Monday, February 22, 2010

Falsifying Business Records -- Conviction of PM&R Physician for Submitting Fraudulent Medical Documentation to No-Fault Insurer Affirmed

People v. Kisina
(Ct. Apps., decided 2/18/2010)

Can a physician can be found guilty of falsifying business records in the first degree (New York Penal Law § 175.10), for submitting fraudulent medical documentation to a no-fault insurance carrier for the purpose of receiving payments for treatments that were unnecessary or unperformed?  Yes, says the New York Court of Appeals.  Records submitted by a health care provider to a no-fault insurer do constitute "business records" for the purpose of this statute.

Tatyana Kisina, a physical medicine and rehabilitation specialist, treated patients at IK Medical P.C., a clinic in Queens, in 2002. The facility reportedly provided comprehensive medical care to persons claiming to have been injured in motor vehicle accidents and billed New York no-fault insurers for its services.  In 2003, the Attorney General investigated the clinic for insurance fraud and other related crimes, and subsequently procured an indictment against Dr. Kisina for engaging in a scheme to defraud in the first degree (Penal Law § 190.65 [1] [b]), two counts of insurance fraud in the third degree (Penal Law § 176.20) and two counts of falsifying business records in the first degree.  The falsifying business records charges were based upon false consultation reports that Dr. Kisina had submitted to State Farm Mutual Automobile Insurance Company, along with verification of treatment forms seeking payment for procedures she purportedly performed on two motor vehicle accident victims.

After trial, a jury found defendant guilty of the two counts of insurance fraud in the third degree and the two counts of falsifying business records in the first degree, acquitting defendant of the scheme to defraud in the first degree charge.  The trial court denied defendant's pre-trial motion to dismiss the falsifying business records counts, stating that "false records resulting from false information submitted to support a fraudulent claim is a sufficient basis for an indictment charging Falsifying Business Records." The Appellate Division affirmed defendant's conviction, and a judge of the Court of Appeals granted defendant leave to appeal to this court. 

On this appeal, defendant argued that the false business records submitted to State Farm fell outside of the purview of Penal Law § 175.10 because:  (1) the statute is not violated when an outsider or third party submits false information to a company to induce it to take action in reliance upon that information; and (2) the medical reports that she submitted to State Farm were not "business records" because they did not reflect the "condition" or "activity" of the recipient enterprise, but rather falsely evidence her activities and the condition of her patients.

In rejecting defendant's arguments and affirming her conviction, the Court of Appeals held:
Falsifying business records in the first degree is committed when a "person," with the requisite intent, makes or causes a false entry in the "business records" of an enterprise (Penal Law §§ 175.05 [1], 175.10). The "person" must act with an "intent to defraud," which includes "an intent to commit another crime or to aid or conceal the commission thereof" (Penal Law § 175.10; see also Donnino, Practice Commentary, McKinney's Cons Laws of NY, Book 39, Penal Law § 175.05, at 65-66). A "business record" is "any writing or article . . . kept or maintained by an enterprise for the purpose of evidencing or reflecting its condition or activity" (Penal Law § 175.00 [2]; cf. CPLR 4518 [admissibility of business records at trial as an exception to the hearsay rule]). 

Regarding defendant's first claim, the Penal Law proscribes no limitation or preconditions on the types of persons who may fall within the ambit of this crime. Nowhere does the Penal Law state that "outsiders" or "third parties" not employed by or agents of the recipient enterprise are immune from prosecution under this statute. Indeed, in People v Bloomfield (6 NY3d 165, 170-172 [2006]), we rejected the "insider/outsider distinction" for the purpose of defining a false business record under the current business record statutes. We sustained a lawyer's conviction for falsifying business records of a bank of which he was not an employee or agent, notwithstanding that he maintained the records in an outside location (cf. People v Cratsley, 86 NY2d 81, 88-91 [1995] [in a rape prosecution, I.Q. tests performed by an "outsider" were properly admitted as a business record of a social service agency pursuant to CPLR 4518]). 

Many other courts have similarly held that a third party's submission of fraudulent records may fall within the scope of the statute (see e.g. People v Myles, 58 AD3d 889, 890-892 [3d Dept 2009] [a consumer of electricity could be guilty of falsifying business records for bypassing the electric meter, causing it to falsely record the amount of electricity used]; People v Johnson, 39 AD3d 338, 339 [1st Dept 2007] [a co-defendant of public assistance applicant could be guilty of falsifying business records of the agency]; People v Smith, 300 AD2d 1145, 1146 [4th Dept 2002] [defendant could be convicted for falsifying the records of the public defender's office for erroneously stating his income]). We agree with the interpretation of these courts, and find that the People's position better comports with the plain language of the statute. The second and most prominent component of defendant's argument is that the records submitted to State Farm do not reflect the "condition" or "activity" of that enterprise as required by Penal Law § 175.00, but rather falsely evidence defendant's own activity and the condition of her patients. Here, the stipulated testimony from the State Farm representative supports the necessary elements of a "business record." The stipulation explains that State Farm was obligated to keep and maintain records submitted by physicians seeking payments for medical services rendered. Further, the stipulation establishes that State Farm's financial condition is affected by these false submissions, as they give rise to liabilities under its policies. 

Defendant seeks support from People v Papatonis (243 AD2d 896, 900 [3d Dept 2009]) in arguing that the false medical reports she submitted do not reflect the "condition" of the receiving enterprise. In that case, the court held that misrepresentations on an employment application, wherein the defendant falsely denied having been convicted of a crime, did not fall within the ambit of the statute (see id. at 900-901). However, the falsifications in the job application did not, as here, relate to any rights or obligations on the part of the recipient agency. Here, by contrast, there exists sufficient evidence establishing that State Farm "kept or maintained" the consultation reports along with the claim forms, and that they evidence or reflect "its condition" — specifically its legal obligation to reimburse medical providers for services. The falsifying business records conviction was, therefore, sustainable under the circumstances presented. 

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