Labor & Employment Law

Violation of the Ethics Law?s ?lifetime bar provision? results in a $3,500 penalty

Violation of the Ethics Law?s ?lifetime bar provision? results in a $3,500 penalty
Matter of William J. Gormley v New York State Ethics Commission, 46 A.D.3d 1078

In April 1995, William J. Gormley left state service after 21 years with the Department of Health. Included among his primary duties while employed by the Department was the promulgation of Medicaid reimbursement rates ? frequently referred to as the RUGS-II reimbursement system -- for nursing homes. This included serving as the executive director of a project that developed and implemented the State?s system. Although amended and adjusted over the years, this system continues to be used to set reimbursement rates for nursing homes.

In 2004, Gormley was hired to perform a cost-to-rate analysis on behalf of western New York nursing home litigants embroiled in a lawsuit with the Department of Health and another State agency. The nursing homes were challenging the adequacy of the Medicaid reimbursement rates. In the course of this litigation, Gormley submitted an affidavit that resulted in an investigation of his actions in this lawsuit by the State Ethics Commission.

An administrative hearing was held and the Hearing Officer found that Gormley violated Public Officers Law §73(8)(a)(ii). Public Officers Law §73(8)(a)(ii) prohibits a former state employee from rendering services ?in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment? for compensation. The Hearing Officer recommended that Gormley be assessed a $3,500 civil penalty. The Commission adopted the Hearing Officer?s findings and recommendation, imposed the $3,500 civil penalty. Gormley appealed the Commission?s action.

The Appellate Division dismissed Gormley?s appeal, noting that:

As relevant here, the lifetime bar provision prohibits a former state employee from rendering compensated services ?in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment?

The court found that the evidence in hearing record establishes that Gormley was directly involved with the development of the RUGS-II reimbursement system while employed by the Department and that following his leaving state service, ?he was compensated for submitting an affidavit on behalf of nursing home litigants in which he touted his role in creating this system and then relayed insider knowledge about its overall scheme.?

According to the decision, Gormley?s affidavit stated:

[T]he RUGS-II system was designed to utilize the 1983 base for multiple years. The term ?multiple years? was used at this time as a signal to the nursing homes that base years would not move virtually every year as had been the history since the inception of the New York State Medicaid program. . . The exact number of years to maintain the same base year was never specified in policy or regulation during the 1983 to 1986 development and implementation time frame. However, it is truly surprising that the 1983 base year has been in place for twenty-one years considering that the longest timeframe for utilizing a base prior to 1986 was just two years. I never envisioned or intended the base year to continue in perpetuity or to ever last as long as it has (sic).

The Appellate Division decided that by including the statements emphasized in italics above in his affidavit, Gormley ?was most assuredly ?taking unfair 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.??

In other words, the court concluded that by submitting an affidavit to a court in an attempt to assist litigants challenging the rationality of the RUGS-II methodology that Gormley himself developed and including in such affidavit statements expressing his personal intentions in so developing this system, Gormley received compensation for services rendered in relation to a ?transaction? with which he was directly involved while employed by the Department, thereby establishing a clear violation of the statute.

The Appellate Division also observed that Gormley ?was certainly aware of the restrictions outlined under Public Officers Law §73(8)(a)(ii), because respondent explicitly reminded him of same in 1996, when he sought to be excepted from another provision of the statute? and found that that substantial evidence supports the $3,500 civil penalty imposed upon him.

Full post as published by New York Public Personnel Law on May 15, 2008 (boomark / email).