Lawson H. MYERS, III; Millie Boaz Myers; Robert W. Simms, Co-Executors of the Estate of Lawson H. Myers, Jr.; and Boaz Hospital Supply Company, Inc., Plaintiffs-Appellants, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellee.
No. 89-5337.
United States Court of Appeals, Sixth Circuit.
Argued Nov. 30, 1989. Decided Jan. 11, 1990.
893 F.2d 840 | 28 Soc.Sec.Rep.Ser. 265 | Medicare & Medicaid Gu 38,344
Joseph M. Whittle, U.S. Atty., Michael F. Spalding, Asst. U.S. Atty., Louisville, Ky., Bruce Granger, F. Richard Waitsman (argued), Dept. of Health and Human Services, Office of General Counsel, Atlanta, Ga., for defendant-appellee.
Before: MILBURN and GUY, Circuit Judges; and LIVELY, Senior Circuit Judge.
MILBURN, Circuit Judge.
Lawson H. Myers, III, Millie Boaz Myers, Robert W. Simms, and Boaz Hospital Supply Company, Inc. (appellants) appeal the judgment of the district court dismissing their action challenging the decision of the Secretary of Health and Human Services (Secretary) to exclude all items and services provided by appellants from coverage under the Medicare program for a period of two years. For the reasons that follow, we affirm.
I.
Appellants were in the business of providing medical supplies and services in the Commonwealth of Kentucky, and utilized the Medicare program to collect payments. On May 11, 1978, appellants were indicted in the United States District Court for the Western District of Kentucky on 170 counts of violating Title XVIII of the
On June 29, 1978, the individual appellants changed their plea from not guilty to nolo contendere to 22 counts in the indictment. The corporation also pleaded nolo contendere to one count and was fined $500, with a nolle prosequi entered as to all other counts. The individual appellants were sentenced to one year as to each of the 22 counts, with a nolle prosequi entered as to all other counts. However, the sentences were suspended, and the individual appellants were placed on probation for two years and fined $2,000.
On August 29, 1979, appellants were notified by the Health Care Financing Administration (HCFA) of a proposal to exclude them from participation in the Medicare program for a period of two years. Appellants were informed that the action was proposed because they had knowingly made or caused to be made false statements and misrepresentations of material facts in application for the payment of Medicare benefits for the purpose of causing payments to be made under Title XVIII of the [Social Security] Act. The proposed exclusion was authorized by section 1862(d)(1)(A) of the Act,
On November 14, 1980, appellants requested a hearing on the HCFA‘s decision to exclude them from the Medicare program. A hearing was held before an administrative law judge (ALJ) on April 22, 1981, at which Robert Foster, an HCFA employee, and appellant Lawson H. Myers, III, testified. Lawson Myers, Jr., did not testify and did not submit an affidavit. On December 1, 1981, the ALJ issued a decision affirming the HCFA‘s determination to exclude appellants from the Medicare program for a period of two years. On February 6, 1986, the Appeals Council affirmed the two-year suspension, finding the ALJ‘s decision was supported by substantial evidence.
On June 14, 1988, the magistrate recommended the action be dismissed because the Secretary‘s decision was supported by substantial evidence. On August 31, 1988, the district court issued an opinion and order adopting the magistrate‘s recommendation and dismissing the case. Appellants filed a motion for reconsideration, which the district court overruled by an order entered on January 17, 1989. This timely appeal followed.
The principal issues on appeal are (1) whether a conviction pursuant to a plea of nolo contendere is admissible in an administrative proceeding; (2) whether substantial evidence supports the Secretary‘s decision; and (3) whether the ALJ erroneously admitted hearsay evidence.
II.
The standard of review applicable to this case is whether the Secretary‘s decision to exclude appellants is supported by substantial evidence. Garner v. Heckler, 745 F.2d 383, 387 (6th Cir.1984);
A.
Appellants first argue the Secretary erred by excluding them from the Medicare program on the basis of their convictions following pleas of nolo contendere. Appellants’ argument presents two issues: (1) whether a criminal conviction, after a plea of nolo contendere, is admissible evidence in an administrative proceeding pursuant to
Citing United States v. Graham, 325 F.2d 922, 928 (6th Cir.1963), appellants argue that neither a plea of nolo contendere nor a conviction resulting therefrom is admissible evidence to prove guilt in another proceeding. Appellants’ reliance upon Graham is misplaced because the nolo contendere pleas and subsequent convictions in this case were not used to prove guilt. Rather, the nolo pleas and convictions were used to disqualify appellants from participating in the Medicare program.
Appellants argued in the district court that the
Appellants argue that this case does not fit the narrow exception to the rule against subsequent use of a nolo contendere conviction because the applicable statute does not give force to the fact of any conviction. Appellants point out that
We reject appellants’ argument. Although appellants do not cite
Appellants’ argument for a narrow exception to the rule against admissibility of a nolo conviction also lacks merit. Contrary to appellants’ assertion, proof of nolo convictions has not been restricted to cases in which a statute gives force to the fact of conviction. In Crofoot v. United States Government Printing Off., 761 F.2d 661 (Fed.Cir.1985), a former federal employee sought review of a final order of the Merit Systems Protection Board which upheld his removal on the ground of notoriously disgraceful conduct. The employee was indicted for the felony of fraud against the United States Government after filing a fraudulent claim for worker‘s compensation. Pursuant to a plea bargain agreement, the employee entered a plea of guilty to a misdemeanor charge under the doctrine of North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970), and was removed from his government job shortly after his Alford plea was accepted by the court. The Board upheld the employee‘s removal on the charge of notoriously disgraceful conduct. Crofoot, 761 F.2d at 663.
Upon review of the Board‘s order, the court held that a conviction on a plea of guilty under the Alford doctrine may, in the Board‘s discretion, be considered as the basis for the employee‘s removal. Id. at 665. The court analogized an Alford plea to a plea of nolo contendere, and added that the collateral consequences of a conviction pursuant to either plea should be the same. Id. The court observed, Several courts have held that the fact of a conviction pursuant to a nolo contendere plea gives rise to a variety of collateral consequences in subsequent proceedings. Id. (emphasis in original). Although the court remanded the case for consideration of a collateral issue, the court did hold that substantial evidence supports the Board‘s finding that under the circumstances of this case, petitioner‘s plea of guilty and subsequent conviction on the charge of false pretenses was notoriously disgraceful conduct. Id.
In Munnelly v. United States Postal Service, 805 F.2d 295 (8th Cir.1986), the Postal Service discharged a postmaster following his nolo contendere plea to an action by the Nebraska Accounting and Disclosure Commission (NADC) charging the postmaster with financial misconduct in his role as a member of the Board of Directors of the Omaha Public Power District. Pursuant to the nolo contendere plea, the NADC made findings of civil violations and imposed a civil penalty of $1,000 for each violation. Id. at 297. The former postmaster exhausted his administrative remedies before filing an action seeking reinstatement. On appeal, the postmaster argued the NADC‘s findings of civil violations could not be used to support his discharge because the findings were based on his plea of nolo contendere. Id. at 300. The court rejected the postmaster‘s argument, stating that a conviction pursuant to a nolo contendere plea gives rise to a variety of collateral consequences in subsequent proceedings. Id. (quoting Crofoot v. United States Government Printing Office, 761 F.2d 661, 665 (Fed.Cir.1985)). The court held that the NADC findings based on Munnelly‘s nolo contendere pleas could be relied upon by the Postal Service as a basis for his removal. Id.
Crofoot and Munnelly establish that a conviction pursuant to a plea of nolo contendere is admissible in an administrative proceeding, even in the absence of a statute giving force to the fact of a conviction. The Secretary‘s exclusion of appellants from participation in the Medicare program is sufficiently analogous to the disciplinary action taken in Crofoot and Munnelly to warrant admissibility of the convictions in the present case. Accordingly, the convictions pursuant to pleas of nolo contendere were properly considered by the Secretary.
B.
We next consider whether or not appellants’ convictions pursuant to
Appellants’ arguments are without merit. Exclusion from the Medicare program pursuant to
It is well-settled that a plea of nolo contendere constitutes an admission of every essential element of the offense [that is] well pleaded in the charge. United States v. Frederickson, 601 F.2d 1358, 1365 n. 10 (8th Cir.), cert. denied, 444 U.S. 934, 100 S.Ct. 281, 62 L.Ed.2d 193 (1979) (brackets in original) (quoting Lott v. United States, 367 U.S. 421, 426, 81 S.Ct. 1563, 1566, 6 L.Ed.2d 940 (1961)). Appellants’ pleas of nolo contendere to the charges constitute an admission that they knowingly and willfully made or caused to be made false, fictitious and fraudulent statements and representations of material facts in applications for payment under the Medicare program. Because the indictment and the statutes have virtually identical language, a conviction under
C.
Appellants next argue the ALJ erred by admitting hearsay evidence which was irrelevant and unreliable. At the hearing, appellants objected to the testimony of Robert Foster, a HCFA employee, regarding his investigation of the case and his interviews with former customers of the appellants. Appellants contend the hearsay testimony was irrelevant because it was not relied upon by the Secretary in excluding appellants from the Medicare program. Appellants assert that admission of the irrelevant hearsay evidence was fundamentally unfair since it did not form the basis of the exclusion.
Appellants cite the case of Calhoun v. Bailar, 626 F.2d 145 (9th Cir.1980), cert. denied, 452 U.S. 906, 101 S.Ct. 3033, 69 L.Ed.2d 407 (1981), as setting out a test for admissibility of hearsay evidence in administrative hearings. The court in Calhoun stated that the test for admissibility of hearsay evidence in an administrative context requires that the hearsay be probative and its use fundamentally fair. Id. at 148. The court also discussed the Supreme Court‘s decision in Richardson v. Perales, 402 U.S. 389, 402-06, 91 S.Ct. 1420, 1427-30, 28 L.Ed.2d 842 (1971), in which the Court listed nine factors that assure reliability and probative value. Appellants argue the multifactor analysis of reliability should have been conducted by the ALJ before admitting the hearsay testimony.
A careful reading of Richardson and Calhoun reveals that the multifactor analysis is used to determine whether the hearsay evidence constitutes substantial evidence supporting an administrative decision. In other words, the multifactor analysis is used to assure reliability when hearsay evidence is the sole basis for agency action. See Calhoun, 626 F.2d at 149. Thus, appellants’ argument for application of Calhoun‘s multifactor analysis is misplaced. The present case is not one in which hearsay evidence alone must constitute substantial evidence in order to support the Secretary‘s decision.
Hearsay evidence is admissible in an administrative proceeding, provided it is relevant and material. Richardson, 402 U.S. at 400, 91 S.Ct. at 1426; Evosevich v. Consolidation Coal Co., 789 F.2d 1021, 1025 (3d Cir.1986). The hearsay testimony to which appellants object is relevant and material to this case. The hearsay testimony concerned the Secretary‘s investigation of appellants and consisted of information derived from interviews with former customers of the appellants. Although the ALJ conceded that the hearsay testimony alone was insufficient to support exclusion of appellants, the hearsay testimony remained relevant and material because the ALJ concluded that the convictions, combined with the hearsay evidence, were sufficient to exclude the appellants.
In the context of their challenge to the hearsay evidence, appellants also challenge the credibility of Foster‘s testimony. Appellants cite testimony by Lawson Myers, III, contradicting and impeaching Foster‘s testimony. However, the ALJ gave little weight to Myers’ self-serving testimony, and found it insufficient to rebut the Secretary‘s evidence. Although the reviewing court does not act, even in credibility matters, as a mere rubber stamp for the administrative agency action on appeal; Krispy Kreme Doughnut Corp. v. NLRB, 732 F.2d 1288, 1290 (6th Cir.1984), [i]t is well-settled that it is the function of the ALJ to resolve credibility problems. NLRB v. Norbar, Inc., 752 F.2d 235, 239 (6th Cir.1985) (quoting NLRB v. Downslope Industries, Inc., 676 F.2d 1114, 1116 (6th Cir 1982)). This court will not normally disturb the credibility assessments of ... the Administrative Law Judge who has observed the demeanor of the witnesses. Norbar, 752 F.2d at 239 (quoting NLRB v. Magnetics International, Inc., 699 F.2d 806, 813 (6th Cir.1983)). Because the ALJ was required to evaluate conflicting testimony from two witnesses, his opportunity to observe the demeanor of the witnesses warrants deference to his decision, and appellants’ argument challenging Foster‘s credibility is rejected.
III.
For the reasons stated, the district court‘s judgment dismissing appellants’ action is AFFIRMED.