DOMENIC STORNANTI vs. COMMONWEALTH.

ABRAMS, J. Domenic Stornanti, president of Birch Drug Co., Inc., a pharmacy, appeals from an order of the

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Superior Court, holding him in civil contempt of court [Note 1] for refusing to comply with a subpoena duces tecum issued by the Medicaid fraud control unit of the office of the Attorney General on behalf of a special grand jury for Suffolk County. See G. L. c. 277, Sections 2A, 68. See also Mass. R. Crim. P. 17 (a) (2), 378 Mass. 885 (1979). The subpoena ordered Stornanti to produce all Birch Drug's records in his possession or control relating to the pharmacy's provision of brand name and generic drugs and medical supplies to individuals receiving benefits under the Medicaid program in 1980 and 1981. Stornanti refused to comply with the subpoena and the Superior Court judge found him to be in civil contempt. We granted Stornanti's application for direct appellate review. We affirm the finding of civil contempt.

We summarize the facts. Stornanti is president, sole pharmacist, and a director of Birch Drug. The judge apparently concluded that Birch Drug is a closely-held corporation. [Note 2] Stornanti does not challenge this finding on appeal, nor did he challenge it in his motion to quash the subpoena. Birch Drug is a provider of prescription drugs to Medicaid recipients. Consequently, Birch Drug is required "to keep such records as are necessary fully to disclose the extent of the services provided to individuals receiving assistance

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under the State plan." 42 U.S.C. Section 1396a(a)(27)(A) (1976 & Supp. V 1981). G. L. c. 118E, Sections 18-20.

Stornanti was served with the subpoena in his capacity as president of Birch Drug. The day before Stornanti was to appear and produce his records to the grand jury, he moved in Superior Court to quash the subpoena. [Note 3]

In his motion and accompanying brief, Stornanti acknowledged that he had the requested records. His motion was denied and Stornanti appeared before the grand jury. He refused to produce the records on the grounds that the subpoena violated his rights under the Fifth and Fourteenth Amendments to the United States Constitution, and art. 12 of the Massachusetts Declaration of Rights.

When Stornanti refused to comply with the subpoena, the Commonwealth petitioned the Superior Court to hold Stornanti in civil contempt of court. After the hearing on the Commonwealth's motion, the judge found that Stornanti was the custodian of Birch Drug's records, and that he had the ability to comply with the subpoena. [Note 4] Further, the judge found that Stornanti had no privilege under either the United States or the Massachusetts Constitution entitling

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him to withhold the requested record, and held him in civil contempt of court for his refusal to comply with the subpoena.

On appeal, Stornanti contends that he was improperly ordered to produce the subpoenaed records, because the "required records" exception to the privilege against self-incrimination guaranteed by the Fifth Amendment is inapplicable to art. 12. Contrary to Stornanti's contention, we conclude that the required records exception does apply to art. 12. Since in the circumstances of the case the required records exception is dispositive of Stornanti's assertion of a privilege against self-incrimination under both the State and Federal Constitutions, we do not reach any other constitutional issues raised by Stornanti. [Note 5]

Birch Drug, as a Medicaid provider, is required by both Federal and State law to maintain the records that Stornanti was ordered to produce. 42 U.S.C. Section 1396a(a)(27) (A) (1976 & Supp. V 1981). G. L. c. 118E, Sections 18-20. "Required records" are those "records required by law to be kept in order that there may be suitable information of transactions which are the appropriate subjects of governmental regulation and the enforcement of restrictions validly established." Shapiro v. United States, 335 U.S. 1, 17 (1948), quoting Davis v. United States, 328 U.S. 582, 590 (1946). [Note 6]

The required records exception applies when three requirements are met: "[F]irst, the purposes of [the State's] inquiry must be essentially regulatory; second, information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept; and

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third, the records themselves must have assumed `public aspects' which render them at least analogous to public documents." Grosso v. United States, 390 U.S. 62, 67-68 (1968).

There is no question that the records which Stornanti has been ordered to produce meet these requirements. The Medicaid fraud control unit's investigation is regulatory, for it is "concerned with regulating the state's medicaid program." In re Morris Thrift Pharmacy, 397 So. 2d 1301, 1304 (La. 1981). The Medicaid fraud control unit "conducts the investigation, in part, by invoking the powers of the grand jury." In re Grand Jury Investigation, 441 A.2d 525, 531 (R.I. 1982). The Medicaid record keeping requirements are used to "monitor the operation of the Medicaid program, not to catch criminals." People v. Herbert, 108 Ill. App. 3d 143, 148 (1982), cert. denied, 459 U.S. 1204 (1983). The fact that Stornanti's records are sought by a grand jury investigating him does not change the regulatory purposes of the record keeping requirements. [Note 7] See id.

There is also no question that Stornanti customarily keeps the records he was ordered to produce. Birch Drug, as an approved Medicaid provider, is required by both Federal and State laws and regulations to maintain records of the type requested by subpoena in this case for audit and inspection. See, e.g., 42 U.S.C. Section 1396a(a)(27) (1976 & Supp. V

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1981); G. L. c. 118E. [Note 8] Massachusetts requires that all Medicaid providers keep and maintain records documenting "proof, subject to audit, of the actual deliverance of services and goods to recipients for which bills are submitted." G. L. c. 118E, Section 20, as amended through St. 1982, c. 368. Thus, Birch Drug has agreed to keep "such records as are necessary to disclose fully the extent of services furnished to recipients, and on request to furnish the Department or the Medicaid Fraud Control Unit with such information and any other information regarding payments claimed by the contractor for furnishing services." 106 Code Mass. Regs. 450.223(C)(3) (1979), 185 Mass. Reg. 25 (Dec. 1, 1979).

The records at issue also "have assumed `public aspects' which render them at least analogous to public documents." Grosso v. United States, supra at 68. The operation of Medicaid programs is "substantially interwoven with the public interest." Sreter v. Hynes, 419 F. Supp. 546, 549 (E.D.N.Y. 1976). Both Massachusetts and the Federal government have built into the procedure for the reimbursement of Medicaid providers record keeping requirements in order to obtain "both quality control and fraud detection." Gabor v. Hyland, 166 N.J. Super. 275, 279 (1979). The required records exception to the privilege against self-incrimination "has been explained on the basis that the public interest in obtaining such information outweighs the private interest opposing disclosure . . . and the further rationale that such records become tantamount to public records." In re Grand Jury Proceedings, 601 F.2d 162, 168 (5th Cir. 1979). See generally Meltzer, Required Records, The McCarran Act, and the Privilege Against Self-Incrimination, 18 U. Chi. L. Rev. 687, 709-718 (1951); 8 J. Wigmore, Evidence Section 2259c (McNaughton rev. 1961).

When Stornanti provides a drug to a Medicaid recipient, he bills Commonwealth, using an "MA-5 form." Every

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time Stornanti signs the reimbursement form, he certifies that he will "keep such records as are necessary to fully disclose the extent of the service provided under the State's Title XIX Plan and to furnish such information regarding any payments claimed above as the State Agency may request." [Note 9]

After Stornanti completes an MA-5 form, the Commonwealth uses taxpayers' dollars to reimburse Birch Drug. In fact, the entire Medicaid program uses public funds to provide health care services to those unable to obtain such services privately. Thus, the records kept pursuant to the Medicaid plan have "public aspects" of an even more significant character than those at issue in Shapiro v. United States, 335 U.S. 1 (1948) (records kept pursuant to price control regulations). See People v. Herbert, 108 Ill. App. 3d 143, 148 (1982); In re Morris Thrift Pharmacy, 397 So. 2d 1301, 1304 (La. 1981). See also United States v. Silverman, 449 F.2d 1341, 1345 (2d Cir. 1971), cert. denied, 405 U.S. 918 (1972). Cf. United States v. Kaufman, 429 F.2d 240 (2d Cir.), cert. denied, 400 U.S. 925 (1970). [Note 10]

Further, Birch Drug voluntarily chose to participate in the Medicaid program and to comply with all the "laws, rules and regulations" of the program including record keeping and inspection requirements. G. L. c. 118E, Section 18 (4). See In re Morris Thrift Pharmacy, supra at 1302. As

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noted, Stornanti consented, when he voluntarily entered into an agreement with the Commonwealth to be a Medicaid provider, that his records for prescriptions and other services rendered would have to be kept and would be open to the Commonwealth for inspection. See In re Rozas Gibson Pharmacy of Eunice, Inc., 382 So. 2d 929, 933 (La. 1980). [Note 11]

"These obligations to keep and produce the records are in a sense consented to as a condition of being able to carry on the regulated activity involved. In this respect, the mere response by production is no more a violation of the privilege against self-incrimination than requiring the creation of the record itself, for it is the record, presumably, that might incriminate." In re Grand Jury Proceedings, 601 F.2d 162, 171 (5th Cir. 1979). We agree with the Commonwealth that "Stornanti should not be permitted to cause the corporation to voluntarily join the Medicaid program . . . and agree to keep records, and then attempt to assert a privilege to prevent the production of those records." See Nichols v. Commissioner of Pub. Welfare, 311 Mass. 125, 129 (1942).

On these facts we conclude that the records Stornanti was ordered to produce are required to be kept pursuant to State and Federal regulations, and thus are "required records." See People v. Doe, 107 Misc. 2d 605 (N.Y. Sup. Ct. 1981). As custodian of the record, Stornanti "has voluntarily assumed a duty which overrides his claim of privilege . . . [and which] applies not only to public documents in public offices, but also to records required by law to be kept . . . ." Shapiro v. United States, 335 U.S. 1, 17 (1948).

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We believe that the same reasons which take required records outside the scope of the Federal privilege against self-incrimination take required records outside the scope of the privilege under the Massachusetts Constitution as well. When there are no reported Massachusetts decisions directly considering whether the required records exception applies to art. 12, [Note 12] this court may look to cases other jurisdictions to define the scope of the required records exception. We can adopt the Federal rule if it is consonant with our Constitution. In this case, the Federal rule is particularly applicable because the Commonwealth's Medicaid program is partially funded under the Federal program with Federal funds, and the records are required to secure Federal reimbursement. Thus, we conclude that a pharmacy which voluntarily participates in the Medicaid program cannot successfully claim the privilege against self-incrimination under art. 12 for records required to be kept by the Medicaid plan. [Note 13]

We conclude, therefore, that in the circumstances of this case, art. 12 does not guarantee more extensive rights than does the Fifth Amendment. Cf. Commonwealth v. Brennan, 386 Mass. 772, 779-780 (1982). Finally, Birch Drug

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has not challenged the constitutionality of the Federal and State laws and regulations requiring record keeping for Medicaid providers, and there is no question as to the State's authority to impose such requirements before us. [Note 14] The records sought by the subpoena are required records. Birch Drug has made a knowing and voluntary waiver of its right to refuse to produce records of its Medicaid services by voluntarily participating in the Medicaid program. Stornanti, as custodian of the records, cannot successfully rely on a privilege against self-incrimination entitling him to refuse to produce Birch Drug's records. Consequently, we affirm the order of the Superior Court holding Stornanti in civil contempt.

Order affirmed.