Young v. N.Y.S. Office of Alcoholism & Substance Abuse Servs. ("OASAS")
| Decision Date | 26 September 2017 |
| Citation | 61 Misc.3d 346,85 N.Y.S.3d 675 |
| Parties | In the Matter of the Application of Peter YOUNG; 820 River Street, Inc., The Altamont Program, Inc., and Vesta Community Housing Development Board, Inc., all doing business as Peter Young Housing Industries and Treatment, Petitioners, v. The NEW YORK STATE OFFICE OF ALCOHOLISM AND SUBSTANCE ABUSE SERVICES ("OASAS"); Robert Kent, as counsel to OASAS; and the Division of the Budget of the State of New York, Respondents. |
| Court | New York Supreme Court |
O'Connell and Aronowitz, Cornelius D. Murray, of Counsel, Attorneys for Petitioners, 54 State Street, Albany, New York 12207-2501
Eric T. Schneiderman, Attorney General of the State of New York, Maria Lisi-Murray, of Counsel, Attorney for Respondents, The Capitol, Albany, New York 12224-0341
Petitioners Peter Young, 820 River Street, Inc., The Altamont Program, Inc., and Vesta Community Housing Development Board, Inc., all doing business as Peter Young Housing Industries and Treatment (PYHIT), commenced this CPLR article 78 proceeding against respondents New York State Office of Alcoholism and Substance Abuse Services (OASAS), OASAS's counsel Robert Kent, and the Division of the Budget of the State of New York. Petitioners seek a judgment (1) rescinding their suspension from, and restoring them to, their status as pre-qualified vendors under the State of New York's Grants Gateway program, and (2) annulling respondents' determination to recoup monies that 820 River Street owes to OASAS on a capital construction loan by withholding payments to petitioners for services provided under prior contracts with counties.1
Respondents oppose the petition, arguing that the mandamus relief petitioners request does not lie given the discretionary nature of respondents' decision-making authority, and that any challenge to the 2014 suspension of their prequalification status under the Grants Gateway program is barred both by their failure to exhaust administrative remedies and by the statute of limitations. In the alternative, respondents request a remand for redetermination of petitioners' prequalification status and further administrative proceedings. Respondents also argue that it is not arbitrary and capricious for them to recoup monies owed on the Altamont capital construction loan from payments for services petitioners rendered under prior-year contracts with the counties.
As to petitioners' first cause of action, the Court has been provided with no evidence of compliance with the procedures set forth in the Grants Gateway Manual before final revocation of petitioners' prequalification status. Thus, while the Court denies petitioners' request for mandamus to compel restoration to their former prequalification status, it remits this matter to the agencies for redetermination and further proceedings. As to petitioners' second cause of action, the Court denies petitioners' request to annul respondents' decision to recoup monies that 820 River Street owes to OASAS on a capital construction loan by withholding payments to petitioners for services provided under past contracts with counties.
Father Peter Young is the founder of petitioners 820 River Street, Inc. (820 River Street), the Altamont Program, and Vesta Community Housing Development Board, Inc. (Vesta), all of which operate under Peter Young Housing Industries and Treatment. 820 River Street, the Altamont Program, and Vesta are not-for-profit corporations that run various programs that offer drug and alcohol treatment, housing, job training, and jobs to recovering individuals. Respondent OASAS certifies and funds community-based chemical dependence treatment programs and inspects and monitors them for quality of care and compliance with State and national standards. 820 River Street is currently licensed by OASAS. In 2015 and 2016, OASAS renewed the operating certificates of nine 820 River Street chemical dependence programs, most of them for two years.
OASAS has no current contracts with 820 River Street and does not directly fund its operational programs. In the fiscal year ending December 31, 2016, however, OASAS provided State funds to 820 River Street through contracts for services with Rensselaer, Warren, and Washington Counties. OASAS has also provided funding to 820 River Street for capital projects and facilities maintenance. In 2013, OASAS gave 820 River Street a $ 650,000 capital construction loan for improvements to its Altamont House property. The project was not completed and, according to respondents, 820 River Street has not entered into any arrangement to repay the loan. In 2016, to recoup monies owed on that loan, OASAS began to withhold funds that were to go to 820 River Street through its contracts with Warren and Washington Counties. OASAS claims that, even after this recoupment, 820 River Street owes $ 520,000 on the initial $ 650,000 loan.
In 2011, OASAS received information that high-level staff at petitioners' programs were misappropriating State funds.2 OASAS referred the matter to the Office of the Medicaid Inspector, the Office of the Attorney General, the Commission on Quality of Care, the Office of Temporary and Disability Assistance, and the Department of Corrections and Community Supervision, prompting a multi-agency investigation. In 2012, 820 River Street's former chief operating officer and its former executive director pleaded guilty to second degree grand larceny for stealing over $ 200,000 in State funds. In 2014, the former operations director of the Altamont Program pleaded guilty to second degree grand larceny. Also in 2014, the chief financial officer of the 820 River Street and Altamont Programs pleaded guilty to first degree offering a false instrument for filing and second degree falsifying business records. And in 2015, the chief operating officer of the Altamont Program pleaded guilty to two counts of misdemeanor second degree offering a false instrument for filing.
New York has implemented a Grants Gateway program — an on-line portal through which not-for-profits must register and be pre-qualified in order to win competitive grants or contracts with State agencies. The Grants Gateway program and procedures are described in a manual entitled, "New York State Prequalification System for Grants Contract Vendors, A Resource Manual and User's Guide for Not-for-Profit Vendors" (Petition, Exhibit N, hereinafter Manual or Grants Gateway Manual).3 The Manual provides that "all vendors doing business with the State of New York must be prequalified in order to submit a competitive bid in response to a Request for Proposal issued by a State agency, or to be considered for contract renewal or contract amendment." Prequalification is effective for State grant contracts issued by numerous State agencies, including OASAS. The application process requires the vendor to answer an extensive set of questions regarding its organization, capacity, management, and finances. Once a vendor submits a prequalification application, it is assigned to the appropriate agency for review. The review agency is generally the agency with whom the vendor has had the most contracts or the agency most likely to provide funding. The Grants Gateway Manual provides a chain of review, with initial review by a prequalification specialist and further review by the agency's deputy director. The process is assisted by a prequalification officer who coordinates with relevant agencies.
The Grants Gateway Manual also establishes specific procedures for subsequent review of a vendor's prequalification status. Section 4.7 of the Grants Gateway Manual states that, "[a]t any time, the reviewing State agency or any other partner State agency may review the vendor's prequalification status." Reasons for review include acts representing "an unacceptable risk in allowing the vendor to remain prequalified."
Section 4.8 of the Grants Gateway Manual governs "Revocation of Prequalification Status." It states that "[i]n rare instances, the reviewing or other State agency may cancel a not-for-profit vendor's prequalification status barring it from competing for State contracts when the State agency finds," among other things, that a vendor has failed to "resolve any outstanding deficiencies" of where there have been "[a]ny convictions for fraud or matters reflecting the integrity of the vendor." Section 4.8 prescribes specific procedures to be followed "[b]efore any vendor's prequalification status is suspended." The "reviewing State agency will contact the vendor in writing noting all matters that may have prompted the decision to suspend." The vendor must be given "an opportunity to state a case for why its prequalification status should not be suspended." The vendor has "30 days from the date of the notice letter within which to submit a statement, in writing, presenting the reasons why suspension should not occur or requesting an extension of time to remedy the defects" identified by the agency. "The vendor's statement and any other relevant information shall be assembled and referred to the agency Executive Deputy for review and final determination."
And section 4.9 of the Grants Gateway Manual provides for "Appeals." If the State agency suspends a vendor's prequalification, the vendor is entitled to a "formal appeal, in writing, to the Prequalification Officer to review the" agency's decision. The appeal must be filed "within 20 business days of the date of the notice letter from the Agency advising the vendor of the original adverse decision." The vendor must give "full details of the reasons for the [appeal] and offer any additional information upon which [it] wishes to rely." The Prequalification Officer may review the agency's file and notes, "interview the vendor, and/or conduct independent research, and then must inform the vendor in writing of the outcome of the review within 30 business...
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