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True Grit
A RURAL, NON-PROFIT HEALTH CARE AGENCY STANDS UP
AGAINST RECKLESS GOVERNMENT AGENTS
For: Immediate Release
Date: September 1997
Contact: Barlow Herget, (919) 832-8201
GOLDSBORO, N.C.—The parking lot was still dark when the vans bearing yellow, government license plates began to roll in. Then came the U.S. Postal Service trailer truck. Rose Below, then 54, was puzzled by the activity on the cold, winter morning as she hurried into work at Home Health and Hospice Care, a rural non-profit, home health care provider that serves eastern North Carolina. It was Jan. 19, 1995, a day she wouldn’t forget.
"I’m the receptionist and switchboard operator, and I usually come in a bit early, about 7:45," recalls Below, a mother of two grown children who lives with her two dogs and two cats in the country. "But we have people who come in earlier than that. When I opened the front door, I saw all these people in the lobby and it was full. There were agents running all over the place, and they had guns. They had taped off the offices and even the rest rooms."
As more employees showed up, they were herded into the lobby and told to remain there. When the phones rang, Below and the others were told to let the lines ring. When one nervous employee asked to use the bathroom, she was told to stay put. Some quietly began to sob.
Most of these people are church-going, God-fearing, small-town citizens who believe in law and order. Craig DeCarlo, 46, is a New Jersey transplant who lives in nearby Princeton, N.C. He is active in the Whitley Pentecostal Church. He is Vice President of Clinical Services for Home Health and Hospice Care (3HC). "My Dad was a World War II veteran and I was an Eagle Scout," says DeCarlo. "I was raised believing in God and Country, in authority and the police, but this . . ." His voice trails off.
This was a government search. It is what is happening across the country today in the government’s campaign against Medicaid and Medicare fraud. Most of the time, the government agents have probable cause. The 3HC story is what happens when these agents disregard the truth and punish the innocent. It’s a story that tests our justice system and tries the grit of those who, like Atlanta security guard Richard Jewell, find themselves fighting for the truth against the overwhelming resources of government agents.
The Jan. 19 raid was part of a joint state-federal task force investigating Medicaid and Medicare fraud. The group that seized 3HC’s main office was simultaneously searching the company’s seven other offices across eastern North Carolina. There were FBI, SBI (State Bureau of Investigation) IRS agents and others in the search parties. They seized any and all papers they believed were related to possible fraud. Their authority flowed from a federal search warrant that outlined suspected criminal behavior. In this case, it was a warrant based on deceptions and deceit.
That Thursday morning, however, the agents refused to show even the warrant to company executives. DeCarlo, a PhD in Social Psychology, recounts, "The agent who met me at the door flashed his badge and said he was from the FBI. He wanted my name and for me to identify which was my office. I asked him, ‘What’s going on?’ and he told me that they had a search warrant to search the premises. I asked to see the warrant and he replied, ‘No, I’m not going to show it to you and I want you to go sit down in the lobby.’ No one ever showed me a search warrant."
Nor did 3HC President Beverly Withrow or corporate attorney Tim Finan see it that morning. Withrow had begun the day brightly. The 60-year-old minister’s wife was on vacation, visiting a new granddaughter in Clayton about 30 miles away. The phone call from Goldsboro reached her at the beauty parlor in nearby Smithfield where she had an 8 a.m. appointment.
"The FBI is here!" quavered the voice on the phone.
Withrow’s day turned quickly to nightmare. She had started work at 3HC as a non-paid volunteer in 1981 when the agency was founded. She became President in 1986, and with a degree in Christian Education and a Vermont Yankee’s no-nonsense attitude for business, she oversaw 3HC’s steady growth as physicians and county commissioners asked the company to provide service to their mostly rural patients and citizens. By 1995, the company had offices in larger cities such as Wilmington, Fayetteville and Raleigh. Today, it employs 1,300 people and serves over 5,000 clients in 48 counties. Among home health care providers, it has achieved an "accreditation with commendation" standard which puts it among the top 23 percent in the nation.
Withrow relates what happened next on Jan. 19: "I drove to Goldsboro and arrived about 8:30. A guard greeted me when I walked in and asked who I was. At first, they told me I could not meet with my management team unless they were present. So, I went to the lobby and stood before my employees and told them that we were not guilty of fraud or abuse, and we had done nothing wrong. I told them that the agents had made a terrible mistake, but we were going to cooperate."
She then dismissed most of the employees for the remainder of the day and told the government agents that someone had to answer the phones to take emergency messages. Next, she called her Chairman of the Board and the attorneys.
Meanwhile, agents were loading up boxes of files and downloading computer discs. They hauled them to the parking lot and loaded the tractor trailer. They rifled desks and even looked behind ceiling tiles. Box after box—5 million documents were seized that day from all eight offices. During the morning, almost on cue, the media began showing up. Local television crews captured pictures in the Greenville offices. At the end of the day, recalls Attorney Tim Finan, someone produced the search warrant. The warrant was based on a sworn affidavit that the agents had signed but the affidavit was sealed at the government’s request. That meant that Finan and Withrow wouldn’t know for three months the details of the accusations made against the company.
The next day and for days following, the local newspapers and television stations ran stories about the raid and that 3HC was suspected of Medicare and Medicaid fraud. For a non-profit agency that had little savvy or experience in dealing with the media, the coverage was devastating. Peggy McCarter, then a 33-year-old visiting nurse, found the publicity especially embarrassing. She had been filmed by one TV station three months earlier for a story about home health care, so when the station ran a news clip on the 3HC raid, it frequently used the McCarter clip from its files.
"It really created a difficult time for me. Every time they showed that piece and talked about fraud, it made me feel like I was on a ‘Wanted Poster,’" she remembers ruefully. "My neighbors would tell me that they saw my picture on the television. People at my church, Elm Grove Free Will Baptist in Ayden, would ask me what was going on. Everywhere you turned, you were made to look like a crook."
Amy Turnage, 30, the attractive office manager at the Smithfield office, didn’t know what to expect when one of her frightened employees called and told Turnage that the FBI wanted to see her. On the way to the office, Turnage hurriedly called her mother in South Carolina, asking if she could care for Turnage’s two young children in the event she was detained.
"I knew that I hadn’t done anything wrong," she says. "We were hard working people just doing our jobs and they treated us like criminals. It was very intimidating. We tried to keep our chins up. We knew that as hard as we worked, we were legitimate, but it was embarrassing, and employees began thinking they had better be looking for another job."
For Donna Smith, 35, a nurse and Director of Intake (referrals), the main source of new business for the agency, the Goldsboro raid was overwhelming. "I’ll never forget it," she declares. "The phones were ringing and I explained to the agents that the referrals had to be answered. They said no; everybody had to stay in the lobby during the search. Men dressed in black, going through your desk drawers and file cabinets.
"The publicity made us feel like criminals and people were nervous. After it came out in the paper, referrals would ask about the investigation. And outside of work, anytime you read something in the paper, it was perceived as negative. My family knew I was honest. But people would ask, ‘Why are you under investigation? Are you fraudulent?’ They make you feel really bad, especially when you know in your heart that it’s not true."
Then, there were the children. Craig DeCarlo poignantly remembers the youngest of his three sons coming home from school: "He looked at me and said, ‘Dad, are you going to jail? My friends at school said you’re going to jail.’" DeCarlo continues, "Having to explain to my child was tough. I’ve never felt so violated and vulnerable—it was nothing less than industrial rape."
While the employees gritted their teeth, put on smiles and kept on working, the company struggled to keep its balance. Recounts President Withrow, "Some patients didn’t pay because they said we were crooks and they didn’t owe us anything. One doctor in New Bern called me a crook and accused us of mistreating his patients. Prospective employees didn’t want to work for us because they didn’t want to risk their reputation. Hospitals with whom we were talking about providing home health services backed off. I couldn’t blame them. It was like having leprosy."
The loss of new business was particularly frustrating. Tim Finan explains: "We lost $500,000 immediately when a regional hospital with whom we negotiated a joint venture withdrew from the arrangement. Then, as news of the raid spread, other potential clients and partners delayed or ceased negotiations. We’re still counting, but a conservative estimate is $5 million. This is especially troubling because as a non-profit, that money would have been invested back into the communities we serve in more care and nurses."
Then, there was the challenge to keep the doors open after government agents walked away with all of the company’s records. "They took almost all medical charts," Withrow states. "They took physician notes. They took our billing records, our computer discs. Our patients’ records, they’re our Bibles."
The records had been taken to Raleigh, the capital city, and stored in a warehouse. To keep going, Withrow first had to get permission from the federal prosecutors to come copy the records. Then, she would make an appointment for a government agent to be present while the copies were made. Painstakingly, 3HC employees would drive the 50 miles to Raleigh, rent a copy machine, and copy one file after another. Says Withrow, "It took us six weeks to copy all the documents, and it was three months before we had all the medical charts. It crippled our accounts receivable because when we send out many of our bills, we have to show medical documentation."
For nurses in the field like Peggy McCarter, the challenge required improvisation. "When I talked to my supervisor, she told me a search warrant had been served. That’s all she knew. I asked if I would have a job tomorrow," says McCarter. Her job in the days head was hectic: "I had a case load of 40 to 50 patients. If I needed a particular file, I would ask my administrator and they would try to get it for me that next day. Sometimes, I would have to contact the physician about lab work or medicine. I had to come in every day and ask the clerical coordinator for records. It was several months before I felt like I was on a normal track."
For Tim Finan, there was the maddening, day by day wait for the search warrant to be unsealed. Finally, after 90 days, the federal Magistrate Judge Alexander B. Denson who signed the warrant, unsealed the document. Now, Finan, Withrow, and newly hired lead defense attorney David Queen of Baltimore saw for the first time the accusations against them. Queen, a former federal prosecutor himself, led the effort to review the allegations, one by one.
Broadly charged, 3HC was accused of fraud in Medicare and Medicaid billings. The unsealed warrant listed the specific accusations. For example, government agents claimed the agency had billed the government for services to dead patients. The agents alleged that 3HC employees were falsifying caregiver’s notes in order to charge more. The agents asserted that 3HC employees were providing unauthorized service. There were eight accusations.
Over the next two months, the defense team pealed away the accusations and found the facts. The bill involving a dead patient cited in the warrant, for instance, was for services rendered before the woman died. The government agents later admitted under oath that they had made the accusation, in the judge’s words, "without verifying the information." One charge after another was found false or misleading.
On June 23, 1995, the attorneys asked to confer with the federal prosecutors. It was a critical meeting. The lawyers hoped to persuade the prosecutors to examine the evidence themselves. If they determined that the case was weaker than they first suspected, they might end the investigation. Withrow and her board, eager to live and let live with their government watchdogs, were willing to smile, shake hands and walk away and get back to business.
Finan clearly recalls the afternoon encounter in detail: "The prosecutors were Sandra Hairston and Yvonne Watford-McKinney and there were two agents and a summer intern. Queen did most of the talking. He told them there were a number of things about which the government agents were wrong. He gave them some examples. He suggested the attorneys should check on the accusations in the warrant—the prosecutors themselves. Because, he told them, there was no nice way to put it, but that in his career as an assistant prosecutor and as a federal prosecutor and as a lawyer, he had never seen a search warrant so filled with errors and omissions.
"He told them that one of their confidential informants had come forward voluntarily and adamantly stated that the agents had misquoted him in the search warrant and were not telling the truth. He asked again that the prosecutors take a few weeks to examine the evidence and find the truth."
Finan leans forward, "I’ll never forget what happened next. Ms. McKinney was sitting beside me on my left. She looked right down the line at the three of us and said, ‘We are the government. We do not make mistakes.’
It put a chill down my spine when I realized she was serious." The meeting ended quickly thereafter.
The break in the case came when Finan and Queen persuaded Judge Denson to hold a hearing on the search warrant. Such a hearing is unusual, but Denson, unlike the government’s lawyers, was willing to examine whether he had made a mistake in signing the search warrant that the agents had given him. The hearing was held between October 31 and November 7. Informants and agents were called to testify. Records were examined. Witnesses spoke under oath. Denson closed the hearing and reviewed the evidence until April 4, 1996, when he issued his ruling. Meanwhile, during the 15 months that the agents held and searched 3HC’s records, no charge had been filed. Not one.
Denson’s ruling reads like the legal document it is. Yet, there is smoldering heat in his judgments, the disciplined indignation of a man who discovers he has been duped. Time after time, accusation after accusation, Denson carefully dissects the agents’ warrant. And in Judgment Day prose, he finds:
- That in the "use of Post-It notes for record falsification," the government agents acted with "a reckless disregard for the truth;"
- That the agents’ claim that an informant had personal knowledge of managers’ falsifying records was bogus and "at least reckless disregard for the truth."
- That the agents’ charge that 3HC had billed for services not rendered "was inaccurate and that the agents included this statement with at least reckless disregard for the truth."
Not once, twice or three times. Eight times altogether, Denson found that the agents had acted with a "reckless disregard" for the truth. The government agents’ accusations, in effect, were not true and the non-profit health care agency had been wrongfully accused. Beverly Withrow’s brave statement to her employees on Jan. 19 that they had done nothing wrong had been vindicated in a court of law.
The warrant was revoked. The government agents stalled in returning the seized documents. Their lawyers appealed to the federal district court within 30 days. Withrow and her employees quietly celebrated their victory anyway. Little notice of the ruling was taken by the press.
On July 23, federal District Judge Malcolm J. Howard upheld Denson’s findings in a crisp three-page opinion. "This court has not found a single case which would persuade the court to reverse the magistrate judge’s granting of relief on the merits . . .," declared Howard. "Home Health and Hospice Care, Inc.’s motion for return of property is affirmed."
The government lawyers asked Howard to reconsider. He again listened to both parties in September and ruled, once again, that "the search warrant was not properly supported by probable cause." He also found "reckless disregard for the truth and material omissions" by government agents. He warned the government: "This matter must end." But it did not. The lawyers appealed again, this time to the second highest court in the land. Withrow and her steadfast Board of Directors agreed to continue the fight. On June 2, 1997, a three-judge panel of the Fourth Circuit Court of Appeals in Richmond, Va., heard the case. By summer’s end, the non-profit agency’s legal fees totaled $524,636. Even when justice prevails, it is seldom cheap.
On Sept. 5, the Fourth Circuit Court upheld Denson’s findings once more.
"It is an absolute victory and resounding vindication for 3HC," stated Robert Zaytoun who, along with Finan and Queen, argued the case before the Circuit judges. Queen and Finan agreed. "We never gave up because we knew 3HC had not intentionally done anything wrong," says Finan.
For the dogged and steady Beverly Withrow, the almost three-year struggle has been a test and vindication of her faith. She reflects on the ordeal that strained her company’s operations, humiliated her employees and cost them millions of dollars in new business: "I have a strong faith in God and I believe He gives strength and wisdom to meet every situation in life, regardless of how difficult it may be. That faith stood with me in this ordeal. We are a good, honest company run by good, honest people. We know that. And now, we’ve proved it in three different courts. Government agents can make mistakes. The truth has prevailed."
- 3HC -
2402 Wayne Memorial Drive
Goldsboro, NC 27534
919-735-1387
info@3hc.org
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