file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/00-469%20Opinion.htm
No. 00-469
IN THE SUPREME COURT OF THE STATE OF MONTANA
2001 MT 220
STATE OF MONTANA,
Plaintiff and Respondent,
v.
DAVID G. VAINIO,
Defendant and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Dorothy McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John Smith, David C. Avery, Smith & Thiel, Missoula, Montana
For Respondent:
Mike McGrath, Montana Attorney General, Barbara C. Harris, Kathy Seeley, Assistant
Montana Attorneys General, Helena, Montana
Submitted on Briefs: May 3, 2001
Decided: November 7, 2001
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Filed:
__________________________________________
Clerk
Justic James C. Nelson delivered the Opinion of the Court.
¶1 David G. Vainio (David), a licensed optometrist, was charged in the First Judicial
District Court, Lewis and Clark County, with three counts of Medicaid fraud and one
count of unsworn falsification to authorities. Following a jury trial, David was found
guilty of two of the Medicaid fraud counts as well as the count of unsworn falsification to
authorities. His sentences on the Medicaid fraud counts were deferred for five years and
his six-month jail sentence on the other charge was suspended on conditions. David
appeals his judgment and sentence. We reverse.
¶2 David raises several issues which we have tailored for clarity as follows:
¶3 1. Whether the District Court erred by failing to dismiss Count I on the grounds that it
is based on the violation of an administrative policy which had not been adopted in
compliance with the Montana Administrative Procedure Act (MAPA).
¶4 2. Whether Montana's Medicaid fraud statute violates due process on void-for-
vagueness grounds because it criminalizes violations of informal administrative policies.
¶5 3. Whether David's conviction on Count II should be reversed because it was based on
the violation of n administrative policy which had not been adopted in compliance with
MAPA.
¶6 4. Whether David's conviction on Count II violates due process because the State was
not required to prove that David knowingly submitted false claims to Medicaid.
¶7 5. Whether the State introduced sufficient evidence to convict David on Count IV,
unsworn falsification to authorities.
¶8 Because we determine that Issues 1, 3 and 5 are dispositive, we do not address Issues 2
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and 4.
Factual and Procedural Background
¶9 Medicaid is a publicly funded medical insurance program established to provide health-
care coverage for persons who cannot otherwise afford coverage. The federal legislation
establishing the Medicaid program is known as Title XIX of the Social Security Act. In
1967, the Montana Legislature chose to participate in the Medicaid program and
authorized what is now the Department of Public Health and Human Services (DPHHS) to
implement a state Medicaid program that complies with Title XIX and the federal
regulations interpreting Title XIX. Section 53-6-101, MCA.
¶10 In 1977, Congress enacted the Medicare-Medicaid Anti-Fraud and Abuse
Amendments to Title XIX. These amendments authorized the creation of state Medicaid
fraud control units and made funds available for states to prosecute Medicaid fraud. 42 U.
S.C. §§ 1396b(a) and (q). Initially, the Montana Legislature chose not to create a fraud
control unit. However, in 1993, Congress mandated that all states participating in
Medicaid establish fraud control units by 1995. Hence, the 1995 Montana Legislature
established the Medicaid Fraud Control Unit within the Department of Justice. Section 53-
6-156, MCA. At the same time, the Legislature enacted a statute under which the unit
could prosecute fraud. Section 45-6-313, MCA.
¶11 The rules governing Montana's Medicaid program at the time relevant to this case
were set forth in Rule 46.12.101, et seq., ARM. (now Rule 37.82.101, et seq., ARM).
DPHHS contracts with Consultec, a subsidiary of General American Life Insurance
Company, to act as DPHHS's fiscal agent by enrolling providers of services paid for by
Medicaid and by processing claims submitted by the providers of those services. The
Medicaid program is voluntary and medical providers are not automatically Medicaid
providers. They must enroll with Consultec to become a Medicaid provider.
¶12 David initially enrolled with Consultec in 1979 and again in 1985. In early 1997,
DPHHS mandated that all Medicaid providers re-enroll. Consequently, David re-enrolled
with Consultec in April 1997.
¶13 On April 17, 1998, the State charged David with three counts of Medicaid fraud in
violation of § 45-6-313(1)(a)(ii), MCA, and one count of unsworn falsification to
authorities in violation of § 45-7-203, MCA. Count I of the information alleged that David
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committed Medicaid fraud by authorizing the submission of Medicaid payment claims for
services performed by another licensed optometrist. Count II alleged that David
committed Medicaid fraud by authorizing the submission of Medicaid payment claims for
examinations of new patients who were actually established patients. Count III alleged
that David committed Medicaid fraud by authorizing the submission of Medicaid payment
claims for comprehensive examinations when less than comprehensive examinations were
performed. And, Count IV alleged that David committed unsworn falsification to
authorities by omitting information on a Montana Medicaid Provider Enrollment Form.
¶14 The following is a summary of the facts and allegations pertinent to each charge.
Count I
¶15 In 1990, Leonard Vainio, David's brother, who, at that time was also a licensed
(1)
optometrist, left Montana to practice optometry in Washington. In 1993, Leonard's
Montana Medicaid provider numbers were terminated because they were no longer being
used. In November 1996, Leonard returned to Montana. By then, David owned more than
a dozen optometric stores across the State. Leonard began performing optometric services
in David's two Missoula stores. David submitted claims to Medicaid under his provider
number for services performed by Leonard even though other optometrists working for
David used their own provider numbers. The State asserted that this billing practice is
contrary to Medicaid policy.
Count II
¶16 Montana's Medicaid program distinguishes between "new" and "established" patients.
The term "new" patients refers to patients the optometrist has never seen before and to
patients the optometrist has not seen in two years. Each of David's stores sent their billing
information to David's main office in Deer Lodge which in turn billed Medicaid. The State
alleged that between April 11, 1995, and December 31, 1997, David's office submitted
210 claims for comprehensive examinations of "new" patients who should have been
billed as "established" patients. At that time, Medicaid paid $44.53 for a comprehensive
examination of a "new" patient and only $29.11 for a comprehensive examination of an
"established" patient.
Count III
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¶17 Because Leonard did not completely fill out the examination forms for several
patients, the State alleged that David billed Medicaid for comprehensive examinations on
those patients even though Leonard may have performed less than a comprehensive
examination.
Count IV
¶18 In his 1997 Medicaid provider re-enrollment form, David answered "No" to the
following question: "Are you the spouse, parent, child or sibling of other persons who
have an ownership or control interest of 5% or more, OR is an agent or managing
employee in this provider entity?" At one point, David's sister managed his Bozeman store
and David's wife participated in the hiring of an optician. In addition, after Leonard moved
to Washington, David failed to remove Leonard's name from the title of the corporation.
The State maintained that these facts established that David answered the question falsely.
¶19 The Medicaid form also asked the name of the county in which David provided
Medicaid services. A provider is assigned and is supposed to use a different provider
number for each location of service. Although he had offices in several counties, David
answered only "Powell County" to the question indicating the county in which his main
office is located. Hence, the State alleged that David purposely omitted information on the
re-enrollment form.
¶20 David pleaded not guilty to all of the charges and went to trial. On February 11, 2000,
a jury found David guilty of Counts I, II and IV, and acquitted him of Count III. The
District Court deferred imposition of David's sentence on Counts I and II for five years
with the periods of deferral to run concurrently. The court also sentenced him to six
months in jail on Count IV, but suspended that sentence on conditions. David appeals his
judgment and sentence.
Issue 1.
¶21 Whether the District Court erred by failing to dismiss Count I on the grounds that it is
based on the violation of an administrative policy which had not been adopted in
compliance with the Montana Administrative Procedure Act (MAPA).
¶22 While the jury found David guilty of Medicaid fraud, it was the District Court that
concluded as a matter of law that a violation of the administrative policies at issue in this
case formed a criminal act. Therefore, we review the District Court's conclusions of law to
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determine if they are correct. State v. Stucker, 1999 MT 14, ¶ 15, 293 Mont. 123, ¶ 15, 973
P.2d 835, ¶ 15 (citing State v. Ahmed (1996), 278 Mont. 200, 207, 924 P.2d 679, 683, cert
denied, Ahmed v. Montana, 519 U.S. 1082, 117 S.Ct. 748, 136 L.Ed.2d 686).
¶23 In charging David for submitting claims under his provider number for services
performed by Leonard, the State asserted that this practice was contrary to DPHHS policy
and was thus a violation of § 45-6-313, MCA, the Medicaid fraud statute. This statute
provides, in relevant part:
(1) A person commits the offense of medicaid fraud when:
(a) the person obtains a medicaid payment or benefit for the person or another
person by purposely or knowingly:
...
(ii) making, submitting, or authorizing the making or submitting of a medicaid
claim, statement, representation, application, or document under the medicaid
program for a service or item when the person knows or has reason to know that the
person is not entitled under applicable statutes, regulations, rules, or policies to
medicaid payment or benefit for the service or item or for the amount of payment
requested or claimed; . . .
Section 45-6-313(1)(a)(ii), MCA (emphasis added).
¶24 David argues that by criminalizing violations of administrative policies which have
not been promulgated as rules, the Medicaid fraud statute "squarely contravenes" MAPA
(Title 2, Chapter 4, Montana Code Annotated) and that policies which have not been
promulgated according to MAPA lack the force of law. The State argues, on the other
hand, that the Medicaid fraud statute specifically refers to "policies" and does not require
that those policies be embodied in a rule promulgated pursuant to MAPA.
¶25 Article II, Section 8 of the Montana Constitution provides:
Right of participation. The public has the right to expect governmental agencies to
afford such reasonable opportunity for citizen participation in the operation of the
agencies prior to the final decision as may be provided by law.
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¶26 Heeding this constitutional provision, the Montana Legislature has enacted laws
expressly aimed at securing the public's right to participate in the operations of Montana's
administrative agencies including that agencies must develop procedures which permit
public notice and comment during the administrative process, § 2-3-103, MCA, and that
agencies must hold proceedings that comply with MAPA in order to promulgate rules, § 2-
3-104(2), MCA.
¶27 Moreover, under MAPA, prior to adopting, amending, or repealing a rule, an
administrative agency must comply with the public notice and comment procedures
detailed in §§ 2-4-302 and 305, MCA. Unless a rule is adopted in substantial compliance
with these procedures, the rule is not valid. Section 2-4-305(7), MCA.
¶28 David correctly notes that this Court has twice held that an agency's failure to comply
with MAPA invalidates a purportedly adopted rule. In Rosebud County v. Department of
Revenue (1993), 257 Mont. 306, 849 P.2d 177, the Department of Revenue (DOR)
changed the method for assessing the market value of heavy equipment. Without any
public notice, the DOR sent a letter to all county assessors directing them to use the new
method. When the county assessors did as they were directed, certain counties experienced
substantial tax revenue losses. After those counties objected, the DOR initiated a formal
rule-making process resulting in a public hearing. There was much opposition to the new
appraisal method at the hearing. Support for the change came in the form of letters from
contractors and mining companies. Rosebud County, 257 Mont. at 308, 849 P.2d at 178.
¶29 After DOR gave notice of the adoption of the proposed rule, a district court
invalidated the rule because DOR had not complied with the notice and comment
requirements of MAPA, but had instead undertaken a formal rule-making process only
after establishing the rule by administrative fiat. Rosebud County, 257 Mont. at 310, 849
P.2d at 180. We affirmed the District Court in that case noting that the rule-making
process at issue was, in essence, "a sham" and that the result was that "the public, the
Legislature, and certain affected agencies were denied their right to participate effectively
in the governmental process." Rosebud County, 257 Mont. at 311, 849 P.2d at 180.
¶30 Similarly, in Northwest Airlines v. State Tax Appeal Bd. (1986), 221 Mont. 441, 720
P.2d 676, this Court invalidated another DOR rule which had not been adopted in
compliance with MAPA. In that case, a DOR auditor decided to include an airline's non-
stop, fly-over mileage in the numerator of a tax apportionment formula for computing the
corporate license tax owed by an airlines. We held in that case that because the DOR
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decision qualified as a rule under § 2-4-102, MCA, it, therefore, was subject to the notice
and comment requirements of MAPA and, because the rule had been adopted without any
such notice and comment, it was invalid. Northwest Airlines, 221 Mont. at 445, 720 P.2d
at 678.
¶31 The State, on the other hand, relies on Huether v. District Court, 2000 MT 158, 300
Mont. 212, 4 P.3d 1193, for the idea that MAPA is irrelevant to the Medicaid fraud statute
because that statute does not expressly incorporate MAPA's procedural requirements and
that this Court would be improperly adding language to the Medicaid fraud statute if the
Court were to hold that a rule or policy cannot be the basis of a conviction unless the rule
or policy had been promulgated according to MAPA.
¶32 However, the State's reliance on Huether is misplaced. In Huether, the personal
representative of a deceased hospital patient sought documents indicating whether the
decedent's vital signs had been monitored prior to his death. The hospital resisted
disclosure by pointing to §§ 50-16-201 through 205, MCA, which provide for
confidentiality of information and proceedings of medical peer review committees.
Huether, ¶¶ 4-5. In holding that the discovery request should not have been quashed, this
Court explained that the medical peer review confidentiality statutes must be reconciled
with another segment of Montana law, the Uniform Health Care Information Act, which
establishes a patient's right to inspect information relating to the patient's health care.
Huether, ¶¶ 12-19. Consequently, in order to give effect to all of the relevant statutes, this
Court realized the need to limit the meaning of the last portion of § 50-16-203, MCA,
providing for confidentiality of all proceedings, records, and reports of health care facility
committees. Huether, ¶ 20.
¶33 Applying these principles to the present case, a charge of Medicaid fraud cannot be
based on the violation of a policy which has not been adopted in compliance with MAPA.
The Medicaid fraud statute's use of the term "policies" is limited to those policies which
have been formally adopted as rules. There is no other way to reconcile the Medicaid
fraud statute and MAPA if MAPA is to have its intended effect.
¶34 Furthermore, the fact that the Medicaid fraud statute does not expressly reference
MAPA does not mean that providers can be criminally prosecuted for violating DPHHS's
informal policies. Under MAPA, an administrative policy cannot have legal effect
independent of a rule. MAPA defines a rule as follows:
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"Rule" means each agency regulation, standard, or statement of general applicability
that implements, interprets, or prescribes law or policy or describes the organization,
procedures, or practice requirements of an agency.
Section 2-4-102(11), MCA.
¶35 The State, however, claims that MAPA's definition of "rule" only applies to that term
as it is used in MAPA itself. However, Montana's statutory code contains no other
definition of an administrative rule because MAPA has already defined the term "rule" and
established rule making procedures for the entire code. See § 1-2-107, MCA (whenever a
word is defined in any part of the code, that definition is applicable throughout the code,
except where a contrary intention plainly appears).
¶36 Moreover, under Rosebud County and Northwest Airlines, the statute granting the
DOR authority to promulgate rules "to supervise the administration of all revenue laws of
the state and assist in their enforcement," § 15-1-201, MCA, includes no reference to
MAPA. Even so, this Court invalidated the challenged rules because the DOR failed to
abide by MAPA's mandates. Rosebud County, 257 Mont. at 310-11, 849 P.2d at 180;
Northwest Airlines, 241 Mont. at 445, 720 P.2d at 678. Thus it is evident from our
holdings in these two cases that when the Montana Legislature authorizes an agency to
adopt rules, the procedures mandated by MAPA apply regardless of whether the
authorizing statute expressly refers to MAPA.
¶37 Moreover, in the general provisions section of MAPA, the Legislature included the
following provision:
Construction and effect. Nothing in this chapter shall be considered to limit or
repeal requirements imposed by statute or otherwise recognized law. No subsequent
legislation shall be considered to supersede or modify any provision of this chapter,
whether by implication or otherwise, except to the extent that such legislation shall
do so expressly.
Section 2-4-107, MCA (emphasis added). The latter sentence of this statute indicates that
the Medicaid fraud statute cannot, through the mere insertion of the word "policies,"
implicitly override MAPA's intricate protection of the public's constitutional right to
participate in administrative government. The Medicaid fraud statute does not have to
expressly reference MAPA for MAPA to apply, rather, MAPA must be followed because
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the Medicaid fraud statute does not expressly repudiate it.
¶38 David notes that DPHHS's policy against submitting claims under another service
provider's number was not formally adopted as a rule by DPHHS until March 12, 1998,
almost three months after the end of the period of alleged fraud. At that time, DPHHS
adopted the following rule:
A person enrolled as an individual provider may not submit a claim for services that
the provider did not personally provide, inclusive of services provided by another
person under the provider's supervision, unless authorization to bill for and receive
reimbursement for services the provider did not personally provide is stated in
administrative rule or a Montana medicaid program manual and is in compliance
with any supervision requirements in state law or rule governing the provider's
professional practice and the practice of assistants and aides.
Rule 46.12.303(16), ARM (later renumbered as Rule 37.85.406(16), ARM).
¶39 When DPHHS proposed adopting the policy at issue in Count I as a rule, after the
period of alleged fraud, DPHHS explained that the proposed amendment to Rule
46.12.303, ARM,
explicitly limits billing by and reimbursement of individual providers to those
services directly provided by the provider unless otherwise authorized. The
proposed amendment eliminates textual confusion that in the recent past has led to
administrative appeals in relation to the denial of reimbursement for services
provided by persons working under or with a provider and billed for through the
provider.
...
. . . Leaving the rule unchanged would also result in continuing confusion and
conflict over billing practices in the circumstances addressed. [Emphasis added.]
David maintains that DPHHS made this concession only 15 days after the end of the
period of alleged fraud in Count I. As David points out, an informal policy which has been
the source of confusion and administrative appeals cannot be the basis of a criminal charge
if due process is to have any meaning.
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¶40 The State justified Count I on the grounds that the policy at issue was explained to
David in a letter addressed to him in September 1988. However, the State's reliance on the
1988 letter merely serves to underscore the insufficient notice which is afforded by the
policy at issue in Count I. Had the policy been a formally promulgated rule, DPHHS
would not have had to write David a letter explaining the policy, it could have just sent
him a copy of the rule itself and the rule would have been included in the billing manuals
sent to all providers.
¶41 In addition, this letter did not inform David that violations of the policy could have
criminal repercussions. And, as Paul Miller, who wrote the 1988 letter testified at trial, he
could not establish policy in a personal letter and the policy at issue in Count I was not
expressed in a rule or in the provider manuals until November 1997 (after the period of
alleged fraud), by which time the policy was being promulgated as a rule under MAPA.
¶42 The State, in discussing this letter in its brief on appeal, states that "[t]he basis for the
notification was Mont. Admin. R. 46.12.301 (1995, 1997), which states that providers are
to comply with applicable state and federal statutes and Mont. Admin. R. 46.12.302 (1995,
1997), which states that providers are to enroll with the Medicaid program . . . ." It is
beyond our comprehension how a letter written in 1988 can be based on a rule that was
not promulgated until 1995. Furthermore, there was no Medicaid fraud statute in 1988.
The Medicaid fraud statute was not enacted until 1995, seven years after David's receipt of
the letter.
¶43 David points out that while the State has sought to hold him criminally accountable
for violating an informal policy, DPHHS has been excused from violating rules which it
had formally adopted. Prior to March 10, 1997, Rule 46.12.303(9), ARM, required
DPHHS to notify a provider of its intention to contest a particular Medicaid claim within
thirty days of receiving the claim. Rule 46.12.407, ARM, required DPHHS to notify a
provider of any information DPHHS had obtained that the provider "may have submitted
bills . . . in a manner inconsistent with program requirements." DPHHS repealed these
rules on March 10, 1997, so as to not require DPHHS to notify providers of discovered
billing improprieties. Contrary to the mandates of these rules, DPHHS had information as
early as December 6, 1996, that David was submitting the claims which became the bases
of Counts I and II, yet DPHHS never notified David it intended to contest the claims.
Thus, as David explains, while DPHHS was investigating him for violations of an
informal policy which had not been adopted as a rule, DPHHS was ignoring rules which
actually had the force of law.
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¶44 Moreover, Rule 46.12.303(16), ARM, has arguably brought Montana's Medicaid
program out of compliance with federal law. "Although participation in the Medicaid
program is entirely optional, once a State elects to participate, it must comply with the
requirements of Title XIX." Harris v. McRae (1980), 448 U.S. 297, 301, 100 S.Ct. 2671,
2680, 65 L.Ed.2d 784; Planned Parenthood v. Blouke (D.Mont. 1994), 858 F. Supp. 137,
137-38. One of the federal regulations implementing Title XIX provides that Medicaid
payment may be made to the employer of a practitioner, "if the practitioner is required as a
condition of employment to turn over his fees to the employer." 42 C.F.R. § 447.10(g)(1).
Rule 46.12.303(16), ARM, and the policy which preceded it, purport to prohibit this
payment arrangement in situations in which a provider is also the employer of other
practitioners. Federal law does not recognize such a prohibition.
¶45 Nothing the State or DPHHS can do will change the fact that during the period of
alleged fraud, the billing practice at issue in Count I was not illegal. The existence of the
1988 letter does not change the fact that there was no formal or legally effective
prohibition against the billing practice at issue in Count I until after the period of alleged
fraud.
¶46 Accordingly, we hold that the District Court erred by failing to dismiss Count I on the
grounds that it is based on the violation of an administrative policy which had not been
adopted in compliance with MAPA.
Issue 3.
¶47 Whether David's conviction on Count II should be reversed because it was based on
the violation of an administrative policy which had not been adopted in compliance with
MAPA.
¶48 David argues that Count II should be reversed because although the definitions of
"new" and "established" patients may have been stated in the provider manual, they had
never been specifically adopted as a rule pursuant to MAPA. The State argues that there is
no requirement in the Medicaid fraud statute, that the policy regarding claims for new or
established patients be promulgated pursuant to MAPA.
¶49 Section 53-6-113(3), MCA, provides that DPHHS "shall establish by rule" the
reimbursement rates for Medicaid services. This directive was enacted in 1989.
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Nevertheless, the reimbursement rates at issue in Count II were not established through
notice, public comment, and official publication as expressly required by MAPA. As we
noted in our discussion in Issue 1, a charge of Medicaid fraud cannot be based on the
violation of a policy which has not been adopted in compliance with MAPA. These
reimbursement rates were not validly promulgated rules, but were instead left to informal
policy. Thus, they lacked the force of law.
¶50 Accordingly, we hold that David's conviction on Count II should be reversed because
it was based on the violation of an administrative policy which had not been adopted in
compliance with MAPA.
Issue 5.
¶51 Whether the State introduced sufficient evidence to convict David on Count IV,
unsworn falsification to authorities.
¶52 We review the sufficiency of the evidence to support a jury verdict in a criminal case
to determine whether, after viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the essential elements of the crime
beyond a reasonable doubt. Stucker, ¶ 15 (citing State v. Lantis, 1998 MT 172, ¶ 32, 289
Mont. 480, ¶ 32, 962 P.2d 1169, ¶ 32).
¶53 In 1997, DPHHS requested that all Montana Medicaid providers re-enroll with the
Medicaid program by June 1997. David submitted his re-enrollment form on April 25,
1997. One of the questions on the form asked if the provider was the spouse or sibling of
an agent or managing employee of the optometric business, or the spouse or sibling of
someone with a 5% or greater ownership or control interest in the business. David
responded "no" to this question. The form also asked the provider to name the "county" in
which he provided Medicaid services. To this question, David responded "Powell County"
indicating the county of his main office.
¶54 On the basis of his answers to these questions, the State charged David with violating
§ 45-7-203(1)(b), MCA, which provides:
(1) A person commits an offense under this section if, with purpose to mislead a
public servant in performing his official function, he:
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...
(b) purposely creates a false impression in a written application for any
pecuniary or other benefit by omitting information necessary to prevent statements
therein from being misleading; . . .
¶55 In its closing argument at trial, the State claimed to have proven that David should
have listed his sister and his wife as managing employees; that David should have listed
Leonard as a co-owner of the businesses; and that David should have listed all of the
counties in which he owns optometric stores.
¶56 David asserts that the State failed to prove that he omitted information on the re-
enrollment form with the conscious objective of misleading a public servant in the
performance of his or her official duties. He maintains that there was insufficient evidence
to convict him on this count and that he was prejudiced by his convictions on Counts I and
II.
¶57 The State argues on the other hand, that David never presented his claim of prejudice
to the District Court, thus it was waived and should not be considered by this Court. The
State also argues that even if that claim is not waived, David did not suffer any prejudice
because the jury found him guilty of Count IV based on the evidence presented at trial
which established beyond a reasonable doubt that he was guilty of violating § 45-7-203,
MCA.
¶58 The unsworn falsification statute requires proof that David omitted information on his
Medicaid provider re-enrollment form with the conscious objective of misleading a public
servant in the performance of his or her official duties. We disagree with the State's
contention that there is a "wealth of evidence" supporting David's conviction of unsworn
falsification to authorities.
¶59 First, the State argued that David's sister, Patricia Terry, was working as a managing
employee in David's Bozeman store in April 1997, when he submitted the re-enrollment
form to DPHHS. The State maintained that Patricia is a managing employee because
Shane Shaw, an agent with the Department of Justice, testified that in an interview he
conducted with David in September 1997, David said that Patricia was the manager of the
Bozeman store. The State also notes that Patricia managed David's Bozeman store starting
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in 1986 and although she started working at Montana State University in December 1996,
Patricia continues to work for her brother in Bozeman.
¶60 However, the State fails to note Patricia's own testimony that while she continues to
work on a limited basis in the Bozeman store, she is no longer the manager and has not
been the manager of that store since May 1996. Patricia testified that she left her position
with the Bozeman store in May 1996 because her husband was ill and she stayed at home
to care for him. She further testified that she went to work full time for Montana State
University in December 1996 and that she returned to work in the Bozeman store part
time, but not as a manager.
¶61 The State also failed to note that Agent Shaw testified that in the September 1997
interview with David, he did not discuss with David a time frame for when Patricia
managed the Bozeman store. Thus, the State presented no evidence supporting its claim
that Patricia managed David's Bozeman store in April 1997, when David filled out and
submitted the re-enrollment form.
¶62 Second, the State maintained that the testimony at trial established that Marie was a
managing employee because she offered employment to individuals, discussed hiring with
employees, and negotiated employment contracts. The State introduced evidence at trial
that Marie hired optician Dennis Haines who manages David's Great Falls store. However,
Haines testified that he does not take direction from Marie as David is his boss. Haines
also testified that although it was Marie that called and offered him the position, he was
actually interviewed by both David and Marie.
¶63 In addition, Roseanne Follman, David's bookkeeper, testified that although Marie
sometimes helped out by interviewing prospective employees, she never managed any of
David's stores and she had no authority to write checks or to fire people. Thus, the State
never established that Marie's limited participation in the business ever rose to the level of
a managing employee or that such participation occurred at or near the time David re-
enrolled with Medicaid in April 1997.
¶64 Third, the State also claimed that testimony at trial established that Leonard had an
ownership interest in the business at the time David re-enrolled with Medicaid because
both Leonard's and David's names were on the checking account (along with bank stamps,
deposit slips, and checks) used by the business. The State introduced documents filed with
the Montana Secretary of State showing that the corporation of "Leonard E. and David G.
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Vainio" owned American Eyecare, the name used by David to refer to his statewide
business, during the time period at issue.
¶65 However, Leslee Shell-Beckert, with the Secretary of State's office, testified that
merely because a name is in the title of a corporation does not mean that that person has an
ownership interest in the corporation. In that regard, Shell-Beckert testified as follows:
Q. . . . So the fact that incorporation papers were filed called Leonard E. and David
G. Vainio, PC, tells us absolutely nothing about the relationship of Leonard Vainio
to the corporation. Right?
A. Yes.
Q. Because it is just the name?
A. Right.
Q. Okay. And it doesn't tell us anything about the relationship Leonard Vainio has
with David Vainio for that matter.
A. Not the business name. Correct.
¶66 Furthermore, David's bookkeeper testified that although Leonard was treated
differently than other employees because he was David's brother, Leonard had no
ownership interest in the business as he could not write checks, he could not fire people,
and he had no access to the accounts or other business records. In addition, several of
David's employees and former employees testified that David was and had been their boss,
not Leonard, and that they did not take orders from Leonard. They also testified that
Leonard did not have the authority to fire them.
¶67 While the State stressed the fact that Leonard's name remained as part of the corporate
name of the business, the State introduced no evidence showing that Leonard actually
owned an interest in the business or that such interest was "5% or more" as the re-
enrollment form specified. Moreover, the corporation's 1997 income tax statement
reflected that David was the corporation's sole shareholder.
¶68 Lastly, the State claimed that David should have listed the counties of all of his stores
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on the re-enrollment form, not just the county of his main office. However, the State
presented no evidence that David purposefully intended to mislead a public servant by
listing the main office from which he did business.
¶69 David had a longstanding relationship with the Medicaid program by the time he filled
out the re-enrollment form. David argues that he merely answered the question as he had
in the previous enrollment form, by listing the county of his corporate office. He also
argues that as far as he was aware, DPHHS and Consultec knew that he owned stores in
several counties. The State failed to prove that David purposely rendered his re-enrollment
form misleading by omitting information. Nor did the State offer any evidence that David
omitted information with the specific purpose of preventing any public servants from
performing their official duties. In its closing argument, the State conceded that the
unsworn falsification statute requires proof of two elements--an omission of information
and an intent to mislead a public servant. However, after recounting the evidence of
David's alleged omissions, the State never addressed the element of intent to mislead, nor
did the State present any evidence of such intent.
¶70 Accordingly, we hold that there was insufficient evidence to convict David of Count
IV, unsworn falsification to authorities.
Conclusion
¶71 Because the administrative policies at issue in Counts I and II had not been adopted in
compliance with MAPA, they were not validly promulgated rules and thus lacked the
force of law. Consequently, we reverse David's conviction on Counts I and II for Medicaid
fraud. We also reverse David's conviction on Count IV because the State failed to produce
sufficient evidence to support the charge of unsworn falsification to authorities.
¶72 Reversed.
/S/ JAMES C. NELSON
We Concur:
/S/ TERRY N. TRIEWEILER
/S/ JIM REGNIER
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/S/ PATRICIA COTTER
/S/ W. WILLIAM LEAPHART
1. According to the Montana Standard, Leonard Vainio passed away on April 10, 2001.
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