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In re Appeal by Kind Heart Daycare, Inc.

Supreme Court of Minnesota

November 22, 2017

In the Matter of the Appeal by Kind Heart Daycare, Inc. of the Order of License Revocation and the Appeal by Yasmin Muhina Salim of the Disqualification Determination, Appellants,
v.
Commissioner of Human Services, Respondent.

         Court of Appeals Office of Appellate Courts

          Joseph A. Gangi, Daniel J. Bellig, Farrish Johnson Law Office, Chtd., Mankato, Minnesota, for appellants.

          Lori Swanson, Attorney General, Heather N. Kjos, Assistant Attorney General, Saint Paul, Minnesota, for respondent.

         SYLLABUS

         1. A person charged with obtaining "the receipt of payments to which the individual is not entitled" under Minn. Stat. § 256.98, subd. 1(3) (2016), is liable only if the person receives payments for public assistance to which the person would not have otherwise been entitled in the absence of a misrepresentation or concealment.

         2. The Minnesota Department of Human Services did not violate Minn. Stat. § 14.69 (2016) by revoking a child care provider's license and disqualifying its owner.

         3. The court of appeals engaged in proper judicial review of the Department's actions.

         Affirmed.

          OPINION

          LILLEHAUG, JUSTICE.

         The Minnesota Department of Human Services (the Department) determined by a preponderance of the evidence that appellant Yasmin Salim wrongfully obtained public assistance for appellant Kind Heart Daycare, Inc. (Kind Heart), in violation of Minn. Stat. § 256.98, subd. 1(3) (2016). Kind Heart had submitted bills to Blue Earth County (the County) under the State of Minnesota's Child Care Assistance Program (CCAP), representing that children from low-income families were present at Kind Heart when in fact they were absent or no longer enrolled with the daycare. The Department disqualified Salim from providing daycare services and revoked Kind Heart's license. The Commissioner of Human Services (the Commissioner) issued an order affirming these decisions, and the Commissioner's order was affirmed in its entirety by the court of appeals. Appellants Salim and Kind Heart assert that: (1) they were actually entitled to the CCAP payments; (2) the Department's actions violated Minn. Stat. § 14.69 (2016); and (3) the court of appeals' review failed to provide adequate judicial oversight of agency action. We affirm.

         FACTS

         1. Minnesota's Child Care Assistance Program.

         CCAP helps low-income parents pay for child care. In order for a licensed provider like Kind Heart to receive CCAP payments, it must fill out attendance records using CCAP's MEC2PRO billing system. Each county uses this billing system to administer CCAP and disburse payments directly to the provider. The Department, which is responsible for licensing child care providers, has a CCAP Child Care Provider Guide[1] that sets forth the requirements to receive CCAP payments.

         The Guide extensively addresses how to receive CCAP payments for days on which a child is absent. CCAP "will pay for up to 25 absent days per calendar year, per child, " but the provider may bill CCAP for those absent days only if the "hours are identified in the provider's attendance records as absent." The Guide includes a sample Billing Form, which shows how to fill out the attendance record and expressly includes a section for identifying absences. The Guide directs, "Fill in an 'A' for any day the child is absent." The Guide also states, "Providers who give false information on a Billing Form could be disqualified from receiving future CCAP payments and could face criminal charges."

         2. Kind Heart's billing history.

         Salim was the sole owner, controlling individual, [2] and license holder for Kind Heart. CCAP payments for services provided by Kind Heart were directly deposited into a Wells Fargo business account in Salim's name. Appellants primarily obtained CCAP payments from the County. In order to obtain such payments, Salim signed a Blue Earth County MEC2PRO Child Care Provider Assurance Form, wherein she acknowledged the importance of (1) ensuring that CCAP funds were appropriately utilized, and (2) preventing the misuse of public funds. In the same form, Salim authorized the County to access Kind Heart's child attendance records to ensure accurate submission of billing forms and appropriate use of CCAP funds. Kind Heart also maintained records acknowledging that Salim was the license holder for Kind Heart and that "wrongfully obtaining child care assistance will be investigated and may be charged as a crime."

         From October 2013 until March 14, 2014, Diane Sorenson was responsible for submitting Kind Heart's CCAP bills, which Salim occasionally reviewed. Both Salim and Sorenson were listed as authorized users on the MEC2PRO billing system. The authorization forms included language to "prevent misuse of public funds, " including an acknowledgment that the provider is required to "authenticate the accuracy of the billing forms."

         Sorenson eventually resigned from Kind Heart. Her last day was March 14, 2014. Sorenson last submitted a bill seeking a CCAP payment on March 3, 2014.

         After Sorenson left, Salim set up a new MEC2PRO account for which she was the sole authorized user. The Department alleges that an "egregious amount of discrepancies" began to appear in Kind Heart's CCAP bills. Salim asserts that she asked another employee, Kim Patterson, to take over Sorenson's CCAP billing responsibilities, but Patterson asserts that she only submitted two weeks' worth of bills and that Salim did the vast majority of the billing after Sorenson left. Salim disputes Patterson's account and alleges that Patterson did the billing.

         3. The County's investigation.

         In the spring of 2014, the Blue Earth County Sheriff's Office received reports indicating that Kind Heart was committing child care financial fraud. Investigator Ginger Peterson confirmed hundreds of instances in March, April, and May 2014, in which Kind Heart had submitted CCAP bills to the County, representing that children were present at Kind Heart, when in fact they were absent or no longer enrolled in the daycare. In total, the County determined that there was probable cause to believe that Kind Heart had billed for $12, 437.94 to which it was not entitled. On June 17, 2014, the State of Minnesota charged Salim with one felony count of wrongfully obtaining child care payments, in violation of Minn. Stat. § 256.98, subd. 1(3), and two additional felony counts of theft. The criminal case has not been tried.[3]

         4. The Department's actions.

         The County informed the Department of its investigation and the charge against Salim. The Department considered whether the evidence supported disqualifying Salim from providing child care services. Specifically, Minn. Stat. § 245C.14, subd. 1(a)(2) (2016), requires the Commissioner to disqualify an individual from direct contact with persons receiving child care services if a preponderance of the evidence indicates that the individual has committed an act that meets the definition of a crime listed in Minn. Stat. § 245C.15 (2016). That statute's list includes Minn. Stat. § 256.98 (2016), which states:

A person who commits any of the following acts or omissions with the intent to defeat the purposes of . . . child care assistance programs . . . is guilty of theft . . .: (3) obtains or attempts to obtain, alone or in collusion with others, the receipt of payments to which the individual is not entitled as a provider of subsidized child care, or by furnishing or concurring in a willfully false claim for child care assistance.

Minn. Stat. § 256.98, subd. 1; see Minn. Stat. § 245C.15.

         On June 18, 2014, the Department sent an e-mail asking for one of its staff attorneys to volunteer to conduct a preponderance-of-the-evidence (POE) review under Minn. Stat. § 245C.14, subd. 1(a)(2). The e-mail's subject line was "Be a part of history in the making…" and asked if there was a staff attorney who had "time to drop everything and review this POE today?" The e-mail asked that this be done "right away."

         One of the staff attorneys for the Department volunteered to conduct the POE review. She correctly understood that a POE review "is a record review to determine whether it's more likely than not that the person committed an act" that warrants disqualification under Minn. Stat. § 245C.14, which includes violating Minn. Stat. § 256.98 by wrongfully obtaining child care assistance. But she mistakenly thought that "[p]robable cause is higher than preponderance of evidence." The staff attorney reviewed the County's incident report, a supplemental report, and the criminal complaint. Based on these documents, she determined that a preponderance of the evidence supported the conclusion that Salim had wrongfully obtained child care assistance.

         Based on the staff attorney's report, on June 20, 2014, the Department disqualified Salim from "any position allowing direct contact with, or access to, persons receiving services from programs licensed by [the Department]." Because Salim was the controlling individual for Kind Heart, the Department revoked Kind Heart's child care center license on June 23, 2014. The Department also advised county CCAP administrators to make Kind Heart ineligible for future CCAP payments.

         On June 30, 2014, Kind Heart appealed the license revocation. Consistent with standard procedure, Kind Heart was allowed to continue operating pending a final order from the Commissioner, and Salim submitted a supervision plan allowing her to continue working at Kind Heart in the interim.

         On July 7 and 9, 2014, the Department sent two licensing investigators to Kind Heart to see whether the facility was complying with licensing requirements while the appeal was pending. The Department identified 14 new licensing violations, including failure to properly supervise Salim after her disqualification, failure to submit a background study request for an employee who had direct contact with children, failure to properly supervise children, failure to have required documentation establishing proper employee education and training, failure to maintain required staff-to-child ratios, failure to provide meals containing sufficient nutritional value, and hygiene violations. On July 24, 2014, the Department issued a supplemental order of license revocation to Kind Heart, determining that the violations constituted "additional reasons to revoke the license." That same day, Salim requested reconsideration of the Department's order to disqualify her.

         Due to Salim's reconsideration request, a senior staff attorney for the Department (not the staff attorney who conducted the POE review) reviewed Salim's disqualification on July 31, 2014, to determine whether the disqualification should be set aside. The review was governed by Minn. Stat. § 245C.22, subd. 4 (2016), which allowed the Department to set aside Salim's disqualification upon a showing that she did not "pose a risk of harm to any person served by" Kind Heart. The statute required the senior staff attorney to consider nine factors in determining whether Salim posed a risk of harm. Minn. Stat. § 245C.22, subd. 4(b)(1)-(9). The senior staff attorney expressly analyzed each factor and determined that Salim failed to show that she did not pose a risk of harm. Accordingly, Salim's request to set aside her disqualification was denied.

         5. The Administrative Law Judge's decision.

         The Department consolidated Salim's disqualification, Kind Heart's license revocation, the senior staff attorney's decision not to set aside Salim's disqualification, and the supplemental revocation order for the 14 licensing violations, for consideration by an administrative law judge (ALJ). The ALJ held an evidentiary hearing over 4 days.

         The ALJ subsequently issued findings of fact, conclusions of law, and recommendations. The ALJ found that Kind Heart's post-Sorenson CCAP billings from March to May 2014 were submitted by Patterson and Salim, and that the "pattern of errors in the bills they submitted demonstrated incompetence in billing and dishonesty."[4] The ALJ determined that Patterson's billing "demonstrate[d] a lack of competency" but there was "no evidence she intentionally submitted false billings." The ALJ determined that Salim, however, "more likely than not, had knowledge of both Patterson's erroneous billing as well as her own, " that "she knew of Patterson's errors and failed to correct them, " and that "it is more likely than not that Salim knew exactly what was going on with the bills, whether she submitted them herself or not." The ALJ ultimately found that Salim "billed public child care assistance for $9, 434 that [she] was not entitled to."

         The ALJ also found that, although the staff attorney "mistakenly believed that the preponderance of evidence review . . . was a lower standard of review than the probable cause required for an arrest warrant . . . the evidence demonstrates that it is more likely than not that [Salim] wrongfully obtained public child care assistance for Kind Heart." Accordingly, the ALJ concluded that Salim "wrongfully obtained child care assistance in violation of Minn. Stat. § 256.98 and, therefore, was properly disqualified pursuant to Minn. Stat. § 245C.14."

         But the ALJ disagreed with the senior staff attorney's determination that Salim posed a risk of harm to people served by Kind Heart. The ALJ found that "the purpose of [Salim's] activity was to aid families in obtaining and keeping access to child care." Accordingly, the ALJ recommended that the Department's decision to disqualify Salim was proper, but that the disqualification be set aside.

         Further, the ALJ concluded that the 14 licensing violations in the supplemental revocation order did not "reflect the need for license revocation." Thus, the ALJ concluded and recommended that the order revoking Kind Heart's license be rescinded.

         6. The Commissioner's order.

         On August 6, 2015, the Commissioner issued a final order, through a designee, accepting in part and rejecting in part the ALJ's recommendations.

         First, the Commissioner accepted the ALJ's recommendation to disqualify Salim. Specifically, the Commissioner adopted the ALJ's finding regarding the staff attorney's mistaken understanding of the relative burdens of proof, and the ALJ's conclusion that a preponderance of the evidence supported a determination that Salim wrongfully obtained public child care assistance. Regarding Salim's intent and knowledge of the wrongful billing, the Commissioner agreed with the ALJ's finding that Salim either submitted the erroneous bills herself or knew of them and did not stop them. Accordingly, the Commissioner concluded that the Department properly disqualified Salim. The Commissioner amended the dollar amount fraudulently obtained to $9, 766 from the $9, 434 found by the ALJ.

         Second, the Commissioner disagreed with the ALJ's conclusion that Salim did not pose a risk of harm and rejected the ALJ's recommendation that her disqualification should be set aside. The Commissioner struck the ALJ's finding that "the purpose of [Salim's] activity was to aid families in obtaining and keeping access to child care, " instead finding that Salim posed a risk of harm due to "the harm suffered by the government and other families needing child care." In a supporting memorandum, the Commissioner explained:

I rejected the ALJ's recommendation that [Salim's] disqualification should be set aside. The ALJ found that [Salim] established that she does not pose a risk of harm to children enrolled in Kind Heart and that the Department had not demonstrated otherwise. I rejected both the findings and the ALJ's conclusion. As the Department pointed out, [Salim's] fraudulent billing is an indication that she may provide erroneous information in other situations. [Salim's] failure ...

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