According to Acting Insurance Fraud Prosecutor Riza Dagli, Osvaldo Morales Sr., 61, of Bronx, N.Y., a co-owner of the now-defunct Chambers Mental Health Clinic LLC, pleaded guilty to third-degree Medicaid fraud before Superior Court Judge Edward M. Neafsey in Mercer County. The charge was contained in a Nov. 13, 2007 state grand jury indictment.  The state recommended that Morales serve a probationary sentence.

Morales’s co-defendants – Pedro Acosta, 64, of Queens, N.Y., a co-owner of Chambers Mental Health Clinic LLC and Arnold Jacques, M.D., 60, of Jackson, the former medical director of the clinic, a medical doctor who practices as a psychiatrist – were also charged in the Nov. 13, 2007 state grand jury indictment. Acosta pleaded guilty to second-degree health care claims fraud and is awaiting sentencing. The case against Jacques is pending. A co-owner of the clinic, Bernardo Estambul, 61, of New York, N.Y., pleaded guilty to an accusation charging him with Medicaid fraud. Estambul was sentenced to three years probation and ordered to pay $10,044 in fines and restitution. Estambul was also barred from participating in the Medicaid program for five years.

In pleading guilty, Morales, who operated Chambers Mental Health Clinic in Trenton, admitted that between January 2004 and November 2005, he fraudulently over-billed the Medicaid program.

Morales, Estambul and Acosta caused Medicaid claims to be billed under Jacques’ Medicaid provider number even though Jacques did not provide the counseling services billed. In addition, Morales, Estambul and Acosta billed Medicaid for longer counseling sessions than those that were actually provided. Medicaid pays a higher rate for longer counseling sessions and for counseling services provided by a medical doctor as opposed to counselors who did not have licenses. It is charged that the defendants allegedly fraudulently billed the Medicaid program for more than $160,000 to which they were not entitled.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2453-08T4

STATE OF NEW JERSEY,

Plaintiff-Appellant,

v.

EDWARD ACQUAYE,

Defendant-Respondent.

________________________________________

Argued October 5, 2009 

Before Judges Rodríguez and Yannotti.

On appeal from an interlocutory order of the

Superior Court of New Jersey, Law Division,

Middlesex County, Indictment No. 06-01-

00143.

Lisa Sarnoff Gochman, Deputy Attorney

General, argued the cause for appellant

(Anne Milgram, Attorney General, attorney;

Alvina Seto, Deputy Attorney General, of

counsel and on the brief).

Jef Henninger, argued the cause for

respondent (Mr. Henninger, on the brief).

PER CURIAM

We granted leave to the State to appeal from the

interlocutory order granting defendant Edward Acquaye’s petition

October 21, 2009

2

A-2453-08T4

for post-conviction relief (PCR), vacating defendant’s

conviction based on a guilty plea. We affirm.

These are the salient facts. In June 2006, defendant

pleaded guilty to third degree Medicaid fraud, N.J.S.A. 30:4D-

17(c). This charge stemmed from defendant’s acceptance of

kickbacks from Michael Stavitski, the owner of Belmar Pharmacy,

in return for defendant steering the prescriptions of all the

residents of his residential healthcare facility, Lincoln Rest

Center in Jamesburg, to Belmar Pharmacy. These prescriptions

were paid by Medicaid pursuant to the New Jersey Medical

Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19.5.

In exchange, the State agreed to recommend a non-custodial term

conditioned on the payment of $1500 in restitution and a $1000

fine and to recommend “that defendant does not lose [his]

license to provide [nursing/rest home] care.”

At the plea hearing, defendant acknowledged reviewing and

understanding the plea form, which he signed and initialed at

every page. Before accepting the plea, the judge informed

defendant that the State’s promise to recommend that he be able

to retain his New Jersey State license to operate Lincoln Rest

Center was not guaranteed because the licensing authorities were

independent agencies and not bound by the State’s

recommendation. The judge said, “I don’t think anyone can

3

A-2453-08T4

guarantee or promise you[] that you’re not going to lose your

license. You understand that[,] right?” Defendant replied,

“Yes.” Defendant then gave an adequate factual basis for his

guilty plea. The judge accepted the plea. Instead of imposing

a probationary term, the judge suspended imposition of the

sentence for five years with the condition that defendant pay

$1500 in restitution and a $1000 fine.

Three weeks after this disposition, the United States

Department of Health and Human Services, Office of Inspector

General (OIG), advised defendant that, as a result of this

conviction, he would be excluded from participation in all

federally-funded healthcare programs for a period of five years

pursuant to 42 U.S.C. § 1320a-7(a). The letter informed

defendant that he had thirty days from the date of the letter to

“submit any information and supporting documentation [he]

want[ed] the OIG to consider before it [made] a final

determination regarding [his] exclusion.” A subsequent letter

informed defendant that he was excluded from participating in

any healthcare programming which receives federal funding.

Defendant was advised of his right to a hearing to appeal his

exclusion. Defendant did not request a hearing.

The OIG also notified the New Jersey Division of Medical

Assistance and Health Services (Division) of this exclusion.

4

A-2453-08T4

The Division then notified defendant that, as a consequence of

OIG’s decision, he was excluded from participating in any

healthcare program receiving federal funding for five years.

Defendant and his wife, Freda Acquaye, a fifty percent owner and

Chief Operating Officer of Lincoln Rest Center, decided to

voluntarily close the facility and surrender its license.

Defendant filed this PCR petition, arguing that the State

and the court failed to inform him of his automatic exclusion

from participating in Medicaid programming and all federallyfunded

healthcare programs pursuant to 42 U.S.C. § 1320a-7(a).

Defendant asked the court to vacate his plea on the ground that

the plea was unknowing and involuntary as a result of the

State’s failure to inform him of the automatic exclusion.

The same judge who accepted the plea and sentenced

defendant heard oral arguments. The judge determined that there

was not a meeting of the minds between defendant and the State

regarding the terms of the plea agreement. The judge ruled

preliminarily that failure to inform defendant that he would not

be able to participate in federally-funded healthcare programs

would render defendant’s previous decision to enter the plea an

uninformed one. The judge gave the parties a September 19, 2008

deadline to resolve the matter or, in the alternative, to

5

A-2453-08T4

proceed with an evidentiary hearing to determine what the

understanding was between the parties.

On October 16, 2008, the judge held an evidentiary hearing.

At this hearing, both defendant and the Deputy Attorney General

who appeared at the plea hearing testified. In a supplemental

brief, another Deputy Attorney General certified that the State

contacted OIG and spoke to Joanne Francis, an OIG

representative, to inquire if defendant had requested any

appeals or hearings after receiving the letter of exclusion.

Francis replied that defendant filed a response to the OIG

letter, but made no request for a hearing.

The judge granted defendant’s PCR petition, finding that

defendant’s guilty plea was not entered knowingly, voluntarily,

or intelligently because the State’s promise to recommend that

defendant not lose his New Jersey license to operate a rest home

implied, according to the judge, that defendant had a chance of

continuing to operate Lincoln Rest Center. However, because

defendant’s debarment from federally-funded healthcare programs

was a mandatory result of the guilty plea, continued operation

of the business was “practically impossible.” Finally, the

judge reasoned that “the mandatory nature of said debarment is

inconsistent with the [plea recommendation.]“

On appeal, the State contends:

6

A-2453-08T4

THE TRIAL COURT ERRED IN FINDING THAT THE

STATE WAS REQUIRED TO INFORM DEFENDANT OF

THE COLLATERAL ISSUE OF HIS FEDERAL

EXCLUSION FROM PARTICIPATING IN FEDERALLY

FUNDED HEALTHCARE PROGRAMMING RENDERING HIS

PLEA INVOLVEMENT AND UNKNOWING.

In a supplemental letter brief, the State contends that:

THE TRIAL COURT ERRED IN GRANTING [PCR];

DEFENDANT’S GUILTY PLEA SHOULD STAND BECAUSE

HE RECEIVED EFFECTIVE ASSISTANCE OF COUNSEL

WHEN HIS ATTORNEY INFORMED HIM ABOUT THE

PENAL CONSEQUENCES OF HIS GUILTY PLEA AND

DEFENDANT WAS NOT MISINFORMED REGARDING ANY

PENAL CONSEQUENCE.

We disagree with the State’s arguments and affirm.

We begin our analysis with a restatement of governing

principles. A defendant seeking to withdraw a plea after

sentencing, pursuant to Rule 3:21-1, must show that he or she is

prejudiced by enforcement of the agreement, i.e., that knowledge

of the consequences would have made a difference in his or her

decision to plead. State v. Johnson, 182 N.J. 232, 241-42

(2005); State v. McQuaid, 147 N.J. 464, 495-96 (1997); State v.

Kiett, 121 N.J. 483, 490 (1990); State v. Howard, 110 N.J. 113,

123 (1988).

It is fundamental to the practice of plea bargaining that

the guilty plea must be made voluntarily, knowingly, and

intelligently. Id. at 122 (citing State v. Taylor, 80 N.J. 353,

362 (1979)). For that reason, in accepting a plea of guilty,

the trial court should question defendant under oath to

7

A-2453-08T4

determine that the plea is made with an understanding of “‘the

nature of the charge and the consequences of the plea.’” State

v. Kovack, 91 N.J. 476, 484 (1982) (quoting R. 3:9-2

awareness of penal consequences may result in the vacating of a

sentence imposed pursuant to a plea agreement. State v.

Johnson, supra, 182 N.J. at 236-37. “The right of the defendant

to be informed of the consequences of his plea, however, extends

only to those consequences that are ‘direct,’ or ‘penal,’ but

not to those that are ‘collateral.’” State v. Howard, supra,

110 N.J. at 122 (citing State v. Heitzman, 209 N.J. Super. 617,

622 (App. Div. 1986), aff’d o.b., 107 N.J. 603 (1987)).

However, these authorities apply to situations where the

defendant is not informed of a consequence.

A defendant also has the right not to be “misinformed . . .

as to a material element of a plea negotiation, which [he] has

relied thereon in entering his plea.” State v. Nichols, 71 N.J.

358, 361 (1976). Defendant’s “reasonable expectations,”

grounded in the terms of the plea agreement, must be fulfilled.

State v. Marzolf, 79 N.J. 167, 183 (1979) (citing State v.

Thomas, 61 N.J. 314, 322 (1972)). Thus, “misinformation about a

collateral consequence may vitiate a guilty plea if the

1). Lack of

1

was added, effective September 1, 2004.

8

The requirement that defendant’s plea colloquy be under oathA-2453-08T4

consequence is a material element of the plea.” State v.

Jamgochian, 363 N.J. Super. 220, 225 (App. Div. 2003) (citing

State v. Howard, supra, 110 N.J. at 122).

Therefore, in the context of defendant’s misinformation,

the distinction between direct or collateral consequences is not

significant. Rather, the focus is on defendant’s expectation

and the inaccurate information conveyed by the plea agreement.

For that reason, this case does not turn on whether defendant’s

exclusion from participating in federally-funded healthcare

programs is a penal or collateral consequence of the plea.

Clearly, such exclusion is a collateral consequence. See

Manocchio v. Kusserow, 961 F.2d 1539, 1543 (11th Cir. 1992)

(holding that debarment pursuant to 42 U.S.C. § 1302a-7 is

remedial in nature and not punitive).

Here, the judge found that the State’s failure to

accurately inform defendant that his subsequent exclusion from

participation in federally-funded healthcare programs rendered

the guilty plea unknowing and involuntary. We agree.

We emphasize that neither the State nor the trial court

were required to alert defendant to the federal exclusion prior

to the entry of his guilty plea. The primary responsibility to

determine this consequence was on defendant, who anticipated the

possibility of losing his ability to operate Lincoln Rest

9

A-2453-08T4

Center. There would not be a reversal here if the State had

simply recommended a non-custodial sentence. However, the State

went further and promised to recommend that defendant’s license

to operate a rest home facility not be suspended. Clearly, the

State had no control over the New Jersey or federal licensing

bodies. But, by making the recommendation that it did, the

State conveyed erroneous information that federal exclusion was

not mandatory. The promise was illusory, and would never be

accepted by the licensing body. Moreover, the minsinformation

went to a consequence which was a material element of the plea

agreement from defendant’s perspective. Not losing the ability

to operate Lincoln Rest Center was defendant’s primary concern.

As stated above, the State’s recommendation had the capacity to

mislead defendant. The disclaimers at the plea hearing did not

resolve this misinformation.

Therefore, we agree with the judge that defendant’s plea

was not a knowing one. The order vacating the conviction is

affirmed and the matter is remanded for trial.

Affirmed.

About a month or so ago, they received a letter from the New York City Human Resources Administration that indicated that they were the subjects of a Medicaid Fraud investigation.  As they already had the deed for the house, it didn’t look good on paper.  However, the clients had a good explanation but I knew that words wouldn’t cut it.

Even though my client’s owned the house on paper, their children were the defacto owners of the house as they lived there while the clients lived in New York.  The children paid for everything associated with the house and did not pay rent to the parents.  In order to make this go as easy as possible, I spent weeks working with the clients to get the documentation necessary to show that all of this was true.

I also spoke to the investigator ahead of time and worked much out with him.  As a result, when I showed up for the interview with the clients, everything went really smooth.  I was expecting the worse but it was great.  The investigators were happy that I had copies of all of the documents for them which they brought to their supervisor. 

Once criminal charges were off the table, we worked on a payment plan for the money that they owe since they were not eligible for Medicaid.  I worked out a 14 year, no-interest payment plan.  In addition, I shaved thousands off of the total amount that they owed.  In the settlement agreement, New York State agreed not to prosecute my client or take any other action against them.

It goes without saying that the clients were very, very happy.  If you are under investigation for Medicaid fraud in either New York or New Jersey, call me today.

There are two sets of allegations here.  According to the press release, the first set of charges allege that:

between Jan. 1, 2004, and June 30, 2008, Weber and Barbers, who are now married to each other, stole more than $3,565 from Medicaid for services that were never rendered and/or completed. According to the indictment, Weber and Barbers regularly instructed another employee who handled the billing for the dental practice, to submit claims to Medicaid for pre-approved work prior to the completion of the pre-approved work. Barbers instructed the same employee to submit claims to Medicaid for a patient’s entire treatment plan on the patient’s first office visit, even if the patient did not return to the office to complete the treatment. She also allegedly instructed an employee to bill Medicaid for crowns and dentures on the patient’s initial visit rather than when or if the work was completed.

That part is not too bad from a defense perspective. Clearly there is an issue with an employee who is not charged.  Thus, it will be difficult to prove that this was not just a disgrunteled employee acting on her own.  Furthermore, the dollar amount is rather low.  If this was it, I would not be worried.

The second part of the case is more serious.  It alleges that:

Barbers allegedly convinced patients to take out loans for dental procedures using specific loan providers, even when the procedures were covered by insurance. She then allegedly processed the loans without the patients’ authorization, and collected payments from the loan providers even if the patients decided not to have the dental work performed. As a result of Barbers’ alleged actions, the patients were responsible for paying back the loans. According to the indictment, Barbers obtained the identifying information of three patients from the loan applications and assumed the identity of those patients in order to obtain the proceeds of the loans. It is alleged that Weber, Barbers and the dental practice fraudulently collected almost $30,000 from the proceeds of these loans.

This sounds bad, but the good thing is that it was only three people.  I am sure there is more to this story.  However, everything here is on the line so I hope they have great attorneys.  I would want to interview these patients right away.  Their testimony will go a long way in determining what happens with the case.  If there are other patients that are similarly situated but not part of the case, I would interview them as well.

Press release is here.