DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:
Leonard N. Schwartz, R. Ph., DATE: August 4, 1989
Petitioner,

Docket No. C-62
DECISION CR 36

-w-

The Inspector General.

DECISION OF ADMINISTRATIVE LAW JUDGE

Petitioner timely requested a hearing, protesting the
Inspector General's (the I.G.'s) determination to exclude
him from participation in the Medicare program and to
direct that he be excluded from participation in State
health care programs, for eight years, pursuant to
section 1128 (b) (3) of the Social Security Act, 42 U.S.c.
1320a-7(b) (3). I conducted a hearing in Philadelphia,
Pennsylvania on March 28, 1989. Based on the evidence
introduced at the hearing, and on applicable law, I
conclude that the exclusions imposed on and directed
against Petitioner in this case are reasonable.

BACKGROUND

On October 6, 1988, the I.G. sent notice to Petitioner,
advising him that he was being excluded from Medicare and
State health care programs for a period of eight years.
Petitioner was advised that his exclusions were being
imposed and directed pursuant to 42 U.S.C. 1320a-7(b) (3),
and were due to his conviction in the United States
District Court for the Eastern District of Pennsylvania

1 “state health care program" is defined by
section 1128(h) of the Social Security Act, 42 U.S.C.
1320a-7(h), to include any State Plan approved under
Title XIX of the Act (such as Medicaid).
2

of a criminal offense related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance. The I.G. told Petitioner that
the eight-year exclusions determined in his case were
based on the following circumstances: (1) Petitioner was
convicted of a criminal offense related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance; (2) the criminal acts resulting
in the conviction were committed over a more than one-
year period of time; (3) the violations had a significant
adverse physical, mental or financial impact on
individuals; and (4) the sentence resulting from the
criminal conviction included incarceration.

On October 24, 1988, Petitioner timely requested a
hearing as to the exclusions, arguing that his conviction
was for a “record keeping" violation of 21 U.S.C.
843(a) (4) (A) and was not a conviction of a criminal
offense relating to the manufacture, distribution,
prescription, or dispensing of a controlled substance.

He also denied that the record contained evidence that
this violation had a significant adverse physical, mental
or financial impact on individuals. Petitioner noted
that he was in a court-approved work release program and
engaged in activity to support his family. Petitioner
asserted that for these reasons the exclusions imposed on
and directed against him were unreasonable.

The case was assigned to me for hearing and decision. I
conducted a prehearing conference on December 15, 1988,
at which time a hearing was scheduled for February 27,
1989, in Philadelphia. Petitioner subsequently filed a
request to stay the exclusions imposed on and directed
against him. He also requested a postponement of the
hearing in his case. I granted Petitioner's request for
a postponement, and rescheduled the hearing for March 28,
1989. On March 1, 1989, I issued an Order denying
Petitioner's request for a stay of the exclusions, ruling
that I lacked authority to grant the requested relief.

APPLICABLE LAW AND REGULATIONS

A. Statutes.

1. Section 1128 of the Social Security Act,
42 U.S.C. 1320a-7(a)~-(i).

2. Controlled Substances Act, 21 U.S.C. 801 et seq.
B.

1.

Spring Garden Street, Philadelphia, Pennsylvania.

Requiations.

1. 21 °C.F.R. Chapter II--Drug Enforcement Admin.,

Dept. of Justice.

2. 42 C.F.R. Part 1001--Program Integrity.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Prior to late 1987, Petitioner was the owner,
operator and sole pharmacist of Cadmus Pharmacy, 1941

110-111.?

2.

On September 25, 1986,

Tr. at

an agent of the Drug

Enforcement Administration (the D.E.A.) performed an
accountability investigation of the drug Preludin at

Cadmus Pharmacy.

3.

country.

4.

is a drug which meets the following criteria:
a high potential for abuse;

Tr. at 86.

This investigation was prompted by complaints that
pharmacies and doctors in Philadelphia were purchasing
more Schedule II stimulants than in any state in the

Tr. at 86.

As defined by law, a Schedule II controlled substance

(1) it has

(2) it has a currently

accepted medical use in the United States or a currently
accepted medical use with severe restrictions; and

2

The exhibits, transcript of the hearing, and the

parties' briefs will be cited as follows:

Petitioner's Exhibit
I.G.'s Exhibit
Transcript

I.G.'s Trial Memorandum

Petitioner's Trial
Memorandum

I.G.'s Reply Brief

Petitioner's Post~Hearing
Memorandum

I.G.'s Findings and
Conclusions

Petitioner's Reply Brief

I.G.'s Reply Brief

P. Ex. (number) / (page)

I.G. Ex. (number) / (page)

Tr. at (page)

I.G.'s Trial Memorandum

P.'s Trial Memorandum at
(page)

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

P.'s Post-Hearing
Memorandum at (page)

I.G.'s Findings and
Conclusions at (page)

P.'s Reply Brief at
(page)

I.G.'s Reply Brief at

(page)
4

(3) abuse of the drug may lead to severe psychological or
physical dependence. 21 U.S.C. 812(b) (2).

5. Cadmus Pharmacy was identified in these complaints as
one of the pharmacies that was purchasing excessive
quantities of Schedule II stimulants. Tr. at 86.

6. Preludin is a Schedule II controlled substance.
21 C.F.R. 1308.12(d).

7. Preludin (phenmetrazine hydrochloride) is an
amphetamine. I.G. Ex. 6/1-2.

8. Preludin is a highly abused controlled substance in
certain areas of the country. I.G. Ex. 14-3.

9. Because of a high potential for abuse, no controlled
substance in Schedule II may be dispensed without a
written prescription from a physician (except in
emergency situations). I.G. Ex. 14-3.

10. Each time a pharmacist dispenses a Schedule II
controlled substance, a legitimate prescription must be
received and retained by the pharmacist. I.G. Ex. 14-3.

11. At the time of the D.E.A. investigation, Cadmus
Pharmacy was the eleventh highest purchaser of Preludin
in the Philadelphia area. Tr. at 97.

12. Petitioner was unable to account to the D.E.A. agent
for 34,356 Preludin tablets, or about 78 percent of the
Preludin purchased by Petitioner during the period
beginning May 1, 1985 and ending September 25, 1986.

Tr. at 86-88.

13. On May 22, 1987, Petitioner agreed to waive
indictment and to be charged by information with two
felony counts of violating 21 U.S.c. 843 (a) (4) (A).
I.G. Ex. 8.

3 This section provides that it:

(S)hall be unlawful for any person knowingly or
intentionally . . . to furnish false or fraudulent
material information in, or omit any material
information from, any application, report, record,
or other document required to be made, kept, or
filed under this subchapter ....

21 U.S.C. 843(a) (4) (A).
5

14. Petitioner was charged in federal court with
knowingly and intentionally omitting material information
from required records in dispensing controlled
substances. I.G. Ex. 9/1~2.

15. Petitioner agreed to plead guilty to two counts of
violating 21 U.S.C. 843(a) (4) (A). I.G. Ex. 10/1.

16. On December 8, 1987, Petitioner was convicted of two
counts of violating 21 U.S.C. 843(a) (4) (A); was sentenced
to 18 months' imprisonment, five years' probation, and
was fined $20,000.00. P. Ex. 8.

17. The criminal offense of which Petitioner was
convicted on December 8, 1987 is related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance. Findings 4, 6-10; 13~16;

42 U.S.C. 1320a-7(b) (3).

18. On October 6, 1988, the I.G. notified Petitioner
that he was being excluded from participation in the
Medicare program and any State health care program for a
period of eight years 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. 3.

19. Petitioner was notified that he was being excluded
pursuant to Section 1128(b) (3) of the Social Security
Act, 42 U.S.C. 1320a-7(b) (3). I.G. Ex. 3.

20. Petitioner was further advised that the length of
his exclusions was in part determined by the following
circumstances: (1) the criminal acts resulting in
Petitioner's conviction were committed over a period
exceeding one year; (2) Petitioner's violations had a
significant adverse physical, mental or financial impact
on individuals; and (3) Petitioner's sentence resulting
from his conviction included a period of incarceration.
I.G. Ex. 3/2.

21. A remedial purpose of Section 1128 of the Social
Security Act is to protect beneficiaries and program
funds by mandating or permitting the Secretary to
disqualify or to direct disqualification from
participation in Medicare and State health care programs
those individuals or entities who had demonstrated by
their conduct that they could not be trusted to
administer program funds. 42 U.S.C. 1320a~7(a)-(i).

22. The Secretary of Health and Human Services (the
Secretary) delegated to the I.G. the duty to impose and
6

direct exclusions pursuant to Section 1128 of the Social
Security Act. 48 Fed. Reg. 21662 (May 13, 1983).

23. The exclusion provisions of Section 1128 of the
Social Security Act establish neither minimum nor maximum
exclusion terms in those circumstances where the I.G. has
discretion to impose and direct exclusions. 42 U.S.C.
1320a~7(b) (1)-(14).

24. The Secretary has discretion to exclude Petitioner
from participating in the Medicare program and to direct
that he be excluded from participating in State health
care programs, as a result of Petitioner's conviction of
a criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled
substance. Finding 17; 42 U.S.C. 1320a-7(b) (3).

25. The offenses of which Petitioner were convicted are
serious criminal offenses, resulting in his
incarceration. Finding 16.

26. Petitioner perpetrated the conduct which resulted in
his conviction over a 17-month period, a lengthy period
of time. Finding 12.

27. The conduct engaged in by Petitioner endangered the
health and safety of the individuals who obtained
Preludin from Cadmus Pharmacy. Findings 4-12.

28. Petitioner succumbed to personal and psychological
pressures to engage in conduct which he knew was illegal.
Tr. at 112, 117, 119.

29. The I.G.'s determination that, given Petitioner's
conduct, he cannot be trusted as a Medicare or Medicaid
provider for eight years, is reasonable. Findings 25-28;
see 42 C.F.R. 1001.125(b) (1)-(7).

30. The I.G.'s determination that relatively lengthy
exclusions are justified in this case in order to deter
other providers from engaging in unlawful conduct, is
reasonable. Findings 25-28; see 42 C.F.R.

1001.125(b) (1)-(7).

31. Petitioner has not established that the personal and
psychological pressures to which he was subject make the
I.G.'s determinations concerning the appropriate length
of exclusions to impose on Petitioner unreasonable. See
Tr. at 112, 117, 119.

32. Petitioner has not proven a community need for his
services as a pharmacist which establishes that the
7

I.G.'s determinations concerning the appropriate length
of exclusions to impose on Petitioner are unreasonable.
See Tr. at 115-116.

33. Even if Petitioner had proven a community need for
his services as a pharmacist, that would not establish
that the I.G.'s determinations concerning the appropriate
length of exclusions to impose on Petitioner are
unreasonable.

34. Evidence offered by Petitioner showing that he is a
person of good moral character does not establish that
the I.G.'s determinations concerning the appropriate
length of exclusions to impose on Petitioner are
unreasonable. See P. Ex. 1-4.

35. Evidence offered by Petitioner showing that he had
no prior criminal record, and that he cooperated with
authorities prosecuting his criminal case, does not
establish that the I.G.'s determinations concerning the
appropriate length of exclusions to impose on Petitioner
are unreasonable. See P. Ex. 7, 8; I.G. Ex. 7-10; 14.

36. Petitioner has not established that the reduction of
his prison sentence to a work-release program makes the
exclusions imposed on him unreasonable. See Tr. at
45-46.

37. Petitioner has not established that his age makes
the exclusions imposed on him unreasonable. See Tr. at
46.

38. Petitioner has not established that, in light of
mitigating factors, the 1.G.'s determinations concerning
the appropriate length of exclusions to impose on
Petitioner are unreasonable. Findings 31~37.

39. The I.G.'s determination to impose an eight-year
exclusion against Petitioner from participating in the
Medicare program, and to direct that Petitioner be
excluded from participating in State health care
programs, for eight years, is reasonable. Findings
30-31; 42 U.S.C. 1320a~7(b) (1)~(14); see 42 C.F.R.
1001.125(b) (1)-(7); 42 C.F.R. 1001.128.
8

ANALYSIS
1. Petitioner was convicted of a criminal offense
elat to the unlawful manu istributi
rescription r_ dis’ si s
within the meaning of 42 U.S.C. 1320a~7(b) (3).

A determinative issue in this case is whether
Petitioner's conviction, for knowingly and intentionally
omitting material information from records required by
law on the dispensing of controlled substances, pursuant
to 21 U.S.C. 843(a) (4) (A), is a conviction of an offense
related to the unlawful manufacture, distribution,
prescription or dispensing of a controlled substance, as
defined by 42 U.S.C. 1320a~7(b) (3).

The I.G. argues that Petitioner's offense is within the
purview of section 7(b) (3). He premises his argument on
two contentions. First, the I.G. asserts that Congress
intended the section to permit exclusions of individuals
or entities convicted of any criminal offense related to
a controlled substance. I.G.'s Trial Memorandum at 4-5.
Second, the I.G. contends that Petitioner was convicted
of criminal record-keeping violations concerning a
“closed distribution system" established by Congress for
controlled substances. Record keeping is an integral
part of this closed system, and thus Petitioner's
conviction is for an offense related to the unlawful
manufacture, distribution, prescription or dispensing of
a controlled substance.

Petitioner asserts that his conviction does not fall
within the ambit of section 7(b)(3). He bases his
argument on the language of the statute. He notes that
the law requires that a conviction must be for an offense
related to the unlawful manufacture, distribution,
prescription or dispensing of a controlled substance. He
asserts that his conviction was for unlawful record
keeping. According to Petitioner, there is nothing in
either the statute pursuant to which he was convicted, or
in the documentation of his conviction which suggests
that his offense related to the unlawful manufacture,
distribution, prescription or dispensing of a controlled
substance. Petitioner's Post-Hearing Memorandum at
11-12.

I conclude that the offense of which Petitioner was
convicted is an offense related to the unlawful
distribution or dispensing of a controlled substance.
Contrary to Petitioner's assertion, the presence of the
word "unlawful" in 42 U.S.C. 1320a-7(b) (3) does not
suggest that a conviction for willful failure to maintain
9

records in connection with the sale of a controlled
substance is beyond the reach of the exclusion law.
Unlawful failure to maintain records in connection with a
sale of a controlled substance is an inseparable element
of an unlawful sale of a controlled substance.

Petitioner was not convicted of a mere record-keeping
violation, but of unlawful transactions in controlled
substances. He is therefore subject to the exclusion
law.

Congress considered maintenance of records of
transactions in controlled substances to be an integral
part of a system designed to assure that such substances
were manufactured, prescribed, and distributed only under
strict controls. Willful failure by a party involved in
sales of controlled substances to comply with this system
is a felony. 21 U.S.C. 843(a) (1)-(5).

The law describes closely related felonies of equal
gravity. These include knowingly and intentionally:

(1) distributing a controlled substance without an order
form as defined by law; (2) using, in the course of the
manufacture or distribution of a controlled substance, a
registration number which is fictitious, revoked,
suspended, or issued to another person; (3) acquiring or
obtaining a controlled substance by misrepresentation,
fraud, forgery, deception or subterfuge; (4) furnishing
false or fraudulent material information in, or omitting
any material information from, any application, report,
record, or other document required to be made, kept or
filed concerning transactions in controlled substances;
or (5) making, distributing, or possessing a device
designed to facilitate the counterfeiting of controlled
substances. 21 U.S.C. 843(a)(1)-(5). The identical
penalty attaches to each of these offenses. 21 U.S.C.
843(c).

It is apparent from this law that Congress did not view
the requirement to maintain records of transactions in
controlled substances as separable from its objective to
strictly regulate transactions in controlled substances.
Sale of a controlled substance without maintenance of
required records can just as easily be characterized as
an unlawful sale under 21 U.S.C. 843(a) (4)(A), as it can
be characterized an unlawful failure to maintain records.
Thus, a conviction under 21 U.S.C. 843(a) (4) (A) may
properly be characterized as a conviction related to
unlawful distribution or dispensing of a controlled
substance pursuant to 42 U.S.C. 1320a-7(b) (3).

Petitioner asserts that it is possible to violate section
843 without actually dispensing controlled substances in
10

an unlawful manner. For example, according to
Petitioner, a person could sell controlled substances in
accordance with statutory requirements, generate records
required by law, and then destroy those records six
months later. P.'s Reply Brief at 4-5. According to
Petitioner, the sale would be lawful but the record-
keeping would be unlawful. He asserts that a conviction
for unlawful record-keeping in that event could not
possibly relate to unlawful distribution or dispensing of
controlled substances.

The facts of Petitioner's hypothetical situation do not
conform to the facts of this case, so strictly speaking,
it is irrelevant.’ Nevertheless, I disagree with
Petitioner's analysis. It is true that in this
hypothetical situation the seller of controlled
substances would not be guilty of violating 21 U.S.C.
843(a)(1) (sale without required forms). But he would
nevertheless be guilty of an unlawful sale of a
controlled substance--whether he failed to generate
required records to begin with, or generated required
records and unlawfully destroyed them at a later date.

The I.G. asserts that legislative history supports the
argument that Congress intended section 7(b) (3) to apply
to individuals or entities convicted of any offense
related to manufacture, distribution, prescription or
dispensing of a controlled substance. It is unnecessary
for me to decide this question, as Petitioner's
conviction was for an offense which related to the
unlawful manufacture, distribution, prescription or
dispensing of a controlled substance.

2. The eight-year exclusions from participation in
Medicare and State health care programs imposed and
directed by the I.G. are reasonable.

The I.G. excluded Petitioner from participating in the
Medicare program, and directed that he be excluded from
participating in State health care programs, for eight
years. Having concluded that the I.G. had discretion to
impose and direct exclusions on Petitioner pursuant to
42 U.S.C. 1320a~-7(b) (3), I must now decide whether the
length of the exclusions imposed and directed by the I.G.
is reasonable.

4 Indeed, in this case Petitioner admitted at the
hearing that he unlawfully distributed controlled
substances without either receiving the required forms or
maintaining required records. Tr. at 111-112.
11

In order to decide whether the I.G.'s exclusion
determination is reasonable in a particular case, I must
measure that determination against both the remedial
purpose of the exclusion statute and the regulations. An
exclusion will be held to be reasonable where it is shown
to fairly comport with legislative intent and the
Secretary's policy as expressed in the regulations. "The
word 'reasonable' conveys the meaning that. . . [the
I.G.] is required at the hearing only to show that the
ef these criteria was not extreme or excessive."
(Emphasis added). 48 Fed. Reg. 3744 (Jan. 27, 1983).

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 statutory purpose and the
Secretary's policies. 42 U.S.C. 405(b). Therefore, ina
hearing on an exclusion, evidence which is relevant to
the reasonableness of the exclusion will be admitted and
considered, even if that evidence was not available to
the I.G at the time the exclusions were imposed and
directed.

The I.G. excluded Petitioner from participating in the
Medicare program and directed that he be excluded from
participating in State health care programs pursuant to a
section of the exclusion law which gives the Secretary
discretion to impose exclusions upon individuals and
entities convicted of offenses related to the unlawful
manufacture, distribution, prescription or dispensing of
a controlled substance. 42 U.S.C. 1320a-7(b)(3). The
law does not specifically prescribe minimum or maximum
exclusions in such circumstances. However, legislative
intent is evident from the language of the statute.

Congress intended the exclusion law to be remedial in
application. By its terms, the law was intended to
protect beneficiaries and program funds by directing or
permitting the Secretary (and his delegate, the I.G.) to
disqualify from participation in Medicare and State
health care programs those individuals and entities who
had demonstrated by their conduct that they could not be
trusted to administer program funds or deal on the
government's behalf with beneficiaries of federally-
funded health care programs. The law was intended to
protect trust funds from the misconduct of larcenous
individuals and entities. It also embodied Congress’
conclusion that the Secretary had a duty to protect
program beneficiaries from individuals or entities whose
conduct demonstrated that they posed a threat to
beneficiaries' well-being.
12

This policy was evident in the original enactment in
1977. Successive revisions of the law have continued to
express this legislative purpose in progressively
stronger language.°

The Secretary has applied this remedial policy in
regulations. Regulations adopted by the Secretary prior
to enactment of the 1987 revisions to the exclusion law,
and applicable to exclusions for program-related
offenses, 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). The regulations are entirely
consistent with Congressional intent to exclude
manifestly untrustworthy parties from participation in
Medicare and State health care programs.

It is true, as Petitioner asserts, that these regulations
were adopted by the Secretary to implement the law as it
existed prior to adoption of the 1987 revisions. The
regulations specifically apply only to exclusions for
"program-related" offenses (convictions for criminal
offenses related to the Medicare and State health care
programs). However, they do express the Secretary's
policy for evaluating cases where discretionary
exclusions may be appropriate. To the extent that these
regulations have not been repealed or modified, they
embody the Secretary's intent that they continue to
apply, at least as broad guidelines, to those cases in
which discretionary exclusions are imposed. Moreover,
Congressional intent has remained consistent with each
revision of the exclusion law--except that Congress has
mandated more stringent exclusions in some cases and has

5 The exclusion law in effect prior to August,
1987, 42 U.S.C. 1320a-7(a), required the Secretary to
suspend from participation in the Medicare and State
health care programs any physician or other individual
who had been convicted of a criminal offense related to
that person's participation in the delivery of medical
care or services under Medicare, Medicaid, or block
grants to states. The law did not specify minimum
exclusion terms. The 1987 amendments extended the reach
of the law to entities, added new categories of mandatory
exclusions, specified a minimum five-year exclusion for
cases in which mandatory exclusions were imposed, and
enumerated circumstances in which the Secretary had
discretion to impose exclusions. 42 U.S.C. 1320a-
7(a)(1)~(2)# (b) (1)-(14)-
13

expanded the Secretary's discretionary authority to
impose exclusions. It is therefore consistent with
legislative purpose to continue to use these regulations
as broad guidelines to determine the length of exclusions
in cases where the Secretary has discretion to exclude
individuals and entities.

I conclude that the I.G. established that the eight-year
exclusions imposed and directed against Petitioner are
reasonable when considered in light of Congressional
intent and the Secretary's policy determinations, and the
evidence of this case. The exclusions were grounded on
evidence establishing that Petitioner committed very
serious crimes involving misconduct which posed a
potential for considerable harm to individuals.
Petitioner demonstrated by his misconduct that he could
not be trusted to deal with program beneficiaries. The
I.G. was justified in concluding that program
beneficiaries needed protection from potentially harmful
conduct by Petitioner for the substantial time period
encompassed by the exclusions.

The record establishes that Petitioner was convicted of
criminal offenses involving a large number of unlawful
transactions of a controlled substance. Findings 12-16,
26; see 42 C.F.R. 1001.125(b) (1). By his own admission,
Petitioner succumbed to personal and psychological
pressures to unlawfully dispense controlled substances.
Finding 28. Petitioner participated in numerous unlawful
transactions in a drug which Congress has determined has
a high potential for abuse. Abuse of this drug may cause
the abuser to experience severe psychological or physical
dependence. Findings 4, 8. It is reasonable to infer
from this that Petitioner's conduct endangered the health
and safety of individuals to whom he unlawfully dispensed
controlled substances. Finding 27; see 42 C.F.R.
1001.125(b) (2). The seriousness of this offense is in
some respect reflected by the fact that Petitioner was
sentenced to incarceration. Finding 16; see 42 C.F.R.
1001.125(b) (5).

Petitioner asserts that the eight-year exclusions imposed
on him are unreasonable in that they fail to take into
account circumstances which he alleges to be mitigating.
See 42 C.F.R. 1001.125(b)(4). According to Petitioner,
these mitigating circumstances include: (1) the fact
that Petitioner had no criminal record prior to the
convictions at issue in this case; (2) that Petitioner's
sentence was reduced from incarceration in prison to
commitment to a work release program; (3) Petitioner's
age; (4) Petitioner's service to his community; (5) that
Petitioner was under stress when he committed the
14

offenses for which he was convicted; and (6) Petitioner's
willingness to cooperate with prosecuting authorities.
P.'s Post-Hearing Memorandum at 17-18.

Regulations do not define what circumstances may be
considered as mitigating. See 42 C.F.R. 1001.125(b) (4).
However, given Congressional intent to exclude
untrustworthy individuals from participation in Medicare
and State health care programs, it is reasonable to
conclude that mitigating circumstances should constitute
those circumstances which demonstrate an individual or
entity to be trustworthy.

None of the circumstances asserted to be mitigating by
Petitioner derogate from the conclusion that in light of
the offenses he committed, he is an individual who should
not be trusted to administer Medicare or State health
care funds. The circumstances cited by Petitioner
essentially address elements of his case which show that
he is a relatively sympathetic individual. While these
factors certainly should have some bearing on the extent
to which Petitioner is punished for his crimes, they have
little to do with the question of whether Petitioner can
now or in the near future be trusted to dispense
controlled substances to program beneficiaries.

The fact that Petitioner did not have a prior criminal
record is essentially neutral, neither adding to nor
detracting from the seriousness of his unlawful
transactions in controlled substances. The reduction of
his sentence of incarceration is not explained in the
record. However, it is reasonable to infer that this
action was based on Petitioner's personal circumstances,
and not on a determination that he had proven himself to
be a trustworthy individual. Similarly, Petitioner's age
has nothing to do with the question of whether he can be
trusted to deal with beneficiaries. The fact that he
succumbed to stress and unlawfully sold controlled
substances is an aggravating, and not a mitigating
factor. Petitioner's service to his community merely
demonstrates that he manifests personal virtues other
than trustworthiness. Finally, his offer to cooperate
with prosecuting authorities, while laudable, says
nothing about the extent to which he should be trusted in
the future to dispense controlled substances to
beneficiaries.

Petitioner also goes to considerable lengths to attack
the thought processes by which the I.G.'s agents
determined that eight-year exclusions were appropriate in
this case. See P.'s Post-Hearing Memorandum at 15-17.
However, the thought processes of the I.G.'s agents are
15

not really at issue in this case. The question before me
is whether the determination arrived at by the I.G. is
reasonable in light of the evidence and applicable law.

CONCLUSION

Based on the evidence in this case and the law, I
conclude that the I.G.'s determination to exclude
Petitioner from participation in the Medicare program,
and to direct that Petitioner be excluded from
participation in State health care programs, for eight
years, is reasonable. Therefore, I am entering a
decision in favor of the I.G. in this case.

/s/

Steven T. Kessel
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

JULL 18, 1989

Napoleon S. Maminta, M.D., DATE:

Petitioner,
-~ Vee Docket No. C-81

The Inspector General. DECISION CR 33

ORDER ENTERING SUMMARY DECISION
IN_FAVOR OF INSPECTOR GENERAL AND DISMISSING

PET: ONER'S S: ie) iG AS TO ISSUE OF
REASONABLENESS OF LENGTH OF EXCLUSION

On October 26, 1988, the Inspector General (the I.G.)
notified Petitioner that he was being excluded from
participation in Medicare and State health care programs
for ten years.' The I.G. told Petitioner that the
exclusions were mandated by section 1128(a)(1) of the
Social Security Act, 42 U.S.C. 1320a-7(a) (1), and
resulted from Petitioner's conviction in federal court of
a criminal offense related to the delivery of an item or
service under the Medicare program. The I.G. stated that
the law required exclusions of at least five years for
those parties excluded pursuant to 42 U.S.C. 1320a-7(a).
The I.G. advised Petitioner that, in light of
circumstances enumerated in the notice, he was being
excluded for ten years.

Petitioner timely requested a hearing. His request
contested the I.G.'s determination that Petitioner's
conviction was related to the delivery of an item or

' “state health care program" is defined by
section 1128(h) of the Social Security Act, 42 U.S.C.
1320a-7(h), to include any State Plan approved under
Title XIX of the Act (such as Medicaid).
service under the Medicare program. Petitioner also
contested the length of the exclusions imposed on him.

The I.G. filed a motion, which among other things,
requested that I rule in the I.G.'s favor on the issue of
whether Petitioner was convicted of an offense related to
the delivery of an item or service under the Medicare
program, within the meaning of 42 U.S.C. 1320a-7(a) (1).
This motion was opposed by Petitioner. On May 5, 1989, I
issued a Ruling in this case which decided one of the
issues in this case in favor of the I.G.° I ruled that,
inasmuch as Petitioner had been convicted of an offense
related to the delivery of an item or service under the
Medicare program, the law mandated his exclusion from
Medicare and State health care programs for a minimum of
five years. I also ruled that, although the law required
that Petitioner be excluded for a minimum of five years,
Petitioner was entitled to a hearing on the issue of
whether the ten-year exclusions imposed and directed
against him by the I.G. are reasonable.

Shortly after issuing my Ruling, I conducted a prehearing
conference to establish a schedule for holding a hearing
on the issue of the reasonableness of the ten year
exclusions imposed and directed by the I.G. Petitioner
advised me at this conference that he might request a
dismissal as to the issue of the reasonableness of the
length of the exclusions imposed on him so that he could
appeal as a final decision that portion of my May 5,
1989, Ruling which held that Petitioner had been
convicted of an offense related to the delivery of an
item or service under the Medicare program.

On June 2, 1989, I issued a Prehearing Order which
provided that if Petitioner requested a dismissal as to
the issue of the reasonableness of the length of the
exclusion, and I accepted that request, I would issue a
final decision: making appropriate findings of fact and
conclusions of law; incorporating my May 5 Ruling into

2 fhe Ruling is attached to this Order.

3 r made it clear to Petitioner at this conference
my view that if he dismissed his hearing request as to
the reasonableness of the ten-year exclusions imposed on
him, and I entered a decision in favor of the I.G. on the
issue of whether Petitioner had been properly excluded
pursuant to the mandatory exclusion provisions of 42
U.S.C. 1320a-7(a) (1), the only appealable issue would be
the issue addressed in my decision.
the final decision; and entering an order summarily
disposing of the issue of the reasonableness of the
length of the exclusion on the basis that the Petitioner
was no longer requesting a hearing on that issue.

On June 27, 1989, Petitioner filed a request that I issue
an Order dismissing his request for hearing with regard
to the issue of the reasonableness of the length of his
Medicare exclusion. His attorney later clarified the
request to apply to both exclusions. The I.G. has not
opposed Petitioner's request.

In light of the foregoing, I enter the following Decision
and Order:

A. I enter summary decision in favor of the I.G. on the
issue of whether Petitioner was convicted of an offense
related to the delivery of an item or service under the
Medicare program. I conclude that 42 U.S.C. 1320a-7a(1)
requires the I.G. to exclude Petitioner from
participation in the Medicare program and direct that he
be excluded from participation in State health care
programs, for at least five years. In connection with
this decision, I make the following Findings of Fact and
Conclusions of Law:

1. Petitioner is a doctor of medicine. P.'s
Memorandum at 7.

2. Petitioner received an envelope in February,
1987, addressed to a laboratory he operated and sent by a
Medicare carrier, which contained documents, including a
Medicare reimbursement check. P. Ex. 1; I.G. Ex. 6; P.'s
Memorandum at 7.

‘ the parties' exhibits and memoranda submitted in

connection with the I.G.'s motion for partial summary
disposition will be cited as follows:

Petitioner's Exhibits P. Ex. (number)

Inspector General's Exhibits I.G. Ex. (number)

Inspector General's Memorandum I.G.'s Memorandum at
(page)

Petitioner's Memorandum P.'s Memorandum at
(page)

Inspector General's Response 1.G.'s Response at
(page)

Petitioner's Rebuttal P.'s Rebuttal at

(page)
3. The reimbursement check, in the amount of
$8,495.92, was payable to a party other than Petitioner
or an entity he operated, and was sent to him by mistake.
I.G. Ex. 6; P.'s Memorandum at 7.

4. Petitioner endorsed the check with the name of
the payee and his own name, and deposited the proceeds in
his own bank account. I.G. Ex. 6; P.'s Memorandum at 7.

5. On May 20, 1988 Petitioner pleaded guilty to a
charge of taking a check from an authorized depository
for mail before it had been delivered to the addressee,
in violation of 18 U.S.C. 1702.” I.G. Ex. 4; P.'s
Memorandum at 7. His sentence included three years'
probation. I.G. Ex. 4.

6. The offense to which Petitioner pleaded guilty
is a criminal offense related to the delivery of an item
or service under the Medicare program. 42 U.S.C. 1320a-
7(a) (1).

7. Petitioner's guilty plea is a conviction as
defined by 42 U.S.C. 1320a-7(i).

8. The minimum mandatory exclusion period is five
years for an individual who has been excluded based on
conviction of a criminal offense related to the delivery
of an item or service under Medicare. 42 U.S.C. 1320a-
7(c) (3) (B).

9. The Secretary delegated to the I.G. the duty to
exclude from participation in Medicare, and to direct the
exclusion from participation in State health care
programs, persons whose exclusion is required or
permitted under 42 U.S.C. 1320a-7. 48 Fed. Reg. 21662
(May 13, 1983).

10. The I.G. excluded Petitioner from participation
in the Medicare program, and directed that Petitioner be
excluded from participation in State health care
programs, for ten years.

5 he indictment charged Petitioner with

additional offenses, and Petitioner's plea included a
guilty plea to another count of the indictment. I.G. Ex.
4, 5. Neither party contends that this additional
conviction is relevant to the issues addressed by the
I.G.'s motion.
11. The law requires that Petitioner be excluded
from participation in Medicare and State health care
programs for at least five years. 42 U.S.C. 1320a-7a(1);
(c) (3) (B).

I adopt as my rationale for this decision that part of my
May 5, 1989 Ruling which addresses the merits of the
I.G.'s motion for partial summary disposition (at pages
2-6).

B. I Order that Petitioner's request for hearing on the
issue of the reasonableness of the ten-year exclusions
from participation in Medicare and State health care
programs imposed and directed against him be dismissed.
The ten-year exclusions remain in effect.

/s/

Steven T. Kessel
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

Lectoy T. Johnson, M.D., JUL 3, 1989

DATE:
Petitioner,

Docket No. C-69
DECISIOM CR 32

-v-

The Inspector General.

DECISION AND ORDER

The Petitioner requested a hearing to contest the
Inspector General's (I.G.'s) determination to exclude him
from participation in the Medicare and Medicaid programs
for a period of five years.’ This Decision and Order
resolves this case on the basis of written briefs and a
stipulated record. I hereby deny the Petitioner's motion
for summary disposition and I conclude that the I.cG. was
required under federal law to exclude the Petitioner for
five years from Medicare and Medicaid.

APPLICABLE STATUTES AND REGULATIONS

I. The Federal Statute.

This case is governed by section 1128 of the Social
Security Act (Act), codified at 42 U.S.C. 1320a-7 (West
U.S.C.A. Supp., 1988). Section 1128(a) of the Act,
headed " Mandatory exclusion," provides in subsection (1)
for the exclusion from Medicare, and a directive to the
State to exclude from State health care programs, any
individual who is "convicted of a criminal offense
related to the delivery of an item or service" under the

1 section 1128 of the Act provides for an exclusion
from the Medicare program and “any State health care
program" as defined in section 1128(h). The Medicaid
program is only 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.
2

Medicare or Medicaid programs. Section 1128 (c) (3) (B)
provides that the period of exclusion from Medicare and
Medicaid, for a person convicted of a criminal offense
related to the delivery of an item or service, shall be
for a minimum period of five years.

The term "convicted" is defined in section 1128(i) to
include when a plea of guilty or nolo contendere has been
"accepted by a Federal, State, or local court"
(subsection (i)(3)) and when under a "first offender or
other program" a "judgment of conviction has been
withheld" (subsection (i) (4)).

II. The Federal Regulations.

The governing federal regulations (Regulations) are found
in 42 C.F.R. Parts 498, 1001, and 1002 (1987). Part 498

governs the procedural aspects of this exclusion case and
Parts 1001 and 1002 govern the substantive aspects.

In accordance with section 498.5(i), a practitioner,
provider, or supplier who has been excluded from program
coverage is "entitled to a hearing before an ALJ
(Administrative Law Judge)." Pursuant to section
1001.128, an individual who has been excluded from
participation has a right to request a hearing before an
ALJ on the issues of whether: (1) he or she was, in
fact, convicted; (2) the conviction was related to the
delivery of an item or service under Medicare or
Medicaid; and (3) the length of the exclusion is
reasonable.

Section 1001.123(a) requires the I.G. to send written
notice of his determination to exclude an individual or
entity from participation in Medicare and Medicaid when
he has "conclusive information" that the individual or
entity has been convicted of a crime related to the
delivery gf an item or service under Medicare or
Medicaid.

2 Before August 1987, the Act did not prescribe a
minimum period of exclusion.

3 Section 1001.123 provides that the period of
exclusion is to begin 15 days from the date on the
notice; however, the I.G. allowed five days for mailing.
42 C.F.R. 1001.123.
3

III. Texas Code Of Criminal Procedure.

The Texas Code of Criminal Procedure states that the
trial court, after (1) receiving a plea of guilty ora
plea of nolo contendere, (2) hearing the evidence, and
(3) finding that the evidence substantiates a defendant's
guilt, may defer further proceedings without entering an
adjudication of guilt, and place the defendant on
probation. Article 42.12, Section 3d. Upon expiration
of the defendant's term of probation, if the court has
not proceeded to adjudication of guilt, it “shall dismiss
the proceedings against the defendant and discharge him."
Id. at 3d.(c). Cf., Article 42. 12, Section 7. Section
3da.(c) also states:

A dismissal and discharge under this section may
not be deemed a conviction for the purposes of
disqualifications or disabilities imposed by law
for conviction of an offense, except that upon
conviction of a subsequent offense, the fact that
the defendant had previously received probation
shall be admissible before the court or jury to be
considered on the issue of penalty.

BACKGROUND

By letter dated October 14, 1988 (Notice), the I.G.
notified the Petitioner that, as a result of his
conviction of a criminal offense related to the delivery
of an item or service under Medicaid, he would be
excluded from participation in Medicare and Medicaid for
a mandatory five year period, commencing 20 days from the
date of the Notice. The I.G.'s stated basis for the
exclusion was the Petitioner's conviction in the State
Court in Harris County, Texas, of a criminal offense
related to the delivery of an item or service under
Medicaid.

By letter received in the Dallas, Texas Regional Office
of the Department of Health and Human Services (DHHS) on
November 18, 1988, the Petitioner requested a hearing on
the I.G.'s determination. (The Petitioner's letter was
dated August 28, 1988 and the I.G. deemed it to be a
timely request for a hearing. See December 9, 1988
letter from James F. Patton to the Petitioner.) This
case was received in the Civil Remedies Division on
December 12, 1988 and I held a prehearing telephone
conference call on January 17, 1989, at which time I
determined that the issues raised by the Petitioner's
hearing request were legal issues, which could be further
developed by the parties in written briefing and that
there was no dispute as to any material fact. As
reflected in the January 23, 1989 Prehearing Order and
Schedule for Filing Motions for Summary Disposition, I
scheduled a subsequent conference call for April 5, 1989
(after the conclusion of the briefing process). The
purpose of the subsequent call was to determine whether
to schedule oral argument, an evidentiary hearing, or to
proceed to decision based on the written record. During
the April 5, 1989 call, I asked the Petitioner to file a
short reply brief addressing why the decision in the case
Carlos Z. Zamor: M.D., v. The Inspector Genera
Civil Remedies Docket No. C-74, decided March 30, 1989
(pending on appeal under Docket No. 89-100), should not
control this case. I also gave either party until May
10, 1989 to request oral argument. Neither party
requested oral argument.

EVIDENCE

The material facts in this case are stipulated to and
evidenced by exhibits concerning the Petitioner's plea of
nolo contendere, such as the probation order and
deferment of adjudication of guilt (I.G. Ex 1). See
also Tape (containing the stipulation by the parties as

* The citations to the record in this Decision and

Order are noted as follows:

February 15,1989 Stipulation 2/15 Stip (number)

March 17, 1989 Stipulation 3/17 Stip (number)
Tape of April 5, 1989 Tape

telephone conference
Petitioner's Brief P Br (page)
Petitioner's Reply Brief P Rep Br (page)
Petitioner's Additional Brief P Add Br (page)
Petitioner's Exhibit P Ex (number) / (page)
I.G. Brief I.G. Br (page)
I.G. Reply Brief I.G. Rep Br (page)
I.G's Exhibit I.G. Ex (number) /

(page)

By letter dated February 15, 1989, the I.G. filed his
proposed stipulations of material facts in this matter.
By letter dated March 17, 1989, the Petitioner filed his
proposed stipulations of material facts. During the
April 5, 1989 telephone conference call, the parties each
agreed to the factual stipulations made by the other.
(Neither party agreed to any conclusions of law stated by
the other in the stipulations.) References to the
stipulations are by the dates the stipulations were
proposed.
5

to the authenticity of all exhibits) .° The Petitioner
acknowledges that he pleaded nolo contendere in State
court to nine counts of securing execution of a document
by deception, specifically submitting a false Medicaid
claim to obtain a payment in the form of a check.

ISSUE

The sole issue presented in this case is whether the
Petitioner was "convicted" of a criminal offense within
the meaning of sections 1128(a)(1) and (i) of the Act.

FINDINGS OF FACT AND CONC OF é

Having considered the entire record, the arguments, and
the submissions of the parties, and being fully advised
herein, I make the following Findings of Fact and
Conclusions of Law:

1. The Petitioner is an anesthesiologist and has been
enrolled as a physician participating in the Medicaid
program since August 15, 1985. 2/15 Stip 1,2; 3/17 Stip
1,2.

2. On August 20, 1987, the Petitioner was indicted in
the 174th District Court of Harris County, Texas of nine
counts of securing execution of a document by deception,
TEXAS PENAL CODE ANN. Section 32.46; specifically,
submitting a false Medicaid claim to obtain payment in
the form of a check. 2/15 Stip 3; 3/17 Stip 3.

3. On March 28, 1988, the Petitioner pleaded no contest
(I.G. Ex 1) or nolo contendere to the above criminal
offense and the court deferred adjudication of his guilt
and placed him on probation for one year. 2/15 Stip 4;
3/17 Stip 4.

4. The conditions of the Petitioner's probation were
controlled by the Texas Code of Criminal Procedure,
Article 42.12, Section 3d. Tape; I.G. Ex 1. See also,
Texas Code Crim. Pro., Art. 42.12, Section 7.

5 During the April 5 call, the Petitioner also
stipulated that the Exhibits attached to the I.G.'s
February 15 submission were authentic.

6 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.
6

5. The Petitioner was "convicted" of a criminal offense
“related to the delivery of an item or service" under
Medicaid, within the meaning of sections 1128(a)(1) and
1128(i)(3) and (i) (4) of the Act, notwithstanding the
provisions of Art. 42.12 of the Texas Code of Criminal
Procedure, or the terms of any Orders which may be, or
may have been, entered in Texas State courts pursuant to
that State law provision.

6. In accordance with section 1128 of the Act, the
Petitioner was properly excluded from participation in
Medicare and Medicaid for a period of five years.

7. The material and relevant facts in this case are not
contested.

8. There is no need for an evidentiary hearing in this
case.

9. The I.G. is entitled to summary disposition in this
proceeding.

SSIO)

I. fhe Petitioner Was "Convicted" Of A Criminal Offense
As A Matter Of Federal Law.

The Petitioner argued that he received deferred
adjudication treatment before deferred adjudication was
considered to be within the definition of "convicted"
under applicable federal law. The Petitioner argued that
the definition of "convicted" at the time of his
indictment on August 20, 1987 and his deferred
adjudication on March 28, 1988 was as follows:

(i) Convicted defined
For purposes of subsections (a) and (b) of this
section, a physician or other individual is
considered to have been "convicted" of a criminal
offense-~-

(1) when a judgment of conviction has been entered
against the physician or individual by a Federal,
State, or local court, regardless of 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
the physician or individual by a Federal, State, or
local court;
7

(3) when a plea of guilty or nolo contendere by the
physician or individual has been accepted by a
Federal, State, or local court; or;

(4) when the physician or individual has entered

into participation in a first offender or other
ram where jud

withheld. TEmphasis Added. ]

See P Br 3.

The Petitioner argued that the definition of "convicted"
in section 1128 (i)(4) of the Act as underlined above did
not include deferred adjudication and was not amended to
include deferred adjudication until the July 1988
amendment, some three months after the Petitioner was
sentenced. P Br 3, 4. See Pub. L. 100-360, Section 411,
July 1, 1988. The Petitioner argued further that
deferred adjudication was not contemplated by Congress in
defining "convicted" prior to that time, and that the
July amendment cannot be applied retroactively.

P Br 4, 5.

The I.G. argued that he was not applying the July 1988
amendment retroactively, because deferred adjudication
was contemplated under the definition effective at the
time of the Petitioner's plea. 1.G. Rep Br 1, 2. The
I.G. argued that the addition of the term "deferred
adjudication" to section (i) (4) was merely a "technical
amendment." I.G. Rep Br 2, 3. Neither party directly or
fully addressed the applicability of section 1128(i) (3)
of the Act to the facts here.

I find and conclude that the Petitioner was "convicted"
within the meaning of sections 1128(a)(1) and (i)(3) of
the Act because he pleaded nolo contendere to the charges
against him and the State Criminal Court "accepted" his
plea. Section 1128(i)(3) provides that "convicted"
includes a plea of nolo contendere "accepted by a

Federal, State, or local court." See Arthur B. Stone,
-P.M. , Civil Remedies Docket

No. C-52, decided May 5, 1989.

As I said in Stone, the term "accepted" in section
1128(i) (3) is defined by Webster's Third New
International Dictionary, 1976 Unabridged Edition, as the
past tense of "to receive with consent," and is the
opposite of the term rejected. The State Criminal Court
did not reject the Petitioner's plea. Quite the
contrary, the State Criminal Court "accepted" the
Petitioner's plea within the meaning of section
1128(i)(3). Once that happened, the provisions of
8

section 1128(i)(3) were triggered, and what happened
after that is of no consequence to the determination that
the Petitioner was "convicted," as a matter of federal
law.

The circumstances of the Petitioner's case fall not only
within the plain meaning of subsection (i) (3), but within
the plain meaning of subsection (i)(4), as well. As of
the date the Petitioner entered his plea, the latter
subsection included within the definition of "convicted"
the situation in which "the physician or individual has
entered into participation in a first offender or other
program where judgment of conviction has been withheld."
The Order memorializing the Petitioner's plea is
captioned "Deferment of Adjudication." I.G. Ex 1.
Pursuant to Texas law, the Petitioner could have the
proceedings dismissed and be discharged based on
satisfactory completion of his probation. On its face,
the treatment of the Petitioner's case by the Texas Court
falls within the term "other program where judgment of
conviction has been withheld." See Carlos 2.

Zamora,M.D. NV. ns) te} .

The Zamora case involved essentially the same law and
facts as this case. Dr. Zamora pleaded nolo contendere
in a Texas State court to a criminal offense related to
the delivery of an item or service under Medicaid. He
was placed on probation under the Texas Code of Criminal
Procedure, Article 42.12, Section 7, a later section of
the same Article involved in this case (i.e., 3d.) and
having essentially the same effect as 3d for purposes
relevant here. Dr. Zamora successfully completed his
probation and his prosecution was subsequently dismissed
in accordance with the terms of section 7. Zamora
Decision, pp. 5,6.

Dr. Zamora made essentially the same arguments presented
by the Petitioner in this case. Dr. Zamora's case was
somewhat stronger than the Petitioner's here. Dr. Zamora
had his record "expunged" upon satisfactory completion of
his probation, whereas the Petitioner here did not argue
that he had completed probation or that his nolo
contendere plea had been withdrawn.

The question before the court in Zamora was whether,
under the same version of section 1128(i) of the Act as
was in effect at the time of the nolo contendere plea in
9

this case Dr. Zamora was "convicted."” The ALJ hearing
that case determined that he was, both under sections
i(3) and i(4). See Zamora Decision, pp. 7, 8.

During the April 5, 1989 telephone conference call,
mentioned above, I informed the Petitioner that the
Zamora decision appeared to control this case, and I gave
the Petitioner the opportunity to address its
applicability.

The Petitioner did not distinguish this case factually
from Zamora, nor did he contend that there were any
substantive differences between sections 7 and 3d. of the
Texas Code of Criminal Procedure. Instead, the
Petitioner made several broad challenges to the Zamora
decision itself.

First, the Petitioner argued that the holding in Zamora
violated the Tenth Amendment proscription that powers not
delegated to the United States by the Constitution are
reserved to the States. Specifically, the Petitioner
contended that to conclude that the Petitioner is
"convicted" under federal law when he is not considered
to be under state law conflicts with the Tenth Amendment.
The Petitioner argued that the Zamora holding also
conflicted with the judicial doctrine of "comity"
(courtesy between courts dealing with the same matter).
Under this doctrine, he asserted, the federal government
should “honor, respect, or accommodate" the previous no
conviction disposition of the state court. P Add Br 2,
3.

I am not persuaded by these arguments. My conclusion
that the Petitioner was "convicted," as defined by
section 1128(i)(3) and (i) (4), is based on the principle
that the interpretation of a federal statute or
regulation is a question of federal, not state, law.
Thus, to the extent that the definition of "convicted"
in a federal statute is different from state law, the
federal law definition controls. United States v.
Allegheny Co., 322 U.S. 174, 183 (1944); i

Anderson Co., Tenn., 705 F.2d 184, 187 (6th Cir., 1983),
cert. denied, 464 U.S. 1017 (1984). The doctrine of

7 Even though I find that the Petitioner was

"convicted," as the term was defined in section
1128(i)(4) prior to July 1, 1988, I find and conclude
that the July 1988 addition of the term "deferred
adjudication" to section 1128(i)(4) was merely a
technical amendment and that the I.G. did not apply the
July 1988 amendment retroactively.
10

comity does not override the principle of the supremacy
of federal law.

Finally, the Petitioner argued that application of the
holding in Zamora conflicted with the double jeopardy and
due process clauses of the Fifth Amendment.

Specifically, the Petitioner argued: (1) that the charges
against Dr. Zamora were resolved without a conviction
under State law and then, for the same actions, treated
under federal law as if he had been "convicted,"
violating the prohibition against double jeopardy; and
(2) that the "perfunctory" action of declaring that Dr.
Zamora had been "convicted" of a violation under state
law, when no actual state conviction had occurred,
violated the right to due process. P Add Br 2, 3.

I am not persuaded by these arguments, and I conclude
that the Section 3d. of Texas deferred adjudication
statute and the federal exclusion law do not conflict.
In Zamora, addressing a similarly worded Section 7, the
ALJ stated:

It is evident from the face of the federal statute,
as well as the legislative history cited above,
that Congress' intent in enacting the exclusion
legislation was remedial and not punitive. A
principal objective of the law was to protect the
financial integrity of federally funded health care
programs from those who have proven themselves to
be untrustworthy. That excluded individuals might
find themselves to be financially disadvantaged by
their exclusions is an incidental effect. Because
the intent of Congress was not to "punish," the
exclusion remedy cannot be viewed as constituting
an additional punishment beyond that contemplated
by Texas law.

Zamora, supra, p. 9.

The Petitioner's double jeopardy/due process arguments
are necessarily premised on the assertion that the
exclusion is an additional punishment. An exclusion is
not a punishment, but a consequence of certain court
actions defined by the federal statute as "convicted."
The Petitioner has not been subjected to double jeopardy,
nor has he been denied due process, by application of the
federal definition of "convicted."
11

Il. 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 direct their exclusion from the Medicaid
program, for a minimum period of five years, when such
individuals and 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., Ist Sess. 2, reprinted in
1987 U.S. Code Cong. and Ad. News 682, 686.

Since the Petitioner was "convicted" of a criminal
offense, and it was "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 the Petitioner for a minimum of five
years.

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

IT IS SO ORDERED.

/s/

Charles E. Stratton
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

DATE: Jul 3 1989

Shelia Mauney,
Petitioner,

Docket No. C-79
DECISION CR 31

-v. =

The Inspector General.

YECISION OF ADMINISTRATIVE LAW JUDGE
ON MOTION FOR SUMMARY DISPOSITION

The Inspector General (the I.G.) notified Petitioner on September
30, 1988, that she was being excluded from participation in
Medicare and any State health care programs for a period of five
years.! The I.G. told Petitioner that her exclusions were due to
her conviction of a criminal offense related to the delivery of
an item or service under the Medicare program. Petitioner was
advised that the law required five year minimum exclusions from
participation in Medicare and State health care programs for
individuals convicted of program-related offenses. The I.G. told
Petitioner that, because of the circumstances of her case, she
was being excluded for the minimum period required by law.

Petitioner timely requested a hearing, and the case was assigned
to me for a hearing and decision. I conducted a prehearing
conference on March 11, 1989, at which the I.G. stated that he
intended to move for summary disposition. I issued a prehearing
Order on April 19, 1989, which established a schedule for filing
the motion and responding to it, and which also provided for oral
argument on the motion. The I.G. timely filed a motion for
summary disposition. By letter dated May 30, 1989, Petitioner's
counsel advised me that Petitioner made no response to the
motion.

1 "state health care program" is defined by section 1128(h)
of the Social Security Act, 42 U.S.C. 1320a-7(h), to include any
State Plan approved under Title XIX of the Act (Medicaid).
I have considered the arguments contained in the I.G.'s motion
for summary disposition, the undisputed material facts, and
applicable law and regulations. I conclude that the exclusions
imposed and directed by the I.G. are mandatory. Therefore, I am
deciding this case in favor of the I.G.

ISSUES

The issue in this case is whether Petitioner was convicted of a
criminal offense related to the delivery of an item or service
under the Medicare program, so as to require mandatory exclusions
from participation in the Medicare and State health care programs
under section 1128(a)(1) of the Social Security Act.

APPLICABLE LAWS AND REGULATIONS

1. Section 1128 of the Social Security Act: Section
1128(a)(1) of the Social Security Act, 42 U.S.C. 1320a-7(a) (1),
requires the Secretary to exclude from participation in the
Medicare program, and to direct the exclusion from participation
in any State health care programs, of any individual or entity
"convicted of a criminal offense related to the delivery of an
item or service" under Medicare or any State health care progran.
"Conviction" is defined at 42 U.S.C. 1320a-7(i) to include those
circumstances when a party pleads guilty to a criminal charge.
The law provides at 42 U.S.C. 1320a-7(c) (3) (B), that for those
excluded under section 1320a-7(a), the minimum exclusion period
shall be at least five years.

2. Regulations Governing Suspension, Exclusion, or
Termination of Practitioners, Providers, Suppliers of Services
and Other Individuals: 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. Regulations governing suspension and exclusion of
individuals pursuant to section 1128 and this delegation are
contained in 42 C.F.R. Part 1001. Section 1001.123(a) provides
that when the I.G. has conclusive information that an individual
has been convicted of a program-related crime, he shall give that
individual written notice that he is being suspended (excluded)
from participation. Section 1001.125(b) establishes criteria for
the I.G. to use in determining the appropriate length of
exclusions in those cases where the I.G. may exercise discretion.

Section 1001.128 provides that an individual excluded based on
conviction of a program-related offense may request a hearing
before an administrative law judge on the issues of whether: (1)
he or she was in fact, convicted; (2) the conviction was related
to his or her participation in the Medicare, Medicaid, or social
services program; and (3) whether the length of the exclusion is
reasonable.

FINDIN OF cT D_ CONCLUSIONS 0.
1. Petitioner is a respiratory therapist. I.G. Ex. 2/18 .7

2. On May 25, 1988, Petitioner was convicted under 18
U.S.C. 1001 of the criminal offense of filing false statements.
I.G. Ex. 1.

3. At the hearing in which Petitioner entered her guilty
plea, Petitioner admitted making a false representation
concerning an arterial blood gas study. I.G. Ex. 2/19.

4. The purpose of the false representation was to convince
the Health Care Financing Administration to make reimbursements
under the Medicare program. I.G. Ex. 2/20.

5. There are no disputed issues of material fact in this
case; therefore, summary disposition is appropriate. See F.R.C.P
56.

6. The offense which Petitioner pleaded guilty to is a
criminal offense related to the delivery of an item or service
under the Medicare program. 42 U.S.C. 1320a-7(a) (1).

7. Petitioner's guilty plea is a conviction as defined by
42 U.S.C, 1320a-7(i).

8. The minimum mandatory exclusion period is five years for
a person who has been excluded based on conviction of a criminal
offense related to the delivery of an item or service under
Medicare.

9. The I.G. excluded Petitioner from participation in the
Medicare program, and directed that Petitioner be excluded from
participation in State health care programs, for five years,
based on Petitioner's conviction of a criminal offense related to
the delivery of an item or service under the Medicare progran.
The exclusions are mandatory and for the minimum period of time

2 The I.G.'s exhibits will be cited as follows:

I.G.'s Exhibit I.G. Ex. (number) / (page)
required by law. 42 U.S.C. 1320a-7(a)(1) and (c) (3) (B).

ANALYSIS

The I.G. bases his motion for summary disposition on Petitioner's
conviction of a federal criminal offense of making false
statements, and the provisions of 42 U.S.C. 1320a-7(a) (1), which
mandate five year exclusions from participation in the Medicare
and State health care programs for persons convicted of criminal
offenses related to the delivery of an item or service under the
Medicare or Medicaid programs. The I.G. asserts that Petitioner
was convicted of an offense "related to" the delivery of an item
or service under the Medicare program; therefore, Petitioner's
exclusions were mandatory. Petitioner does not challenge the
I.G.'s representation of the facts.

Summary disposition is appropriate in an exclusion case where
there are no disputed issues of material fact and where the
undisputed facts demonstrate that one party is entitled to
judgment as a matter of law. Howard B. if D.P.M. v. Th
Inspector General, Docket No. C-64, decided April 28, 1989;
Michael I. Sabbagh, M.D. v. The Inspector General, Docket No. C-
59, decided February 22, 1989; Jack W. Greene v. The Inspector
General, Docket No. C-56, decided January 31, 1989; See F.R.C.P.
56.

The issue which I must resolve in deciding the I.G.'s motion for
summary disposition is whether Petitioner was convicted of an
offense which falls within the ambit of 42 U.S.C. 1320a~-7(a) (1).
I must make certain factual conclusions in order to decide this
issue. First, I must decide whether Petitioner was "convicted"
of an offense within the meaning of 42 U.S.C. 1320a-7(i).
Petitioner does not dispute her guilty plea is a "conviction"
within the meaning of the law. Second, I must decide the nature
of the offense to which Petitioner pleaded guilty. Again, there
is no dispute as to this issue. The I.G. has offered as an
exhibit the record of Petitioner's conviction, and Petitioner has
not challenged the authenticity or truthfulness of the document.

Therefore, the only question remaining for me to decide is the
legal question of how to characterize Petitioner's conviction
under the exclusion law. As there are no disputed issues of
material fact, summary disposition is appropriate in this case.

In the hearing conducted on Petitioner's plea to the criminal
charge against her, Petitioner admitted that she falsified the
result of an arterial blood gas study. The purpose of this
falsehood was to unlawfully obtain Medicare reimbursement. I
conclude from this that Petitioner's offense was related to the
delivery of an item or service under the Medicare program. But
for Petitioner's falsification, it would have been impossible to
claim or to obtain Medicare reimbursement for a purported
service.

My conclusion does not depend on determining whether the
falsification was an element of a successful attempt to obtain
Medicare reimbursement. The exclusion law does not distinguish
between convictions related to attempted unlawful reimbursement
claims and convictions related to successful unlawful
reimbusement claims. The phrase “related to the delivery of an
item or service," contained in 42 U.S.C. 1320a-7(a) (1), pertains
to any offense related to the physical delivery of services or to
the process by which payment is made for such services.

I therefore conclude that this case involves a conviction of a
criminal offense related to the delivery of an item or service
under the Medicare program and is governed by the mandatory
exclusion provisions of 42 U.S.C. 1320a-7(a) (1).

CONCLUSION

Based on the undisputed material facts, the law, and regulations,
I conclude that the I.G.'s determination to exclude Petitioner
from participation in the Medicare program, and to direct that
Petitioner be excluded from participation in State health care
programs, for five years, was mandated by law. Therefore, I am
entering a decision in favor of the I.G. in this case.

/s/

Steven T. Kessel
Administrative Law Judge