Pataki's Sick Department of Health

How a Collusive Contagion Has Infected a $34 Billion Bureaucracy

George Pataki and Carl McCall have pivoted the gubernatorial race around school issues, but the biggest business in Albany is health, with hospital, adult- and nursing-home, and related interests spending $18 million on lobbyists last year—$11 million more than education groups and twice as much as any other state stakeholders. In keeping with that state-recorded level of gaudy influence peddling, the Department of Health (DOH), which consumes $34 billion of the state's $90 billion budget, has been a political cancer throughout the Pataki years, literally sick with scandal.

Even after a recent New York Times exposé of the department's abusive mismanagement of the adult- and nursing-home programs, Pataki is dodging accountability, with much of the media failing to focus on a record of gubernatorial malpractice that has cost lives and tainted the delivery of vital services.

This story is a diary of disrepute, recounting the sometimes familiar and sometimes unreported scandals, culminating with the sordid new saga of the state's worst-rated HMO and Child Health Plus provider, a window into just how medical care is compromised in New York. The chronology of CarePlus's rise—from bare-bones startup to one of the top-paid contractors in the governor's best-advertised health program—involves a cast of characters from Pataki's personal counsel to a convicted lobbyist to several major fundraisers and donors.


Let's start at the top. Dr. Barbara DeBuono, the health commissioner for Pataki's first term, was the sister-in-law of his personal attorney Richard Farren, a close friend of Pataki's since their days at Dewey-Ballantine more than 30 years ago who's handled all his real estate and tax matters for decades. Her selection was such a fait accompli that Dr. David Skinner, the president of New York Hospital and a member of the governor's health transition committee after Pataki's election in 1994, recalls that the group "didn't recommend a commissioner," adding: "Pataki had his own idea—Dr. DeBuono—and he just did it."

Skinner should know, because he hired her when she left the administration in 1998, giving her a $300,000-a-year job with the newly merged Columbia Presbyterian and New York hospitals just months after her department approved the deal. DeBuono lost her lofty hospital post when she was caught shoplifting $8.86 worth of hot dog rolls, bagels, goat cheese, and dip at an upstate supermarket. She currently works for Pfizer, the pharmaceutical giant whose interests at DOH are promoted by the same high-powered lobbyists who represent the tawdry adult-home industry.

Executive Deputy Commissioner Dennis Whalen, the department's No. 2, who actually served as interim commissioner for most of a year, was caught taking a Mont Blanc roller ball pen, four Brooks Brothers shirts, Yankees tickets, a tie, and three years of repeated dinners and lunches from two mysterious lobbyists who raised a half-million dollars for the governor's 1994 campaign. Even when Whalen—who returned gifts including jewelry and clothing to the lobbyists—was found by the State Ethics Commission to have violated the Public Officer's law, the new commissioner, Dr. Antonia Novello, kept him on the job. She fined him one week's salary—$2652—and later gave him a $4825 raise (though a notation on state records indicates the raise was held up, and DOH officials declined to answer Voice written information requests about this or any other matter).

It didn't seem to matter that the commission found that Whalen had met with the lobbyists, Rabbis Joseph Goldberger and Joseph Menczer—known in the corridors of Albany power as "the two Josephs"—23 times in three years, a record for access in a department known for its closed doors. Nor did it matter that the Brooklyn-based rabbis, owners of a dress shop and kosher supermarket, had included DeBuono's brother-in-law Farren as a partner in one of their less successful health care ventures while she was still commissioner. Whalen survived even though one client of the two Josephs, nursing-home operator Lawrence Friedman, went to jail in the largest Medicaid fraud in state history, having so prospered at DOH that his annual state payments soared from $4 million to $47 million.

Joseph Chiseri, another deputy commissioner, was forced to quit after belatedly informing officials that Friedman had offered him a $20,000 bribe. Chiseri, who was one of the earliest Pataki contributors and was described in the Times as a "key contact" for the governor's office within the 6000-employee department, rubber-stamped Friedman's applications even when they sought approvals outside the scope of his job.

As Attorney General Eliot Spitzer zeroed in on Friedman, the department circled the wagons, ordering all executive staff to report any law enforcement contacts. Department spokesmen threw up their hands at Times questions, making no effort to explain how Friedman, who paid the Josephs a half-million dollars, had managed to become the first nursing-home operator ever to avert a final state audit after earlier independent ones uncovered serious irregularities. DOH officials did finger one of the governor's top aides, Jeff Wiesenfeld, for introducing them to the two Josephs, both of whom were named to Pataki's post-election transition team and honored by him, one with a silver clock at a Williamsburg dinner.

The investigation of another nursing home represented by the Josephs—whose applications for additional funding whisked through DOH—led to the demotion, and eventual retirement, of the department's director of health facility planning, Charles Murphy Jr. The Ethics Commission found that Murphy asked a second lobbyist representing the home if they were hiring employees in the Albany area, suggesting his wife for a job. Murphy then got clearance from his DOH superiors for his wife to take the job by erroneously assuring them she would have nothing to do with the kind of applications he reviewed. The commission's notice to Murphy found that the firm "actually hired your wife specifically to do the work" he supervised, and that he wound up handling five matters in which she was directly involved. Murphy's wife, who is still working for the lobbying firm, told the Voice her husband was "cleared" in an administrative hearing and was collecting back pay from the department.

Laura Leeds, who ran the department's Office of Continuing Care—which oversaw nursing and adult homes—left to become vice president for continuing care at the Health Association of New York State, one of the state's top 10 spenders on special-interest lobbying last year ($633,707). The State Ethics Commission fined her $2500 in February, finding that she actively lobbied her former DOH colleagues on two occasions in 2000, even urging them to waive hospital reporting requirements. Concluding that this was an apparent violation of a ban on such contacts for two years after leaving state employment, the commission also cited e-mails she sent her former colleagues.

During Leeds's tenure, the department drastically slashed its inspection staff and cut nursing-home fines, from 24 cases to two. "The goal of the process," she told the Albany Times Union in 1998, "is to get people the care they need—not to punish people." Saluted by industry association leaders for understanding that "you attract more flies with honey than vinegar," Pataki's DOH was blasted in a 2000 Daily News series that concluded it was "unable to keep up with patient abuse complaints or monitor the industry properly." Despite profits that hit $1.3 billion, the homes were so understaffed that the U.S. Health Care Financing Administration criticized the state for overlooking serious—sometimes even life-threatening—problems.

Two audits by Comptroller McCall, one released this July and one in 1998, "uncovered thousands of cases where nursing home complaints were not handled properly," with an incredible 1000 abuse or neglect complaints assigned to investigators who no longer worked at DOH and another 1200 assigned to uncertified investigators. Though complaints rose from 3000 in 1998 to 8000 in 2001, DOH failed for four years to file a legislatively mandated report on how it was handling them, allowing the backlog of unresolved cases to quadruple.

This official indifference was no accident, with Pataki announcing just three months into his administration, in 1995, a 16-point plan to "reduce onerous regulations," and DeBuono proudly announcing that DOH would not longer "micromanage the daily affairs of hospitals, nursing homes, and other health care providers." The same laissez-faire approach, even for a state-supported industry, also infected DOH's oversight of adult homes, which provide housing without nursing care to 28,000 elderly and mentally ill residents.

It was Pataki who shifted adult homes from the Department of Social Services to DOH after industry fat cats donated over $87,000 to his campaign before and immediately after his 1994 election (they've given at least another $202,426 since). And it was the Pataki team that steered hundreds of the mentally ill into isolated and locked wards at nursing homes in apparent violation of state regulations, as the Times reported on its front page last weekend. The health department launched this punishing experiment in partnership with a nursing-home owner also represented by the two Josephs, Benjamin Landa, who gave at least $22,000 to the governor's campaign and got over 200 subsidized beds in his four homes for these specialized units.

Just as Laura Leeds's role overseeing adult homes was coming to an end, the department hired Susan Peerless, the longtime executive director of the industry association, as a special assistant to the commissioner on policies for the homes. The state lobbying commission is currently probing Peerless's relationship with Coppola, Ryan & McHugh, the lobbying firm that represented Peerless's group, the Empire State Association of Adult Homes, and once shared an office with it. She and the firm allegedly conspired to make a false submission to the commission understating Coppola's fee, with some of the excess being paid to Peerless personally. Though documents supporting these allegations—which the Coppola firm vigorously disputes—have been revealed in an ongoing lawsuit, DOH has taken no action against Peerless.

Peerless has hardly been the only state official supervising adult homes who has incestuous ties to the industry. Marti McHugh, who left the governor's personal staff to become the DOH assistant commissioner for intergovernmental affairs, is married to a partner in the lobbying firm. Right after Pataki took office, Robert Balachandran joined the administration as an assistant counsel in the governor's office, advising him on adult-home policy, fresh from the firm whose largest client was the industry association.

The consequence of this intertwining, virtually conceded by an administration promising a clean-up plan before election day, has been a wholesale failure of enforcement, to the point of ignoring a legal requirement that a report be filed for every death that occurs in one of the homes (only three of 1000 were properly recorded). With the Empire State Association boasting on its Web site that it had convinced Pataki officials to adopt "a more reasonable" survey process and make "positive, sweeping changes" in "inspection protocols," inspectors in the NYC office were cut from 25 to three.

"Witness after witness at our hearings," the chairs of four assembly committees concluded in a June report on adult homes, "described situations where the state stopped enforcement actions, reduced fines, let bad operators off the hook, and under-funded enforcement offices." Mental Health Committee Chair Marty Luster charged that "the result has been the untimely deaths of the most vulnerable of our residents."

In addition to these DOH scandals of life-threatening magnitude, the department has also been bit by smaller stuff—including the bribery indictment of the state official leasing a new headquarters for the agency and the recent hiring, despite a hiring freeze, of the son of indicted state senator Guy Velella as a nursing-home auditor. The disturbing tale that follows is a prototype of DOH contracting that demonstrates how agency policies are influenced by politics to the detriment of patients.


In the weeks between Pataki's 1994 election and inaugural, the new governor made it clear that he planned to move immediately to force Medicaid recipients into managed-care programs, a controversial experiment for which he sought a waiver from the Clinton administration just three months into his term. A band of good friends from his campaign was poised to profit from this potentially lucrative policy shift, executing an operating agreement for a Medicaid managed-care company called CarePlus by May 1995.

Incorporated that October, the untested company's certification was fast-tracked through DOH by April 1996, qualifying it to cover Medicaid enrollees. Barbara DeBuono listed it that month as one of the firms ready to take Medicaid patients, saying it had met the state's "fiscal test," even though court records would later reveal it was unable to produce a financial statement two years later.

Protracted delays in winning Clinton approval of the switch—because of questions in Washington about its impact on the quality of care—forced CarePlus to find business elsewhere, applying in February 1997 for a contract under DOH's brand-new and highly touted Child Plus Health program. It took until November 6, 1998—three days after Pataki was re-elected—before DOH finally sent the comptroller the first of a series of Child Health Plus and Family Health Plus contracts for the wired company, eventually totaling $218.6 million.

It also took years before CarePlus got rolling as a Medicaid insurer, but it now covers 70,000 enrollees. The tens of millions DOH has paid it for Medicaid—after it was designated by the department as a provider in five counties—comes on top of the $85,661,767 it's so far received under its multi-year Child Plus contract (its Family Health Plus contract is just beginning).

CarePlus has prospered at DOH, though it came in dead last in the department's fiscal review when it got that first major contract—for $13 million—and despite dismal ratings in surveys published by the department itself. In 1999 and 2000 (the latest years for which results are available), CarePlus was the lowest-rated of the 30 Medicaid managed-care plans in a DOH consumer survey, scoring "significantly worse than the statewide average" on eight of 10 questions put to members. It was in a league almost by itself, with the second-lowest plan getting six bad scores. Asked in one question if they would "recommend the plan to family or friends," members said no about CarePlus more often than about all but one other plan in New York.

The department's internal assessment has been kinder to the company than consumers have, finding in a January 2002 newsletter that there had been no deficiencies the previous year. However, its latest public report, issued in 2001 for 2000, found that CarePlus had the highest rate of primary care and OB/GYN turnover of any Medicaid plan in the state, more than twice the statewide average, and warned that such a rate "may disrupt continuity of care." While the company did get passing grades on the department's assessment in several other categories, it scored well below average on prenatal care, childhood immunization, and adult "access to health care services."

Despite this record, the company's state business is booming. Starting with one of the smaller Child Plus contracts, it now has the 13th largest of the 30 awarded, competing with major, established HMOs. After the Family Plus contract was awarded last year, its four-county coverage expanded to include Manhattan, while the company's Medicaid enrollment has leapfrogged from a couple thousand. Its principals and their businesses, as well as its lawyers and other associates, have contributed $511,647 to the Pataki campaign and the state GOP committee over the years, giving $119,484 in 1994, when early donors were placing their IOUs.

The leading CarePlus players at the start were John Moore, a young fundraiser with a desk in the finance office of the 1994 campaign headquarters, and Bart Lawson, the longtime executive director of the Greater New York Health Care Facilities Association and a major bundler of adult- and nursing-home contributions to Pataki. Moore, who was described in business stories as the CarePlus founder, was initially listed on the company's capital call as a $30,000 investor with a 13 percent stake, though that designation was quickly changed to show the name of Kathleen Moore, who sources say is related to John. John Moore and Lawson were soon made members of the company's five-member Board of Managers, with Lawson becoming CEO and president even while he continued to run his nursing-home association.

According to half a dozen sources who know Moore, he was sharing an office at 110 East 42nd after the election with the governor's then and current top campaign consultant, Kieran Mahoney, when he helped create CarePlus in 1995 and 1996. Richard Farren, Pataki's lawyer and DeBuono's brother-in-law who represented CarePlus during this period, told the Voice: "Moore was at Kieran's offices for a couple of years. They got together shortly after Pataki was elected governor. I don't know if they were partners or whether they were just sharing space. Moore was a self-promoter in the campaign, trying to show he had all these connections." Moore is listed as a paid fundraiser in the 1994 filings, contributing ($3000) more than he was paid ($1157).

Another campaign operative from 1994, ex-Pataki aide Jeff Wiesenfeld, whose wife is a CarePlus bookkeeper, said Moore was "a very significant fundraiser for the governor who reported directly to Patrick Donohue," the deputy director of the finance unit. Wiesenfeld recalled that Donohue and Moore "had an apartment together on Park Avenue near 38th Street, close to the campaign headquarters," a recollection other Pataki activists shared. Moore's principal entry into the Pataki inner circle, however, was Mahoney, not Donohue, the sources recall.

Mahoney was also the chief campaign consultant for Westchester D.A. Jeanine Pirro, and Pirro's husband, supercharged lawyer/ lobbyist Al, was given a significant slice of CarePlus from the start. A close friend of the Pataki family and a Westchester GOP ally for years, Jeanine Pirro was named to the governor's transition committee, as were Farren and Lawson. Though the capital call lists Pirro and his law partner Phil Halpern as having invested just $10,000 apiece in the company, each got 8 percent of its shares. The top investor listed on the call, Breindy Melnicke, who is a major nursing-home operator with her husband, Michael, and is close to Lawson, contributed $960,000 and got a mere 7.5 percent stake.

Since other shareholders performing direct services for the company got discounted stock, it's reasonable to presume Pirro, a registered state lobbyist who did not list CarePlus as a lobbying client at the time, was also given a break in exchange for professional help. Pirro's filings with the state during the early Pataki years, when CarePlus got its initial DOH approvals, listed Kieran Mahoney as a lobbyist with Pirro's firm.

By the time Pirro first registered as a lobbyist for CarePlus in 1999, he had reportedly sold his stock in the HMO and was already under federal indictment in a widely publicized tax fraud case. Mahoney was no longer listed as a Pirro associate, and Pirro's new partner was Jeff Buley, the counsel to the State Republican Party who currently represents the Pataki campaign committee. While Pirro served his 17-month prison and halfway house sentence, his firm became Buley Public Affairs, continuing to represent CarePlus and Lawson's nursing-home association. Pirro's interest in the firm—which earned the highest per-client fee of any lobbyist in Albany—was placed in a trust while he was in prison, with his wife as trustee. Since his release early this year, he's rejoined Buley, and is once again a consultant to CarePlus, which has paid the firm $183,288 since 1999 (part of an extraordinary $391,334 it spent on lobbyists in that period).

Another principal of CarePlus was Joseph Zappala, the Florida and New York businessman who's been its board chairman since the beginning and is said to be friendly with Charles Gargano, the Pataki economic development czar. Zappala and a business associate of his from Boca Raton, Jerome Ansel, also a major CarePlus investor, have contributed a remarkable $225,214 to Pataki and the state party since 1994. Zappala invested $11,000 in the initial capital call and got 6 percent of the stock, an amount raised to 9 percent after Ansel kicked in $3 million (and got only a 7 percent stake). CarePlus is using a Florida firm Zappala is also tied to as its pharmaceutical benefits manager.

Sued last year by the Securities & Exchange Commission for failing to comply with subpoenas for testimony and documents "relating to his investment activities," Zappala is a major Republican donor who was the national finance co-chair for George Bush Sr.'s inaugural in 1989. Zappala became the focus of a Washington furor when Bush named him ambassador to Spain though he spoke no Spanish, apparently qualifying by contributing $127,000 to the GOP. Pataki campaign operatives recall his periodic appearances at the headquarters in 1994, where he was still addressed as Ambassador Zappala.

The CarePlus centerpiece, however, was Lawson, whose personal, PAC, and association contributions to Pataki, totaling $180,096, are dwarfed by the hundreds of thousands he's helped raise from nursing- and adult-home interests. It was Lawson who befriended Farren, meeting him at the campaign headquarters, by Farren's account, taking him on golf outings sponsored by the Friends of Pataki, and retaining him as an attorney for CarePlus and other business. Acknowledging that he "worked for CarePlus for a few years on other matters," Farren insisted he was "out" of his CarePlus representation by the time it won its first Child Plus contract.

Incredibly, the last of a half-dozen DOH officials to approve the contract was an attorney from legal affairs, and he signed off on July 28, the same day Farren's sister-in-law DeBuono announced she was resigning. She did not leave until November, simultaneous with the DOH memo that sent the contract to the comptroller for confirmation and payment.

Lawson was also the one who agreed to hire Wiesenfeld's wife as a part-time bookkeeper at $35,000 a year, allowing her to work at home for CarePlus and two other Lawson entities. "I knew Bart from the campaign, and when my wife was ill, I called him up and asked if he had any need for an offsite clerical employee," Wiesenfeld said. Wiesenfeld, who has since left the executive chamber, where he was special assistant to the governor, insists he never interceded with DOH on Lawson's behalf, precisely what he was accused of doing on behalf of the infamous two Josephs.

Lawson has become a pivotal player in Pataki's Albany not just because of his legendary fundraising prowess, but because of his ironically close ties to the governor's No. 1 union backer, Dennis Rivera. Indicted in the early '80s for paying to have a trailer used by Rivera's striking union blown up—and then submitting the $5000 payment for Medicaid reimbursement—Lawson was acquitted at trial. He subsequently sued the union for conspiring with prosecutors to have him indicted. But now the two are quite friendly, having negotiated labor agreements for years.

The combined power of these associations has no doubt helped CarePlus prosper at DOH. Going back to the original bid process in 1997 and 1998, the department had to reopen the door to let CarePlus in, having rejected them when the 24 contracts were first awarded. The company got the worst fiscal rating from the evaluation team of any of the 32 bidders, failing to fully disclose their board, expense and revenue projections, target population, budget, subcontractor reimbursement plan, and other key matters. It was given points for complying with a financial statement requirement though it simultaneously contended it couldn't provide one in a suit filed by two executives who'd left the company dismayed.

A DOH memo, dated four months after the contract period had started, explained that CarePlus alone was being added to the bid winners this late because "additional service capacity is needed in the areas they proposed to serve." One other contractor was selected past the deadline—but that had occurred at least a month earlier—and, ironically, it turned out to get the second lowest ratings in subsequent consumer surveys. But the worst provider, with the consistently lowest scores, snuck in as the final bidder—more a matter of juice than justice.

The emergence of CarePlus from the sinkhole of DOH is merely a slice of life in the Pataki reign—an era that will be remembered as a sad moment in the ethical history of the state.


Research assistance by Sandy Amos, Yi Chen, Jen DiMascio, Rebecca Eisenberg, Ross Goldberg, Matteen Mokalla, Will St. John, Clementine Wallace, and Emily Weinstein

Show Pages
 
My Voice Nation Help
0 comments
 
New York Concert Tickets
Loading...