DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case o
Bernard Lerner, M.D., DATE: December 22, 1989

Petitioner,
“Ve Docket No. C-48

The Inspector General. DECISION CR 60

DECISION OF ADMINISTRATIVE LAW JUDGE

On July 1, 1988, the Inspector General (the I.G.)
notified Petitioner that he was being excluded from
participation in Medicare and State health care programs
for 15 years.’ The 1.G. told Petitioner that he was
being excluded as a result of his conviction in federal
court of a criminal offense related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance. Petitioner was advised that
exclusion from participation in Medicare and Medicaid of
individuals or entities convicted of such an offense is
permitted by section 1128(b)(3) of the Social Security
Act. The I.G. stated that the 15-year exclusion imposed
and directed against Petitioner was based on factors
which included the fact that the sentence resulting from
Petitioner's criminal conviction included incarceration.

Petitioner requested a hearing, and the case was assigned
to me for a hearing and a decision. I held a hearing in
Chicago, Illinois on August 1, 1989. Based on the
evidence introduced at the hearing, and on applicable

1 “State health care program" is defined by
section 1128(h) of the Social Security Act to include any
State Plan approved under Title XIX of the Act (such as
Medicaid). I use the term "Medicaid" hereafter to
represent all State health care programs from which
Petitioner was excluded.
law, I conclude that the exclusion imposed and directed
against Petitioner is reasonable. Therefore, I am
entering a decision in this case sustaining the exclusion
imposed and directed against Petitioner.

ISSUE

The issue in this case is whether the exclusion imposed
and directed against Petitioner by the I.G. is
reasonable.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner is a physician who has specialized in
neurosurgery. Tr. at 157; I.G. Ex. 15/ 2, 5.

2. On April 10, 1987, Petitioner was charged in a 167
count indictment with knowingly, willfully and unlawfully
obtaining, possessing controlled substances, in violation
of 21 U.S.C. 841(a)(1) and 843(a) (3), and 21 C.F.R.
1306.04(a). I.G. Ex. 6.

3. Following a jury trial, on November 25, 1987,
Petitioner was convicted of 163 counts of the indictment.
I.G. Ex. 1.

4. Petitioner was convicted of possessing and
distributing Dilaudid in violation of 21 U.S.C. 841(a) (1)
and 843(a)(3), and 21 C.F.R.1306.04(a). I.G. Ex. 1;
6/3-1, 32-34, 36-40, 41-54, 56-93.

2 The parties' stipulations, exhibits, transcript
of the hearing, and the parties' briefs will be cited as
follows:

Stipulation Stip. (number)
I.G.'s Exhibit I.G. Ex. (number) / (page)
Petitioner's Exhibit P. Ex. (number) / (page)
Transcript Tr. at (page)

I.G.'s Posthearing Brief I.G.'s Brief at (page)

Petitioner's Posthearing P.'s Brief at (page)
Brief
-3-

5. Dilaudid is a Schedule II controlled substance.
21 C.F.R. 1308.12(c).

6. A Schedule II controlled substance is a drug that
meets the following criteria: (1) it has a high
potential for abuse; (2) it has a currently accepted
medical use in the United States or a currently accepted
medical use with severe restrictions; and (3) abuse of
the drug may lead to severe psychological or physical
dependence, 21 U.S.C. 812(b) (2).

7. Administration of Dilaudid may cause side effects,
including drowsiness and impaired judgment. I.G. Ex.
19/9; 32; Tr. at 287, 289.

8. Dilaudid has a very high potential for abuse. I.G.
Ex. 19/9.

9. Petitioner was convicted of possessing and
distributing biphetamine in violation of 21 U.S.C.
841(a)(1) and 21 C.F.R. 1306.04(a). I.G. Ex. 1; 6/94-95;
132-133.

10. Biphetamine is a Schedule III controlled substance.
I.G. Ex. 19/13; 21 C.F.R. 1308.13(b).

11. A Schedule III controlled substance is a drug which
meets the following criteria: (1) it has a potential for
abuse; (2) it has a currently accepted medical use in the
United States or a currently accepted medical use with
severe restrictions; and (3) abuse of the drug may lead
to limited physical or high psychological dependence.

21 U.S.C. 812(b) (3).

12. Petitioner was convicted of possessing and
distributing Quaaludes in violation of 21 U.S.C.
841(a)(1) and 21 C.F.R. 1306.04(a). I.G. Ex. 1;
6/146-147.

13. At the time Petitioner unlawfully possessed and
distributed Quaaludes, it was a Schedule II controlled
substance. I.G. Ex. 19/14.

14. Petitioner was convicted of possessing and
distributing Dolophine in violation of 21 U.S.C.
841(a)(1), and 21 C.F.R. 1306.04(a). I.G. Ex. 1;
6/146-169.

15. Dolophine is a Schedule II controlled substance.
21 C.F.R. 1308.12(c); I.G. Ex. 33/1191.
16. On January 14, 1988, Petitioner was sentenced to
three and one-half years incarceration and five years
probation to run consecutively to the prison sentence,
and to a special parole term of ten years. Stip. 3.

17. Between 1981 and 1986, Petitioner engaged in
criminal activity whereby he wrote prescriptions for
controlled substances to some patients who gave some of
these drugs back to him for his use. I.G. Ex. 6/1-2;
Tr. at 36, 172.

18. Between 1980 and 1987 Petitioner unlawfully used
Dilaudid, Dolophine, biphetamines and cocaine. Tr. at
247.

19. Between 1980 and 1987 Petitioner was addicted to
Dilaudid. Tr. at 172.

20. Petitioner continued to treat patients and perform
neurological surgeries while he suffered from the
physical and mental problems associated with his
addiction to drugs and his withdrawal from drug
addiction. Stip. 8; Tr. at 247-248.

21. Several of the individuals to whom Petitioner
prescribed controlled substances had received treatment
for drug addiction. I.G. 16/90; Tr. at 236, 263.

22. The individuals who had received treatment for drug
addiction and to whom Petitioner prescribed controlled
substances included a 15~year old female employed by
Petitioner as a receptionist. Tr. at 263.

23. Petitioner persisted in his unlawful conduct despite
warnings from investigative and regulatory agencies.
Tr. at 35, 50, 108, 303.

24. Petitioner did not seek treatment for his addiction
until after he had been indicted for criminal violations.
Tr. at 182.

25. Petitioner did not complete the drug rehabilitation
programs in which he enrolled. I.G. Ex. 35/25, 60-65,
74; Tr. at 184-185.

26. Petitioner was convicted of criminal offenses
relating to the unlawful manufacture, distribution,
prescription, or dispensing of controlled substances.
Findings 3-16.
27. The criminal offenses of which Petitioner was
convicted are criminal offenses as described in section
1128(b) (3) of the Social Security Act. Social Security
Act, section 1128(b) (3).

28. The Secretary of the Department of Health and Human
Services (the Secretary) has authority to impose and
direct an exclusion against Petitioner from participating
in Medicare and Medicaid, pursuant to section 1128(b) (3)
of the Social Security Act. Social Security Act, section
1128(b) (3).

29. The Secretary delegated to the I.G. the duty to
impose and direct exclusions pursuant to section 1128 of
the Social Security Act. 48 Fed. Reg. 21662 (May 13,
1983).

30. On July 1, 1988, the I.G. notified Petitioner that
he was being excluded from participation in the Medicare
and Medicaid programs as a result of his conviction of a
criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled
substance. I.G. Ex. 4; Stip. 6.

31. Petitioner was notified that he was being excluded
pursuant to section 1128(b) (3) of the Social Security
Act. I.G. ex. 4.

32. The exclusion provisions of section 1128 of the
Social Security Act establish neither minimum nor maximun
exclusion terms in those circumstances where the I.G. has
discretion to impose and direct exclusions. Social
Security Act, section 1128(b) (1)-(14).

33. A remedial objective of section 1128 of the Social
Security Act is to protect program beneficiaries and
recipients by permitting the Secretary (or his delegate,
the I.G.) to impose and direct exclusions from partici-
pation in Medicare and Medicaid of those individuals who
demonstrate by their conduct that they cannot be trusted
to treat beneficiaries and recipients. Social Security
Act, section 1128.

34. An additional remedial objective of section 1128 of
the Social Security Act is to deter individuals from
engaging in conduct which jeopardizes the integrity of
federally-funded health care programs. Social Security
Act, section 1128.
35. Petitioner was convicted of many criminal
violations. Findings 3-16; see 42 C.F.R. 1001.125(b) (1).

36. Petitioner's actions endangered the health and
safety of individuals, including Petitioner's patients,
who obtained prescriptions for controlled substances
from Petitioner. Findings 3-16, 20~22; see 42 C.F.R.
1001.125(b) (2).

37. Petitioner's criminal activities were perpetrated
over a six-year period, a lengthy period of time.
Findings 3-19; see 42 C.F.R. 1001.125(b) (6).

38. As a result of his convictions, Petitioner was
sentenced to a lengthy period of incarceration, three and
one-half years. Finding 16; see 42 C.F.R.
1001.125(b) (5).

39. The seriousness of Petitioner's offenses is also
established by the fact that he was sentenced to serve
ten years special parole in addition to his incarcera-
tion. Finding 16; see 42 C.F.R. 1001.125(b) (5).

40. Petitioner did not prove a community need for his
services as a neurological surgeon which establishes that
the exclusion imposed against him is unreasonable. See
Tr. at 227-229.

41. Even if Petitioner proved a community need for his
services as a neurological surgeon, that would not
establish that the exclusion imposed against him is
unreasonable.

42. Petitioner did not prove that his early release
from incarceration establishes that the exclusion
imposed against him is unreasonable. See Tr. at
157-158.

43. Petitioner did not prove that his age establishes
that the exclusion imposed against him is unreasonable.
See Tr. at 227.

44. Petitioner did not prove that his current drug-free
status or his acknowledgement of responsibility for his
addiction establishes that the exclusion imposed against
him is unreasonable. See Tr. at 120, 161-162, 236.

45. Petitioner did not prove that his involvement in
drug education and rehabilitation programs establishes
that the exclusion imposed against him is unreasonable.
See Tr. at 187-188, 208-209.

46. Petitioner did not establish that, in light of
mitigating factors, the exclusion imposed against him
is unreasonable. Findings 42-47.

47. The 15-year exclusion against Petitioner
participating in Medicare or Medicaid is reasonable.
Findings 40-46; Social Security Act, section 1128(b) (3);
see 42 C.F.R. 1001.125(b) (1)-(7)7 42 C.F.R. 1001.128.

ANALYSIS

The parties do not dispute that Petitioner was

convicted of criminal offenses relating to the unlawful
distribution, prescription, or dispensing of controlled
substances. The I.G. has authority under section

1128(b) (3) of the Social Security Act to impose and
direct an exclusion against Petitioner from participating
in the Medicare and Medicaid programs. The only
contested issue in this case is the reasonableness of the
15~year exclusion which the I.G. imposed and directed
against Petitioner.

The I.G. contends that the lengthy exclusion imposed

and directed against Petitioner is reasonable, when
considered in the context of the evidence and the purpose
of the exclusion law. The I.G. argues that Petitioner
was convicted of very serious criminal offenses
perpetrated over a period of several years. According to
the I.G., Petitioner's conduct was not only unlawful, but
it endangered the health and well-being of others,
including the patients whom Petitioner treated. The I.G.
argues that a lengthy exclusion is necessary to protect
Medicare recipients and Medicaid beneficiaries from the
possibility that Petitioner might again jeopardize their
well-being by abusing controlled substances.

Petitioner acknowledges his unlawful conduct, but
contends that there is little likelihood that it will
recur. He asserts that there exists a need in his
community for his special medical skills and that
restoring his participant status will serve to meet that
need. Petitioner argues that, because there is little
likelihood that he will again engage in the conduct for
which he was convicted, a lengthy exclusion is
unnecessarily punitive.
The exclusion law was enacted by Congress to protect the
integrity of the Medicare and Medicaid programs. Among
other things, the law was designed to protect program
recipients and beneficiaries from individuals who had
demonstrated by their behavior that they posed a threat
to the well-being and safety of recipients and
beneficiaries.

There are two ways that exclusions imposed and directed
pursuant to this law advance this remedial purpose.
First, the law protects recipients and beneficiaries from
untrustworthy providers until such time as these
providers demonstrate that they can be trusted to treat
program recipients and beneficiaries. Second, exclusions
serve as examples to deter providers of items or services
from engaging in conduct which threatens the well-being
and safety of recipients and beneficiaries. See House
Rep. No. 95-393, Part II, 95th Cong., 1st Sess.,
reprinted in 1977 U.S. Code Cong & Admin. News, 3072.

An exclusion imposed and directed pursuant to section
1128 will likely have an adverse financial impact on the
person against whom the exclusion is imposed. However,
the law places the well-being and safety of recipients
and beneficiaries ahead of the pecuniary interests of
providers. Thus, in determining the reasonableness of an
exclusion, the primary consideration must be the degree
to which the exclusion serves the law's remedial
objectives. An exclusion is not punitive if it does
reasonably serve these objectives, even if it has a
severe adverse impact on the person against whom it is
imposed.

In order to decide whether an exclusion is reasonable in
a particular case, I must judge the exclusion in light of
the evidence of the case and the intent of the exclusion
law. The purpose of the hearing is not to determine how
accurately the I.G. applied the law to the facts before
him, but whether, based on all relevant evidence, the
exclusion comports with the legislative purpose.

The hearing is, by law, de novo. Social Security Act,
section 205(b). Evidence which is relevant to the
reasonableness of an exclusion will be admitted in a
hearing on an exclusion even if that evidence was not
available to the I.G. at the time the I.G. made his
exclusion determination. I permitted the parties to this
case to offer evidence as to the reasonableness of the
exclusion which was not available to the I.G. at the time
he made his exclusion determination. For example, I
admitted evidence from Petitioner pertaining to his
efforts at rehabilitation while incarcerated in federal
prison.

An exclusion will be held to be reasonable where, given
the evidence of the case, it is shown to fairly comport
with legislative intent. "The word ‘reasonable' conveys
the meaning that... [the I.G.] is required at the
hearing only to show that the length of the...
[exclusion] determined . . . was not extreme or

excessive." (Emphasis added). 48 Fed. Reg. 3744 (Jan.
27, 1983). However, should I determine that an exclusion

is unreasonable, I have authority to modify the
exclusion, based on the law and the evidence. Social
Security Act, section 205(b).

The Secretary has adopted regulations to be applied in
exclusion cases. The regulations specifically apply only
to exclusions for "program-related" offenses (convictions
for criminal offenses related to Medicare and Medicaid).
However, they do express the Secretary's policy for
evaluating cases where permissive exclusions may be
appropriate. Thus, the regulations are instructive as
broad guidelines for determining the appropriate length
of exclusions in cases where the Secretary has authority
to exclude individuals and entities. The regulations
require the I.G. in determining exclusions to consider
factors related to the seriousness and program impact of
the offense and to balance those factors against any
mitigating factors that may exist. 42 C.F.R.

1001.125(b) (1)~(7).

I conclude that the 15-year exclusion imposed against
Petitioner is entirely consistent with the exclusion
law's remedial purpose. My conclusion is grounded on the
very serious crimes Petitioner committed and the jeopardy
in which Petitioner's unlawful conduct placed his
patients. I find that the danger of harm to patients is
so great, should Petitioner resume his previous behavior,
that a lengthy exclusion is justified to insure that
program recipients and beneficiaries are protected from
even a slight possibility that they will be exposed to
such danger. I also conclude that a lengthy exclusion
may have the additional benefit of deterring other
providers of services from engaging in the conduct
engaged in by Petitioner.

The evidence establishes a pattern of many criminal
violations by Petitioner over a long period of time.
See 42 C.F.R. 1001.125(b) (1). The seriousness of
~10 =

Petitioner's violations is in some measure reflected
in the sentence imposed on him. See 42 C.F.R.
1001.125(b) (5). The evidence also establishes that
Petitioner's conduct jeopardized the safety of his
patients. See 42 C.F.R. 1001.125(b) (2).

For years, Petitioner was addicted to Dilaudid, and he
abused other medications. Findings 4-17. In order to
support his addiction, Petitioner engaged in a scheme
whereby he prescribed Dilaudid and other controlled
substances to patients who were also addicted to these
drugs. These patients then gave back to Petitioner a
portion of the drugs they obtained from him. Finding 17.

Among the people whom Petitioner enlisted in his scheme
were patients who had histories of substance abuse and
treatment for drug addiction. Rather than treat these
patients, Petitioner abetted and encouraged their
addiction in order to supply his own needs. The persons
whom Petitioner used as fronts for the purpose of
obtaining drugs included a child, aged 15 years.

Moreover, Petitioner rendered treatment, including
performing neurological surgery, while addicted to
Dilaudid. He did so despite the potential side effects
of this drug, which include drowsiness and impaired
judgment. Finding 20.

The record establishes that on several occasions prior
to being indicted, Petitioner was investigated for his
pattern of prescribing large quantities of controlled
substances and warned by investigating authorities that
his conduct was questionable. These warnings failed to
deter Petitioner. It was only after Petitioner was
indicted and faced the possibility of incarceration that
he sought treatment for his addiction. Even then,
Petitioner failed to complete the programs he enrolled
in. Findings 23-25.

The inescapable inference that this evidence creates is
that Petitioner is an individual who is highly
susceptible to the temptations posed by addictive drugs.
He is a person who has engaged in destructive and self-
destructive behavior in spite of his education and his
knowledge of the medical risks and dangers posed by his
conduct. Most disturbing, the record supports the
conclusion that Petitioner is an individual who can
consciously place gratification of his needs above the
well-being of those he has sworn to treat and to protect.
-i1l1-

Petitioner's argument that the exclusion is unreasonable
is essentially premised on his contention that he has
learned his lesson and that he is therefore not about to
repeat his misconduct. He asserts that in light of his
rehabilitation, the very long exclusion imposed against
him is punitive.

The evidence does show that Petitioner has made some
recent efforts to rehabilitate himself. For example,
while incarcerated, Petitiorier instructed fellow inmates
on the dangers of drug addiction. Tr. at 187-188,
208-209. Petitioner has remained drug-free since his
conviction. However, I conclude that the 15-year
exclusion imposed against Petitioner is nonetheless
reasonable. See 42 C.F.R. 1001.125(b) (4).

I do not accept Petitioner's argument that the exclusion
is unreasonable in light of his efforts at rehabilita-
tion. Petitioner has not established to my satisfaction
that he will not relapse, if again exposed to the
temptation presented by unlawful drugs. The evidence in
this case documents a long history of substance abuse by
Petitioner, and a stubborn refusal by him to do anything
about his condition. The record also documents efforts
by Petitioner to cover up the dimensions of his addiction
and his involvement of his patients in his scheme to
obtain drugs .? His rehabilitation, so far, has been
accomplished in environments of confinement (including
federal prison) where his access to unlawful substances
has been restricted, and where he has been subjected to
strict scrutiny. The opportunities for relapse will
multiply if and when Petitioner returns to his former
profession.

Furthermore, the potential dangers to Petitioner's future
patients are enormous should Petitioner relapse. Given
this, a substantial margin of safety must be built into
any exclusion imposed against Petitioner. A 15-year
exclusion does not appear to be unreasonable in view of
the damage that Petitioner could cause to recipients and
beneficiaries should he resume his past conduct.

3 The judge who sentenced Petitioner to
incarceration found that Petitioner had perjured himself
as a witness in his criminal trial and characterized
elements of Petitioner's testimony as "blatant lies."
I.G. Ex. 14/38-39.
-12-

Petitioner argues that the exclusion imposed against
him is unreasonable in view of the asserted need for
neurological surgeons in his community. Petitioner's
evidence as to need consists largely of his uncorrob-
orated assertion that a need exists. More important,
even if a need for surgeons of Petitioner's specialty
does exist, that need is for surgeons who are not
addicted to controlled substances. In this case, the
loss to recipients and beneficiaries of Petitioner's
talents and skills is more than compensated for by the
protection to the safety of recipients and beneficiaries
which results from excluding Petitioner.

I am not persuaded by Petitioner's assertion that, in
light of his age (46), a 15-year exclusion is
unreasonable. As is noted supra, an exclusion will be
upheld as reasonable, even where it has an adverse effect
on the excluded party, if there is a legitimate need for
the exclusion in order to protect the integrity of the
Medicare and Medicaid programs.

Both parties compared this case to my decision in the
case of Leonard N. Schwartz, R.Ph., v. The Inspector
General, DAB Docket No. C-62 (1989). In Schwartz, I
upheld an eight-year exclusion for a pharmacist convicted
of two counts of knowingly and intentionally omitting
material information from required records in dispensing
controlled substances, a violation of 21 U.S.c.
843(a) (4) (A). I held in Schwartz (p. 13), that an eight-
year exclusion is justified where an individual
participated in numerous unlawful transactions of a
controlled substance, after having succumbed to personal
and psychological pressures, and where the individual's
conduct endangered the health and safety of others.

Both parties argued the comparisons between this case and
Schwartz. The I.G. stressed the many ways in which the
circumstances here justify a lengthier exclusion than
Schwartz; Petitioner relied principally on his assertion
that he was driven by his addiction and did not profit
from his wrongdoing, whereas the petitioner in Schwartz
did profit.

I conclude that the comparison with Schwartz amply
justifies the greater 15 year exclusion in this case.

The petitioner in Schwartz was convicted on two counts of
omitting required information in connection with the
distribution of controlled substances; Petitioner here on
163 counts of illegally distributing controlled
substances. The offenses in Schwartz were committed over
-13-

a period of 17 months; here, over a period of six to
seven years. The petitioner in Schwartz was sentenced to
18 months prison; Petitioner here was sentenced to 3.5
years. Both endangered the lives of others by making
controlled substances available in an unlawful manner; in
addition Petitioner here risked the lives of patients on
whom he performed operations while he was under the
influence of controlled substances, ignored warnings by
governmental agencies that he should discontinue the
activities of which he was later convicted, and perjured
himself when questioned by authorities about his
activities.

Petitioner attempted to distinguish Schwartz by
contending that the petitioner there profited from his
illegal activities, whereas Petitioner was driven by his
addiction and not profit. The I.G. argues that
Petitioner did profit because had he not been able to
obtain these substances in the illegal manner which he
did (i.e., by having patients give him a share of their
prescriptions), he would have had to pay for them
himself, at considerable expense. I find that Petitioner
did "profit" to the extent described by the I.G. Also, I
conclude that even if Petitioner did not "profit" per se,
the fact that he was driven by his addiction instead of a
desire for profit makes him less, not more, trustworthy.
Thus, even Petitioner's alleged distinction supports a
lengthier exclusion.

The exclusion imposed in this case may have the ancillary
benefit of deterring other individuals from engaging in
the conduct Petitioner engaged in. It should send a
message that individuals who engage in this kind of
behavior can expect to incur substantial exclusions from
participation in Medicare and Medicaid.
-14-

CONCLUSION

Based on the evidence in this case and the law, I
conclude that the 15-year exclusion imposed against
Petitioner from participating in the Medicare and
Medicaid programs is reasonable. Therefore, I sustain
the exclusion imposed against Petitioner, and I enter a
decision in favor of the I.G.

/s/

Steven T. Kessel
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

Jerry L. Edmonson, DATE: December 20, 1989

Petitioner,

- Veo Docket No. C-138

DECISION CR 59
The Inspector General. s

DECISION OF ADMINISTRATIVE LAW JUDGE
ON MOTION FOR SUMMARY DISPOSITION

On June 12, 1989, the Inspector General (the I.G.)
notified Petitioner that he was being excluded from
participation in Medicare and State health care programs
for a period of five years. The I.G. told Petitioner
that his exclusion was due to his conviction in a Texas
state court of a criminal offense related to the delivery
of an item or service under the Medicaid program. The
I.G. advised Petitioner that exclusions of individuals
convicted of such offenses are mandated by subsection
1128(a)(1) of the Social Security Act. The I.G. further
advised Petitioner that subsection 1128(c) (3)(B) of the
Social Security Act provides that the minimum period for
a mandatory exclusion is five years.

Petitioner timely requested a hearing, and the case was

assigned to me for a hearing and decision. I conducted a
prehearing conference by telephone on August 14, 1989, As
indicated at the conference, the I.G. filed a motion for

' "State health care program" is defined by

subsection 1128(h) of the Social Security Act to include
any State Plan approved under Title XIX of the Act (such
as Medicaid). I use the term "Medicaid" hereafter to
represent all State health care programs from which
Petitioner was excluded.
summary disposition, and Petitioner replied to the
motion. Neither party requested oral argument.

I have considered the parties' arguments, the undisputed
material facts, and applicable law. I conclude that the
exclusion imposed and directed by the I.G. is mandated by
subsection 1128(a) (1) of the Social Security Act, and is
for the minimum period required by law. Therefore, I am
deciding this case in favor of the I.G.

ISSUES

The issues in this case are whether Petitioner was:

1. "Convicted" of a criminal offense within the
meaning of section 1128 of the Social Security Act.

2. Convicted of a criminal offense related to the
delivery of an item or service under the Medicaid
progran.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner was employed as a nursing home
administrator. I.G. Ex. B.%

2. Petitioner was charged by criminal information
under Texas law with the offense of recklessly
misapplying property he held as a fiduciary. I.G. Ex. B.

3. Petitioner was charged with violating his
fiduciary duty by: (1) signing a blank check from the

2 he exhibits and the parties' memoranda will be
cited as follows:

I.G.'s Exhibit I.G. Ex. (letter
designation)

Brief in Support of Motion

For Summary Disposition I.G.'s Brief at

(page)

Petitioner's Reply to

Respondent's Motion for

Summary Disposition P.'s Brief at
(page)
patients' trust fund account which was used by another
employee of the nursing home at which Petitioner was
employed for the purchase of furniture, (2) by failing to
limit the amount of the purchase, (3) by failing to
determine if the debited patients approved such a
purchase, and (4) by failing to ensure that patients
received the furniture purchased with their funds. 1I.G.
Ex. B.

4. Specifically, Petitioner was charged with
misapplying the funds of a patient at the nursing home at
which Petitioner was employed and a Medicaid recipient.
I.G. Ex. B; see I.G.'s Brief at 9.

5. On January 6, 1989, Petitioner admitted that he
knowingly and intentionally committed the acts alleged in
the criminal information and pleaded guilty to the
offense of misapplication of fiduciary property. I.G.
Ex. A.

6. On January 6, 1989, the sentencing court
deferred further proceedings in Petitioner's case, fined
Petitioner $350.00, assessed court costs of $82.50, and
placed Petitioner on probation for a period of one year.
I.G. Ex. C.

7. The sentencing court ordered that, upon
successful completion of Petitioner's probation,
Petitioner would be discharged and the proceedings
against him dismissed. I.G. Ex. C.

8. Petitioner was convicted of a criminal offense
within the meaning of section 1128 of the Social Security
Act. Findings 2-7; Social Security Act, subsections
1128(a) (1); 1128(i).

9. Petitioner was convicted of a criminal offense
relating to the delivery of an item or service under the
Medicaid program. Findings 2-7; Social Security Act,
subsection 1128(a) (1).

10. The Secretary delegated to the I.G. the
authority to determine, impose, and direct exclusions
pursuant to section 1128 of the Social Security Act. 48
Fed. Reg. 21662 (May 13, 1983).

11. On June 12, 1989, the imposed and directed a
five year exclusion against Petitioner from participation
in the Medicare and Medicaid programs, pursuant to
subsection 1128(a)(1) of the Social Security Act.
12. The exclusion imposed and directed against
Petitioner is mandated by law. Findings 1-11; Social
Security Act, subsection 1128(a) (1).

ANALYSIS

There are no disputed material facts in this case. The
evidence establishes that Petitioner pleaded guilty in a
Texas court to one count of misapplying funds held in
trust for a Medicaid recipient-patient in the nursing
home in which Petitioner was employed as administrator.
The evidence also establishes that the Texas court fined
Petitioner and placed him on probation, but deferred
further proceedings in Petitioner's case. The court
ordered that, upon successful completion of Petitioner's
probation, the charges against him would be dismissed.

The I.G. determined that these undisputed facts
established that Petitioner was convicted of a criminal
offense related to the delivery of an item or service
under Medicaid. The I.G. excluded Petitioner from
participating in Medicare and directed that Petitioner be
excluded from participating in Medicaid, for five years.

The Social Security Act mandates an exclusion of:

Any individual or entity that has been
convicted of a criminal offense related to the
delivery of an item or service under...
[Medicare] or under . . . [Medicaid].

Social Security Act, subsection 1128(a) (1).

The law further requires, at subsection 1128(c) (3) (B),
that in the case of an exclusion imposed and directed
pursuant to subsection 1128(a)(1), the minimum term of
such an exclusion shall be five years. The I.G. contends
that the exclusion imposed and directed against
Petitioner was mandated by law.

Petitioner contests his exclusion on two grounds. First,
Petitioner asserts that his guilty plea does not fall
within the meaning of the term "conviction" as that term
is defined in subsection 1128(i) of the Act. Thus,
according to Petitioner, he has not been convicted of a
criminal offense within the meaning of section 1128 of
the Act. P.'s Brief at 2-3. Second, Petitioner argues
that, even if he was convicted of a criminal offense, the
criminal offense was not related to the delivery of an
item or service under the Medicaid program. P.'s Brief
at 4-6. Therefore, according to Petitioner, the I.G. had
no authority to impose and direct an exclusion against
him.

I disagree with Petitioner's arguments. I conclude that
Petitioner's guilty plea was a "conviction" within the
meaning of subsection 1128(i) of the Social Security Act.
I also conclude that the criminal offense of which
Petitioner was convicted related to the delivery of an
item or service under the Medicaid program. Therefore,
the I.G. was required to impose and direct an exclusion
against Petitioner from participating in the Medicare and
Medicaid programs for at least the minimum period
required by law.

1. iti was "convic " ¢
hin the mea: of secti 1128 0 e u

The term "conviction" is defined, for purposes of section
1128 of the Social Security Act, at subsection 1128(i).
That subsection provides that a party is considered to
have been convicted of a criminal offense:

(1) when a judgment of conviction has been
entered against . . . [that party] by a
Federal, State, or local court, regardless of
whether there is an appeal pending or whether
the judgment of conviction or other record
relating to criminal conduct has been expunged;

(2) when there has been a finding of guilt
against . . . [that party] by a Federal, State,
or local court;

(3) when a plea of guilty or nolo contendere by
. « . [that party] has been accepted by a
Federal, State, or local court; or

(4) when. . . [that party] has entered into
participation in a first offender, deferred
adjudication, or other arrangement or program
where judgment of conviction has been withheld.

The issue in this case is not whether a judgment of
conviction was entered against Petitioner, or whether a
finding of guilt was made against Petitioner by the Texas
court in which Petitioner made his guilty plea. What is
at issue is whether the court "accepted" Petitioner's
guilty plea, or whether Petitioner entered into a
deferred adjudication or other arrangement or program
where judgment of conviction has been withheld.

Petitioner asserts that receipt of a guilty plea by a
court does not constitute "acceptance" of that plea
within the meaning of Texas law. Petitioner does not
elaborate on this contention, but apparently means that
under Texas law, a court's decision to defer further
proceedings against a party based upon that party's
guilty plea does not constitute "acceptance" of a plea.

There is nothing in section 1128 of the Social Security
Act which suggests that Congress intended to subordinate
the exclusion law to state enactments or procedures. To
the contrary, section 1128 was plainly intended to create
a federal exclusion remedy which operated independently
of state laws. Thus, it is not relevant whether the
Texas court "accepted" Petitioner's guilty plea within in
the meaning of Texas law. What is relevant is whether
the plea was “accepted" within the meaning of subsection
1128(i) (3) of the exclusion law.

The evidence establishes that Petitioner made a voluntary
plea of guilty in which he admitted the facts of the
criminal information filed against him. His plea was
made as a choice among the alternative courses of action
available to him, including a trial. I conclude that the
court "accepted" Petitioner's plea. The statutory
definition of acceptance of a plea was met when
Petitioner offered to plead guilty and the court accepted
that offer. Petitioner's plea and the court's acceptance
of that plea precisely conform to the criteria of
subsection 1128(i)(3). The fact that the court deferred
further proceedings against Petitioner and agreed to
dismiss the criminal charges against Petitioner,
conditioned on his satisfying the terms of his probation,
is not relevant. There is no language in subsection
1128(i) (3) which states or suggests that the definition
of "conviction" in this subsection is qualified or
limited by judicial actions taken subsequent to
acceptance of a plea. a. Ss a . v
Inspector General, Docket No. C-74 (1989), appeal
docketed, Appellate No. 89-100, Decision No. 1104
(1989).

Furthermore, I conclude that the arrangement entered into
by Petitioner as an adjunct to his guilty plea
constituted entry into a deferred adjudication program
within the meaning of subsection 1128(i)(4). Therefore,
even if a plea had not been "accepted" within the meaning
of subsection 1128(i)(3), Petitioner's guilty plea would
nevertheless constitute a "conviction" for purposes of
section 1128.

Petitioner asserts that the criminal conduct which
resulted in his guilty plea occurred in 1986. He notes
that the term "deferred adjudication program" was not
added to subsection 1128(i) (4) until July, 1988, and
asserts that the law should not apply retroactively to
him. Alternatively, he argues that retroactive
application of the law would constitute an
unconstitutional deprivation of due process. P.'s Brief
at 4.

The I.G. asserts that Congress' 1988 addition of the term
“deferred adjudication" to subsection 1128(i)(4) was a
clarification designed to rectify an inadvertent omission
of language from the law, rather than a substantive
addition. To support his argument, the I.G. cites
legislative history to the 1986 legislation which enacted
the present definition of conviction. I.G.'s Brief at 5.

It is unnecessary for me to resolve whether the July 1988
addition of the term "deferred adjudication" to
subsection (i)(4) was a substantive amendment, as is
contended by Petitioner, or merely a clarification of
terms, as is contended by the I.G. Petitioner made his
guilty plea after the 1988 enactment. It is evident from
the language of subsection 1128(i) that a "conviction"
constitutes the events described in subsections (i) (1)
through (i) (4), and not the criminal conduct which leads
to the occurrence of any of these events. The fact that

3 The Zamora case involved a nolo contendere plea
entered under the identical section of Texas law as the
plea in this case.
the criminal conduct in this case may have occurred prior
to Congress' 1988 enactment is, therefore, not relevant.‘
2. i as_convi imi
ted to deliv i i
Medicaid program.

Petitioner argues that, even if he was "convicted" of a
criminal offense within the meaning of section 1128, he
was not convicted of an offense described in subsection
1128(a)(1). He concedes that his crime involved an
offense directed against a Medicaid recipient. P.'s
Brief at 4. He argues that subsection 1128(a)(1) does
not sweep into its ambit all crimes directed against
program recipients. Petitioner asserts that his offense
did not relate to the delivery of an item or service
under Medicaid, and therefore, does not fall within
subsection 1128(a) (1).

I agree with Petitioner's contention that an offense
directed against a Medicaid recipient does not fall
within subsection 1128(a)(1) unless it is related to the
delivery of an item or service under the Medicare or
Medicaid program. However, it is apparent from the
undisputed material facts of this case that Petitioner's
offense relates to the delivery of an item or service
under Medicaid.

The essential elements of Petitioner's criminal offense,
which were admitted by Petitioner when he made his guilty
plea, are that Petitioner, operating as a nursing home
administrator, misapplied patients' funds which were
deposited in a trust account. These funds included
monies paid into the account for the benefit of a
Medicaid recipient. Findings 2-5.

Regulations governing skilled nursing facilities eligible
to receive Medicaid reimbursement require those
facilities to protect the funds of their patients, as a

* I conclude that there is no foundation for

Petitioner's due process argument, because contrary to
his assertion, the law is not being applied retroactively
in this case. However, I note that I do not have
authority to decide questions concerning the
constitutionality of statutes or their application in
particular cases. WwW v

General, Docket No. C-56 (1989), a

Appellate No. 89-59, Decision No. 1078 (1989).
condition of participation in the Medicaid program. 42
C.F.R. 1125(m). Protection of patients' funds is
therefore an integral element of Medicaid services
delivered by nursing facilities. Petitioner's criminal
acts interfered with the nursing home's ability to
provide the protection required by the Medicaid program.
I conclude that Petitioner's breach of his fiduciary duty
related to the delivery of Medicaid services at the
nursing home which employed Petitioner. Therefore, the
criminal offense of which Petitioner was convicted
therefore related to the delivery of an item or service
under the Medicaid program within the meaning of
subsection 1128(a)(1) of the Social Security Act.

Petitioner argues that this case is distinguishable from
cases in which subsection 1128(a)(1) was held to apply,
because the offense of which Petitioner was convicted did
not directly affect the payment of reimbursement by
Medicaid. P.'s Brief at 5. Petitioner cites the Greene
case as an example of the kind of case which should fall
within the ambit of subsection 1128(a)(1). In Greene,
the petitioner was convicted of filing fraudulent claims
for Medicare reimbursement.

It is true that the Greene case involved a crime which
directly affected the payment of reimbursement for
services under a federally financed health care program.
However, that is not to suggest that only theft of
Medicare or Medicaid funds or fraud directed against
these programs are offenses which fall within subsection
1128(a)(1). The language of that subsection plainly
intends that a broader range of criminal offenses be
covered by the mandatory exclusion provisions.

The impact of Petitioner's offense on the delivery of
Medicaid services is not tangential or ephemeral.
Petitioner was convicted of an offense affecting an
integral element of Medicaid services at skilled nursing
facilities -- the protection of patients' funds. I
conclude that Petitioner's offense involved conduct which
had a direct effect on the integrity of the Medicaid
progran.

Petitioner argues that his offense falls within the ambit
of subsection 1128(b) (1) of the Social Security Act, a
subsection which permits the Secretary to exclude persons
who have been convicted of a criminal offense "relating
to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct" in
connection with the delivery of a health care item or
-10-

service, or "with respect to any act or omission ina
program operated by or financed in whole or in part by
any Federal, State, or local government agency."
Therefore, according to Petitioner, the Secretary (and
his delegate, the I.G.) was not required by law to
exclude hin.

This argument is virtually the same argument which was
made by the petitioner in Greene and found to be without
merit. If subsection 1128(b)(1) is read in isolation,
its language would literally encompass the criminal
offense of which Petitioner was convicted. However, such
a reading would ignore a legislative scheme in which
Congress mandated exclusion of persons convicted of
criminal offenses related to the delivery of items or
services under Medicare and Medicaid, and permitted
exclusion of persons convicted of criminal offenses
related to the delivery of items or services under other
health care programs. Social Security Act, subsections
1128(a) (1); 1128(b)(1). This case falls within the
mandatory exclusion provisions of subsection 1128 (a) (1)
because it involves a conviction of a criminal offense
related to the delivery of an item or service under the
Medicaid program.

Petitioner additionally argues that the offense of which
he was convicted was not directed against the Medicaid
program, but against an individual. P.'s Brief at 6.
While this assertion is technically correct, it does not
serve to distinguish this case from those which fall
within the mandatory exclusion provisions of subsection
1128(a) (1). That subsection does not require offenses to
be directed against Medicare or Medicaid in order to be
covered by the mandatory exclusion provisions. The
offense need only relate to the delivery of items or
services under Medicare or Medicaid to trigger the
mandatory exclusion provisions. Here, the offense
relates to the delivery of Medicaid services, whether it
was directed against the Medicaid program or a program
recipient.

Petitioner asserts that he did not personally benefit
from his criminal offense. P.'s Brief at 6. The
evidence does not establish that Petitioner personally
benefitted from his crime. For purposes of deciding the
I.G.'s motion I am willing to accept Petitioner's
assertion that he did not benefit. However, there is
nothing in subsection 1128(a)(1) which suggests that an
individual must personally benefit from his crime in
order to be covered by the mandatory exclusion
-11 -

provisions. Therefore, Petitioner's assertion is not
relevant.

Finally, Petitioner argues that there is no evidence to
show that the nursing home at which Petitioner was
employed as an administrator failed to comply with
applicable law or regulations. P.'s Brief at 6. That
may be so, but it is not relevant. The issue is whether
Petitioner was convicted of a criminal offense related to
the delivery of an item or service under the Medicaid
program,

CONCLUSION

Based on the undisputed material facts and the law, I
conclude that the I.G.'s determination to exclude
Petitioner from participation in Medicare, and to direct
that Petitioner be excluded from participation in
Medicaid, for five years, was mandated by law. There-
fore, I am entering a decision in favor of the I.G.
which sustains the five~year exclusion imposed and
directed against Petitioner.

/s/

Steven T. Kessel
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:
DATE: December 13, 1989
DeWayne Franzen,
Petitioner, Docket No. C~96
7 vem DECISION CR 58

The Inspector General.

DECISION AND ORDER

In this case, governed by section 1128 of the Social
Security Act (Act), Petitioner filed a timely request for
a hearing before an Administrative Law Judge (ALJ) to
contest the December 23, 1988 notice of determination
(Notice) issued by the Inspector General (I.G.). The
Notice advised Petitioner that an exclusion was being
imposed and directed against him for a minimum period of
five years based upon his conviction of a criminal
offense related to the delivery of an item or service
under the Medicaid program.

Based on the entire record before me, I conclude that:
(1) there are no material facts at issue, (2) Petitioner
is subject to the minimum mandatory exclusion provisions
of sections 1128(a)(1) and 1128(c)(3)(B) of the Act, and
(3) based upon the facts of Petitioner's case, a five-
year period of exclusion is mandated.

"section 1128 of the Act provides for the exclusion
of individuals and entities from the Medicare program
(Title XVIII of the Act) and requires the I.G. to direct
States to exclude those same individuals and entities for
the same period of time from "any State health care
program" as defined in section 1128(h). The Medicaid
program (Title XIX of the Act) is one of three types of
State health care programs defined in Section 1128(h)
and, for the sake of brevity, I refer only to it.
APP BLE STATUTES

I. The Federal Statute.

Section 1128 of the Social Security Act (Act) is codified
at 42 U.S.C.A. 1320a-7 (West Supp. 1989). Section
1128(a)(1) of the Act requires the I.G. to impose and
direct exclusion from participation in the Medicare and
Medicaid programs those individuals or entities who are
"convicted" of a criminal offense “related to" the
delivery of an item or service under the Medicare or
Medicaid programs. Section 1128(c) (3) (B) provides that
the period of exclusion for those excluded pursuant to
section 1128(a)(1) shall be for a minimum of five years.

Section 1128(b) of the Act permits the I.G. to impose and
direct exclusions from participation in the Medicare and
Medicaid programs against individuals or entities who
have engaged in other types of impermissible conduct.

II. The Federal Requlations.

The governing federal regulations (Regulations) are
codified in 42 C.F.R. Parts 498, 1001, and 1002 (1988).
Part 498 governs the procedural aspects of this exclusion
case; Parts 1001 and 1002 govern the substantive aspects.

Section 1001.123 requires the I.G. to issue an exclusion
notice to an individual whenever the I.G. has "conclusive
information" that such individual has been "convicted" of
a criminal offense "related to" the delivery of a
Medicare or Medicaid item or service; the exclusion to
begin 15 days from the date on the notice.*

*The I.G.'s notice letter allows an additional five
days for receipt by mail.
BACKGROUND *

I conducted a prehearing conference by telephone on

July 18, 1989. The parties agreed that this case could
be decided based upon documentary evidence and briefs.
The parties submitted stipulations and agreed findings of
fact, and a stipulation as to the authenticity of eight
joint exhibits. The I.G. submitted a brief in support of
his motion for summary disposition. Petitioner submitted
a brief which supported his motion for summary
disposition and which opposed the I.G.'s motion for
summary disposition. The I.G. also submitted a reply
brief.

Petitioner admitted that he was "convicted" of criminal
offenses within the meaning of section 1128(i) of the
Act. P. Br. 2, 4.

ISSUES

The issues are:

1. Whether Petitioner's convictions are "related to the
delivery of an item or service" under the Medicaid
program within the meaning of section 1128(a)(1) of the
Act.

2. Whether Petitioner is subject to the minimum
mandatory five year exclusion provisions of
sections 1128(a)(1) and 1128(c) (3)(B) of the Act.

3. Whether the principles espoused in the recent United
States Supreme Court decision in United States v. Halper,
109 S.Ct. 1892 (1989), bar the I.G. from excluding
Petitioner.

3 Phe citations in this Ruling are as follows:

Stipulations Stip. (paragraph)
Petitioner's Brief P. Br. (page)
I.G.'s Brief I.G. Br. (page)
I.G.'s Reply Brief I.G. Rep. Br. (page)
Joint Exhibits J.Ex. (number)

Findings of Fact and
Conclusions of Law

FFCL (number)
DINGS OF FACT AND co 4

1. Petitioner is a pharmacist who, at all times relevant
to this case, was the owner and pharmacist at Bessemer
Pharmacy in Greensboro, North Carolina. Stip. 1.

2. Petitioner was charged in Guilford County District
Court with three misdemeanor counts of violating North
Carolina General Statutes (N.C. Gen. Stat.) sections 90-
85.29 and 90-85.40 (false prescription labeling), and one
misdemeanor count of violating N.C. Gen. Stat. sections
90-106(c) and 90-108(a)(2) (unlawful dispensing of a
controlled substance). J. Ex. 1,3,5,7.

3. On January 27, 1988, Petitioner pled guilty to all
four charges and judgment was entered against him.
Stip. 4; J. Ex. 2,4,6,8.

4. Petitioner violated the "False Prescription Labeling"
provisions of N.C. Gen. Stat. sections 90-85.29 and 90-
85.40 by placing brand name prescription labels on
bottles in which generic drugs were dispensed. Stip. 8;
J. Ex. 1,3,5.

5. Petitioner violated the "Unlawful Dispensing of a
Controlled Substance" provisions of N.C. Gen. Stat.
sections 90-106(c) and 90-108(a) (2) by unlawfully
refilling a prescription for a controlled substance more
than five times after the date of the prescription.
Stip. 8; J. Ex. 7.

6. In each of the three instances where Petitioner was
convicted of false prescription labeling, the drug
product was dispensed to a Medicaid recipient. In the
one instance where Petitioner was convicted of unlawfully
dispensing a controlled substance, the controlled
substance was dispensed to a Medicaid recipient. Stip.
9; J. Ex. 1,3,5,7.

7. Petitioner submitted a claim for reimbursement to the
Medicaid program in each of the charges for which he was
convicted. Stip.9.

“any part of this Decision and Order preceding the
Findings of Fact and Conclusions of law which is
obviously a finding of fact or conclusion of law is
incorporated herein.
8. Petitioner was reimbursed by the Medicaid program for
each of the claims which he submitted. Payment to
Petitioner by the Medicaid program resulted in an
overpayment. Stip. 9.

9. Petitioner was sentenced to pay a fine of $1,000.00,
plus $40.00 in court costs. Stip. 5; J. Ex. 2, 4, 6, 8.

10. Petitioner was ordered to make restitution in the
amount of $4,000.00 to the North Carolina Medicaid
Program. Stip. 6; J. Ex. 2, 4, 6, 8.

11. Section 1128(a)(1) of the Act requires the I.G. to
impose and direct exclusions from participation in the
Medicare and Medicaid programs against individuals who
are convicted of a criminal offense “related to the
delivery of an item or service" under the Medicare or
Medicaid programs.

12. Petitioner admitted that he was "convicted" of
criminal offenses within the meaning of section 1128(i)
of the Act. P. Br. 4.

13. The criminal offenses for which Petitioner was
convicted are "related to the delivery of an item or
service" under the Medicaid program. FFCL 4 - 8, 10.

14. Petitioner is subject to the minimum mandatory
provisions of section 1128(a)(1) of the Act. FFCL 12,
13.

15. The I.G. properly imposed and directed an exclusion
against Petitioner from participation in the Medicare and
Medicaid programs for a minimum mandatory period of five
years. FFCL 14.

16. The principles espoused in the recent United States
Supreme Court decision in United States v. Halper, 109
S.Ct. 1892 (1989), do not bar the I.G. from imposing and
directing exclusions from participation in the Medicare
and Medicaid programs against Petitioner.
DISCUSSION

I. Petitioner's Convictions "Related to the Delivery of

1128(a)(1) of .

Section 1128(a)(1) of the Act requires the I.G. to impose
and direct exclusions against individuals who are
convicted of a criminal offense which is related to the
delivery of an item or service under the Medicare or
Medicaid program. Thus, in order for Petitioner to be
properly excluded from participation in the Medicare and
Medicaid programs, he must satisfy a two-part test.
First, he must be "convicted" of a criminal offense
within the meaning of section 1128(i) of the Act; and
second, the conviction must be “related to the delivery
of an item or service" under the Medicare or Medicaid
programs.

In this case, the first part of the test has been
satisfied in that Petitioner has admitted that he was
"convicted" of criminal offenses within the meaning of
section 1128(i) of the Act. FFCL 12. However,
Petitioner argues that the I.G. has not satisfied the
second part of the test because the criminal offenses for
which Petitioner was convicted are not "related to the
delivery of an item or service" under the Medicare or
Medicaid programs. Petitioner argues that section 1128
authorizes the exclusion of individuals who are convicted
of a criminal offense which is related to the delivery of
an item or service under the Medicaid program only in
instances where such individual possessed criminal intent
in the commission of the offense.

I do not agree that a determination of whether a
relationship exists between the criminal offense for
which Petitioner is convicted and the delivery of an item
or service under the Medicaid program should be based
upon whether Petitioner intended to disobey the law.

The provisions of section 1128(a)(1) do not require that
the individual must intend to commit the criminal offense
in order for an exclusion to be proper. Section
1128(a)(1) requires only that there be a "reasonable"
relationship between the criminal offense and the
delivery of an item or service under the Medicaid
program.
Petitioner's judgments of conviction state that a factual
basis existed for the charges against Petitioner and that
Petitioner pleaded guilty to each charge. Petitioner
stipulated that the Misdemeanor Statement of Charges
(Charges) accurately states the factual basis for each of
the convictions. FFCL 3-6. The facts stated in the
Charges were that: (1) in three instances, Petitioner
mislabeled prescriptions dispensed to Medicaid recipients
by placing the brand name label on the product when, in
actuality, a generic product was dispensed; and (2) in
one instance, Petitioner improperly refilled a Medicaid
recipient's prescription for a controlled substance more
than five times after the date of the prescription. FFCL
3-6. Further, Petitioner stipulated that a claim for
reimbursement from the Medicaid program was submitted for
each charge at issue. FFCL 8.

Pharmacists, such as Petitioner, play a key role in the
dispensing of prescription medications. Doctors who
prescribe medications for their patients and the patients
who receive the medications trust that the pharmacist
will provide the medication which has been prescribed.
The Medicaid program which reimburses pharmacists for the
items or services which they provide to Medicaid
recipients trust that the pharmacist's claim will
accurately reflect the item or service which has been
provided and that the pharmacist will provide the
Medicaid recipient with the item or service in both a
professional and legal manner. A breach of these duties
by an individual so charged with them, and a conviction
resulting from the breach, represents a conviction for a
criminal offense which is directly "related to the
delivery of an item or service" under the Medicaid
program. Petitioner was such an individual. The
criminal offenses for which Petitioner was convicted
constitute a direct relationship between the delivery of
an item or service and the Medicaid program. See H. Gene

enship v. The Inspec General, DAB Docket No. C-67
(1989).

Further, the relationship between the criminal offenses
for which Petitioner was convicted and the Medicaid
program may also be found based upon the financial impact
which Petitioner's criminal offense had on the Medicaid
program. Petitioner submitted claims for reimbursement
for services which were not provided as claimed.
Petitioner admits that he received an overpayment from
the Medicaid program as a result of the claims submitted
for the charges at issue. FFCL 8~10. In the case of
Jack W. Greene v. The Inspector General, DAB Docket No.

c-56, decided January 31, 1989, appeal docketed, DAB No.
89-59, Decision No. 1078 (1989), a review panel of the
Departmental Appeals Board addressed this argument and
held that "the false Medicaid billing and the delivery of
the drugs to the Medicaid recipient are inextricably
intertwined and therefore 'related' under any reasonable
reading of that term".

Based on the above, I conclude that Petitioner's
convictions are "related to the delivery of an item or
service" under the Medicaid program within the meaning of
section 1128(a)(1) of the Act.

II. A Minimum Mandatory Five Year Exclusion Was
Required In This Case.

Section 1128(a)(1) of the Act clearly requires the I.G.
to exclude individuals and entities from the Medicare
program, and to direct that they be excluded the Medicaid
program, for a minimum period of five years, when such
individuals or entities have been "convicted" of a
criminal offense "related to the delivery of an item or
service" under the Medicare or Medicaid programs within
the meaning of section 1128(a)(1) of the Act.
Congressional intent on this matter is clear:

A minimum five-year exclusion is appropriate,
given the seriousness of the offenses at
issue. .. . Moreover, a mandatory five-year
exclusion should provide a clear and strong
deterrent against the commission of criminal
acts.

S. Rep. No. 109, 100th Cong., 1st Sess. 2, reprinted in
1987 U.S. Code Cong. & Admin. News 682, 686.

Since Petitioner was "convicted" of criminal offenses
which are "related to the delivery of an item or service"
under the Medicaid program within the meaning of section
1128(a)(1) and (i) of the Act, the I.G. was required to
exclude Petitioner for a minimum of five years.

5since I have found and concluded that the mandatory
exclusion provisions of section 1128(a)(1) apply in this
case, I need not address the issue of whether I should
make a de novo determination to reclassify the
Petitioner's criminal offense as subject to the
permissive authority under section 1128(b) of the Act.
III. The Principles Espoused In The Recent Case Of
United States v. Halper Do Not Apply To This Case.

In United States v. Halper, 109 S. Ct. 1892 (1989), the
Supreme Court held that under some circumstances the
imposition of civil penalties may violate the Double
Jeopardy Clause of the Sixth Amendment to the United
States Constitution. The Court held that the imposition
of a penalty under the False Claims Act, 31 U.S.C. 3729-
3231, could constitute double jeopardy in the narrow
circumstance where (1) there was a prior federal criminal
conviction, (2) based upon the same false claims for
which a civil penalty was being imposed, and (3) there
was no reasonable relationship between the amount of the
penalty sought and the damages suffered by the government
as a result of the false claims at issue.

This case is distinguishable, both legally and factually,
from Halper. First, this case involves a state
conviction whereas Halper involved a federal conviction.
Double jeopardy does not apply to a subsequent federal
prosecution based on facts which led to a state
conviction. Chapman v. U.S. Dept. of Health & Human
Services, 821 F.2d 523 (10th Cir. 1987); Abbate v. United
States, 359 U.S. 187 (1959). See also, Crofoot v. United
States Government Printing Office, 761 F.2d 661, 665
(Fed. Cir. 1985). Secondly, the purpose of section 1128
of the Act is to protect the Medicare and Medicaid
programs, not punishment. Halper involved different
factual circumstances ~- the federal government was
attempting to recover approximately $130,000 in civil
penalties based on an individual's federal conviction for
a $585.00 overcharge to the Medicare program -- and the
Court concluded that such a result might be tantamount to
punishment. In this case, there are no civil penalties.
The principal thrust of the statute is protection, even
though a section 1128 exclusion is also a deterrent. See
Charles J. Burks, M.D. v. The Inspector General, DAB
Docket No. C-111, at page 8 (1989).

‘petitioner also argues that his convictions were
based upon strict liability and that Congress did not
intend to exclude providers whose convictions were based
upon statutes imposing strict liability. There is no
basis for deleting strict liability convictions from the
coverage of the exclusion authority and Petitioner's
reliance on excerpts from the legislative history are
misplaced.
- 10 -

CONCLUSION

Based on the law and undisputed material facts in the
record of this case, I conclude the I.G. properly
excluded Petitioner from the Medicare program, and
directed his exclusion from the Medicaid program, for
the minimum mandatory period of five years.

IT IS SO ORDERED.

/s/

Charles E. Stratton
Administrative Law Judge