United States District Court, S.D. Mississippi, Northern Division
FRANK B. MCCUNE, JR., PLAINTIFF
UNITED STATES DEPARTMENT OF JUSTICE and OFFICE OF UNITED STATES ATTORNEY GENERAL, SOUTHERN DISTRICT OF MISSISSIPPI, DEFENDANTS
For Frank B. McCune, Jr., Plaintiff: Chokwe Lumumba, LEAD ATTORNEY, LUMUMBA FREELON & ASSOCIATES, Jackson, MS; Angela Givens Williams, U.S. ATTORNEY'S OFFICE - Jackson, Jackson, MS; Dellwyn K. Smith, Robert L. Gibbs, Vikki J. Taylor, GIBBS WHITWELL, PLLC, Jackson, MS.
For United States , Office of U.S. Attorney General - Southern District of Mississippi, Defendants: Angela Givens Williams, LEAD ATTORNEY, Mitzi Dease Paige, U.S. ATTORNEY'S OFFICE - Jackson, Jackson, MS.
MEMORANDUM OPINION AND ORDER
David Bramlette, UNITED STATES DISTRICT JUDGE.
This cause is before the Court on the Motion for Summary Judgment (docket
entry 313) filed by the defendants United States Department of Justice and Office of the United States Attorney General for the Southern District of Mississippi (hereafter collectively referred to as " the DOJ" in the singular); and the plaintiff Frank B. McCune, Jr. (" Dr. McCune" )'s Motion for Partial Summary Judgment (docket entry 317). Having carefully considered the motions and responses, the memoranda of the parties and the applicable law, and being fully advised in the premises, the Court finds as follows:
Dr. McCune filed the instant action alleging four (4) violations of the Right to Financial Privacy Act for failure to provide notice of disclosure of financial records under 12 U.S.C. § 3417. The DOJ submits that it is entitled to summary judgment as there is no genuine issue of material fact, and it is entitled to judgment as a matter of law. Specifically, the DOJ contends that Dr. McCune's claims are barred by the three (3) year statute of limitations. In the alternative, the DOJ contends that it is entitled to partial summary judgment: First, as to two (2) of the four (4) subpoenas at issue, the DOJ asserts that Dr. McCune cannot establish that his personal bank records were produced or disclosed; Second, the DOJ asserts that it is entitled to partial summary judgment on any claims for actual damages because Dr. McCune cannot establish a causal connection. Finally, the DOJ asserts that it is entitled to partial summary judgment on any claim for punitive damages because Dr. McCune cannot establish willfulness.
Dr. Frank McCune owned and operated several health care businesses in the 1980's and 1990's. Among the businesses he owned were two home health agencies. Both agencies had separate Medicare provider numbers under the name " Serve-U Home Health" (" Serve-U" ), although the Jackson location operated under the name " Domicile, Inc." (" Domicile" ), and the Natchez location operated under the name " Serve-U-Home Health Out-Patient and Rehabilitation Services, Inc." (" Serve-U Rehab" ). Both Serve-U Rehab and Domicile were managed by Neo-Ventures Enterprises, Inc. (" Neo-Ventures" ), another company owned by Dr. McCune. Neo-Ventures represented the home office of these home health agencies.
Dr. McCune's wife, Ellen McCune, also worked with these businesses. She signed the cost reports for the Medicare entities and the Neo-Ventures home office. She was also the fiduciary for the companies' pension plan.
Based on complaints, Dr. McCune and his businesses came under investigation in the late 1990's. One of the investigations, a criminal investigation by the Department of Health and Human Services Office of Inspector General (" HHS" ), led to Dr. McCune's indictment.
On December 15, 1997, HHS received a complaint or tip from an informant regarding allegations of home health agency fraud by Dr. McCune, Ellen McCune, and their businesses, Neo Ventures and Serve-U, which consisted of Serve-U Rehab and Domicile (hereinafter collectively referred to as " the McCunes" ). Melear Decl. ¶ 2, Def. Ex. A.
The informant made a number of allegations, including: (1) the McCunes improperly received reimbursement from Medicare for a Department of Labor (" DOL" ) fine that was levied against Serve-U; (2) the McCunes improperly received reimbursement from Medicare in the sum of $275,000 for a computer system that was never purchased by Serve-U; (3) employees were not receiving contributions to their pension plans; (4) the McCunes improperly received reimbursement from Medicare for trips to Aruba and Hawaii for the McCunes' employees and Dr. McCune's family members. Id. When
HHS received the complaint, it did not have an office in Jackson, Mississippi. Melear Dep. 199:19-22, Def. Ex. B. The complaint was forwarded to the fiscal intermediary, which was Palmetto Government Benefits Administrators (" Palmetto GBA" ), for investigation, and the case was closed with HHS. Id.
In the early part of 1998, HHS opened an office in Jackson, Mississippi. Melear Dep. 200:3-7. Special Agent Lynn Townsend (now Lynn Melear) was hired to investigate health care fraud involving federal government benefits. Melear Decl. ¶ 1. The case involving the McCunes was one of the cases Special Agent Melear received. Id.
On or about July 9, 1998, Melear contacted Lori Dion with Palmetto GBA to discuss the allegations of cost report fraud  by the McCunes. Id. at ¶ 3. Ms. Dion, an auditor, noted that no field audit of Serve-U had been conducted since 1989. Id. She also noted that a desk audit of 1997 cost reports was scheduled for fiscal year (FY) 1999, which started July 1, 1998, and went through June 30, 1999. Id. Melear also discussed some of the allegations against the McCunes and the circumstances under which costs are allowable. Id. Melear reopened HHS's case on the McCunes on or about August 24, 1998, and began an investigation of the matter. Id. at ¶ 4. She interviewed a number of individuals over the course of the next several years, including Dr. and Mrs. McCune.
As discussed below, the investigation culminated in an indictment of Dr. and Mrs. McCune. Id. The Office of the United States Attorney for the Southern District of Mississippi (" USAO" ) also issued a number of subpoenas pursuant to its authority under 18 U.S.C. § 3486, which authorizes the issuance of administrative subpoenas to investigate, inter alia, federal health care offenses. The record indicates that the USAO issued subpoenas to Union Planters Bank, Industrial Employees Credit Union (now Members Exchange Credit Union (" MECU" )), and Merchant and Farmers Bank (" M& F" ) on January 25, 1999, for financial records belonging to Dr. McCune, Mrs. McCune, Serve-U, Neo-Ventures and Domicile. Union Planters Subpoena, Def. Ex. C; MECU Subpoena, Def. Ex. D; M& F Subpoena, Def. Ex. E. On the same day, the USAO issued a subpoena to Mrs. McCune for, among other things, banking statements, American Express statements, and gas credit card statements for the Serve-U home health agencies and Neo-Ventures. Ellen McCune Subpoena, Def. Ex. F. Also, on June 23, 1999, the USAO issued a subpoena to a travel agency for travel documents related to the McCunes. Travel Subpoena, Def. Ex. G.
In November of 2001, the USAO also drafted a subpoena dated November 7, 2001, to Dr. Frank McCune as the custodian of records for Neo-Ventures and Serve-U as well as American Express Financial Services (now Ameriprise). Ameriprise Subpoena, Def. Ex. H. There is no indication as to whether these subpoenas were actually served. The subpoena that was drafted for Ameriprise requested any and all documentation related to any accounts owned directly or indirectly by, among others, Dr. McCune and Neo-Ventures, Inc.
As previously mentioned, HHS forwarded the complaint it received in December of 1997 to the fiscal intermediary, Palmetto GBA. The complaint would have come through Palmetto GBA's fraud/ integrity unit to the Audit Division, which was supervised by Lori Dion for investigation. Dion Decl. ¶ 2, Def. Ex. I.
On June 16, 1998, within six months of the referral to Palmetto GBA, Palmetto GBA selected Serve-U Rehab and Domicile for desk reviews of their respective FY 1997 cost reports. Dion Decl. at ¶ 3. Palmetto GBA requested information from the McCunes related to the companies' accruals including the pension plan. Id.
The items requested with respect to the focused desk review were all items that would be requested in any focused desk review, except that the review of Serve-U Rehab also requested information related to leases. Id. The focused reviews concluded on June 28, 1999. Id. These reviews resulted in a notice of overpayment of $291,706 with respect to Serve-U Rehab, and $825,052 with respect to Domicile. Id. The reviews found that there were unsupported accrued expenses including vacation, mileage and pension as well as unsupported professional fees. Id.
The McCunes were notified of the results of the focused reviews on December 29, 1999, in two separate letters, one for each institution. Id. The home office also was selected for a full desk review on July 13, 1998, for review of its FY 1997 cost report. Dion Decl. ¶ 4. The review of the home office lasted until July 8, 1999, and was followed by a full audit from July 12, 1999, to July 30, 1999. Id. Serve-U Rehab and Domicile were also selected for desk review on December 18, 1998, for a review of their respective FY 1998 cost reports. Dion Decl. ¶ 5. These reviews were completed on May 30, 2000. Id. The review of Domicile resulted in an overpayment of $427,386, and the review of Serve-U Rehab resulted in an overpayment of $21,083. Id. The McCunes were notified of these overpayments in separate letters dated September 30, 2000. Id.
Lori Dion unequivocally testified that she did not consider Dr. McCune's personal financial records in any of the audits and desk reviews conducted by her division and under her supervision. Dion Dep. 126:9-128:3, Def. Ex. U. She testified that " [t]here was no need, in the course of the Medicare audit, to review personal banking records." Id. at 128:2-3.
The DOL's Employee Benefits Security Administration (" EBSA" ) is charged with assuring the security of the retirement, health and other workplace-related benefits of employees. McConnell Decl. ¶ 1, Def. Ex. J. Among other things, the EBSA conducts civil and criminal investigations regarding employee benefits plans, including matters related to compliance issues and fraudulent activity. Id.
In July of 1998, EBSA began receiving complaints about the handling of the Neo-Ventures' Employee Pension Plan, and by February 24, 1999, EBSA had received six complaints from employees. McConnell Decl. ¶ 2. In July of 1998, an employee reported that the company was having financial difficulty and that there was no distribution. Id. In December of 1998, an employee reported that he or she was terminated in 1996 and still had not received
his or her distribution. Id. In January of 1999, three employees complained to ESBA: each had not received distributions he or she was due and reported other irregularities -- one employee having completed the distribution paperwork in July 1997, and another in July 1998. Id. On February 24, 1999, another employee reported that he or she did not receive his or her distribution despite having completed his or her paperwork in July of 1998. Id. Based on these complaints, EBSA opened a civil investigation into the Neo-Ventures employee benefits plan. Auditor Niki McConnell was assigned the case. Id. at ¶ 3. She opened her case on February 26, 1999. Id.
Auditor McConnell conducted her investigation on several issues related to the Neo-Ventures pension plan. One of the key issues the investigation covered was whether Neo-Ventures was contributing monies it had received from Medicare for contribution to the Neo-Ventures employees' pension plan. McConnell Decl. ¶ 4. For FY 1996, 1997, and 1998, Neo-Ventures, because it was the parent or managing company of the Medicare entities Serve-U Home Health and Domicile, received reimbursement from Medicare for contributions that it claimed it was making to its employees' pension plans. Id. at ¶ 5. Neo-Ventures claimed the pension plan contributions as expenses on its home office cost reports. Id. Medicare regulations required that the company pay the contributions into the employees' pension plans within one year of the end of the fiscal year. Id. The McCunes admittedly had not done so. Auditor McConnell conducted her investigation by requesting and/or subpoenaing a number of documents and interviewing a number of witnesses, including Mrs. McCune who was the pension plan trustee. McConnell Decl. ¶ 6. Dr. McCune was also a fiduciary of the pension plan. Id. McConnell also consulted with Special Agent Melear regarding how home health agencies and cost reports worked. McConnell Dep. 31:16-32:6, Def. Ex. K. ...