SUBJECT: Gary Alan Katz, R.Ph.,

Petitioner,

The Inspector General

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Gary Alan Katz, R.Ph., (Petitioner) appealed an April 24, 2002 decision by Administrative Law Judge (ALJ) Keith W. Sickendick. Gary Alan Katz, R.Ph., DAB CR896 (2002) (ALJ Decision). The ALJ affirmed the decision of the Inspector General (I.G.) to exclude Petitioner from participation in Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f) of the Social Security Act (Act) for a period of 10 years. The ALJ determined that a five-year exclusion was mandatory because Petitioner was convicted of the manufacture of a controlled substance, marijuana. The ALJ further determined that the five-year additional period of exclusion imposed by the I.G. was within a reasonable range given the presence of two aggravating factors, although the ALJ found no factual support for a third aggravating factor relied on by the I.G. Petitioner did not dispute either before the ALJ or on appeal to the Board that a five-year exclusion was mandated based on Petitioner's conviction. Petitioner argued, however, that no additional period of exclusion was warranted based on the two aggravating factors that the ALJ found were present.

For the reasons discussed below, we conclude that the 10-year exclusion imposed by the ALJ is not within a reasonable range of exclusion periods under the circumstances here, but that an eight-year exclusion is reasonable. ⁽¹⁾ We therefore modify the Conclusion of Law identified in the ALJ Decision as number 10 to read:

10. A 10-year exclusion is not within a reasonable range of exclusion periods under the circumstances of this case. An eight-year exclusion (five years mandatory and a three-year extension) is reasonable under the circumstances of this case.

The record for our decision includes the record before the ALJ and the parties' submissions on appeal. Our standard of review on a disputed conclusion of law is whether the ALJ decision is erroneous. 42 C.F.R. � 1005.21(h). Our standard of review on a disputed finding of fact is whether the ALJ decision is supported by substantial evidence on the record as a whole. Id.

Applicable Law

Petitioner was excluded from participation in federal health care programs under section 1128(a)(4) of the Act. Section 1128(a)(4) mandates exclusion of any individual or entity that 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(c)(3)(B) of the Act provides generally that the minimum period of an exclusion under section 1128(a) shall be not less than five years. The regulations governing mandatory exclusions also provide that no such exclusion will be for less than five years. 42 C.F.R. � 1001.102(a). The regulations further provide that specified factors may be considered in lengthening the period of an exclusion beyond the five-year minimum for a mandatory exclusion. 42 C.F.R. � 1001.102(b). The aggravating factors on which the I.G. relied in this case were: whether the acts that resulted in the conviction were committed over a period of one year or more (section 1001.102(b)(2)), whether the sentence imposed by the court included incarceration (section 1001.102(b)(5)), and whether the individual has been the subject of any other adverse action by any federal, state, or local government agency or board if the adverse action is based on the same set of circumstances that serves as the basis of imposition of the exclusion (section 1001.102(b)(9)). Only if any of the aggravating factors justifies an exclusion longer than five years may mitigating factors be considered as a basis for reducing the period of exclusion to no less than five years. 42 C.F.R.
� 1001.102(c). The regulations provide that only the following mitigating factors may be considered by an ALJ:

(1) The individual or entity was convicted of 3 or fewer misdemeanor offenses, and the entire amount of financial loss to Medicare and the State health care programs due to the acts that resulted in the conviction, and similar acts, is less than $1,500.
(2) The record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional or physical condition before or during the commission of the offense that reduced the individual's culpability.
(3) The individual's or entity's cooperation with Federal or State officials resulted in --

(i) Others being convicted or excluded from Medicare, Medicaid and all other Federal health care programs,
(ii) Additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or
(iii) The imposition against anyone of a civil monetary penalty or assessment under part 1003 of this chapter.

42 C.F.R. � 1001.102(c).

Factual Background and Procedural History

The following summary of the undisputed facts is intended to provide a general framework for understanding the decision and is not intended to be a substitute for the ALJ's findings.

At the time of his arrest in May 1998, Petitioner was a pharmacist licensed by the State of Michigan. On November 24, 1999, Petitioner was found guilty of the felony offense of the manufacture of five kilos or more but less than 45 kilos of marijuana or a mixture containing marijuana and 20 marijuana plants or more, but less than 200 plants. Petitioner was sentenced to serve a minimum of one-year confinement up to a maximum of seven years confinement, to pay a $150 forensic laboratory fee, and to pay a $60 Victim's Right Fund fee. On September 7, 2000, the Disciplinary Subcommittee of the Board of Pharmacy, Michigan Department of Consumer and Industry Services, ordered that Petitioner's pharmacist license be suspended for a minimum period of three years, effective October 7, 2000.

On March 30, 2001, the I.G. notified Petitioner that he was being excluded from participation in federal health programs for a period of ten years. The notification stated that Petitioner's exclusion was being extended beyond the minimum period of exclusion because of the following circumstances:

• The acts that resulted in Petitioner's conviction were committed over a period of one year or more, from approximately 1995 through May 5, 1998.
  

• The sentence imposed by the court included incarceration for a minimum period of one year to a maximum period of seven years.



• Petitioner was the subject of an adverse action by a State board, in that the State of Michigan Board of Pharmacy suspended his pharmacist's license for three years.

On May 14, 2001, Petitioner appealed his exclusion. The parties agreed that an oral hearing in this matter was not required and that the appeal could be resolved on briefs.

The ALJ Decision

The ALJ found that there was an appropriate basis for Petitioner's exclusion because he was convicted of a felony offense of manufacture of marijuana. ALJ Decision at 1. The ALJ then examined whether the I.G.'s proposed 10-year exclusion was reasonable. The ALJ stated that, under Board precedent, he was required, in determining whether a period of exclusion is "unreasonable," to consider whether such period falls within a "reasonable range." ALJ Decision at 7, citing Joann Fletcher Cash, DAB No. 1725 (2000). The ALJ concluded that "[a] 10-year exclusion of Petitioner is within a reasonable range and is reasonable given the presence of two aggravating factors and no mitigating factors." ALJ Decision at 7.

In arriving at this conclusion, the ALJ found that the I.G. had proved by a preponderance of the evidence the existence of two aggravating factors (Petitioner's incarceration as a result of his felony conviction and the suspension of his pharmacist's license by the State of Michigan), but that the I.G. had not proved by the preponderance of the evidence the existence of a third aggravating factor (that Petitioner was convicted for acts that occurred over a period of one year or more).

The ALJ further found that none of the mitigating factors specified at 42 C.F.R. � 1001.102(c) had been proven by Petitioner. The ALJ stated in part:

Instead, Petitioner seeks to excuse his unlawful conduct arguing that: the manufacture of marijuana was for Petitioner's own use; Petitioner had not practiced as a pharmacist for more than two years prior to his arrest; he never used marijuana while working as a pharmacist; the attorney who represented him in the license revocation proceeding did a poor job and gave poor advice regarding challenging the I.G. action; Petitioner was addicted to marijuana; and there is no evidence that the use of marijuana adversely affected Petitioner's performance as a pharmacist. I accept none of these arguments as they are not recognized as mitigating factors under the regulation.

ALJ Decision at 9.

Since the I.G. had relied upon three aggravating factors when she imposed a 10-year exclusion instead of the two which the ALJ found were present, the ALJ stated that he was required "to reassess the appropriateness of imposing more than the minimum period of exclusion . . . ." The ALJ continued:

I have carefully considered the two aggravating factors in this case and find that a 10-year exclusion is very reasonable. Although Petitioner was sentenced to serve a minimum of one-year confinement, the maximum to which he was subject was seven years. The maximum authorized confinement indicates the seriousness of the offense. Further, as Petitioner points out, the suspension of Petitioner's pharmacist license was for much longer than the minimum, also an indication of the seriousness of the offense. Petitioner's Response, pp. 9-10. Petitioner's attempts to minimize or excuse his conduct do not militate against extending the minimum period of exclusion by five years as his excuses do not constitute mitigating factors under the regulations.

ALJ Decision at 10.

Issues on Appeal

Petitioner argued that an exclusion longer than the mandatory five-year period was not justified in the absence of the aggravating factor relating to the duration of the acts of which Petitioner was convicted. Petitioner further argued that, in evaluating the reasonableness of the length of the exclusion, the ALJ should have taken into consideration the facts of the case set forth in Petitioner's brief below, which showed that there was no harm to program beneficiaries. Petitioner further argued that the ALJ gave undue weight to the aggravating factor of Petitioner's incarceration based on a misunderstanding of Michigan law regarding sentencing. Finally, Petitioner argued that the ALJ gave undue weight to the aggravating factor of Petitioner's license suspension, the length of which Petitioner attributed to the incompetence of counsel representing him in the licensing proceeding. ⁽²⁾

Below, we discuss each of the arguments raised by Petitioner. We affirm without further discussion those findings of fact and conclusions of law to which no exception was made.

1. The ALJ erred in not reducing the 10-year exclusion in view of his conclusion that the I.G. had not established the aggravating factor at section 1001.102(b)(2).

Petitioner contended that the aggravating factor at 42 C.F.R.
� 1001.102(b)(2) (relating to the duration of his criminal activity) was "the primary aggravating factor" relied on by the I.G. because it was the second aggravating factor listed in section 1001.102(b), while the two other aggravating factors on which the I.G. relied were listed fifth and ninth. P. Br. at 6. Petitioner also asserted that the aggravating factor at section 1001.102(b)(2) was inherently more significant than the other two aggravating factors on which the I.G. relied. Thus, Petitioner contended, once the ALJ found that the I.G. had not established + this aggravating factor, "there remained no justifiable basis for the ALJ to have sustained any increased exclusion, much less a five-year increase in the [minimum five-year] exclusion." P. Br. at 7 (emphasis in original).

We find no merit in Petitioner's argument that the aggravating factor at section 1001.102(b)(2) was of such overwhelming significance that there was no basis for increasing the minimum five-year exclusion in the absence of this aggravating factor. Section 1001.102(b) states in relevant part: "Any of the following factors may be considered to be aggravating and a basis for lengthening the period of exclusion . . . ." There is no indication on the face of the regulation that any aggravating factor carries more weight simply because of the order in which it appears in the regulation. Moreover, the preamble to the regulations on mandatory exclusions states that "[a]n aggravating factor is one that does not automatically exist in every case, but when it does exist, justifies a longer period of exclusion. . . . To be an aggravating factor, we agree that the impact must be more than minimal, that is, it must have been significant . . . ." 57 Fed. Reg. 3298, 3315 (Jan. 29, 1992). Thus, the Department viewed each aggravating factor as having a significant impact and as a basis for lengthening the mandatory exclusion period. Accordingly, an exclusion longer than the mandatory five years is justified based on the two remaining aggravating factors.

We agree with Petitioner, however, that some reduction in the 10-year exclusion imposed by the I.G. was required in view of the ALJ's finding that the I.G. failed to establish the aggravating factor at section 1001.102(b)(2). The ALJ himself recognized that the I.G.'s error in relying on this aggravating factor "places the burden upon me to reassess the appropriateness of imposing more than the minimum period of exclusion given the existence of two aggravating factors." ALJ Decision at 10. The ALJ nonetheless determined that the absence of one of the aggravating factors made no difference in the length of the exclusion. This conclusion is difficult to reconcile with the Department's view, expressed in the preamble language quoted above, that each aggravating factor provides a basis for lengthening the mandatory five-year period. Given this language, some part of the additional five years that the I.G. added to the five-year mandatory exclusion period was necessarily attributable to the aggravating factor at section 1001.102(b)(2). Conversely, one would generally expect that the absence of one of the three aggravating factors on which the I.G. relied should result in a downward adjustment in the length of the exclusion.

The basis upon which the ALJ concluded that a 10-year exclusion was reasonable was that the two remaining aggravating factors had aspects that he found indicated the seriousness of Petitioner's offense: the period of incarceration to which Petitioner was sentenced and the length of his license suspension. We discuss Petitioner's arguments about these factors next, and conclude that Petitioner's argument about the ALJ's use of the period of incarceration has some (albeit limited) merit. Even if the ALJ correctly accorded some additional weight to both remaining aggravating factors beyond what the I.G. accorded them, however, the record does not support a conclusion that the particular circumstances surrounding these aggravating factors are so exceptional as to justify the same exclusion period as the I.G. imposed based on three aggravating factors. ⁽³⁾

Having concluded that some downward adjustment was required in light of the I.G.'s failure to prove one of the alleged aggravating factors, we therefore also conclude that the 10-year period chosen by the I.G. was not within a reasonable range. ⁽⁴⁾

In light of this conclusion, we next turn to Petitioner's arguments about the weight to be given to the two remaining aggravating factors. We necessarily must consider the weight to give these two factors in order to determine what is a reasonable length of an exclusion under the particular circumstances here.

2. Petitioner's argument about the period of incarceration has some merit, but only de minimis effect in deciding a reasonable length of the exclusion.

On appeal, Petitioner challenged the ALJ's statement that the seriousness of the offense of which Petitioner was convicted was shown by the fact that "the maximum authorized confinement" to which Petitioner was sentenced was seven years. ALJ Decision at 10. Petitioner asserted that Michigan is an "indeterminate sentencing state," meaning that under state law, the court must both set a minimum term and state a maximum term which is the maximum required by law. P. Br. at 9. Petitioner argued that it violated due process for the ALJ to rely on the maximum sentence since no maximum would be stated in a determinate sentencing state.

We conclude that, in determining what weight to give Petitioner's incarceration, the extent to which Petitioner's maximum sentence resulted from State law, rather than from the court's evaluation of the seriousness of Petitioner's offense, is relevant. ⁽⁵⁾ The statutory penalty for the offense of which Petitioner was convicted was "imprisonment for not more than 7 years or a fine of not more than $500,000.00, or both." M.C.L.A. 333.7401(2)(d)(ii). As indicated earlier in this decision, Petitioner was sentenced to serve a minimum of one year up to a maximum of seven years. While Petitioner's sentence stated the maximum term under the statute, this did not have the significance attributed to it by the ALJ. Instead, as Petitioner correctly observed, state law requires the court to set an indeterminate sentence, including both a minimum term and the statutory maximum term. M.C.L.A. 769.8(1). Since the length of the maximum term to which Petitioner was sentenced was automatic, it can hardly be probative of the court's judgment as to the seriousness of the offense in this particular instance. Indeed, the fact that the court set a minimum term of only one year indicates that the court viewed Petitioner's actions as significantly less serious than other actions which could constitute the same offense.

On the other hand, this conclusion does not substantially reduce the weight to be accorded this aggravating factor. Incarceration for an indeterminate period with a minimum of one year and a maximum of seven is significant in itself and certainly justifies a longer period of exclusion than if there was no incarceration or incarceration of a lesser type or shorter period.

Accordingly, while we conclude that the State law is relevant in determining what weight to accord this aggravating factor in determining the appropriate length of the exclusion, we further conclude that it should not substantially affect the weight to be given this factor here.

3. Petitioner's argument about the length of Petitioner's license suspension lacks merit.

On appeal, Petitioner challenged the ALJ's statement that "the suspension of petitioner's pharmacist license was for much longer than the minimum, also an indication of the seriousness of the offense." ALJ Decision at 10. Petitioner asserted that "[i]n part as a consequence of . . . the attorney's incompetence," "the licensing board disregarded all precedent and imposed a three-year suspension on Petitioner." P. Br. at 2, 4 (emphasis in original). Petitioner asserted that "every other pharmacist whose disciplinary cases preceded Petitioner, and whose underlying convictions had been based on controlled substance violations unrelated to the practice of pharmacy, received no more than probationary disciplines . . . ." Id. at 3 (emphasis in original), citing P. Ex. 2 (captioned "Disciplinary Decisions by Michigan Board of Pharmacy (1999-2001) for Similar or More Egregious Conduct Than Petitioner's."). Petitioner also asserted that counsel's incompetence was manifest in the transcript of the hearing before the state administrative law judge whose proposed decision was accepted by the Disciplinary Subcommittee of the Board of Pharmacy (P. Ex. 1). ⁽⁶⁾

The ALJ noted Petitioner's argument that "the attorney who represented him in the license revocation proceeding did a poor job," but stated that he did not accept this argument because it was not recognized as a mitigating factor. ALJ Decision at 9. We agree that Petitioner's argument does not itself establish a mitigating factor. Nor does it undercut the existence of the aggravating factor since Petitioner admitted to the suspension. The Board has previously stated that "the fact of additional adverse action beyond the criminal conviction could be considered as additional evidence of the seriousness of the underlying conduct." Narendra M. Patel, M.D., DAB No. 1736, at 28-29 (2000).

Petitioner's argument is, however, relevant to the question of whether the three-year length of the suspension in fact reflects a further indication of the seriousness of the offense (beyond the fact of the suspension itself) so as to justify the ALJ's conclusion that extra weight should be accorded to this aggravating factor. In effect, Petitioner questioned whether it was reasonable of the ALJ to infer from the fact that the suspension was more than the minimum suspension that the licensing body had evaluated Petitioner's offense as being more serious than the norm. Petitioner would have us infer instead that the length of his license suspension was attributable in part to poor representation by counsel in the licensing proceeding.

We first note that the adverse action was a suspension, rather than a revocation of Petitioner's license. The limited issue is merely whether we should find, as Petitioner argued, that the fact that the suspension exceeded that imposed in other cases involving convictions of similar controlled substance violations was attributable in part to poor representation by counsel and therefore treat it as though the suspension were in fact for a shorter period.

Generally, we consider it reasonable to infer that a licensing body will base its decisionmaking on appropriate factors and make a considered judgment about what sanction to impose based on the facts of the particular case. Here, the record as a whole provides no basis for concluding that the licensing body based its decision on the poor behavior of Petitioner's counsel; instead, the record, including the administrative complaint which initiated the proceedings, indicates that the focus was on the facts of Petitioner's offense and his past history. ⁽⁷⁾

Accordingly, we conclude that the ALJ properly relied on the three-year length of the license suspension as an indication of the seriousness of Petitioner's offense.

4. The ALJ did not err in not considering facts alleged by Petitioner to show that there was no harm to program beneficiaries.

On appeal, Petitioner reiterated that he had not practiced pharmacy for two and one half years prior to his arrest; that he had never used marijuana at any time during the work week while working as a pharmacist; that he used marijuana only to "feed his addiction"; and that neither his personal use of marijuana nor his growing it for his own use "had anything whatsoever to do with his practice of pharmacy." P. Br. at 3 (emphasis in original). Petitioner argued that these facts should have been considered in setting the length of the exclusion. The ALJ did not consider the alleged facts--which he characterized as seeking "to excuse [Petitioner's] unlawful conduct"--on the ground that they did not involve any of the mitigating factors specified in the regulations. ALJ Decision at 9. Petitioner argued that this was error. P. Br. at 12.

The factors that may be considered in determining whether an exclusion longer than the five-year mandatory period is warranted are limited to the aggravating and mitigating factors specified in the regulations. 42 C.F.R. � 1001.102(b) and (c). However, facts which do not themselves constitute a mitigating factor may still be relevant in evaluating the weight to be given to an aggravating factor.

The regulations make it an aggravating factor that the "acts that resulted in the conviction, or similar acts, had a significant adverse physical, mental or financial impact on one or more program beneficiaries or other individuals." See 42 C.F.R.
� 1001.102(b)(3). Since neither the I.G. nor the ALJ found that this aggravating factor was present, however, Petitioner's arguments are not relevant under the circumstances of the case.

5. An eight-year period is a reasonable period for an exclusion, given the specific facts associated with the two aggravating factors.

As discussed above, the fact that the I.G. did not establish the aggravating factor at section 1001.102(b)(2) warrants a reduction in the length of the exclusion. As also discussed above, in determining the weight to be given to the aggravating factor at section 1001.102(b)(5), we need to consider the fact that the court did not independently determine that Petitioner's offense warranted incarceration for up to seven years. On the other hand, a sentence of a minimum of one year of incarceration is still very serious. Under these circumstances, we conclude that an eight-year exclusion is reasonable, since it reduces the exclusion period by two years, which is slightly more than one-third of the five-year extension as determined by the I.G. based on three aggravating factors after according undue weight to the period of incarceration.

Conclusion

Based on the preceding analysis, we modify the Conclusion of Law identified in the ALJ Decision as number 10 to read:

10. A 10-year exclusion is not within a reasonable range of exclusion periods under the circumstances of this case. An eight-year exclusion (five years mandatory and a three-year extension) is reasonable under the circumstances of this case.

We also modify any unnumbered findings of fact and conclusions of law to which Petitioner took exception consistent with this decision.

Marc R. Hillson

M. Terry Johnson

Judith A. Ballard
Presiding Board Member

1. In order to expedite the resolution of this case, we are reaching this question rather than remanding the case to the ALJ. The Board has the option under 42 C.F.R. � 1005.21(g) of issuing a decision or remanding a case to the ALJ. Neither party suggested that the Board should remand the case to the ALJ. While a remand would be appropriate if the credibility of witnesses were at issue, that is not the situation here.

2. Petitioner did not specifically identify the findings of fact and conclusions of law to which he excepted. Based on his arguments, however, we conclude that Petitioner excepted to the Conclusion of Law on page 4 of the ALJ Decision that reads: "10. A 10-year exclusion (5 years mandatory and a 5 year extension) is within a reasonable range and is not unreasonable." In addition, we consider Petitioner as having excepted to the unnumbered conclusion on page 7 of the ALJ Decision that reads: "A 10-year exclusion of Petitioner is within a reasonable range and is reasonable given the presence of two aggravating factors and no mitigating factors." Finally, we consider Petitioner as having excepted to the statements on pages 9 and 10 of the ALJ Decision that are quoted in the previous section of this decision.

3. This does not mean that, under other circumstances, an ALJ could not reasonably decide that the remaining aggravating factors should be given more weight than the I.G. gave them (for example, based on new evidence), so that the length of the exclusion imposed by the I.G. is within a reasonable range even where the I.G. fails to prove an aggravating factor on which she relied.

4. We note that the ALJ Decision states that the "reasonable range" of mandatory exclusions is "from the minimum of 5 years to a maximum of permanent exclusion." ALJ Decision at 7. The ALJ continued: "This is the only range I have found specified in the law and it seems to be 'reasonable.'" Id. Under this reasoning, any exclusion period between five years and a permanent exclusion would be within a reasonable range and must be upheld in every case. As the Board has previously noted, however, the preamble to the regulations governing exclusions states that "[s]o long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule." See e.g., Cash at 17, quoting 57 Fed. Reg. 3298, 3321 (1992). Thus, a "reasonable range" refers to a range of exclusion periods that is more limited than the full range authorized by the statute and that is tied to the circumstances of the individual case. If the ALJ determines that the length of the exclusion imposed by the I.G. is within this range under the circumstances as found by the ALJ, he may not change it even if he believes that another exclusion period is more reasonable.

5. Petitioner's argument (at P. Br. at 5) that incarceration is "a matter of happenstance, dependent upon the time of day, a given judge's mood, the county of the state in which the person's case is brought, or any one of a million other factors that have absolutely no relationship whatsoever to the conviction," and thus is not an indication of "egregious" conduct, has no merit, however. Petitioner pointed to no evidence that this was the case here. Moreover, the regulations making incarceration an aggravating factor reasonably assume that a sentence of incarceration will be imposed pursuant to the applicable laws and sentencing guidelines.

6. In an exhibit admitted by the ALJ, Petitioner listed the respects in which it believed his counsel's conduct in the state disciplinary proceeding was "reprehensible." P. Ex. 4. However, Petitioner did not cite this exhibit in his exceptions to the ALJ Decision.

7. Nor are we persuaded by Petitioner's attempt to discount the significance of this aggravating factor as well as the aggravating factor of his incarceration on the ground that, under Michigan law, any health care practitioner convicted of a felony would have had his license suspended and been incarcerated. The regulations reflect a determination that these aggravating factors are not present in every case and that, where they are present, they are a basis for increasing the mandatory exclusion period. In any event, Petitioner's argument here contradicts his own assertion that similarly situated pharmacists in the state received no more than probationary disciplines, and the criminal statute under which Petitioner was convicted does not require incarceration.