A New Jersey appeals court on Thursday warned pharmacies applying to participate in the state’s Medicaid program to make sure that all information about their employees’ criminal histories is complete and accurate.

The panel, in Township Pharmacy v. Division of Medical Assistance and Health Services, A-3849-10, held that a state agency properly rejected an application even though the pharmacy owner acted in good faith in stating that no employee had a criminal history.

“Although plaintiff did not intend to deceive or conceal this information, public policy supports the [agency's] determination that, under these circumstances, failure to provide accurate, truthful, and complete information constituted good cause to deny the application,” Appellate Division Judges Jose Fuentes, Ronald Graves and Ellen Koblitz held.

John Sclafani, a registered pharmacist, bought Township Pharmacy in Somerset in 2009 and applied to the division to participate in the Medicaid program in early 2010. He did not know that one of his employees, a pharmaceutical technician identified as B.L.R., had been sentenced to three years of probation in 2003 for possession of oxycodone and was fined $375 in 2008 for possession of a small amount of marijuana.

In later testimony, Sclafani said he had no reason to suspect B.L.R. had a criminal history, especially in view of her having recently been licensed as a pharmacy technician, which requires a background check. The Board of Pharmacy learned of her history but granted her a license after she explained that the violations occurred during a “troubled period” in her youth.

Sclafani answered “no” to Question 37 of the application for admission into the Medicaid program, which asks: “Have any of the persons or entities named in response to any questions in this application, or their officers, directors, shareholders, members, owners, employees or partners, or any of the individuals named in response to any questions in this application ever been indicted, arrested, charged, convicted of, or pled guilty or no contest to any federal or State crime or offense in this State or any other jurisdiction, even if this resulted in pre-trial intervention?”

A state investigator learned of B.L.R.’s criminal record and the Division of Medical Assistance and Health Services rejected the application, saying Sclafani had made a false statement.

Sclafani appealed to an administrative law judge, arguing that he had no knowledge of how to conduct a criminal background check and the application form gave no instructions. He said he assumed one had to be “a cop or a lawyer” to access that information. He admitted that he never asked B.L.R. or any other employee whether they had criminal histories.

Administrative Law Judge Susan Scarola, though finding that Sclafani had not acted with any intent to deceive, found applicants have a duty to provide truthful, accurate and complete answers to all questions and supply all required information to ensure the integrity of the Medicaid program.

The appeals court said it could not overturn Scarola’s decision, which complied with the relevant statute and administrative regulations, absent evidence that it was arbitrary or capricious. The panel also found Sclafini, despite good faith, failed in due diligence.

“We are sympathetic to plaintiff’s predicament. However, we agree with the Director that the integrity of the Medicaid provider program demands scrupulous compliance with the disclosure requirements,” Fuentes wrote.

Sclafini’s lawyer, Matt Mandel, of Mandel & Mandel in Millburn, says the “ruling certainly tells pharmacists to do their homework and meet with an attorney prior to submitting an application to the state and especially to the Medicaid program.” No appeal is planned.

Christopher Porrino, director of the Division of Law of the Attorney General’s Office, says, “The court acknowledged that program applicants have a duty to provide truthful, accurate, and complete answers to all questions, and supply all required information to ensure the integrity of the Medicaid program. To comply with this duty, applicants should perform basic due diligence before answering questions on the application. Even omissions of material information can result in denial of the application.” •