Bitcoin seeps into mainstream

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By Jeanine Prezioso
June 13, 2014

Bitcoin – an illusion, a fad, a passing hobby. Not so much. This week, travel web site Expedia.com said it would begin accepting the virtual currency as payment for hotel accommodations and the owner of a Canadian gold mine offered its sale for $2 million in Bitcoin.

Replacing or even comparing gold with a so-called crypto-currency is still something of a reach, but more and more investors are turning their attention toward how Bitcoin can be used for monetary transactions and how they can profit from it.

“I had my first Bitcoin-related client in 2011. I didn’t really “get” it until earlier this year when I started attending Bitcoin conferences and really digging in,” Andrew Ittleman, a partner with Miami, Florida-based Fuerst Ittleman David & Joseph told the Global Markets Forum this week.

The web-based monetary unit remains shrouded in mystery and is often times associated with the spectacular fall of Bitcoin operator Mt. Gox.  Skeptics also point to the Silk Road case, the website where illicit activities were being transacted in Bitcoin.

“I think the community at large views the Silk Road case as something that was unfortunate, but a lesson nonetheless. There are still many, many people using it for perfectly legitimate purposes,” Ittleman said.

The issues of how to track the currency, how to use it and how to regulate have been percolating among regulators and the legal community in the last year. The U.S. Internal Revenue Service in March said it would treat Bitcoins as “property” rather than currency. Any money made from the sale of the crypto-currency would be subject to capital gains tax. An investor is responsible for booking a gain or loss from the time they purchase the Bitcoin to the time they sell it.

To make it more user-friendly: “I’ve been arguing that it is now critical for Bitcoin wallet companies to start building “basis trackers” into their wallets,” Ittleman told the GMF.

In April, New York State regulator Benjamin Lawsky said he hopes to have regulations in place this summer so residents can begin using the currency to send money back to family members in other countries for a fraction of the transactional fees.

“If these systems become more efficient, potentially you could do those kinds of transmissions in a much more efficient way and the charges would go down to 1 percent,” Lawsky, superintendent of the New York State Department of Financial Services told the GMF on April 29.

Ittleman echoed those same notions.

“People in the U.S. send billions of dollars a year internationally…and the companies that process those transactions rake in billions in fees. For many people in the Bitcoin space, that is the greatest attribute. The ability to spend money between countries with no currency restrictions. That’s huge!” he said.

 

 

 

Announcing the FIDJ Mini-Blog

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This week, Fuerst Ittleman David & Joseph is launching a Mini Blog, which will be submitted to its readers on a weekly basis. Unlike its usual Blog, which will continue to be updated here, the Mini Blog will allow FIDJ to communicate with its readers in a short and to-the-point style, delivering critical news updates with just enough commentary to explain why the updates are critical. We believe that this Mini Blog will be a valuable resource for our readers, and will allow subscribers to stay up to date on issues affecting all of our practice areas, including Tax & Tax Litigation, Food Drug & Cosmetic Law, Complex Litigation, Customs Import & Trade Law, White Collar Criminal Defense, Anti-Money Laundering, Healthcare Law, and Wealth & Estate Planning. Additionally, subscribers may sign up to receive only the content relevant to their interests on a subject-by-subject basis. As always, please feel free to reach out to us with comments regarding our content or suggestions regarding how we may better keep you up to date.

Click here to sign up.

Here is a sampling of what you can expect to receive in our Mini Blog:

Food and Drug:

On May 28, 2013, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued guidelines for voluntary “serving facts statements” that alcoholic beverage manufacturers may include on their packaging. A copy of TTB’s press release can be read here. The serving facts statements are similar to the nutrition panels currently found on non-alcoholic foods and beverages. According to the rule, serving facts statements will include: 1) the serving size; 2) the number of servings per container; 3) the number of calories; and 4) the number of grams of carbohydrates, protein, and fat preserving. In addition, serving fact statements may also include the percentage of alcohol by volume and a statement of the fluid ounces of pure ethyl alcohol per serving. TTB is providing the interim guidance on the use of voluntary serving facts statements on labels and in advertisements pending the completion of rulemaking on the matter. A copy of the TTB Ruling can be read here.

Healthcare:

A new bill in the U.S. House of Representatives, the Medicare Audit Improvement Act of 2013, seeks to amend title XVIII of the Social Security Act to improve operations of recovery auditors under the Medicare integrity program and to increase transparency and accuracy in audits conducted by contractors. A few proposals include limiting the amount of additional document requests, imposing financial penalties on auditors whose payment denials are overturned on appeal and publishing auditor denials and appeals outcomes.

In related news, the Department of Health and Human Services c/o the Centers for Medicare and Medicaid Services  (“CMS”) is proposing to increase the maximum reward for reporting Medicare fraud from “10 percent of the overpayments recovered in the case or $1,000, whichever is less, to 15 percent of the final amount collected applied to the first $66,000,000”¦” In case you don’t have a calculator handy, that’s a change from $1,000 to a potential maximum windfall of $9,900,000. It’s safe to assume that the number of whistleblower reports of alleged Medicare fraud are going to skyrocket. As the saying goes, you miss 100% of the shots you don’t take.

As decided by the United States Court of Appeals for the Eleventh Circuit, HIPAA preempts Florida’s broad medical records disclosure law pertaining to a decedent’s medical records. In Opis Management Resources, LLC v. Secretary of Florida Agency for Health Care Administration, No. 12-12593 (11th Cir. Apr. l 9, 2013), the 11th Circuit Court of Appeals ruled that Florida’s broad medical records disclosure law did not sufficiently protect the privacy of a decedent’s medical records. The Court noted that Florida allows for “sweeping disclosures, making a deceased resident’s protected health information available to a spouse or other enumerated party upon request, without any need for authorization, for any conceivable reason, and without regard to the authority of the individual making the request to act in a deceased resident’s stead.” In contrast, HIPAA only permits the disclosure of a decedent’s protected health information to a “personal representative” or other identified persons “who were involved in the individual’s care or payment for health care prior to the individual’s death” to the extent the disclosed information is “relevant to such person’s involvement”.

Tax:

On May 29, 2013, the New York Times reported that the Swiss Government will allow Swiss Banks to provide information to the U.S. Government in exchange for assurances that Swiss banks would only be subject to fines and not be indicted in an American criminal case. Per the New York Times,

The New York Times article reports that: But [Ms. Widemer-Schlumpf (Switzerland’s finance minister)] said the Swiss government would not make any payments as part of the agreement. Sources briefed on the matter say the total fines could eventually total $7 billion to $10 billion, and that to ease any financial pressure on the banks, the Swiss government might advance the sums and then seek reimbursement”¦. Ms. Widmer-Schlumpf said the government would work with Parliament to quickly pass a new law that would allow Swiss banks to accept the terms of the United States offer, but said the onus would be on individual banks to decide whether to participate.

This appears to be the beginning of the end of Swiss bank secrecy. If the Swiss relent to the U.S., the European Union will be next in line to obtain the same concession.

Anti-Money Laundering:

Our thoughts on the United States government’s attack on Mt. Gox can be read here, and Bitcoin continues to remain a hot topic all across the internet; see here, here, and here. Another virtual currency, Liberty Reserve, has also made a splash since being shut down by the Feds last week in what many have described as the largest money laundering scheme of all time; see here for details of the takedown, as well as the following articles describing the initial bits of fallout from the Liberty Reserve takedown: online anonymity, anti-money laundering compliance,Barclays Bank involvement, and the not guilty pleas entered by Liberty Reserve’s proprietors on Thursday. We will keep our eyes on these two cases as the fallout continues.

Mitchell Fuerst Presents Webinar on Year-End Tax Planning for CFOs

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On November 23rd, Mitchell Fuerst, Managing Partner of Fuerst Ittleman, PL, presented a webinar on “CFO Best Practices for Tax Breaks & Strategies to Capitalize on Before Year-End 2010.” Offered by ExecSense, the worlds largest library of webinars for executives and legal professionals, the seminar focused on the steps that companies and their CFOs can implement before the end of the calendar year to maximize their tax advantages; i.e., to anticipate those tax increases that will be coming in 2011 and to make use of tax breaks that must occur before January 1st.

The list of topics addressed in the webinar included:

¢ accelerating income and postponing deductions
¢ taxable compensation and ordinary dividends to shareholders
¢ distributions of real estate
¢ dividends in lieu of salary
¢ accelerating capital gains
¢ electing out of installment treatment

The webinar detailed the key provisions of the tax code that will be expiring at the end of 2010 and those which will be carrying over into 2011. Mr. Fuerst also focused listeners attention to new reports that will be due to the Internal Revenue Service with a companys 2010 tax filing.

The complete webinar can be accessed for your computer, iPhone, Blackberry, iPod, Kindle or iPad through ExecSense by clicking here.

For a private consultation regarding you companys tax planning or tax issues, contact Mitchell Fuerst, Esq., and the Tax Planning practice of Fuerst Ittleman.

FDA Releases Detained Shipment After Company Brings Suit

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November 18, 2010

Last week, Amphastar filed a Notice of Withdrawal, voluntarily dropping its Motion for a Preliminary Injunction in the Companys suit against the FDA. The Motion, which was filed just eight days earlier, concerned the detention of two shipments from Amphastars foreign-manufacturer. The two shipments detained by the FDA contained semi-purified heparin, an intended starting material, for which the Company needs to complete the FDAs qualification process. To secure approval from the FDA, the Company must get the raw material and its source approved before they are able to move forward. Because Amphastar needed these materials released in order to ultimately gain FDA approval, the Company sought injunctive relief to secure the release of the shipments.

The Motion raised serious issues as to the appropriateness of the detention. According to the Motion, while the first shipment was initially released by an FDA Customs Officer after samples had shown no contamination, the FDA rescinded the release. Citing a “mistake,” the Agency reopened its investigation and again detained the shipment. The FDAs basis for detaining the heparin was two-fold. First, the FDA notified Amphastar that the heparin was misbranded because the packaging lacked “adequate directions for use.” Second, the FDA informed the Company that the foreign-manufacturer of the heparin was not registered with the Agency
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While Amphastar refuted these allegations in the Motion, the FDA soon responded by releasing the detained materials. Because Amphastar obtained the relief they were ultimately seeking, the Company voluntarily withdrew their motion. Interestingly, this is not the first time the FDA has released shipments after legal action has been taken against them. Rather, it is becoming more common to see the Agency release shipments after the legality of their detentions are challenged in court.

Last year, as lead counsel for Seagate, we successfully obtained the release of detained shipments by bringing suit and challenging the legality of the FDAs actions. Under circumstances similar to Amphastars situation, the FDA detained a series of shipments being imported into the country without alleging that the specific products were contaminated. After several unsuccessful communications with the FDA, the company attempting to import the products decided to pursue legal action. As Seagates lead counsel, we brought suit against the FDA, challenging the legality of the detention and seeking injunctive relief. Just weeks after the suit was filed, the Agency “voluntarily” released the detained shipments and removed the Import Alert that it placed on these products. For more details about this suit, the Complaint can be found here.

This pattern of detention and release upon being challenged in court is not new. As far back as 2007, while serving as lead counsel for Allied, we were able to secure the release of detained entries by bringing action against the FDA. Allied sought our help after several of its shrimp entries were detained upon arrival and the FDA refused to release the shipments. Despite receiving test results showing the shipments were not contaminated and were compliant with FDA standards, the Agency would not budge until formal action was brought to challenge their practices. However, after we brought suit to challenge the detention, the FDA quickly released the shipments. The Complaint can be accessed here. Because a trend has developed with the FDA releasing detained products as a response to being challenged in court, it appears that the Agency is more willing to cooperate with companies after formal action is taken against them.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

McConnell Says Republicans Must Block Obama Tax Hikes

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U.S. Senate Republican Leader Mitch McConnell (R-KY) spoke on November 4, 2010 at the Heritage Foundation in Washington, D.C., laying out his roadmap for the future of the Republican Party agenda in the aftermath of the election. What is among the top GOP priorities according to McConnell? Blocking President Obama from raising taxes.

“[W]hat can Americans expect from Republicans now? On the economy,” promised McConnell, “we will work hard to ensure Democrats dont raise taxes on anybody, especially in the middle of a recession.”

Since President Obamas election in 2008, the Republican Party has been focused on keeping the President from raising taxes. The drumbeat has been that the Bush-era tax cuts, which are set to expire at the end of this year, must remain in place. In 2001 and 2003, Bush enacted several major tax cuts including:

  • A reduction of individual income tax rates from 15, 28, 31, 36, and 39.6 percent to 10, 15, 25, 28, 33, and 35 percent;
  • Lowered tax rates for dividends and capital gains;
  • An increase in the child tax credit from $500 to $1,000;
  • A phased-in reduction in estate taxes, and a one-year repeal in 2010;
  • A big expansion of tax-favored retirement savings plans.

Republicans have warned that allowing these tax cuts to expire during the current recession will further damage the overall U.S. economy and cause even higher unemployment.

Fresh from his “shellacking” in Tuesdays election, President Obama seems to be extending an olive branch to the Republicans when it comes to the tax cuts. White House Spokesman Robert Gibbs said Thursday “ after McConnells speech “ that while Obama believes that extending tax cuts permanently for upper income earners “is something the President does not believe is a good idea,” Obama may be open to the possibility of extending the cuts for one or two years.

How would McConnell respond to this offer of détente on tax cuts?

“The formula is simple, really,” said McConnell on Thursday, “when the administration agrees with the American people, we will agree with the administration. When it disagrees with the American people, we wont. If the administration wants cooperation, it will have to begin to move in our direction.”

While the olive branch is looking a little bedraggled and singed from the fiery rhetoric, according to McConnell, “There is no reason we cant work together to prevent a tax hike on small businesses.”

In these uncertain tax times, effective, aggressive and proactive tax planning is a must for individuals and businesses of all sizes. Let the experienced Tax Planning practice at Fuerst Ittleman, PL, help guide you. Contact us today for a free consultation.

Phone Companies Urge US Government To Loosen Telecommunications Regulations For Cuba

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Several of the largest telecommunications companies in the United States including AT&T, Verizon, and Nokia are urging the US government to ease regulations which currently prevent them from operating in Cuba. The regulations stem from the 47 year old trade embargo the US has enforced against Cuba due to the oppressive Castro regime. AT&T and Verizon are seeking a loosening of regulations to make it easier for telecommunications companies to directly connect calls to and from Cuba, while Nokia, the worlds largest mobile-phone manufacturer, is urging Washington to ease the embargo so it can export mobile-phone accessories from its US locations.

Under current rules, the Federal Communications Commission (“FCC”) has established a rate cap on the fee telecoms can pay the Cuban government for direct calls to Cuba which hampers the telecommunications industrys ability to do business in Cuba. Currently, US providers are only allowed to pay the Cuban government a fee no higher than 19 cents per call, however, Cuba demands 84 cents a call.

In June, Verizon wrote the FCC asking it to grant requests by others in the telecom industry for the FCC to waive its maximum rate cap rules. A copy of Verizons comments can be read at: Verizons reply to the FCC.

US telecoms are also interested in establishing roaming services on the island for US customers who visit the island as a first step to expanding cell phone services. Analysts believe that the mobile phone market in Cuba has the potential to be profitable given the islands population, 11.4 million, and the relative few between, 10 and 20 percent, who currently use mobile phone services.

The telecoms requests for greater access to Cuba come several months after the idea was first presented by the Obama administration. On April 13, 2009, President Obama issued a memorandum to the Secretaries of State, Treasury, and Commerce entitled “Promoting Democracy and Human Rights in Cuba” in which the President said that increased contacts between Cuba and the outside world would reduce Cubans dependency on the Castro regime. President Obama directed his Secretaries to take such actions as necessary to authorize US telecommunications providers to enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the US and Cuba and to license US telecom service providers to enter into and operate roaming services agreements with Cubas telecommunications service providers. The Presidents full memorandum can be read at: White House Memo on Promoting Democracy and Human Rights in Cuba.

However, while an easing of telecommunications regulations may be in the near future, US companies looking to do business in Cuba still risk violating sanctions still in place, such as the Cuban Democracy Act of 1992 that prohibits investment in Cubas telecommunications network.

For guidance on how your import/export business, or related business, can take advantage of the surging trade economy while maintaining strong regulatory compliance, contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.

Distinguished Orthopaedic Surgeon Joins NeoStem’s Medical Advisory Board

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NeoStem, Inc. (“NeoStem”) recently announced the appointment of Thomas Einhorn, M.D., Chairman of Orthopaedic Surgery at Boston University to its Medical Advisory Board. NeoStem is an international biopharmaceutical company that is engaged in the development of stem cell-based therapies and building a network of adult stem cell collection centers in the United States and China that allow people to donate and store their own stem cells for their personal use in the event of a future medical need. Dr. Einhorns professional focus has been on the repair and regeneration of bone and cartilage using autologous adult stem cells, reconstructive surgery of the hip and knee, and the treatment of metabolic bone disease making him an excellent addition to NeoStems Medical Advisory Board.

Dr. Einhorn is Chairman of the Department of Orthopaedic Surgery and Professor of Orthopaedic Surgery, Biochemistry and Biomedical Engineering at Boston University. To date, he has authored over 200 peer-reviewed articles during his career. Dr. Einhorn has a distinguished career which includes serving as Chairman and President of numerous orthopaedic research societies and foundations. In addition, he has won numerous awards and served as Deputy Editor for Current Concepts Reviews for The Journal of Bone and Joint Surgery, and on the Editorial Boards of The Journal of Bone and Mineral Research, Journal of Orthopaedic Research and Bone.

Wayne A. Marasco, M.D., Ph.D., Chairman of NeoStems Advisory Boards, stated, “We are extremely pleased to have Dr. Einhorn join our medical advisory board. His in-depth understanding of orthopaedic injuries and the use of adult stem cells to regenerate damaged bone and cartilage will be a tremendous asset in our development of applications of adult stem cells for orthopedic injuries.”

Dr. Einhorn stated, “I am excited to join the Medical Advisory Board of an innovative, forward-looking company like NeoStem and be part of the team of experts to help advance stem cell technologies in the field of orthopaedics and assist in developing VSEL┞¢ Technology applications for orthopaedic disease. Not only has [NeoStem] put together a promising base of technologies for future stem cell treatment in orthopaedics, cardiac, skin rejuvenation and the treatment of wounds but it continues to partner with experts in other areas to facilitate meaningful [Research and Development]. This should encourage people to collect, process, and store their stem cells through NeoStems existing network of collection centers in anticipation of a variety of future personalized medicine applications.”

Federal Prosecutors Drop Charges Against Former Westar Executives

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On August 20, 2010, U.S. District Court Judge Julie Robinson for the District of Kansas granted the United States Department of Justices motion to dismiss the charges against former Westar executives David Wittig and Douglas Lake. The charges were dismissed without prejudice, meaning they could be filed again.

Wittig and Lake were charged with conspiracy and circumvention of internal controls. The former executives were accused of manipulating a proposed merger for personal benefit and using Westars legal counsel to remove other directors who challenged their actions. Authorities also alleged that Wittig and Lake submitted false reports to the Securities and Exchange Commission (“SEC”) about their personal use of corporate aircraft. The SEC requires such reports if the added cost to the corporation for air travel exceeds $50,000. Prosecutors alleged that Wittig and Lake conspired to inflate their compensation from the company and took steps to hide their actions.

This case was the third attempt by the U.S. Department of Justice to try Wittig and Lake. The first case ended in a hung jury in December 2004. The government retried the case in early 2005 and in that second trial a jury found Wittig and Lake guilty of wire fraud, money laundering, circumvention of internal controls and conspiracy. The court also ordered millions of dollars in restitution. However, the U.S. Court of Appeals for the 10th Circuit reversed the convictions in January of 2007. The 10th Circuit threw out the money laundering and wire fraud convictions because of a lack of evidence and found that jury instructions for the circumvention and conspiracy charges were flawed.

After the 10th Circuit had ruled, prosecutors announced they would seek a third trial for the charges of conspiracy and circumvention. However, prior to trial, the Supreme Court announced its decision in Skilling v United States. Defense attorneys believe that the dismissal of this most recent case is byproduct of the recent Supreme Court decision that changed the landscape of the “honest services” fraud statute.

The decision of prosecutors to drop the charges comes less than two months after the Supreme Courts landmark decision in Skilling v United States. In Skilling, the Court severely narrowed the scope of the “theft of honest services” fraud statue, 18 U.S.C. Sec. 3146, by ruling that it is unconstitutionally vague except in cases involving bribery and kickback schemes. The Court ruled that federal prosecutors can no longer rely on the “theft of honest services” charge in cases involving private sector employees charged with self-dealing or undisclosed conflicts of interest without a bribery or kickback scheme. As a result of the Skilling decision, a once flexible tool in the arsenal of the federal prosecutors office has been sharply limited.

For information about Fuerst Ittlemans experience litigating white collar criminal cases please contact us at contact@fidjlaw.com.

Health Care Reform Strengthens Fraud Prosecutions and Expands Scope of False Claims Act

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The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, will make it easier for the federal government to investigate and prosecute health care fraud and increase penalties for violations. The new bill provides for more than $350 million over 10 years to reduce healthcare fraud and abuse while easing prosecutions, strengthening sentencing guidelines, and expanding the False Claims Act.

The bill eliminates the need for prosecutors to prove actual knowledge of or specific intent to violate the law under the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b) and the federal health care fraud statute (18 U.S.C. § 1347). The Bill is likely in response to the 9th Circuit Case, Hanlester Network v. Shalala, which provided for heightened standards of intent. Prosecutors will also be able to issue administrative subpoenas for the production of documents.

Kickbacks and offenses in violation of Section 301 of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 331) will now be considered Federal Health Care Fraud Offenses. Further, those suspected of obstructing a criminal investigation of federal health care fraud may have their assets frozen, while those who obtain property from the commission of fraud w have their personal property subject to forfeiture.

The bill will also change the definition of “intended loss” under the Federal Sentencing Guidelines. Section 2B1.1(b)(1) of the guidelines provides that the loss from fraud is calculated as either the actual loss or intended loss whichever is greater. While courts in the past have calculated “intended loss” as the amount actually paid by the government or payable under government fee schedules, the new bill allows for the dollar amount of fraudulent bills submitted to constitute prima facie evidence of intended loss. The result will be heightened sentencing for white collar criminals in health care. Further, the statute will increase the offense level for defendants convicted. Changes include:
¢ A two-level increase in the offense level for losses of $1 million or more.
¢ A three-level increase in the offense level for losses of $7 million or more.
¢ A four-level increase in the offense level for losses of $20 million or more.

The False Claims Act will also be strengthened by the reform statute. Claims arising from a violation of the Ant-Kickback statute will now expressly constitute violations of the False Claims Act, regardless of whether the wrongdoer submits the claim. The bill also strengthens the Act by allowing for whistleblowers to bring suits and restricting the public disclosure bar (providing that disclosures made in criminal, civil or administrative hearing or in government reports, hearings, audits and investigations bar a federal FCA suit) to federal government hearings, reports, audits and investigations. Finally, the FCA will be applicable to payments made by the American Health Benefit Exchanges if they include federal funds and civil penalties for exchange-related FCA liability will be 3 to 6 times the amount of damages.

Additional Provisions include:
¢ The ability to suspend pending Medicare and Medicaid payments to providers and suppliers pending investigations into allegations of fraud.
¢ Civil monetary penalties for knowingly making false statements to enroll as a provider or supplier in a federal health care program.
¢ Mandatory compliance programs for providers and suppliers.
¢ HHS oversight of Medicaid and Medicare Parts C and D.
¢ Exclusions from Medicaid for companies or individuals that control entities that have not repaid overpayments, have been suspended, terminated, or excluded from participation, or are affiliated with an entity that has.
For more information regarding Health Care Reform please contact us at contact@fidjlaw.com.

Judge Agrees Agency for Health Care Administration Rule Goes Beyond Regulatory Powers

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On July 23, 2010, Administrative Law Judge Eleanor M. Hunter entered a Final Order in the case of Las Mercedes Home Care Corp v. Agency for Health Care Administration. The Order declared invalid a rule requiring Medicaid providers of home health agencies to issue either W-2 or 1099 tax forms to individuals on their staffs.

Las Mercedes is a licensed home health agency in Florida and was an enrolled Medicaid provider of home health services from July 1, 2004 through June 30, 2006. The company works with patient physicians to determine the type and scope of home health services needed and arranges for such services to be provided through one of 22 companies with which it maintains staffing agreements.

The suit began in response to a September 30, 2008, Final Audit Report issued by ACHA which sought $878,843.93 in Medicaid overpayments and a fine of $1,000. Soon afterwards, Las Mercedes requested an administrative hearing and the case was referred to the Division of Administrative Hearings (DOAH) in November and set for hearing in February. Following numerous continuations, the AHCA Motion to Amend Final Audit Report was granted on June 24, 2009.

After additional discovery, Las Mercedes filed a Motion to Dismiss arguing that the AHCA rule requiring that Medicaid home health agencies issue W-2 or 1099 forms to individuals conflicted with Statutory authority. In response to an AHCA objection to consideration of the validity of the rule, Las Mercedes filed a rule challenge case; the two cases were then consolidated.

The challenged rule is a provision from the Florida Medicaid Home Health Services Coverage and Limitations Handbook, which has been incorporated by reference by Florida Administrative Code Rule 59G-4.130. The rule requires Home Health services to be provided by professionals who are directly employed by or under contract with a home health agency enrolled in Medicaid Home Health Services program and provides, “Employed or contracted means that the home health agency provides a W-2 of 1099 tax form for the individual.”

Attorney Andrew Ittleman of Fuerst Ittleman, on behalf of Las Mercedes, alleged that the Rule was an invalid exercise of AHCA authority because it (1) went beyond AHCAs powers, (2) contradicted the Florida Statute 400.463(9) definition of “employed by or under contract with” and (3) was arbitrary and capricious.

After determining that the DOAH had jurisdiction to determine the validity of Medicaid rules, the court found that none of the purported statutes authorized AHCA to regulate the business relationship between a home health agency and its employees or contractors. Accordingly, the Court held that the Rule goes beyond the scope of AHCA powers.

The court then found that the “direct employee” definition provided in Section 400.462(9), which includes, “an employee for whom a management company that has a contract to manage the home health agency on a day-today basis…” contradicted and precluded the AHCA definition of the same term. Further, there was no indication that the Legislature or federal government had intended for the AHCA to create its own more restrictive definition.

Finally, the court ruled that the additional requirement under the AHCA Rule was an irrational and illogical methodology for ensuring health, safety, and welfare, and curbing fraud, waste, and abuse. Thus, the court voided the rule established on page 1-8 of the Florida Medicaid Home Health Services Coverage and Limitations Handbook as an invalid exercise of delegated legislative authority.

For more information regarding the AHCA, Medicaid, or administrative agency regulations please contact us at contact@fidjlaw.com.