Court Opinion

ID: 3043097
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:10:41.363503+00
Date Added: 2024-06-11T11:49:02.658758
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
      ___________

      No. 06-2115
      ___________

Thomas M. Horras,                     *
                                      *
            Petitioner,               *
                                      *
      v.                              *
                                      *
Michael O. Leavitt, Secretary,        *
United States Department of Health    *
and Human Services,                   *
                                      *
            Respondent.               *

      ___________                         Appeals from United States
                                          Department of Health and Human
      No. 06-2124                         Services Departmental Appeals
      ___________                         Board.

Christine Richards,                   *
                                      *
            Petitioner,               *
                                      *
      v.                              *
                                      *
United States Department of Health    *
and Human Services,                   *
                                      *
            Respondent.               *
                                 ___________

                           Submitted: June 14, 2007
                              Filed: August 7, 2007
                               ___________
Before BYE, RILEY, and BENTON, Circuit Judges.
                            ___________

BENTON, Circuit Judge.

      Thomas M. Horras is the founder, and former owner, president, and chief
operating officer of Hawkeye Health Services, Inc. Christine Richards is Hawkeye’s
former Director of Finance. As a “home health agency,” Hawkeye participated in
Medicare and Medicaid. Horras and Richards appeal civil monetary penalties
(CMPs), assessments, and exclusions from all federal health care programs, imposed
by the Department of Health and Human Services (DHHS) for making “false or
fraudulent” claims on Hawkeye’s cost reports. Having jurisdiction under 42 U.S.C.
§ 1320a-7a(e), this court affirms.

                                           I.

       Horras founded Hawkeye in 1986 as a home health agency offering “home
health services” to Iowans. See 42 U.S.C. §§ 1395x(m), (o). In March 1987,
Hawkeye began participating in Medicare. For the first several years, its headquarters
were Horras’s basement. In 1990, Hawkeye opened its “home office” at a separate
address in Knoxville, Iowa. The company expanded rapidly, from seven part-and-
full-time employees in 1991 to nearly 100 in 1993. By 1997, there were more than
500 employees and seven branch offices across Iowa (in addition to Knoxville home
office), doing millions of dollars of business every year, the single largest home health
provider in Iowa. Horras hired Richards, an accountant, as a part-time employee in
August 1991. Within a month, Horras promoted her to Staff Accountant, and then to
Comptroller. As Comptroller, her supervisor was a Director of Finance who left in
July 1993. Richards then became Director of Finance, with Horras as her supervisor.
In 1995, a new Vice President of Operations began supervising Richards for daily
operations; Horras continued to supervise Richards for financial issues and cost

                                          -2-
reporting. In March 1999, Horras sold Hawkeye to Auxi Health, Inc. Both Horras
and Richards left soon thereafter.

       In August 1997, acting on separate complaints by a former Hawkeye employee
and Horras’s ex-wife, the DHHS Inspector General investigated Hawkeye’s cost
reports. In May 2002, the IG imposed CMPs and assessments against Horras and
Richards, excluding them from all federal health care programs. The IG alleged that
Horras “submitted or caused to be submitted annual Medicare and Medicaid cost
reports covering the periods of 1995 through 1997 that contained 192 items or
services that were not related to patient care and/or were not reasonable and proper
costs of operation.” The IG imposed a $38,000 CMP against Horras, and a $784,072
assessment. The IG alleged that Richards “submitted or caused to be submitted” 124
such claims, imposing a $20,000 CMP and a $100,000 assessment. The IG ordered
Horras excluded for seven years, and Richards for five.

       In April and May 2003, Horras and Richards had a two-week consolidated
hearing with an administrative law judge. In November 2003 (before the ALJ issued
a decision), Hawkeye/Auxi settled with the IG for $125,000. In April 2005, the ALJ
sustained the IG. As to Horras, the ALJ affirmed the exclusion and the CMP. In
consideration of the $125,000 settlement by Hawkeye/Auxi, the ALJ reduced Horras’s
assessment to $673,212. As to Richards, although her level of knowledge satisfies
“the legal standard for violation of the CMPL [Civil Monetary Penalties Law],” the
ALJ acknowledged that “these Respondents had different quanta of management
responsibilities.”

      Nor has the IG shown any motive for Richards’ actions which could be
      traced to cupidity, greed, or the self-aggrandizement so evident in
      Horras’ conduct. Culpability on her part is still present, based on what
      has been shown to be her reckless disregard or distanced indifference to
      what was going on around her at Hawkeye; however it moves away
      from, rather than toward, the degree of culpability which Horras bears.

                                        -3-
The ALJ also noted that Richards fully cooperated with criminal investigators (no
charges were brought). For these reasons, and considering Hawkeye’s settlement with
the IG, the ALJ reduced Richards’s exclusion to one year, with a $2,500 CMP and a
$2,146 assessment.

      Horras and Richards proceeded to the DHHS Departmental Appeals Board
appellate division (DAB). The DAB upheld the ALJ’s decision: “contrary to the
Respondents’ contentions, no prejudicial legal error occurred and the ALJ’s factual
findings are supported by substantial evidence.” The DAB rejected “the I.G.’s
argument that the exclusion, CMP, and assessment imposed on Richards by the ALJ
should be increased.” The DAB’s decision is identified as the Secretary’s “final
decision,” subject to this court’s review. Cf. Anesthesiologists Affiliated v. Sullivan,
941 F.2d 678, 680 (8th Cir. 1991) (“The departmental appeals board declined to
review the ALJ’s decision, which therefore became the final decision of the Secretary
of Health and Human Services, and this appeal followed.”). Because the DAB affirms
and adopts the ALJ’s decision, this court also reviews the ALJ’s decision as part of
the Secretary’s final decision. Horras and Richards now appeal to this court.

                                           II.

      “The findings of the Secretary with respect to questions of fact, if supported by
substantial evidence on the record considered as a whole, shall be conclusive.” 42
U.S.C. § 1320a-7a(e). Substantial evidence is “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion. . . . the possibility of drawing
two conclusions from the evidence does not prevent an administrative agency’s
findings from being supported by substantial evidence.” Consolo v. Fed. Mar.
Comm’n, 383 U.S. 607, 619-20 (1966). “Therefore, if it is possible to draw two
inconsistent positions from the evidence and one of those positions represents the

                                          -4-
agency’s findings, we must affirm the decision.” Robinson v. Sullivan, 956 F.2d 836,
838 (8th Cir. 1992).

        The parties offer conflicting interpretations of the Social Security Act, the Civil
Monetary Penalties Law, and related DHHS regulations implementing these statutes.
This court must determine “whether the proper legal standards were employed” by the
DHHS. MeadowWood Nursing Home v. United States Dep’t of Health & Human
Servs., 364 F.3d 786, 788 (6th Cir. 2004). “The plain meaning of a statute controls,
if there is one, regardless of an agency’s interpretation.” Hennepin County Med. Ctr.
v. Shalala, 81 F.3d 743, 748 (8th Cir. 1996). “If there is ambiguity in a statute that
an agency has been entrusted to administer, however, the agency’s interpretation is
controlling when embodied in a regulation, unless the interpretation is ‘arbitrary,
capricious, or manifestly contrary to the statute.’” Id. (quoting Chevron, U.S.A., Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984)).

                                            III.

        During the period in question (1995 to 1997), Medicare reimbursed HHAs like
Hawkeye for the “reasonable cost” of services provided to Medicare recipients. 42
U.S.C. § 1395f(b). “The determination of reasonable cost of services must be based
on cost related to the care of Medicare beneficiaries.” 42 C.F.R. § 413.9(c)(3).
“However, if the provider’s operating costs include amounts not related to patient care
. . . such amounts will not be allowable.” Id.

       Medicare providers file annual reports of costs for the past year. 42 C.F.R. pts.
421, 424. Interim payments are made based on the previous year’s costs. 42 C.F.R.
pt. 413 et seq. The cost report reconciles the provider’s expenses against the interim
payments, and determines the interim payment rate for the following year. Id. To
help providers like Hawkeye, the Secretary issues a Provider Reimbursement Manual.
“The PRM is an extensive set of informal interpretative guidelines and policies

                                           -5-
published to assist intermediaries and providers in applying the reasonable cost
reimbursement principles.” Providence Hosp. of Toppenish v. Shalala, 52 F.3d 213,
218 (9th Cir. 1995). The PRM gives examples of unallowable items and services to
illustrate the overarching principle of “related to patient care.” Hawkeye was issued
a PRM.

        The CMPL authorizes the Secretary to impose civil monetary penalties and
assessments against “any person that knowingly presents or causes to be presented .
. . a claim . . . that the Secretary determines . . . is for a medical or other item or
service and the person knows or should know the claim is false or fraudulent.” 42
U.S.C. § 1320a-7a(a)(1)(B). The Secretary also may exclude such persons “from
participation in any Federal health care program.” 42 U.S.C. § 1320a-7(b)(7). A
provider “is considered to have known that the services were not covered” based on
“[i]ts receipt of CMS notices, including manual issuances, bulletins, or other written
guides or directives.” 42 C.F.R. § 411.406. The regulations further explain:
“Knowingly” means that “a person, with respect to information, has actual knowledge
of information, acts in deliberate ignorance of the truth or falsity of the information,
or acts in reckless disregard of the truth or falsity of the information, and that no proof
of specific intent to defraud is required.” 42 C.F.R. 1003.102(e). As to “should have
known,” the statute defines,

      The term ‘should know’ means that a person, with respect to
      information,
            (A) acts in deliberate ignorance of the truth or falsity of the
            information; or
            (B) acts in reckless disregard of the truth or falsity of the
            information,
      and no proof of specific intent to defraud is required.

42 U.S.C. § 1320a-7a(i)(7).

                                           -6-
                                          IV.

       The Secretary found that Horras “submitted or caused to be submitted” 178
false or fraudulent claims1, totaling $343,279.97:

      •      $132,035.86 in professional fees for business valuation and
             similar expert services related to his divorce
      •      $44,678.55 in unallowable costs related to personal use of luxury
             vehicles (including monthly lease payments, automobile expenses,
             and license fees)
      •      $1,411 in monthly membership dues to the Embassy Club
      •      $514.95 for pest control services at his private residence
      •      $16,013.54 in charitable donations
      •      $26,937.58 of professional fees for legal and business valuation
             expenses related to the sale of Hawkeye
      •      $107,215.64 for marketing program fees to increase patient
             utilization of Hawkeye services
      •      $14,472.85 in advertising fees to increase patient utilization of
             Hawkeye services

                                          A.

       Horras argues that “the Hawkeye/Auxi settlement with the OIG precludes this
action against Horras in whole or part as a matter of law.” The CMPL applies to
“[a]ny person (including an organization, agency, or other entity . . .).” 42 U.S.C. §
1320a-7a(a). See also 42 C.F.R. § 1003.101 (“Person means an individual, trust or
estate, partnership, corporation, professional association or corporation, or other
entity, public or private.”). Hawkeye/Auxi is a person under the CMPL. The
regulations for calculating penalties and assessments provide,

      1
       Following its initial letter to Horras, the IG reduced the number of allegedly
improper claims from 192 to 178.

                                         -7-
      In any case in which it is determined that more than one person was
      responsible for presenting or causing to be presented a claim as
      described in paragraph (a) of this section, each such person may be held
      liable for the penalty prescribed by this part, and an assessment may be
      imposed against any one such person or jointly and severally against two
      or more such persons, but the aggregate amount of the assessments
      collected may not exceed the amount that could be assessed if only one
      person was responsible.

42 C.F.R. § 1003.102(d)(1). Under the CMPL, “a principal is liable for penalties,
assessments, and an exclusion under this section for the actions of the principal’s
agent acting within the scope of the agency.” 42 U.S.C. § 1320a-7a(l). See also 42
C.F.R. § 1003.102(d)(5) (“Under this section, a principal is liable for penalties and
assessments for the actions of his or her agent acting within the scope of the agency.”).
Drawing on concepts of vicarious liability and respondeat superior from tort law,
Horras contends: “The decision of the IG to independently compromise
Hawkeye/Auxi’s statutory liability was an election to pursue its monetary remedies
against Hawkeye/Auxi alone and is a bar to further amounts against Horras.”

       Horras cites no authority for this proposition. Common law tort notions of
vicarious liability and respondeat superior are irrelevant to this issue.
Hawkeye/Auxi’s liability under the CMPL derives from its status as a person under
the CMPL, just as Horras is also a person under the CMPL. He asserts (without
support in the record) that the $125,000 settlement “represents a full and fair
settlement of the claims against Hawkeye/Auxi.” But Horras does not argue that
“aggregate amount of the assessments [ ] exceed the amount that could be assessed if
only one person was responsible,” and overlooks that the ALJ reduced his assessment
in consideration of the settlement.

                                           B.

       Horras asserts that a “home office cost report is not an application for payment
nor is it seeking payment and thus cannot be considered a ‘claim’” under the CMPL.

                                          -8-
Instead, Horras explains, “the only potentially false ‘claims’ were the branch office
cost reports submitted to Medicare and Medicaid for the years 1995, 1996, and 1997.”
These 34 branch office cost reports each contain an allocated share of home office cost
reports.

       The CMPL defines a claim as “an application for payments for items and
services under a Federal health care program.” 42 U.S.C. § 1320a-7a(i)(2). “The
term ‘item or service’ includes . . . in the case of a claim based on costs, any entry in
the cost report, books of account or other documents supporting such claim.” 42
U.S.C. § 1320a-7a(i)(3). The 178 claims at issue were entries in the home office cost
reports, whose totals were allocated to the branch office cost reports, constituting
Hawkeye’s total claim. Each entry on the home office cost reports results in “an
application for payment for items and services” under the CMPL. See, e.g., Chapman
v. United States Dep’t of Health & Human Servs., 821 F.2d 523, 525 (10th Cir.
1987) (19 false line-item cost entries on four separate cost reports are 19 false claims;
each individual cost report is not counted as a false claim). Horras’s argument on this
point is without merit.

                                           C.

       Horras states that the Secretary did not show that his allegedly false or
fraudulent claims were “material.” Horras argues that “for 20 of the 34 Medicare and
Medicaid branch office cost reports the inclusion or exclusion of the questioned costs
from the submitted cost reports made no difference to Hawkeye or the government
with respect to how much money Hawkeye would receive.” By analogy, Horras cites
the federal False Claims Act, under which “only those actions by the claimant which
have the purpose and effect of causing the United States to pay out money it is not
obligated to pay, or those actions which intentionally deprive the United States of
money it is lawfully due, are properly considered ‘claims’ within the meaning of the
FCA.” Costner v. URS Consultants, Inc., 153 F.3d 667, 677 (8th Cir. 1998). See
generally 31 U.S.C. § 3729 et seq.

                                          -9-
       The CMPL calculates “an assessment of not more than 3 times the amount
claimed for each such item or service in lieu of damages sustained by the United
States or a State agency because of such claim.” 42 U.S.C. § 1320a-7a(a) (emphasis
added). The FCA, by contrast, authorizes a $5,000 to $10,000 civil penalty, “plus 3
times the amount of damages which the Government sustains.” 31 U.S.C. § 3729(a).
Unlike the FCA, the CMPL focuses on the amount falsely or fraudulently “claimed.”
See generally Chapman, 821 F.2d at 528 (“By authorizing assessments of twice ‘the
amount claimed’ rather than twice ‘the amount of damages,’ Congress seems to have
deliberately shifted the focus away from the actual loss sustained and onto the amount
claimed as a basis for assessments.”). Proof of loss by the United States is not an
element of the CMPL.

                                          D.

       Horras believes that the claims are not “false or fraudulent” because they “were
in no way concealed in Hawkeye’s books or cost reports and were true and accurate
costs of Hawkeye.” The legal standard, however, is whether the costs are “related to
patient care,” not whether the item or service is disclosed. See 42 C.F.R. §
413.9(c)(3). The Secretary found they are not related to patient care, an issue Horras
avoids.

      To claim an item or service unrelated to patient care is to file a false or
fraudulent claim under the CMPL. The PRM instructs providers to file presumptively
unallowable costs that the provider thinks should be reimbursed “under protest.”
“While it is true that a provider may submit claims for costs it knows to be
presumptively nonreimbursable, it must do so openly and honestly, describing them
accurately while challenging the presumption and seeking reimbursement.” United
States v. Calhoon, 97 F.3d 518, 529 (11th Cir. 1996). Otherwise, the Medicare
reimbursement system devolves “into a cat and mouse game in which clever providers
could, with impunity, practice fraud on the government.” Id. Horras’s disclosure
defense is not persuasive.

                                         -10-
                                          E.

       Horras generally challenges the sufficiency of the evidence and offers a “good
faith defense,” claiming he was an “idea man” who “employed competent people” and
“repeatedly relied upon the advice of experts in submitting costs on the cost reports
that are at issue in this action.”

       The ALJ found that Horras “knowingly presented or caused to be presented”
the false or fraudulent claims; had “direct first-hand knowledge” that they represent
unallowable costs; “acted with reckless disregard of this knowledge when he included
or caused to be included” them on Hawkeye’s cost reports. Any claim of good faith
reliance by Horras is not supported by the record. The DAB concluded, “The ALJ’s
factual findings are supported by substantial evidence on the record as a whole.”
Having reviewed the voluminous record, this court agrees. The factual findings are
supported by substantial evidence on the record as a whole; further discussion would
have no precedential value. See 8TH CIR. R. 47(B).

                                          F.

       According to Horras, the ALJ erred by retroactively applying an amendment
from the Balanced Budget Act of 1997. The BBA went into effect January 1, 1998;
the cost reports in this case are for the years 1995, 1996, and 1997. Specifically, the
BBA states, “Reasonable costs do not include costs for the following: (i)
entertainment, including tickets to sporting and other entertainment events; (ii) gifts
or donations; (iii) personal use of motor vehicles . . . .” 42 U.S.C. § 1395x(v)(8).

       But the DAB found that Horras “had ample notice long prior to BBA 1997 that
costs such as those enumerated were not considered reasonable for purposes of
Medicare reimbursement policy.” As with the Secretary’s other factual findings,
substantial evidence supports this finding. Since 1986, Medicare regulations
disallowed costs “not related to patient care.” 42 C.F.R. § 413.9(c)(3). The

                                         -11-
retroactivity of the BBA is irrelevant. The civil monetary penalties, assessment, and
exclusion were imposed on Horras under the relevant legal standards in effect for the
periods in question.

                                          V.

      The Secretary found that in the 1995, 1996, and 1997 cost reports, Richards
“presented or caused to be presented” 112 claims2, totaling $89,040.67:

      •      $44,678.55 for the unallowable automobile costs
      •      $1,411 for the monthly Embassy Club dues
      •      $16,013.54 for the charitable donations
      •      $26,937.58 for the fees related to the sale of Hawkeye

                                          A.

      Richards first argues that she is not a “person” under the CMPL, because
“Congress intended the Act to apply to providers and principals of providers.”
Richards says that the doctrine of respondeat superior shields her from liability,
because the IG chose to pursue Horras and Hawkeye. Richards also asserts:
“Recovering from both Richards and Horras in this case as well as Hawkeye/Auxi will
do much more than make the government whole, it will result in unjust enrichment to
the government, particularly since the employer has already settled and paid.”

      The “plain meaning” of the CMPL allow penalties and assessments against “any
person.” See Hennepin County Med. Ctr., 81 F.3d at 748. There is no exception for
non-principal employees. Richards cites no authority limiting the statute only to
providers or principals. True, when more than one person is liable under the CMPL,
“the aggregate amount of the assessments collected may not exceed the amount that
could be assessed if only one person was responsible.” 42 C.F.R. § 1003.102(d)(1).

      2
      Following its initial letter to Richards, the IG reduced the number of allegedly
improper claims from 124 to 112.
                                        -12-
But Richards has no evidence that the government stands to recover more than this
maximum.

       Respondeat superior is a common law doctrine “whereby a master is liable for
his servant’s torts committed in the course and scope of his employment.” Burger
Chef Sys., Inc. v. Govro, 407 F.2d 921, 925 (8th Cir. 1969). “[T]his doctrine imputes
the negligence of the servant to the master and makes the latter liable for the torts of
the former. But that liability is joint and several; the servant is not relieved.” Pavelka
v. Carter, 996 F.2d 645, 651 (4th Cir. 1993). As the DAB explained, it does not
follow “that because Hawkeye/Auxi is liable for Richards’ conduct that Richards is
not liable for her own conduct.” Neither the recovery from Horras, nor the settlement
with Hawkeye/Auxi, protects Richards from liability.

                                            B.

       Richards makes a host of arguments about the evidence itself, claiming no
substantial evidence supports the Secretary’s factual findings. She notes that almost
all the 112 entries are “true and correct entries on Hawkeye’s books and correctly
characterized on the Home Office Cost Reports.” As discussed, disclosure is not a
defense under the CMPL. Like Horras, Richards claims she “frequently relied on
consultants to insure the proper preparation of the reports.” Richards makes no
citations to the record to support this claim. Richards also focuses on the Secretary’s
finding: “The I.G. did not prove by a preponderance of the evidence that Richards had
actual, direct, concrete knowledge that most of the claims were improper.” On this
point, this court considers the four categories of expenses for which Richards was
found liable.

                                            i.

       As to automobile expenses, the Secretary’s factual findings are based on
Richards’s familiarity with a decision of the Provider Reimbursement Review Board
that cautioned against claiming personal mileage for Medicare reimbursement. For

                                          -13-
the earlier 1992 cost report, Richards authored an “audit exposure list” identifying
automobile expenses that she anticipated would be adjusted out of the cost reports.
This is sufficient to show knowledge under the CMPL. See 42 C.F.R. § 411.406.

       Richards argues at length that there is no “luxury car” rule specifically and
categorically prohibiting these types of claims. But again, the question is whether the
costs are “related to patient care.” Substantial evidence on the record supports the
conclusion that Richards “knew that the costs related to Horras’ personal use of
Hawkeye automobiles and the luxury portion of the costs of these automobiles were
not allowable Medicare expenditures.”

                                            ii.

       As to the Embassy Club dues, the Secretary found: “(1) these dues were
previously disallowed by the Medicare FI in Hawkeye’s 1991 cost report; (2) Richards
acknowledged these dues to be one of the expenses that the Medicare FI would
disallow, based on the 1991 disallowances, in her ‘Audit Exposure List’; and (3)
Richards listed these dues as the kinds of personal expenses that were submitted in
cost reports in her conversations with Mr. Booth, a representative of Auxi.”

      These findings – based on substantial evidence – support the Secretary’s
conclusion that “Richards should have known that the presented costs for Embassy
Club dues on Hawkeye’s 1995, 1996, and 1997 cost reports were unallowable
expenses.” This court agrees that “Richards acted in reckless disregard of this
knowledge” by claiming these costs. See 42 U.S.C. § 1320a-7a(i)(7)(B).

       Richards’s claim that Horras used the Embassy Club for business meetings is
irrelevant – again, the standard is “related to patient care,” not whether it is a business
expense for other purposes. Nor is this court persuaded that $1,411 is de minimus.
Richards’s “good faith” defense on this point is belied by the record.

                                           -14-
                                               iii.

      Regarding the charitable donations, the Secretary found:

      Evidence presented by the I.G. shows that charitable donations were
      disallowed by the FI in 1993 from Hawkeye’s 1991 cost report.
      Richards listed donations on her ‘Audit Exposure List’ as an expense she
      expected to be disallowed from the 1992 cost report. Moreover,
      Richards attended an exit conference with the FI in 1994 regarding the
      1992 cost report in which auditors warned that this was the third cost
      report in which unallowable costs had been included and that Hawkeye
      must discontinue this practice or risk losing its Medicare funding.
      Finally, Richards testified that she knew that these costs were disallowed
      in the past, yet she continued to include them in the 1995, 1996, and
      1997 cost reports.

Substantial evidence on the record supports the Secretary’s conclusion that “Richards
knowingly presented unallowable charitable donations in Hawkeye’s 1995, 1996, and
1997 Medicare and Medicaid cost reports.”3 This court agrees that Richards “acted
with reckless disregard of this knowledge when she included or caused to be included
such costs in Hawkeye’s 1995, 1996, and 1997 Medicare and Medicaid cost reports.”
See 42 U.S.C. § 1320a-7a(i)(7)(B).

      Richards complains “there was no standard for [her] to rely on. Some
contributions were allowed, some were not.” On the contrary, the applicable legal
standard was whether the costs were “related to patient care.” That the Balanced
Budget Act of 1997 specifically disallowed “gifts or donations” does not prove that
Richards never “knew or had reason to know that placing donations on the 1995 or
1996 cost reports was somehow fraudulent.”

      3
        Although the DAB refers only to 1995 and 1996 in the text of its decision, a
footnote rejects Richards’s challenge to the ALJ’s factual finding about charitable
contributions on the 1997 cost report.

                                        -15-
                                                iv.

      Richards disavows all knowledge of the $26,937.58 for fees related to the sale
of Hawkeye. The Secretary, however, found that “Richards, in her role as Director
of Finance, having been given notice that previous cost report submissions had
included unallowable costs specifically related to the sale of Hawkeye, should have
known that she was presenting or causing to present improper costs related to the sale
of Hawkeye.” Richards attended a meeting with Horras where she would have learned
the nature of these fees. Richards does not deny preparing the cost reports that
included these unallowable costs. By the substantial evidence on the record, Richards
“should have known” that these costs were not allowable.

                                          C.

       Richards stresses that she was Horras’s subordinate, not an owner or manager
at Hawkeye. But she forgets the ALJ recognized that she and Horras “had different
quanta of management responsibilities” and that she did not act with the “cupidity,
greed, or the self-aggrandizement so evident in Horras’s conduct.” Accordingly, and
in recognition of her cooperation with criminal investigators and of the Hawkeye/Auxi
settlement, the ALJ reduced her exclusion from five years to one, her CMP from
$20,000 to $2,500, and her assessment from $100,000 to $2,146.

                                          VI.

      The decision of the Secretary is affirmed.
                       ______________________________

                                        -16-