SUBJECT: Marc Schneider, D.M.D.,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Marc Schneider, D.M.D. (Petitioner) appealed a decision by Administrative Law Judge (ALJ) Jose Anglada dated July 20, 2005 upholding the Inspector General's (I.G.) exclusion of Petitioner from participation in Medicare, Medicaid and all other federal health care programs pursuant to section 1128(a)(4) of the Social Security Act (the Act). Marc Schneider, D.M.D., DAB CR1328 (2005)(ALJ Decision).

Section 1128(a)(4) provides for the exclusion of individuals who have been convicted of felonies relating to a controlled substance. Section 1128(i) defines the term "convicted." Petitioner appeals the ALJ Decision on the ground that he was not "convicted" within the meaning of section 1128(i). Petitioner also argues the ALJ erred by relying on certain state court documents in determining that he was convicted.

For the reasons discussed below, we conclude that the ALJ correctly determined Petitioner was convicted of a section 1128(a)(4) criminal offense and we uphold the ALJ Decision.

[Page 2] Applicable Statutes

Section 1128(a)(4) of the Act ⁽¹⁾ provides that the Secretary shall exclude any individual from participation in any federal health care program (as defined in section 1128B(f)) who has been "convicted . . . of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance."

Section 1128(i) provides that an individual has been "convicted" of a criminal offense under section 1128(a) if he/she meets one of four circumstances. Two of these circumstances are at issue in this appeal. They are --

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

(4) when the individual or entity has entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld.

We review an ALJ decision involving an I.G. exclusion to determine whether the decision is erroneous as to a disputed issue of law and whether the decision is supported by substantial evidence in the record as a whole as to any disputed issues of fact. 42 C.F.R. � 1005.21(h).

Background

Petitioner is a doctor of dental medicine licensed in the State of Kentucky. On June 12, 2002, the Grand Jurors of the County of Jefferson, Commonwealth of Kentucky, returned a five-count indictment against Petitioner related to obtaining or attempting to obtain a controlled substance by fraud or deceit. ALJ Decision at 3, citing I.G. Ex. 4. On July 7, 2002, Petitioner moved to enter a guilty plea to the indictment in return for the Commonwealth's recommendation that the court allow him to [Page 3] participate in a pretrial diversion program. Id., citing I.G. Exs. 1, 2. On August 22, 2002, the court entered an Order granting pretrial diversion under Kentucky Revised Statutes (KRS) � 533.250 et seq. Id., citing I.G. Ex. 5. On December 28, 2004, the court granted an early termination of the period of pretrial diversion, and, based on the finding that Petitioner had successfully complied with the provisions of the agreement, ordered that the charges against him be "dismissed/diverted" pursuant to KRS � 533.258(1). Id., citing I.G. Ex. 6.

The ALJ made two numbered Findings of Fact and Conclusions of Law, which stated:

1. Petitioner, Marc Schneider, is a doctor of dental medicine who was convicted in a state court of a criminal offense relating to the manufacture, distribution, prescription, or dispensing of a controlled substance pursuant to section 1128(a)(4) of the Act.

2. Petitioner's exclusion for a period of five years is the mandatory minimum period as a matter of law.

Id. at 3, 7.

Relying on the definition of "convicted" and specifically citing subsection 1128(i)(4), the ALJ concluded that Petitioner was convicted of a felony when he participated in the pretrial diversion program established by KRS � 533.250 et seq. ⁽²⁾ ALJ [Page 4] Decision at 6. On appeal, Petitioner asserts that proceedings under KRS � 533.250 do not fall within section 1128(i)(4). ⁽³⁾ Petitioner also argues that the ALJ erred by admitting unauthenticated copies of documents from the state court proceeding and by not requiring the I.G. to submit all of the documents from the state court proceeding. Below we explain why we reject these arguments.

1. Petitioner participated in a first offender, deferred adjudication, or other arrangement or program in which judgment of conviction was withheld and was therefore convicted within the meaning of section 1128(i)(4).

Section 1128(i)(4) provides that an individual is convicted "when the individual or entity has entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld."

Petitioner participated in Kentucky's pretrial diversion program, set forth at KRS � 533.250 et seq. Under this statute, an individual eligible to participate in the program ⁽⁴⁾ "may apply in [Page 5] writing to the trial court . . . for entry into a pretrial diversion program." KRS � 533.250(1)(d). The individual "shall be required to enter an Alford plea or a plea of guilty as a condition of pretrial diversion." KRS � 533.250(1)(e). If a person fails to complete a pretrial diversion agreement, the prosecutor may ask the court to void the diversion agreement. KRS � 533.256(1). If the court voids the agreement, "the prosecutor shall decide whether or not to proceed on the plea of guilty in accordance with the law." KRS � 533.256(4). If a defendant "successfully completes the provisions of the pretrial diversion agreement, the charges against the defendant shall be listed as 'dismissed-diverted' and shall not constitute a criminal conviction." KRS � 533.258(1). The Order Granting Pretrial Diversion states, "If the Court . . . voids the agreement, the Court may impose a sentence equal to or less than the penalty recommended by the prosecutor, or the Court may permit the defendant to withdraw his/her plea" I.G. Ex. 5 at 2.

As the ALJ recognized, what constitutes a conviction for purposes of section 1128(a)(4) exclusions is determined by federal law, not state law. ALJ Decision at 6; Travers v. Shalala, 20 F.3d 993 (9^th Cir. 1994). The ALJ concluded that, because KRS � 533.250 requires the entry of a guilty plea that cannot be unilaterally withdrawn, it is a deferred adjudication or other program in which judgment of conviction is withheld within the meaning of section 1128(i)(4). Petitioner's participation in KRS � 533.250 therefore constitutes a conviction, the ALJ concluded. ALJ Decision at 5, 6. We agree.

The ALJ's construction of section 1128(i)(4) is consistent with its broad language and with congressional intent as reflected in the legislative history. Section 1128(i)(4) encompasses participation in "a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld." (Emphasis added.) As the ALJ wrote, "Congress broadly defined the term 'convicted' in order "to ensure that exclusions from federally-funded programs would not hinge on state criminal justice policies.'" ALJ Decision at 6, quoting Carolyn Westin, DAB No. 1381, at 3 (1993). In adopting section 1128(i), Congress sought to better enable the I.G. to exclude individuals whom Congress regarded as threats to federal heath care programs and beneficiaries. The congressional committee [Page 6] charged with drafting the 1986 amendments adopting section 1128(i) clearly stated this legislative intent. It wrote:

The principal criminal dispositions to which the exclusion remedy (currently) does not apply are the "first offender" or "deferred adjudication" dispositions. It is the Committee's understanding that States are increasingly opting to dispose of criminal cases through such programs, where judgment of conviction is withheld. The Committee is informed that State first offender or deferred adjudication programs typically consist of a procedure whereby an individual pleads guilty or nolo contendere to criminal charges, but the court withholds the actual entry of a judgment of conviction against them and instead imposes certain conditions of probation, such as community service or a given number of months of good behavior. If the individual successfully complies with these terms, the case is dismissed entirely without a judgment of conviction ever being entered.

These criminal dispositions may well represent rational criminal justice policy. The Committee is concerned, however, that individuals who have entered guilty or nolo (contendere) pleas to criminal charges of defrauding the Medicaid program are not subject to exclusion from either Medicare or Medicaid. These individuals have admitted that they engaged in criminal abuse against a Federal health program and, in the view of the Committee, they should be subject to exclusion. If the financial integrity of Medicare and Medicaid is to be protected, the programs must have the prerogative not to do business with those who have pleaded to charges of criminal abuse against them.

H.R. No. 727, 99th Cong., 2d Sess. 75, reprinted in 1986 U.S. CODE CONG. & AD. NEWS 3607, 3665. ⁽⁵⁾

[Page 7] Petitioner argues that KRS � 533.250 does not fall within section 1128(i)(4) because it is a deferred prosecution program rather than a deferred adjudication program. P. Br. at 8, 11, 12-16. Petitioner relies on the Ninth Circuit's statement in Travers, "Had Travers participated in a deferred prosecution, the proceedings would not have constituted a "conviction" within the meaning of section 1320a-7(i)(4)." 20 F.3d at 997. However, the Ninth Circuit found that the Utah pretrial diversion program at issue was not a deferred prosecution but a deferred adjudication program for reasons that make KRS � 533.250 a deferred adjudication program as well. The Ninth Circuit explained the difference between deferred prosecution and deferred adjudication as follows.

In a deferred prosecution, it is not simply the judgment, but the initiation of charges altogether, which is withheld. If the defendant does not live up to the terms of his agreement with the prosecutor, he may be free to enter or persist in a plea of not guilty and proceed to trial. In a deferred adjudication, on the other hand, if the defendant does not live up to the terms of his agreement, he is not free to set aside his plea or proceed to trial--the court may simply enter a judgment of conviction. Under those circumstances, the entry of a judgment is a mere formality because the defendant has irrevocably committed himself to a plea of guilty or no contest which cannot be unilaterally withdrawn.

Id. at 997 (emphasis added). ⁽⁶⁾

[Page 8] Thus, as Petitioner recognizes (P. Reply Br. at 3), Travers identified two principal characteristics of a deferred prosecution program: the deferral of initiation of charges and the ability to enter or persist in a plea of not guilty if the agreement with the prosecutor is voided. In contrast, in a deferred adjudication a defendant is not free to set aside his plea or proceed to trial.

KRS � 533.250 meets neither of the characteristics of a deferred prosecution program. First, the initiation of charges is not withheld. Indeed, section 533.250(1)(a) states that the program is for individuals "charged with a Class D felony offense" and Petitioner was charged by a Grand Jury with a Class D felony offense in five counts. I.G. Ex. 4. Second, as the ALJ correctly observed, Petitioner could not unilaterally withdraw his guilty plea. ALJ Decision at 5, 6. Therefore, KRS � 533.250 does not meet the standards described by the Travers court for deferred prosecution and instead meets the standards for deferred adjudication. ⁽⁷⁾

Petitioner asserts that the ALJ erred when he concluded that a defendant cannot unilaterally withdraw his guilty plea after a court grants a KRS � 533.250 pretrial diversion motion. Petitioner states that "the Defendant, Prosecutor, and/or Court each have the ability to proceed on the charges rather than the [Page 9] guilty plea if any one of them decide to do so." P. Br. at 16 (emphasis added). In support of this assertion, Petitioner cites the portion of the Order entered by the court in response to Petitioner's guilty plea that states:

If the Court finds the defendant fails to successfully complete Pre-Trial Diversion and voids the agreement, the Court may impose a sentence equal to or less than the penalty recommended by the prosecutor, or the Court may permit the defendant to withdraw his/her plea. If the defendant persists in his/her plea, the Court may enter a sentence which exceeds the Commonwealth's prior recommendation.

I.G. Ex. 5, at 2 (bold in Court document, underline and italics in P. Br. at 15).

This language does not indicate that a defendant may unilaterally withdraw a plea. Rather, the court "may permit the defendant to withdraw his/her plea." Thus, a defendant must have the court's consent to withdraw the guilty plea.

Petitioner argues that, under Kentucky Rule of Criminal Procedure (KRCrP) 8.04, he was entitled to unilaterally withdraw his guilty plea entered under KRS � 533.250. P. Br. at 3-5; P. Reply Br. at 5-6. KRCrP 8.04 establishes a diversion procedure in which a defendant and prosecutor agree "that the prosecution will be suspended for a specified period" pursuant to agreed upon conditions, which does not require a defendant to enter a guilty plea, and which allows the defendant to "unilaterally terminate this agreement" whereupon "the prosecution may resume as if there had been no agreement." KRCrP 8.04(4).

We disagree. As the Kentucky Supreme Court explained in Flynt v. Commonwealth, 105 S.W.3d 415, 417 (Ky. 2003), KRS � 533.250, not KRCrP 8.04, "govern[s] the creation of pretrial diversion programs in Kentucky's circuit courts." (Emphasis added.) The court went on to state that KRS � 533.262(1) "reflects the General Assembly's determination that, although the district courts may employ other pretrial diversion programs, [section 533.250 et seq.] 'shall be the sole program utilized in the Circuit Courts . . .'" ⁽⁸⁾ Id. at 418 (quoting section 533.262(1)). [Page 10] In an accompanying footnote, the court identifies KRCrP 8.04 as an example of "other" diversion programs which may continue to be used for misdemeanants in district courts. Id. at 418, n. 10. Petitioner was prosecuted in the Kentucky Circuit Court of Jefferson County, not a Kentucky district court. P. Ex. 3. Therefore, we conclude that KRCrP 8.04 is separate from and irrelevant to the operation of KRS � 533.250. ⁽⁹⁾

Petitioner also asserts that the Kentucky Supreme Court in Flynt characterized KRS � 533.250 as a "deferred prosecution." P. Br. at 8, 10, 11. We disagree with Petitioner's reading of Flynt. The only time the court uses the phrase "deferred prosecution" is in the following passage.

We initially observe that the title of the "Pretrial Diversion Program" . . . is misleading. KRS � 533.250(1)(e) states that, "[a]ny person shall be required to enter an Alford plea or a plea of guilty as a condition of pretrial diversion." Thus, unlike the more typical, deferred prosecution diversion schemes - such as the one authorized in district courts by [KRCrP 8.04] - [KRS � 533.250] is not, in any meaningful sense "pretrial."

Flynt, 105 S.W.3d at 424 (emphasis in original).

Contrary to Petitioner's assertion, the court is distinguishing between "deferred prosecution diversion schemes" like KRCrP 8.04, in which a defendant retains the right to a trial, and deferred adjudication schemes like KRS � 533.250, in which a defendant no longer has right to a trial after entering the required guilty plea. But even if we were to conclude that the Flynt court did use the label "deferred prosecution" in reference to KRS � 533.250, we "look to the substance of the proceedings, rather [Page 11] than any formal labels or characterizations used by the state or by the parties" in determining whether a program falls within section 1128(i)(4). Travers, 20 F.3d at 996. As explained above, the substance of KRS � 533.250 does not fall within deferred prosecution standards articulated in Travers because it requires the filing of charges and the entry of a guilty plea that cannot be unilaterally withdrawn by the defendant.

Finally, we conclude that, contrary to what Petitioner argues, the ALJ correctly cited Hampton in support of his conclusion that a defendant cannot unilaterally withdraw a guilty plea under KRS � 533.250. ⁽¹⁰⁾ In Hampton, the defendant pled guilty under KRS � 533.250 to flagrant nonsupport and entered into a diversion agreement. The trial court subsequently voided the diversion agreement because the defendant failed to pay the support required by the agreement. The appellate court affirmed the trial court's reliance on the guilty plea, concluding that Hampton had waived his right to a trial when he pled guilty.

In trying to bring KRS � 533.250 within the Travers statement that a deferred prosecution would not constitute a conviction under section 1128(i)(4), Petitioner also points out that the imposition of judgment under the statute is not automatic. P. Br. at 2, 5, 14-16, citing KRS � 533.256(4) and I.G. Ex. 5, at 2. Petitioner's argument is not persuasive because nothing in Travers suggests that whether the entry of judgment is automatic determines whether a program is a deferred prosecution program. ⁽¹¹⁾ Travers focuses instead on whether the defendant has entered a plea which he/she cannot unilaterally withdraw, i.e., whether the defendant no longer has a right to a trial on the merits of the charges against him. Petitioner lost this right when he pled [Page 12] guilty as a condition of participating in the KRS � 533.250 program. In his plea, Petitioner expressly stated that he understood that by pleading guilty he waived his right to not incriminate himself, to a speedy and public trial by a jury, to cross examine witnesses, to produce evidence, and to appeal his case to a higher court. I.G. Ex. 1.

Accordingly, we conclude that Petitioner's arguments on appeal that he was not convicted within the meaning of section 1128(i)(4) lack merit and that the ALJ correctly determined that the Petitioner was convicted within the meaning of that provision.

2. The ALJ Decision is supported by substantial evidence in the record as a whole.

Petitioner argues that the ALJ Decision is not based on substantial evidence because the record does not contain certified copies of all the documents in Petitioner's state court case. P. Br. at 19-20. Petitioner states that the I.G. is unable to produce such documents because, under KRS � 431.076, the case was expunged and the documents are not available to either party. Id. Petitioner argues that "the inability to obtain and proffer a true, complete and certified copy of the entire state court proceeding is tantamount to having no evidence of the proceedings whatsoever." Id. at 20 (emphasis added). Additionally, Petitioner argues that uncertified documents are not admissible and cannot support a summary judgment.

We disagree with Petitioner's assertion that the I.G. was required to proffer the record of the entire state proceeding. First, while Petitioner disputes the legal effect of the entry of a guilty plea pursuant to KRS � 533.250(1)(e), he does not deny the facts that these documents prove, such as that he entered a guilty plea to five counts of a criminal offense relating to controlled substances. Second, the I.G. proffered and the ALJ admitted Petitioner's Motion to Enter a Guilty Plea (I.G. Ex. 1); the Commonwealth's Offer on a Guilty Plea (I.G. Ex. 2); the Petitioner's Motion for Pretrial Diversion of a Class D Felony (I.G. Ex. 3); the Grand Jury charging document (I.G. Ex. 4); the Order Granting Pretrial Diversion (I.G. Ex. 5); and the Order terminating the pretrial diversion (I.G. Ex. 6). Thus, the ALJ admitted documents that were necessary and material to his concluding that Petitioner was convicted within the meaning of section 1128(i)(4), and Petitioner does not allege that missing documents would undermine this finding.

[Page 13] We also disagree with Petitioner's assertion that copies of court records must be certified. In exclusion proceedings, ALJs have the authority to determine the admissibility of evidence. 42 C.F.R. � 1005.17(a). ALJs are not bound by the Federal Rules of Evidence but may apply them to exclude unreliable evidence. 42 C.F.R. � 1005.17(b). Petitioner does not dispute the accuracy, and therefore reliability, of the copies of the court records. Thus, the ALJ properly admitted the uncertified court records, and they constitute substantial evidence supporting the ALJ Decision.

Conclusion

For the reasons discussed above, we affirm the ALJ's determination that Petitioner was convicted, under section 1128(i), of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. Accordingly, the I.G. was authorized to exclude Petitioner, under section 1128(a)(4), for a minimum period of five years from participation in any federal health care program.

Judith A. Ballard

Sheila Ann Hegy

Donald F. Garrett
Presiding Board Member

1. The current version of the Social Security Act can be found at www.ssa.gov/OP Home/ssact/comp-ssa.htm. Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section. Also, a cross reference table for the Act and the United States Code can be found at 42 U.S.C.A. Ch. 7, Disp Table.

2. The decision does not specifically cite subsection 1128(i)(3), which makes a court's acceptance of a guilty plea another ground for finding a conviction, as an alternative basis for the ALJ's decision. However, the ALJ did "infer that the court's issuance of an Order granting pretrial diversion, based on Petitioner's entry of a guilty plea, indicates acceptance of that plea ...." ALJ Decision at 4. Although we need not reach this alternative ground in order to uphold the ALJ, we do not find Petitioner's arguments challenging the ALJ's conclusion persuasive. The conclusion that Petitioner's plea was accepted by the trial court is consistent with Hampton v. Commonwealth of Kentucky, 2005 WL 327533 (Ky. App. 2005). In Hampton, the Kentucky Court of Appeals upheld the Pike County Circuit Court's entry of judgment upon revocation of pretrial diversion under KRS � 533.250. The appeals court appears to have treated the trial court's order granting pretrial diversion as acceptance of the guilty plea by stating that Hampton's guilty plea "was accepted" by the trial court and by concluding that Hampton was "deemed convicted." We contrast the Hampton court's treatment of a guilty plea in a diversion program with the discussion in Travers v. Shalala, 791 F.Supp. 1471, at 1476, 1477 (1992), aff'd, 20 F.3d 993 (1994), where the Utah court "expressly took the Plaintiff's [nolo] plea under advisement" and stated that it would entertain the State's petition to accept the plea only if the plaintiff failed to comply with the diversion order or plea agreement. (Emphasis added.) Under those circumstances, the federal court found no conviction based on acceptance of a plea under 1128(i)(3) although it did find a conviction under 1128(i)(4).

3. Petitioner does not dispute the ALJ's finding that the offense at issue related to a controlled substance within the meaning of section 1128(a)(4).

4. An individual is eligible if he/she is charged with a certain class of felony and has not, within ten years preceding the offense, been convicted of a felony or been on probation. KRS � 533.250(a).

5. The legislative history focuses on program-related crimes because, at the time section 1128(i) was enacted, mandatory exclusions under section 1128(a) were limited to convictions for program-related crimes and patient abuse. In 1996, Congress expanded the bases for mandatory exclusion to include felony convictions for health fraud and controlled substances. Pub. L. No. 104-191, � 218. Both these new authorities are subject to the definition of "convicted" in section 1128(i).

6. The Travers district court described deferred prosecution as follows:

In a deferred prosecution, an agreement is entered into between the prosecutor and the defendant. At the heart of a deferred prosecution is an agreement by the prosecutor to delay bringing charges. What occurred in the case at bar cannot be characterized as a deferred prosecution because there was no deferral of prosecution. Instead, the charges were brought and a plea was tendered to the Utah court and the court, in effect, reserved ruling on the acceptance of the plea until the terms of the plea agreement had been fulfilled. This type of arrangement can most accurately be described as deferred acceptance of a plea.

Travers v. Shalala, 791 F.Supp. 1471, at 1478 n.2 (E.D. Wash. 1992).

7. Petitioner also relies on a statement in the Travers district court opinion that participation in a Utah diversion program under Utah Code Ann. � 77-2-5 would not constitute a conviction within section 1128(i)(4). Travers, 791 F.Supp. at 1478. However, the court's statement was dicta since the pretrial diversion program in which Travers participated did not fall under that statute. Additionally, contrary to what Petitioner argues, the program under Utah Code Ann. � 77-2-5 differs fundamentally from that under KRS � 533.250 in that the Utah scheme does not require the defendant to enter a guilty plea. Rather, the Utah program simply requires a written diversion agreement between the defendant and the prosecutor. Utah Code Ann. � 77-2-5(1).

8. Section 533.262(1) provides in full: "The pretrial diversion program authorized by KRS 522.250 to 533.260 shall be the sole program utilized in the Circuit Courts of the Commonwealth except for drug court diversion as approved by the Supreme Court and the Department of Corrections."

9. Petitioner cites KRCrP 1.02, which states: "These rules [KRCrP] shall govern procedure and practice in all criminal proceedings in the Court of Justice." This rule simply states the general applicability of the Kentucky rules of criminal procedure. It cannot reasonably be read to mean KRCrP 8.04 modifies the operation of KRS 533.250 et seq., a program which the legislature enacted as the exclusive means of pretrial diversion in circuit court cases.

10. Petitioner argues the ALJ erred in relying on Hampton because it was not published. P. Br. at 9. Petitioner cites Kentucky Rule of Civil Procedure (KRCP) 76.28(4), which states "Unpublished opinions shall never be cited or used as authority in any other case in any court of this state." This rule does not apply to the ALJ proceedings, which are federal administrative proceedings, not Kentucky court proceedings. See Managed Health Care Assoc. v. Kethan, 209 F.3d 923, 929 (6^th Cir. 2000) (KRCP 76.28(4) is not controlling in federal diversity case.)

11. In fact, the Utah procedure appears to have required the state to make and the court to entertain a motion to accept Dr. Traver's guilty plea if he had violated his agreement. Travers, 791 F.Supp. at 1478.