Nutting says $1.6 million Medicaid overbilling was honest mistake

Posted Nov. 17, 2010, at 10:37 p.m.
Last modified Nov. 18, 2010, at 5:41 a.m.

LEWISTON, Maine — The presumptive speaker of the state House of Representatives is facing renewed scrutiny for overbilling state and federal agencies more than $1.6 million for Medicaid reimbursements.

About $1.2 million of that sum remains unpaid and unrecoverable, according to the state.

Rep. Robert Nutting, R-Oakland, last week was nominated by a Republican caucus to lead the new GOP majority in the next legislative session, all but ensuring that he’ll become the first Republican to preside over the chamber in 36 years.

However, what was supposed to have been a career achievement for the five-term legislator has become mired in questions about Nutting’s business practices at True’s Pharmacy. In 2003, Nutting closed the business after a settlement ordered him to repay $1.6 million for overcharging the state in Medicaid reimbursements for shipments of adult diapers, latex gloves and bed liners.

The case received significant media attention between 2002 and 2004 as the Maine Department of Health and Hu-man Services originally alleged that Nutting, at the time a sitting legislator, defrauded the state for $3.6 million over five years. A subsequent investigation and settlement lowered the figure.

Nutting consistently countered that the issue stemmed from misinterpreting the state’s prescribed reimbursement formula.

On Wednesday, Nutting agreed to a series of interviews with media outlets to explain the issue, which he claimed largely was driven by “confusing regulations” enforced by DHHS and other state departments that hurt Maine’s small businesses.

“This is what we’re working on,” said Nutting, a reference to the new Republican majority’s vow to dial back rules they say are strangling economic growth.

Nutting also contends that the state’s vigorous pursuit of the case forced him to close his business and liquidate its assets after True’s Pharmacy paid back just over $433,000, 26 percent of the settlement.

“When an honest company, an honest business, an honest individual makes a mistake, instead of working through the problem … instead of collecting more money back, [the state] just takes out a hammer when it’s not necessary,” he said.

According to documents obtained from DHHS through a Freedom of Access request, Nutting repaid $433,188 of the settlement. Shortly after filing a lawsuit to contest the sum, True’s Pharmacy declared bankruptcy, forcing the Department of Health and Human Services and Medicaid to eat the remaining $1.2 million.

True’s Pharmacy filed Chapter 7 rather than Chapter 11. The distinction is significant because Chapter 11 would have allowed Nutting to hold off True’s creditors and delay liquidation while he attempted to repay the balance of the settlement.

Asked why True’s Pharmacy filed Chapter 7 instead of Chapter 11, Nutting said Wednesday that he didn’t know the particular ramifications of either filing. He said he acted on the advice of his lawyers and that the state urged him to file for bankruptcy.

“They were anxious to get their money,” Nutting said, adding that the settlement schedule forced him to shutter the business and file for bankruptcy.

Press accounts from the time indicate that Nutting’s team of lawyers in 2004 filed a countersuit to reduce the final settlement amount. Shortly thereafter, True’s Pharmacy dropped the suit and filed Chapter 7.

Nutting initially said he didn’t recall the countersuit to reduce the settlement. However, when read a press account from that period, he said his decision to file Chapter 7 came at the state’s suggestion.

“They wouldn’t allow us a long enough period to pay the money back,” he said.

Bankruptcy files showed that True’s Pharmacy sold off its assets — a van, computers, tables and even soda foun-tain stools — for $128,000.

That amount, plus other assets, left True’s with $189,882 in proceeds to go to the state.

The $433,000 amount was the result of the liquidation plus the state’s decision to choke off True’s Pharmacy Medicaid reimbursements during the investigation.

Nutting said he found no contradiction between his new role as leader of the House, which oversees programs such as MaineCare, and his unpaid debt.

He said the errors he made were “unintentional” and that the overpayments did not make him wealthy.

Lance Dutson, communications director for the Maine Republican Party, said Nutting pumped the $1.6 million back into business operations. Dutson said the company didn’t expand, nor did Nutting use the money for personal gain.

“It’s not like there’s a house in Costa Rica or something,” Dutson said.

Nutting said he paid his three lawyers “over six figures” during the case. He couldn’t give a specific amount.

The 2004 final decision on the case said True’s Pharmacy didn’t keep accurate records for an extended period, making it difficult for auditors to determine exactly how much he overcharged the state.

Nutting denied that claim, saying 96 percent of the documents the pharmacy provided were verifiable by state standards. He also refuted early charges that his employees had destroyed records to thwart the investigation.

Nutting said early accusations withered once the public understood that he had made “an honest mistake.”

“When this first came out, the stories said things like ‘fraud,’ ‘deceit’ and ‘bilked’ and those sorts of things,” he said. “Over the timeline you saw the dollar amount come down … those words disappeared. It became much more about an honest mistake.”

Press accounts from the period showed Nutting garnering support from Oakland residents, doctors and party members. During a hearing process that extended into August 2003, a Waterville Sentinel story detailed a rally at the State House in which supporters urged the state to halt the investigation. Some attendees carried signs that read, “If the diaper fits, you must acquit” and “Stop the insanity.”

Later that summer, Nutting closed True’s Pharmacy and laid off its 23 employees.

In 2004, the state filed its final report, saying Nutting owed $1.6 million. An April 2004 Waterville Sentinel story quoted Nutting as saying, “There’s no hope that True’s will be able to repay anywhere near that. There’s no source of income. We will file for bankruptcy at some point. The state will get whatever assets they will get.”

Four months later, True’s dropped its countersuit and filed for Chapter 7.

Nutting was serving his third term in the Legislature at the time. He won a fourth term in November, edging out two challengers.

Nutting said Wednesday that voters’ endorsement of him despite the high profile of the True’s Pharmacy case showed that the community supported him.

“Since this occurred, since the people who know me the best in Oakland and Sidney have seen this play out in real time, they have elected me three consecutive occasions,” he said. “I think that should tell the people who don’t know me very well that if you did know me very well, that this is an honest mistake.”

Nutting said he still intends to seek the House speaker position.

“Not only do I have the support of the House Republican Caucus, I think you will see that I have the support of the House Democratic Caucus as well,” he said.

John Christie of the Maine Center for Public Interest Reporting contributed to this report.

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