U.S. ex rel Doe v. DeGregorio

• Decision Date: 27 April 2007
• Docket Number: No. 8:03-CV-1813-T-27TGW.,8:03-CV-1813-T-27TGW.
• Citation: 510 F.Supp.2d 877
• Parties: UNITED STATES of America ex rel. Jane DOE, Plaintiff's, v. Joseph DeGREGORIO, Acculab Laboratories, Inc., Defendants.
• Court: U.S. District Court — Middle District of Florida

510 F.Supp.2d 877

UNITED STATES of America ex rel. Jane DOE, Plaintiff's, v. Joseph DeGREGORIO, Acculab Laboratories, Inc., Defendants.

No. 8:03-CV-1813-T-27TGW.

United States District Court, M.D. Florida, Tampa Division.

April 27, 2007.

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Bill Wagner, Wagner, Vaughan & McLaughlin, Lacy R. Harwell, Jr., U.S. Attorney's Office, Tampa, FL, Donald P. McKenna, Scott A. Powell, Hare, Wynn, Newell & Newton, LLP/Birmingham, AL, for Plaintiff's.

Erik R. Matheney, Hill, Ward & Henderson, P.A., Tampa, FL, for Defendants.

ORDER

JAMES D. WHITTEMORE, District Judge.

IN THIS Qui Tam action, the Government alleges a conspiracy to submit false and fraudulent claims under the False Claims Act, 31 U.S.C. § 3729(a)(3). (Dkt.20).¹ Acculab Laboratories, Inc., and Joseph DeGregorio, Acculab's President and sole shareholder, are alleged, among other things, to have engaged in a conspiracy to defraud the United States by seeking and receiving, or causing to be sought and received, payment of false and/or fraudulent claims submitted to Medicare. DeGregorio is alleged to have participated in the conspiracy, knowing that claims submitted to Medicare through Acculab were false and fraudulent, resulting in payment to Acculab in excess of $17,000,000 by Medicare. (Dkt.20, ¶ 41(3)). Pursuant to the prejudgment remedies of the Federal Debt Collection Practices Act, Prejudgment Writs of Attachment and Sequestration were issued as to real property owned by DeGregorio individually.

Before the Court is Defendant DeGregorio's Request for Hearing on the Notice of Prejudgment Writs of Attachment and Sequestration (Dkt. 30).² In his Request for Hearing, DeGregorio argued that the Government had not established the "probable validity of the claim for a debt" and that the Government failed to establish that Defendant was about to assign, dispose or destroy property or convert his property into money with the effect of hindering, delaying or defrauding the Government. See 28 U.S.C. § 3101(d)(2).³

The Court conducted an evidentiary hearing pursuant to 28 U.S.C. § 3101(d) on January 3, 4, and 5, 2007. Upon consideration of the briefs, the evidence presented and argument of counsel, this Court finds that the United States has established the probable validity of its claim against De-Gregorio and has complied with the statutory requirements for issuance of the prejudgment remedy granted. This Court further finds that DeGregorio, as debtor, prior to issuance of the Writ, was about to dispose of real property owned by him and convert that property into money in a manner prejudicial to the United States with the effect of hindering, delaying, or defrauding the United States. The United States established a compelling need and exigent circumstances supporting prejudgment remedies to secure its claim of debt. Defendant's request to quash the writs is accordingly DENIED.

The Complaint

The Amended Complaint alleges a conspiracy under the False Claims Act ("FCA") pursuant to 31 U.S.C. § 3729(a)(3) (Count I), claims for treble damages and civil penalties for violations of the False Claims Act pursuant to 31 U.S.C. §§ 3729(a)(1) and (a)(2)(Counts II, III and IV), unjust enrichment (Count V), payment by mistake of fact (Count VI), common law fraud (Count VII), and a claim for prejudgment and postjudgment remedies on a debt pursuant to the Federal Debt Collection Procedures Act ("FDCPA"), 28 U.S.C. § 3001, et seq. (Count VIII).

The Amended Complaint alleges that DeGregorio "submitted claims [] electronically to the Medicare Part B Program and through his wholly-owned corporation, Defendant Acculab" (Dkt. 20 at ¶ 30); "De-Gregorio agreed in the electronic enrollment form application with Medicare, among other things, that DeGregorio would be responsible for all Medicare claims submitted to HCFA/CMS relating to Acculab's clinical laboratory services, ... and that DeGregorio would submit claims that were accurate, complete and truthful" (Id.); that DeGregorio designed computer software programs that unbundled CPT codes and changed ICD-9 codes on claims submitted to Medicare in order to maximize reimbursement from the Medicare Program (Id. at ¶ 36); that DeGregorio fraudulently submitted claims for reimbursement that were never ordered by a physician or were in excess of what was ordered by a physician (Id. at ¶ 37); that by reason of these false submissions, the Government has been damaged by a loss of funds (Id. at ¶¶ 40, 46, 51, 56); and that as a result of these allegedly false submissions, DeGregorio has been unjustly enriched "in an as yet undetermined amount under circumstances where equity requires Defendants to repay Plaintiff those amounts of Medicare benefits paid to or on account of Defendants...." (Id. at ¶ 59).

The Application for Prejudgment Remedy

On November 30, 2006, the Government applied for prejudgment remedies in the form of writs of attachment and sequestration pursuant to the FDCPA. The Government asserted reasonable cause to believe that DeGregorio "is disposing of, or has disposed of, property with the effect of hindering the United States or is converting property into money or evidence of debt." (Dkt. S-41 at p. 4-5); see 28 U.S.C. §§ 3101(b)(1)(B), (b)(1)(C). Pursuant to the requirements of the FDCPA, the Government attached the Affidavit of Special Agent Patricia Allen. See 28 U.S.C. § 3101(c). Allen investigated the suspected health care fraud violations during the eighteen months prior to her affidavit and avers that DeGregorio, who is currently imprisoned, listed four of his personally owned commercial properties for sale and was heard in monitored telephone calls making efforts to liquidate company assets. (Allen Aff. at ¶¶ 70-71).

Allen further avers that "[m]y investigation reveals that Joseph DeGregorio, through his corporation, Acculab Laboratories, Inc., has bilked Medicare by systematically presenting or causing to be presented, false or fraudulent claims." (Allen Aff. at ¶ 4). "Specifically, DeGregorio presented or caused to be presented, to Medicare for reimbursement, false billings which included unbundling, adding services not ordered by the referring physician, changing diagnosis codes, non-rendered services and medically unnecessary procedures. ..." (Id.)

Allen's affidavit is largely based on interviews with confidential witnesses. Confidential Witness Number 1 ("CW 1") stated that DeGregorio developed a software program that would make up a payable diagnosis code that Medicare would pay when a referring physician did not provide a diagnosis code on a lab requisition form. (Allen Aff. at ¶ 27(a)). The software program would generate a higher paying code if a doctor wrote a code on a lab requisition form that did not pay as well as another.⁴ (Id. at ¶ 27(b)). "In the beginning, DeGregorio also unbundled procedure codes." (Id. at ¶ 27(d)).

Confidential Witness Number 2 ("CW 2"), formerly employed as an Acculab office manager, provided that "DeGregorio solely handled and administered all the Medicare billing." (Allen Aff. at ¶ 28(b)). According to CW 2, the data entry clerks who input the Medicare billings actually believed they were conducting business but were just there "as a front and cover-up." (Id. at ¶ 28(c)). "DeGregorio arrived at work late at night daily and downloaded the billing data from the billing entry clerks' computers, placed the data on a separate computer, then changed the codes. DeGregorio altered the Medicare billing that the clerks recorded during the day." (Id. at ¶ 28(d)). CW 2 indicated that two separate Medicare billing computers exist that do not match. (Id. at ¶ 28(e)). In addition, several other confidential witnesses informed Agent Allen that they were instructed "by management" to alter diagnosis codes on lab requisition forms. (Id. at ¶¶ 30, 31, 32).

As a result of a 2003 audit of thirty-five of Acculab's Medicare claim submissions, all thirty-five reviewed claims were denied.⁵ Acculab admitted that it had an error in its billing computer coding for the time period covered by the audit. (Allen Aff. at ¶ 40, Plaintiff's Ex. 2c). Acculab admitted that "[t]he code for a direct LDL test was inadvertently used not only for direct LDL's but also for calculated LDL's." (Id.). An April 25, 2006 audit performed on claims submitted in 2003 denied forty-eight out of sixty-four reviewed claims. (Allen Aff. at ¶¶ 49-50). Four of the sixty-two reviewed claims were denied due to unbundling services and seven of the sixty-two reviewed claims were denied because of conflicting information. (Allen Aff. at ¶¶ 50, 54, 57). A May 16, 2006 audit performed on beneficiary files with dates of service in 2004 denied thirty-two out of forty-nine claims. (Id. at ¶ 62). Six of the claims were denied due to conflicting information. (Id. at ¶ 66). The April and May audits concluded that the allegations of unbundling, adding services not ordered by the referring physician, changing diagnosis codes, and billing non-rendered services and medically unnecessary services were substantiated by the reviews. (Plaintiff's Ex. 3 at p. 4, Ex. 4 at p. 6, Allen Aff. at ¶ 67).

Based on the Application and Allen's affidavit, a Writ of Attachment (Dkt.45) and a Writ of Sequestration (Dkt.46) were issued, encumbering seven parcels of real property owned by DeGregorio.⁶

Discussion

The FDCPA provides the exclusive civil procedures for the United States "to obtain, before judgment on a claim for a debt, a remedy in connection with such claim." 28 U.S.C. § 3001(a)(2). In order to obtain prejudgment remedies, the Government must include with its application an affidavit "establishing with particularity to the court's satisfaction facts supporting the probable validity of the, claim for a debt and the right of the United States to recover what is demanded in the application." 28 U.S.C. § 3101(c).

"Debt"

Preliminarily, Defendant argues that the Government cannot establish that...