Park v State of New York

[*1] Park v State of New York 2006 NY Slip Op 52164(U) [13 Misc 3d 1238(A)] Decided on September 26, 2006 Ct Cl Marin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 26, 2006
Ct Cl

Yoon Y. Park and Lincoln Medical Laboratory Center, Inc., Claimants,

against

State of New York, Defendant.



85525



APPEARANCES:For Claimants:

Ruskin Moscou Faltischek P.C.

by: Douglas J. Good, Esq. and Robert F. Regan, Esq.

For Defendant:

Eliot Spitzer, Attorney General

by: Jacqueline E. Berkowitz, AAG,

Paul J. Mahoney, AAG and Arthur Patane, AAG

Alan C. Marin, J.

Yoon Y. Park and Lincoln Medical Laboratory Center, Inc. have brought a claim for monies due arising from their involvement with the medicaid program of the defendant State of New York. This is the decision following the trial of the matter.

The Agreement

It is not in dispute that an agreement was entered into between Yoon Y. Park [FN1] and the medicaid fraud office of the Attorney General (the "Office"), which was memorialized by a three-page letter dated February 22, 1990 (cl exh 1). The Agreement was on the letterhead of the deputy attorney general for medicaid fraud control, Edward J. Kuriansky, and addressed to Mr. Park, care of Lincoln Medical Laboratories and was signed by Park and Michael R. Berlowitz, special assistant attorney general, on behalf of Mr. Kuriansky. There were two additional signatures on the document by persons affiliated with the AG's fraud unit: Peter M. Bloch, regional director and Robert M. Dery, special investigator.

The February 22 Agreement included these terms: -

Park/Lincoln Laboratory would assist the Office in an investigation of medicaid fraud and illegal payments concerning laboratory services for medicaid patients (id., p. 1). -

The Laboratory, with Mr. Park as its director, would be issued a valid medicaid provider number so that when it tested blood specimens, medicaid reimbursement could be received. At the close of the operation, or earlier if appropriate, the provider number was to be suspended. (Cl [*2]exh 1, p. 2; see cl exh 9). -

Video and audiotaping equipment would be placed in the laboratory; conversations between Park and other individuals would be recorded (cl exh 1, p. 1; def exh C is a videotape). -

The Office would place an undercover operative in the Laboratory with the authority to act in Park's stead and on behalf of the Laboratory (cl exh 1, pp. 1-2). -

All blood samples accepted were to be tested in accordance with applicable Department of Health regulations and the tests performed were to be billed to the State (id., p. 2). -

In return for Park's cooperation, including, if requested, testimony before a grand jury or at trial, the Office would inform any agency or person Park would designate of such cooperation, without making any recommendations thereon (id., pp. 2-3). (Mr. Park was not and never became a criminal target.)

The Operation

The undercover operation was intended to ensnare corrupt "blood salesmen," who would solicit kickbacks from medical laboratories for referring blood testing that would be reimbursed by the medicaid system, even though the referrals were fraudulent: they included unnecessary tests, or the blood was not drawn from patients, but purchased, for example, from drug addicts. Lincoln was to be held out as a laboratory willing to pay kickbacks in exchange for false medical testing requisitions. The amount Lincoln kicked back to the salesmen was 30% of the authorized medicaid billings.

The undercover operative assigned to the laboratory was Edward LaFond, who in 1990 was serving as an investigator with the fraud control office. Mr. LaFond began as a driver picking up blood samples, but by early July, became the manager, replacing Zuflikar Walli.

While Park may have been uncomfortable in discussing and arranging kickbacks with salesmen, a role assumed by LaFond, members of the fraud control office pronounced as satisfactory his work in furtherance of the operation. Bloch, the regional director of the Office, testified that at a "fairly early" stage, a determination was made that Park be paid a salary of $1,500 a week as an expense of the operation.[FN2]

The undercover operation was shut down after nine months, on November 30, 1990, and was described at trial as a success. Twenty-nine individuals were criminally charged in State or Federal court. See the press release dated November 30, 1990 (cl exh 16, and see cl exh 20).[FN3]

A not inconsiderable amount of money flowed through Lincoln for these nine months. Lincoln's IRS Form 1099 listing as payer the NYS Department of Social Services (DSS) was in the amount of $9,868,064 (cl exhs 7 & 24). Some money was also in the pipeline: for the following year, there was a Form 1099 for Lincoln with DSS as the payer in the amount of $59,519 (cl exh 8).

The amount on Form 1099 represented approved medicaid claims. Not all of it was paid [*3]out; of the $9.9 million for 1990, DSS withheld $2,678,887 (cl exh 4). In fact, the latter figure includes two checks for $50,000 that Park wrote at the request of the fraud control office for return to the State (id.; cl exh 32). The kickbacks to the blood salesmen totaled $1,969,445 (cl exh 5).

The Dispute

Claimant contends that the State owes it for the excess during the undercover operation of the amount of: i) approved Lincoln medicaid claims over ii) the expenses incurred. In this calculation, claimant would exclude from expenses the nearly two million dollars in kickbacks.

The closing paragraph of the February 22, 1990 letter reads that "No additional promises, agreements, and conditions have been entered into other than those set forth in this letter and none will be entered into unless in writing and signed by all parties." Claimant describes the Agreement as unambiguous, but not comprehensive. For example, the Agreement provides that Park will act as an agent of the Office and that he and the laboratory "will be held harmless monetarily and free from any prosecution in connection with this operation . . ." (p. 2). Claimant argues that such language is limited to protecting Park from prosecution.

However, the latter excerpt must be read in its larger context:

The NYS Department of Social Services will be free to set appropriate payment caps, and will hold all other monies in escrow accounts for later possible disbursement in accordance with this agreement.

Payments of expenses are only those strictly necessary for the operation of the laboratory and are subject to approval by this Office.

It is understood by all parties that payments to others and billings to Medicaid that have been made pursuant to our instructions are made as part of a law enforcement operation, and as such you will have acted as an agent of this Office. You and the Laboratory will be held harmless monetarily and free from any prosecution in connection with this operation, as long as, and to the extent that you follow the instructions of those representatives of this Office with whom you are dealing. Any actions taken without clearance are not authorized.

[Id.].

Lincoln Laboratory could not have functioned from late February to the close of November 1990 without the medicaid provider number which was only furnished as a necessary part of the Agreement. The references to funds in the Agreement relate only to the undercover operation: the aforementioned power of DSS to set payment caps and hold "all other monies" for "possible disbursement in accordance with this agreement"; that only expenses "strictly necessary" for the operation of the laboratory would be paid, subject to the approval of the medicaid fraud office; that "payments to others and billings to Medicaid that have been made pursuant to our instructions are made as part of a law enforcement operation" (id.).

Moreover, it is clear from the Agreement that the undercover operation was set up to be temporary. The operation - - and its fruits - - were under the control of the Office (together with, where appropriate, the Department of Social Services). Thus, it cannot be concluded that pursuant to the February 22, 1990 Agreement, medicaid funds generated as part of this [*4]undercover operation, which could not have existed without the provider number issued only for its duration, would accrue to claimant.

Nonetheless, such conclusion is not inconsistent with claimant's contention that the Agreement is not comprehensive. An argument could be advanced that defendant is liable to claimant for lost revenues or opportunities, for example, were there an ongoing operation that was generating net revenues from non-medicaid laboratory work, and engagement in the undercover operation caused Park and Lincoln to lose or forego such revenues. But there was no offer of proof about such losses.

Finally, Park did not contend that his consideration for entering into the Agreement was to retain the excess of reimbursements over expenses. Rather, Park was of the belief that "his cooperation would help him get a permanent Medicaid provider number and would help an acquaintance, Mr. Walli, who had been criminally convicted and was awaiting sentence."[FN4]

***

In view of the foregoing, claimants have failed to prove their case, and claim no. 85525 is dismissed.

LET JUDGMENT BE ENTERED ACCORDINGLY. Footnotes

Footnote 1: "Park" and "claimant," in the singular, will be used here to comprehend both

claimants, except where the text clearly indicates otherwise.

Footnote 2: Park in his deposition testified that initially his salary was $500 weekly and then went to $800 a week, but did not directly contest that it ultimately became $1,500. No witness at trial mentioned a figure other than $1,500.

Footnote 3: Claimant's exhibit 21 is a summary status of the various criminal proceedings as of June 1, 1993.

Footnote 4: From the closing argument made on Park's behalf at trial.