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GA Supreme Court Upholds Prosecution in Medicaid Fraud Case

July 1, 2013

The Supreme Court of Georgia held that administrative hearing proceedings in a Medicaid fraud case did not bar a subsequent criminal prosecution since it concluded that the State did not have a full and fair opportunity to litigate at the administrative hearing level.

The defendant, Dr. Cecil Malloy, was indicted on two counts of Medicaid fraud in DeKalb County Superior Court. Prior to the criminal prosecution, the Georgia Department of Community Health (DCH) reviewed Malloy’s clinic looking for evidence that the clinic used federal funds to pay for elective abortions in violation of the Hyde Amendment. DCH referred the case to the Medicaid Fraud Control Unit for investigation and instituted a “withhold” to stop Medicaid reimbursements to him. Malloy requested a hearing before an administrative law judge on the issue of the withholding. The hearing was granted and the administrative law judge held that the record did not support a finding of fraud. The withheld funds were then released to Malloy.

Despite the decision, the State sought criminal charges and subsequently indicted Malloy under Georgia’s Medicaid fraud statute. In response, his defense attorneys filed a plea in abatement arguing that collateral estoppel applied to preclude the State from prosecuting because the issue in the criminal prosecution, whether he knowingly and willfully accepted medical assistance payments to which he was not entitled, was decided in his favor in the earlier administrative proceeding.

The doctrine of collateral estoppel provides that once an issue of ultimate fact has been decided by a valid and final judgment, the issue cannot be litigated in a future suit between the same parties. Collateral estoppel can be used to bar certain facts or issues, or may completely bar a prosecution when the issue that is precluded is an essential element of the crime charged. The Court noted that prior cases applied collateral estoppel where both proceedings were between the same parties, the issue was actually litigated and determined in the first proceeding, the determination was essential to the judgment in the first proceeding, and the party against whom the doctrine applies had a full opportunity to litigate the issue in the first proceeding.

The Supreme Court reasoned that an administrative law judge should not be able to “subvert the authority of the district attorneys and attorney general.” Additionally, the Court was concerned that giving administrative hearings preclusive effect would make these hearings an integral part of the criminal trial, placing an extremely high burden on the State in preparing and investigating for them. According to the Court, this would run contrary to the purpose of administrative hearings.

As a result, the Court concluded that the administrative hearing proceedings did not give the State a full opportunity to litigate the issues pertinent to the criminal case. Thus, it held that the State was not precluded from prosecuting Malloy on the Medicaid fraud charges in a subsequent indictment.

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