People v. Khan

82 A.D.3d 44, 916 N.Y.2d 28

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: January 20, 2011
• Status: Published

Opinions

OPINION OF THE COURT

Acosta, J.

This case stems from a joint investigation by the New York City Police Department and the Human Resources Administration (HRA) of a pharmacy in Manhattan based on a tip that drugs were being sold out of that location without prescriptions. The investigation resulted in the prosecution of defendant for, among other crimes, health care fraud pursuant to Penal Law article 177, which was enacted in 2006 to deal specifically with fraud by health care providers.¹ This is the first case on appeal under that statute and we therefore write to address the nature of proof required for a conviction.

Background

On November 15, 2007, undercover detective Pedro Gomez entered the NYC Pharmacy and asked the clerk, Marvin Portillo, for 40 pills each of the prescription medications Amitriptyline (an antidepressant) and Clonidine (use for treating high blood pressure and for detoxing from, among other things, alcohol and methadone).² Portillo said that was too many pills to dispense without a prescription, and he would have to ask his “boss.” Portillo went to the back of the pharmacy and spoke to defendant. Although defendant told Gomez that it was a federal crime to sell those pills without a prescription, and that he could lose his job if he did so, he eventually agreed to sell Gomez the Amitriptyline and Clonidine. Portillo gave the detective two orange bottles containing pills from the back of the pharmacy, and the detective gave him two $20 bills. At the precinct, Gomez vouchered the pills: one bottle contained 40 pink pills stamped “2105V” and the other contained 41 pills stamped “129.” Gomez had no relevant experience with any pharmaceutical terms and was therefore unqualified to offer an opinion identifying the pills. The pills were not subjected to laboratory analysis to determine their chemical composition.

On November 21, 2007, Detective Gomez returned to NYC Pharmacy, and asked Portillo for 20 more pills each of Amitriptyline and Clonidine. Defendant gave Gomez two small yellow envelopes, and Gomez paid with two $20 bills. Gomez vouchered 25 pink pills stamped “2105V” and 25 orange pills stamped “129,” which the People assert matched the known colors and imprints for Amitriptyline and Clonidine, respectively, although they concede on appeal that no evidence was introduced at trial on this issue.

Detective Gomez made his next purchase on February 1, 2008, when he again asked Portillo for 20 pills each of Amitriptyline and Clonidine. Initially, Portillo refused to sell the medications without a prescription, explaining that the police had recently questioned him and his boss (meaning defendant). Portillo spoke to defendant, who then asked Gomez some questions, commenting, “You could be a cop. There’s a lot of cops out there.” Gomez gave defendant two $20 bills; defendant went to the back of the pharmacy, and a few minutes later gave Gomez a small orange bottle of pills. These pills were not introduced into evidence.

In the second phase of their investigation, Gomez presented prescriptions to defendant and asked for medications not specified in the prescriptions. To pay for the medications, Gomez used a New York State Medicaid benefits card (prepared by HRA to be used in this investigation) in the name of Ivonne Arroyo, a fictitious woman, whom Gomez said was his wife. According to Gomez, when a Medicaid recipient presents a prescription to a participating pharmacy, the pharmacy dispenses the medication and then bills Medicaid for reimbursement.

On February 28, 2008, Gomez presented defendant with a Zyprexa prescription (an antipsychotic drug), stating that it was for his girlfriend/wife.³ He also told defendant that “[t]hey gave [his wife] this because she’s crazy,” adding, “I don’t want that, my wife is not crazy.” Rather, he wanted Amitriptyline and Clonidine like he had gotten in the past. He told Portillo earlier that he wanted the pills so that he could make money.

Defendant took the prescription to the back of the pharmacy, then returned and had Gomez sign a book on the counter and the back of the Zyprexa prescription. Gomez signed the name “Ivonne Arroyo.” Defendant told Gomez that he could give him 30 pills, but Gomez asked for 40 pills of Amitriptyline and Clonidine, urging, “Come on I need to make a little money.” After more negotiation, defendant agreed to give Gomez 40 pills. Defendant told Gomez to “go to no one else in the future with this kind of thing,” instructing Gomez to come directly to him. Gomez asked defendant for his Medicaid card before he left. Afterward, at the precinct, Gomez vouchered 40 orange pills stamped “129.” Although the pills were entered into evidence, they too were not subjected to laboratory analysis.

On March 6, 2008, Gomez went directly to defendant, bypassing Portillo, and presented a prescription for 30 pills of 600-milligram Sustiva (an anti-retroviral medication used for treating HIV). Gomez told defendant that he did not want the medication on the prescription, but wanted the usual pills he had previously gotten from defendant. Defendant took the prescription in the back and returned with an orange bottle labeled “Sustiva - 600 milligrams.” Despite the label, according to Gomez, the bottle contained “40 orange pills stamped as GG 461, which is the Amitriptyline that I was getting in the past.” According to the People, however, the orange pills he had received previously were stamped “129” not “GG 461.” These pills were not introduced into evidence nor subjected to laboratory analysis.

On April 2, 2008, Gomez returned to the pharmacy and gave defendant prescriptions for three medications: Epzicom, Prezista (both of which are anti-retroviral medications) and Advair, which he said he had gotten from his “girl.” Gomez also asked for Percocet, a painkiller, for his cousin, who had been hurt in a motorcycle accident. Defendant replied that he could not give Gomez anything with codeine or any other controlled substance, but could dispense anything else, including “very very strong” painkillers worth $5 to $10 per pill.

In response to defendant’s request for photo identification, Gomez said he did not have any on him, and complained about being hassled despite their past dealings. Defendant explained that detectives might ask about who provided the prescriptions. Defendant asked Gomez what he wanted, and he requested “40 of my pills” plus two kinds of painkillers. Gomez signed the prescriptions, reassuring defendant that he was familiar with Arroyo’s signature and would sign the way he had before. Defendant went to the back of the pharmacy, but returned and explained that he could not dispense the painkillers because they were not registered in the computer. Defendant reminded Gomez to bring identification the next time, said he would gave him the 40 pills, and told him to return on Saturday for the painkillers. Gomez asked for his Medicaid card and defendant replied, “Alright,” and returned a few seconds later with the card. At the precinct, Gomez vouchered the 40 round pink pills stamped “2105V” These pills were entered into evidence, but like the others, were never subjected to laboratory analysis.

On May 21, 2008, Detective Gomez made his final purchase from defendant. Gomez returned to the pharmacy with two prescriptions; he also asked for Amitriptyline, Clonidine and Percocet. Defendant went to the back of the pharmacy, but came back and advised Gomez that the prescriptions were “not properly registered in the computer” and that the prescription had to be “in the computer by the doctor in order to be dispensed,” otherwise he could not bill Medicaid for the prescriptions. Gomez reminded defendant that he had promised Gomez strong painkillers, and asked for Amitriptyline and Clonidine instead. After some “back and forth,” defendant agreed, and also asked Gomez if he wanted to purchase additional Clonidine. Gomez said yes, and defendant sold him a total of 60 pills for $20. At the precinct, he vouchered 60 round pink pills stamped “2105V”

Two months later, on July 21, 2008, the police arrested defendant and Portillo inside the pharmacy. The police recovered five prescriptions for Ivonne Arroyo that defendant had accepted from Gomez in exchange for the pink and orange pills at the pharmacy. Records showed that four of the five billings transpired almost simultaneously with defendant’s receipt of the corresponding prescriptions. No such record exists for the March 6, 2008 purchase. The police also recovered a check from Medicaid made out to NYC Pharmacy in the amount of $32,297.60. It was dated April 7, 2008 — five days after the April 2 exchange in which defendant received three prescriptions. Significantly, the remittance number on the check matched the remittance number in Medicaid’s database for the three corresponding claims made on April 2.

Levon Aharonyan, supervising investigator at the New York Office of the Inspector General, testified, based on a document with information on Medicaid’s electronic database (EMED), that on February 28, 2008 at 6:42 p.m., Medicaid was billed $706.55 for 20-milligram tablets of Zyprexa, on behalf of NYC Pharmacy for medicine dispensed to Ivonne Arroyo. On March 6, 2008, Medicaid was billed $519.04 on behalf of NYC Pharmacy for 600-milligram tablets of Sustiva dispensed to Ivonne Arroyo. Finally, on April 2, 2008, three times between 5:29 p.m. and 5:34 p.m., Medicaid was billed on behalf of NYC Pharmacy for medications dispensed to Ivonne Arroyo: $884.28 for 300-milligram tablets of Prezista; $812.89 for Epzicom tablets; and $150.71 for an Advair Diskus. All five claims were marked paid in EMED, meaning that the claims had been submitted for payment and approved, and payment made. Aharonyan, however, acknowledged that a claim could be marked as paid but payment could be withheld.

Defendant was charged with, among other offenses, grand larceny in the third degree (Penal Law § 155.35), criminal diversion of prescription medications in the second degree (Penal Law § 178.20), and health care fraud in the fourth degree (Penal Law § 177.10), encompassing the transactions that occurred on February 28, March 6 and April 2, 2008. He was also charged with four counts of criminal diversion of prescription medications in the fourth degree (Penal Law § 178.10) (for transactions that occurred on November 15, 2007, November 21, 2007, February 1, 2008, and May 21, 2008), as well as various lesser included offenses. He was convicted of grand larceny in the third degree (count one), criminal diversion of prescription medications in the fourth degree (a lesser included offense of count two), health care fraud in the fourth degree (count three), and the four counts of criminal diversion of prescription medications in the fourth degree (counts four to seven).

On defendant’s CPL 290.10 motion, the court dismissed the five counts of fourth-degree criminal diversion of prescription medications, and otherwise denied the motion (24 Misc 3d 1231[A], 2009 NY Slip Op 51685[U]). For the reasons that follow, we affirm the judgment.

Health Care Fraud in the Fourth Degree

Health care fraud in the fourth degree is committed when, with intent to defraud a health plan, a person⁴ knowingly and willfully provides materially false information or omits material information for the purpose of requesting payment from the health plan for a health care item, and as a result of such information, the person or another receives payment in an amount to which the person or another is not entitled, and the payment wrongfully received from a single health plan in the period of a year exceeds $3,000 in the aggregate (Penal Law §§ 177.05, 177.10).⁵

Here, the evidence supported a conviction of health care fraud in the fourth degree on the theory that the Medicaid claims misidentified the recipient of the medications. Although I agree with the dissent that the evidence presented by the prosecution for the March 6 transaction was carelessly weak, when combined with the evidence presented for the February 28th and April 2nd transactions, the evidence as a whole was sufficient (cf. People v Ramirez, 33 AD3d 460, 460 [2006], lv denied 7 NY3d 928 [2006] [“(w)hile each link in the chain of circumstances might have an innocent explanation when viewed in isolation, the evidence, viewed as a whole, supported the conclusion that defendant was a participant in the drug conspiracy”]; People v Coscia, 279 AD2d 352, 352 [2001] [“(d)efendant’s pattern of conduct, viewed as a whole, had no reasonable explanation other than guilt”]). Indeed, it would take a very narrow view of the evidence for a jury not to figure out that the “usual pills” were not for Arroyo, but for Gomez. For instance, on February 28, when defendant told Gomez that he could give him 30 pills, Gomez asked for 40, stating that he needed to make money. Defendant also instructed Gomez to go to no one else in the future “with this kind of thing,” implying that he knew what Gomez was doing. On March 6, Gomez told defendant that he did not want what was prescribed for Arroyo, but what he had gotten in the past. Significantly, on April 2, when Gomez asked for “40 of my pills” and painkillers, defendant told Gomez that he could give him “very very strong” painkillers worth $5 to $10 each. And, during the negotiations, when Gomez was trying to convince defendant to give him painkillers with codeine, he told defendant “that’s why I got my girl to get me this, hook me up with this.” Gomez then stated, “Listen I’ve been here before, so many times already. You know [inaudible] [s]he’s got the hook up you know what I am saying” to which defendant responded “[w] hate ver you do, if you do it with the head on, it’s ok.”

Viewing the evidence in the light most favorable to the People, and giving them the benefit of every reasonable inference (People v Robinson, 225 AD2d 399, 400 [1996], lv denied 88 NY2d 884 [1996]), a rational jury could have found that defendant knew that Ivonne Arroyo was not the recipient of the medications, but rather Gomez, who wanted the drugs to sell for a profit.

Defendant posits that under this theory, a customer who goes to a pharmacy to obtain medication for a spouse would be guilty of health care fraud merely because the insurance claim or Medicaid claim is made in the spouse’s name. We disagree. The definition of “person” for purposes of prosecution under this statute excludes a recipient of a health care item or service unless such person was an accessory to the fraud (Penal Law § 177.00 [2]). Thus, absent evidence that a spouse under defendant’s hypothetical is involved in a scheme to defraud a health plan, there would be no prosecution for health care fraud. Nor would a pharmacist who dispenses medications to someone other than the one for whom medications are prescribed commit fraud in the absence of evidence that the person picking up the medications is involved in an illegal scheme and the pharmacist is also aware of what is going on.

An additional element of a health care fraud prosecution is evidence that the defendant “provide[d]” the materially false information. Although the statute does not expressly specify to whom the information is provided, nor does it limit the method by which the information is provided, it must be for the purpose of requesting payment from a health plan for a health care item or service (see Donnino, Practice Commentary, McKinney’s Cons Laws of NY, Book 39, Penal Law § 177.00, at 482-483). According to defendant, there is no evidence that defendant was the person who actually misled Medicaid. The statute, however, does not require that the People establish that defendant personally provided the false information to Medicaid. It is enough that he relayed that information to someone for the purpose of requesting payment from a health plan. Whether the bookkeeper or a secretary actually entered the information via computer is irrelevant in prosecuting defendant.⁶

Moreover, there is strong circumstantial evidence that defendant provided false information. Indeed, the pharmacy billed Medicaid for the five prescriptions used in the February 28, March 6, and April 2, 2008 transactions. The information compiled in Medicaid’s electronic database proved that, on February 28, March 6, and April 2, 2008, New York State was billed on behalf of NYC Pharmacy for five prescription medications: 20-milligram tablets of Zyprexa, 600-milligram tablets of Sustiva, an Advair 100/50 Diskus, Epzicom tablets, and 300-milligram tablets of Prezista. These five medications were certified as being dispensed by NYC Pharmacy to “Ivonne Arroyo.”

Significantly, the time line of the February 28 and April 2 billings, when compared with the corresponding time line of the undercover operation, supports the conclusion that defendant conducted the billings. For example, on February 28, 2008, the undercover detective entered NYC Pharmacy at approximately 6:30 p.m., and spent the next 17 minutes negotiating with defendant over the Zyprexa prescription. The billing of Medicaid for the Zyprexa occurred on that day at 6:42 p.m. Similarly, on April 2, 2008, the undercover operation transpired at approximately 5:35 p.m. and the billing of Medicaid for the Prezista, Epzicom, and Advair occurred that day at three separate times between 5:29 p.m. and 5:34 p.m.

In addition to the dovetailing time lines, other evidence was introduced that defendant provided the false information to Medicaid. For instance, on two different occasions, defendant explicitly told Detective Gomez that he could not dispense and accept certain medications because they were “not properly registered on the computer.” Moreover, defendant himself stamped the prescriptions, had the detective sign the back of the prescriptions and the book on the pharmacy counter and directed Gomez, during the second phase of the investigation, to “go to no one else in the future with this kind of thing.”

The offense of health care fraud in the fourth degree also requires proof of receipt of payment in an ¿mount exceeding $3,000, whether by defendant or another. Here, the evidence established that Medicaid reimbursed NYC Pharmacy for the fraudulent claims submitted by defendant, and that the total payment exceeded $3,000 in less than one year. The five claims marked as paid in EMED — $706.55, $519.04, $150.71, $812.89 and $884.28 — totaled $3,073.47, paid to NYC Pharmacy, which is a “person” under the health care fraud statute (see Penal Law § 177.00 [2]).

The fact that none of the drugs were subjected to laboratory analysis is of no moment with respect to this count. The relevant inquiry is whether defendant provided false information for the purpose of receiving payment and a person received a payment in excess of $3,000, not the identity of the drugs that were dispensed. Had the indictment limited defendant’s act of providing materially false information to misinforming Medicaid as to the drugs that were actually dispensed, the evidence would have been insufficient.⁷ But the indictment was not so limited, and, as noted above, a rational jury could have found that the materially false information consisted of misinforming Medicaid that Ivonne Arroyo was the recipient.

Grand Larceny in the Third Degree

The evidence was also legally sufficient to establish defendant’s guilt of third-degree grand larceny, which required the People to prove that from February 28 to April 7, 2008, defendant wrongfully took, obtained or withheld money from New York State through its Medicaid program; that defendant intended to appropriate the money to himself or a third person; and that the money exceeded an aggregate of $3,000 (see Penal Law §§ 155.35, 155.05 [1]). Here, defendant wrongfully took, obtained or withheld money from New York State, by misleading Medicaid as to the actual recipient of whatever drugs were dispensed, billing Medicaid for $3,073.47, and causing New York State to reimburse the pharmacy in that amount. As a result of defendant’s fraudulent claims, the pharmacy exercised “dominion and control” over money to which it was not entitled, and defendant’s negotiations with the undercover detective indicated his intent to appropriate the money to the pharmacy which employed him.

Other Issues

The court correctly declined to submit attempted third-degree grand larceny as a lesser included offense, as there was no reasonable view of the evidence, viewed most favorably to defendant, that he only attempted to commit grand larceny but did not complete the crime (see People v Scarborough, 49 NY2d 364, 371-374 [1980]).

The court properly denied defendant’s speedy trial motion. The delay during the period in question was properly excluded, since it was attributable to motion practice, including a reasonable period after a decision regarding a motion, or resulted from defense counsel’s request (see People v Jones, 235 AD2d 297 [1997], lv denied 89 NY2d 1095 [1997]).

Defendant’s claim that the verdict was repugnant and otherwise defective is unpreserved and we decline to review it in the interest of justice. As an alternative holding, we also reject it on the merits.

Accordingly, the judgment of the Supreme Court, New York County (James A. Yates, J., at speedy trial motion; Marcy L. Kahn, J., at jury trial and sentence), rendered July 17, 2009, convicting defendant of grand larceny in the third degree and health care fraud in the fourth degree, and sentencing him, as a second felony offender, to an aggregate term of to 4V2 years, should be affirmed.

1 . Although article 177 applies to conduct which was already covered by other Penal Law articles, such as larceny (Penal Law art 155) and insurance fraud (Penal Law art 176), the Legislature’s “stated rationale” for the health care fraud statutes was to

“get at the specific conduct by health care providers who defraud the system; make it easier to aggregate claims for fraud against a single health plan; and send a clear message to health care providers that the state remains vigilant and will punish fraud against the health care system. Legislative Memorandum.” (Donnino, Practice Commentary, McKinney’s Cons Laws of NY, Book 39, Penal Law § 177.00, at 481-482.)

2 . Although we state what the medications are primarily used for, this information was not elicited at trial other than when Gomez testified that Advair is an asthma medication.

3 . There was some confusion as to whether the name on the prescription was Gomez’s girlfriend or wife, and Gomez cleared up the situation by stating “[n]o; no; no; she’s not really my wife; okay. You know the deal.”

4 . Penal Law § 177.00 (2) defines “person” as “any individual or entity, other than a recipient of a health care item or service under a health plan unless such recipient acts as an accessory to such an individual or entity.”

5 . Count 3 of the indictment charged:

“The defendant, in the County of New York, from on or about February 28, 2008 to on or about April 7, 2008, with intent to defraud a health care plan, knowingly and willfully provided false information and omitted material information for the purpose of requesting payment from a health plan for a health care item and service and, as a result of such information and omission, he or another person received payment in an amount that he or such other person were not entitled to under the circumstances, and the payment wrongfully received, from a single health plan, in a period of not more than one year, exceeded three thousand dollars in the aggregate.”

6 . It should be noted in this regard that pursuant to Penal Law § 177.30, “[i]n any prosecution under this article, it shall be an affirmative defense that the defendant was a clerk, bookkeeper or other employee, other than an employee charged with the active management and control, in an executive capacity, of the affairs of the corporation, who, without personal benefit, merely executed the orders of his or her employer or of a superior employee generally authorized to direct his or her activities.”

7 . Given the absence of laboratory analysis and expert testimony as to what medications were dispensed, in particular on March 6, the evidence could not sustain a fourth-degree health care fraud conviction based on a theory that defendant falsely identified the medications dispensed. To be sure, unlike the criminal diversion charges, which required proof that a prescription medication was involved (see Penal Law § 178.00), the exact identity of the pills may be immaterial with respect to health care fraud. Rather, in this case, it was only necessary to prove that the pink and orange pills were not the prescribed medications. Arguably, the People’s proof was adequate in that regard with respect to the February 28th and April 2nd transactions. That is, based on Gomez’s testimony that he had received the same pink and orange pills on three prior occasions when he asked to purchase Amitriptyline and Clonidine, it could reasonably be inferred that the pills were not the medication Zyprexa, Epzicom or Prezista, and even more obviously, the pills were not the asthma inhalant Advair. On March 6, however, Gomez received orange pills marked “GG 461,” and not “129.” There is no evidence, however, that orange pills marked “GG 461” were not 600-milligram Sustiva pills. Without the March 6 transaction, the aggregate amount of money defrauded from Medicaid would not have exceeded $3,000.