On appeal from a Final Decision of the Board of Trustees of the Public Employees Retirement System, Docket Number 2-10-149632.
Before Judges Petrella, Lintner and Parker.
The opinion of the court was delivered by: Parker, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 30, 2002
Petitioner appeals from a decision by the Board of Trustees of the Public Employees' Retirement System (PERS) partially forfeiting her pension based upon her conviction for theft by deception, N.J.S.A. 2C:20-4.
The matter was referred to the Office of Administrative Law (OAL) on petitioner's appeal and was heard by an Administrative Law Judge (ALJ) who rendered an initial decision on August 16, 2001, recommending partial forfeiture. Petitioner submitted a letter of exceptions on August 30, 2001, in which she argued, among other issues, that (1) forfeiture of pension benefits results in double jeopardy; and (2) the New Jersey forfeiture statute is preempted by the vesting provisions of the Internal Revenue Code (IRC). Petitioner's arguments were rejected by the PERS Board and the ALJ's Initial Decision was adopted on September 20, 2001.
The facts elicited at the hearing before the ALJ are as follows. Petitioner began employment at Bergen Pines County Hospital on January 11, 1982. She was a registered nurse assigned to the psychiatric jail unit. In 1989, she began having financial difficulties and a friend told her that Dr. Carl H. Lichtman could help her with her financial concerns. Petitioner acknowledged that she was fully aware that this "help" actually involved participating in an insurance fraud scheme, whereby Lichtman submitted fraudulent claims to plaintiff's health insurance carrier, the State Health Benefits Program, and split the proceeds with her. Petitioner continued in this scheme with Lichtman until the scheme was discovered in 1995. She received numerous checks from the insurance company during that time and cashed them all. In 1996, she was formally accused of third degree theft by deception and pled guilty in Bergen County Superior Court. She was sentenced on June 6, 1997, to three years probation on the condition that she pay restitution in the amount of $28,208.
At the conclusion of the hearing, the ALJ considered the eleven factors established by the Supreme Court in Uricoli v. Bd. of Trs., Police & Firemen's Ret. Sys., 91 N.J. 62 (1982), codified in N.J.S.A. 43:1-3, and concluded that the undisputed facts demonstrated that petitioner willingly participated "in a criminal scheme to submit fraudulent insurance claims and to receive kick backs from Dr. Lichtman totaling $28,028." The ALJ found that petitioner intended to defraud the State Health Benefits Program by submitting the false claims, and that there was a nexus between the theft and her nursing duties because she "would not have been able to submit fradulent [sic] claims to the Plan unless she worked as a nurse at the Bergen Pines County Hospital." After evaluating the eleven Uricoli factors, the ALJ determined that "petitioner's betrayal of her public trust outweighs the mitigating factors and warrants a partial forfeiture of her pension from March 1, 1989 to April 30, 1997, a total of 8 years and 2 months."
In this appeal, petitioner argues: (1) the forfeiture statute, N.J.S.A. 43:1-3, violates the double jeopardy provision of the New Jersey Constitution; (2) the forfeiture statute violates the supremacy clause of the U. S. Const., art. VI, cl. 2; *fn1 and (3) the forfeiture statute does not apply to the facts of this case.
Petitioner did not raise her constitutional arguments before the ALJ but addressed them in her exceptions to the ALJ's initial decision. We reject all of her arguments and affirm the PERS decision for the reasons set forth herein.
We have previously addressed petitioner's argument that forfeiture of her public pension constitutes double jeopardy under the New Jersey Constitution, art. I, ¶ 11. In LePrince v. Bd. of Trs., Teachers' Pension Fund, 267 N.J. Super. 270 (App. Div.), certif. denied, 134 N.J. 482 (1993), cert. den. 510 U.S. 1119, 114 S. Ct. 1072, 127 L. Ed. 2d 390 (1994), we held that forfeiture of a public pension because of a criminal conviction relating to public employment does not constitute double jeopardy. Id. at 277. "Full or partial forfeiture of pension rights is based on the employee's violation of the implied condition that the employee render honorable service." Id. at 276. Pension forfeiture is a civil penalty. State v. Darby, 246 N.J. Super. 432, 445-46 (App. Div.), certif. denied, 126 N.J. 342 (1991). It is not automatic but dependent upon "the gravity of the misconduct." Uricoli, supra, 91 N.J. at 67. All government pensions are subject to forfeiture for dishonorable service. Id. at 66, citing Masse v. Bd. of Trs., Public Employment Ret. Sys., 87 N.J. 252, 255-56 (1981) and Makwinski v. State, Bd. of Comm'rs, Consol. Police & Firemen's Pension Fund, Div. of Pensions, Dep't of Treasury, 76 N.J. 87, 90 (1978).
Petitioner next argues that the forfeiture provisions in N.J.S.A. 43:1-3 are preempted by federal law. She contended in her initial brief that: The fact of the matter is that by permitting forfeiture as in the case at bar, the State's plan runs afoul of, inter alia, 26 U.S.C.A. 411(a)(2). That section requires that an employee be entitled to a 100% nonforfeitable right in his or her plan benefits by the end of either a straight 5 year term of service or after a 7 year term of service where the nonforfeitable portion of such plan benefit is increased from 20% in year 3 to 100% in year 7.
In situations where a State Law runs afoul of a Federal Law, the Sixth Amendment [sic] of our U.S. Constitution, applied to the States through the Fourteenth Amendment of our U.S. Constitution, mandates that State Law be superseded.
Since the parties did not explore this issue in depth in their initial briefs and it appeared to be a novel one, we requested supplemental ...