Antitrust Law Daily Wrap Up, RICO—E.D. N.Y.: Pharmacist’s RICO claims against her nursing home employer fail, (Nov 4, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by a pharmacist against her former employer, a rehabilitation and nursing home facility, for allegedly conspiring to commit Medicare fraud and making false statements to the state education department that harmed her reputation, the pharmacist failed to properly plead either the existence of an enterprise or pattern of racketeering activity, both which were necessary to establish a violation of RICO, the federal district court in Central Islip, New York has ruled (Mack v. Parker Jewish Institute for Health Care and Rehabilitation, October 30, 2014, Wexler, L.).

Dr. Eleanor Mack was employed by Parker Jewish Institute for Health Care and Rehabilitation, a provider of rehabilitation and nursing home services, as a pharmacist from November 2011 to March 2012. The majority of Parker’s patients receive Medicare coverage for all or part of their care, including prescription drug coverage. While employed at Parker, Mack became aware of a conspiracy to commit Medicare prescription billing fraud and reported her suspicions to Parker’s director, Charles Seide, and vice-president, Georgiene Kenny. Seide, Kenny, and another pharmacist, Nora Kustin, then accused Mack of diverting prescription drugs and narcotics for her own use and made allegations to the state department of education. Subsequently, Mack resigned her position at Parker and the state board declined to bring disciplinary charges against her after an investigation.

Mack filed suit against Parker, Seide, Kenny, and Kustin, alleging a conspiracy to violate the Racketeering Influenced and Corrupt Organizations Act (RICO), among other claims. The defendants moved for dismissal.

RICO enterprise. To support a claim that there was a RICO enterprise, a plaintiff must plead that each defendant participated in the operation or management of the enterprise. According to the court, the plaintiff’s complaint alleged that Parker was an enterprise under RICO and Seide, Kenny, and Kustin conducted its affairs. However, Parker was also named as a defendant that violated RICO. Thus, the plaintiff’s claim failed since she failed to allege an enterprise distinct from the defendants.

Pattern of racketeering activity. Moreover, the plaintiff’s complaint failed to plead either wire or mail fraud with the requisite particularity. A “pattern of racketeering” requires a showing of at least two predicate acts of racketeering occurring within a ten year period and predicate acts encompass wire and mail fraud. In this case, the complaint did not state the specific dates on which the alleged acts of wire and mail fraud occurred or identify the specific mailings or wirings that were allegedly fraudulent. Although the plaintiff asserted that the defendants engaged in a scheme to commit Medicare prescription billing fraud, she failed to state how such fraud occurred through the use of the mail or interstate wires. The plaintiff’s allegation regarding the transmission of the defendants’ alleged defamatory statements against her to the state board could not form the basis of a RICO claim, the court noted.

Standing. Further, the plaintiff lacked standing to bring a RICO claim because she failed to cite to a specific injury to her business or property. Her allegation that she was unable to find employment that reflects her level of professional achievement due to the damage to her reputation by the defendants was a “generalized reputational harm” that was not a cognizable injury under RICO. Finally, her allegations of a conspiracy to commit Medicare fraud and false allegations against her to the state board were not directly related. The injury the plaintiff alleged to her reputation could have occurred regardless of whether there was a conspiracy to commit Medicare fraud and was not proximately caused by the alleged defendants’ RICO violation, the court concluded.

The case is No. 2:14-cv-01299.

Attorneys: Peter E. Brill (Brill Legal Group, P.C.) for Dr. Eleanor Mack. Robert B. Buehler and Nathanial S. Boyer (Hogan Lvells US LLP) and Michael P. Mezzacappa, Stephanie B. Gitnik, and Matthew B. Spergel (Kaufman Borgeest & Ryan LLP) for Parker Jewish Institute for Health Care and Rehabilitation.

Companies: Parker Jewish Institute for Health Care and Rehabilitation

Cases: RICO NewYorkNews