Restitution vacated in Medicaid fraud case

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A former Oneida County drug treatment center director will not have to pay the state $675,984 it claimed was owed in restitution for improperly billing Medicaid by having clients simultaneously enrolled in two programs.

The Appellate Division, Fourth Department has ruled the state only supplied auditing documentation of its conclusion on the amount owed, but no trial testimony or client records to support that conclusion. The higher court found the state did not provide a proper evidentiary basis and vacated the restitution order against Ole Pettersen, but let stand his conviction for three counts of first-degree offering a false instrument for filing.

Pettersen, 64, was represented on appeal by Utica attorney Peter J. DiGiorgio Jr. who said the restitution was a big part of the appeal. He noted a jury had acquitted Pettersen of the most serious charge, second-degree grand larceny, alleging he stole more than $500,000 in Medicaid benefits while he ran the Center for Addiction Recovery in nearby Clinton from 2003 to 2006.

“By acquitting him, there is no way the jury felt he was depriving the state of money,” DiGiorgio said.

Pettersen was also acquitted of three counts of falsifying business records at his 2009 trial. The state claimed Pettersen did not have proper documentation to justify enrolling clients in two programs at a time, thereby billing Medicaid at a higher rate for each.

DiGiorgio said Pettersen did not think he did anything improper with the way he billed. He said the regulations are not easy to understand and that Pettersen did provide multiple services to clients. DiGiorgio said some substance abusers require more than one method of treatment. For instance, those who use opiates may need a methadone program, as well as counseling.

“This was a very difficult record,” DiGiorgio said. “It was such a complex case.  We had always contended that these clients got services. He provided services to this community. We’re very pleased that the Appellate Division looked at that and vacated the restitution.”

The prosecutor on appeal was Daniel J. Jawor, of counsel for the Office of Attorney General Eric T. Schneiderman. An office spokeswoman said the office was in the process of reviewing the decision and declined to comment.

The offering a false instrument for filing charges, which the jury found Pettersen guilty of, related to documents Pettersen added to client folders which the state said were backdated to cover up his alleged theft of Medicaid funds.

The Appellate Division panel rejected Pettersen’s contention there was not enough evidence to support his conviction.

The panel consisted of Justice John V. Centra, presiding, and Justices Erin M. Peradotto, Stephen K. Lindley, Joseph D. Valentino and Brian F. DeJoseph.

They rejected Pettersen’s contention that Oneida County Court Judge Barry M. Donalty should have instructed the jury on a mistake of law defense under Penal Law Section 15.20 (2) (a), which relieves a person of criminal liability if their conduct relied on an official statement of law.

Pettersen maintained the evidence demonstrated his good faith misunderstanding of complex billing regulations, which supported having the jury be told of that as a possible defense.

Citing People v. Marrero, 69 NY2d 382, the panel noted the Court of Appeals noted the mistake of law defense was to be very narrowly used and only where someone could show he or she tried to learn the law, relied on its validity and it was later determined there was an actual mistake in the law.

“That is not the case here,” the panel wrote in People v. Pettersen (2015 NY Slip Op 06061). “In any event, we note that the court properly instructed the jury on the issue of specific intent, thereby allowing the jury to consider whether defendant’s good-faith belief that his billing practice was legal prevented him from forming a specific intent to defraud.”

They further concluded the mistake of law defense did not apply because no government official issued a statement authoring Pettersen’s conduct and had, in fact, warned him it was improper.

The panel declined to review Pettersen’s contention he was denied a fair trial based on alleged prosecutorial misconduct, noting he failed to preserve that by not objecting during summations. DiGiorgio said following a Sandoval hearing, the judge ordered the fact Pettersen had multiple sites and was seeing more clients than regulations provided for was not to be brought up at trial, but that the defense attorney mentioned it in his closing argument.

In addition, the panel rejected Pettersen’s contention the court should not have denied his request for a circumstantial evidence charge, saying the people presented direct and circumstantial evidence so even though the element of intent was established solely through circumstantial evidence, instructions on circumstantial evidence were not required.

The panel did agree with Pettersen, however, that the state failed to meet its burden of establishing the amount of restitution.

“An auditor for the attorney general testified at the hearing that, based on her review of the records of 52 clients, defendant owed restitution in the amount of $675,984,” the panel noted. “Those client records, however, were not admitted in evidence at the restitution hearing. Moreover, the people did not seek to incorporate any of the trial testimony to support the restitution claim, nor did they offer any evidence other than the auditor’s testimony and two spreadsheets summarizing her findings based on the client records.”

Pettersen was sentenced to one to three years in state prison and served about a year before being released in late May 2010 from the Cayuga Correctional Facility in Cayuga County.

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