This Week in New York State Government



Governor Cuomo Announces Student Loan Debt Relief Provider Will Cease Operations After Misleading and Improper Practices

Governor Cuomo announced that student loan debt relief provider Interactiv Education, LLC (d/b/a Direct Student Aid, Inc., “Direct Student Aid”) will wind down and cease its operations nationwide after an investigation by his Administration’s Student Protection Unit. The Unit, which is run by the Department of Financial Services uncovered that the company engaged in misleading and deceptive advertising, and other improper practices.

Direct Student Aid advertised that it could “reduce” and “lower” its customers’ monthly student loan payments. Direct Student Aid obtained this advertised relief merely by completing applications for Direct Consolidation Loans from the U.S. Department of Education, which are already available free of charge to consumers.

The Student Protection Unit’s investigation found that Direct Student Aid charged more than 400 New York consumers upfront fees ranging from $99 to $3,400 for its advertised student debt relief services in violation of state and federal laws and regulations. The Unit also found that Direct Student Aid failed to adequately disclose to prospective clients that they could complete and submit the same federal student loan consolidation paperwork themselves through the U.S. Department of Education free of charge if they wished to do so.

Direct Student Aid also held itself out as a credit services business and advertised that it could improve its clients’ credit scores. During the period that Direct Student Aid held itself out as a credit services business, it received illegal upfront fees from its New York customers and failed to provide numerous notices and disclosures as required under state and federal laws and regulations. The Department of Financial Services has accepted a penalty of $10,000 from the company under the condition Direct Student Aid will permanently cease all student loan debt relief and credit repair services nationwide.

Governor Cuomo Deploying DFS Mobile Command Center to Orange and Sullivan Counties to Provide Homeowners With Foreclosure Prevention Assistance

Governor Cuomo announced that he is deploying Department of Financial Services representatives to Chester in Orange County and Monticello in Sullivan County to offer foreclosure prevention assistance to financially struggling homeowners.

Department of Finance representatives will be available to meet homeowners in the agency’s Mobile Command Center at the following locations:

The sites will be staffed by DFS representatives both days from 9 a.m. to 5 p.m. More than 10,000 consumers have visited the DFS Mobile Command Center for assistance since its inception.

State Resources Available to Homeowners

Governor Cuomo launched the DFS foreclosure prevention program in 2012 to extend help to homeowners facing foreclosure. The outreach program has visited locations throughout the State with high rates of foreclosure to provide assistance at no cost to the homeowners. Depending on individuals’ specific situations, DFS representatives may offer homeowners assistance in such areas as:

U.S. Housing and Urban Development approved housing counselors will also be available to offer assistance to homeowners.

Homeowners unable to meet personally with DFS representatives are urged to the call the Department’s toll-free foreclosure hotline, 1-800-342-3736, from 8:30 a.m. to 4:30 p.m., Monday through Friday. Homeowners may also file complaints using the Department website,

Department of Financial Services also urges homeowners to be cautious of mortgage rescue scams, which may be marketed by private businesses. For example, homeowners should:

Governor Cuomo Announces Medicaid Redesign Efforts Saving Taxpayers Billions

Governor Andrew M. Cuomo announced that New York’s Medicaid spending per person dropped to a 13 year low over the past 12 months. This significant spending decrease, which has resulted in billions of dollars of savings for taxpayers, can be attributed to the reforms instituted by Governor Cuomo’s Medicaid Redesign Team.

Under the federal Affordable Care Act, more than 500,000 New Yorkers joined the Medicaid program in 2013 and 2014. At the same time of that nine percent growth in enrollment, annual spending per recipient fell to $8,223 – the lowest level in more than ten years. Additionally, overall Medicaid spending growth has significantly slowed to 1.4 percent per year since 2011, when Governor Cuomo established the MRT. Prior to that, the 2003-2010 rate of increase was 4.3 percent annually. A chart detailing total Medicaid spending per recipient is available here.

Governor Cuomo also announced that the Delivery System Reform Incentive Payment (DSRIP) program, which enables New York to invest $7.3 billion of Medicaid savings over the next five years into transforming its health care system, has now made specific funding allocations to 25 provider networks across New York state. This funding, a result of last year’s groundbreaking waiver between New York and the federal government, will enable health care providers to implement reforms that reduce avoidable hospitalizations, improve care and reduce costs. DSRIP requires providers to collaborate by forming a Performing Provider System (PPS) to implement innovative projects focusing on system transformation, clinical improvement and population health improvement. Through community-level collaborations and a focus on system reform, the ultimate goal of these projects is to achieve a 25 percent reduction in avoidable hospital use over five years. The total includes approximately $1 billion in additional federal funds which will help ensure that the state achieves all DSRIP goals.

Each PPS submitted a plan, upon which awards (also known as ‘valuations’) are based. PPS’s that meet benchmarks and performance metrics will be eligible to receive the full amount of their valuations. Twenty-five Performing Providers Systems have already received state and federal approval, and have been notified of the dollar amounts they may receive during the five-year DSRIP program. The remainder of the waiver funds are being used to enhance health homes, the long term care workforce and behavioral health services.

Governor Cuomo Announces Free Meals to Boost Children’s Nutrition During Summer Months

Governor Cuomo announced the availability of free summer meals sites throughout the state to provide children from low-income households with fresh, healthy food when schools are out of session. Data from a national report shows nearly 360,000 children received free summer meals in New York in 2014, an increase of nine percent from 2013.

Governor Cuomo also issued a proclamation recognizing July as Summer Meals Month in New York State to acknowledge the importance of this effort.

The federally-funded Summer Food Service Program, administered by the New York State Education Department, helps fill a gap for families who count on free and reduced-price school meals during the school year to help feed their children. In 2014, federal and State reimbursements exceeded $40 million dollars in New York State. Summer meals site sponsors are paid a per meal cost to serve up to two meals per day.

Children ages 18 and under, and disabled young adults over 18 who are enrolled in school programs for persons with disabilities, can receive free nutritious meals and snacks at the summer meals sites.


Comptroller DiNapoli Releases Municipal Audits

New York State Comptroller Thomas P. DiNapoli announced his office completed the following audits:

Clifton Park-Halfmoon Fire District No. 1 – Length of Service Awards Program (Saratoga County)
The district’s Length of Service Awards Program (LOSAP) point system is not consistent with state law. Some firefighters did not receive all of the LOSAP points to which they were entitled.

Clifton Park Volunteer Fire Department – Internal Controls Over Financial Operations (Saratoga County)
Overall, auditors found that the department has good controls over financial activity. However, officials have not adopted written procedures to provide specific guidance to the department treasurer.

Town of Fishkill – Audit Follow-Up (Dutchess County)
The town has made progress implementing corrective action. Of the six previous audit recommendations, two recommendations were fully implemented and four recommendations were partially implemented.

Hamburg Industrial Development Agency – Project Approval and Monitoring (Erie County)
IDA officials developed a uniform tax exemption policy for project selection, but the method of determining the benefits to be provided is not well defined. The board did not implement an adequate system to monitor approved projects and did not develop an adequate recapture policy to allow for the recovery of previously granted benefits if job creation, economic goals or other terms of the agreements are not met.

Town of Hebron – Fiscal Oversight (Washington County)
The supervisor did not provide the board with adequate monthly financial reports, and the town’s procedures for auditing claims and signing checks were not in compliance with town law.

Pultneyville Fire District – Internal Controls Over Financial Operations (Wayne County)
The board generally provides adequate oversight of the district’s financial activities, but should make certain improvements. For example, the board did not complete, or contract with an independent accountant to complete, an annual audit of the district’s records.

Waterford Volunteer Fire Department – Cash Disbursements (Saratoga County)
The board ensured that the controls over the cash disbursement process were adequate and auditors did not find any questionable bank withdrawals or payments.

For access to state and local government spending and 50,000 state contracts, visit OpenBookNewYork. The easy-to-use website was created by Comptroller DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.

DiNapoli: Audits Find $70 Million in Dubious Claims, Persistent Medicaid Billing System Failures

New York State Comptroller Thomas P. DiNapoli released two audits revealing more than $70 million in questionable Medicaid claims and payments. DiNapoli’s auditors found the state reimbursed providers for excessive services, including 41 dental exams for one patient over three years and identified about a dozen providers that should have been kicked out of the system for wrongdoing.

In the first audit, the Department of Health (DOH) made as much as $39.6 million in Medicaid overpayments through a reimbursement method intended to more accurately compensate providers for medical procedures. DiNapoli’s auditors determined that the state may have overpaid as much as $32.1 million for services that exceeded Medicaid limits and $7.5 million for duplicate claims. Instituted in 2008, the ambulatory patient groups (APG) payment methodology uses the diagnosis, procedures performed, and the amount and type of resources used, to calculate the provider payment. DOH’s computer payment system, eMedNY, suspends processing of claims when services are billed in excess of specific limits or thresholds. DOH will then request additional documentation from the provider to support why it was necessary to exceed the threshold. If providers do not supply the appropriate documentation, their claims are supposed to be denied. DiNapoli’s auditors, however, found that APG payments are not subject to the same checks and balances as other Medicaid payments.

For the period Dec. 1, 2008 through May 29, 2013, auditors identified $13.6 million in APG claims that would have been suspended for review – and potentially denied – if they faced the same controls as other Medicaid claims. Auditors determined another $18.5 million of the potential overpayments was for excessive services that eMedNY would have automatically denied if they were treated the same as non-APG claims. Most of the payments were for dental procedures totaling $17.5 million. Medicaid limits dental cleaning and dental exam services to twice per year, yet in one case, DiNapoli’s auditors found Medicaid reimbursed a clinic for seven dental cleanings for one patient in a single year. Medicaid reimbursed another clinic for 41 dental exams (totaling $2,771) for one patient over three years. Claims such as these would have been automatically denied if they were billed by a dentist instead of a clinic.

Medicaid also overpaid more than $7.5 million in duplicate claims to 2,244 doctors and other medical professionals who separately billed the state for 224,673 services that were also included on claims that clinics and other outpatient facilities submitted. In each case, one payment was made to the practitioner and a second payment was made to the clinic or outpatient facility. Auditors also found DOH has provided weak guidance to clinic providers, resulting in confusion and misinterpretation of payment rules.

Attorney General:

Attorney General Schneiderman Announces Agreement with JP Morgan Chase Bank to Provide More Customers with Access to Mainstream Financial Services

Attorney General Eric T. Schneiderman announced that JP Morgan Chase Bank, N.A. has committed to modifying its policies to permit consumers greater access to mainstream financial services. Chase has modified the procedures it uses to screen consumers who apply for checking accounts, thereby permitting more consumers to open accounts. Chase, which offers the option of a prepaid debit card, known as the Liquid Card, to consumers who do not qualify for a checking account, will also allow those consumers to pay bills online or have Chase mail checks for them at no additional charge. These changes will enable card users to pay their rent, utilities, and other bills without having to resort to high-cost alternative financial services like check-cashing outlets and money transmitters.

The commitment by Chase comes as part of an initiative launched by the Attorney General in 2013 to expand access to mainstream banking for unbanked and underbanked communities. In earlier agreements with the Attorney General, three major banks—Citibank, Capital One, and Santander—agreed to overhaul their use of ChexSystems, a consumer-reporting agency that screens people seeking to open checking or savings accounts. Such databases disproportionately affect lower-income Americans, often punishing them for relatively small financial errors. As a result, many consumers must resort to alternative banking services to carry out basic financial transactions like cashing payroll checks and paying bills—services that cost them hundreds, if not thousands of dollars each year in extra fees. Those agreements expanded the array of mainstream financial services available to consumers.

Studies show that more than 3 million New York households are either “unbanked,” meaning that no family member has a bank account, or are “underbanked,” meaning that they have a bank account but also rely on high-cost alternative financial services.

Attorney General Schneiderman Announces $2.5 Million Settlement With NYC Pharmacy For Improper Medicaid Billings

Attorney General Eric T. Schneiderman announced a settlement that returns $2.5 million to the state’s Medicaid program. The agreement reached with Trinity Homecare LLC, a pharmacy primarily owned by Walgreen Co., began with a whistleblower claim of improper conduct and false Medicaid billings related to drugs mainly prescribed for hemophilia patients. The court approved settlement resolves claims of undocumented delivery by the pharmacy of infusion drugs. In at least one instance, these expensive drugs were allegedly left outside a patient’s home without signature by the patient. The drugs can cost tens of thousands of dollars per delivery. Located in College Point, Queens, Trinity also allegedly submitted claims to Medicaid for a greater amount of drugs than it could document were actually delivered.

The Attorney General’s investigation and audit of Trinity’s Medicaid billings found improper conduct and false billings from 2007 to September 2011, totaling $2.5 million for eight patients in New York City and one on Long Island.

Trinity HomeCare LLC is a  pharmacy that dispenses and delivers expensive prescription drugs to patient homes. During the relevant period, Trinity was acquired by Option Care, Inc. and OptionCare of New York. In August 2007, Walgreen Co. acquired Option Care, Inc., later known as Walgreens Infusion Services, Inc. The investigation found that Option Care and Walgreen, which are both parties to the settlement, failed to ensure that Trinity complied with federal and state laws and Medicaid rules and regulations.

Attorney General Schneiderman Announces Arrest and Indictment of New York City Man in Multi-Victim Identity Theft Scheme

Attorney General Eric T. Schneiderman announced the arrest of Sharif King, 29, of Manhattan, for allegedly perpetrating an identity theft scheme in which he held himself out as a record company executive, hired employees and then stole their identities in order to open credit cards, apply for a loan, steal a vehicle and collect on an insurance claim. King is charged on a 15-count indictment with Identity Theft, Scheme to Defraud, Forgery, and Grand Larceny, among other charges, and if convicted he faces up to 20 years in prison.

According to the indictment and statements made by prosecutors at arraignment, King’s alleged scheme began in the summer of 2013, when King posted job opportunities online for his purported record label “Dower Music Entertainment, LLC.” The posting attracted numerous applicants from across the country who aspired to work in the music industry. King allegedly invited the applicants to a group interview in Manhattan, where King introduced himself as the Executive Vice President of Dower Music. King then hired the applicants for unpaid internship positions where they would work from home and be reimbursed for expenses, with the promise of future full-time, paid employment.

Also according to statements by prosecutors, under the pretext of reimbursing their expenses and putting them on the payroll, King allegedly requested personal identifying information from employees, including their date of birth, address, and social security number. King allegedly then used the stolen personal information to open a credit card in the name of one employee and charge $2,384.75 in expenses, and to apply for a $29,000 loan and attempt to open a credit card in the name of a second employee.

Prosecutors further allege that in addition to using stolen identities to apply for credit cards and a loan, King directed one of his employees to purchase a 2007 Lexus for work purposes, claiming that the employee would need a fancy car to keep up appearances. The Lexus was registered, financed, and insured in the employee’s name, but days later and without the employee’s knowledge, King added his name to the policy. King allegedly then told the employee he was fired and stole the Lexus. Prosecutors further allege that when King subsequently got into an accident with the Lexus, he pretended to be the employee when he reported the accident to both the police and GEICO. King then allegedly changed the address on the insurance policy to his own so that the insurance claim check would be mailed to his residence. After King received the $8,886.32 check from GEICO, he allegedly altered it, making it payable to himself, and deposited it into his own checking account.



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