Michael Ingram, DAB CR5252 (2019)

DECISION

The Inspector General of the United States Department of Health and Human Services (the IG) excluded Petitioner, Michael Ingram, from participation in Medicare, Medicaid, and all other federal health care programs for 12 years, based on his criminal conviction for an offense related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. Petitioner sought review of the exclusion. For the reasons stated below, I affirm the basis for the IG’s exclusion but reduce the period to 10 years.

I. Background and Procedural History

By letter dated May 31 2018,1 the IG notified Petitioner that he was excluded from participating in Medicare, Medicaid, and all federal health care programs under section 1128(a)(4) of the Social Security Act (Act) for a period of 12 years due to his conviction for a criminal offense related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.  IG Ex. 1.  The IG relied on two aggravating factors

Page 2

to extend the term of Petitioner’s exclusion to 12 years.  Id.  Petitioner timely requested a hearing before an administrative law judge (ALJ), and I was designated to hear and decide this case.

I held a pre-hearing telephone conference on August 22, 2018, the substance of which is summarized in my August 24, 2018 Order Summarizing Pre-hearing Conference and Setting Briefing Schedule (Summary Order).  Among other things, I directed the parties to file pre-hearing briefs articulating their respective arguments as well as identifying witnesses and exhibits in support thereof.  Summary Order at 3.

The IG filed a brief (IG Br.) and six exhibits (IG Exs. 1-6), while Petitioner filed a brief (P. Br.) and five exhibits (P. Exs. 1-5).  The IG then submitted a reply brief (IG Reply).  On December 13, 2018, Petitioner sought leave to file additional evidence attached as Exhibit A to his motion.  The IG responded and voiced no objection to the admission of that exhibit, which I will refer to as P. Ex. 6.

II. Admission of Exhibits and Decision on the Record

In the absence of any objections, I admit into evidence IG Exs. 1-6 and P. Exs. 1-6. 

Neither party indicated a hearing was necessary or requested cross-examination of the opposing party’s witnesses.  IG Br. at 9-10; P. Br. at 14.  An in-person hearing would therefore serve no purpose and the matter may be decided on the written record. See Civ. Remedies Div. P. 19(d).

III. Issues

Whether the IG has a basis to exclude Petitioner from participation in federal health care programs under section 1128(a)(4) of the Social Security Act, and if so, whether the minimum length of the exclusion, 12 years, is reasonable.  42 C.F.R. § 1001.2007.

IV. Applicable Law

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) provides Petitioner with rights to a hearing before an ALJ and judicial review of the final action of the Secretary of Health and Human Services (Secretary).  The right to a hearing before an ALJ is set forth in 42 C.F.R. §§ 1001.2007(a) and 1005.2, while the rights of both the sanctioned party and the IG to participate in a hearing are specified by 42 C.F.R. § 1005.3.

The Secretary must exclude from participation in federal health care programs “[a]ny individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law, of a criminal offense consisting of a felony relating

Page 3

to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.”  42 U.S.C. § 1320a-7(a)(4); see also 42 C.F.R. § 1001.101(d).

An individual is convicted of a criminal offense when:  (1) a judgment of conviction has been entered against him or her in a federal, state, or local court whether an appeal is pending or the record of the conviction is expunged; (2) there is a finding of guilt by a court; (3) a plea of guilty or no contest is accepted by a court; or (4) the individual has entered into any arrangement or program where judgment of conviction is withheld.  42 U.S.C. § 1320a-7(i).  There may be no collateral attack of the conviction that provides the basis of the exclusion.  42 C.F.R. § 1001.2007(d).

Section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)) provides that an exclusion imposed under section 1128(a) of the Act (42 U.S.C. § 1320a-7(a)) shall be for a minimum period of five years.  The exclusion is effective twenty days from the date of the notice of exclusion.  42 C.F.R. § 1001.2002(b).  The period of exclusion may be extended based on the presence of specified aggravating factors.  42 C.F.R. § 1001.102(b).  Mitigating factors are considered as a basis for reducing the period of exclusion only if aggravating factors justify an exclusion of longer than five years.  42 C.F.R. § 1001.102(c).

The standard of proof is a preponderance of the evidence.  42 C.F.R. § 1001.2007(c).  Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors; the IG bears the burden on all other issues.  42 C.F.R. § 1005.15(c); Summary Order at 2.

V. Jurisdiction

Because Petitioner timely requested a hearing, I have jurisdiction to hear and decide this case.  See 42 C.F.R. §§ 1001.2007(a)(1)-(2), 1005.2(a); see also 42 U.S.C. § 1320a‑7(f)(1).

VI. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold and followed by pertinent findings of fact and analysis.

A. There is a basis for Petitioner’s exclusion as he was convicted of a criminal offense within the meaning of section 1128(a)(4) of the Act.

Section 1128(a)(4) mandates that the Secretary exclude from program participation any individual or entity convicted of a felony criminal offense “relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.”  See 42

Page 4

C.F.R. § 1001.101(d).  As discussed below, the IG has established, by preponderance of the evidence, the elements necessary to exclude Petitioner.

On June 2, 2017, the United States charged Petitioner with conspiring with others to knowingly and intentionally distribute and dispense a controlled substance, in this case Oxycodone.  IG Ex. 5 at 1.2  Petitioner subsequently pleaded guilty to the conspiracy count as well as one count of engaging in a monetary transaction in criminally derived property (in essence, money laundering).  IG Ex. 3 at 1.  On October 27, 2017, the U.S. District Court for the Eastern District of Kentucky (District Court) accepted Petitioner’s plea and entered judgment against him.  IG Ex. 4.  The District Court dismissed the remaining counts against Petitioner, sentenced him to 96 months’ imprisonment, and ordered him to forfeit the items listed in the forfeiture allegation of the government’s second superseding indictment, namely $300,000, four parcels of real property, an airplane, a car, and a motorcycle.  IG Ex. 4 at 1-3, 7; IG. Ex. 5 at 15-18.

Petitioner concedes he was convicted of a felony committed after August 21, 1996.  P. Br. at 1.  He further concedes his conviction was related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance, and that his exclusion is thus required.  Id. at 3.  I therefore need not devote any great deal of time to articulating how the IG met his burden as to these elements.

I find it sufficient to note that on their face, the counts to which Petitioner pleaded relate to the unlawful distribution or dispensing of a controlled substance; specifically, conspiring to distribute a controlled substance, Oxycodone, and laundering the proceeds of that crime.  IG Exs. 3, 5.  His plea agreement specifically sets forth his conduct that demonstrates a factual basis for his conviction on those offenses.  IG Ex. 3 at 2-4.  His conviction in District Court under these charges clearly meets the elements necessary for the IG to demonstrate exclusion is necessary.  I therefore have no difficulty concluding that Petitioner was convicted of a criminal offense that occurred after August 21, 1996 which related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance, as contemplated by 42 U.S.C. § 1320a-7(a)(4).

B. Petitioner must be excluded for a minimum of five years.

Because I have concluded that a basis exists to exclude Petitioner under 42 U.S.C. § 1320a-7(a)(4), Petitioner must be excluded for a minimum period of five years.  42 U.S.C. § 1320a-7(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2).  Petitioner has conceded a five-year exclusion period is appropriate.  P. Br. at 3.  In any event, the IG has no discretion to impose a lesser period of exclusion, and I may not reduce the period of exclusion below five years.

Page 5

C. The IG has proven only one aggravating factor exists to support an exclusion period beyond the five-year statutory minimum.

The regulations establish aggravating factors that the IG may consider to lengthen the period of exclusion beyond the five-year minimum for a mandatory exclusion.  42 C.F.R. § 1001.102(b).  In this case, the IG applied two aggravating factors to impose a 12-year term of exclusion:  (1) the sentence imposed by the court included incarceration; and (2) Petitioner’s offense had a significant adverse financial impact on program beneficiaries or other individuals.  IG Ex. 2 at 1; 42 C.F.R. §§ 1001.102(b)(3),(5).  I must uphold the IG’s determination as to the length of exclusion so long as it is not unreasonable.  42 C.F.R. § 1001.2007(a)(1)(ii).  As outlined below, the IG’s determination is unreasonable.

1. The IG established the sentence imposed against Petitioner included a period of incarceration.

The IG determined the aggravating factor found at 42 C.F.R. § 1001.102(b)(5) is applicable because Petitioner’s criminal conviction resulted in a sentence of incarceration.  IG Ex. 1 at 2.  There is no dispute that the District Court sentenced Petitioner to a 96-month term of incarceration for the conviction upon which the IG’s exclusion is based.  IG Ex. 4 at 2.  Therefore I conclude the IG reasonably applied this aggravating factor in determining Petitioner’s period of exclusion.

2. The IG was authorized to amend the notice of exclusion and Petitioner suffered no harm as a result.

Petitioner disputes the IG’s application of the second aggravating factor found at 42 C.F.R. § 1001.102(b)(3), that the acts resulting in his conviction had a significant adverse physical, mental, or financial impact on one or more program beneficiaries or other individuals.  P. Br. at 6.

He first argues that the IG violated his due process rights by amending the notice of exclusion to him well after he filed his appeal, only days before the IG’s brief was due, and thus “changing theories midstream” in the case against him.  Id. at 5-6.

Putting aside the fact that I am not authorized to hear constitutional claims, see Susan Malady, R.N., DAB No. 1816 (2002), I do not find any actual prejudice to Petitioner in this instance.  The applicable regulations permit the IG to modify the actual period of exclusion as late as fifteen days prior to the final submission of pre-hearing exchanges.  42 C.F.R. § 1001.2002(e).  Here, the IG amended the notice well before Petitioner’s pre-hearing exchange was due.

Page 6

Moreover, the IG did not, as Petitioner suggested, change theories midstream.  The basis for Petitioner’s exclusion, the period of exclusion, and the basis for the application of a second aggravating factor – the amount Petitioner agreed to forfeit as proceeds of his crime – all remained the same.

If Petitioner was truly caught off-guard and required additional time to respond to the IG’s allegedly new theory, his recourse was plain – to ask me for additional time to file his pre-hearing exchange.  He did precisely that, requesting a two-week extension of time, which I granted.3 If Petitioner believed he needed additional time to fully address the slight change contained in the amended notice, he need only have requested it.  I therefore find no actual harm to Petitioner as a result of the amended notice, which was provided to him by the IG approximately two months before his own pre-hearing exchange was due.

3. The IG has not established the acts resulting in Petitioner’s conviction had a significant adverse physical, mental, or financial impact on one or more program beneficiaries or other individuals.

Petitioner next argues that the aggravating factor found at 42 C.F.R. § 1001.102(b)(3) is otherwise inapplicable to his exclusion because the IG did not demonstrate actual significant harm to program beneficiaries or other individuals by relying on the amount of forfeiture imposed against him by the District Court in the underlying criminal case upon which this exclusion action is based.  P. Br. at 8-9.

The IG asserts that Petitioner’s forfeiture of $230,087, the proceeds of his criminal conduct, meets this aggravating factor because it “represents the money that Petitioner received from individuals in exchange for illegally distributed oxycodone. . . . [T]hese purchasers suffered a significant adverse financial impact.”  IG Reply at 5 (emphasis added).  The IG claims the oxycodone Petitioner provided to numerous individuals was “worthless” because it was not lawfully provided.  IG Br. at 6.

The IG’s contention – that I should find significant financial harm befell the individuals who paid for fraudulently prescribed oxycodone because it was illegally distributed – is, logically speaking, a non sequitur.  For each individual who purchased oxycodone from Petitioner, its financial value came from its pharmaceutical effect, not its provenance.  Had Petitioner sold counterfeit pills containing no oxycodone, or if he had sold pills of substantially lower potency, I would perhaps be able to find he had caused financial harm to individuals who purchased those pills.

Page 7

However, the IG fails to demonstrate any such facts in the record that would allow me to make such a finding.  He contends the forfeiture amount “represents a direct and measurable harm to the individuals who paid for the oxycodone that Petitioner illegally distributed.”  IG Br. at 5.  But if that were true, the District Court would have imposed an order of restitution, which would have identified victims who Petitioner would be obliged to repay.4  Instead, as the U.S. Probation Office observed in its pre-sentencing report, “no victims can be identified in this offense and restitution is neither appropriate nor practical.”  P. Ex. 1 at 8.

Petitioner correctly observes that where this aggravating factor’s application has been affirmed by other judges of this division, some form of harm resulting from the excluded individual’s actions to identifiable individuals has been documented.  P. Br. at 8.  By contrast, the IG cites to only one case to support his notion that an order of forfeiture can demonstrate significant adverse financial impact, asserting a $27,947.32 order of restitution against an identified victim is equivalent.  IG Reply at 4, citing Georgina A. Molina, a/k/a Julia Ann Marie Mejia, DAB CR3632 (2015).

But that case is clearly inapposite; there, the petitioner had stolen and used credit card information from identified individuals who were her patients.  As I have explained, forfeiture and restitution are not the same, and for purposes of applying this aggravating factor, are clearly not interchangeable.  Nothing in the charging documents, the plea agreement, the judgment, or the order of forfeiture indicates the amount of forfeiture imposed was meant to reflect financial losses incurred by any victim or victims as a result of Petitioner’s criminal offenses.  Instead, the fact the District Court did not impose an order of restitution strongly signals that court did not identify any individuals who were financially harmed.  IG Ex. 4 at 6.  In sum, because the forfeiture amount represents the ill-gotten gains stemming from Petitioner’s crime, not the losses he caused to any individual or individuals in particular, I cannot find the application of this aggravating factor to be appropriate.

D. Petitioner has not established any mitigating factors exist in this case upon which I may rely to reduce the exclusion period.

The IG considered no mitigating factors in determining the length of Petitioner’s exclusion.  IG Br. at 6.  Petitioner contends his exclusion period should be reduced

Page 8

because the IG failed to properly consider and apply all three mitigating factors5 at 42 C.F.R. § 1001.102(c)(3).  P. Br. at 11-14.  I take these in turn.

The first mitigating circumstance – three or fewer misdemeanor convictions and a loss below $1,500 – is plainly inapplicable.  Petitioner makes no coherent effort to argue for its application; he simply asks me to ignore the plain language of the regulation and cites its regulatory history in the hope that I will do so.  P. Br. at 12.  I decline to ignore the law in Petitioner’s favor.  His argument in this circumstance is without merit.

Petitioner similarly argues for application of the third mitigating factor, cooperation with the government, relying on his anticipation that his sentence may be reduced in the future based on his cooperation, as evidenced by an e-mail from an Assistant U.S. Attorney, presumably his prosecutor, who confirmed Petitioner had voluntarily answered questions and that he understood Petitioner remained willing to cooperate in the future.  P. Ex. 6.  The mitigating factors are not intended to be applied speculatively.  Petitioner has made no effort to demonstrate actual cooperation resulting in any of the favorable outcomes to the government demanded by the regulation.  42 C.F.R. § 1001.102(c).  The e‑mail he proffered instead merely demonstrates his willingness to cooperate.6  Id.

Finally, Petitioner contends the IG should have reduced his exclusion period based on the mitigating factor of reduced culpability in the underlying criminal offense caused by a mental, physical, or emotional condition.  He asserts that “large portions” of his pre-sentencing report and sentencing memo reflect severe mental and emotional trauma that negatively affected his life.  P. Br. at 13.

It is Petitioner’s burden to show his circumstance meets a mitigating factor, 42 C.F.R. § 1005.15(b)(1), but he has identified no specific circumstances or argued how they demonstrate his reduced culpability.  Nevertheless, I have considered both pieces of evidence and find Petitioner’s claim for the applicability of this mitigating factor to be without merit.

When interviewed by the U.S. Probation Office, Petitioner asserted recent situational depression and a longstanding history of using alcohol to self-medicate.  P. Ex. 1 at 12.  His sentencing memorandum relies primarily on the early illness and death of his father.

Page 9

P. Ex. 2 at 5-6.  At best, these documents were useful in assessing Petitioner’s history and characteristics for the purpose of sentencing, but in neither case do they demonstrate reduced culpability, as required for me to apply this mitigating factor.

Petitioner’s reliance on the Board’s decision in Arthur C. Haspel, D.P.M., DAB No. 1929 (2004) is misplaced.  It may be true that I could infer the sentencing court found reduced culpability based on unrebutted testimony concerning an impairment and a resulting lenient sentence, but that situation did not occur here, because the District Court did not impose a lenient sentence.

Petitioner claims that his 96-month sentence of incarceration should be considered lenient because it is lower than the 97- to 121-month range of incarceration recommended by the U.S. Sentencing Guidelines.  P. Br. at 13.  Petitioner cites no authority for his proposition that an eight-year term of incarceration in federal prison for a non-violent offense is lenient.  Such a claim defies common sense.

By contrast, the Board in Haspel thought a sentence of no incarceration and three months of home confinement, when compared to a maximum possible penalty of five years’ incarceration, could imply the sentencing court’s leniency.  And in that case, the record demonstrated Haspel’s extensive history of drug abuse, along with “extensive and time-consuming efforts” at rehabilitation, were taken into account by the sentencing court.  Haspel, DAB No. 1929.  The harsh sentence imposed on Petitioner here leads me to conclude that the District Court did not believe Petitioner’s proffered evidence of emotional or mental impairment warranted a lenient sentence.  Petitioner has not met his burden to prove that this mitigating factor should have been applied.

E. A 12-year exclusion period is unreasonable, and I therefore impose a 10-year exclusion period.

I must uphold the IG’s determination as to the length of exclusion unless it is unreasonable.  42 C.F.R. § 1001.2007(a)(1)(ii).  It is important to note that it is the quality of the aggravating (or mitigating) factors that is most important when considering the length of exclusion, and not the sheer number of aggravating factors that are present in a given case.  As the Secretary of Health and Human Services stated in the preamble to the final rule establishing the exclusion regulations:

We do not intend for the aggravating and mitigating factors to have specific values; rather, these factors must be evaluated based on the circumstances of a particular case.  For example, in one case many aggravating factors may exist, but the subject’s cooperation with the OIG may be so significant that it is appropriate to give that one mitigating factor more weight than all of the aggravating. Similarly, many mitigating factors

Page 10

may exist in a case, but the acts could have had such a significant physical impact on program beneficiaries that the existence of that one aggravating factor must be given more weight than all of the mitigating.  The weight accorded to each mitigating and aggravating factor cannot be established according to a rigid formula, but must be determined in the context of the particular case at issue.

57 Fed. Reg. 3298, 3314-15 (Jan. 29, 1992).

Here, Petitioner participated in a conspiracy to distribute and dispense Oxycodone, a controlled substance.  IG Ex. 5 at 1.  When he pleaded guilty to this crime, Petitioner admitted that despite the fact his criminal conduct only persisted for approximately seven months, he had dispensed almost 41,000 tablets of Oxycodone by means of forged prescriptions.  IG Ex. 3 at 3.  Because of this offense, as well as another count of money laundering, the District Court sentenced Petitioner to 96 months’ incarceration.  IG Ex. 4 at 2.  This lengthy period of incarceration demonstrates the severity of Petitioner’s offense, as well as his level of untrustworthiness.  Eugene Goldman, M.D., a/k/a Yevgeniy Goldman, M.D.,DAB No. 2635 at 5 (2015).

I have seriously considered upholding the 12-year exclusion period based solely on the staggering impact Petitioner’s conduct has likely wrought in his community, as reflected in the factual basis for the one aggravating factor established by the IG.  The profound and appalling effect of the opioid epidemic in Petitioner’s area is widely reported and nationally recognized.7 Petitioner has the temerity to argue that his prolonged exclusion would limit access to health care by underserved populations.  P. Br. at 15.  Nothing could be further from the truth.  The IG may have failed to show a financial impact on any of the individuals to whom Petitioner illegally supplied over 40,000 Oxycodone pills in barely half a year.  But it is highly likely Petitioner’s conduct contributed to profound addiction and possibly harsher outcomes for an untold number of the most needy and desperate people in his area.  His prolonged exclusion will not reduce access to health care, but it may save lives.

However, I must also take into account the fact that the IG has failed to establish one of the two aggravating factors it used to impose a 12-year period of exclusion.  A reduction in the exclusion period is therefore appropriate.  As discussed above, I find the one aggravating factor established by the IG is entitled to significant weight.  I also find no

Page 11

evidence of mitigating circumstances.  I therefore conclude a 10-year period of exclusion is reasonable, as it takes into account the seriousness of Petitioner’s offense and his high level of untrustworthiness to participate in federal health care programs.

VII. Conclusion

The IG properly excluded Petitioner from participating in Medicare, Medicaid, and other federal health care programs.  The IG did not establish by preponderance of the evidence one of the two aggravating factors he relied upon to determine a period of exclusion.  I have taken into account the remaining aggravating factor, the lack of mitigating circumstances, and other salient circumstances unique to this case to find Petitioner should be excluded for a period of 10 years.

• 1. The IG issued an amended notice to Petitioner on September 25, 2018 that cited a different regulatory provision as the basis for one of the two aggravating factors, discussed further below.
• 2. Counts 1 and 72 of the second superseding indictment. IG Ex. 5.
• 3. I observe Petitioner’s counsel did not cite the IG’s amended notice as the reason he required additional time. He instead asserted he obtained information in late October 2018 relevant to my determination of the reasonableness of the exclusion that required additional time to brief. P. Mtn. Ext. at 1.
• 4. For purposes of applying this aggravating factor, the IG has improperly conflated the concepts of restitution and forfeiture. Restitution is intended to make a victim whole by restoring the losses suffered as a result of the crime; forfeiture is a punitive measure intended to force a criminal defendant to disgorge the proceeds of the crime. U.S. v. Newman, 659 F.3d 1235, 1240-42 (9th Cir. 2011). Put more simply, restitution measures the loss to the victim; forfeiture, the gain to the criminal.
• 5. I am permitted to consider only three mitigating factors: (1) a petitioner was convicted of three or fewer misdemeanor offenses and the resulting financial loss to the program was less than $1,500; (2) the record in the criminal proceedings demonstrates that a petitioner had a mental, physical, or emotional condition that reduced his culpability; and (3) a petitioner’s cooperation with federal or state officials resulted in others being convicted or excluded, or additional cases being investigated, or a civil money penalty being imposed. 42 C.F.R. § 1001.102(c).
• 6. Should Petitioner’s optimism concerning the impact of his cooperation with the government be borne out, he is free to notify the IG and ask for a reduction of his exclusion period.
• 7. Kentucky is among the top ten states for opioid-related deaths, which occur there at nearly twice the national rate. Nat'l Inst. On Drug Abuse, Kentucky Opioid Summary, available at https://www.drugabuse.gov/drugs-abuse/opioids/opioid-summaries-by-state/kentucky-opioid-summary (last rev. Feb. 2018). The U.S. Attorney for the Eastern District of Kentucky described his jurisdiction as “Ground Zero in the overdose crisis,” noting the five counties in Kentucky with the highest per-capita overdose death rates were all contained within that district. Robert M. Duncan, Jr., Federal prosecutors finding new ways to fight Ky.'s opioid crisis, Lexington Herald Reader (2018), available at https://www.kentucky.com/opinion/op-ed/article217240795.html (last updated Aug. 23, 2018).