Pennsylvania Record

Thursday, December 12, 2019

Fired COO's racketeering case against nonprofit fails in federal court

Federal Court

By Charmaine Little | Aug 21, 2019

U.S. District Judge Michael M. Baylson

PHILADELPHIA - A nonprofit organization accused of fraud was granted its motion for summary judgment in the U.S. District Court for the Eastern District of Pennsylvania on Aug. 9.

Caryn Gratz was an agency director for Philadelphia Mental Health Clinic Inc. (PMHC) from the 1990s through the mid-2000s and then the COO from January 2015 through February 2016. She claimed in a lawsuit some of PMHC's key figures committed fraud.

Gratz sued Kerey Parnes, the CEO of PMHC and president of Staffmore LLC, which Parnes launched in 2005; Donna Moran, the former executive director for Staffmore; Anthony A. Wolf and Ruggiero LLC (holding companies for real estate that Parnes had a controlling interest for); and Behavioral Healthworks LLC, a company that offers information technology and marketing services for health care companies.

Gratz said the defendants violated the Racketeer Influenced and Corrupt Organizations Act. 

In her lawsuit, Gratz claimed that Parnes used her authority and position in the PMHC to “generate Medicaid payments” and used the money for her own benefit, instead of for PMHC, with the help of Moran. 

While at PMHC, Grantz said, she and Parnes worked closely together to launch the Delaware Valley Children’s Health Management. Gratz owned 20 percent and Parnes owned the remaining 80 percent. 

Gratz said she ultimately left in 2004 or 2005 because she was “uncomfortable with the direction of the organization,” and that she “felt like there were monies being taken off … and used for personal purposes. … Kerey was building a home and I felt like some of the money, the Medicaid money was going to the building of her home."

Gratz then worked as the managing director of behavioral health services for the Public Health Management Corporation. She made about $125,000 a year. But in 2015, she went back to PMHC as the COO. 

While she was being interviewed, she never said she had concerns about money being misused. As part of her responsibilities, Gratz reviewed several reports from patient census information to billing and cash transactions. 

She was fired in February 2016. She said she didn’t want to sign a release to receive two months of pay. She then filed a lawsuit in July 2016.

The defendants said her claims don’t have standing, and that they’re not responsible under RICO because Gratz failed to point out established acts of racketeering. They also said her allegations fall short because they lack a participation claim. 

The court agreed and dismissed the case.

The court said Gratz did properly claim she had an injury that could be recovered under RICO but failed to prove the alleged racketeering activity actually caused the injury. 

“Plaintiff has failed to connect any alleged wire and/or mail fraud with her alleged injury,” the court said in its ruling.

It had the same ruling for her claims that witness tampering caused her injury. 

Gratz said she expressed concerns about self-dealing between Parnes and PMHC with PMHC’s CFO and director of clinical services. She said she was fired three days after hearing a conversation between the CFO and Parnes in which Parnes said she didn’t trust Gratz or her motives but said she could lean on the CFO’s loyalty to tell Parnes anything about Gratz that Parnes needed to know. 

The CFO and Gratz got into an argument two days later, and Gratz was fired three days after that.

The court said Gratz didn’t take her concerns about ill activity to anyone other than coworkers and failed to prove that a moment in which she asked the CFO to collect certain documents constituted a violation of RICO.

U.S. District Judge Michael M. Baylson ruled on the case.

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