When he was chief executive officer of Coast Plaza Doctors Hospital in Norwalk, Calif., Gerald Garner allegedly billed Medicare for expenses the hospital never incurred. In the wake of his 2002 death, his estate and the hospital are picking up the tab.
Last week, the U.S. attorney in Los Angeles announced an unusual settlement in which 126-bed Coast Plaza and Garner's estate will pay a combined $4.1 million to resolve a civil whistleblower lawsuit alleging $1.7 million in Medicare fraud. The government charged that Garner wrote a number of checks to vendors and suppliers that were never sent. The privately held, for-profit hospital allegedly billed those "expenses" to Medicare from 1994 to 1999. Garner was killed in an auto accident in 2002.
Assistant U.S. Attorney Vipal Patel said the hospital and the Garner estate are jointly liable for the settlement, and it's up to them to decide who pays what amount.
The charges stem from a 1999 lawsuit filed under the federal False Claims Act in U.S. District Court in Santa Ana, Calif., by former Coast Plaza Chief Financial Officer Raul Lopez, who will receive $718,678 from the settle- ment for reporting the fraud. Patel said the settlement amount represents 21/2 times the alleged damages.
"This settlement sends a message that this kind of conduct cannot be tolerated and if you do it, it will cost you," said Patel, who noted no criminal charges have been filed. Patel said there were no allegations that Garner's family members were involved in the alleged scheme.
Current Coast Plaza CEO Craig Garner, Gerald Garner's son, said the hospital is pleased to resolve the issue. He declined to disclose hospital finances but said Coast Plaza is making a profit. "The Medicare program is extraordinarily complex and constantly changing," Garner said. "As soon as we were informed of the possible errors in our reporting, we instituted changes within the hospital as the investigation continued to ensure that we were in compliance and continue to be in compliance."
Coast Plaza, which is owned by a partnership with local doctors in which Gerald Garner held a stake, settled without admitting legal wrongdoing and signed a five-year corporate integrity agreement with HHS' inspector general. The partnership bought the hospital in 1991, said Craig Garner, who is chairman of the board of the general partner in the limited partnership. While his father was aware of the federal investigation before his death, he was unaware of the whistleblower lawsuit, Garner said.
Coast Plaza's attorney, Lloyd Bookman of Hooper, Lundy & Bookman, said the hospital is one of many to face this type of investigation.
The posthumous settlement wasn't Gerald Garner's first brush with the law. In 1996 the Office of the Comptroller of the Currency, a U.S. Treasury Department agency regulating 2,800 banks, banned Gerald Garner from the banking industry. He, his wife and his brother, Daniel Garner, had founded American Commerce National Bank in Anaheim, Calif., in 1984 and operated it until 1993, when federal regulators seized its charter and closed it.
The agency charged the Garners with making false statements, causing the bank to pay excessive compensation to themselves and other directors and concealing hidden ownership interests. They were banned from banking for life and agreed to pay $204,000 in civil monetary penalties. Several of the bank's directors were also fined about $35,000.
The Federal Deposit Insurance Corp. sued the bank and its directors in 1996 for $5 million. Gerald Garner paid $1.2 million of the $2.3 million settlement, according to an FDIC spokesman.