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In re License of Fanelli

August 13, 2002

IN THE MATTER OF THE LICENSE OF ANDREW T. FANELLI, D.O., TO PRACTICE MEDICINE AND SURGERY IN THE STATE OF NEW JERSEY.


On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The issue in this appeal is whether Dr. Andrew T. Fanelli, D.O., who pled guilty to conspiracy to unlawfully abstract and convert funds of an employee benefit plan, has a statutory right to a hearing on the issue of the appropriate sanction.

Dr. Fanelli was co-administrator of the pension fund for Regional Gastroenterological Associates, P.A. (RGA), a medical practice in which he was a partner. Dr. Fanelli was licensed in both New Jersey and Pennsylvania. The RGA pension fund was a fund within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 to 1461. Dr. Fanelli's wife was RGA's bookkeeper and business manager. In order to meet a cash flow shortage, Mrs. Fanelli recommended borrowing from the pension fund, assuring Dr. Fanelli that it was legal to do so. Dr. Fanelli gave his consent. Without his knowledge, however, Mrs. Fanelli borrowed additional funds with the approval of Dr. Kravitz, Dr. Fanelli's partner. The borrowed amounts exceeded the legal limit and beneficiaries of the pension fund sued RGA's accountants for malpractice.

In December 1997, the United States Attorney for the Eastern District of Pennsylvania indicted Dr. Fanelli and his wife for breach of their fiduciary duties in administering the pension fund. Although Dr. Fanelli claimed he had no knowledge of the improper actions, he was presumed to have at least constructive knowledge of the wrongdoing. In December 1998, Dr. Fanelli pled guilty to the indictment charging him with conspiracy to unlawfully abstract and convert funds of an employee benefit plan to his own use. Subsequently, the United States Attorney's Office informed the New Jersey State Board of Medical Examiners (Board) of the disposition. In October 2000, the Board issued a Provisional Order revoking Dr. Fanelli's license.

Pursuant to the Board's Order, Dr. Fanelli requested modification or dismissal of the Board's Findings of Fact and, in addition, requested an evidentiary hearing permitting him to submit mitigating evidence on the issue of the appropriate sanction. Dr. Fanelli's request was denied. He was allowed, however, to submit forty-seven letters from family members, friends, physicians, and others attesting to his good character and medical competence. Noting that his plea of guilty to the conspiracy charge precluded him from arguing that he was not part of the conspiracy, the Board entered a Final Order of Discipline revoking Dr. Fanelli's license to practice medicine and surgery in the State of New Jersey.

Dr. Fanelli appealed the Board's Order to the Appellate Division. He also petitioned the Board for a stay pending appeal. Both were denied. Subsequently, the Supreme Court granted Dr. Fanelli's motion for a stay pending appeal. The Appellate Division, in an unpublished per curiam opinion, affirmed the Board's Order. The court rejected Dr. Fanelli's arguments that his actions were at best negligent and that they did not constitute professional misconduct or involve moral turpitude.

The Supreme Court granted Dr. Fanelli's petition for certification.

HELD: Dr. Fanelli has the right to an evidentiary hearing to determine whether his criminal conviction relates adversely to the practice of medicine.

1. The Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15, does not create a substantive right to an administrative hearing, except where an agency revokes or refuses to renew a license in a contested case. The

statute reflects our State's long-standing commitment to procedural fairness in administrative proceedings. (Pp. 10- 12)

2. In accordance with the APA, a plenary hearing is required in the circumstances of this appeal. As there exist contested adjudicative facts, Dr. Fanelli may "respond, appear and present evidence and argument on all issues involved." Under the circumstances of this case, the court is required to determine the extent of Dr. Fanelli's knowledge and, in addition, determine whether Dr. Fanelli pled guilty to a conspiracy "to commit any offense against the United States" or "to defraud the United States." 18 U.S.C.A. § 371. (P. 12-14)

3 The legislative history of N.J.S.A. 45:1-21 does not define moral turpitude and therefore courts and governmental agencies must look elsewhere for its definition. In State Board of Medical Examiners v. Weiner, 68 N.J. Super. 468, 483 (App. Div. 1961), the Appellate Division categorized moral turpitude as an "act of baseness, vileness, or depravity in the private and social duties which a man owes to his fellow men, to society in general, contrary to the accepted and customary rule of right and duty between man and man . . . everything done contrary to justice, honesty, modesty, or good morals." Whether the Board in this appeal acted arbitrarily and capriciously in finding moral turpitude turns on a full understanding and interpretation of Dr. Fanelli's crime. In the absence of plea and sentencing transcripts and other evidence, we cannot decide on this record whether Dr. Fanelli's crime involved moral turpitude. The introduction of relevant evidence at a hearing before the Board will permit the Board to make an informed decision. (Pp. 14-20)

4 Whether Dr. Fanelli's conviction on criminal charges related adversely to the practice of medicine pursuant to N.J.S.A. 45:1-21(f) must be determined via an evidentiary hearing. Our remand on this issue is for the purpose of allowing Dr. Fanelli an opportunity to prove his contention and is not to be construed as a conclusion on our part that the underlying offense does or does not relate adversely to the practice of medicine. (Pp. 20-22)

5. At the remand hearing, Dr. Fanelli may not re-litigate his guilt or innocence, but he should be permitted to develop the core facts concerning the pension fund and his conduct. In addition, Dr. Fanelli may be heard on the question of moral turpitude, the relationship between his actions and his practice, and he may present evidence on mitigation and argue for a sanction less than a full revocation of his license. If character is a contested issue, character witnesses may be presented. If character is not an issue, the fact-finder may nevertheless allow such testimony at its discretion. The Board retains the discretion, subject to appellate review, whether discipline should be imposed and the quantum of that discipline. (Pp. 23-24)

The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Board of Medical Examiners for further proceedings consistent with this opinion.

CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, LONG, VERNIERO, and LaVECCHIA join in Justice ZAZZALI's opinion.

The opinion of the court was delivered by: Zazzali, J.

Argued March 26, 2002

Dr. Andrew T. Fanelli, D.O. (Fanelli) pled guilty to conspiracy to unlawfully abstract and convert funds of an employee benefit plan to his own use in violation of federal law. In a subsequent license revocation proceeding before the New Jersey State Board of Medical Examiners (Board), Fanelli's request for a full hearing on the issue of the appropriate sanction was rejected. The Board then revoked his license to practice medicine and surgery in this State. The Appellate Division affirmed.

We find that Dr. Fanelli has a statutory right to a hearing. We therefore reverse the Appellate Division and remand the matter to the Board for further proceedings.

I.

In 1991 and 1992, Fanelli, a physician licensed in New Jersey and Pennsylvania, was a partner in a medical practice known as Regional Gastroenterological Associates, P.A. (RGA). Fanelli and his partner, Dr. John Kravitz, were co- administrators of the pension fund for RGA. The fund contained approximately $1.5 million, of which $800,000 was attributable to Fanelli, $560,000 to his partner, and $85,000 to their employees. The RGA pension fund is a fund within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 to 1461. Fanelli's wife was RGA's bookkeeper and business manager. Mrs. Fanelli informed her husband that RGA had a cash flow shortage and recommended that RGA borrow money from the pension fund. She advised him that this practice was permitted under the law and that she had obtained prior approval for the loan from Dr. Kravitz and RGA's accountants. Fanelli gave his consent and approved the loan.

Fanelli claimed that without his knowledge his wife subsequently sought and received the approval from Dr. Kravitz for three additional loans totaling approximately $1,000,000. The amounts withdrawn by Mrs. Fanelli exceeded the legal limit fund administrators are authorized to borrow from a pension fund. See I.R.C. § 401 (a)(13)(A); Treas. Reg. § 1.401 (a)- 13(d)(2). The record indicates that Mrs. Fanelli's withdrawals depleted virtually all of the money in the fund. Fanelli contends that he later learned that at the time of the pension withdrawals his wife was suffering from a mental illness that manifested itself in pathological and reckless spending. Fanelli did not personally withdraw any money from the pension fund.

After discovery of the withdrawals, the beneficiaries of the pension fund sued RGA's accountants for malpractice. In 1996, the accountants settled with the pension fund beneficiaries for $900,000. As a result of that settlement the fund was reimbursed, except for Fanelli's interest in the fund. In 1996 and 1997, Fanelli repaid the plan those amounts that had not been repaid through the settlement proceeds, thereby fully reimbursing the fund.

In December 1997, the United States Attorney for the Eastern District of Pennsylvania indicted Fanelli and his wife for breach of their fiduciary duties in administering the pension fund. Although Fanelli claims that he did not have any knowledge of the improper actions, as administrator of the fund, and therefore a fiduciary, he was presumed to have at least constructive knowledge of the wrongdoing. An ERISA fiduciary is subject to a reasonable person standard of care in ...


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