This was found on the Rogak’s site, The Rogak Report:
Today, I spoke with Mark Smith, Esq., of Smith Valliere & Martinez PLLC, who tried the case for Dr. Carothers, in order to get his (and his client’s) version of the story.
The crux of Mr. Smith’s criticism of the jury verdict, and the trial itself, is that no actual fraud in the provision of medical services was either alleged or proven, nor was any intent to commit fraud on the part of Dr. Carothers proven.
What the trial proved, at best, in Mr. Smith’s view, was that there were technical irregularities in the incorporation of Dr. Carothers’ P.C. However, argues Mr. Smith, “insurance companies should not be exonerated from paying millions in no-fault bills for real services provided to real patients by real doctors just because Dr. Carothers did not set up his practice as though he had an M.B.A. from Harvard.”
There is a fundamental flaw in the way Mallela is interpreted, says Mr. Smith. In order to open the gates to discovery of possible fraudulent incorporation, insurance companies must demonstrate a “founded belief” that the provider has committed fraud. And yet, he says, in a fraudulent incorporation trial, the insurance company does not need to prove that any fraud in fact occurred, nor that any fraud was intended. This, he says, is illogical and contradictory — and not the intent of the Court of Appeals in deciding Mallela.
Mr. Smith argues that irregularities in a provider’s corporate structure are a completely separate issue from the question of whether medical treatment was necessary and appropriate. Depriving medical providers of payment for services rendered due to defects in its corporate structure does nothing to deter insurance fraud.
Allowing insurance companies to second-guess all of a provider’s business decisions is bad policy, says Mr. Smith. Insurance carriers should not be allowed to critique how much a doctor spends on “secretaries, toner, paper clips and rent” and create an inference that if he pays too much for any of these usual costs of doing business, he must be fraudulently incorporated.
The jury, which was charged on both the “clear and convincing evidence” standard and the “preponderance of the evidence” standard, found that Dr. Carothers did not practice medicine through his P.C. Under the same standard, he says, chairmen and department heads at medical schools would be found guilty as well because they only supervise junior doctors and nurses. Supervision of other medical professionals, he says, also constitutes the practice of medicine, and this is what Dr. Carothers did.
Mr. Smith insists that Dr. Carothers and an employee, Dr. Chase, read all of the diagnostic films.
“If Dr. Carothers wasn’t actually running his medical practice, why would he bother to show up for all the depositions and to testify over five trial days?” asked Mr. Smith. “Maybe because there was $20 million at stake?” I countered. “Yes, but if he was a fraud, why didn’t he just take his money and run to the Carribean instead of spending all this time at a trial in Richmond?” I don’t know. Mr. Smith argues, however, that Dr. Carothers’ vigorous participation at trial proves that he had a vested interest in his P.C. “If he was a fraud, he would have run, not sued.”
There was no “smoking gun” at the trial, says Mr. Smith. Instead, it was “death by a thousand paper cuts.” The cumulative effect of a lot of small pieces of evidence, and some erroneous rulings by the trial judge, are what did in Dr. Carothers. Mr. Smith cites the fact that the management company executives pleaded the Fifth Amendment during their depositions — a fact that was disclosed to the jury. However, other testimony by these non-party witnesses at an EUO which Mr. Smith believed had exculpatory value, was kept out of the trial.
Mr. Smith is beginning to work on an appeal. He believes that numerous evidentiary rulings and the charge to the jury were erroneous, including the fact that the jury was not required to find intent to commit fraud.
I asked Mr. Smith, “What should an insurance company have to prove in a fraudulent incorporation case? I’m sure the Appellate Term will ask you that question.” His response: intent to set up a fraudulent practice, and the intent to commit fraud. Although fraudulent incorporation is defined by the Mallela decision and the Business Corporation Law, Mr. Smith insists that “technical” errors in a P.C.’s corporate structure should not deprive a doctor of the right to be paid. Without proof of intent, he says, a jury cannot conclude there was fraud.
The burden on insurance companies in these cases should be very high, he said.
“Mallela was about insurance fraud. This trial was about eligibility to collect benefits,” said Mr. Smith. Therefore, he sees a distinction between Mallela and this case. Mallela, he says, was not intended to deprive doctors of payment for legitimate services rendered.
Mr. Smith’s web site is www.svmlaw.com.
Larry Rogak