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
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
- 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 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
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
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.
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).
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
The amount on Form 1099 represented approved medicaid claims. Not all
of it was paid 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
; 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
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:
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
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 undercover operation, which could not have
existed without the provider number issued only for its duration, would accrue
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.”
In view of the foregoing, claimants have failed to prove their case, and
claim no. 85525 is dismissed.
LET JUDGMENT BE ENTERED ACCORDINGLY.