Aleksey Illyuk, DAB CR5830 (2021)

DECISION

I affirm the determination by the Centers for Medicare & Medicaid Services (CMS) to deny Petitioner’s enrollment in the Medicare program as a supplier and to add Petitioner’s name to CMS’s preclusion list related to Medicare Parts C and D. 

I.  Background and Procedural History

Petitioner is a Certified Registered Nurse Anesthetist (CRNA) who, after obtaining his license in Missouri in 2020, applied for enrollment in the Medicare program.  Petitioner disclosed that he had been convicted of felonies in the recent past.  Based on those convictions, CMS denied his enrollment application and added his name to CMS’s preclusion list, which restricts Petitioner’s ability to obtain reimbursement for services provided to patients who are covered by a Medicare Advantage Plan (Medicare Part C) and makes the cost of prescriptions he writes non-reimbursable for patients in a Medicare Part D plan.  Petitioner sought reconsideration, but CMS upheld the prior determination. 

On December 11, 2020, Petitioner requested a hearing before an administrative law judge (ALJ) to dispute CMS’s actions.  On December 16, 2020, the Civil Remedies Division

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acknowledged receipt of the hearing request and issued my Standing Prehearing Order (SPO).  In accordance with the SPO, CMS filed its prehearing exchange, which included a motion for summary judgment/prehearing brief (CMS Br.) and 11 exhibits (CMS Exs. 1-11).  Petitioner’s prehearing exchange primarily consisted of a motion for summary judgment and a memorandum supporting that motion and responding to CMS’s summary judgment motion (P. Br.).   

II.  Admission of Exhibits

In a filing entitled “Petitioner’s Exhibits,” Petitioner stated that he did not have any exhibits to offer and that he did not object to any of CMS’s proposed exhibits.  Therefore, I admit all of CMS’s proposed exhibits into the record. 

III.  Decision on the Record

I directed the parties to submit, as part of the prehearing exchange, the written direct testimony for all witnesses that they wanted to present in this case and that the parties must file written requests to cross-examine any such witnesses.  SPO ¶¶ 7(d)(iv), 11-12; Civil Remedies Procedures (CRDP) §§ 16(b), 19(d); see Vandalia Park, DAB No. 1940 (2004); Pac. Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross-examine those witnesses).  I informed the parties that a hearing would be necessary only if a party files admissible, written direct testimony and the opposing party seeks to cross-examine that witness.  SPO ¶ 13; CRDP § 19(b).

In the present case, neither CMS nor Petitioner submitted written direct testimony for any witnesses.  Although Petitioner indicated that he would testify should this case proceed to a hearing, Petitioner neither submitted his written direct testimony nor requested exemption from that requirement. 

I decide this case based on the written record because neither party submitted written direct testimony for any witnesses.  SPO ¶ 14; CRDP § 19(d) (“The ALJ may determine that an oral hearing is unnecessary and not in the overall interest of judicial economy if the parties . . . do not offer the written direct testimony of any witnesses when ordered to do so.”).  Therefore, I need not rule on the parties’ motions for summary judgment. 

IV.  Issues

1. Whether CMS had a legitimate basis to deny Petitioner’s Medicare enrollment application based on 42 U.S.C. § 1395u(h)(8) and 42 C.F.R. § 424.530(a)(3).

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2. Whether CMS had a legitimate basis to place Petitioner on CMS’s preclusion list under 42 C.F.R. §§ 422.2 and 423.100.

V.  Jurisdiction

I have jurisdiction to hear and decide this case.  42 U.S.C. § 1395cc(j)(8); 42 C.F.R. §§ 498.3(b)(17), (20), 498.5(l)(2), (n)(2); see also 42 C.F.R. §§ 405.803(a), 422.222(a)(2)(i), 423.120(c)(6)(v)(A), 424.545(a), 498.1(g).

VI.  Findings of Fact

1) During the period from 2013 to 2017, Petitioner received associate’s and bachelor’s degrees in nursing, was licensed as a registered nurse in Missouri, was employed at a hospital as a nurse, and ultimately commenced full-time study to become a CRNA.  CMS Ex. 3 at 1; see also CMS Ex. 5 at 2.

2) In order to earn money in preparation for becoming a student in the CRNA program, Petitioner “began a small company selling new and used goods from China.”  CMS Ex. 3 at 1. 

3) On December 6, 2017, Petitioner entered into a Plea Agreement with the United States Government to plead guilty to a two-count Information that charged him with violating 18 U.S.C. §§ 1341 (Mail Fraud) and 545 (Smuggling Goods into the United States).  CMS Exs. 6-7. 

4) The charged offenses were both Class C Felonies.  CMS Ex. 6 at 1. 

5) The Plea Agreement indicated that the parties agreed to the following facts in relation to the two crimes (CMS Ex. 7 at 2-3): 

Mail Fraud (Count 1)

Based on the documentation received from EBay, DHL, Paypal, and various financial institutions, federal agents with the Department of Homeland Security Investigations determined that the defendant, ALEKSEY ILLYUK (ILLYUK), caused counterfeit airbags and airbag components, to be shipped to him in the United States from various manufacturers in China using a private commercial carrier.  ILLYUK, through his business CarPro417, would then advertise the sale of these items over the internet, while displaying the trademarks and logos of numerous companies on these internet sites, as well as on the items themselves. 

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ILLYUK caused representations to be made to consumers that the airbags and airbag components being purchased had been manufactured by the company that held the legitimate logo or trademark, when in fact the items were counterfeit.  ILLYUK, through CarPro417, would then sell these counterfeit items as legitimate component airbags or airbag components that had been manufactured by the actual companies who legally owned the trademarks and logos appearing on each item.  After receiving payment for the counterfeit parts, ILLYUK then used various commercial carriers to ship the items to individual consumers throughout the United States.  The fact that the airbags and the airbag components parts were counterfeit and not manufactured by the legal holders of the displayed trademark or logo on the item was never truthfully disclosed to the consumers.  This fraud scheme was initiated by ILLYUK on or about January 1, 2015, and continued through until on or about August 17, 2017.  ILLYUK would mail the counterfeit airbags or airbag components from his residence, located in Ozark, Missouri, within the Western District of Missouri, to each consumer throughout the United States.  ILLYUK received approximately $120,000 in monies for the sale of the counterfeit airbags and airbag components.

Specifically, on July 5, 2017, ILLYUK received a shipment of counterfeit airbags and airbag component parts utilizing a private commercial carrier who transported those items from China to his address in Christian County, Missouri, within the Western District of Missouri.  These counterfeit airbags and airbag components parts were then sold as airbags and related component parts that had been manufactured by the company that held the legitimate logo or trademark.  ILLYUK never revealed to consumers that the airbags and airbag components were counterfeit and not manufactured by the companies that legally owned the logo or trademark appearing on the aforementioned items. Furthermore, between January 1, 2015, and August 17, 2017, statements obtained by Paypal and other financial instructions utilized by ILLYUK to conduct the financial transactions related to the sale of the aforementioned counterfeit merchandise revealed that approximately $120,000.00 in

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sales of counterfeit airbags and component parts were received by ILLYUK.

Smuggling Goods into the United States (Count 2)

Between January 1, 2015, and August 17, 2017, ALEKSEY ILLYUK caused airbags and airbag components parts affixed with counterfeit trademarks and logos to be shipped into the United States, specifically to his residence, in Ozark, Missouri, within the Western District of Missouri. ILLYUK knew the airbags and airbag components being shipped to him were counterfeit and not manufactured by the legal trademark or logo holder.  Further, ILLYUK and the Chinese manufacturers producing the airbags and airbag component parts did not have the lawful authority to affix the trademarks and logos to the aforementioned items that were shipped to ILLYUK for resale.  Further, ILLYUK did not have the authority to sell the airbags and airbag components with the trademarks and logos affixed to them as if the items had been manufactured by the lawful trademark and logo holder.  Finally, the ILLYUK did this with the intent to fraudulently mislead consumers that the airbags and airbag components had been manufactured by the legal trademark or logo holder, and thereby received proceeds from the intentional misrepresentations made to those consumers purchasing the aforementioned items.

6) On December 21, 2017, the United States District Court for the Western District of Missouri (District Court) accepted Petitioner’s guilty plea and adjudged Petitioner guilty of the two offenses alleged in the Information.  CMS Ex. 9.

7) On June 27, 2018, the District Court issued a Judgment in Criminal Case that stated Petitioner had been adjudged guilty of 18 U.S.C. § 1341 Mail Fraud (Class C Felony) and 18 U.S.C. § 545 Smuggling Goods in the United States (Class C Felony), and had been sentenced to imprisonment for 45 days and supervised release for three years.  CMS Ex. 10 at 1-3.

8) The District Court ordered Petitioner to forfeit his ownership interest in hundreds of counterfeit automobile airbags and $17,000 in cash seized at his premises.  CMS Ex. 10 at 7; CMS Ex. 11 at 1. 

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9) On June 29, 2018, the District Court issued a Restitution Judgment in which it ordered Petitioner to pay restitution in the aggregate amount of $120,000 to nine automotive companies.  CMS Ex. 11. 

10) Based on Petitioner’s conviction, in 2018, the Missouri Board of Nursing (Nursing Board) commenced a disciplinary action against Petitioner, culminating in the censure of his nursing license.  CMS Ex. 5.

11) In its January 22, 2019 Findings of Fact, Conclusions of Law, and Disciplinary Order, the Nursing Board found cause to discipline Petitioner because his crimes involved fraud, dishonesty, and moral turpitude; however, the Nursing Board also found that Petitioner’s guilty plea and payment of restitution mitigated the severity of the discipline to be imposed.  CMS Ex. 5 at 6.

12) In May 2020, Petitioner completed the CRNA program and, on July 7, 2020, he received his license to practice as a CRNA in Missouri.  CMS Ex. 1 at 2; CMS Ex. 3 at 1.

13) On July 9, 2020, Petitioner electronically filed an application for enrollment in the Medicare program as a CRNA.  CMS Ex. 1 at 1, 3.

14) Petitioner disclosed in his application that he had been convicted of a felony and reprimanded or censured.  CMS Ex. 1 at 3.

15) On August 3, 2020, a CMS contractor issued an initial determination denying Petitioner’s enrollment in the Medicare program because Petitioner had been convicted of felonies detrimental to the best interests of the Medicare program and its beneficiaries.  The CMS contractor also decided that it would add Petitioner’s name to CMS’s preclusion list.  CMS Ex. 2 at 1.

16) Petitioner requested that CMS reconsider the initial determination.  CMS Ex. 3. 

17) On October 15, 2020, a CMS hearing officer issued a reconsidered determination upholding the initial determination.  DAB E-File Document # 1a. 

18) The hearing officer gave the following explanation as to why Petitioner’s felony convictions are detrimental to the best interests of the Medicare program and its beneficiaries:  “Payment in the Medicare program is made in a way that relies on the veracity and integrity of CMS’s Medicare partners.  Mr. Illyuk’s actions demonstrate that he cannot be a trustworthy and reliable partner in the Medicare program.  Further, Mr. Illyuk knowingly sold illegitimate airbags, an important

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vehicle safety component.  This is an indication the Mr. Illyuk values personal profit over the safety of others.”  DAB E-File Document #1a at 3.

19) In regard to her analysis related to adding Petitioner’s name to CMS’s preclusion list, the hearing officer concluded that:  the offenses for which Petitioner was convicted were severe because “they had the potential to cause harm to consumers and indicate that he places profit over the safety of others”; Petitioner’s crimes and convictions took place from 2015 to 2017; and Petitioner had been censured by the Nursing Board for his criminal acts.  DAB E-File Document #1a at 4.          

VII.  Conclusions of Law and Analysis

1. CMS had a legitimate basis to deny Petitioner enrollment and billing privileges in the Medicare program because Petitioner was convicted, within the last ten years, of felonies that CMS reasonably determined to be detrimental to the best interests of the Medicare program and its beneficiaries under 42 C.F.R. § 424.530(a)(3).

The Social Security Act (Act) authorizes the Secretary of Health and Human Services (Secretary) to create regulations governing the enrollment of suppliers in the Medicare program.  42 U.S.C. § 1395cc(j).  Further, the Act authorizes the Secretary to refuse to enter into a supplier agreement with any physician or supplier who “has been convicted of a felony under Federal or State law for an offense which the Secretary determines is detrimental to the best interests of the [Medicare] program or program beneficiaries.”  42 U.S.C. § 1395u(h)(8).  For Medicare program purposes, a CRNA is a supplier.  See  42 U.S.C. § 1395x(d), (bb).   

Under the Secretary’s regulations, CMS may deny enrollment in the Medicare program to any supplier who has been convicted within the last ten years of a federal or state felony offense that CMS determines is detrimental to the best interests of the Medicare program or its beneficiaries.  42 C.F.R. § 424.530(a)(3)(i).  Further, the regulations provide a non-exhaustive list of the types of felony offenses that CMS considers detrimental to the best interests of the program and its beneficiaries.  42 C.F.R. § 424.530(a)(3)(ii).  However, this non-exhaustive list does not restrict CMS from making a “case-by-case” determination as to whether a felony conviction is detrimental, and thus disqualifying for purposes of enrollment in the Medicare program.  Eva Orticio Villamor-Goubeaux, DAB No. 2997 at 8 (2020). 

In the present case, there is no dispute that Petitioner was convicted of two felonies within 10 years preceding Petitioner’s application for enrollment.  Therefore, the only issue is whether CMS’s case-by-case determination, that Petitioner’s felonies are detrimental to the best interests of the Medicare program or its beneficiaries, is

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reasonable.  Villamor-Goubeaux, DAB No. 2997 at 10 (“CMS nevertheless had a lawful basis to revoke Petitioner’s enrollment based on its determination that the offense raises concerns about Petitioner’s ability to be a supplier who complies with Medicare participation requirements – a determination we find reasonable.  In our view, that is the ultimate issue in this case.”).  

Petitioner argues the following in opposition to CMS’s determination: 

Upon being accepted into the Missouri State University (“MSU”) CRNA program in 2017, Petitioner was anticipating a long period of unemployment while also balancing the obligations of his academic program with his obligations to his growing family.  To earn additional income, Petitioner began selling auto parts he purchased from China.  Petitioner was unaware of the licensing requirements and trade laws he was violating with this small enterprise; he simply wanted to work to provide for his family as he furthered his education. See CMS Ex. 3.  Petitioner ultimately paid the price for his combined ambition and naivety.

* * * * *

CMS would have this Court dwell entirely on the most severe, thinly-supported interpretation of Petitioner’s short-lived poor decision-making so that Petitioner is, in practical effect, rendered completely unable to provide any nursing services to the general public.  The CMS analysis makes no room for Petitioner’s personal rehabilitation, to which both Petitioner and the Missouri State Board of Nursing have persuasively attested.  An honest, fulsome interpretation of the entirety of Petitioner’s record shows that the only existing threat to the Medicare program or its beneficiaries is the decision to deny them the quality care that Petitioner can provide.  There is no safety issue involved in Petitioner’s practice as a CRNA or in his participation in any public programs that might render payment for his services.

P. Br. at 3-4. 

CMS argues, consistent with the reconsidered determination, that Petitioner’s crimes of mail fraud and smuggling show that he is insufficiently trustworthy.  CMS Br. at 4-5.  In addition, CMS points out that Petitioner’s sale of counterfeit airbags presented a

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significant safety hazard for any individual purchasing one for instillation in his or her car because counterfeit airbags are more likely to fail in an accident.  CMS Br. at 5.  CMS summed it up this way: 

Whether Illyuk was selling these directly to consumers or to service shops does not change the fact he was profiting at the expense of real people’s safety.  When air bags properly deploy during a collision, they save lives. When they fail to properly deploy or when they deploy and launch metallic particles in the air, injuries and deaths occur.  Illyuk either knew or should have known this was the result of his sales.

CMS Br. at 5.

Based on the facts in this case, there is no doubt that CMS’s determination was reasonable.  Although Petitioner portrays himself as merely an ignorant man simply trying to earn money to care for his family in the future while he furthered his nursing qualifications, Petitioner admitted in his Plea Agreement that he understood very well that he was selling airbags from an unauthorized source and misleading customers to believe they were manufactured by reputable companies: 

Finally, the [sic] ILLYUK did this with the intent to fraudulently mislead consumers that the airbags and airbag components had been manufactured by the legal trademark or logo holder, and thereby received proceeds from the intentional misrepresentations made to those consumers purchasing the aforementioned items.

CMS Ex. 7 at 3.  Further, Petitioner attempts to portray his scheme as short-lived, but he admitted in the Plea Agreement that it lasted over two and half years and involved the sale of $120,000 worth of counterfeit merchandise.  CMS Ex. 7 at 3.  Finally, had law enforcement not arrested Petitioner, he would have continued his fraudulent scheme.  After all, agents confiscated hundreds of counterfeit airbags and related components in Petitioner’s possession.  CMS Ex. 7 at 5-6; CMS Ex. 10 at 7.

CMS was reasonable when it concluded that allowing Petitioner’s enrollment was not in the best interests of the Medicare program.  Petitioner’s scheme of fraud and deceit show that he is insufficiently trustworthy to be granted Medicare billing privileges for fear that he will abuse those privileges and commit fraud.  It was also reasonable for CMS to conclude that Petitioner’s disregard for the safety of hundreds of people who purchased his counterfeit products indicates that beneficiaries’ best interests are not served by permitting Petitioner to provide services to them.

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Petitioner believes that the Nursing Board acted more appropriately than CMS.  However, the Nursing Board appears to have shrugged off the import of Petitioner’s crimes, giving him significant credit for admitting to the crimes after being caught red-handed and paying restitution that the District Court ordered.  These actions were in Petitioner’s self-interest and not morally meritorious

Therefore, I conclude that CMS had a legitimate basis to deny Petitioner’s application for Medicare enrollment and billing privileges under 42 C.F.R. § 424.530(a)(3).

2. CMS had a legitimate basis to add Petitioner to the CMS preclusion list.

The regulations establish a preclusion list that affects reimbursement under Medicare Parts C and D in the following way:

• Medicare Advantage Plans cannot pay any individual or entity on the preclusion list for items and services provided to Medicare Advantage Plan participants (42 C.F.R. § 422.222); and
• Medicare Part D plans cannot reimburse plan participants for drugs obtained through a prescription written by an individual on the preclusion list (42 C.F.R. § 423.120(c)(6)). 

As applicable to this case, for CMS to include an individual, entity, or prescriber on its preclusion list, the following requirements must be met:

(3) The individual or entity, regardless of whether they are or were enrolled in Medicare, has been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program.  Factors that CMS considers in making such a determination under this paragraph (3) are—

(i) The severity of the offense;

(ii) When the offense occurred; and

(iii) Any other information that CMS deems relevant to its determination.

42 C.F.R. §§ 422.2, 423.100 (definition of Preclusion list).

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CMS’s analysis under this regulation, as summarized in the Findings of Fact above, is supported by the record.  I described in the preceding section that Petitioner’s criminal offenses were very severe, both because they involved intentional misrepresentations and because those misrepresentations induced individuals to purchase counterfeit safety items that may fail.  The offense is not long ago, with Petitioner’s arrest occurring in August 2017 for misconduct from 2015 to 2015.  Further, CMS correctly considered the Nursing Board’s discipline. 

Therefore, I uphold CMS’s decision to include Petitioner on the preclusion list.

VIII.  Conclusion

I affirm CMS’s denial of Petitioner’s enrollment in the Medicare program and CMS’s decision to add Petitioner’s name to the preclusion list.