Department of Health and Human Services (H.H.S.)
Departmental Appeals Board
Civil Money Penalty
GEORGE G. GRIFFON, RESPONDENT
Docket No. C-8
Decision No. CR3
May 15, 1985
DECISION AND ORDER
This is a civil money penalties case arising from a determination by the
Inspector General of the Department of Health and Human Services (HHS) that
the Respondent submitted false Medicaid claims for payment in violation of
Sec. 1128A of the Social Security Act, as amended, (42 U.S.C. Secs. 1320a -
7a
et seq. (Act)) and its implementing regulation, 45 CFR Sec. 101.100 et seq.
(Regulation).
By letter dated July 3, 1984, the Deputy Inspector General for Civil Fraud
notified George G. Griffon, Respondent, of the Inspector General's (IG's)
intent to impose civil monetary penalties of $44,000 pursuant to the Act and
Regulation. More specifically, the IG's notice of intent was based on a
determination by the IG that Respondent presented or caused to be presented
to
the Louisiana Department of Health and Human Resources (DHHR), a State agency
administering the State plan for medical assistance under Title XIX of the
Social Security Act (Medicaid), claims for items which Respondent knew were
not provided as claimed. The IG charged that from September 1979 through
November 1979, Respondent's pharmacy in Baton Rouge, Louisiana, submitted 22
claims for prescriptions filled with brand-name drugs when, in fact, the
prescriptions had been filled with generic drugs. The IG alleged that
Respondent had defrauded the Medicaid program by instructing his pharmacist
employees to fill Medicaid prescriptions with lower priced generic drugs and
to charge the program with higher priced brand-name drugs. The IG stated that,
based on Respondent's presentation that the prescriptions had been filled with
brand-name drugs, the Medicaid program had reimbursed him the higher price of
the brand-name drugs. The IG noted that Respondent had been found guilty or
Medicaid fraud in violation of Louisiana law with respect to the 22 claims on
which the IG's proposed penalties were based.
By letter dated September 6, 1984, counsel for Respondent requested a
hearing before an Administrative Law Judge as provided for in 45 CFR Part 101.
On January 14, 1985, the undersigned conducted a hearing in New Orleans,
Louisiana, at which the parties were given the opportunity to present material
evidence relevant to the issues, to present and cross examine witnesses, and
to present orally their arguments on the facts and the law. Following the
hearing, after receipt of the hearing transcript, the parties were given the
opportunity to submit written briefs with their proposed findings of fact and
conclusions of law.
ISSUES
The principal issues in this case are: [FN1]
1. Whether Respondent submitted claims for items that he knew were not
provided as claimed, as defined by the Act and Regulation.
2. If Respondent submitted claims in violation of law, whether the amount
of the proposed penalties ($44,000) is reasonable and appropriate under the
circumstances of this case and within the intent and meaning of the Act and
Regulation.
BACKGROUND
Under the Medicaid program, HHS provides financial assistance to
participating states to aid them in furnishing health care to needy persons.
In Louisiana, DHHR is responsible for administering the Medicaid program,
including the payment of claims for pharmaceutical drugs dispensed to Medicaid
beneficiaries.
Pursuant to 42 U.S.C. Sec. 1320a - 7a, the Secretary of HHS may impose civil
money penalties and assessments against any person who presents or causes to
be presented a claim for an item or service, furnished under the Medicaid
program, that the person knew or had reason to know was not provided as
claimed. The Secretary may impose a penalty of up to $2,000 for each item or
service so falsely claimed and an assessment of up to twice the amount claimed
for each item or service. In addition, the Secretary may suspend a person
subject to a penalty or assessment from participation in the Medicaid and
Medicare (Title XVIII of the Act) programs.
On January 30, 1980, Respondent was indicted by the grand jury of East Baton
Rouge Parish on 32 counts of Medicaid fraud in violation of Louisiana Revised
Statutes 14:70.1. Joint Ex 1. [FN2] Prior to trial, four counts were
dismissed. Id. After a trial in the Nineteenth Judicial District Court,
Respondent was convicted on March 15, 1982 on 22 counts and sentenced as to
each count on June 15, 1982, to serve consecutive one year terms, suspended
upon restitution of $2,500 on each count, for a total of $55,000.
Additionally, Respondent was ordered to pay a fine of $2,500 on each count.
Respondent appealed, and on February 27, 1984, the Supreme Court of Louisiana
affirmed the conviction and sentence. Respondent did not seek further review.
As a result of his conviction, Respondent was suspended from participation
in the Medicare and Medicaid programs for five years. Respondent did not
appeal his suspension.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Having considered the entire record, the arguments of the parties, and being
advised fully herein, I make the following findings of fact and conclusions
of
law:
1. During the period September 1979 through November 1979 and at all other
times relevant to this proceeding, Respondent George Griffon was part owner
and manager of Griffon Drugs in Baton Rouge, Louisiana. Mr. Griffon is a
registered pharmacist.
2. Griffon Drugs has participated in the Medicaid program since 1966, and
applied for a provider number on October 6, 1975.
3. During the period September 1979 through November 1979, Respondent
submitted to DHHR the following claims for prescriptions billed at the rate
for brand-name drugs, although the pharmacists at Griffon Drugs dispensed
lower priced generic drugs to Medicaid recipients to fill the prescriptions:
Approximate Prescrip- Date of Date of Individual tion Prescrip- Amount Claim
Claim Number Number tion Claimed
a. 9-13-79 9879256128050 118609 8-14-79 $ 4.67
b. 10-15-79 9879288183270 659692 9-4-79 $ 8.84
c. 10-15-79 9879288183530 666831 9-6-79 $ 4.15
d. 10-15-79 9879288180100 120549 9-20-79 $ 5.35
e. 10-15-79 9879288180040 120557 9-20-79 $ 5.08
f. 10-15-79 9879288180570 667705 9-25-79 $14.08
g. 10-15-79 9879288170300 664331 10-1-79 $ 5.68
h. 10-15-79 9879288170320 667958 10-1-79 $ 9.85
i. 10-30-79 9879303064720 120480 10-4-79 $ 4.93
j. 10-30-79 9879303075190 668134 10-4-79 $ 9.71
k. 10-30-79 9879303063730 120244 10-11-79 $ 4.69
l. 10-30-79 9879303177460 668673 10-15-79 $17.34
m. 10-30-79 9879303076130 120707 10-17-79 $ 6.58
n. 10-30-79 9879303075710 666649 10-20-79 $ 4.18
o. 11-5-79 9879309013450 120935 10-22-79 $ 6.10
p. 11-5-79 9879309015340 665328 10-24-79 $13.64
q. 11-5-79 9879309189870 663385 10-26-79 $10.23
r. 11-5-79 9879309012720 119082 10-29-79 $ 5.83
s. 11-5-79 9879309012740 119313 10-29-79 $10.97
t. 11-5-79 9879309013640 119694 10-26-79 $ 4.55
u. 11-5-79 9879309013700 120976 10-26-79 $ 4.27
v. 11-5-79 9879309012550 121011 10-30-79 $ 4.93
4. Each of the items listed in 3a -- 3v, supra, is subject to a
determination that Respondent presented or caused to be presented a claim with
respect to that item and that Respondent knew the item was not provided as
claimed, within the scope of 45 CFR Sec. 101.102.
5. After a trial in State court in which Respondent was the defendant and
had the opportunity to be heard, Respondent was convicted of having presented
a claim for each of the items listed in 3a -- 3v, supra, knowing that the item
had not been provided as claimed. The conviction was affirmed on appeal and
is
final.
6. In this civil money penalty proceeding, Respondent is bound by the State
court conviction as to each of the 22 items listed in 3a -- 3v, supra.
7. The IG proved by clear and convincing evidence that Respondent knowingly
presented false claims as described in Nos. 3 -- 6, supra, so that Respondent
could have been rendered liable under the provisions of the False Claims Act,
31 U.S.C. Sec. 3729 et seq. for payment of not less than $44,000. Respondent
did not dispute the adequacy of the IG's proof.
8. Respondent did not assert any factors in mitigation of the penalty
proposed, nor do I find any.
9. It is an aggravating circumstance that Respondent not only directed
employees to fill prescriptions with generic drugs while billing for
brand-name drugs, but also personally participated in the transfer of generic
drugs into brand-name containers as one method of ensuring that the State
Medicaid agency would reimburse at the higher brand-name level. See IG Ex. 1,
pp. 637 - 645.
10. It is an aggravating circumstance that since as early as 1974,
Respondent made a practice of substituting generic drugs for brand-name drugs
and billing for the higher priced brand names. See Joint Ex 3, pp. 8-9.
11. It is an aggravating circumstance that Respondent's practice of filling
prescriptions with generic drugs while billing for brand-name drugs was
extensive, averaging 50 percent of the approximately 200 prescriptions per day
which Griffon Drugs supplied to Medicaid recipients in nursing homes, using
30
to 40 different generic drugs. See IG Ex 3, pp. 923, 951, 968. Respondent was
reimbursed slightly over one million dollars for Medicaid claims during the
period 1974-1979. See IG Ex. 6.
12. It is an aggravating circumstance that Respondent submitted false claims
in which he not only submitted brand names in lieu of the generic drugs
actually supplied, but also identified the drugs with the National Drug Code
numbers associated with the brand name. See Joint Ex 3, pp. 7, 9.
DISCUSSION
1. The Inspector General proved that Respondent submitted 22 false claims
so
that Respondent was subject to civil money penalties and assessment, and
suspension from the Medicare and Medicaid programs.
The Inspector General proved that Respondent had been convicted by the State
of Louisiana of submitting false claims for 22 items with the intent to
defraud the State Medicaid program. Respondent did not dispute that his
conviction, affirmed on appeal, was a final determination on those 22 false
claims and that in this proceeding he was bound by that determination in
accordance with 45 CFR Sec. 101.114( c). His counsel stated specifically that
he was "not contesting the adequacy of proof of those items claimed by
the
government which correspond to counts of the state indictment upon which
Griffon was convicted." March 4, 1985 letter transmitting Respondent's
Post-Hearing Brief. [FN3] Respondent joined in a stipulation and exhibits
attesting to the circumstances of his conviction. Prehearing Memorandum of IG;
order dated November 29, 1984; Joint 1-3. The details of Respondent's
conviction are set out in these documents and in IG Ex 5, which is a chart
identical to one introduced at his State trial.
Upon review of these materials, and in the absence of any argument or
showing to the contrary, I conclude that the IG has proved by clear and
convincing evidence that Respondent presented Medicaid reimbursement claims
for the 22 items on which he was convicted, and that Respondent knew that the
22 items were not provided as claimed. Respondent claimed reimbursement for
the cost of brand-name drugs when in fact he knew that lower cost generic
drugs had actually been dispensed to Medicaid recipients. For this he could
have been liable under the False Claims Act, 31 U.S.C. 3729 et seq. and thus
was subject to penalties and an assessment, and suspension from the Medicare
and Medicaid programs, all of which could be imposed administratively by HHS.
2. The penalties imposed are appropriate and reasonable.
Having found that Respondent submitted false claims, I am empowered to
impose a penalty of not more than $2,000 for each of the 22 items which he
knew had not been provided as claimed. 45 CFR Sec. 103. In addition,
Respondent may be subject to assessment of not more than twice the amount
claimed and to a suspension for a period of time.
The IG proposed a penalty of $2,000 for each of the 22 items. The IG did not
seek an assessment. HHS imposed a suspension of five years in a separate
proceeding and the IG did not propose suspension here.
Respondent did not suggest any mitigating circumstances, nor do I find any.
Counsel for Respondent stated specifically that he was not raising any
defenses or factors in mitigation, nor was he contesting the propriety of the
proposed penalty. March 4, 1985 transmittal letter, supra. There were several
aggravating circumstances. See Findings 9-12, supra.
I conclude that a penalty of $2,000 for each of the 22 items -- a total of
$44,000 -- is appropriate in this case. The guidelines for determining the
amount of the penalty and assessment state that where there are substantial
or
several aggravating circumstances, the aggregate amount of the penalty and
assessment should be set at an amount sufficiently close to or at the maximum
to reflect that fact. The substantial nature of the aggravating circumstances
is well summarized in the findings of the Louisiana Supreme Court that
Respondent:
knew exactly what he was doing and knew the benefit he would reap in
utilizing this scheme. . . The scheme to defraud the Medicaid program had been
in practice for at least six years, at great cost to the state and the
program, all as evidenced by the great volume of prescription business enjoyed
by the defendant through those years. . . The seriousness of the crime is that
funds which would and could have benefitted needy Medicaid recipients were
unlawfully diverted to defendant's own use.
Joint Ex 3, pp. 8, 12.
The IG asserted in the Post Hearing Brief that penalties are meant to be
punitive, to deter the wrongdoer and others from engaging in similar
fraudulent conduct in the future, are designed to go beyond monetary losses
to
the government, and are in addition to other penalties that may be prescribed
by law. Brief, p. 27. Thus, although Respondent paid restitution of $55,000
and an additional $55,000 in fines to the State of Louisiana, it is reasonable
and appropriate to impose another $44,000 in penalties because of the
aggravating circumstances and the need for an amount substantial enough to act
as a deterrent.
3. Respondent had adequate notice of the basis for the civil money penalties
imposed herein and a full opportunity to be heard.
For the first time in his Post Hearing Brief, Respondent asserted that the
IG had not proved his case with respect to eight of the 22 claims on the basis
of which the IG proposed penalties of $2,000 per claim. Brief, p. 9.
Respondent pointed out that 1) four of those claims were counts of the
original 32-count indictment, but those four had been dismissed prior to
trial; and 2) four other claims were ones on which the Respondent had been
found not guilty. The eight claims to which Respondent was referring were on
a
list of 22 claims attached to the Notice of Intent.
In a reply brief, the IG conceded that the Notice of Intent in error had
listed the eight claims discussed above. As a result of this error, the Notice
had not listed eight of the claims on which Respondent had been convicted.
Reply Brief, p. 2. Accompanying the IG's reply brief was a "Motion to Amend
the Notice of Proposed Determination" which in effect proposed to substitute
a
corrected chart containing only the 22 claims on which Respondent had been
convicted for the erroneous chart attached to the original Notice of Intent.
In his opposition to the IG's motion, Respondent asserted that he had not
objected to that evidence "relative to counts of the indictment which were
not
itemized in the notice of determination" because at the time of the hearing
such evidence was "irrelevant and immaterial." Respondent contended
that the
effect of the motion was to make that evidence relevant at a time when no
objection could be made. Respondent also contended he was prejudiced because
prior to the motion to amend he had relinquished any possible argument that
he
had relied on incorrect information supplied by the State agency.
By Order of April 11, 1985, I granted the IG's motion but suspended my order
for 10 days to permit the Respondent to file a motion to strike or other
appropriate pleading. Respondent did not reply.
I conclude that Respondent was not prejudiced by permitting the IG, in
effect, to amend the pleadings to conform to the proof. As I noted in my
Order, the Notice of Intent itself referred to the 22 claims on which
Respondent was convicted as forming the basis for the proposed penalties. In
his prehearing conference statement, Respondent also asserts that the basis
for the IG's proposed penalties "are the same acts charged in the indictment."
At the hearing, counsel for Respondent referred to the indictment as the
"spring from which this whole case has eventually sprung" and counsel
for the
IG declared again that the IG's case was based on the 22 counts on which
Respondent was convicted. Tr. 5, 70. It is simply not credible that Respondent
was misled to his prejudice into believing that the IG would base any part of
his case on counts of the indictment which had been dismissed or on which
Respondent had been found not guilty while omitting counts on which Respondent
had been convicted. If there had been any prejudice, Respondent was given an
opportunity to present his case, but he chose to remain silent. It is only
reasonable to conclude that Respondent's silence confirms the obvious --
Respondent was given adequate notice of the IG's basis and a full opportunity
to present his own case.
4. I am not authorized to decide the Respondent's challenge to the validity
of the Act and regulations.
Respondent challenged the validity of the Act and regulations as applied to
him in this case because the bases for the proposed penalties are actions
which took place prior to the 1981 amendment adding the civil money penalties
provision to the Act. I do not have the authority to decide upon the validity
of federal statutes or regulations; as Administrative Law Judge I make an
assumption that the Act and Regulation are valid. Consequently, I make no
decision on this issue. 45 CFR Sec. 101.115(c).
5. The testimony of Carolyn Maggio, the exhibit contains the provider manual
(Resp. Ex 1) were not considered in this decision.
At the hearing in this case I admitted into evidence the testimony of the
only witness and two exhibits, over the objection of counsel for the IG,
subject to considering the relevancy of that evidence on the basis of that
objection. Tr. 50. The testimony was that of Carolyn Maggio, Assistant
Director of the Medical Assistance Division, Office of Family Security,
Louisiana Department of Health and Human Resources. Tr. 18-49. The exhibits
were 1) the trial testimony of the Respondent (Resp. Ex 3); and 2) selected
pages from the Louisiana Medical Assistance Provider Manual (Resp. Ex 1).
The IG objected to this evidence because Respondent was using it to re-
argue defenses which he had asserted without success at his criminal trial.
The IG contended that Respondent was collaterally estopped from raising those
defenses again in this proceeding, citing 45 CFR Sec. 101.114(c) as well as
Montana v. United States, 440 U.S. 147, 153 (1979) and other well established
case law. Respondent apparently finally agreed, for in his Post Hearing brief
he conceded that he was bound by his conviction. See p. 6 of this decision,
supra.
Accordingly, I did not consider this evidence in Respondent's defense. Even
if I had, Respondent's purpose in using this evidence to support his defense
of lack of intent would have been frustrated. The issue in this case is
whether he knew; the degree of his intent speaks only to the question of
mitigating or aggravating circumstances. As I noted in discussing that issue,
there is ample evidence that Respondent not only knew but intended the
unlawful consequences of his actions. See pp. 5-6 supra. Carolyn Maggio's
testimony would have supported, not undermined, that conclusion.
ORDER
Penalties of $2,000 for each of 22 items falsely claimed, on which
Respondent was convicted in state court, (a total of $44,000) are hereby
imposed and Respondent is Ordered to pay this amount.
Ronald T. Osborn
FN1. These issues subsume those identified in my letter of February 5, 1985.
FN2. Exhibits admitted into evidence at the hearing are referred to herein
as
"Joint Ex" (followed by the number) for exhibits introduced jointly;
"Resp.
Ex" for the Respondent's exhibits; and "IG Ex" for the Inspector
General's
exhibits. The transcript of the hearing is referred to as "Tr", followed
by a
page number".
FN3. In the letter and in the brief, Respondent raised an issue with respect
to items in the original notice of intent which did not correspond to the
items on which Respondent was convicted. This issue is discussed at pp. 7-8,
infra.
END OF DOCUMENT