Former West Carthage Housing Authority executive director and mother pled guilty for over $48,000 theft

On June 4, 2024, New York State Comptroller Thomas P. DiNapoli, Jefferson County District Attorney Kristyna S. Mills, the U.S. Department of Housing and Urban Development, Office of the Inspector General (HUD OIG), and the New York State Police announced the guilty pleas of former West Carthage Housing Authority (WCHA) Executive Director Jan Hoffman for stealing over $48,000 in WCHA funds, and Katherine (Katie) Pais, Hoffman’s mother and former WCHA consultant, for aiding in and concealing the scheme.

“Hoffman and Pais brazenly diverted funds meant to support seniors and individuals with disabilities to line their own pockets,” DiNapoli said. “Thanks to the partnership between my office, Jefferson County District Attorney Kristyna S. Mills, the HUD Inspector General, and the New York State Police, they have been held accountable for their actions.”

“The fraud committed by the defendants diverted critical taxpayer money that was intended to benefit elderly and-low-income families in our communities," said Special Agent-in-Charge Vicky Vazquez with the U.S. Department of Housing and Urban Development, Office of Inspector General. “HUD OIG remains steadfast in its commitment to working with our prosecutorial, law enforcement and oversight partners to aggressively pursue those who engage in activities that threaten the integrity of HUD programs.”

New York State Police Superintendent Steven G. James said, “The individuals charged in this case stole funds from unsuspecting citizens, using the money for their own personal benefit. We will not tolerate the conduct of those who take advantage of their position to steal money that was meant to benefit people in need. I commend everyone who worked on this case – our members and all our partners – who have now ensured that the two people responsible for this crime are held fully accountable.”

Hoffman served as the executive director of WCHA, a government-funded apartment complex for low-income senior citizens and individuals with disabilities, from 2016 to 2021. Pais, Hoffman’s mother, was hired by the WCHA board and served as accounts payable bookkeeper from 2016 to 2020.

Based upon an anonymous tip, Comptroller DiNapoli’s Office and the HUD OIG commenced an investigation of all monies controlled by Hoffman and found that she had been making personal purchases with housing authority funds since 2016, her entire tenure as executive director. In total, Hoffman stole over $48,000 from WCHA by using WCHA’s financial accounts and credit lines for unauthorized personal expenses including retail purchases, personal cell phone bills, and groceries. Additionally, Hoffman submitted over $1,000 in false reimbursements.

Through her role as the accounts payable bookkeeper, Pais facilitated and concealed Hoffman’s theft. Pais was responsible for reviewing claims and preparing checks for payment. Pais not only knew about Hoffman’s continuous theft and failed to report it to the board, but also made the illicit payments and then falsified records to cover for her daughter.

Hoffman pled to Grand Larceny in the Third Degree, charged as a crime of public corruption and Pais pled to Corrupting the Government in the Fourth Degree before Judge David A. Renzi at Jefferson County Court. The defendants are due back in court for sentencing on August 6, 2024.

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Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse. New Yorkers can report allegations of fraud involving taxpayer money by calling the toll-free Fraud Hotline at 1-888-672-4555, by filing a complaint online at https://www.osc.ny.gov/investigations, or by mailing a complaint to: Office of the State Comptroller, Division of Investigations, 8th Floor, 110 State St., Albany, NY 12236.

A union’s decision to dismiss a meritorious grievance does not constitute a breach of the duty of fair representation in the absence of evidence that the union’s decision was arbitrary or made in bad faith

22-2779-cv

Felton v. Loc. Union 804, Int’l Bhd. of Teamsters 

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 3rd day of June, two thousand twenty-four. 

PRESENT: AMALYA L. KEARSE, JOSEPH F. BIANCO, STEVEN J. MENASHI, Circuit Judges.

 

JEFFERY FELTON, Plaintiff-Appellant,

v.

LOCAL UNION 804, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, (IBT), UNITED PARCEL SERVICE INC., (UPS), Defendants-Appellees.

 

FOR PLAINTIFF-APPELLANT:

YENISEY RODRIGUEZ-MCCLOSKEY, Rodriguez McCloskey PLLC, Brooklyn, New York.

 

FOR DEFENDANTS-APPELLEES:

NATHANIEL K. CHARNY (H. Joseph Cronen, on the brief), Charny & Wheeler P.C., Rhinebeck, New York, for Local Union 804, International Brotherhood of Teamsters.

SHAWN MATTHEW CLARK, Littler Mendelson, P.C., New York, New York, for United Parcel Service Inc. 

Appeal from a judgment of the United States District Court for the Eastern District of New York (Ann M. Donnelly, Judge). 

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment, entered on September 27, 2022, is AFFIRMED. Plaintiff-Appellant Jeffery Felton appeals the district court’s dismissal with prejudice of his claims against Defendants-Appellees Local Union 804, International Brotherhood of Teamsters (the “Union”) and United Parcel Service Inc. (“UPS,” and together with the Union, “Defendants”).1 

This appeal arises from the second of two lawsuits in which Felton alleged that the Union breached its duty to represent him fairly at a grievance hearing following what he alleges was an unlawful termination of his employment at UPS. We assume the parties’ familiarity with the underlying facts, procedural history, and issues on appeal, to which we refer only as necessary to explain our decision to affirm. In January 2016, Felton was terminated from his job at UPS and filed with the Union a grievance for unjust discharge. Felton’s grievance proceeded to arbitration before an arbitrator and a panel consisting of three representatives from UPS and three from the Union, and his termination was ultimately upheld. In April 2017, Felton, proceeding pro se, brought an action against the Union and UPS, claiming that the Union breached its duty to fairly represent him at the arbitration. 

After granting Felton multiple opportunities to amend, the district court dismissed with prejudice his ninth amended complaint for failure to state a claim pursuant to Federal Rule of 1 Felton proceeded pro se in the district court, but he is now represented by counsel. 3 Civil Procedure 12(b)(6). Felton v. Loc. Union 804, Int’l Bhd. of Teamsters, Nos. 17-CV-2309 (AMD) (RML) et seq., 2020 WL 3104048, at *1 (E.D.N.Y. June 11, 2020) (“Felton I”). 

In March 2021, Felton commenced the instant action. In the operative third amended complaint, Felton alleged, as he had in the prior action, that the Union breached its duty to represent him fairly at the arbitration. Felton also alleged that newly discovered evidence in an unrelated case—namely, the deposition of Matthew Hoffman, one of the UPS representatives on his arbitration panel (the “Hoffman Deposition”)—warranted relief from the final judgment in the prior action. 

Because “[a] party seeking to file an amended complaint postjudgment must first have the judgment vacated or set aside pursuant to [Federal Rules of Civil Procedure] 59(e) or 60(b),” Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008), the district court construed Felton’s pro se complaint as including a motion under Rule 60(b)(2). 2 Felton v. Loc. Union 804, Int’l Bhd. of Teamsters, No. 21-CV-1628 (AMD) (RML), 2022 WL 4468290, at *2 (E.D.N.Y. Sept. 26, 2022) (“Felton II”). 

After concluding that Felton had not satisfied the standard for relief under Rule 60(b)(2), the district court granted Defendants’ motion to dismiss the complaint on the ground of res judicata. Felton challenges both rulings on appeal. 

I. Rule 60(b) Motion 

We review denials of relief under Rule 60(b) for an abuse of discretion. United States v. Int’l Bhd. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001). “A district court is said to abuse its discretion if it bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence, or renders a decision that cannot be located within the range of permissible 2 Rule 60(b)(2) provides that “the court may relieve a party or its legal representative from a final judgment, order, or proceeding [due to] . . . newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b).” Fed. R. Civ. P. 60(b)(2). 4 decisions.” Gomez v. City of New York, 805 F.3d 419, 423 (2d Cir. 2015) (per curiam) (alteration adopted) (internal quotation marks and citation omitted).

As we have emphasized, Rule 60(b) is “a mechanism for ‘extraordinary judicial relief’” and may be “invoked only if the moving party demonstrates ‘exceptional circumstances.’” Ruotolo, 514 F.3d at 191 (quoting Paddington Partners v. Bouchard, 34 F.3d 1132, 1142 (2d Cir. 1994)). Rule 60(b)(2) poses a particularly “onerous standard,” Int’l Bhd. of Teamsters, 247 F.3d at 392, requiring a movant to show that: “(1) the newly discovered evidence was of facts that existed at the time of trial or other dispositive proceeding, (2) the movant [was] justifiably ignorant of them despite due diligence, (3) the evidence [is] admissible and of such importance that it probably would have changed the outcome, and (4) the evidence [is] not . . . merely cumulative or impeaching,” Mirlis v. Greer, 952 F.3d 36, 50 (2d Cir. 2020) (internal quotation marks and citations omitted). The district court had dismissed Felton’s prior action after finding that the allegations in his ninth amended complaint did not “demonstrate that the Union acted irrationally or in bad faith in representing [him].” Felton I, 2020 WL 3104048, at *2.

In the third amended complaint in the instant action, Felton contends that his discovery of the Hoffman Deposition warrants relief from the prior judgment because Hoffman’s testimony indicates that the Union representatives on the arbitration panel agreed with the UPS representatives and voted to uphold Felton’s termination. Felton had previously been told that the arbitrator denied his grievance because the Union and UPS panel representatives were deadlocked. Accordingly, in Felton’s view, the Hoffman Deposition would have changed the outcome of the prior action because it revealed “that UPS and the Union were both against [him,] highlight[ing] that [he] was not represented and was duped into believing that the Union was on his side and advocating for him.” Appellant’s Reply Br. at 7–8. 5 The district court concluded that the alleged new evidence would not have affected its decision to dismiss Felton’s prior action, and we discern no error in that analysis.

The fact that the Union representatives on the arbitration panel may have voted to dismiss Felton’s grievance does nothing to bolster his claim that the Union breached its duty of fair representation because Felton has failed to provide any allegations to plausibly support a claim that the votes—or the Union’s actions at the arbitration overall—were arbitrary or in bad faith. Cf. Vaca v. Sipes, 386 U.S. 171, 194–95 (1967) (concluding that a union’s decision to dismiss a meritorious grievance does not constitute a breach of the duty of fair representation in the absence of evidence that the union’s decision was arbitrary or made in bad faith). And even if we assume that the Union inaccurately described the precise distribution of the votes cast at the arbitration, that also does not show that the Union’s actions were arbitrary or in bad faith. See Spellacy v. Airline Pilots Ass’n-Int’l, 156 F.3d 120, 126 (2d Cir. 1998) (“Plaintiffs must . . . demonstrate a causal connection between the union’s wrongful conduct and their injuries.”).

Thus, because the Hoffman Deposition would not have changed the outcome in Felton’s prior case, we affirm the district court’s denial of relief under Rule 60(b).3 See Int’l Bhd. of Teamsters, 247 F.3d at 392. 3 The district court held in the alternative that Rule 60(b) relief was not warranted because the Hoffman Deposition was “clearly available while [Felton’s] prior lawsuit was pending.” Felton II, 2022 WL 4468290, at *2. On appeal, Felton challenges this conclusion, arguing that the “opportunity to depose Hoffman in the 2017 Action does not mean that he could have discovered this exact evidence,” and that “[t]he simple fact is that this evidence did not at all exist at the time that the 2017 Action was commenced.” Appellant’s Br. at 31; see also UPS Br. at 7 (acknowledging that “it may be true that the District Court erred in stating that this [evidence] was available while [Felton’s] lawsuit was pending”). 

However, we need not address this argument on appeal because we affirm the district court’s denial of relief on an alternative basis—namely, that the evidence would not have affected the outcome of the case. See Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 413 (2d Cir. 2014) (“[We] may affirm on any basis for which there is sufficient support in the record.” (internal quotation marks and citation omitted)). 6 

II. Motion to Dismiss 

We review de novo a district court’s dismissal of a complaint on the ground of res judicata. See TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 498 (2d Cir. 2014). “A court may consider a res judicata defense on a Rule 12(b)(6) motion to dismiss when the court’s inquiry is limited to the plaintiff's complaint, documents attached or incorporated therein, and materials appropriate for judicial notice.” Id.; see also Day v. Moscow, 955 F.2d 807, 811 (2d Cir. 1992) (“[W]hen all relevant facts are shown by the court’s own records, of which the court takes notice, the defense [of res judicata] may be upheld on a Rule 12(b)(6) motion without requiring an answer.”). 

“Under the doctrine of res judicata, or claim preclusion, ‘a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.’” St. Pierre v. Dyer, 208 F.3d 394, 399 (2d Cir. 2000) (alteration adopted) (quoting Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981)). Here, after declining to vacate the prior judgment, the district court dismissed Felton’s complaint on the ground of res judicata, finding that it “ma[de] the same claims against the same defendants and relie[d] on exactly the same facts about his termination and grievance hearing.” Felton II, 2022 WL 4468290, at *3. Felton challenges the district court’s dismissal on appeal, arguing that the doctrine of res judicata does not apply in the Rule 60(b) context and that, because the district court decided to construe his complaint as a Rule 60(b) motion, it could not rule on defendants’ motion to dismiss in the same order. We are not persuaded. As a threshold matter, the district court properly considered Defendants’ motion to dismiss under Rule 12(b)(6) after determining that Felton was not entitled to relief under Rule 60(b). 

The district court did not, as Felton contends, erroneously apply two contradicting legal standards. Instead, it construed his complaint as containing a Rule 60(b) motion to vacate the prior judgment so that, if that motion were successful, he could then avoid dismissal of his complaint under the 7 doctrine of res judicata. See, e.g., Campaniello Imps., Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 661 (2d Cir. 1997) (“Res judicata does not preclude a litigant from making a direct attack upon the judgment before the court which rendered it.” (alteration adopted) (internal quotation marks and citation omitted)); Bettis v. Kelly, 137 F. App’x 381, 382 (2d Cir. 2005) (summary order) (affirming dismissal of complaint under the doctrine of res judicata, notwithstanding allegations that appellees had withheld information during the prior litigation because “any allegations of misconduct in the prior litigation should have been raised in an appropriate challenge to that judgment”). By doing so, the district court adhered to the well-settled rule that pro se submissions be “liberally construe[d] . . . to raise the strongest arguments they suggest.” McLeod v. Jewish Guild for the Blind, 864 F.3d 154, 156 (2d Cir. 2017) (per curiam) (internal quotation marks and citation omitted). In short, despite Felton’s arguments to the contrary, the district court’s decision to construe Felton’s pro se complaint as including a Rule 60(b) motion did not deprive it of its ability to address the motion to dismiss in the same decision once it ruled on the Rule 60(b) motion. See, e.g., Serzysko v. Chase Manhattan Bank, 461 F.2d 699, 701–03 (2d Cir. 1972) (per curiam) (affirming district court’s order denying plaintiff’s Rule 60(b) motion and granting defendant’s motion to dismiss for failure to state a claim). 

The district court’s opinion carefully analyzed the two motions before it in separate sections, applying the relevant legal standards to each. Thus, the district court committed no procedural error in its disposition of the motions. To the extent that Felton argues that the district court’s analysis under Rule 12(b)(6) was inconsistent with its Rule 60(b) determination, we disagree. Once it determined that there was no basis to vacate the prior judgment under Rule 60(b), the district court properly concluded that Felton’s complaint was barred by res judicata. “Res judicata bars re-litigation if (1) the previous action involved an adjudication on the merits; (2) the previous action involved the plaintiffs or 8 those in privity with them; [and] (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action.” Soules v. Connecticut, 882 F.3d 52, 55 (2d Cir. 2018) (underlining, internal quotation marks, and citation omitted). The district court’s dismissal of Felton’s complaint in the prior action for failure to state a claim under Rule 12(b)(6) was a judgment on the merits, see Federated Dep’t Stores, Inc., 452 U.S. at 399 n.3, and as the district court correctly noted, in the instant lawsuit “[Felton] makes the same claims against the same defendants and relies on exactly the same facts about his termination and grievance hearing,” which were the subject of the dismissal in the prior action, 2022 WL 4468290, at *3. 

Accordingly, Felton may not assert the same claims in the instant action. See Soules, 882 F.3d at 55. Felton contends that res judicata is inapplicable here because of newly discovered evidence. To be sure, despite the “general rule [that] newly discovered evidence does not preclude the application of res judicata,” we have recognized that “[e]xceptions to this rule exist when the evidence was either fraudulently concealed or when it could not have been discovered with due diligence.” Saud v. Bank of N.Y., 929 F.2d 916, 920 (2d Cir. 1991). 

Here, however, as discussed above with respect to the Rule 60(b) motion, the district court correctly determined that the Hoffman Deposition would not have provided a basis for asserting a plausible claim for breach of the duty of fair representation, and thus would not have changed the outcome. See, e.g., TAL Props. of Pomona, LLC v. Village of Pomona, No. 22-1826, 2023 WL 2924571, at *3 (2d Cir. Apr. 13, 2023) (summary order) (affirming dismissal of complaint on the ground of res judicata, notwithstanding appellants’ argument that “newly discovered evidence” supported an exception, because the purported new evidence would “have not changed the outcome” (citing Waldman v. Village of Kiryas Joel, 207 F.3d 105, 113 (2d Cir. 2000))); see also TechnoMarine, 758 F.3d at 501 (observing that even when new facts post-date commencement of the earlier action, such facts 9 must be “legally significant” to avoid res judicata). Accordingly, the district court properly recognized the res judicata effect of the prior judgment and dismissed Felton’s complaint. * * * 

We have considered Felton’s remaining arguments and find them to be without merit. 

Accordingly, we AFFIRM the judgment of the district court. 

FOR THE COURT: 

Catherine O’Hagan Wolfe, Clerk of Court

 

Daughter pleads guilty to stealing $85,000 in NYS pension payments meant for her deceased father

On June 6, 2024, State Comptroller Thomas P. DiNapoli and Albany County District Attorney David Soares reported that a 37-year-old Queens woman pleaded guilty today to felony grand larceny for stealing nearly $85,000 in New York state pension payments meant for her deceased father. The defendant, Deanna Hansen, faces up to 28 months to seven years in prison and will pay full restitution as part of the plea.

“Deanna Hansen callously exploited her father’s death to steal from the New Your State Retirement System,” DiNapoli said. “Thanks to the work of my office and Albany County District Attorney David Soares, she has been held accountable.”

“The New York State and Local Retirement System is structured to benefit those who have dedicated years of their life to public service. Instead of acknowledging and respecting the intended purpose, the defendant assumed her deceased father’s identity for personal gain,” Soares said. “I hope this resolution deters anyone who might think of gaming the system. I’d like to thank ADA Bill Andrews for handling this case, and the Albany County Sheriff’s Office for their work in bringing this case to a close. This office, along with our partners in the New York State Comptroller’s Office, will do our best to make sure crime doesn’t pay by holding offenders accountable.”

Deanna Hansen’s father retired from the state Department of Transportation in March 2003. He was receiving a direct deposit of his pension into a bank account that was in his and his deceased wife’s name. He died in April 2020, at which time the pension payments should have stopped.

Investigators determined a total of $84,754.13 in pension payments were paid into Hansen’s father’s account after his death and then fraudulently taken by Deanna Hansen.

In July 2022, the state retirement system learned that the defendant’s father had died and stopped payments. At that time, Hansen contacted the retirement system about beneficiary information.

A review of the deceased pensioner’s account showed that Deanna Hansen, who was not listed as a signatory or account holder, received $67,423 through an online payment platform from the account. Additionally, $14,914 from the account was paid to the management company of her father’s condominium, where she resided.

Hansen appeared before Judge Roger D. McDonough in Albany County Court. Sentencing was scheduled for Sept. 13.

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Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse. New Yorkers can report allegations of fraud involving taxpayer money by calling the toll-free Fraud Hotline at 1-888-672-4555, by mailing a complaint to the Office of the State Comptroller, Division of Investigations, 8th Floor, 110 State St., Albany, New York or via the Internet by clicking the following URL: https://www.osc.state.ny.us/investigations.

 NY 12236.

New York State's Governor Kathy Hochul announces ratification of 3-year labor agreement with PBA

Governor Kathy Hochul today announced the ratification of a three-year labor agreement with the Police Benevolent Association of New York State, which includes more than 1,100 members of the New York State Agency Police Services Unit in titles such as Forest Ranger, Environmental Conservation Officer, Park Patrol Officer and University Police Officer. The agreement, which runs until March 31, 2026, won the approval of 97 percent of PBA of New York State members who cast ballots. 

The Agreement with New York State Agency Police Services Unit covers more than 1,100 New York State employees and includes yearly salary increases, increases in location pay, up to 12 weeks fully paid parental leave, and changes in health benefits.

“This labor agreement will help guarantee fair compensation for the fearless members of the Agency Police Services Unit of the PBA of New York State for their extraordinary contributions to our state,” Governor Hochul said. “I appreciate the partnership of the PBA of New York State’s leadership throughout negotiations and thank its membership for their hard work and resolve in keeping New Yorkers safe, particularly our visitors to the Empire State’s parks and environmental areas and the members of our university communities.”

The ratified contract includes raises in each year of the agreement consistent with other recently negotiated agreements. In addition, the contract includes other increases in compensation such as a lump sum bonus and up to 12 weeks of fully paid parental leave. The contract also includes changes in the health insurance program that will encourage in-network employee utilization and help control health insurance costs.

Police Benevolent Association of New York State President Jim McCartney said, “The PBA of New York State is pleased that following exhaustive negotiations with the state Office of Employee Relations our members have overwhelmingly ratified a three-year contract with the State of New York. While this contract is a positive step forward and an improvement over our previous contract, much work remains to be done to provide a competitive compensation and retirement package that will aid in recruiting and retaining the most diverse and highly specialized state law enforcement officers.”

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New York State's Comptroller's audit finds hundreds of millions of dollars in Medicaid payments went to providers not enrolled in the program

 

New York State Comptroller Thomas P. DiNapoli calls on New York State Department of Health to improve oversight of managed care organizations, seek to recoup money where appropriate.

An audit released on June 4, 2024 by New York State Comptroller Thomas P. DiNapoli found Medicaid managed care organizations made as much as $1.5 billion in improper and questionable payments to providers who did not appear to be enrolled in Medicaid. Generally, under federal and state law providers are supposed to be enrolled, a process that gives DOH assurance that they are equipped and eligible to deliver services.

“The deadline for managed care organizations and their providers to comply with enrollment requirements was over five years ago, yet our audit shows payments to providers that are still not enrolled in Medicaid or have been denied, ” DiNapoli said. “Medicaid is vital to millions of New Yorkers in need of quality health care and the Department of Health must do a better job ensuring the program’s integrity.”

DOH pays for Medicaid in two ways — fee-for-service and managed care. Under fee-for-service, DOH pays Medicaid enrolled providers directly for health care services. Under managed care, DOH pays monthly premiums to Managed Care Organizations (MCOs) for each enrolled Medicaid recipient and in exchange MCOs arrange for services with providers.  

Under the federal 21st Century Cures Act, in-network managed care providers were required to be enrolled in Medicaid by January 1, 2018. Enrollment informs DOH that the providers are licensed, credentialed, and able to provide Medicaid services. MCOs are supposed to terminate providers from their networks who do not enroll in the state’s Medicaid program.

After services are provided and paid by MCOs, they then submit claims that report the services to DOH. Auditors reviewed claims from January 2018 through June 2022 and found $1.5 billion in improper and questionable claims:

1. Five MCOs paid $916 million in claims for services by in-network providers whose IDs did not match with a Medicaid enrolled provider on the date of service.

2. $832.5 million in claims were for services by providers whose Medicaid application was denied or had been withdrawn by DOH either because they failed to meet Medicaid program standards or were automatically withdrawn because the application was missing information. For example, one pharmacy was denied enrollment by OMIG due to unclean conditions, lack of proper supporting documentation, and expired medications on pharmacy shelves, yet received over $57 million in MCO payments. ($212 million of the $832.5 million was included in the $916 million referenced above).

3. $9.6 million in improper MCO payments went to in-network and out-of-network providers who were excluded from or otherwise ineligible for the Medicaid program. ($548,184 of the $9.6 million was included in the $916 million referenced above.)

MCOs are supposed to maintain a network of providers that can deliver comprehensive care to their enrolled population. They submit their contracted providers to DOH’s Provider Network Data System (PNDS) at least quarterly. The data system helps DOH ensure MCOs are meeting requirements of federal and state regulations and the providers are entered into the NYS Provider and Health Plan Look-up website. DOH also uses PNDS to create error reports for MCOs to identify unenrolled in-network providers.

DiNapoli’s audit found PNDS error reports were flawed and did not capture all unenrolled in-network providers. Even when providers were identified on error reports, auditors found MCOs often did not make timely fixes to their submissions to DOH. For example, one physician was flagged on 12 consecutive error reports for one MCO that indicated the physician was not enrolled. The audit concluded that the MCOs’ lack of response could be attributed at least in part to inadequate DOH oversight and communication.

DiNapoli’s audit recommended that DOH improve its oversight of MCO claim payments, ensure MCOs are following the requirements under the Act, and review the payments and providers the audit identified and take appropriate action, including recovering money where appropriate.

DOH generally agreed with most of the audit’s recommendations, and said it is examining the audit findings to determine how to best address the issues raised.

However, in its response, DOH pointed out its limited data hindered auditor’s matching of certain providers. DOH’s data limitations highlight that DOH has not developed the infrastructure to accurately review MCOs’ compliance with the Act. To illustrate, DOH cited a provider from the audit findings that it said was enrolled, but auditors review of DOH’s records confirmed that it was not.

The audit also suggests that the findings may have larger implications. DiNapoli’s auditors reviewed claims from just five MCOs that indicated payments to unenrolled providers — just half of the payments to unenrolled providers identified in the audit period. Accordingly, DOH’s inability to determine the extent of unenrolled or excluded providers who are still doing business with the State puts Medicaid patients and taxpayers at risk.

To download a copy of the Comptroller's audit click Medicaid Program: Managed Care Payments to Unenrolled Providers. 

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