Ballantyne NC dentist charged with embezzlement, calls it a business dispute

A South Charlotte dentist is scheduled to appear in Mecklenburg County Criminal District Court on Monday on an embezzlement charge.

Dr. Steven Ghim is charged with felony embezzlement of more than $100,000, court records show. The offense date is listed in court records as Feb. 5, 2011.

WSOC-TV reported Friday that Ghim is accused of embezzling $124,000 from his Blakeney practice for about 11 months between 2011 and 2012.

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Two dentists practice together, both claim to have been embezzled by the other

MEMORANDUM OF DECISION


ROBERT SOMMA, Bankruptcy Judge

Before the Court is Linda Massod’s complaint seeking a determination that a debt she claims is owed to her by debtor Terry Fayad, arising from their co-ownership and operation of a joint dental practice, is excepted from discharge. Having tried the matter, I now render my decision.

I Introduction

Linda Massod and Terry Fayad, both dentists, formed a romantic relationship in the late 1980s and a professional relationship in the early 1990s. Both relationships failed in the late 1990s, when they separated from each other romantically and professionally. Their breakup was not without recriminations. Those recriminations reverberate to this day and include Massod’s state court lawsuit against Fayad in 1999, Fayad’s bankruptcy case in 2000, and Massod’s exception to discharge complaint in 2001, the subject of this adversary proceeding.

In the adversary proceeding, Massod makes two allegations. First, she alleges that, to induce her to form a joint dental practice, Fayad falsely promised that her dental school loans would be paid from funds generated by that practice and that, relying on that false promise, she was damaged. Second, she alleges that Fayad misappropriated funds from their joint practice for himself and his brother, thereby causing the financial deterioration of the practice and consequent damage to her. Based on these allegations, Massod asks the Court to except from discharge the debt she claims Fayad owes her for the damages caused by his false promises as to her student loans and by his misappropriation of corporate funds. She grounds each request in three separate provisions of the non-dischargeability statute: § 523(a)(2)(A) regarding fraud; § 523(a)(4) regarding fraud or defalcation while acting in a fiduciary capacity; and § 523(a)(6) regarding willful and malicious injury. Fayad denies these allegations.

She also alleges that Fayad made but never intended to honor a later agreement implementing that promise, thereby further damaging her.

I tried these matters on four separate days over a period of several months. At trial, four witnesses testified: Massod, Fayad, their former accountant, and a former joint practice employee (currently employed by Massod). I admitted hundreds of pages of documents including credit card statements and bank statements. The non-party witnesses were generally credible, but the substance of their testimony was peripheral. Massod and Fayad were understandably, perhaps predictably, self-serving in their testimony. Fayad at times was not credible. After trial, I reviewed the trial documents, the testimony, the post-trial submissions, and applicable law. I now set forth my analysis, findings, and rulings.

II Framework

Massod has the burden of going forward and the burden of proof by a preponderance of the evidence as to each of the elements of the separate causes of action in her complaint. Grogan v. Garner, 498 U.S. 279 (1991). See Collier on Bankruptcy ¶ 523.04 (15th ed. rev.).

Under § 523(a)(2)(A), Massod must demonstrate that (1) Fayad made a false representation (2) which he knew at the time was false (3) and which he made with the intent and purpose of deceiving Massod (4) on which Massod justifiably relied and (5) as a result of which reliance and as a consequence of which false representation, Massod sustained a loss or damage. 11 U.S.C. § 523(a)(2)(A); In re Spigel, 260 F.3d 27, 32 (1st Cir. 2001). See Collier on Bankruptcy ¶ 523.08[1] (15th ed. rev.).

Under § 523(a)(4), Massod must demonstrate that (1) a fiduciary relationship existed between Fayad and her, and (2) Fayad committed fraud or defalcation in the course of that fiduciary relationship, (3) causing harm to Massod. 11 U.S.C. § 523(a)(4). In re Baylis, 313 F.3d 9, 17 (1st Cir. 2002). See Collier on Bankruptcy ¶ 523.10 (15th ed. rev.).

Under § 523(a)(6), Massod must demonstrate that (1) Fayad injured her (2) with either the intent to injure her or at least the intent to do an act which he was substantially certain would lead to the injury in question, and (3) the injury was wrongful, without just cause and committed in conscious disregard of his duties. 11 U.S.C. § 523(a)(6). Kawaauhau v. Geiger, 523 U.S. 57 (1991) (as to “willful”); Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853, 859 (1st Cir. 1997) (as to “malicious”); Burke v. Neronha (In re Neronha), 344 B.R. 229, 231-232 (Bankr. D. Mass. 2006) (expanding on objective and subjective elements of malice). See Collier on Bankruptcy ¶ 523.12 (15th ed. rev.).

III Facts

Here are the facts established at trial. In the early 1990s, Massod had a developing dental practice as a solo practitioner, with a patient roster, an office, and an independent business operation. She also had limited financial and business experience and substantial student loans. At that time, Fayad had no independent practice but rather was employed as a dentist by the City of Cambridge, Massachusetts. Fayad occasionally assisted Massod in her practice. He had considerably more business experience and financial expertise than Massod, or so he represented to her. At that time, Massod and Fayad were engaged in an on-going, established romantic and domestic relationship. At some point in that time period, Fayad suggested that they form a joint dental practice, and they did so. They became co-owners of the professional corporation through which that practice was conducted. They agreed upon their respective practice areas and conducted their practice in accordance with that agreement. They also agreed upon their respective corporate titles and roles, with Massod as president and principal marketer and Fayad as treasurer, keeper of the corporate books, and manager of the corporate finances (as well as Massod’s personal finances). They agreed to share equally in the profits of the practice. They also agreed that Massod’s student loans would be repaid through revenues generated by the practice; they did not at first reduce this agreement to a writing. This repayment commitment was a major factor for Massod in her consideration of, and agreement to, the joint practice arrangement, and one upon which she relied. Massod and Fayad provided working capital for the operation of the practice primarily through the use of personal credit cards. In a somewhat atypical and unbusinesslike practice, they employed these credit cards for personal and business expenditures, paying the card billings with corporate funds and directing their accountant at year end as to the allocation of business and personal credit expenditures for income, tax reporting, tax treatment, and financial statement purposes. Fayad instituted and indeed insisted upon this practice, and he did so with Massod’s acquiescence and trust. While their testimony differed on this subject, Massod credibly testified that Fayad maintained sole possession and control over the corporate and practice books and records, and that he resisted Massod’s efforts to review those books and records herself or to engage professionals to review and maintain them. Although she lacked access to these books and records, she nonetheless observed both growth in the practice, which was evident from the increasing patient roster, and, at the same time, signs of financial distress in the business: collection calls, delayed payrolls, balky suppliers, limited income, and unpaid student loans.

Massod testified, without rebuttal, that the student loans were in the approximate amount of $100,000. She contends that, as a consequence of Fayad’s false promises and misappropriations, her loans increased by at least $50,000.

The evidence indicates that they made comparable contributions to the initial capital formation of the corporation.

Fayad’s brother Hidar had financial dealings with Fayad personally and with the corporation. During 1995-1999, the corporation paid substantial sums to Hidar, either directly or through the credit card accounts. Fayad contends that the payments to or on account of Hidar were in repayment of loans or for services rendered. Massod disputes that any loans or services were rendered by Hidar, and she contends that she never authorized any such recompense to Hidar. Hidar did not testify at trial. The documentation is not conclusive. Massod’s testimony on this subject was credible. Fayad’s was not credible. I find that Fayad diverted corporate funds to Hidar without any consideration from Hidar, financial or otherwise.

In July 1997, Fayad and Massod caused the corporation to make an agreement with Massod. The agreement was intended to implement the student loan repayment promise that was a key consideration in Massod’s decision to proceed with the joint practice. Under the agreement, the corporation would re-deploy corporate revenues resulting from the retirement of various corporate office equipment leases toward repayment of Massod’s student loans. The agreement also provided that Massod and Fayad, under certain circumstances relating to the financial performance of the practice, would consider using excess cash flow from the practice for such student loan repayment. These corporate repayment obligations were secured by the grant of a security interest in the corporate equipment. Fayad refused to attend to the paperwork, namely, the issuance of a promissory note and the execution and recordation of the requisite financing statement necessary to render such corporate obligation and collateral commitment perfected and hence meaningful. Moreover, he failed to provide the financial information regarding the performance of the practice upon which the use of excess cash flow for student loan repayment would be based. In any case, Massod’s student loans were not repaid, at least not from corporate revenues in accordance with the Fayad’s promise and the written agreement. Fayad explains his refusal to complete the student loan deal on the breach in their personal relationship, having “caught her cheating.”

In February 1999, three relevant events occurred. First, Massod had occasion to review a corporate bank statement that aroused her concern and confirmed her suspicion that the finances of the practice were not being handled properly or being reported to her accurately.Second, Fayad discovered that Massod was engaged in a relationship with another man, by his testimony causing an immediate breach in his relationship with Massod. And third, Fayad left Massod and promptly established a romantic and domestic relationship with another woman whom he married several months later. Thereafter, Massod and Fayad maintained their joint practice until, commencing in July 2000, Fayad opened his own office, developed a practice, and established a marital residence.

The statement reflected a monthly revenue deposit of approximately $88,000, an amount she considered inconsistent with the distressed finances of the practice and the mounting financial difficulties of the business operation.

During the year and a half following their domestic separation in February 1999, Fayad and Massod practiced together in the same office and under the joint practice banner. By both accounts, the forced professional proximity was awkward and strained. Not surprisingly, they engaged in a series of acrimonious encounters and disputes regarding the practice. These concerned the disposition of corporate assets, the collection and disbursement of corporate receivables, the maintenance of the patient roster, and access to the corporate books and records. As noted, Massod sued Fayad in state court for breach of contract, breach of fiduciary duty, and an accounting. In that action, they executed a stipulation and injunction intended to regulate the joint practice under the eye of a custodian (who is no longer active in that action). Ultimately, burdened by debt, Fayad commenced the underlying bankruptcy case on June 29, 2000. In the bankruptcy case, he listed $238,164 in nonpriority unsecured debts, a substantial portion of which comprised credit card debt to various issuers. The state court litigation, like Fayad’s bankruptcy, awaits the outcome of this adversary proceeding.

IV Rulings

Here are my rulings.

A. Misuse and Misappropriation of Corporate Funds

Each party contends that the other misappropriated practice funds primarily through the use of corporate-funded credit cards for unauthorized personal expenditures. Certainly, their business practice — funding working capital and personal needs through personal credit cards — is particularly susceptible to such misuse. Their strategy at trial as to this matter consisted of presenting what appears to be virtually all of the credit card bills and bank statements for the period in question, together with their respective characterizations of a selection of such charges as instances of the alleged misappropriation, presumably calling upon the Court to render a decision based upon an extrapolation of such charges to encompass a substantially greater sum. While it is Massod’s burden to make that case in this litigation, neither she nor Fayad has done so. Both used the credit cards, and did so both for corporate and personal purposes. Disentangling and examining each and every such charge for a determination of misuse may be possible but that has not been attempted, much less accomplished by either party. To the extent that evidence on this issue was presented, it tended to favor Massod in that she credibly explained the particular charges brought forward by Fayad. Nonetheless, with the exception noted below, Massod has not proved by a preponderance of the evidence Fayad’s misappropriation of the vast sums she claims in her complaint.

B. Defalcation in a Fiduciary Capacity

A discharge exception under § 523(a)(4) based on defalcation while acting in a fiduciary capacity requires a demonstration that Fayad acted in a fiduciary capacity in his dealings with Massod. Fayad and Massod did owe each other duties of good faith and loyalty. However, as co-owners, they enjoyed equal rights and powers with respect to the corporation and the joint practice, even if Massod ceded control of important aspects of her personal and professional life to Fayad, at least for a while. That acquiescence is not enough to warrant the conclusion that either was acting in the requisite fiduciary capacity. See In re Carlson, 334 B.R. 626, 629 (Bankr. C. D. Ill. 2005). Thus, in the absence of such fiduciary capacity, Massod has not established by a preponderance of the evidence one of the elements of her defalcation causes of action. Accordingly, the causes of action relating to the student loans and the misappropriation of corporate funds under § 523(a)(4) fail.

In Massachusetts, shareholders of a closely held corporation are likened to partners and deemed to have the same duty of utmost good faith and loyalty to each other. Donohue v. Rodd Electrotype Co. of New England, Inc., 328 N.E. 2d 505 (1975). Donohue is typically invoked to protect the minority against the majority. See also In re Curran, 157 B.R. 500 (Bankr. D. Mass. 1993); In re Romano, 353 B.R. 738 (Bankr. D. Mass. 2006). Here, Massod and Fayad occupied the same status as co-owners and had equal rights and powers with respect to the management and operation of the practice and its business. For § 523(a)(4) purposes, I find that their relationship was not the fiduciary one contemplated by the statute. See also In re Bologna, 206 B.R. 628, 632 (Bankr. D. Mass. 1997) (“fiduciary capacity” is limited to “the capacity of one who holds property under either an express trust or . . . a technical trust, but not under a trust imposed by law as a remedy, as a constructive trust, an implied trust, or a trust ex maleficio”).

C. Fraud Regarding the Student Loans

Further, Massod has not proved by a preponderance of the evidence that Fayad made a false representation when he agreed, in 1994, to cause her student loans to be repaid from their joint practice. Nor has she established that he did so when he caused the corporation to enter into the collateralized repayment agreement, in 1997. Nothing he said or did at either time establishes that he did not intend to perform the student loan repayment commitment at the time he agreed to do so. He may have broken his promise and breached his agreement subsequently; however, the evidence does not support the conclusion that he engaged in fraud in making either the promise or the agreement. Accordingly, the cause of action relating to the student loans under § 523(a)(2)(A) fails.

D. Fraud Regarding Hidar

Massod contends that Fayad’s liability to her, arising from his diversion of corporate funds to Hidar, is excepted from discharge under § 523(a)(2)(A) as a debt arising from fraud or a false representation because Fayad falsely represented to her that his brother Hidar provided loans and services to the corporation and that the diversion of corporate funds to Hidar constituted the repayment of such loans and recompense for such services. The evidence shows only that Fayad did divert corporate funds to Hidar, and that Fayad, to cover up this diversion, falsely represented to Massod that the payments to Hidar were compensation for value provided by Hidar to the corporation. The evidence fails to establish a requirement of § 523(a)(2)(A): that her reliance on the misrepresentation was a cause of the damage suffered. Here, the damage was caused by the diversion itself. The misrepresentation served to cover-up the wrongfulness of the diversion, but Massod has not demonstrated that it caused the diversion in the first instance. Accordingly, liability arising from the diversions to Hidar is not excepted from discharge under § 523(a)(2)(A).

Fayad’s testimony on this subject was notably inconsistent, evasive, and ultimately lacking in credibility.

E. Willful and Malicious Injury Regarding the Diversion of Corporate Funds

Massod also contends that Fayad’s liability to her, arising from his diversion of corporate funds to Hidar, is excepted from discharge under § 523(a)(6) as a debt for willful and malicious injury to another entity. The injury includes both diminution in the value of her interest in the corporate joint practice and an increase in her own personal liability as a result of the consequent failure of the corporation. Massod has satisfied the requirements of § 523(a)(6) as to these transfers. I find that Fayad made the transfers with at least substantial certainty that they would harm both the corporation and Massod as a one-half owner. He clearly understood as well that every dollar diverted to Hidar diminished the value of the corporation and of Massod’s interest in it. The injury to Massod was therefore “willful” within the meaning of § 523(a)(6) and the Kawaauhau decision. The payments to Hidar were also objectively wrongful in that they were not proper or authorized corporate expenditures, they served no corporate purpose, and they were not sanctioned by any agreement or understanding between himself and Massod. Moreover, Fayad clearly understood the wrongfulness of these diversions. The injury was therefore both objectively wrongful and made with conscious disregard of that wrongfulness, and it was thus “malicious” within the meaning of § 523(a)(6). The Court therefore concludes that Fayad’s liability to Massod for diversion of corporate funds to Hidar is excepted from discharge under § 523(a)(6) as a debt for willful and malicious injury to another entity.

Incident to the collapse of the joint practice, Massod had to pay certain corporate obligations that she and Fayad had guaranteed, including the balance due on a car lease. Massod testified, without rebuttal, that these obligations amounted to at least $40,000. In addition, upon failure of the practice, Massod lost the benefit of payments on her student loans that the corporation was obligated to fund.

F. Willful and Malicious Injury Regarding the Student Loans

Massod also contends that Fayad’s liability to her for failing to implement the student loan agreement — by failing to effectuate the corporation’s obligations (i) to make payments on her student loans and (ii) to give her a promissory note and security interest to secure the corporation’s obligation to her — is excepted from discharge under § 523(a)(6) as a debt for willful and malicious injury to another entity. I find that Massod has carried her burden of proof as to this count.

Fayad’s non-implementation of the student loan agreement injured Massod in two ways. First,by his failure to cause the corporation to make payments on the student loans, she was injured to the extent of payments that the corporation should have made but did not make, plus interest, penalties, and other finance charges that Massod incurred as a result of the nonpayment. Second, in failing to cause the corporation to give Massod a promissory note and security interest, he deprived her of a right to look to assets of the corporation as security for enforcement of the corporate obligation to pay her student loans. Fayad contends that, given the collapse of the joint practice, the security interest would have been subject to avoidance by the corporation’s creditors as a fraudulent conveyance; therefore, he urges, its value would have been negligible and his failure to cause the corporation to give Massod a security interest was not injurious to Massod. This argument, however, goes only to the extent of damages, which is not an issue before me. (Fayad does not contend that it was a factor he considered in his decision not to effectuate the student loan agreement, and I find it was not a factor.) In addition, Fayad has not established that the grant of a security interest would have been a fraudulent as to creditors, especially if he had effectuated it when he should have. There is no evidence that the grant of a security interest would have rendered the corporation insolvent or left it insufficiently capitalized. In any event, whatever the vulnerability of the security interest to avoidance, she had a right to the lien, and he had the obligation to cause the corporation to provide it.

In July 1997, when the lien agreement was made, the practice was in the midst of its highest revenue-producing year (followed by an even higher revenue-producing year in 1998). Thus, there was certainly a basis to view the lien as valuable and not subject to avoidance, thereby establishing, at least to that extent, the injury to Massod in Fayad’s refusal to perfect it.

Fayad testified that he did not implement the student loan agreement because he had caught Massod cheating on him. I find that his non-implementation of the agreement was deliberate, a considered refusal to carry out his obligation as an officer of the corporation, with full knowledge that it would injure her and indeed intent to injure. This was simple retaliation. The wilfulness of the injury is therefore established.

Fayad was also aware of the student loan agreement, of the corporation’s obligations under that agreement, and of his own obligation, as the corporate officer responsible for implementation of the agreement, to effectuate the corporation’s obligations thereunder. I therefore conclude that the injury was wrongful and inflicted in conscious disregard of a known duty: it was “malicious” within the meaning of § 523(a)(6). The Court therefore concludes that Fayad’s liability to Massod for failing to implement the student loan agreement is excepted from discharge under § 523(a)(6) as a debt for willful and malicious injury to another entity.

Fayad’s argument that Massod could just as readily as he, and with the same authority, have issued the requisite promissory note and executed and recorded the necessary financing statement is unpersuasive and irrelevant to the wilfulness and maliciousness of the injury. She was the less experienced and the more trusting of the two, less versed in general business practices, and even less so in the niceties of secured transactions, and he exploited that inexperience and trust. He held the upper hand in the finances of the corporation, and he knowingly used it to her detriment. Moreover, by their own division of labor within the corporation, the obligation to effectuate the student loan agreement was his.

V Conclusion

In accordance with the foregoing findings and rulings, the Court concludes that Fayad’s liability to Massod for diversion of corporate funds to Hidar and for failing to implement the student loan agreement is excepted from discharge as a debt for willful and malicious injury. The Court makes no determination as to the existence or extent of the underlying liability; Massod may establish and enforce the underlying liability in another court of appropriate jurisdiction. All other counts in the complaint must be dismissed. A separate judgment will enter accordingly.


University of Louisville Professor found dead after being questioned by police about missing funds

University of Louisville dental professor Michael H. Martin’s was found dead in his office hours after he was interviewed by university police for allegedly misusing a university credit card.

The credit card was for a $353,875 grant that Martin directed that was funded by the National Institutes of Health, according to university records.

Hebert said Friday that two School of Dentistry employees — Joan Scott, the unit business manager, and Gary Dryden, the assistant dean for finance — were suspended without pay in connection with that investigation.

Scott was suspended for three days, and Dryden for five, Hebert said, but he described both as “good employees.”

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Content retrieved from: http://www.courier-journal.com/story/news/crime/2014/07/02/admitted-borrowing-university-money/12047131/

Dentist vs. Dentist — Dr. Nicole LeCann successfully sues partner for misappropriation. Awarded $2.34 million in damages.

N.C. Business Court judge has ruled that a Winston-Salem dentist must pay her former partner $2.34 million in compensatory and punitive damages for transferring money for personal use without permission.

The Nov. 7 ruling by John Jolly Jr., chief special Superior Court judge for complex business cases, concluded a nearly 2½-year-old lawsuit brought by Dr. Nicole LeCann against Dr. Sharon Cobham. The court specializes in complex business cases.

Cobham was accused of making “unjustified expense reimbursements” to herself. The lawsuit said Cobham used the money to pay for personal expenses that include: mortgage payments on a Charlotte condo occupied by her brother; accommodations at the Ritz Carlton in Charlotte; the purchase of Prada shoes at Saks Fifth Avenue; purchases at Belk; and a Match.com account.

Cobham currently operates Forsyth Family Dental Care at 2912 Maplewood Ave., as well as offices in Burlington and Durham. According to her website, she has plans to open a practice in Greensboro office off Wendover Avenue.

LeCann currently operates practices in Apex and Raleigh.

The dentists did not immediately return phone calls seeking comment. David Rooks, Cobham’s attorney, declined Wednesday to comment on the case.

Robert Fields III, LeCann’s attorney, said Wednesday that Cobham did not file a post-trial motion in the 10 days following the ruling. She has 30 days to file an appeal.

“The damages can be paid at any time voluntarily,” Fields said. “There is a legal process through the receiver for collection if necessary.”

According to the judge’s ruling, Cobham began in 2007 “a long series of complicated, wrongful, self-dealing transfers of funds” from their Apex, Burlington, Durham and Raleigh practices to their joint Winston-Salem practice, which eventually went to Cobham’s solely owned Winston-Salem practice.

Cobham was ruled to have committed “constructive fraud” from co-mingling money from the five co-owned dental practices. Jolly awarded $559,888 in compensatory damages and $1.68 million in punitive damages – both listed as personal liabilities.

“The court finds that this amount bears a rational relationship to the sum necessary to punish Cobham for her egregiously wrongful acts, and to deter her and others from committing similar wrongful acts,” Jolly wrote in his ruling.

According to LeCann’s lawsuit, the dentists graduated together from the UNC School of Dentistry in Chapel Hill in 1999 and formed a partnership in 2000 that involved the jointly owned dental practices and three real-estate ventures operated as limited liability companies.

The lawsuit said Cobham served as president of the joint entities, while LeCann served as their administrative manager.

The lawsuit listed the dentists as “close companions and shared a personal relationship,” a phrase Fields said that the judge chose. Although Fields said he did not know what their relationship was, he said it led LeCann to trust Cobham’s business decisions.

Cobham said in her reply to the lawsuit she considered some of her spending as business expenses, such as buying movie tickets and the Prada shoes, as uniform costs. Cobham also said that she provided more money to the five dental practices than she transferred, but, according to the judge, she provided no such documentation.

Once LeCann became aware of the expenditures, she asked that the money be put back into the practices. LeCann filed her lawsuit after Cobham declined to do so. LeCann’s lawsuit also accused Cobham of acts of intimidation and personal abuse, which Cobham denied.

Fields said Cobham’s expenditures were affecting the practices’ ability to make payroll, including checks bouncing, and to pay vendors. The ruling said the practices incurred a combined $54,388 for more than 200 overdraft charges.

Three months after LeCann’s lawsuit was filed, a judge ordered the dissolution of the LLCs and appointed Dr. Joseph Laton as receiver, who happened to be a dentist.

Fields said Laton was able to keep the individual practices open long enough for LeCann and Cobham to form new LLCs and buy the individual practices they now operate.

A second receiver, Christine Mayhew, was appointed in March 2011. Mayhew is responsible for pursuing Cobham’s financial obligations if she doesn’t make them voluntarily, Fields said.

“It remains to be seen whether the defendant has the money” to pay the damages, Fields said.

Content retrieved from: http://www.journalnow.com/news/local/judge-orders-dentist-to-pay-her-former-partner-million/article_18b17b9e-3986-11e2-8da7-001a4bcf6878.html

See the decision here:

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lecann-vs-cobham

Prison term for Pennsylvania oral surgeon in theft, prescription fraud case

donald-dinello

HARRISBURG — Saying incarceration remains his aim, a judge Wednesday refused to reconsider a 15- to 30-month prison term he slapped on a Hershey-based oral surgeon who pleaded guilty to theft and drug prescription violation charges.

Senior Judge John L. Braxton did allow Dr. Donald Dinello Jr. to remain free on $50,000 bail pending a possible appeal to the state Superior Court, however.

Braxton returned to a Dauphin County courtroom to hear — and ultimately reject — a petition that defense attorney Royce Morris filed to modify the sentence imposed on Dinello in July.

Under a deal with the Pennsylvania Attorney General’s Office, Dinello, 46, pleaded guilty to charges that he stole from his partner in Hershey Oral Surgery Associates and improperly wrote prescriptions for the painkiller Oxycodon for an employee and her husband. He pleaded to a charge of refusing to keep required records of drugs he prescribed in connection with the prescription fraud allegation.

Dinello’s pleas also resulted in a 2-year suspension of his state dental license.

The tension was palpable as Morris made his sentence modification request during Wednesday’s hearing. Among other arguments, he contended that Dinello “has maintained a remorseful attitude” about his crimes.

Senior Deputy Attorney General Patrick Leonard urged Braxton not to budge from the original sentence. He noted that the charges against Dinello carry a maximum possible penalty of 8 1/2 years in prison.

The message sent in the case is important, Leonard said, because “there are others in the dental community … who I’m sure have a keen eye on what happens here with Dr. Dinello.”

Braxton said he still considers his initial sentence “fair and appropriate.” Dinello deserves nothing that would hint at special treatment and must spend time behind bars for betraying the trust the community placed in him as a healer, the judge said.

“He’s a convicted felon, and he has to pay the consequences,” Braxton said.

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Content retrieved from: http://www.pennlive.com/midstate/index.ssf/2014/10/judge_doesnt_budge_on_prison_t.html

A really bad way to start your dental career — dental student arrested for stealing NBDE exam questions

Attorney General Spitzer and State Education Commissioner Richard Mills today announced the arrests of three city residents in the theft of the dental licensing exam administered by the American Dental Association. The defendants used a high tech system involving a concealed camera and computer monitor to steal the test, which is given to an estimated 20,000 dental students nationwide annually. The test, which is administered twice a year, is taken by students who wish to obtain a license to practice dentistry.

The theft allegedly occurred when one person posing as a test taker transmitted the image of the exam using a concealed camera to the two co-defendants who were in a car outside monitoring the transmission on a computer monitor. The defendants are: Svetlana Bogomolova, 28, of 2 Gaylord Drive North, Brooklyn, N.Y.; Yelena Tayba, 35, of 201 Brighton Ave., Brooklyn N.Y. and Nicola Kapitanov, 33, of 67 McArthur Ave., Staten Island N.Y.

“These defendants threatened to put dental patients throughout New York at risk,” said Spitzer. “Had their plans to sell the tests been successful, an unknown number of unqualified dental school graduates would have received a license to practice.”

State Education Commissioner Richard Mills said “The arrests were the result of quick action and great teamwork between the Attorney General and the State Education Department. Those arrested used sophisticated electronic equipment. This shows the need to anticipate increasingly varied and clever schemes to defraud the public. We will continue to take all possible actions to protect the public.”

The defendants are charged with Grand Larceny in the Fourth Degree, Criminal Possession of Stolen Property in the Fifth Degree, and Obstructing Governmental Administration in the Second Degree.

The case was investigated for the Department of Education’s Office of Professional Discipline by Supervising Investigator Thomas Meade and Senior Investigator Wanda Meade. The case is being handled by Assistant Attorney General Ronda Lustman, under the supervision of Criminal Prosecutions Chief Janet Cohn and the head of the Criminal Division, Peter B. Pope.

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Ontario dentist accused of involvement Ponzi scheme to fleece other dentists of $50 million

dr-peter-sbaraglia

Dr. Joseph Radice had every reason to believe his money was in good hands.

The Woodbridge dentist had invested $617,000 of hard earned savings with a dental colleague he believed was a financial whiz who had made a killing on the New York and Toronto stock exchanges.

Today, Radice alleges he is one of at least 50 investors — many of them prominent dentists — looking for $50 million in lost funds. In allegations filed in court Radice accuses former colleague Peter Sbaraglia and wife Mandy, both dentists, of being key cogs in a sophisticated Ponzi scheme.

What Radice and investors did not know was that the Ontario Securities Commission (OSC) was actively investigating the scheme, even as they were being reassured that their money was safe and earning vast returns.

“If they are a protective government agency then, hey, (the OSC) should have stepped up,” Radice said in an interview. “What safeguards are in place to protect investors from unscrupulous people?”

Radice believes the OSC should have acted to freeze bank accounts and protect investor assets back in 2008.

The scheme exploded a year ago when its kingpin, Robert Mander, killed himself in his Flamborough just before a court hearing into the matter.

Today, as lawyers, receivers and investigators squabble over the case, questions are being raised over whether the OSC should have warned investors to back off the scheme. The judge who appointed a receiver to wind up the scheme’s assets last December remarked “it could very well be that the OSC could have acted more promptly.”

An OSC spokesperson told the Star the regulator did nothing wrong, saying that the receiver in its investigation did not “conclude the OSC failed to protect investors.”

The regulator has filed a series of allegations against Sbaraglia and his wife and summoned them to appear at a hearing March 31. The OSC has accused them of taking part in a fraudulent scheme and wants to ban them from trading securities. Sbaraglia declined an interview request from the Star. In his own statement to the OSC, Sbaraglia describes himself as a victim and criticizes the regulator for not warning him to beware of the Mander Ponzi scheme.

For Radice, it all started around the dentist chair at his Woodbridge practice in 2005.

When the veteran family dentist needed a dental anesthesiologist to help treat a patient, Radice called for Sbaraglia. Radice grew to trust him.

Over time, according to Radice, Sbaraglia boasted that he and his wife had great “prowess” in trading private and public securities in Toronto and New York. So much prowess, Radice recalled in a court action he started against his old dental colleague, that Sbaraglia was planning to leave his own practice and become a full time investor.

According to the OSC, Sbaraglia was, by 2006, hooked up with Robert Mander, the mastermind of a Ponzi scheme that would take at least $40 million from investors. A Ponzi scheme is a financial operation that pays returns to investors from money that new investors contribute.

Radice said he had no idea that Mander and Sbaraglia were working together.

The OSC, in a release last week, alleges both men participated in a “fraudulent scheme” through their company, C.O. Capital Growth. Radice would have liked to have known that years ago.

“When someone is under investigation you know what they should have done. They should have frozen the assets and stopped the whole process from tumbling and falling down,” said Radice.

“Maybe I should have educated myself. Sometimes you have to take responsibility for your actions. I really dropped the ball on this,” Radice said. He estimates 50 investors lost $50 million in the scheme, though the regulator has pegged the amount at $40 million.

Between November 2006 and August 2008, Radice said he invested $617,000 in six different contributions to Sbaraglia, who promised a 25 per cent return on the dentist’s investments. Radice acknowledges he made a mistake in trusting his former colleague who, he said, promised his money would continue to grow as long as he resisted the urge to withdraw it.

Other investors continued to invest in 2009, according to the receiver’s report on the case.

Radice, in a statement of claim filed in court in 2010, said he often dropped by Sbaraglia’s office to get a report on the investments. Radice said Sbaraglia typically told him they were doing well and “there was no possibility of him losing his money.”

According to the OSC, Sbaraglia and wife Mandy were on a spending spree by this time, racking up whopping credit card bills while dining at fine restaurants and using some of the investor money to support a dental hygiene business owned by Mandy, a periodontist.

The OSC alleges that up to $7 million was never properly invested and remained in the Sbaraglia’s accounts.

About $2 million was viewed as “profits” and used for personal expenses, the agency claims. About $2.4 million was lost making bad trades and $585,000 was used to buy open venture securities. Most of the remainder used for general business expenses.

Sbaraglia and his wife allegedly racked up a $383,000 VISA bill, for personal expenses including office renovations and restaurant bills. Investor money also went to pay rent for a dental hygiene company owned by his wife.

By July 2009, the OSC had called in Sbaraglia for an interview as part of their growing — but secret — probe into the Ponzi scheme.

The OSC, in its statement of allegations against Sbaraglia, said he misled them in his statements under oath by saying that the investor money was not at risk.

The Star tried to interview Sbaraglia and his wife but they declined.

“You have no idea how badly I want to tell you my side,” Sbaraglia said outside a hockey arena where he coaches a youth team. “It will take a week to tell you the story.”

In his November 2010 response to the OSC, Sbaraglia and his lawyers say they were dupes of a “malevolent career fraudster” (Mander) who convinced them to become investors. The Sbarablia’s say they in turn got friends and family to invest money. Even their 11-year-old daughter was convinced to invest $1,000 in the scheme.

Sbaraglia and his lawyers blame the OSC for conducting a “deficient” investigation into Mander.

In their response to the OSC, Sbaraglia said the regulator had evidence of “Mander’s fraud” as far back as 2008 and “ignored it.”

Sbaraglia, who shared lawyers with Mander, blames the lawyers for not alerting him to the scheme.

As a result, he says, he and his company continued to renew or enter into loan agreements with new investors . From October 2008 to July 2009, after the OSC investigation had begun, the company renewed or entered into new loan agreements worth at least $7.4 million. Interest rates on those agreements range from 8 to 25 per cent.

Sbaraglia’s former lawyers deny the allegations, and say that the Sbaraglias repeatedly advised “that they were well aware of the details of Mander’s business affairs, that they had no concerns about his integrity or wherewithal, and that all of the monies obtained from investors had been invested in a legitimate fashion.”

Last December, an Ontario judge put the Sparaglia’s assets into receivership, including their $2.9 million heritage home in Oakville. It was listed for sale recently.

One of the family members drawn into the scheme was dentist Mandy Sbaraglia’s brother, Rick McIntosh, the former head of the Toronto Police Association. McIntosh and his wife formed a company they called R.S. Capital Growth and invested about $1 million with the Sbaraglia’s.

McIntosh said the Sbaraglia’s have done nothing wrong.

“You’re barking up the wrong tree,” McIntosh said in an interview. “You’ll never find two more honest people than Peter and my sister.”

“I think the bigger story, honest to God, is how the system works,” McIntosh said. “How the civil system works in this kind of a system is just mind boggling. How does it make sense? It’s supposed to be in place to protect people.”

Do you have questions about embezzlement?  Give Prosperident a call at 888-398-2327 or send an email to requests@dentalembezzlement.com

Content retrieved from: https://www.thestar.com/news/investigations/2011/03/01/ponzi_scheme_duped_gta_dentists.html

Kansas dentist disciplined; accuses associate of embezzlement

Do you have questions about embezzlement?  Give Prosperident a call at 888-398-2327 or send an email to requests@dentalembezzlement.com


IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 87,875

ROBERT E. LACY, D.D.S.,

Appellant,

v.

KANSAS DENTAL BOARD,

Appellee.

SYLLABUS BY THE COURT

In this appeal by a Kansas dentist from the decision of the Kansas Dental Board, it is held: (1) There is substantial competent evidence to show the dentist owned in his name and conducted a dental practice in Wichita without being personally present or overseeing the operations during a majority of the time the office was being operated in violation of K.S.A. 65-1435(c); (2) the dentist’s actions in submitting multiple claim forms to Delta Dental Insurance certifying that he was the treating dentist when he in fact was not and would attempt to collect charges he never intended to collect were violations of K.S.A. 65-1436(a)(1), which authorizes discipline for fraud, deceit, or misrepresentation to obtain money or other thing of value and (a)(13), which authorizes discipline for knowingly submitting any misleading, deceptive, untrue, or fraudulent misrepresentation on a claim form, bill, or statement. The violations of K.S.A. 65-1436(a)(1) and (13) were shown by substantial competent evidence; and (3) constitutional grounds asserted for the first time on appeal are not properly before the appellate court for review.

Appeal from Shawnee district court; JAN W. LEUENBERGER, judge. Opinion filed December 6, 2002. Affirmed.

Dennis Owens, of Kansas City, Missouri, argued the cause, and Steven Benner, of Kansas City, Missouri, and David Rauzi, of Overland Park, were with him on the brief for appellant.

Clinton E. Patty, of Frieden, Haynes & Forbes, of Topeka, argued the cause, and Randall J. Forbes, of the same firm, was with him on the brief for appellee.

The opinion of the court was delivered by

LARSON, J.: This is an appeal from the district court’s ruling upholding a decision of the Kansas Dental Board wherein Robert E. Lacy, D.D.S, was found to have violated K.S.A. 65-1435(c) and K.S.A. 65-1436(a)(1) and (13) and ordered suspended from the practice of dentistry for a period of 30 days. Issues of statutory construction, existence of substantial competent evidence, and claimed violations of due process rights are raised. Our jurisdiction is under K.S.A. 20-3018(c) (transfer from the Court of Appeals on our own motion).

Procedural summary

Dr. Lacy was the subject of a disciplinary action by the Kansas Dental Board (Board) based on claims of false or misleading information placed on claim forms submitted to Delta Dental Insurance and allegations that Dr. Lacy conducted a dental office in Wichita without being present a majority of the hours that it was open. The Board affirmed the decision of the administrative law judge (ALJ) finding Dr. Lacy violated both charges. The decision was appealed to the district court, which affirmed the Board’s decision. It is from the district court’s decision that Dr. Lacy appeals to us.

Findings of the ALJ and additional facts

The ALJ made findings of fact numbered 1 through 20:

“1. The respondent, Dr. Robert E. Lacy, is a licensed dentist in the state of Kansas. Dr. Lacy has been practicing in the state of Kansas since 1962.

“2. The Kansas Dental Board is vested with authority to discipline its licensees.

“3. Dr. Lacy’s primary dental practice is located in Topeka, Kansas. However, Dr. Lacy has also operated dental offices in Oswego, Kansas; Fredonia, Kansas; and in Wichita, Kansas.

“4. Regarding the Wichita dental office, Dr. Lacy acquired this office in June 1995, and operated the office through March 1996.

“5. Dr. Lacy did not personally perform any dental services in the Wichita office. Dr. Lacy hired Dr. James Murphy to perform dental services in the Wichita office.

“6. Dr. Lacy would visit the Wichita office approximately twice a week.

“7. Dr. Lacy’s agreement with Dr. Murphy called for Dr. Murphy to charge for Dr. Lacy’s normal operating procedures as done in Dr. Lacy’s other offices. This would include charges for periodic and emergency exams.

“8. Dr. Murphy did not make charges for services as contemplated by Dr. Lacy. Dr. Murphy did not always charge for periodic and emergency examinations.

“9. Dr. Lacy served as a participating dentist in the Delta Dental Plan of Kansas, Inc., from June 1995 through December 1996.

“10. Dr. Murphy, while employed in Dr. Lacy’s Wichita office, was not a participating dentist in the Delta Dental Plan.

“11. Under the Delta Dental Plan, a participating dentist is paid directly from Delta Dental. Non-participating dentists are not paid by Delta Dental and instead Delta Dental payments are paid directly to dental patients.

“12. In July 1995, officials of Delta Dental met with Dr. Lacy. During this visit, Dr. Lacy was advised that the Delta Dental claim form must be completed by the treating dentist. The treating dentist certifies that the dental procedures were completed, were necessary, and the fee charge was the usual fee to be collected. Additionally, the certifying dentist states that they intend to collect the fee unless otherwise noted.

“13. In March 1996, Dr. Lacy was concerned that Dr. Murphy was not performing according to his contractual agreement and was concerned at the loss of revenues from the Wichita office. As a result of these concerns, Dr. Lacy ended his business relationship with Dr. Murphy.

“14. Dr. Lacy’s employees began to examine the dental records contained in the Wichita office and the billings to Delta Dental done by Dr. Murphy. In reviewing these records, Dr. Lacy’s employees determined certain services were not billed. For example, the dental records indicated, in some cases, that periodic exams were not billed. In other cases, x-rays were taken and there were no billings to Delta Dental for the x-rays.

“15. As a result of Dr. Lacy’s review of the billings from the Wichita office, Dr. Lacy began to submit claims to Delta Dental, Inc., for additional fees. Dr. Lacy signed claim forms, which included the following statement:

‘I hereby certify that the procedures as indicated by date have been completed by me and were necessary in my professional judgment and the fees shown as the usual fee and fee intended to collect except where noted. I request payment in accordance with DDPK rules and regulations.’

“16. Of the billings submitted by Dr. Lacy for patients of the Wichita office, Dr. Lacy received approximately $120.00. Most of the claims submitted by Dr. Lacy were denied. The basis for the denial was that the claims were filed six months after the services were performed or that the services were not performed by Dr. Lacy, but instead were performed by Dr. Murphy.

“17. As a result of his review of the operations of the Wichita office, Dr. Lacy became convinced that Dr. Murphy embezzled funds from Dr. Lacy. Dr. Lacy sought criminal charges against Dr. Murphy and Dr. Lacy filed a claim with his insurance carrier for Dr. Murphy’s alleged malfeasance.

“18. Ultimately, Dr. Murphy and Dr. Lacy settled their disputes through litigation. Thereafter, Dr. Murphy sought relief through bankruptcy proceedings.

“19. Dr. Lacy’s insurance company ultimately paid him the maximum allowable under the terms of the policy. Payment made from the insurance company to Dr. Lacy was $10,000.00.

“20. The dental records completed by Dr. Murphy in the Wichita office did not indicate that patients would be charged for the services that Dr. Lacy ultimately submitted billings to Delta Dental. Dr. Murphy would either not bill for the services or would indicate that there was no charge for the services. Dr. Lacy’s billings to Delta Dental conflicted with Dr. Murphy’s records that indicated the patients should not be charged.”

The evidence presented to the ALJ further showed that Dr. Lacy called his Wichita practice “Kansas Dental Service,” which is the same name he sometimes uses for his own practice. Kansas Dental Service is not a professional corporation. Dr. Lacy paid Dr. Murphy a salary and provided him a vehicle which was surrendered when Dr. Murphy was fired by Dr. Lacy near the end of March 1996.

Dr. Murphy denied he took money from Dr. Lacy and claimed the practice income declined because his advertising budget was cut by Dr. Lacy. He said that some of his patients were rebilled by Dr. Lacy after his services were terminated. He claims the Wichita police did not find him guilty of wrongdoing, and he was not subject to an investigation by the Kansas Dental Board.

Dr. Lacy testified that Dr. Murphy was required to use the same billing practices that were used at Dr. Lacy’s Topeka office, but that Dr. Murphy violated these agreements. Dr. Lacy contended he submitted the claim forms to Delta Dental Insurance to make a record of Dr. Murphy’s embezzlement scheme. Dr. Lacy testified he did not provide dental services to or see patients at the Kansas Dental Service office in Wichita.

After Dr. Murphy left in March 1996, Dr. Lacy had his employee, Angie Leprich, review the Wichita files and submit claims for which Dr. Lacy would have charged for but Dr. Murphy did not. Highly summarized, the extra claims generally involved x-rays or periodic or emergency examinations for which charges had not previously been made. According to Delta Dental’s employee, Junetta Everett, approximately 80 claims were processed from the Wichita office between January 1 and June 1, 1996. The records of seven of the claims were admitted at the administrative hearing. The claims were dated in late April 1996; most were signed in the name of Dr. Lacy indicating he was the treating dentist. The signature line also stated the signor agreed to pursue collection of the fees. One of the claim forms did note that the “operating Dentist” was Dr. Murphy, but the remaining ones utilize Dr. Lacy’s name only.

Applicable Law and Conclusions of ALJ and Kansas Dental Board.

The ALJ’s decision referenced K.S.A. 74-1406, K.S.A. 65-1436(a)(1) and (16), and K.S.A. 65-1436(b) and (c). As a point of clarification, the ALJ and district court referred to subsection (a)(16). However, the statute in effect at the time of the alleged violations was K.S.A. 65-1436(a)(13). Amendments to 65-1436 in 1996, 1997, 1998, and 2001 resulted in the renumbering of the subsections so that (a)(13) is now (a)(16). See K.S.A. 2001 Supp. 65-1436(a). With the exception of the addition of language not relevant to this opinion, the two subsections are identical. Our discussion, however, will reference (a)(13). The ALJ reached the following conclusions:

“CONCLUSIONS

“1. The petitioner makes two allegations concerning the respondent’s dental practice insofar as it relates to the Wichita office. First, the petitioner alleges that Dr. Lacy has violated K.S.A. 65-1435(c) in that he failed to personally be present in the Wichita office and that he personally failed to oversee the operations of the office during the majority of the time the office was operating. Second, the petitioner alleges that Dr. Lacy’s submission of claims to Delta Dental were misleading and false and were in violation of K.S.A. 65-1436(a)(1) and (16).

“2. Turning first to the alleged violation of K.S.A. 65-1435(c), the evidence presented establishes that Dr. Lacy was not in the Wichita office during the majority of the time the office was being operated and that he did not personally oversee the operations of this office. Dr. Lacy did not perform dental services nor supervise the dental services that were performed in the Wichita office. As such, Dr. Lacy has violated K.S.A. 65-1435(c).

“3. The respondent argues that he did not ‘conduct’ a dental office, and therefore a violation of 65-1435(c) has not been established. The term conduct is not defined in the statute. However, Dr. Lacy certainly was operating the Wichita office as his facility. Dr. Lacy on two occasions in his testimony referred to Dr. Murphy as an employee. Dr. Lacy directed Dr. Murphy on how to bill and for which services he was to bill. Dr. Lacy went to the Wichita office twice a week to ‘check on the operations of the office.’

“4. Under K.S.A. 65-1435(c), Dr. Lacy was required to be personally present in the office or personally overseeing such operations during the majority of the time the Wichita office was being operated. Dr. Lacy did not do this. As such, a violation of K.S.A. 65-1435(c) has been established.

“5. The petitioner’s second violation involves multiple misleading insurance claim forms submitted to Delta Dental in violation of K.S.A. 65-1436(a)(1) and (16). It is undisputed that claim forms indicating that Dr. Lacy performed services in the Wichita office were submitted to Delta Dental. These claim forms purport that Dr. Lacy performed services for patients in the Wichita clinic and that payment was due for these services.

“6. The facts establish that Dr. Lacy did not perform any services for patients in the Wichita office. This is a misrepresentation. Further, the facts establish that the patients in many of the cases were not to be billed for the services provided. Since the patients were not to be billed, this is also a misrepresentation.

“7. Dr. Lacy argues that Delta Dental knew that he was not performing services in the Wichita office, and therefore the claims were not misleading. Whether Delta Dental knew Dr. Lacy was not practicing in Wichita or not is irrelevant. The fact is that Dr. Lacy signed a claim form certifying that services were performed by him when services were not performed by him. This was a misrepresentation by Dr. Lacy to Delta Dental and whether Delta Dental was misled or deceived is irrelevant.

“8. Dr. Lacy also argues that it was necessary to submit these claims to Delta Dental to establish that Dr. Murphy had embezzled from Dr. Lacy’s office. This argument has no merit. Whether Dr. Murphy embezzled from Dr. Lacy would not be established by submitting claims to Delta Dental. Dr. Murphy’s failure to submit claims to Delta Dental would not show Dr. Murphy embezzled from Dr. Lacy.

“9. Finally, Dr. Lacy argues that there is no evidence that he was paid on claim forms submitted to Delta Dental after the Wichita office closed, and therefore there is no violation of K.S.A. 65-1436(a)(1). This argument is also without merit. Dr. Lacy signed Delta Dental claim forms as well as other forms seeking payment from Delta Dental. In each of these signings, Dr. Lacy purports to have performed dental services for patients in the Wichita office and seeks payment for these services. This is untrue. This violates K.S.A. 65-1436(a)(1). Dr. Lacy did not perform any services for patients in the Wichita office yet he told Delta Dental he did. This is a clear misrepresentation of the facts. Turning to K.S.A. 65-1436(a)(16) this was an ‘untrue or fraudulent misrepresentation in the practice of dentistry or on any documents connected with the practice of dentistry by knowingly submitting any misleading, deceptive, untrue or fraudulent misrepresentation on a claim form.’ Dr. Lacy’s submission cannot be said to be anything less than a deceptive, untrue, and fraudulent misrepresentation. Dr. Lacy has violated both K.S.A. 65-1436(a)(1) and K.S.A. 65-1436(a)(16).

“10. The petitioner has established by clear and convincing evidence that Dr. Lacy has violated K.S.A. 65-1436(c) and K.S.A. 65-1436(a)(1) and (16). At the request of the Kansas Dental Board, the license to practice dentistry of Dr. Robert E. Lacy is hereby suspended for a period of thirty (30) days.

“11. The thirty-day (30) suspension of Dr. Lacy’s license shall be completed within six months from the date of this Initial Order or any appeal thereof. Dr. Lacy shall advise the Kansas Dental Board and the Dental Board’s attorneys of record in writing of what thirty (30) consecutive day period in which his license will be suspended. Dr. Lacy shall select this 30-day period to allow Dr. Lacy to coordinate the suspension of his license with his practice for the continued treatment of Dr. Lacy’s patients.”

The Kansas Dental Board approved and adopted the findings and conclusions of the ALJ.

Appeal to the District Court

Dr. Lacy appealed the findings and conclusions of the ALJ and the Board to the Shawnee County District Court. He there contended, for the first time, that his due process rights were violated by the agency’s failing to hear charges against him within 90 days of the initial filing. Dr. Lacy further contended the Board erroneously interpreted K.S.A. 65-1435(c) and the finding that he operated a dental office in Wichita without being personally present in violation of K.S.A. 65-1435(c) was not supported by clear and convincing evidence.

Dr. Lacy additionally argued that the Board’s findings that he violated the provisions of K.S.A. 65-1436(a)(1) and (13) were not supported by clear and convincing evidence. He also argued the disciplinary action against him was arbitrary and capricious when measured against his employee, a licensed dentist. This last argument was not made in the appeal from the denial of his petition for judicial review by the district court, and it will not be further discussed.

The district court set forth in detail the factual allegations of the parties, which need not again be repeated. The district court concluded that its standard of review was as follows:

“Orders of the Kansas Dental Board are subject to judicial review under the Act for Judicial Review and Civil Enforcement of Agency Actions. K.S.A. § 77-601 et seq. ‘The burden of proving the invalidity of the agency action is on the party asserting invalidity.’ K.S.A. § 77-621(a)(1). When reviewing an agency’s decision, the findings of fact, ‘if supported by substantial competent evidence, are conclusive and may not be set aside by a reviewing court.’ Sunflower Racing, Inc. v. Board of Wyandotte County Comm’rs, 256 Kan. 426, 441, 885 P.2d 1233 (1994). The evidence of the defendant board, to justify its conclusion needs to be ‘substantial’ and ‘competent,’ and it need not rise to the level of being ‘clear and convincing’ as urged by the plaintiff. Also, on disputed issues of fact, the evidence must be reviewed in the light most favorable to the prevailing party in determining whether there is substantial competent evidence to support the findings. (Sunflower, supra, p. 441; Angleton v. Starkan, Inc., 250 Kan. 711, 716, 828 P.2d 933 (1992). This Court should not reweigh the evidence. (Sunflower, supra, p. 441). Additionally, when reviewing such a decision, the court is to engage in de novo review of issues of law. Citizens’ Utility Ratepayer Board v. State Corp. Comm’n, 264 Kan. 363, 410, 956 P.2d 685 (1998). However, the court should grant deference to the agency’s statutory interpretation if it is supported by a rational basis. National Council on Compensation Ins. v. Todd, 258 Kan. 535, 905 P.2d 114 (1995). On review, relief will be granted by the Court only if it determines any one of the following:

(1) The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied;

(2) the agency has acted beyond the jurisdiction conferred by any provision of law;

(3) the agency has not decided an issue requiring resolution;

(4) the agency has erroneously interpreted or applied the law;

(5) the agency has engaged in an unlawful procedure or has failed to follow prescribed procedure;

(6) the persons taking the agency action were improperly constituted as a decision-making body or subject to disqualification;

(7) the agency action is based on a determination of fact, made or implied by agency, that is not supported by evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act; or

(8) the agency action is otherwise unreasonable, arbitrary, or capricious.

(See K.S.A. § 77-621(c)).

“An agency order is arbitrary or capricious when it is not supported by substantial evidence. Kansas Racing Management, Inc. v. Kansas Racing Comm’n, 244 Kan. 343, 365, 770 P.2d 423 (1989). ‘Substantial evidence’ is evidence possessing both relevance and substance that furnishes substantial basis of fact from which issues can reasonably be resolved. City of Wichita v. Public Employee Relations Bd., 259 Kan. 628, 913 P.2d 137 (1996).”

The district court denied Dr. Lacy’s petition for judicial review in its memorandum decision, which as to the issues raised before us is summarized as follows:

1. As to the alleged due process violation for not having a hearing within 90 days under K.S.A. 77-511(b)(2), the court held this statute applied only to applications for license or renewal and this contention was denied for lack of any compelling legal authority.

2. The wording of K.S.A. 65-1435(c) was set forth and the court’s decision pointed to that wording.

It shall be unlawful . . . to associate together with persons licensed to practice medicine or surgery in a clinic or professional association under a name that may or may not contain the proper name of any such person or persons and may contain the word, ‘clinic,’ unless such licensee is personally present in the office operating as a dentist or personally overseeing such operation as are performed in the office or each of the offices during a majority of the time the office or each of the offices is being operated.” (Emphasis in district court decision.)

Apparently Dr. Lacy’s argument was that to violate this statute the Board would have had to find the office or clinic was in his name. The district court noted Dr. Lacy owned the Wichita office, was not there a majority of the time, and failed to oversee Dr. Murphy’s work when the office was being operated. The decision held that the “name” was secondary and while a dentist may own or have several offices, it is illegal unless he or she is personally present or personally oversees the office whenever it is operated. The district court decision further stated the obvious intent of the statute “is to prevent absentee ownership which might create a chain or franchising for the delivery of dental services.” By requiring a dentist’s personal presence, the statute eliminates absentee ownership of dental offices.

The district court found there was substantial evidence to support the Board’s finding that Dr. Lacy owned and operated the Wichita office without being present or supervising the performance of dental services as required by K.S.A. 65-1435(c). The decision held there was a rational basis for the Board’s interpretation of K.S.A. 65-1435(c).

3. As to complaints concerning K.S.A. 65-1436, the district court’s memorandum decision and order looked only to the wording of subsection (a)(1), which provides:

“‘(a) The Kansas dental board may . . . take any of the actions with respect to any dental . . . license as set forth in subsection (b), whenever it is established . . . that . . . any licensed dentist . . . has:

‘(1) committed fraud, deceit or misrepresentation in obtaining any license, money or other thing of value.'”

The district court found Dr. Lacy had represented that dental work had been done by him when it had in fact been done by Dr. Murphy without his assistance, presence, or supervision in the claims he filed for compensation with either Delta Dental or Cincinnati Insurance Company. Dr. Lacy’s acts, plans, and representations were held to be tainted with fraud, deceit, and misrepresentation. These misrepresentations were held to include the representation that he had performed dental work which he had not done and for adding services not separately billed by Dr. Murphy, all after being warned by representatives of Delta Dental not to make claims in this manner.

The district court decision held there was substantial evidence that while Dr. Lacy may not have expected payment from Delta Dental, he did from Cincinnati, and he did receive $120 from Delta. Fraud was defined as “anything calculated to deceive, including all acts, omissions, and concealments involving a breach of legal or equitable duty, trust, or confidence resulting in damage to another.” It was held there was substantial evidence to support the Board’s findings of fraud.

It is from the district court’s decision that Dr. Lacy now appeals to us.

Standards of Review of Decisions of Administrative Agencies

The standards of review set forth in the Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq., were previously stated herein from the district court’s decision. We have further said in Hickman Trust v. City of Clay Center, 266 Kan. 1022, 1036, 974 P.2d 584 (1999):

“As stated in Lawrence v. Preservation Alliance, Inc. v. Allen Realty, Inc., 16 Kan. App. 2d 93, 102-03, 819 P.2d 138 (1991), rev. denied 250 Kan. 805 (1992):

‘The standard of review for appeals from administrative action is well-settled:

“‘A district court may not, on appeal, substitute its judgment for that of an administrative tribunal, but is restricted to considering whether, as a matter of law, (1) the tribunal acted fraudulently, arbitrarily or capriciously, (2) the administrative order is substantially supported by evidence, and (3) the tribunal’s action was within the scope of its authority.

“‘In reviewing a district court’s judgment, as above, this court will, in the first instance, for the purpose of determining whether the district court observed the requirements and restrictions placed upon it, make the same review of the administrative tribunal’s action as does the district court.'” Board of Johnson County Comm’rs v. J.A. Peterson Co., 239 Kan. 112, 114, 716 P.2d 188 (1986) (quoting Kansas State Board of Healing Arts v. Foote, 200 Kan. 447, Syl. ¶ ¶ 1 and 2, 436 P.2d 828 [1986]).

See DSG Corp. v. Shelor, 239 Kan. 312, 315, 720 P.2d 1039 (1986); K.S.A. 77-621.’

“The Court of Appeals added that the administrative action may be found to be invalid if the governing body erroneously interpreted or applied the law. 16 Kan. App. 2d at 103.”

Here, we have clear issues of statutory construction. We must follow the rules of statutory construction set out in GT, Kansas, L.L.C. v. Riley County Register of Deeds, 271 Kan. 311, 316, 22 P.3d 600 (2001):

“This case involves the interpretation of a statute, which is a question of law over which our review is unlimited. Hamilton v. State Farm Fire & Cas. Co., 263 Kan. 875, 879, 953 P.2d 1027 (1998). Our rules of statutory construction are well known and require us to interpret a statute to give the effect intended by the legislature, State ex rel. Stephan v. Kansas Racing Comm’n, 246 Kan. 708, 719, 792 P.2d 981 (1990), construe the statute to avoid unreasonable results,Wells v. Anderson, 8 Kan. App. 2d 431, 433, 659 P.2d 833, rev. denied 233 Kan. 1093 (1983), and read the statute to give effect, if possible, to the entire act and every part thereof. KPERS v. Reimer & Koger Assocs., Inc., 262 Kan. 635, 643-44, 941 P.2d 1321 (1997). Ordinary words are to be given their ordinary meaning, and a statute should not be so read as to add that which is not readily found therein or to read out what as a matter of ordinary English language is in it. Director of Taxation v. Kansas Krude Oil Reclaiming Co., 236 Kan. 450, 455, 691 P.2d 1303 (1984).”

In addition, as the basic review in this case is from the actions of the Board, we are obligated to apply the doctrine of operative construction, which we defined in GT Kansas in this manner:

“‘”The interpretation of a statute by an administrative agency charged with the responsibility of enforcing that statute is entitled to judicial deference. . . . Further, if there is a rational basis for the agency’s interpretation, it should be upheld on judicial review. If, however, the reviewing court finds that the administrative body’s interpretation is erroneous as a matter of law, the court should take corrective steps. The determination of an administrative body as to questions of law is not conclusive and, while persuasive, is not binding on the courts. [Citation omitted.]”‘ McTaggart v. Liberty Mut. Ins., 267 Kan. 641, 645, 983 P.2d 853 (1999) (quoting State Dept. of SRS v. Public Employee Relations Board, 249 Kan. 163, 166, 815 P.2d 66 [1991]).”‘” 271 Kan. at 317.

With this background of our standards of review, we move to the three issues raised by Dr. Lacy in this appeal.

Did Dr. Lacy’s owning and operating of a dental office in Wichita where he was not personally present during the majority of the time the office was open violate the provisions of K.S.A. 65-1435(c)?

The specific language of K.S.A. 65-1435(c) is as follows:

“It shall be unlawful, and a licensee may have a license suspended or revoked, for any licensee to conduct a dental office in the name of the licensee, or to advertise the licensee’s name in connection with any dental office or offices, or to associate together for the practice of dentistry with other licensed dentists in a professional corporation, organized under the professional corporation law of Kansas, under a corporate name, established in accordance with the professional corporation law of Kansas, that may or may not contain the proper name of any such person or persons or to associate together with persons licensed to practice medicine and surgery in a clinic or professional association under a name that may or may not contain the proper name of any such person or persons and may contain the word ‘clinic,’ unless such licensee is personally present in the office operating as a dentist or personally overseeing such operations as are performed in the office or each of the offices during a majority of the time the office or each of the offices is being operated.”

We also consider the following language of subsection (d) of K.S.A. 65-1435, which reads: “Nothing in this section shall be construed to permit the franchise practice of dentistry.”

The ALJ in his conclusions of law, paragraph 3, stated that Dr. Lacy argued that he did not “conduct” a dental office. Dr. Lacy continues this argument in his appeal before us. The ALJ noted that Dr. Lacy’s operation was consistent with ownership, he referred to Dr. Murphy as an employee, he directed Dr. Murphy as to what services to bill for, and, he went to Wichita to check on the operations of the office. Each of the ALJ’s conclusions is clearly supported by substantial competent evidence. In addition to the ALJ’s findings, the record reflects that Dr. Lacy controlled the advertising budget of the Wichita office, he provided a vehicle for Dr. Murphy and took it away when he terminated Dr. Murphy’s employment, he sent a Topeka employee to examine the operations of the Wichita office, and in all relevant respects, owned, controlled, and managed the Wichita practice.

When an analysis is made of K.S.A. 65-1435(c), it shows there are four categories under which a practice is conducted which require the presence of the licensee. We break down the operative language of 65-1435(c) in the following manner:

“It shall be lawful . . . for any licensee

“to conduct a dental office in the name of the licensee, or

“to advertise the licensee’s name in connection with any dental office or offices, or

“to associate together for the practice of dentistry with other licensed dentists in a professional corporation, organized under the professional corporation law of Kansas, under a corporate name, established in accordance with the professional corporation law of Kansas, that may or may not contain the proper name of any such person or persons, or

“to associate together with persons licensed to practice medicine and surgery in a clinic or professional association under a name that may or may not contain the proper name of such person or persons and may contain the word ‘clinic.'”

After setting forth the four categories of operation of a practice, 65-1435(c) concludes with the limitation and requirement that makes it unlawful to so operate in any of the ways set forth above “unless such licensee is personally present in the office operating as a dentist or personally overseeing such operations as are performed in the office or each of the offices during a majority of the time the office or each of the offices is being operated.”

The facts in this case make it clear that Dr. Lacy’s actions amount to conducting a dental office in Wichita. When we look to the definition of “conduct,” we find that it means “to direct the course of: CONTROL . . . to guide or lead.” Webster’s II, New College Dictionary 235 (1999). Everything about the Wichita office of Dr. Lacy showed that it was under his direct control. He was the owner. He hired and fired employees, he directed the manner of operations, he used the business name of Kansas Dental Services under which he did business at other locations, and he applied for reimbursement to Delta Dental on numerous occasions under Kansas Dental Service, Robert E. Lacy, D.D.S.

There is substantial competent evidence that Dr. Lacy conducted a dental office “in the name of the licensee” which K.S.A. 65-1435(c) specifically prohibits “unless such licensee is personally present . . . during a majority of the time the office . . . is being operated.” It is also clear by his own testimony and admissions that Dr. Lacy was not personally present in the office operating as a dentist, nor did he oversee the operations during a majority of the time the office was being operated.

Unfortunately, while the result reached by the district court was correct, the portion of K.S.A. 65-1435(c) upon which it focused simply was not applicable to Dr. Lacy. He has not associated himself with another licensed dentist in a professional corporation. This third category of dental practice, to which K.S.A. 65-1435(c) refers and that was underscored in the trial court memorandum decision previously set forth, does not directly apply to Dr. Lacy. But, as we have often stated, a trial court’s reason for its decision is immaterial if the ruling is correct for any reason. KPERS v. Reimer & Koger Assoc., Inc., 262 Kan. 110, 118, 936 P.2d 714 (1997).

The trial court correctly noted that the intent of K.S.A. 65-1435 is to prevent absentee ownership which might create the franchising of the delivery of dental services. This intent is clearly stated in K.S.A. 65-1435(d), which sets forth the legislature’s intent to prohibit the “franchise practice of dentistry.”

We have previously disposed of the argument that Dr. Lacy made on appeal that he did not “conduct” a dental office in Wichita because he provided no services there. He further argues that the intent of K.S.A. 65-1435 is to preserve the relationship between a patient and his or her dentist and that such intent was accomplished by Dr. Murphy’s treatment of the patients. Dr. Lacy then points to amendments by other states of statutory provisions similar to K.S.A. 65-1435 to delete the “majority of the time” requirement and argues he did not violate the true purpose of K.S.A. 65-1435, the protection of the relationship between the patient and the dentist.

The arguments the Board makes are more persuasive. There is no exception in K.S.A. 65-1435(c) permitting a dentist to own the practice of another dentist, and Dr. Lacy in fact owned, operated, controlled, and conducted the Wichita practice of Dr. Murphy, which is prohibited by the plain language of the statute. The action taken by other states is not persuasive. If, in fact, the statute’s plain wording does not fit the business plan which Dr. Lacy desired to pursue, his remedy is with the Kansas Legislature to amend the existing statutory language to permit ownership of the practice of another dentist. Until it does so, we must apply K.S.A. 65-1435 as it is written. A reading of the entire statute, which must include subsection (d), shows that the ALJ, the Board, and the district court were correct in their construction and application of K.S.A. 65-1435(c): Dr. Lacy utilized his license as a dentist to conduct the Wichita practice which he operated in his name and conducted its operation without being personally present or overseeing the operations during a majority of the time that the office was being operated, contrary to the statute.

Are the Kansas Dental Board’s findings that Dr. Lacy violated K.S.A. 65-1436(a)(1) and (13) supported by substantial competent evidence?

K.S.A. 65-1436(a)(1) and (13) state:

“(a) The Kansas dental board may refuse to issue the license provided for in this act, or may take any of the actions with respect to any dental or dental hygiene license as set forth in subsection (b), wherever it is established, after notice and opportunity for hearing in accordance with the provisions of the Kansas administrative procedure act, that any applicant for a dental or dental hygiene license or any licensed dentist or dental hygienist practicing in the state of Kansas has:

(1) Committed fraud, deceit or misrepresentation in obtaining any license, money or other thing of value;

. . . .

(13) engaged in a misleading, deceptive, untrue or fraudulent misrepresentation in the practice of dentistry or on any document connected with the practice of dentistry by knowingly submitting any misleading, deceptive, untrue or fraudulent misrepresentation on a claim form, bill or statement.”

Subsection (b) of K.S.A. 65-1436 grants the Board the right to (1) revoke the license, (2) suspend the license for such period of time as may be determined by the Board, (3) restrict the practice, and (4) grant probation.

The principal argument that Dr. Lacy makes on appeal is that violations of subsections (a)(1) and (13) require proof of fraud by intentional acts. Dr. Lacy further contends there was no intent to receive anything of value from Delta Dental, as his submissions were only intended to substantiate his claims against Cincinnati Insurance Co. He argues that the statutes were misinterpreted and the holdings of the ALJ, Board, and district court were not based on substantial competent evidence.

The Board counters by arguing there is substantial evidence that Dr. Lacy’s actions show a knowing violation of both subsections (a)(1) and (13). Additionally, the Board contends it is not limited to proving only fraud, as the statute’s plain language authorizes discipline for “fraud, deceit or misrepresentation” in subsection (a)(1) and of “misleading, deceptive, untrue or fraudulent misrepresentation” in subsection (a)(13). The Board contends and the record amply reflects that multiple claim forms were submitted to Delta Dental certifying that Dr. Lacy was the treating dentist in the Wichita office and would attempt to collect charges he never intended to collect.

The Board admits that Dr. Lacy offered justification for the submissions and contended there was no intent to mislead or deceive. But, the Board argues that Dr. Lacy had been warned by Delta Dental in 1995 not to submit the same type of false claim forms which he submitted in April 1996 and that the common definitions of “misleading, deceptive, untrue and misrepresented” all apply to his actions of submitting the false claim forms in violation of subsection (a)(13).

Further, there was a direct conflict between the testimony of Dr. Lacy and Dr. Ed Hall, which the ALJ resolved to Dr. Lacy’s detriment. Dr. Lacy contended the forms he submitted were done under the instruction and knowledge of Dr. Hall, who contracted to provide claim review services to Delta Dental. Dr. Hall testified he was unaware of Dr. Lacy’s problems with Delta Dental and never advised him how to file claim forms with Delta Dental.

In our discussion of this issue, we point out that the language in subsections (a)(1) and (13) is similar as to the wrongdoing required but that subsection (a)(1) also requires that “money or other thing of value” be obtained, while there is not a financial element to subsection (a)(13), and (a) the submission which is a misleading, deceptive, untrue, or fraudulent misrepresentation claim form is sufficient to be a violation.

In addition, the plain meaning of both subsections is not limited to require proof of fraud in order to substantiate a violation, as is centered by Dr. Lacy’s arguments. While the Board may show fraud, it may also show deceit or misrepresentation to prove a violation of subsection (a)(1) and/or acts or actions which are misleading, deceptive, or untrue to show a violation of subsection (a)(13).

We will not limit our discussion to the district court’s finding of fraudulent conduct as that is not necessary to uphold the Board’s decision. The evidence is clear that the claim forms submitted to Delta Dental, which did in fact result in a minimal payment, represented work which had in fact been done by Dr. Murphy, not Dr. Lacy. The actions of Dr. Lacy taken in their entirety show deceit and misrepresentations. They were misleading, deceptive, and untrue.

For something to be “misleading” means “to lead into error or wrongdoing: DECEIVE.” “Untrue” means “contrary to fact: FALSE; deviating from a standard of correctness.” Webster’s II, New College Dictionary 701, 1211 (1999). It is clear that the actions of Dr. Lacy fall within both of the above definitions of the statutory elements of subsections (a)(1) and (13). They were shown by substantial competent evidence from the claim form exhibits, as well as by the testimony of Everett, Leprick, and to an extent by the testimony of Dr. Lacy himself, although he offered justification which, in the final analysis, the ALJ, as the finder of fact, did not find sufficient to authorize his misleading, deceptive, and untrue actions.

The testimony of Dr. Lacy by which he contended his filings were made as suggested by Dr. Hall was not found by the ALJ to be credible. Nor was the explanation convincing that Delta Dental understood the reason for the filing of the claims in light of direct testimony and documentary evidence to the contrary. As the Court of Appeals said in Boutwell v. Domino’s Pizza, 25 Kan. App. 2d 110, 112-13, 959 P.2d 469 (1998), rev. denied 265 Kan. 884 (1998):

“The appellate court cannot pass on the credibility of witnesses or weigh conflicting evidence. City of Wichita v. Rice, 20 Kan. App. 2d 370, 373 889 P.2d 789 (1995). It is the function of the administrative hearing body to determine the weight or credibility of the testimony of witnesses. See Swezey v. State Department of Social & Rehabilitation Services, 1 Kan. App. 2d 94, 98, 562 P.2d 117 (1977).”

We accept the findings of the ALJ and hold that there was substantial competent evidence to show violations of both subsections (a)(1) and (a)(13) of K.S.A. 65-1436 and the subsequent imposition of the suspension as authorized by subsection (b)(2) of the same statute.

Were Dr. Lacy’s due process rights violated?

Finally, Dr. Lacy argues that his constitutional rights under the Due Process Clause of the Fourteenth Amendment to the United States Constitution and K.S.A. 77-511(b)(2) were violated by the delay in bringing this case to an administrative hearing. The principal prejudice claimed is that Dr. Hall was unable to recall conversations which Dr. Lacy asserts would have justified his actions.

We have consistently held that “where constitutional grounds are asserted for the first time on appeal, they are not properly before the appellate court for review.” Ruddick v. Boeing Co., 263 Kan. 494, 498, 949 P.2d 1132 (1997). The record reflects Dr. Lacy did not raise this defense or argument during his administrative hearing. Having failed to raise the issue where a proper and full record could have been developed, we hold he is precluded from doing so at this time. We further point out the issue attempted to be raised is not the claimed constitutional infirmity of a statute or regulation, which could not have been raised before an administrative agency. See U.S.D. No. 443 v. Kansas State Board of Education, 266 Kan. 75, 81, 90-91, 966 P.2d 68 (1998).

We have considered all of the arguments raised and hold that the rulings of the ALJ, Board, and district court are affirmed.

Larson, S.J., assigned.

Content retrieved from: http://www.kscourts.org/cases-and-opinions/opinions/supct/2002/20021206/87875.htm

Former UBC Dentistry faculty member misused funds for personal gain, university says

Do you have questions about embezzlement?  Give Prosperident a call at 888-398-2327 or send an email to requests@dentalembezzlement.com


dr-christopher-zed

The University of British Columbia alleges a former member of its faculty of dentistry “personally inappropriately enriched himself” when he was involved in a pilot project aimed at improving dental service in Haida Gwaii.

The federal government filed a lawsuit against the university and the former faculty member, Christopher Zed, in B.C. Supreme Court last November over the alleged misuse of millions of dollars in funds. Its allegations have not been proven. Criminal charges have not been laid.

The university, in its response to the federal government’s claim, said it was not unjustly enriched by the project. The federal government, through Health Canada, helped UBC establish the two dental clinics in Haida Gwaii.

“UBC acknowledges that Dr. Zed personally inappropriately enriched himself during the period in which he was involved in the project,” the university’s response to the civil claim says. “However, UBC says that Dr. Zed’s enrichment was to the loss and detriment of UBC, and not Health Canada.”

The university said Dr. Zed “breached his fiduciary duties to UBC” between 2002, when bank accounts for the clinics were opened, and 2013, when the project wrapped. It said he “incurred inappropriate or excessive expenses and diverted funds generated by the project to the use and personal benefit of Dr. Zed and others.”

However, the university said Dr. Zed and the others – who were not named – subsequently repaid a portion of the funds.

The university also took issue with a couple of the federal government’s specific allegations around money. First, it said a reference in the lawsuit to Dr. Zed making a $1.2-million deposit to his personal bank account in 2011 should have instead said he deposited that money to the clinic accounts.

Second, it said Health Canada mistakenly concluded $5.1-million was used by Dr. Zed for his personal benefit when that amount included “valid expenditures to deliver dentistry services.”

Dr. Zed has not filed his response to the federal government’s claim. However, he did file a response in April to another lawsuit brought by the Skidegate Indian Band. In that document, Dr. Zed denied he was unjustly enriched by the project. He could not be reached for comment Wednesday.

The university’s response was filed in late June but does not appear to have been previously reported.

The Skidegate Indian Band filed its lawsuit against the university, Dr. Zed, and the federal government in February. It alleged funds it should have received instead went to the university and Dr. Zed.

Dr. Zed, in his response to that lawsuit, denied the band had suffered any loss or damage and said it had no claim against him.

The RCMP has said it is investigating allegations of financial improprieties at the university’s faculty of dentistry, but a police spokesperson did not respond to a message seeking comment Wednesday.

A UBC spokesperson said she could only disclose Dr. Zed is no longer a university employee and was with the faculty of dentistry from September, 1995, until December, 2013.

Dr. Zed was formerly the associate dean of strategic and external affairs with the faculty of dentistry, as well as clinical professor of dentistry.

Content retrieved from: http://www.theglobeandmail.com/news/british-columbia/former-ubc-faculty-member-misused-funds-for-personal-gain-university-says/article31545753/


Troubled Vancouver dentist faces new lawsuit