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In re Huber

October 21, 1985

IN THE MATTER OF KARL R. HUBER, AN ATTORNEY AT LAW

ORDER

The Disciplinary Review Board having filed a report with the Supreme Court recommending that KARL R. HUBER, of NEWARK, who was admitted to the Bar of this State in 1965, be disbarred, and good cause appearing;

It is ORDERED that the findings of the Disciplinary Review Board are hereby adopted and respondent is disbarred, effective immediately; and it is further

Ordered that KARL R. HUBER be and hereby is permanently restrained and enjoined from practicing law; and it is further

Ordered that KARL R. HUBER reimburse the Ethics Financial Committee for appropriate administrative costs; and it is further

Ordered that respondent comply with Administrative Guideline No. 23 of the Office of Attorney Ethics dealing with suspended, disbarred or resigned attorneys.

Decision and Recommendation of the Disciplinary Review Board

This matter is before the Board on a Motion for Final Discipline filed by the Office of Attorney Ethics. This is based on Respondent's criminal conviction in the United States District Court for the Southern District of New York of conspiracy, false statements, mail fraud, perjury and racketeering, all in violation of federal law.

Respondent and three others were indicted in a multi-count indictment returned by a federal grand jury in 1978. The charges pertained to Respondent's activities concerning Hospital Equipment Company (HEC), a New Jersey hospital supply house, and its divisions and corporate successors. Respondent and his father obtained control of HEC in October, 1971. HEC had entered into a number of cost-plus contracts with hospitals in New York and New Jersey for the sale of hospital and surgical supplies, furniture and equipment. Respondent was involved in and managed the hospital supply business on a day-to-day basis, and was kept apprised in detail about new contracts as they were being made. The record established that:

Shortly after the Hubers acquired HEC, and at their specific direction, HEC employees Conroy and Eckert . . . . began to inflate the manufacturers' costs

quoted to the hospitals. At appellant's [Respondent's] suggestion, invoices were falsified where necessary. The hospitals were also charged for freight not actually incurred. The term "phantom freight," apparently coined by appellant's father, was in general usage at the office. As a result of these fraudulent practices, HEC and Medical Facilities received an effective mark-up of roughly between 18 percent and 29 percent rather than the five to eight percent specified in the contracts. There was evidence that the mails were used in connection with the scheme to defraud the hospitals. The fraudulent over charges totalled nearly $471,000, most of which was subject to reimbursement by either the federal or state government [footnote omitted]. Further, each hospital capitalized the costs incurred in outfitting it, and a depreciation expense was annually claimed as part of each hospital's operating expenses. These expenses were reported to insurance companies, which served as fiscal intermediaries for the Medicare and Medicaid Programs. The cost reports formed the basis for reimbursement by the federal and state governments, and the fraud resulted in an inflated depreciation claims of nearly $105,000. The nature of the federal and state hospital funding programs was made clear to the Hubers from the outset of their involvement in the hospital supply operation, and they understood that those programs would stimulate hospital expansion.

In July 1977, appellant appeared before a grand jury that was investigating whether fraud had been committed by HEC or its successors. Appellant denied to the grand jury that he exercised close control over the hospital business and that he knew of the cost-plus nature of the contracts or the meaning of the term "phantom freight." The proof at trial overwhelmingly showed otherwise. In defense, appellant contended that he and his father had been cheated by Conroy and Eckert and that if appellant was directly involved in the fraudulent scheme, because of the peculiar relationship between him and his domineering father, appellant lacked the independence of will necessary to form ...


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