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Lucy, Esq.
Lucy, Esq., Attorney
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Experience:  Attorney
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My medical billing company is being sued by a doctor who we

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My medical billing company is being sued by a doctor who we no longer bill for. We're a C Corp, the doctor is an LLC. We couldn't afford an attorney, so the judge ruled us in default. There is a damages hearing scheduled. In order to send claims, a doctor must have an National Provider Identification number assigned by the US Dept of Health & Human Services. It turns out the doctor sold his practice and its NPI number, kept the LLC, but didn't get a new NPI number. He was submitting claims under a borrowed NPI number. The owner of the borrowed number sent him a "cease & desist" notice on 3/2/09. Using someone else's NPI number is XXXXX fraud. We found this out during discovery. Without an NPI number, we can't legally submit medical claims on the doctor's behalf. The claims we submitted since 03/02/09 are illegal. The judge referred the matter to the US Attorney at my request, and we filed complaints with HHS's OIG as required by law. I am the sole shareholder of the C Corp. The doctor is the sole shareholder of the LLC.
Will I be able to present this evidence that the doctor is in violation of federal law at the Damages Hearing? Second, I have filed suit Pro Se as an individual and sole shareholder of my company against the doctor as the sole shareholder of his LLC for damages due to his commission of healthcare fraud. Factually, it looks like he's working with a nursing home that accepts payments from Medicare as payment for services in full, he's drawing a salary there as a staff physician AND trying to bill Medicare and Medicaid. THis is called double-dipping under the law and is considered federal healthcare fraud. We're a small company that ended the year with about $3K in the bank. He's suing for $28K claiming that's what he lost in 8 months, but the records I have show he only made $21K in 30 months. So, can I present this evidence at the damages hearing? Can I sue him individually for fraud and money lost as a result of his fraud and failure to perform under the contract?
Submitted: 3 years ago.
Category: Business Law
Expert:  Lucy, Esq. replied 3 years ago.
Hi,

My name is XXXXX XXXXX I'd be happy to answer your questions today.

There are actually a few different issues here. The first is that a corporation cannot represent itself in court. A shareholder and officer is not allowed to represent the corporation, unless he happens to be an attorney. So, you will need a lawyer to defend the corporation in court. One place to look is http://www.martindale.com.

You cannot sue someone individually for damage to the corporation - if the contract was with the company, the company is the one that would have to sue him. You would need to show actual damages - if the doctor was defrauding the patients, and that somehow cost you money, you can claim it. The same is true of the contract - you'll have to show both that he failed to perform, and that it cost the business money.

As far as the evidence goes, if you have evidence that the billings were illegal, you will be able to present that to show that he's not entitled to the money. You'll also be able to introduce evidence of his business' prior earnings to show that, more likely than not, he would not have earned $28,000 in eight months.

Good luck.
Customer: replied 3 years ago.
My understanding is that if an individual sole shareholder knowingly commits fraud, the veil of corporate protection can be pierced. All the evidence gathered by me, shows that he continued to bill without an NPI number, billed with someone else's NPI number, hid it from us, hid it from the owner of the NPI, and has finally been caught at all of this. Wouldn't the judge's referral to the U.S. Attorney be an indicator here for a damages hearing as well?
Expert:  Lucy, Esq. replied 3 years ago.
I'm sorry - I thought you meant that you wanted to sue individually, meaning on your own behalf, not that you wanted to sue the doctor individually, as himself.

The veil of corporate protection may be pierced where a person does not observe corporate formalities and is basically hiding behind the corporate form to allow him to avoid his liabilities. Fraud may also be a reason for piercing the corporate veil.

The fact that the US Attorney is investigating would have to be relevant to one of the issues in your case. If you're trying to establish that he committed fraud, that might be something that you could bring up, although it would help if you had their findings. For example, it's better if he's being prosecuted, rather than just investigated.
Customer: replied 3 years ago.
You were right the 1st time. I'm paid in dividends. If profits are diluted, my pay is affected. His fraud cost me a lot of money - over $100,000 in salaries and expenses incurred to bill for him. He sold his practice, lost his NPI number, and never disclosed this to us. Factually, his LLC can't bill without the NPI number, so I can't perform under the contract.

So, I was hoping to be able to sue him personally, outside the corporate environment. In other words,
me suing him, man to man, with the corporate entities left out. We're both sole shareholders, and as such we both have to perform for our companies to perform. If he knowingly committed fraud (and I have the documents to prove he knew he was committing fraud), continued, NEVER told us what he was doing, and I personally lost money.

As a result can I sue him for what he did? Or am I wasting my time? Should I just get to the Damages Hearing as a witness, present my evidence, show what he did, and hope the judge says, "You're right."
Should I wait out the U.S. Attorney, and then sue?
Expert:  Lucy, Esq. replied 3 years ago.
You have to sue on behalf of the company. So, you may have a case, and you may be entitled to the money, but his fraud doesn't allow you to sue individually for an injury that was to the corporation. You would have to show that he had a separate contract with you personally.

It sounds like you have the evidence that you need to show that there's fraud - you don't necessarily need to wait for the U.S. Attorney's office, but it's up to you. The standard of proof for civil court to show fraud is by clear and convincing evidence, which is lower than what is needed to prove fraud in criminal court. Given the complexity of the issues, it may help to sit down with a lawyer who can read the contract and review all of your other evidence.
Lucy, Esq., Attorney
Category: Business Law
Satisfied Customers: 20406
Experience: Attorney
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