| Matter of Gormley v New York State Ethics Commn. |
| 2007 NY Slip Op 09858 [46 AD3d 1078] |
| December 13, 2007 |
| Appellate Division, Third Department |
| In the Matter of William J. Gormley, Petitioner, v New York StateEthics Commission, Respondent. |
—[*1] Andrew M. Cuomo, Attorney General, Albany (Julie M. Sheridan of counsel), forrespondent.
Carpinello, J. Proceeding pursuant to CPLR article 78 (transferred to this Court by order ofSupreme Court, entered in Albany County) to review a determination of respondent which foundpetitioner in violation of Public Officers Law § 73 (8) (a) (ii) and imposed a fine of $3,500.
In April 1995, petitioner left state service after 21 years with the Department of Health.During his later years with the Department, he served in various senior management positions.Included among his primary duties was the promulgation of Medicaid reimbursement rates fornursing homes. As particularly relevant here, he served as the executive director of a project thatdeveloped and implemented the state's "RUGS-II case mix reimbursement system."[FN1]This [*2]system, while amended and adjusted over the years,continues to be used to set reimbursement rates for nursing homes.
In 2004, petitioner was hired to perform a cost-to-rate analysis on behalf of western NewYork nursing home litigants embroiled in a lawsuit with the Department, along with another stateagency, over the adequacy of the Medicaid reimbursement rates. In the course of this litigation, inwhich the petitioning nursing homes were alleging that the Department's rate-settingmethodology irrationally relied on outdated and unrepresentative 1983 costs (see Matter of Nazareth Home of theFranciscan Sisters v Novello, 7 NY3d 538, 542 [2006]), petitioner submitted anaffidavit which is at the heart of the instant dispute. Specifically, certain averments contained inthis affidavit prompted an investigation by respondent that petitioner violated Public OfficersLaw § 73 (8) (a) (ii), referred to as the "lifetime bar" provision. After a hearing, a HearingOfficer found that petitioner violated the statute and recommended that he be assessed a $3,500civil penalty. Respondent adopted the Hearing Officer's findings and recommendation promptingthis CPLR article 78 challenge, which has been transferred to this Court (see CPLR 7804[g]).
Upon our review of the record, we are satisfied that substantial evidence supportsrespondent's determination (see CPLR 7803 [4]). As relevant here, the lifetime barprovision prohibits a former state employee from rendering compensated services "in relation toany case, proceeding, application or transaction with respect to which such person was directlyconcerned and in which he or she personally participated during the period of his or her serviceor employment" (Public Officers Law § 73 [8] [a] [ii]; see Matter of McCulloch v NewYork State Ethics Commn., 285 AD2d 236, 242 [2001]). The evidence in this proceedingestablishes that petitioner was directly involved with the development of the RUGS-IIreimbursement system while employed with the Department. It further establishes that, followinghis cessation of state service, he was compensated for submitting an affidavit on behalf ofnursing home litigants in which he touted his role in creating this system and then relayed insiderknowledge about its overall scheme.[FN2]Specifically, petitioner averred: "[T]he RUGS-II system was designed to utilize the 1983 base formultiple years. The term 'multiple years' was used at this time as a signal to the nursinghomes that base years would not move virtually every year as had been the history since theinception of the New York State Medicaid program . . . The exact number ofyears to maintain the same base year was never specified in policy or regulation during the 1983to 1986 development and implementation time frame. However, it is truly surprising that the1983 base year has been in place for twenty-one years considering that the longest timeframe forutilizing a base prior to 1986 was just two years. I never envisioned or intended the base year to[*3]continue in perpetuity or to ever last as long as it has"(emphasis added).
By including the italicized statements in his affidavit, petitioner was most assuredly "takingunfair advantage of [his] insider's knowledge and contacts, including the confidences and secrets[he] may have gained while working on [the RUGS-II system] on behalf of the State" (Forti vNew York State Ethics Commn., 75 NY2d 596, 611 [1990]). In other words, by submittingan affidavit to a court in an attempt to assist litigants challenging the rationality of the RUGS-IImethodology that he himself developed and including in such affidavit statements expressing hispersonal intentions in so developing this system, petitioner received compensation for servicesrendered in relation to a "transaction" with which he was directly involved while employed bythe Department, thereby establishing a clear violation of the statute (see Matter of McCullochv New York State Ethics Commn., supra).
Moreover, we find that evidence of such a flagrant violation of the statute also justified theimposition of the civil penalty. In other words, we are unpersuaded that the record lackssubstantial evidence to support respondent's finding that petitioner knowingly and intentionallyviolated the statute such that a civil penalty was permitted (see Public Officers Law§ 73 former [14], currently renumbered [18]). To this end, petitioner was certainly awareof the restrictions outlined under Public Officers Law § 73 (8) (a) (ii), because respondentexplicitly reminded him of same in 1996, when he sought to be excepted from another provisionof the statute. In a letter dated February 15, 1996, respondent informed petitioner that he "maynot work on any case, proceeding, application or transaction on which [he] worked while in[s]tate service" and further advised him that additional information on "these restrictions" couldbe obtained by contacting it. In sum, given proof in the record that petitioner knowingly andintentionally submitted an affidavit to a court that he knew related to a matter (i.e., the RUGS-IIsystem) with which he was directly involved during his state service and that clearly containedinsider information about such matter that he could only have garnered through such former stateservice (i.e., that there was no intent for the Department to use the 1983 base year for as long as ithad been doing), we find that substantial evidence supports the $3,500 civil penalty under PublicOfficers Law § 73 former (14).
As a final matter, we reject petitioner's argument that, as a former state employee, respondentlacked jurisdiction over him to enforce the lifetime bar provision of Public Officers Law §73 (8) (a) (ii). While the Court of Appeals found merit to a like jurisdictional argument made bya former state employee in Matter of Flynn v State Ethics Commn., Dept. of State, State ofN.Y. (87 NY2d 199, 205 [1995]), that employee was charged under Public Officers Law§ 73 (5) and not, as expressly distinguished by the Court, the statute at issue here. Indeed,the Court of Appeals noted that Public Officers Law § 73 (8) "by its essential nature,necessitates jurisdiction over former employees and officers" (id.).
Crew III, J.P., Spain, Rose and Lahtinen, JJ., concur. Adjudged that the determination isconfirmed, without costs, and petition dismissed.
Footnote 1: RUGS, which is an acronym for"Resource Utilization Groups," is a system for classifying residents of a nursing home based onthe cost of care and acuity of these residents. "RUGS II" refers to the second version of thissystem which was developed and implemented between 1983 and 1986 under petitioner'stutelage.
Footnote 2: In so doing, petitioner wasobviously attempting to assist these litigants in proving their claim that the Department wasirrationally relying on outdated costs in setting reimbursement rates.