Jones v. Howell

• Decision Date: 27 June 2002
• Docket Number: No. 1998-CA-01523-SCT.,1998-CA-01523-SCT.
• Citation: 827 So.2d 691
• Parties: Charles T. JONES, Individually and as Taxpayer and Citizen of Montgomery County, Mississippi; and the Mississippi Ethics Commission v. Bobby M. HOWELL, Individually and as Mississippi State Representative, District 46; Kilmichael Drugs, Inc.; John Read, Individually and as Mississippi State Representative, District 112; and Division of Medicaid, Office of the Governor, State of Mississippi.
• Court: Mississippi Supreme Court

827 So.2d 691

Charles T. JONES, Individually and as Taxpayer and Citizen of Montgomery County, Mississippi; and the Mississippi Ethics Commission v. Bobby M. HOWELL, Individually and as Mississippi State Representative, District 46; Kilmichael Drugs, Inc.; John Read, Individually and as Mississippi State Representative, District 112; and Division of Medicaid, Office of the Governor, State of Mississippi.

No. 1998-CA-01523-SCT.

Supreme Court of Mississippi.

June 27, 2002.

Rehearing Denied October 10, 2002.

W. Wayne Drinkwater, Jr., Office of the Attorney General by Geoffrey C. Morgan, attorneys for appellants.

John R. Reeves, Jackson, Jeffrey C. Smith, Columbus, attorneys for appellees.

EN BANC.

SMITH, P.J., for the Court.

¶ 1. This case comes to this Court on appeal from the Chancery Court of the First Judicial District of Hinds County, Mississippi, where Charles T. Jones brought suit against Bobby M. Howell, a pharmacist and member of the Mississippi House of Representatives, for Howell's alleged violation of Article 4, Section 109 of the Mississippi Constitution. Section 109 forbids public officers from having a direct or indirect interest in a contract authorized by the public body of which they are members during their term of office and for one year thereafter. Jones complained that Howell's participation in the Legislature's appropriation of funds to the Mississippi Division of Medicaid and Howell's receipt of Medicaid funds as a pharmacist constituted a conflict of interest in violation of Section 109.

¶ 2. John Read, also a legislator and pharmacist, intervened as a party-defendant, and the Mississippi Ethics Commission was joined as a plaintiff by order of the court. After a trial, the chancellor found Howell and Read in violation of Section 109 and enjoined their further receipt of Medicaid funds. The chancellor denied the plaintiffs' request for restitution. The plaintiffs appealed to this Court from the chancery court's refusal to order restitution, and the legislators cross-appealed on the chancery court's finding that they violated Section 109.

¶ 3. In arriving at our decision, this Court is ever mindful that Section 109 serves the policy of protecting the public interest by "preventing graft of every possible sort, and secure the honest and clean administration of [governmental] affairs." Noxubee County Hardware Co. v. City of Macon, 90 Miss. 636, 43 So. 304, 305 (1907). Nevertheless, we are also mindful that Section 109 must not be interpreted too expansively, without regard to common sense considering modern, current circumstances and conditions. We will not allow or cause grave risks to state government, nor will we require that which is "thoroughly impracticable." Frazier v. State ex rel. Pittman, 504 So.2d 675, 695 (Miss. 1987). We hold that the two legislators, Howell and Read, are not in violation of Section 109 and accordingly are not required to reimburse the state for funds accepted during their roles as providers through their respective pharmacies participating in the Medicaid program for the poor and needy. We, therefore, reverse and render the chancellor's judgment.

FACTS AND PROCEEDINGS BELOW

¶ 4. Charles T. Jones, as a taxpayer and citizen of Montgomery County, Mississippi, filed a complaint against Representative Bobby M. Howell in the Chancery Court of Hinds County on July 24, 1995, alleging that because Howell's compensation as a Medicaid provider depends upon the appropriation of funds authorized by the Mississippi Legislature during his terms of office, he is "interested" in a contract authorized by the public body of which he is a member in violation of Section 109.

¶ 5. The Medical Assistance Program (hereinafter "Medicaid") is a cooperative program of the state and federal governments that provides medical assistance for the poor. See Title XIX of the Social Security Act of 1935, 42 U.S.C. §§ 1396 et seq. Under the Medicaid program, the federal government shares with the states the cost of reimbursing participating agencies, physicians and pharmacies for services rendered to eligible recipients. 42 U.S.C. §§ 1396a & 1396d. On the state level, the Mississippi Medicaid law, enacted in 1969, provides for a statewide system of medical assistance, to be administered by the Mississippi Medicaid Commission, now called the Division of Medicaid, Office of the Governor. Miss.Code Ann. §§ 43-13-101 et seq. (2000 & Supp.2001). The Legislature annually appropriates money for the Mississippi Medicaid program.

¶ 6. To become a Medicaid provider, a pharmacist must submit an application and execute a Medical Assistance Participation Agreement (hereinafter "participation agreement") with the Division of Medicaid. Pursuant to the participation agreement, the pharmacist fills prescriptions for Medicaid recipients and submits claims for reimbursement to the Division of Medicaid. The Division of Medicaid reimburses each provider at the end of each month according to a specific formula. The formula was established by statute prior to 1992, and the formula cannot be varied by the Division of Medicaid. See Miss.Code Ann § 43-13-117(9) (Supp.2001). The formula for prescription drugs provides that, for every prescription filled, the provider receives a dispensing fee of $4.91, without regard to the cost of the medicine. In addition to the dispensing fee, the provider also receives the average wholesale price of the medicine less ten percent of the average wholesale price. The provider usually receives a discount from the drug company from which he or she purchases the medicine. This discount is generally sixteen to eighteen percent of the wholesale price. Thus, taking into account the formula, a provider may realize a gross profit of approximately six to eight percent on the cost of the medicine purchased, plus the dispensing fee of $4.91.

Representative Howell

¶ 7. Bobby M. Howell was elected to the Mississippi House of Representatives, 46th District, in 1991 and initially took the oath of office in that body in January 1992. Howell has been reelected to that office and has served continuously in that office since 1992. A licensed pharmacist, Howell has practiced pharmacy in Kilmichael, Mississippi, since 1968. He has participated in the Medicaid program since 1970.

¶ 8. Howell was sole proprietor of Kilmichael Drugs from 1968 to 1995. He executed participation agreements in 1970, 1973, 1976 and 1980. During the time he was sole proprietor of Kilmichael Drugs, Howell received all Medicaid reimbursements directly. In July 1995, five days before this action was filed, Howell incorporated Kilmichael Drugs. Upon incorporation, Howell transferred all assets of the drugstore to the corporation, Kilmichael Drugs, Inc. He testified that a substantial factor in his decision to incorporate was the news that Jones was preparing to file this action. He testified that he incorporated the drugstore in order to shelter his assets.

¶ 9. Howell's wife, Charmayne Howell, serves as president and owner of Kilmichael Drugs, Inc. Howell's two children serve on the corporation's board of directors. Howell owns no stock in the corporation. He has no employment contract with the corporation, nor does he receive a salary. Howell testified that he draws money out of the corporation "as needed." Mrs. Howell executed a participation agreement in 1995 on behalf of Kilmichael Drugs, Inc. All Medicaid reimbursements are now received by the corporation. Jones sought declaratory and injunctive relief and asked that Howell repay the state $864,000 in gross funds which he had received from Medicaid.

¶ 10. During Howell's terms of office in the Legislature, the Legislature passed the following bills: several Medicaid appropriation bills. From March of 1992 through March of 1994, Howell voted "yea" in favor of seven bills that provided for Medicaid funding. In February of 1995 and March of 1997, Howell voted "present" on two house appropriation bills, and in April of 1996, Howell cast his only "nay" vote on one bill.

Representative Read

¶ 11. John Read has served continuously as a member of the House of Representatives, 112th District, since January 1993. During his time in office, Read, also a licensed pharmacist, has been employed by Controlex Enterprise, doing business as Sav Rex Pharmacy, in Gautier, Mississippi. Read testified that he is not a shareholder of Controlex, but that he is a salaried employee. Read testified that reimbursements from the Medicaid Division go directly to Controlex Enterprise, and any Medicaid funds received by Read are received only indirectly in the form of salary. Read stated that his salary is not based on a percentage of the corporation's Medicaid business.

¶ 12. Read executed a participation agreement in 1974 on behalf of Sav-Rex Pharmacy. The participation agreement bears Read's signature as partner. Prior to Read's testimony regarding his role at Sav-Rex, at the hearing on the motions for summary judgment, counsel for Read stipulated that Read is a partner in the drugstore, but that he is not the controlling partner. However, in an effort to clarify his employment status, Read testified at trial that at the time the agreement was executed, he and two others were planning on establishing a partnership. However, because one of the partners backed out, the partnership was never formed.

¶ 13. Like Howell, Read has participated in the appropriation of funding to the Medicaid program. During Read's tenure in office—seven Medicaid appropriations bills were passed. Read voted "yea" on four bills, voted "present" on two bills, and was "absent" for the vote on one bill.

¶ 14. Both Howell and Read are required to file annually a sworn Statement of Economic Interest provided by the Mississippi Ethics Commission. See Miss. Code Ann. § 25-4-27 (1999). The statement requires a listing of all public bodies from which the legislator received compensation in excess of $1,000 during...