A Chicago lawyer, once the state`s chief investigator of pharmacies, is under investigation by a federal grand jury for his alleged role in the largest Medicaid fraud in history.
The attorney is David Blumenfeld, a onetime top legal gun for the Illinois Department of Registration and Education. His problems stem from later service for pharmacy magnate Morton Goldsmith, especially when Goldsmith sought to avoid tangles with regulatory agencies.
Goldsmith ran a string of 20 pharmacies and health clinics in Chicago from 1979 to 1984. He was convicted of masterminding a $20 million Medicaid fraud scheme in which hundreds of patients, mostly drug addicts and peddlers, were administered unnecessary tests each day and prescribed unneeded items billed to Medicaid.
The patients were sold a sedative and a codeine-based cough syrup that, taken together, produced a heroin-like high. Goldsmith was sentenced to 12 years in prison, fined $150,000 and ordered to forfeit $8 million in profits from his business, Drug Industry Consultants Inc. After the verdict, Goldsmith, who had pleaded poverty and got a court-appointed lawyer, tried to remove more than $200,000 from area banks. That gambit failed.
Blumenfeld was with the Department of Registration and Education between 1969 and 1973 and played a big role in drafting certain important regulations. In private practice, he clearly was a full-service adviser. Many of the names picked for Goldsmith`s pharmacies (like Kiwi, Cherry, Eclair, Fudge and Almond) are said to be Blumenfeld`s favorite flavors at a well-known ice cream chain.
Some insight on what the grand jury may be checking comes from the trial transcript of a former partner of Goldsmith`s, Robert Dubin, who pleaded guilty and testified against Goldsmith.
In 1982, Dubin said, Blumenfeld advised Goldsmith that the percentage of prescriptions for cough syrup–a controlled drug due to its high codeine content–was too high and might raise eyebrows at the state agency. Most Goldsmith customers came for cough syrup and sedatives.
”He (Blumenfeld) told us to keep the percentages in line on controlled drugs,” Dubin testified. ”If we stayed under 25 percent–25 percent or less of controlled drugs–we wouldn`t have any trouble with the department.”
To lower the percentage, Dubin said, doctors at the clinics and pharmacists were instructed by Goldsmith to begin selling more over-the-counter items, such as condoms, toothpaste and birth control pills, all of which were billed to Medicaid.
Dubin also testified that Blumenfeld inspired what amounted to a dual bookkeeping system.
Pharmacies must number each prescription, using a machine similar to a time-date stamp that punches a number and automatically moves to the next number. That list is turned over to the Illinois Department of Public Aid, which processes the Medicaid reimbursements. The list is audited by Blumenfeld`s old agency.
Dubin testified that Blumenfeld suggested keeping two of these machines at each pharmacy. One was used to number all the prescriptions to submit to public aid for reimbursement. Evidence at the trial showed that 19 out of 20 prescriptions on that list were for syrup and sedatives. The list produced by the second machine, the one kept for Blumenfeld`s former employer, showed that only one out of five prescriptions was for syrup and sedatives, according to the evidence.
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Dubin was asked by defense lawyer Craig Tobin, ”And the reason for the second . . . machine was in case anyone ever wanted to look at your prescriptions, is that right?” Dubin said that was true.
”It was an attempt, once again, to cover up what you were doing?” the lawyer asked. Correct, Dubin replied.
”Would it be akin to keeping two sets of books?” Tobin asked. That`s right, replied Dubin, saying that having two machines was meant to ”deceive the one specific department that was coming in.”
Contacted late Monday, Blumenfeld said, ”I can tell you simply that those are uncorroborated lies.”
JUDGE RILED OVER SALMONELLA CASES
Don`t ask Circuit Judge Thomas O`Brien to herald the ethical virtue of the American insurance industry. In January, he ordered Kaufman`s Delicatessen in Skokie and its insurer to stop settling cases with prospective claimants in a court case resulting from the salmonella outbreak at the deli. He said there were to be no deals unless people received a court-approved notice of pending class-action lawsuits.
Well, guess what the judge learned last week? A total of 32 settlements were reached with people by Providence Washington Insurance Co., which was assisted by Mark Frayne, an adjuster for Chicagoland Claims Service Inc. Hearing the news, O`Brien on Friday declared null and void those settlements made after his January order. But he said that claimants can keep as an advance for further recoveries the money they agreed to take.
Agreeing with plaintiffs attorney Robert Atkins, the judge also ordered Frayne to show up in court June 23 to show cause why he shouldn`t be held in contempt. Defense lawyer John C. Doyle, who represents the deli through Providence Washington Insurance Co., maintains that through inadvertence the
”letter,” but not ”the spirit,” of O`Brien`s order, may have been breached; meaning that notices didn`t get sent out in the right time but people had them by the time they were settling.
JENNER & BLOCK SETTLES FOR LESS
Partners at Jenner & Block won`t be forced to exist on tuna casserole, but the firm has agreed to accept a reduced fee of $85,000 for work on behalf of the Chicago Lawyers Committee for Civil Rights Under Law. It involved the lawsuit accusing the notorious, now-defunct Red Squad of the Chicago Police Department with spying on lawyers representing minority group members who applied for police jobs. District Judge Susan Getzendanner cut the firm`s original request from $202,773 to $131,802 last year, taking particular note to knock off $2,818.75 requested by that legend in his own time, Albert Jenner Jr., for time spent at a single news conference. The settlement was reached after lawyers for the city said they would appeal the $131,802 award.
DIVORCE ATTORNEY WORTH $200 AN HOUR
A few months ago, we revealed the tiff between heavyweight divorce lawyer Marshall Auerbach and former client June Barry, who was contesting a $250,000 fee Auerbach charged for six months` work in her case. Barry hired Joanne Pitulla, who`s gaining a reputation for taking on the city`s divorce establishment, in the fee dispute and Auerbach countered by retaining the irrepressible William Harte, friend of the Democratic political establishment. Judge Barbara Disko has ruled that Auerbach is worth the $200 an hour he charges, but that she didn`t believe the number of hours charged Barry were justified. She slashed the fee to $103,000, also saying that much of the work was duplicative. Harte says Auerbach will appeal.
YOUNG LAWYERS DEFECT FROM FIRM
A group of young Turks bolted Robbins Schwartz Nicholas Lifton & Taylor Ltd. and aim to take many of its clients in the public sector labor law field, including school boards. Four of the firm`s 10 partners and two associates split to Gottlieb and Schwartz. ”You had the junior partners doing the lion`s share of the work and the senior partners in their middle or late 50s with substantially reduced, 9-to-5 workloads drawing the lion`s share of profits,” said Michael Loizzi, a partner who said he doubled his compensation by leaving. Other departed partners are Stanley Eisenhammer, oldest of the group at 37; S. Bennet Rodick and Therese Hodges, who had served as special counsel for the Chicago Board of Education. Name partner Jerome Robbins said the rift was ”an internal matter. . . . Employees come and employees leave, but the firm remains the same,” he said.
BRIEFS: Attorneys James Costello, convicted of paying bribes to former Judge Wayne Olson, and Jerry Berliant, who pleaded guilty in a Greylord-related tax case, on Monday agreed to disbarment by the state Supreme Court. . . . Somehow, the Chicago Bar Association will try to limit to three hours Tuesday a $10-a-head seminar on ”major issues facing the legal community.”
Participants include U.S. Atty. Anton Valukas, State`s Atty. Richard Daley, Illinois Supreme Court Chief Justice William Clark, U.S. Appeals Judge William Bauer and private attorneys Daniel Webb, Jerold Solovy, Patricia Bobb and Gary Johnson. It`s at 4 p.m. at 29 S. LaSalle St.