No 'red flag' yet in Felix probe
By Johnny Brannon
Advertiser Staff Writer
Eight months after state prosecutors announced a single felony indictment as "the tip of the iceberg" of impending fraud charges related to services provided under the Felix Consent Decree, no one else has been formally charged with wrongdoing.
Lawyers who pushed for improved services for mentally disabled public school students under the consent decree say they never believed fraud was widespread.
"Told you so," said Eric Seitz, attorney for the plaintiffs in the federal lawsuit that led to the 1994 consent decree. "To the best of our knowledge, there has been no significant fraud.
"To have said with such great certainty that this was the tip of the iceberg we said at the time was ill-advised, and it has so far turned out to be a red herring."
But lawmakers who have closely monitored costly state efforts to meet the consent decree's goals say they remain hopeful investigators will continue aggressively.
Sen. Colleen Hanabusa, who co-chaired a legislative committee to investigate state spending to comply with consent decree requirements, said she remains convinced that taxpayers were bilked.
"We have been told that there are other cases, and it was our understanding that they would proceed," said Hanabusa, D-21st (Kalaeloa, Makaha). "I do know, from reports we received, that the attorney general was very close to more than one major fraud case."
The single indictment issued so far was against Susan Puapuaga, who worked as a therapeutic aide with the Alaka'i Na Keiki mental health services agency. She was charged in May with 10 felony counts of medical assistance fraud for allegedly billing the state for unprovided services worth $1,800. She pleaded no contest in July.
The charges carry a maximum penalty of 50 years in prison, but Puapuaga is expected to seek probation because she has no criminal record. Court records show sentencing is scheduled for Feb. 5, and had been delayed in October "so that sentencing can be consolidated with upcoming new cases."
Former Attorney General Earl Anzai said in May that additional indictments were expected by June, and that investigators were looking into billings by at least six other care providers.
Deputy Attorney General Michael Parrish of the office's Medicaid Investigations Division declined to discuss details of the probe, but said "the pace of the investigation has not changed in any respect."
"There have been dozens of allegations regarding possible fraudulent activity associated with the Felix consent decree since the indictment of Susan Puapuaga," Parrish said.
Gov. Linda Lingle appointed Attorney General Mark Bennett last month to replace Anzai, who was appointed by former Gov. Ben Cayetano.
Attorney Jeff Portnoy, the federal court's special master for the consent decree, said he was not overly concerned about fraud, but wanted to be kept informed.
"There are bigger fish to fry, and that's to get Felix completed," Portnoy said. "But if there's wrongdoing, we're the first ones who want to know about it, the federal court."
The consent decree ended a 1993 lawsuit by the families of Maui student Jennifer Felix and other children that charged the state's special-education services were abysmal and failed to comply with federal law.
The state has struggled since to meet the court's goals, and reached a milestone last month as all public school campuses came into provisional or full compliance with the consent decree.
Seitz said some over- and under-payment disputes should be expected in a large, complex compliance effort, but he had no reason to believe they were disproportionate.
"I don't see anything that raises a red flag about how moneys have been expended or handled," Seitz said. "We don't want to discourage anybody, if there has been misconduct, from coming forward to rectify that problem, but it was irresponsible to claim it was riddled with fraud."
The state has spent more than $1 billion on services to special-education children under the consent decree. Approximately $700 million would have been spent if services had remained at the 1994 level, according to a court monitor's report.
The investigative committee of lawmakers tried repeatedly to subpoena testimony from officials who designed the criteria for meeting consent decree goals and measured the state's progress.
But the subpoenas were quashed by U.S. District Judge David Ezra, who angrily accused lawmakers of harassing court-empowered officials while presenting no evidence of fraud or mismanagement.
Hanabusa said the committee was prevented from asking fundamental questions that would have helped lawmakers understand goals and procedures so they could follow up with important inquiries.
"Right now we're stuck, because we can't get anything," she said.
Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.
