Benny R. Bailey, DAB CR5210 (2018)

DECISION

Petitioner, Benny R. Bailey, laundered money for a purported "pain management clinic" in Hazard, Kentucky, and pled guilty to one felony count of conspiracy to commit money laundering. Based on this conviction, the Inspector General (IG) has excluded him from participating in the Medicare, Medicaid, and all federal health care programs for a period of five years, pursuant to section 1128(a)(3) of the Social Security Act (Act).

For the reasons discussed below, I find that the IG is authorized to exclude Petitioner and that the statute mandates a minimum five-year exclusion.

Background

In a letter dated March 30, 2018, the IG advised Petitioner Bailey that, because he had been convicted of a felony offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service, the IG was excluding him from participating in Medicare, Medicaid, and all federal health care programs for a period of five years. IG Ex. 1. Petitioner requested review.

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The parties have submitted their written arguments. (IG Br.; P. Br.). The IG submitted seven exhibits (IG Exs. 1-7) and a reply. Petitioner submitted eleven exhibits (P. Exs. 1‑11).

In the absence of any objections, I admit into evidence IG Exs. 1-7.

The IG objects to P. Exs. 1‑2, 5‑8, and 10‑11. P. Exs. 1-8 include documents from the criminal case and exclusion of Petitioner's co-defendant. P. Ex. 7 includes press releases and related information regarding exclusions imposed in other cases. I agree that these documents are irrelevant and immaterial and decline to admit them. 42 C.F.R. § 1005.17(c). P. Ex. 11 is a list of published decisions issued by the Departmental Appeals Board and its administrative law judges. It is not evidence. I therefore admit P. Exs. 3‑4, and 9.

I instructed the parties to indicate, in their briefs, whether an in-person (video) hearing would be necessary and, if so, to explain why, identify any proposed witness, and submit, "in the form of an affidavit or sworn declaration," the witness's complete written direct testimony. Order and Schedule for Filing Briefs and Documentary Evidence at 5 (¶ 7) (June 25, 2018). The IG indicates that an in-person hearing is not necessary. IG Br. at 12.

Petitioner, however, claims that an in-person hearing is necessary and lists as witnesses three officials from the IG Office of Investigations. According to Petitioner, these witnesses would "rebut the two 'underlying facts' analyses articulated by the [IG] in his case-in-chief" and would testify about the IG's "deviation from past interpretations of the statute." P. Br. at 24. Petitioner does not specify which "underlying facts" these witnesses would rebut. In any event, I find that their testimony would be irrelevant and therefore inadmissible. 42 C.F.R. § 1005.17(c) (requiring the ALJ to exclude irrelevant or immaterial evidence). Here, I decide, de novo, whether Petitioner Bailey's felony conviction constitutes financial misconduct in connection with the delivery of a health care item or service. See Act §§ 1128(f), 205(b)(1). If so, I must uphold the exclusion without regard to the process by which OIG officials reached that conclusion. See Mohamed Basel Aswad, M.D., DAB No. 2741 at 13 (2016) (holding that documents related to the IG's decision to exclude are irrelevant and documents related to the length of exclusions in other cases have little, if any, relevance); Fady Fayad, M.D., DAB No. 2266 (2009), aff'd, Fayad v. Sebelius, 803 F. Supp. 2d 699 (E.D. Mich. 2011) (in a similar context, holding that the "ALJ proceeding is not an appellate or quasi-appellate review of the adequacy of the federal agency's decision making process, [but] a de novo proceeding in which the ALJ determines the legality of the challenged determination based on the evidence presented in that proceeding."). An in-person hearing would therefore serve no purpose.

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Petitioner also renews his motions for discovery, for a "litigation hold," and for access to the Departmental Appeals Board's entire e-file system. I ruled on those motions in my June 25, 2018 order, and Petitioner presents no new or compelling arguments to warrant my revisiting that ruling. Order and Schedule for Filing Briefs at 2-3 (¶ 2) (June 25, 2018).

Discussion

Petitioner must be excluded from program participation for a minimum of five years because he was convicted of felony financial misconduct in connection with the delivery of a healthcare item or service.I make this one finding of fact/conclusion of law.

Section 1128(a)(3) provides that an individual or entity convicted of felony fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service must be excluded from participating in federal health care programs for a minimum of five years. See 42 C.F.R. § 1001.101(c).

The facts of this case are not in dispute. Petitioner was the office manager of Clarion Health and Wellness, a "pain management" clinic in Hazard, Kentucky. IG Ex. 2 at 2. In an indictment filed July 10, 2014, he and others were charged with two felony counts of conspiring to distribute and unlawfully dispense controlled substances (21 U.S.C. § 846) and one felony count of maintaining a place for the purpose of distributing and unlawfully dispensing controlled substances (21 U.S.C. § 856(a)). IG Ex. 2.

Petitioner subsequently pled guilty to conspiracy to commit money laundering (18 U.S.C. § 1956(h)). In a plea agreement, dated March 23, 2015, he admitted knowing that Clarion physicians were writing prescriptions for controlled substances "for illegitimate purposes." He admitted that he concealed "that portion of Clarion's income that came from the unlawful [dispensing] of controlled substances by illegitimate prescriptions." He also admitted that, on a monthly basis, he "held back" thousands of dollars from the clinic's cash income. He used these "non-deposited cash funds" to pay cash, "under‑the‑table," to individuals designated by Dr. James Dustin Chaney, the clinic's owner. He personally received $40,000 of the laundered funds. IG Ex. 4 at 3; see IG Ex. 3.

On August 29, 2016, Petitioner Bailey appeared in U.S. District Court for the Eastern District of Kentucky to testify at Dr. Chaney's sentencing hearing. With respect to the money laundering, he testified that he withheld cash payments from patients and dispensed it to Dr. Chaney and others. IG Ex. 5 at 14-15, 18-20. He admitted that he

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paid himself between $30,000 and $40,000 in cash. IG Ex. 5 at 21. He also admitted that, in addition to laundering cash, he fraudulently obtained for himself controlled substances, mainly Oxycodone. IG Ex. 5 at 4-5, 27.

On September 21, 2016, the district court, having approved Petitioner's plea agreement, entered judgment against him. IG Ex. 6; see IG Ex. 4 at 8. The court sentenced him to twelve months and one day imprisonment, followed by one year of supervised release. IG Ex. 6 at 2‑3.

Petitioner concedes that he was convicted of a criminal offense but argues that he is not subject to exclusion because his crime was not related to financial misconduct in connection with the delivery of a healthcare item or service. P. Br. at 4-14. In a non sequitur presented as argument, Petitioner points out that his co-defendant, Dr. Chaney, was also convicted of money laundering, yet the IG excluded him under section 1128(a)(4). P. Br. at 5. Section 1128(a)(4) directs the IG to exclude an individual convicted of a felony offense "relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance." Dr. Chaney's exclusion, which is not before me, is irrelevant.The IG agrees that Petitioner also satisfies the criteria of section 1128(a)(4) and suggests that I exercise my authority to add this issue to these proceedings. In the IG’s view, Petitioner can hardly complain about lack of notice because he himself raised the issue. I don’t disagree that the IG might have excluded Petitioner under section 1128(a)(4) – he did, after all steal prescriptions and launder drug money – but I decline to add this as a basis for his exclusion, especially at this late date. Inasmuch as the IG has imposed on Petitioner the minimum period of exclusion and does not propose extending that period based on section 1128(a)(4), I see no point in gilding this lily by adding the second basis.

Petitioner also complains that the IG impermissibly relied on "underlying facts" to conclude that his criminal activity related to financial misconduct in connection with the delivery of a healthcare item or service. P. Br. at 6‑8. It is well-settled that the IG may consider underlying facts. By regulation, "evidence of crimes, wrongs or acts other than those at issue in the instant case is admissible . . . ." 42 C.F.R. § 1005.17(g). If I were limited to considering the generic elements of the criminal offense to which Petitioner pled guilty, this regulation would serve no purpose. The Departmental Appeals Board has long rejected efforts to limit section 1128 review to the bare elements of the criminal offense. See Narendra M. Patel, M.D. DAB No. 1736 at 7 (2000), aff'd, Patel v. Thompson, 319 F.3d 1317 (11th Cir. 2003) ("We thus see nothing in section 1128(a)(2) that requires that the necessary element of the criminal offense must mirror the elements of the exclusion authority, nor that all statutory elements required for an exclusion must be contained in the findings or record of the state criminal court."); Timothy Wayne Hensley, DAB No. 2044 (2006); Scott D. Augustine, DAB No. 2043 (2006); Lyle Kai,

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R.Ph., DAB No. 1979 at 5 (2005), aff'd, Kai v. Leavitt, No. 05-00514 BMK (D. Haw. July 17, 2006) (holding that an offense is "related to" the delivery of a healthcare item or service, if there is "a nexus or common-sense connection" between the conduct giving rise to the offense and the delivery of a healthcare item or service); Berton Siegel, D.O., DAB No. 1467 at 5 (1994); Carolyn Westin, DAB No. 1381 (1993), aff'd sub nom. Westin v. Shalala, 845 F. Supp. 1446 (D. Kan. 1994).

Moreover, while the underlying facts are instructive, the IG need not go beyond the four corners of the money laundering statute and Petitioner's plea agreement to conclude that his conviction satisfies the requirements of section 1128(a)(3). Money laundering is, by definition, "financial misconduct" because it necessarily involves a "financial transaction." 18 U.S.C. § 1956(a). Petitioner admitted that he conspired "to conduct financial transactions" involving the proceeds from "the unlawful distribution and [dispensing] of controlled substances." IG Ex. 4 at 1. Controlled substances are "health care items." His crime thus falls squarely within the parameters of section 1128(a)(3).

An exclusion brought under section 1128(a)(3) must be for a minimum period of five years. Act § 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 2007(a)(2).

Conclusion

For these reasons, I conclude that the IG properly excluded Petitioner from participating in Medicare, Medicaid and all federal health care programs, and I sustain the five-year exclusion.