 1320a-7(a)(1). See 42 C.F.R. §1001.2007(a).

III. Findings of Fact, Conclusions of Law, and Analysis”

The Secretary of Health and Human Services (Secretary) must exclude an individual
from participation in any federal health care program if that individual has been
convicted of a criminal offense related to the delivery of an item or service under
Medicare or any state health care program.* 42 US.C. § 1320a-7(a)(1).

A, Petitioner entered an Alford plea in an Iowa court to one count of theft, a
misdemeanor, and received a deferred judgment from the court.

Petitioner was the office manager and bookkeeper at Elmwood Care Center (Elmwood), a
nursing home located in Onawa, Iowa. P. Br. at 6. On July 1, 2011, Petitioner was
charged in a preliminary complaint with Theft in the Second Degree in violation of lowa
Code §§ 714.1(2) and 714.2(2). LG. Ex. 2. According to the complaint, on or about

> My findings of fact and conclusions of law are set forth in italics and bold font.

> The term “State health care program” includes a state’s Medicaid program. 42 U.S.C.
§ 1320a-7(h)(1); 42 C.F.R. § 1001.2.
February 16, 2008, through June 2, 2011, in Onawa, Monona County, Iowa, Petitioner
took possession of the checking account of a resident of Elmwood (Resident), who died
on February 16, 2008, and did not report the monies in the account to the State of Iowa,
as required by Iowa Code § 249A.5, to ensure that the lowa Medicaid program properly
recouped all monies possible at the time a Medicaid recipient dies. I.G. Ex. 2. On
September 20, 2011, Petitioner entered an A/ford plea to the amended (lesser) charge of
Theft in the Fifth Degree, a simple misdemeanor, in violation of lowa Code §§ 714.1(1),
(2) and 714.2(5). LG. Ex. 4; P. Exs. 1, 6. The Iowa District Court for Monona County
accepted Petitioner’s Alford plea and deferred judgment until March 20, 2012. LG. Ex.
4; P. Exs. 1, 6. The court sentenced Petitioner to pay court costs and a $625 civil penalty,
and ordered, as restitution, that all funds in the Resident’s bank account be released,
payable to the State of Iowa in care of the Medicaid Fraud Control Unit. I.G. Exs. 4, 5.
On May 7, 2012, the court entered an Order Granting Final Discharge From Deferred
Judgment, and Petitioner’s record was expunged. P. Ex. 10. On July 10, 2012, in the
Iowa District Court for Monona County, Petitioner filed a Motion to Withdraw Plea of
Guilty. P. Ex. 6, at 1-4. On July 13, 2012, Petitioner withdrew her motion to withdraw
her plea. 1.G. Ex. 6.

B. Petitioner was convicted of a criminal offense for the purposes of 42 U.S.C.
§ 1320a-7(a)(1).

For exclusion purposes, 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 whether an appeal is pending or 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 a first offender program, deferred adjudication
program, or other arrangement where a judgment of conviction is withheld. 42 U.S.C.

§ 1320a-7(i).

Petitioner’s primary defense to the I.G.’s imposition of exclusion is that she has not been
convicted of a criminal offense. P. Br. at 2, 5-8. Petitioner contends that her criminal
defense counsel and the prosecutor told her that if she entered an A/ford plea, the plea
would be expunged from her record and not affect her employment. RFH at 3.

Petitioner acknowledges that she entered an Alford plea to the lesser charge of Theft in
the Fifth Degree, in violation of lowa Code §§ 714.1(1), (2) and 714.2(5), but claims that
because the Iowa court granted her a deferred judgment and subsequently expunged her
record related to this plea and charge, no conviction was entered. P. Br. 10-11. Despite
the fact that Petitioner’s record has been expunged, under federal law, Petitioner is
considered to have been convicted for purposes of exclusion.

An “Alford plea” is one by which a defendant maintains his innocence to a criminal
charge, but pleads guilty because the defendant believes that the prosecutor has sufficient
evidence to obtain a conviction. North Carolina v. Alford, 400 U.S. 25, 37-39 (1970).
Under 42 U.S.C. § 1320a-7(i)(3), an individual is considered to have been “convicted”
when a plea of guilty has been accepted by a federal, state, or local court. That statutory
provision is met by an A/ford plea. Rudman v. Leavitt, 578 F.Supp.2d 812, 815 (D. Md.
2008). Thus, Petitioner’s entry of an Alford plea and its acceptance by the Iowa court
constitutes a conviction under 42 U.S.C. § 1320a-7(i)(3).

Further, under 42 U.S.C. § 1320a-7(i)(4), an individual who has entered into a deferred
adjudication or other arrangement or program where judgment of conviction has been
withheld is considered to have been “convicted.” Petitioner’s acceptance of deferred
judgment following her entry of an A/ford plea means that Petitioner has been convicted
under the definition in 42 U.S.C. § 1320a-7(i)(4). See Rudman, 578 F.Supp.2d at 815.

Finally, although the Iowa court subsequently expunged Petitioner’s record after she
completed the requirements of her deferred judgment, this action by the court does not
affect a determination under federal law as to whether she is considered to have been
convicted. See Travers v. Shalala, 20 F.3d 993, 996 (9th Cir. 1994) (“[w]hat constitutes a
‘conviction’ under [42 U.S.C. 1320a-7] . . . is determined by federal law, not state law.”).
Under 42 U.S.C. § 1320a-7(i), an individual is still considered to be convicted regardless
as to whether a criminal judgment has been expunged. See Rudman, 578 F.Supp.2d at
815; Gupton v. Leavitt, 575 F. Supp. 2d 874, 879-881 (E.D. Tenn. 2008). Therefore, for
purposes of 42 U.S.C. § 1320a-7(a)(1), Petitioner is considered to be convicted of a
criminal offense despite the action of the state court to expunge her record.

C. Petitioner’s conviction requires exclusion under 42 U.S.C. § 1320a-7(a)(1)
because her criminal conduct related to the delivery of an item or service
under Medicaid.

An individual must be excluded from participation in any federal health care program if
the individual was convicted under federal or state law of a criminal offense related to the
delivery of an item or service under Medicare or a state health care program.* 42 U.S.C.
§ 1320a-7(a)(1). As discussed below, Petitioner’s Alford plea for theft from a resident at
a nursing home who was a recipient of Medicaid provides a sufficient nexus to the
delivery of items or services under the Medicaid program to uphold the L.G.’s exclusion.

One of Petitioner’s duties as the office manager at Elmwood was “to make deposits, write
checks and make withdrawals on [the Resident’s] behalf.” P. Br. at 6. Petitioner was a
co-signer on the Resident’s checking account, and wrote checks on the Resident’s behalf
to pay her monthly fees for residing at Elmwood and to purchase items the Resident

* Medicaid is a “State health care program” for purposes of 42 U.S.C. § 1320a-7(a)(1).
42 C.F.R. § 1001.2.
needed. RFH at 2; P. Ex. 3, at 2. Petitioner’s duties also included notifying the Iowa
Medicaid Estate Recovery program when an Elmwood resident who was a Medicaid
recipient died. P. Br. at 6.

Although the original charge against Petitioner stated that she was accused of theft in the
second degree under Iowa law, specifically taking possession of the Resident’s checking
account after she died on February 16, 2008, and failing to report the monies in the
account to the State of Iowa as required by Iowa Code § 249A.5, to ensure that the lowa
Medicaid program properly recouped all monies paid on behalf of the Resident, I am only
concerned with the offense to which Petitioner pled guilty. Based on the evidence of
record, it appears that Petitioner’s Alford plea related to the withdrawal of $60.00 from
the Resident’s bank account on August 30, 2010, (LG. Ex. 3; P. Ex. 7) because
Petitioner’s plea was to fifth degree theft, which means that it involved theft of less than
$200. Iowa Code § 714.2(5). The original charge of second degree theft had to involve
an alleged amount of theft between $1,000 and $10,000, or a range that included the full
value of the Resident’s bank account in Petitioner’s care. Iowa Code § 714.2(2). In any
event, the record is clear that the A/ford plea to theft relates in some way to Petitioner’s
possession of the Resident’s bank account well after the Resident’s death, as evidenced
by the order of restitution requiring all of the funds in the Resident’s bank account to be
released to the Iowa Medicaid Fraud Control Unit. I.G. Exs. 2, 5.

Petitioner argues that her criminal offense was not in connection with the “delivery of an
item or service reimbursed by the Medicare program.” P. Br. at 8. In her defense,
Petitioner contends that she properly notified the Medicaid Estate Recovery program of
the Resident’s death, but admits that she inadvertently failed to disclose the amount
remaining in the Resident’s checking account on the Estate Recovery form. P. Br. at 4,
6-7; P. Ex 3, at 2. According to Petitioner, she used an older form, which did not contain
an area for reporting this information. P. Br. at 6. Petitioner also admits that $60.00 was
taken from the Resident’s bank account on or about August 30, 2010, but states that her
personal bank account was linked to the Resident’s account and the money was
withdrawn without Petitioner’s knowledge. P. Br. at 6; see P. Ex. 3, at 2.

I conclude that the record demonstrates that a sufficient nexus exists between Petitioner’s
criminal conduct and the delivery of an item or service under Medicaid. Medicaid paid
for the care that the Resident received at Elmwood. Cf P. Br. at 6; P. Ex. 4. A service
provided by Elmwood to the Resident was that Petitioner administered the Resident’s
bank account. P. Br. at 6. The “delivery of an item or service under Medicare or a State
health care program” includes “the performance of management or administrative

5 According to the I.G., the amount in the Resident’s bank account was $1,645.70. LG.
Br. at 3; 1.G. Ex. 3.
services relating to the delivery of items or services under any such program.” 42 C.F.R.
§ 1001.101(a); see also Charice D. Curtis, DAB No. 2430, at 5-6 (2011). As Petitioner
admits, her control over the Resident’s account was “during the course of her
employment at Elmwood” and was “within the scope of her duties as bookkeeper.” P.
Br. at 6. Petitioner’s theft offense relates to her possession of the Resident’s funds as a
result of her position at Elmwood. Therefore, there is a nexus between Petitioner’s
actions and the delivery of an item or service under the Medicaid program. See Steven
Lee Ives, DAB CR1861, at 3 (2008) (nexus found between the burglary of nursing home
residents’ money by an employee of the nursing home and the delivery of an item or
service under Medicare and Medicaid); see also Frances C. Minaya, DAB CR2736, at 5
(2013) (nexus found between the collection of fraudulent fees from nursing home
residents by an employee of the nursing home and the delivery of an item or service
under Medicare and/or Medicaid).

Further, the court-ordered restitution was for the full amount of the Resident’s bank
account that had been in Petitioner’s possession and the restitution was ordered to be paid
to the State of Iowa in care of the “Medicaid Fraud Control Unit.” I.G. Ex. 5. This order
of restitution alone can serve as sufficient evidence of a nexus between Petitioner’s
conviction and the Medicaid program. Blessing Okuji, DAB CR2343, at 5 (2011)
(holding that a sentence including an order to pay restitution to the “New York State
Medicaid Fraud Restitution Fund” created a rebuttable presumption of a nexus between
the conviction and the delivery of an item or service under the Medicaid program);
Alexander Nepomuceno Jamias, DAB CR1480 (2006) (holding that a sentence involving
restitution to an agency that administers a program can serve as proof of a rebuttable
presumption that there is a nexus between the criminal conviction and the delivery of
items or services under the program administered by that agency).

To the extent that Petitioner claims that she is not guilty of any criminal conduct, I am
unable to consider such an argument because it is a collateral attack on her original
conviction (i.e., the A/ford plea and participation in a deferred adjudication program).

42 C.F.R. § 1001.2007(d). Further, Petitioner has offered letters from current and former
co-workers, those with whom she has a professional relationship, and friends attesting to
her upstanding character. P. Ex. 12, at 3-8. However, the law mandates an exclusion for
any individual who is convicted of a crime under 42 U.S.C. § 1320a-7(a)(1). See
Travers, 20 F.3d at 998. Thus, any evidence relating to Petitioner’s character and
reputation is irrelevant to my analysis. Even the fact that Petitioner’s conviction related
to a very small amount of money is not relevant under the exclusion statute. See
Manocchio v. Kusserow, 961 F.2d 1539, 1542 (11th Cir. 1992) (upholding a five-year
exclusion based on conviction for a $62.40 fraudulent claim.)

I find that Petitioner’s conviction is related to the delivery of services under the lowa
Medicaid program. I conclude that the record fully supports Petitioner’s mandatory
exclusion under 42 U.S.C. § 1320a-7(a)(1).
D. Petitioner must be excluded for the statutory minimum of five years under
42 U.S.C. § 1320a-7(c)(3)(B).

Five years is the minimum authorized period for a mandatory exclusion pursuant to

42 U.S.C. § 1320a-7(a)(1). 42 U.S.C. § 1320a-7(c)(3)(B); 42 C.F.R. § 1001.102(a). I
have found there is a basis for Petitioner’s exclusion under 42 U.S.C. § 1320a-7(a)(1).
Accordingly, Petitioner must be excluded for the minimum period of five years and I do
not have any discretion to reduce the length of exclusion. See 42 C.F.R. §

001.2007(a)(2).
IV. Conclusion

For the foregoing reasons, | affirm the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all federal health care programs for the statutory
five-year minimum period pursuant to 42 U.S.C. § 1320a-7(a)(1), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2013-H-0158)

Complainant
v.

Yong Sheng Liu
d/b/a Hao Sam Chinese Restaurant,

Respondent.
Docket No. C-13-404
Decision No. CR2738

Date: March 28, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an
administrative complaint on Respondent, Yong Sheng Liu d/b/a Hao Sam Chinese
Restaurant, at 3901 North Broad Street, Philadelphia, PA 19140, and by filing a
copy of the complaint with the Food and Drug Administration's (FDA) Division of
Dockets Management. The complaint alleges that Hao Sam Chinese Restaurant
impermissibly sold cigarettes or smokeless tobacco to a minor and failed to verify
the purchaser’s age by means of photo identification containing a date of birth,
violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq.,
and its implementing regulations, 21 C.F.R. Part 1140. CTP seeks to impose a
$500 civil money penalty against Respondent Hao Sam Chinese Restaurant.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on February 14, 2013, CTP served
the complaint on Respondent Hao Sam Chinese Restaurant by United Parcel
Service. In the complaint and accompanying cover letter, CTP explained that,
within 30 days, Respondent should pay the penalty, file an answer, or request an
extension of time in which to file an answer. CTP warned Respondent that, if it
failed to take one of these actions within 30 days, the Administrative Law Judge
could, pursuant to 21 C.F.R. § 17.11, issue an initial decision ordering it to pay the
full amount of the proposed penalty.

Respondent Hao Sam Chinese Restaurant has neither filed an answer within the
time prescribed, nor requested an extension of time within which to file an answer.
Pursuant to 21 C.F.R. § 17.11, Lassume that the facts alleged in the complaint (but
not its conclusory statements) are true. Specifically:

e At Respondent's business establishment, 3901 North Broad Street,
Philadelphia, PA 19140, on August 11, 2011, an FDA-commissioned
inspector observed a sale of cigarettes or smokeless tobacco to a person
younger than 18 years of age;

e At Respondent's business establishment, 3901 North Broad Street,
Philadelphia, PA 19140, on August 11, 2011, an FDA-commissioned
inspector observed that staff failed to verify, by means of photo
identification containing the bearer's date of birth, that no purchaser of
cigarettes or smokeless tobacco is younger than 18 years of age;

e Ina warning letter dated November 10, 2011, CTP informed Respondent of
the inspector's August 11, 2011 observations, and that such actions violate
federal law, 21 C.F.R. §§ 1140.14(a) and 1140.14(b)(1). The letter further
warned that Respondent's failure to correct its violations could result in a
civil money penalty or other regulatory action;

e At approximately 5:05 p.m. on April 18, 2012, at Respondent's business
establishment, 3901 North Broad Street, Philadelphia, PA 19140, an FDA
commissioned inspector observed the sale of a package of Newport Box
100s cigarettes to a person younger than 18 years of age; staff also failed to
verify, by means of photo identification containing the bearer's date of
birth, the purchaser’s age.

These facts establish Respondent Hao Sam Chinese Restaurant' s liability under
the Act. The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k).
A tobacco product is misbranded if sold or distributed in violation of regulations
issued under section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C.

§ 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The Secretary issued the regulations at 21
C.F.R. Part 1140 under section 906(d) of the Act. 21 U.S.C. 387(a); see 21 U.S.C.
§ 387£(d)(1); 75 Fed. Reg. 13,229 (Mar. 10, 2010). Under 21 C.F.R. § 1140.14(a),
no retailer may sell cigarettes or smokeless tobacco to any person younger than 18
years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer must verify, by means of
photo identification containing the bearer's date of birth, that no person purchasing
cigarettes or smokeless tobacco is younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against
Respondent Yong Sheng Liu d/b/a Hao Sam Chinese Restaurant. Pursuant to 21
C.F.R. § 17.11 (b), this order becomes final and binding upon both parties within
30 days of the date of its issuance.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Frances C. Minaya
(OI File No.: H-12-40546-9),

Petitioner,
v.
The Inspector General.
Docket No. C-12-1186
Decision No. CR2736

Date: March 28, 2013

DECISION

The Inspector General (1.G.) of the Department of Health and Human Services notified
Frances C. Minaya (Petitioner) that she was being excluded from participation in
Medicare, Medicaid, and all other federal health care programs for a minimum period of
five years pursuant to 42 U.S.C. § 1320a-7(a)(3). Petitioner appealed. I find that the LG.
has a basis for excluding Petitioner from program participation and that the five-year
exclusion is mandated by law.

I. Background

By letter dated June 29, 2012, the I.G. notified Petitioner that she was being excluded
from Medicare, Medicaid, and all federal health care programs for a minimum period of
five years pursuant to 42 U.S.C. § 1320a-7(a)(3). LG. Exhibit (Ex.) 1. The I.G. advised
Petitioner that the exclusion was based on her conviction “in the Circuit Court of the
Eleventh Judicial Circuit in and for Miami-Dade County, Florida, of a criminal offense
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 or financed in whole or in part,
by any Federal, State or local Government agency.” LG. Ex. 1, at 1. Petitioner,
represented by counsel, timely filed her August 17, 2012 request for hearing (RFH) with
the Departmental Appeals Board, Civil Remedies Division. This case was assigned to
me for hearing and decision. On September 18, 2012, I convened a prehearing
conference by telephone, the substance of which is summarized in my Order and
Schedule for Filing Briefs and Documentary Evidence (Order), dated September 19,
2012. See 42 C.F.R. § 1005.6. Pursuant to the Order, the I.G. filed a brief (I.G. Br.) on
October 17, 2012, with LG. Exs. 1 through 5. Petitioner filed a response (P. Br.), which
the Civil Remedies Division received on November 16, 2012. Petitioner did not submit
any proposed exhibits. The LG. filed a reply brief (I.G. Reply Br.) on December 3, 2012.
Absent objection, I admit I.G. Exs. 1 - 5 into the record.

The I.G. requested a decision on the written record stating that it has no witnesses to
offer. LG. Br., at 6. Petitioner stated that a hearing was required and that Petitioner
would be the only witness. P. Br., at 2-3. In an Order dated December 13, 2012, I
afforded Petitioner the opportunity to provide her complete, written direct testimony in
the form of an affidavit. See 42 C.F.R. § 1005.16(b). On January 7, 2013, Petitioner
submitted her affidavit. The I.G. declined the opportunity to cross-examine Petitioner.
Instead, on January 14, 2013, the I.G. objected to the admission of Petitioner’s affidavit
on the grounds of relevancy and that it impermissibly collaterally attacks Petitioner’s
conviction. I.G. Surreply Br., at 2-3. Because Petitioner has the right to testify in her
own case, see 42 C.F.R. § 1005.3(a)(6), at least some of the Petitioner’s written testimony
is relevant and material, see 42 C.F.R. § 1005.17(c), and the LG. did not file a motion for
summary judgment, see 42 C.F.R. § 1005.4(b)(12), I overrule the I.G.’s objections and
admit Petitioner’s affidavit into the record as Petitioner’s Exhibit (P. Ex.) 1

The record in this matter is now closed and all of the evidence of record has been
considered in rendering this decision.

IL. Issue

Whether the I.G. has a basis for excluding Petitioner for five years from participating in
Medicare, Medicaid, and all other federal health care programs, pursuant to 42 U.S.C.

§ 1320a-7(a)(3). See 42 C.F.R. § 1001.2007(a).

III. Findings of Fact, Conclusions of Law, and Analysis’

The Secretary of Health and Human Services (the Secretary) must exclude an individual
from participation in any federal health care program if that individual:

' My findings of fact and conclusions of law are set forth in italics and bold font.
has been convicted for an offense which occurred after August 21, 1996,
under Federal or State law, 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 (other than those specifically described in paragraph (1)) operated
by or financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a felony relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct.

42 U.S.C. § 1320a-7(a)(3).

A. Petitioner pled guilty in a Florida court to five counts of exploitation of the
elderly/disabled and one count of organized fraud, and the court ordered the
adjudication of guilt stayed and withheld.

Petitioner was an employee at the Susanna Wesley Health Care Center (the nursing
facility). The Office of the Attorney General, Medicaid Fraud Control Unit for the State
of Florida investigated Petitioner for exploitation of funds from the nursing facility’s
elderly residents. I.G. Ex. 5, at 3. According to the Investigative Summary Report,
Petitioner demanded cash payments from residents when in fact no payments were owed.
Id. The residents’ family members made the cash payments to Petitioner or, at least on
one occasion, to the Admissions Assistant on behalf of Petitioner. I.G. Ex. 5, at 3, 12.

On August 17, 2009, an Information for 14 counts of felony Exploitation of
Elderly/Disabled and one count of felony Organized Fraud — Scheme to Defraud under
Florida law was filed against Petitioner. I.G. Ex. 4. On May 5, 2012, Petitioner entered
into a plea agreement and pled guilty to Counts | through 5 (Exploitation of the
Elderly/Disabled) and to Count 15 (Organized Scheme to Defraud). I.G. Ex. 3, at 1.
Petitioner entered a guilty plea and a Florida Circuit Court Judge ordered that the
adjudication of guilt be stayed and withheld. LG. Ex. 2, at 1.

B. Petitioner was convicted of a criminal offense for the purposes of 42 U.S.C.
§ 1320a-7(a)(3).

The I.G. argues that Petitioner was “convicted” of a crime for the purposes of 42 U.S.C.
§ 1320a-7(a)(3). That statute defines “convicted” to include “when a plea of guilty or
nolo contendere by the individual . . . has been accepted by a Federal, State, or local
court” or “when the individual . . . has entered into . . . deferred adjudication . .. where
judgment of conviction has been withheld.” 42 U.S.C. § 1320a-7(i); see also 42 C.F.R.
§ 1001.2.
Petitioner disputes that she has been convicted of a crime. RFH at 1; P. Br., at 1, 2.
Petitioner states that she pled “no contest to the charges” and that “the court agreed to
withhold adjudication.” P. Ex. 1, at 3 (internal quotations omitted). The record confirms
that Petitioner’s adjudication was withheld but indicates Petitioner pled guilty. LG. Exs.
2, 3. Petitioner argues, however, that under Florida law a withheld adjudication of guilt
does not constitute a conviction. P. Br., at 1-2. The LG. argues that for purposes of
exclusion, federal law and not state law controls. I.G. Reply Br., at 1.

The I.G.’s contention that federal law is determinative as to whether an individual is
“convicted” for the purposes of 42 U.S.C. § 1320a-7 is correct. Petitioner’s exclusion
arises under a federal statutory scheme that is aimed at excluding participation in federal
health care programs. See Manocchio v. Kusserow, 961 F.2d 1539, 1542 (11™ Cir. 1992)
(“we find that the legislative history, taken as a whole, demonstrates that the primary goal
of [42 U.S.C. § 1320a-7] is to protect present and future Medicare beneficiaries from the
abusers of these programs.”) As a result, “what constitutes a ‘conviction’ under [42
U.S.C. § 1320a-7] . . . is determined by federal law, not state law.” Travers v. Shalala,
20 F.3d 993, 996 (9"" Cir. 1994); Henry L. Gupton, DAB No. 2058, at 5-6 (2007).

The 1.G.’s exhibits and Petitioner’s testimony show that Petitioner was granted
withholding of adjudication of the charges to which she pled guilty. Such an
arrangement is encompassed by the definition of “conviction” under 42 U.S.C. § 1320a-
7(i) and, therefore, Petitioner was convicted of a criminal offense within the meaning of
the statute. Rudman v. Leavitt, 578 F.Supp.2d 812, 815 (D. MD 2008).

C. Petitioner’s conviction for fraud or other financial misconduct requires
exclusion under 42 U.S.C. § 1320a-7(a)(3) because her criminal conduct
related to the delivery of a health care item or service.

An individual must be excluded from participation in any federal health care program if
the individual was convicted under federal or state law of a criminal offense related to
fraud or other financial misconduct in connection with the delivery of a health care item
or service. 42 U.S.C. § 1320a-7(a)(3). Petitioner argues that her criminal offense was
not in connection with the delivery of a health care item or service. Petitioner states that
she received only occasional payments from family members of residents and “only
because the person in charge of finance was not in the building.” P. Ex. 1, at 2.
Petitioner states that the receipt of payments was not her responsibility and that she gave
the payments to the responsible co-worker. P. Ex. 1, at 2. In addition, Petitioner states
her duties were limited to filling out paperwork and to assist in the moving of patients
about the facility. P. Ex. 1, at 1. Because her job at the nursing facility did not include
administrative functions or the collection or disbursement of fees, Petitioner states her
conviction was not related to the delivery of health care. P. Br., at 2.
The L.G. argues that Petitioner was the Admissions Director of the nursing facility who
oversaw and coordinated the placement of elderly individuals to receive skilled nursing
and other services. I.G. Br., at 4. According to the I.G., regardless of Petitioner’s job
title, Petitioner performed administrative services integral to the delivery of care at the
nursing facility. I.G. Reply Br., at 2.

The record in this case fully supports the conclusion that Petitioner’s conviction was in
connection with the delivery of a health care item or service. According to the
Investigative Summary Report, family members of residents made cash payments to
Petitioner. I.G. Ex. 5, at 3. The Investigative Summary Report includes sworn
statements from family members indicating that Petitioner claimed the cash payments
paid to her were patient responsibility payments and/or funds owed by residents. I.G. Ex.
5, at 14-17. I find the Investigative Summary Report and sworn witness statements
contained therein reliable because there is an affidavit authenticating the report (I.G. Ex.
5, at 30-31) and because Petitioner did not object to the exhibit. Furthermore, I rely only
on those statements that relate to counts 1 — 5, the counts to which Petitioner pled guilty.
1G. Ex. 3, at 1. Specifically, Petitioner represented to residents and their relatives that
they needed to make payments so that the residents could obtain care at the nursing
facility. Moreover, Petitioner admits that she accepted money while performing her job
at the nursing facility, which further substantiates the connection between the criminal
conduct and Petitioner’s position. P. Ex. 1, at 2. Based on these statements and on the
fact that Petitioner pled guilty to Count 15 of the Information entitled “Organized Fraud”
(LG. Ex. 2, at 1), it is clear that Petitioner’s offense involved fraud and/or other financial
misconduct related to providing health care services.” Further, the Secretary has
interpreted “delivery of a health care item or service” in 42 U.S.C. § 1320a-7(a)(3) to
include “the performance of management or administrative services relating to the
delivery of such items or services.” 42 C.F.R. § 1001.101(c)(1). Collecting fees from
residents of the nursing facility can be characterized as a management or administrative
services. Therefore, I find that there is a sufficient nexus between Petitioner’s
administrative functions and the delivery of health care services. See 42 C.F.R.

§ 1001.101(c)(1).

> In this case, all of the nursing facility’s residents who were victims of Petitioner’s
criminal conduct “were fully covered by Medicare for the first 100 days of the victim’s
[sic] stay and thereafter by Medicaid.” I.G. Ex. 5, at 1. In order for a skilled nursing
facility to participate in Medicare or Medicaid, it must provide “nursing services” and
ensure that residents are seen periodically by a physician. 42 C.F.R. §§ 483.1(b), 483.30,
483.40. Therefore, the nursing facility was providing health care services.
D. Petitioner must be excluded for the statutory minimum of five years under
42 U.S.C. § 1320a-7(c)(3)(B).

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(3), Petitioner must be excluded for a minimum period of five years.
42 US.C. § 1320a-7(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2).

IV. Conclusion

For the foregoing reasons, I affirm the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all federal health care programs for the statutory
five-year minimum period pursuant to 42 U.S.C. § 1320a-7(a)(3), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Beth Ann Lee, R.N.
(O.L. File No. H-12-40135-9),
Petitioner,

v.

The Inspector General.
Docket No. C-12-1258
Decision No. CR2735

Date: March 27, 2013

DECISION

Petitioner, Beth Ann Lee, R.N., appeals the determination of the Department of Health
and Human Services’ Inspector General (1.G.) to exclude her for five years from
participation in Medicare, Medicaid, and all other federal health care programs pursuant
to 42 U.S.C. § 1320a-7(a)(1). For the reasons explained below, I conclude that the I.G.
has a basis for excluding Petitioner from program participation and that the five-year
exclusion is mandated by law. Therefore, I affirm the I.G.’s exclusion of Petitioner.

I. Background and Procedural History

By letter dated July 31, 2012, the I.G. notified Petitioner, a registered nurse, that she was
being excluded from participation in Medicare, Medicaid, and all federal health care
programs for a period of five years pursuant to 42 U.S.C. § 1320a-7(a)(1). LG. Exhibit
(Ex.) 1. The I.G. advised Petitioner that her exclusion was based on her conviction

in the Court of Common Pleas of Franklin County, Ohio, of a criminal
offense related to the delivery of an item or service under the Medicare or a
State health care program, including the performance of management or
administrative services relating to the delivery of items or services, under any
such program.

LG. Ex. 1, at 1.

Petitioner timely filed her September 4, 2012 request for hearing (RFH) with the Civil
Remedies Division. After this case was assigned to me, on October 18, 2012, I convened
a prehearing conference by telephone. Before proceeding with any substantive or
procedural issues, technical difficulties with the telephone connection made it necessary
to reschedule the prehearing conference. On October 23, 2012, I reconvened the
prehearing conference by telephone, the substance of which is summarized in my Order
and Schedule for Filing Briefs and Documentary Evidence (Order), dated October 24,
2012. See 42 C.F.R. § 1005.6. Pursuant to the Order, the I.G. filed a brief (I.G. Br.) on
November 27, 2012, along with seven proposed exhibits (I.G.’s Exs. 1-7). Petitioner
subsequently filed eight proposed exhibits (P. Exs. 1-8), which the Civil Remedies
Division received on January 14, 2013. As part of her submission, Petitioner provided
written argument, which she labeled as “P. Ex. 1.” On January 16, 2013, I ordered that
Petitioner file a “short-form brief” to clarify her position on pertinent issues of the case.
Petitioner subsequently filed her short-form brief (P. Br.) on January 28, 2013. The I.G.
then filed a reply brief (I.G. Reply Br.) on February 20, 2013.

Petitioner did not object to any of the I.G.’s proposed exhibits. The I.G. submitted as one
of its exhibits a declaration from a prosecuting attorney with the Health Care Fraud Unit
of the Ohio Attorney General’s Office. I.G. Ex. 3. The declaration, submitted under a
caption for this case, appears to have been produced specifically for this proceeding. See
1.G. Ex. 3, at 1. Although I may accept written direct testimony, the I.G. did not request
that I do so in this case. 42 C.F.R. § 1005.16(b). To the contrary, the I.G. indicated in its
brief that it did not have any testimony that it wanted to offer at a hearing. I.G. Br. at 6.
Moreover, a significant portion of the attorney’s declaration contains hearsay, including
statements that Petitioner allegedly made to an investigator, now reported by the attorney.
1.G. Ex. 3, at 1-2. While hearsay alone is not a basis to exclude an exhibit, see 42 C.F.R.
§ 1005.17(b), I nevertheless find that the declaration made specifically for this
proceeding is impermissible hearsay because the declarant is not a witness for the LG.,
yet the declarant provides substantive testimony specifically intended to support the
1.G.’s case. The reports of an investigator, described through a non-witness cannot be
used to support the I.G.’s case against Petitioner, especially when Petitioner will not be
afforded an opportunity to cross-examine either the investigator or the declarant. See 42
C.F.R. § 1005.16(b). “At the discretion of the [administrative law judge], testimony
(other than expert testimony) may be admitted in the form of a written statement.” Id.
For the reasons stated above, I do not admit I.G. Ex. 3 into the record. In the absence of
objection, I.G. Exs. 1-2, 4-7, are admitted into the record.

The L.G. does not object to any of Petitioner’s proposed exhibits. Petitioner submitted
two exhibits consisting of letters from her former patients. P. Exs. 6, 7. Both of these
letters appear to have been prepared for this proceeding. See P. Ex. 6 (dated December
2012); P. Ex. 7 (referencing Petitioner’s exclusion). These letters amount to the written
direct testimony of two witnesses who Petitioner cannot produce for cross-examination.
42 C.F.R. § 1005.16(b); P. Br. at 3. Further, due to the limited nature of my jurisdiction
in this matter, see 42 C.F.R. § 1001.2007(a)(1)(i), the statements of these individuals are
not relevant to whether there is a basis for the I.G. to impose an exclusion. I am required
to exclude irrelevant and immaterial evidence. 42 C.F.R. § 1005.17(c). Accordingly, I
exclude P. Exs. 6 and 7 from the record. In the absence of objection, all other proposed
exhibits of Petitioner, P. Exs. 1-5, 8, are admitted into the record.

Both parties indicated in their briefs that an in-person hearing was unnecessary. I.G. Br.
at 6; P. Br. at 2. Petitioner, however, stated that she wanted to provide direct testimony
from six witnesses. P. Br. at 2-3. All six witnesses would testify about the “quality of
care” Petitioner provided as a nurse. P. Br. at 3. Neither Petitioner’s nursing abilities nor
her reputation as a well-performing nurse are at issue in these proceedings. As indicated
above, I am required to exclude irrelevant and immaterial evidence. 42 C.F.R.

§ 1005.17(c). Further, to the extent that Petitioner’s witnesses would testify for the
purpose of showing that Petitioner did not commit the criminal offense to which she pled
guilty, I should not allow such testimony since Petitioner cannot “relitigate the facts
underlying the state court proceedings.” Travers v. Shalala, 20 F.3d. 993, 998 (9th Cir.
1994). Therefore, an in-person hearing for Petitioner to provide immaterial witness
testimony is not required. I shall issue this decision on the basis of the written record.

II. Issue

The sole issue in this case is whether the I.G. has a basis for excluding Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs pursuant
to 42 U.S.C. § 1320a-7(a)(1). 42 C.F.R. § 1001.2007(a)(1)-(2).

III. Findings of Fact, Conclusions of Law, and Analysis’

The Secretary of Health and Human Services must exclude from participation in any
federal health care program “[a]ny individual or entity that has been convicted of a
criminal offense related to the delivery of an item or service under subchapter XVIII of
this chapter or under any State health care program.” 42 U.S.C. § 1320a-7(a)(1).

A. Petitioner pled guilty to theft by deception from the Ohio Department of Job
and Family Services due to improper billing for nursing services.

' My findings of fact and conclusions of law are set forth in italics and bold font as
headings in this section of the decision.
Petitioner is a nurse currently licensed in Ohio. LG. Ex. 2. On May 17, 2011, a grand
jury in Franklin County, Ohio, indicted Petitioner on one count of theft by deception in
violation of section 2913.02(A)(3) of the Ohio Revised Code. I.G. Ex. 4, at 1.

According to the indictment, Petitioner illegally obtained money from the Ohio
Department of Job and Family Services (JFS). In a consent agreement, Petitioner’s
conduct was characterized as overbilling for nursing services she provided. See I.G. Ex.
4, at 1; P. Ex. 2, at 2. The LG. asserts, and Petitioner does not dispute, that JFS
implements and operates the Ohio Medicaid program. LG. Br. at 2. The indictment
specifically charged that Petitioner, “as part of a course of criminal conduct, with purpose
to deprive the owner, the Ohio Department of Job and Family Services of property to wit:
obtaining money from the Ohio Department of Job and Family Services did knowingly
obtain or exert control over said property, by deception, the value of the property or
services being five thousand dollars ($5,000.00) or more, and less than one hundred
thousand dollars ($100,000.00) . . . a Felony of the Fourth Degree.” I.G. Ex. 4, at 1.

On November 16, 2011, Petitioner entered into an agreement to plead guilty to a lesser-
included misdemeanor offense of theft by deception. LG. Ex. 5. The trial court
sentenced Petitioner according to the agreement, which included a three-day suspended
jail sentence, three years of probation, and ordered Petitioner to pay $6,800 in restitution
to JFS. I.G. Exs. 5, 6 at 2.

B. Petitioner was convicted of a criminal offense for the purposes of 42 U.S.C.
§ 1320a-7(a)(1).

Under 42 U.S.C. § 1320a-7(a)(1), Petitioner must be “convicted of a criminal offense”
before the I.G. excludes her. The statute defines the term “convicted” to include “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); see 42 C.F.R. § 1001.2. Here,
the Court of Common Pleas for Franklin County, Ohio accepted Petitioner’s guilty plea
to misdemeanor theft by deception. LG. Ex. 6, at 1. Accordingly, Petitioner was
“convicted” of a criminal offense within the meaning of the statute because she pleaded
guilty to the offense and the state court accepted the plea.

Petitioner now claims that she is not guilty of the underlying offense to which she
pleaded guilty. P. Br. at 1; P. Ex. 1, at 3. Rather, Petitioner asserts she was ill at the time
of the criminal proceedings and agreed to plead guilty to expedite the end of the
proceedings. P. Ex. 1, at 3-4; see also P. Ex. 4 (showing Petitioner’s hospitalization in
the month prior to her guilty plea). Petitioner claims that she had “no idea how [the
prosecuting attorney] came up with [the restitution] figure and I have no idea how they
came up with the seven year time period.” P. Ex. 1, at 3. Petitioner also asserts that she
pleaded guilty to the misdemeanor offense because she was told it would be removed
from her criminal record after one year and would not impact her ability to work as a
nurse. RFH at 1; P. Br. at 1.

By regulation, “the basis for the underlying conviction, civil judgment or determination is
not reviewable and the individual . . . may not collaterally attack it either on substantive
or procedural grounds in this appeal.” 42 C.F.R. § 1001.2007(d). Petitioner’s arguments
about her innocence and the motivating factors for her pleading guilty relate to the basis
for the underlying conviction, and are not reviewable in this case. Jd. Moreover, the fact
that Petitioner pleaded guilty to a misdemeanor, which may be removed from her record
after a year under Ohio law, is not material here. The applicable section of the statute
does not differentiate between a felony or misdemeanor conviction for an offense related
to the delivery of a health care item or service under Medicare or a State health care
program. 42 U.S.C. § 1320a-7(a)(1). The statute requires, in relevant part, that Petitioner
be convicted of any criminal offense related to those programs. Jd. Also, even if
Petitioner’s conviction is later removed from her criminal record, the statute and
implementing regulations mandate exclusion even if an individual’s criminal record has
been expunged. Jd. § 1320a-7(i); 42 C.F.R. § 1001.2. Further, the statute and regulations
expressly include offenses that are later expunged through a “first-offender program” as a
“conviction” for purposes of exclusion. /d. Therefore, Petitioner’s alleged innocence or
motivations for pleading guilty cannot serve as a basis to reverse the exclusion.

C. Petitioner must be excluded under 42 U.S.C. § 1320a-7(a)(1) because her
conviction was for an offense related to the delivery of an item or service
under a State health care program.

The I.G. must exclude an individual from participation in any federal health care program
if the individual was convicted under federal or state law of a criminal offense related to
the delivery of an item or service under the Medicare program or a State health care
program. 42 U.S.C. § 1320a-7(a)(1). Here, Count One of the indictment against
Petitioner charged her with unlawfully obtaining, through deception, between $5,000 and
$100,000 from JFS. I.G. Ex. 4, at 1. Petitioner pled to a lesser-included offense of this
charge, but nevertheless admitted to theft from JFS. 1.G. Ex. 5. As stated above,
Petitioner does not dispute that JFS implements and operates the Ohio Medicaid program.
1G. Br. at 2; P. Br. at 2. Petitioner acknowledges that criminal charge and her conviction
arose from improper billing of JFS for health care services. P. Ex. 1, at 2. (“[The
investigators] asked if I had ever billed for a visit and paid someone else to provide the
services. I answered yes because there had been a few time in an emergency situation
when [the beneficiary] would not have any care if I had not.”); see also P. Ex. 2, at 2
(consent agreement between the Ohio Board of Nursing and Petitioner, stating that
Petitioner admitted to “overbilling” for nursing services). In addition, the trial court’s
order that Petitioner pay JFS restitution, through the “Health Care Fraud Section” of the
state Attorney General’s Office, is further evidence supporting that her criminal conduct
was related to JFS and the Medicaid program. I.G. Ex. 5. The Medicaid program is a

“State health care program” for purposes of exclusion. See 42 C.F.R. § 1001.2 (defining
“Medicaid” as “medical assistance provided under a State plan approved under Title XIX
of the [Social Security] Act”). Thus, Petitioner’s conviction is related to the delivery of
services under a state health care program. I conclude that the record supports
Petitioner’s mandatory exclusion under section 1320a-7(a)(1). I.G. Exs. 4-6.

D. Petitioner must be excluded for the statutory minimum of five years under
42 U.S.C. § 1320a-7(c)(3)(B).

Petitioner must be excluded for a minimum period of five years because, as discussed
above, there is a basis to exclude Petitioner pursuant to the mandatory exclusion
provision of the Act. 42 U.S.C. § 1320a-7(a)(1), (c)(3)(B); 42 C.F.R. § 1001.2007(a)(2).
Petitioner points out that the Ohio nursing board suspended her nursing license for only
three months, from which a reasonable inference may be that the criminal conduct to
which she pleaded guilty was minor and that a five-year exclusion period is too harsh by
comparison. See P. Ex. 1, at 4. That fact, however, is not material in this proceeding
because the statute does not give me discretion to reduce a five-year exclusion. See
Manocchio v. Kusserow, 961 F.2d 1539, 1542 (11" Cir. 1990) (upholding a five-year
exclusion based on “making a $62.40 fraudulent demand against the Government”).

The process has been described by one court in the following way:

Conviction of a program-related offense as defined by § 1320a-7(i) is the
triggering event that mandates the Secretary to impose a minimum five-
year exclusion. The language—“[t]he Secretary shall exclude”—is
mandatory, not discretionary. To determine whether Travers was convicted
of a program-related offense, the Inspector General looked to the substance
of the state proceedings and the nature of Travers' crime as charged by the
State of Utah. As noted by the district court, “[iJ]t is not necessary or proper
for the Inspector General to delve into the facts surrounding the
conviction.” Once he found that the Utah state court's disposition of the
charge amounted to a conviction of a program-related offense, the Inspector
General had no choice but to impose the mandatory 5—year exclusion under
§ 1320a-7(a)(1).

Travers, 20 F.3d. at 998 (citations omitted).

Nothing in the record of this case shows that Petitioner was deficient in the medical care
she provided to her patients. On the contrary, Petitioner’s patients appear to have been
very satisfied with her services. However, the five-year exclusion imposed by the L.G. is
the required minimum exclusion period.
IV. Conclusion

For the foregoing reasons, I affirm the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all federal health care programs for the statutory
five-year minimum period pursuant to 42 U.S.C. § 1320a-7(a)(1).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.
Quik Stop Auto Service, Inc.,
Respondent.
Docket No. C-13-392
FDA Docket No. FDA-2013-H-0141
Decision No. CR2733

Date: March 27, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Quik Stop Auto Service, Inc., alleging facts and
legal authority sufficient to justify the imposition of a civil money penalty of $250.
Respondent did not timely answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and order that Respondent pay a civil money penalty
in the amount of $250.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
tobacco products to a minor, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act) and its implementing regulations found at 21 C.F.R. Part
1140. CTP seeks a civil money penalty of $250.
On February 12, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent
should pay the penalty, file an answer, or request an extension of time within
which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty. Respondent did not take one of the required
actions within the time provided by regulation.

lam required to issue a default judgment if the Complaint is sufficient to justify a
penalty, and the Respondent fails to answer timely or to request an extension. 21
C.F.R. § 17.11(a). For that reason, I must decide whether a default judgment is
appropriate here, and I conclude that it is merited based on the allegations of the
Complaint and Respondent’s failure to answer them.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Quik Stop Auto Service, Inc., a business that sells
tobacco products and is located at 23418 Ridge Road, Germantown,
Maryland 20876.

e On April 12, 2012, during an inspection of Respondent’s establishment, an
FDA-commissioned inspector observed a violation when Respondent sold
cigarettes to a person younger than 18 years of age.

e On June 7, 2012, CTP issued a Warning Letter to Quik Stop Auto Service
regarding the inspector’s observations from April 12, 2012. The letter
stated that Respondent’s sale of tobacco products to a minor violated
regulations found at 21 C.F.R. § 1140.14(a). The letter also advised
Respondent that failure to correct the violations could result in the
imposition of a civil money penalty or other regulatory action by FDA.

e Delivery records show that an individual named “Bailey” received the
Warning Letter on June 8, 2012. CTP did not receive a response to the
Warning Letter.

¢ On October 18, 2012, FDA commissioned inspectors documented an
additional violation during a subsequent inspection of the establishment.
At approximately 2:13 P.M., a person younger than the age of 18 was able
to purchase a package of “Newport Box” cigarettes.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any
person younger than 18 years of age.

Here, Respondent sold cigarettes to a minor in violation of the foregoing
regulations on two separate occasions, April 12, 2012, and October 18, 2012.
Respondent’s actions on two separate occasions at the same retail outlet constitute
violations of law for which a civil money penalty is merited. Accordingly, I find
that a civil money penalty of $250 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Boram Enterprises Inc.,
d/b/a Village Market & Deli

Respondent.

Docket No. C-13-364
FDA Docket No. FDA-2013-H-0123

Decision No. CR2732

Date: March 26, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Boram Enterprises Inc. d/b/a Village Market &
Deli, alleging facts and legal authority sufficient to justify the imposition of a civil
money penalty of $500. Respondent did not timely answer the Complaint, nor did
Respondent request an extension of time within which to file an answer.
Therefore, I enter a default judgment against Respondent and order that
Respondent pay a civil money penalty in the amount of $500.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
tobacco products to a minor and failed to appropriately verify the age of a person
purchasing tobacco products, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act) and its implementing regulations found at 21 C.F.R. Part
1140. CTP seeks a civil money penalty of $500.

On February 8, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent
should pay the penalty, file an answer, or request an extension of time within
which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty. Respondent did not take one of the required
actions within the time provided by regulation.

lam required to issue a default judgment if the Complaint is sufficient to justify a
penalty, and the Respondent fails to answer timely or to request an extension. 21
C.F.R. § 17.11(a). For that reason, I must decide whether a default judgment is
appropriate here, and I conclude that it is merited based on the allegations of the
Complaint and Respondent’s failure to answer them.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Village Market & Deli, a business that sells tobacco
products and is located at 811 Russell Avenue, Suite A, Gaithersburg,
Maryland 20879.

e¢ On November 8, 2011, an FDA-commissioned inspector observed
violations while inspecting Respondent’s establishment. These violations
included Respondent’s sale of cigarettes or smokeless tobacco to a person
younger than 18 years of age and Respondent’s failure to verify, by means
of photographic identification containing the bearer’s date of birth, the age
of the person purchasing cigarettes or smokeless tobacco.

e On January 5, 2012, CTP issued a Warning Letter to Village Market & Deli
regarding the inspector’s observations from November 8, 2011. The letter
stated that Respondent’s sale of cigarettes or smokeless tobacco to a minor
violated regulations found at 21 C.F.R. § 1140.14(a), and Respondent’s
failure to verify, by means of photographic identification containing the
bearer’s date of birth, that no person purchasing cigarettes or smokeless
tobacco is younger than 18 years of age violated regulations found at 21
C.F.R. § 1140.14(b)(1). The letter also advised Respondent that failure to
correct the violations could result in the imposition of a civil money penalty
or other regulatory action by FDA.

¢ On September 11, 2012, FDA commissioned inspectors documented
additional violations during a subsequent inspection of the establishment.
At approximately 2:23 P.M., a person under the age of 18 was able to
purchase a package of “Newport Box” cigarettes. Additionally, the minor’s
identification was not verified, by means of photographic identification
containing the bearer’s date of birth, before this sale.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any
person younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer
must verify, by means of photo identification containing the bearer’s date of birth,
that no person purchasing the tobacco product is younger than 18 years of age.

Here, Respondent sold cigarettes or smokeless tobacco to a minor in violation of
the foregoing regulations on two separate occasions, November 8, 2011, and
September 11, 2012. In addition, Respondent did not appropriately check the
photographic identification of the tobacco purchasers prior to these transactions.
Respondent’s actions and omissions on two separate occasions at the same retail
outlet constitute violations of law for which a civil money penalty is merited.
Accordingly, I find that a civil money penalty of $500 is permissible under 21
C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.
Cedar Junction LLC,
Respondent.

Docket No. C-13-374
FDA Docket No. FDA-2013-H-0130

Decision No. CR2731

Date: March 25, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Cedar Junction LLC, alleging facts and legal
authority sufficient to justify the imposition of a civil money penalty of $250.
Respondent did not timely answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and order that Respondent pay a civil money penalty
in the amount of $250.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
tobacco products to a minor and failed to appropriately verify the age of a person
purchasing tobacco products, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act) and its implementing regulations found at 21 C.F.R. Part
1140. CTP seeks a civil money penalty of $250.
On February 8, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent
should pay the penalty, file an answer, or request an extension of time within
which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty. Respondent did not take one of the required
actions within the time provided by regulation.

lam required to issue a default judgment if the Complaint is sufficient to justify a
penalty, and the Respondent fails to answer timely or to request an extension. 21
C.F.R. § 17.11(a). For that reason, I must decide whether a default judgment is
appropriate here, and I conclude that it is merited based on the allegations of the
Complaint and Respondent’s failure to answer them.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Cedar Junction, a business that sells tobacco products
and is located at 662 Highway Y, Eldon, Missouri 65206. This
establishment also serves as a Sinclair gas station.

e On April 27, 2012, an FDA-commissioned inspector observed violations
while inspecting Respondent’s establishment. These violations included
Respondent’s sale of tobacco products to a person younger than 18 years of
age and Respondent’s failure to verify, by means of photographic
identification containing the bearer’s date of birth, the age of a person
purchasing tobacco products.

e On June 14, 2012, CTP issued a Warning Letter to Cedar Junction/Sinclair
regarding the inspector’s observations from April 27, 2012. The letter
stated that Respondent’s sale of tobacco products to a minor violated
regulations found at 21 C.F.R. § 1140.14(a), and Respondent’s failure to
verify the age of a tobacco purchaser, by means of photographic
identification containing the bearer’s date of birth, violated regulations
found at 21 C.F.R. § 1140.14(b)(1). The letter also advised Respondent
that failure to correct the violations could result in the imposition of a civil
money penalty or other regulatory action by FDA.
e¢ On December 10, 2012, FDA commissioned inspectors documented an
additional violation during a subsequent inspection of the establishment.
At approximately 12:48 P.M. CT, a person under the age of 18 was able to
purchase a package of “Grizzly Long Cut Premium Wintergreen”
smokeless tobacco.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any
person younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer
must verify, by means of photo identification containing the bearer’s date of birth,
that no person purchasing the tobacco product is younger than 18 years of age.

Here, Respondent sold cigarettes or smokeless tobacco to a minor in violation of
the foregoing regulations on two separate occasions, April 27, 2012, and
December 10, 2012. In addition, Respondent did not appropriately check the
photographic identification of a tobacco purchaser prior to the April 27, 2012,
transaction. CTP alleges that the April 27, 2012 violations occurred at Cedar
Junction/Sinclair. Although the Complaint does not state that Cedar
Junction/Sinclair is also known as or is a prior name of Cedar Junction, | infer that
the two names refer to the same retail outlet. Therefore, Respondent’s actions and
omissions on two separate occasions at the same retail outlet constitute violations
of law for which a civil money penalty is merited. Accordingly, I find that a civil
money penalty of $250 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

4000 Western Inc.
d/b/a/ Western & Irving Mobil,

Respondent.

Docket No. C-13-395
FDA Docket No. FDA-2013-H-0143

Decision No. CR2729

Date: March 22, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, 4000 Western Inc. d/b/a/ Western & Irving
Mobil, alleging facts and legal authority sufficient to justify the imposition of a
civil money penalty of $500. Respondent did not timely answer the Complaint,
nor did Respondent request an extension of time within which to file an Answer.
Therefore, I enter a default judgment against Respondent and assess a civil money
penalty of $500.

CTP began this case by serving the Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
cigarettes or smokeless tobacco to a minor or minors and impermissibly failed to
verify the photo identification of a purchaser or purchasers of cigarettes or
smokeless tobacco, thereby violating the Federal Food, Drug, and Cosmetic Act
(Act), 21 U.S.C. § 301 et seq., and its implementing regulations, Cigarettes and
Smokeless Tobacco, 21 C.F.R. Part 1140 (2012). CTP seeks a civil money
penalty of $500.

On February 11, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that within 30 days, Respondent should
pay the proposed penalty, file an answer, or request an extension of time within
which to file an Answer. CTP warned Respondent that if it failed to take one of
these actions within 30 days, an Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor
has it timely requested an extension. Pursuant to 21 C.F.R. § 17.11(a), lam
required to “assume the facts alleged in the [C]omplaint to be true” and, if those
facts establish liability under the Act, issue a default judgment and impose a civil
money penalty. Accordingly, I must determine whether the allegations in the
Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Western & Irving Mobil, an establishment that sells
tobacco products and is located at 4000 North Western Avenue, Chicago,
IL 60618. Complaint § 2.

e¢ On September 6, 2011, an FDA-commissioned inspector observed two
violations at Respondent’s establishment. The inspector observed a
violation of 21 C.F.R. § 1140.14(a), a regulation prohibiting the sale of
cigarettes or smokeless tobacco to a person younger than 18 years of age.
The inspector also observed a violation of 21 C.F.R. § 1140.14(b)(1), a
regulation requiring retailers to verify the photo identification of a
purchaser of cigarettes or smokeless tobacco in order to ensure that no
person purchasing such products is under 18 years of age. Complaint § 9.

e¢ On December 8, 2011, CTP issued a Warning Letter to Respondent
regarding the inspector’s observations from September 6, 2011. The letter
explained that the observations constituted violations of regulations found
at 21 C.F.R. § 1140.14(a) and 21 C.F.R. § 1140.14(b)(1), and that the
named violations were not necessarily intended to be an exhaustive list of
all violations at the establishment. The Warning Letter went on to state that
failure to correct the violations could result in the imposition of a civil
money penalty or other regulatory action by the FDA and that Respondent
is responsible for complying with the law. Jd.

e FDA received a response to the Warning Letter from “Syed” on
Respondent’s behalf. In a letter, he stated that he would ensure “that all
employees are in compliance with city, state, and federal laws and
regulations.” Complaint § 10.

e On May 7, 2012, FDA commissioned inspectors documented further
violations at Respondent’s establishment. A minor purchased a package of
“Camel Blue” cigarettes at approximately 6:06 PM CT. Additionally,
Respondent failed to verify the age of a purchaser of tobacco products by
means of photographic identification containing the bearer's date of birth
during the same transaction. Complaint §

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if distributed or offered for sale in any state in violation of regulations
issued under section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R §
1140.1(b). The Secretary issued the regulations at 21 C.F.R. Part 1140 under
section 906(d) of the Act. 21 U.S.C. 387(a); 21 U.S.C. § 387f(d)(1); 75 Fed. Reg.
13,229 (Mar. 10, 2010). The regulations prohibit the sale of cigarettes or
smokeless tobacco to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations likewise require retailers to verify, by means of
photographic identification containing the bearer’s date of birth, that no purchaser
of cigarettes or smokeless tobacco is younger than 18 years of age. 21 C.F.R.

§ 1140.14(b)(1).

Taking the above alleged facts as true, Respondent had four violations of
regulations contained in 21 C.F.R. Part 1140 within a twelve month period.
Specifically, Respondent had two violations on September 6, 2011, and two
violations on May 7, 2012. Respondent’s actions on both dates violated
regulations prohibiting the sale of cigarettes or smokeless tobacco to minors. 21
C.F.R. § 1140.14(a). Respondent’s actions on both dates also violated the
requirement that retailers verify, by photo identification containing the bearer’s
date of birth, that no purchaser of cigarettes or smokeless tobacco is younger than
18 years of age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions
constitute violations of law for which a civil money penalty is merited.

The regulations require the imposition of a civil money penalty in the amount that
is either the maximum provided for by law or the amount sought in the Complaint,
whichever is smaller. 21 C.F.R. § 17.11(a)(1)-(2). The regulations currently
allow a maximum penalty of $2,000 for four violations within a twelve month
period. 21 C.F.R. § 17.2. CTP, however, has requested a fine in the amount of
$500. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Howard B. Reife, D.P.M.,

(NPI: 1801901343),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-36
Decision No. CR2728

Date: March 20, 2013

DECISION

Petitioner, Howard B. Riefe, D.P.M., appeals the reconsidered determination of
Wisconsin Physician Services Insurance Corporation (WPS), a contractor for the Centers
for Medicare & Medicaid Services (CMS), which revoked Petitioner’s Medicare billing
privileges. WPS revoked Petitioner’s billing privileges pursuant to 42 C.F.R.

§ 424.535(a)(8) because it determined that Petitioner submitted Medicare claims for
services that could not have been provided to specific individuals on the dates of service.
Both parties now move for summary judgment. For the reasons set forth below, I deny
the parties’ motions for summary judgment and find that CMS was authorized to revoke

Petitioner’s Medicare billing privileges effective 30 days after the date of the revocation
notice.

I. Case Background and Procedural History

Petitioner is a podiatrist currently licensed to practice in Kansas and Missouri. Petitioner
participated in the Medicare program as a “supplier” of services.’ While he participated

' A “supplier” is “a physician or other practitioner, or an entity other than a provider, that
furnishes health care services under Medicare.” 42 C.F.R. § 400.202.
in Medicare, Petitioner acquired four Provider Transaction Access Numbers (PTANs)
associated with his National Provider Identifier (NPI). By four separate letters, each
dated May 18, 2012, WPS notified Petitioner that it was revoking each of Petitioner’s
four PTANs and thus revoking his Medicare billing privileges. WPS stated that it had
revoked Petitioner’s billing privileges effective May 16, 2012. WPS did not identify
specific facts upon which it relied to revoke Petitioner’s billing privileges, but it recited
the language of 42 C.F.R. § 424.535(a)(8) in each letter as its authority for the revocation.
WPS imposed a two-year bar on Petitioner’s reenrollment in the Medicare program.

Petitioner submitted a corrective action plan, which WPS rejected.* Petitioner also
requested reconsideration of the initial determination to revoke his billing privileges. On
August 27, 2012, WPS issued a reconsidered determination that upheld the revocation.
The WPS hearing officer stated that Petitioner “billed WPS for services that were not
furnished to the specific beneficiaries indicated on the claims and has not reported any
billing errors or submitted any voluntary refunds for these services.” P. Ex. 12.

By letter dated October 3, 2012, Petitioner requested a hearing before an administrative
law judge (ALJ) to challenge the initial and reconsidered determinations.’ This case was
assigned to me for a hearing, if necessary, and decision. On October 22, 2012, I issued
an Acknowledgment and Pre-Hearing Order (Pre-Hearing Order), which established
general procedures for record development in this case. CMS filed a motion for
summary judgment with a supporting brief (CMS Br.) along with three supporting
exhibits (CMS Exs. 1-3). Petitioner opposed CMS’s motion for summary judgment and
also filed his own motion for summary judgment with supporting brief and 13 proposed
exhibits (P. Exs. 1-13). Petitioner subsequently filed a motion to amend his supporting
brief and one additional exhibit (P. Ex. 14). In the absence of objections from either
party, I admit CMS Exs. 1-3, P. Exs. 1-14, and Petitioner’s amended brief (P. Amend.
Br.) into the record.

> Tn 1988, the Inspector General for the Department of Health and Human Services
excluded Petitioner from participating in all federal health care programs for five years
based on his conviction for submitting false Medicare claims. That exclusion was upheld
on an appeal to this forum. Howard B. Reife, D.P.M., DAB CR25 (1989). Nothing in
this decision is based on Petitioner’s prior exclusion.

> T do not have authority to review the denial of a corrective action plan. 42 C.F.R.
§§ 424.545(a), 498.3(b)(17); DMS Imaging, Inc., DAB No. 2313, at 5-8 (2010).

4 My review is limited to CMS’s reconsidered determination. 42 C.F.R. § 498.5(1)(2).
II. Applicable Law

CMS, acting on behalf of the Secretary of Health and Human Services, may revoke an
enrolled provider’s or supplier’s Medicare billing privileges if, among other things, the
“provider or supplier submits a claim or claims for services that could not have been
furnished to a specific individual on the date of service.” 42 C.F.R. § 424.535(a)(8). The
regulation provides a non-exhaustive list of examples of services that could not have been
furnished to a specific individual on the date of service: “situations where the beneficiary
is deceased, the directing physician is not in the State or country when services were
furnished, or when the equipment necessary for testing is not present where the testing is
said to have occurred.” Jd.; see also 73 Fed. Reg. 36, 448 at 36,455 (June 27, 2008)
(“We will direct contractors to use this basis of revocation after identifying providers or
suppliers that have these billing issues. We have found numerous examples of situations
where a physician claims to have furnished a service to a beneficiary more than a month
after their recorded death, or when the provider or supplier was out of State when the
supposed services had been furnished.”).

The regulatory drafters explained in the preamble to section 424.535(a)(8):

This revocation authority is not intended to be used for isolated occurrences
or accidental billing errors. Rather, this basis for revocation is directed at
providers and suppliers who are engaging in a pattern of improper billing
.... Accordingly, [CMS] will not revoke billing privileges under [section]
424.535(a)(8) unless there are multiple instances, at least three, where
abusive billing practices have taken place.

73 Fed. Reg. at 36,455.

If CMS revokes a supplier’s Medicare billing privileges, the revocation becomes
effective 30 days after CMS or one of its contractors mails the revocation notice to the
supplier, unless certain exceptions apply. 42 C.F.R. § 424.535(g). The exceptions
include instances where CMS has revoked a supplier’s billing privileges based on an
exclusion from Federal health care programs, felony conviction, license suspension or
revocation, or CMS determines the supplier’s practice location is not operational. Jd.
Under these exceptions, the revocation of billing privileges is effective retroactively to
the date of the supplier’s exclusion, conviction, license suspension or revocation, or the
date CMS determines non-operational status began. Id.

A supplier whose billing privileges have been revoked is barred from reenrollment for a
minimum of one year, though CMS may increase the reenrollment bar to a maximum of
three years. 42 C.F.R. § 424.535(c). Once the reenrollment bar has expired, the supplier
must submit a new enrollment application to reenroll in the Medicare program. Jd.

§ 424.535(d).
III. Analysis
A. Issue
This case presents three issues:
1. whether either party is entitled to summary judgment;

2. whether CMS was authorized to revoke Petitioner’s Medicare billing privileges
pursuant to 42 C.F.R. § 424.535(a)(8); and

2. if CMS was authorized to revoke Petitioner’s billing privileges, whether the
effective date of the revocation, May 16, 2012, was appropriate.

B. Findings of Fact and Conclusions of Law
1. Neither party is entitled to summary judgment.

Summary judgment is appropriate if there is no genuine dispute as to any material fact,
and the moving party is entitled to judgment as a matter of law. Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted). When evaluating the
appropriateness of summary judgment, the adjudicator must “view the evidence in the
light most favorable to the non-moving party, drawing all reasonable inferences in that
party’s favor.” Jd. For the purposes of motions for summary judgment, the ALJ should
not assess credibility or evaluate the weight of conflicting evidence. Holy Cross Vill. at
Notre Dame, Inc., DAB No. 2291, at 5 (2009).

Here, there are material facts in dispute regarding whether Petitioner submitted claims
that showed a “pattern of improper billing” that would result in revocation of his billing
privileges. While Petitioner does not dispute the existence of improper claims, he argues
that certain billing practices were “accidental.” Therefore, summary judgment is not
appropriate as there are questions of material fact that require a credibility determination.

I decide this case on the merits of the complete written record by fully evaluating the
evidence and applying it to the applicable legal standards. An in-person hearing is not
necessary considering neither party submitted direct written testimony that would require
the opportunity for cross-examination. Pre-Hearing Order at 4-5, fj 8-11.
2. Petitioner submitted a pattern of improper Medicare claims for
services that could not have been furnished to specific individuals on
the purported dates of services.

CMS identified two types of improper billing from Petitioner: (a) claims where the
named beneficiary had died before the date of service; and (b) claims for procedures
performed on 6-10 toes where the named beneficiary had one leg amputated.

a. Petitioner submitted claims for payment where the named
beneficiaries predeceased the purported dates of service.

CMS presented evidence showing that Petitioner, or Petitioner’s agent for billing
purposes, D.A.R.E. Foot Care, submitted claims for services that Petitioner could not
ave furnished to specific individuals on the purported dates of services because the
beneficiaries named in the claims predeceased those dates of service. CMS Ex. 1, at 24.
Petitioner does not dispute that D.A.R.E. Foot Care submitted 25 such claims on his
behalf, but he argues that the beneficiaries named in the claims were the result of
“accidental billing errors.” P. Amend. Br. 10-11. Petitioner explains that 16 of the 25
improper claims were for services rendered to beneficiaries with the same or similar
names to those of the deceased beneficiaries named. P. Amend. Br. 10-11; P Exs. 6-7.

However, for nine claims that D.A.R.E. Foot Care submitted on Petitioner’s behalf,
where the named beneficiary was deceased at the time of service, Petitioner simply
asserts that these were “accidental” claims but offers nothing substantive to support that
assertion. P. Amend. Br. 11-12; see CMS Ex. 1, at 24. Petitioner made seven of these
nine undisputed claims within eight months of each other, between March 2008 and
December 2008. The regulatory drafters explained that CMS “will not revoke billing
privileges under [section] 424.535(a)(8) unless there are multiple instances, at /east three,
where abusive billing practices have taken place.” 73 Fed. Reg. at 36,455 (emphasis
added). Here, Petitioner’s billing practices, which resulted in seven improper claims in
eight months, demonstrate a pattern of improper billing under the standard announced in
the preamble because there were more than three instances of improper claims in less
than eight months.°

Moreover, Petitioner’s argument that 16 claims naming beneficiaries who predeceased
the date of service were “accidental” based on beneficiaries with similar names to other
patients is not persuasive. Submitting 16 improper claims cannot be overlooked or
mitigated as merely being “accidental” when done by the same entity (D.A.R.E. Foot

> This finding does not suggest that there is a defined timeframe within which three
instances of improper billing practices must occur for a “pattern” to emerge. Neither the
regulation nor the preamble suggests that there is such a timeframe. See 42 C.F.R.

§ 424.535(a)(8), 73 Fed. Reg. at 36,455.
Care), on behalf of the same supplier (Petitioner), making the same error (naming
beneficiaries that predeceased the date of service). Repeatedly making those same errors
reduces their credibility as “accidental” and establishes a pattern of improper billing that
suggests a lack of attention to detail considering Petitioner could have differentiated the
patients through their birthdates or Medicare numbers.

b. Petitioner submitted Medicare reimbursement claims for
procedures on beneficiaries involving 6-10 toes where the
beneficiaries had one leg amputated.

CMS identified 10 claims that Petitioner submitted for services performed on 6-10 toes of
beneficiaries even though the named beneficiaries had one leg amputated. CMS Ex. 1, at
25. Petitioner does not dispute D.A.R.E. Foot Care improperly submitted these claims on
his behalf, other than to assert that Petitioner documented the patients’ statuses as
amputees correctly on patient evaluation forms, but the “biller inadvertently submitted
claims using the incorrect procedure code.” P. Amend. Br. 7; P. Exs. 1-5, 7b, 14. As
explained, for purposes of revocation under 42 C.F.R. § 424.535(a)(8), “accidental
claims” may not be considered “accidental” in nature after a supplier submits three
improper claims. See 73 Fed. Reg. at 36,455. Therefore, even if D.A.R.E. Foot Care
submitted claims using the incorrect codes, it did so 10 times on Petitioner’s behalf,
which supports a pattern of improper claims.

Petitioner argues that he did “everything he could to ensure that the billing was done
appropriately, but unbeknownst to him, D.A.R.E. Foot Care mistakenly billed Medicare
for a Debridement of 6[-10] nails.” P. Amend Br. 8-10 (emphasis added). However,
Petitioner is ultimately responsible for claims submitted to Medicare on his behalf.
Petitioner cannot shirk his responsibility through a faulty reliance on D.A.R.E.’s billing
actions. See 73 Fed. Reg. at 36,455 (“In conclusion, we believe that providers and
suppliers are responsible for the claims they submit or the claims submitted on their
behalf.”’).

3. CMS was authorized to revoke Petitioner’s Medicare billing privileges
pursuant to 42 C.F.R. § 424.535(a)(8).

Once CMS establishes that Petitioner’s billing practices constituted a pattern of claims
for services that could not have been furnished to specific individuals on the dates of
service, it is authorized to revoke Petitioner’s Medicare billing privileges. 42 C.F.R.

§ 424.535(a)(8). Here, Petitioner provided statistical estimates of his Medicare claims for
payment, arguing that the instances of billing issues leading to revocation were so minor
that he was clearly not attempting to defraud Medicare or otherwise have some type of
improper pecuniary gain. P. Amend. Br. at 6-7. Petitioner also claimed that all of the
identified billing errors were “accidental,” that CMS’s position regarding Petitioner’s
claims as “abuse” was “flawed,” and that the preamble does not support revocation for
“accidental” claims that are a result of human error. See P. Amend. Br. at 9-13 (citing 73
Fed. Reg. at 36,455).

The operative language of the revocation provision does not require that CMS
demonstrate that Petitioner intended to defraud Medicare before it may revoke
Petitioner’s billing privileges. See 42 C.F.R. § 424.535(a)(8). In addition, the regulation
does not suggest that a certain minimum percentage of total improper claims be tolerable.
Id. CMS must demonstrate that Petitioner’s billing practices showed a pattern of making
claims that could not have been furnished to specific individuals on the dates of service.
Id.; see also 73 Fed. Reg. at 36,455 (“[T]his basis for revocation is directed at providers
and suppliers who are engaging in a pattern of improper billing.”). As explained above,
CMS demonstrated, in 35 instances, that Petitioner engaged in a “pattern of improper
billing” for services that could not have been furnished to specific individuals on the
dates of service. Therefore, CMS had a legitimate basis to revoke Petitioner’s billing
privileges.

4. The proper effective date of revocation is June 17, 2012.

The revocation of billing privileges is effective 30 days after CMS or its contractor issues
the notice of revocation, unless certain exceptions apply. See 42 C.F.R. § 424.535(g). It
is undisputed that none of the exceptions listed in section 424.535(g) apply to this case.
CMS notified Petitioner by letter, dated May 18, 2012, that it was revoking Petitioner’s
billing privileges effective May 16, 2012. The date of Petitioner’s revocation, therefore,
should have been effective on June 17, 2012, which is 30 days after the date on the notice
of revocation. 42 C.F.R. § 424.535(g). Accordingly, CMS must modify the effective
date of revocation of Petitioner’s billing privileges to June 17, 2012.

Petitioner argues that the revocation must be reversed because “CMS did not follow its
own rules and did not properly exercise its authority to revoke [Petitioner’s] Medicare
billing privileges, and thus such revocation is invalid.” P. Amend. Br. 4. For support,
Petitioner cites Fort Steward Schools v. Federal Labor Relations Authority, 495 U.S.
641, 654 (1990), for the general proposition that it is a “familiar rule of administrative
law that an agency must abide by its own regulations.” P. Amend. Br. 4. While I agree
that an agency must abide by its own regulations, that proposition does not support the
relief that Petitioner seeks -- reversal of an otherwise duly authorized act. Petitioner cites
no authority that requires reversal of an entire administrative action when it may be
modified or reversed in part. Here, modifying the effective date of revocation to June 17,
2012 is enough to ensure that CMS has complied fully with applicable regulations in
revoking Petitioner’s billing privileges.
IV. Conclusion

For the foregoing reasons, I find CMS was authorized to revoke Petitioner’s Medicare
billing privileges under 42 C.F.R. § 424.535(a)(8) because he submitted 35 claims for
services that were not furnished to those individuals. CMS must modify the effective
date of Petitioner’s revocation to June 17, 2012, in accordance with 42 C.F.R.

§ 424.535(g).

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Han Holding Inc.
d/b/a Super H Convenience Store,

Respondent.

Docket No. C-13-321
FDA Docket No. FDA-2013-H-0090

Decision No. CR2727

Date: March 21, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Han Holding Inc. d/b/a Super H Convenience
Store, alleging facts and legal authority sufficient to justify the imposition of a
civil money penalty of $500. Respondent did not timely answer the Complaint,
nor did Respondent request an extension of time within which to file an answer.
Therefore, I enter a default judgment against Respondent and order that
Respondent pay a civil money penalty in the amount of $500.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent impermissibly sold
tobacco products to a minor and failed to appropriately verify the age of a person
purchasing tobacco products, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act) and its implementing regulations found at 21 C.F.R. Part
1140. CTP seeks a civil money penalty of $500.

On February 5, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent
should pay the penalty, file an answer, or request an extension of time within
which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering Respondent to pay the full
amount of the proposed penalty. Respondent did not take one of the required
actions within the time provided by regulation.

lam required to issue a default judgment if the Complaint is sufficient to justify a
penalty, and the Respondent fails to answer timely or to request an extension. 21
C.F.R. § 17.11(a). For that reason, I must decide whether a default judgment is
appropriate here, and I conclude that it is merited based on the allegations of the
Complaint and Respondent’s failure to answer them.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Super H Convenience Store, a business that sells tobacco
products and is located at 11901 Business Park Drive, Waldorf, Maryland
20601.

e¢ On June 18, 2012, an FDA-commissioned inspector observed violations
while inspecting Respondent’s establishment. These violations included
Respondent’s sale of cigarettes or smokeless tobacco to a person younger
than 18 years of age and Respondent’s failure to verify, by means of
photographic identification containing the bearer’s date of birth, the age of
a person purchasing tobacco products.

e On August 16, 2012, CTP issued a Warning Letter to Super H Convenience
Store regarding the inspector’s observations from June 18, 2012. The letter
stated that Respondent’s sale of tobacco products to a minor violated
regulations found at 21 C.F.R. § 1140.14(a), and Respondent’s failure to
verify the age of a tobacco purchaser, by means of photographic
identification containing the bearer’s date of birth, violated regulations
found at 21 C.F.R. § 1140.14(b)(1). The letter also advised Respondent
that failure to correct the violations could result in the imposition of a civil
money penalty or other regulatory action by FDA.
e On November 29, 2012, FDA commissioned inspectors documented
additional violations during a subsequent inspection of the establishment.
At approximately 2:07 P.M. ET, a person under the age of 18 was able to
purchase a package of “Newport Box” cigarettes. Additionally, the minor’s
identification was not verified, by means of photographic identification
containing the bearer’s date of birth, before this sale.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any
person younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer
must verify, by means of photo identification containing the bearer’s date of birth,
that no person purchasing the tobacco product is younger than 18 years of age.

Here, Respondent sold cigarettes or smokeless tobacco to a minor in violation of
the foregoing regulations on two separate occasions, June 18, 2012, and November
29, 2012. In addition, Respondent did not appropriately check the photographic
identification of the tobacco purchasers prior to these transactions. Respondent’s
actions and omissions on two separate occasions at the same retail outlet constitute
violations of law for which a civil money penalty is merited. Accordingly, I find
that a civil money penalty of $500 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge