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8Th Annual Report EIGHTH ANNUAL REPORT of the COMMISSION OF INVESTIGATION of the STATE OF NEW JERSEY to THE GOVERNOR AND THE LEGISLATURE of the STATE OF NEW JERSEY THE COMMISSION OF INVESTIGATION OF THE STATE OF NEW JERSEY Commissioners Joseph H. Rodriguez, Chainnan Lewis B. Kaden' Thomas R. Farley Stewart G. Pollock" Executive Director Frank L. Holst(Oin Counsel to the Commission Michael R. Siavage Jay L. Hundertmark Alfred L. Genton Anthony G. Dickson'" Executive Assistant John O. Davies 28 West State Street Trenton, New Jersey 08608 609-292-6767 * Mr. Kaden in July, 1976, succeeded Mr. Charles L. Bertini, who had served on the Commission since December, 1968. ** Mr. Pollock in May, 1976, succeeded Mr. David G. Lucas, who had served as a Commissioner since June, 1973. *** Mr. Dickson served as Counsel to the Commission from September, 1974, to December, 1976, when he resigned to join the legal staff of the New Jersey Manufacturers Insurance Co. STATE OF NEW JERSEY COMMISSION OF INVESTIGATION 28 WEST STA'J.'E STREET TRENtON, N. J. 08608 TELEPHONE (609) 292-6767 April, 1977 TO: The Governor and the Members of the Senate and the General Assembly of the State of New Jersey The New Jersey State Commission of Investigation is pleased to snbmit for the year 1976 its eighth annual report and recommenda­ tions pursuant to Section 10 of P. L. 1968, Chapter 266 (N.,J.S.A. 52 :9M-10), the Act establishing the Connnission of Investigation. Respectfully submitted, Joseph H. Rodriguez, (Jhairman Thomas R.. l<'arley Stewart G. Pollock Lewis B. Kaden 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 TABLE OF CONTENTS PAGE FOREWORD 1 ORIGIN AND SCOPE OF THE COMMISSION 3 RESUME OF THE COMMISSION'S MAJOR INVESTIGATIONS 9 Organized Crime Confrontations 9 Recommendations on the Garbage Industry 14 Organized Crime I1~fiuence in Long Branch 14 The Monmouth County Prosecutor's Office 15 Practices of the Division of Purchase and Property . 16 The Building Services and Maintenance Ind,.stry . 17 The Hudson Cmtnty Mosquito Extermination Commission. 17 Misappropriation of Funds in Atlantic County 18 Developrnent of Point Breeze in Jersey City. 19 Tactics and Strategies of Organized Crime 19 Property Purcha,ses in Atlantic County 20 Bank Fraud in Middlesex County 21 The Office of the Attorney General. 22 The Workmen's Compensation System 23 Misuse of School Property in Passaic County 24 The Drug Traffic and Law Enforcement . 25 . Pseudo-Charitable Fund-Raising Appeals 26 The Delaware River Port Authority 27 The Government of Lindenwold 28 Land Acquisition by Middlesex County 29 Pre-Parole Release Rip-Offs in the Prisons. 30 The New Jersey Medicaid Program. 31 Casino Gambling 33 INVESTIGATION OF THE PRE-PAROLE REI,EASE PROGRAMS OF THE NEW ,JERSEY STATE CORRECTIONAL SYSTEM .. 3E Introduction 3[ B aclcground .. 37 PAGE The Testimony 39 Furlough Objectives Change 39 No Pre- or Post-Furlough Interviews 42 Phony Court Opinion .. 45 Ineligibles Receive Furlough 48 Unsystematic Dealings 51 Furloughs for Sale. 52 Did the Administration Know? . 55 Furlough Cover Up 57 Inmates Go Unsupervised 60 Double Standards for Crimes Committed by Inmates 62 Statistics Do Lie 62 Escort Furloughs or Paid Taxi Service 63 Work Release-JJlIore Abuses and Exploitation 64 "No Show" Jobs 67 Education Release 69 Community Release 71 Schemes at Trenton State Prison. 72 Clerk Issues Standards .... 82 Sttperintendent Overntles Classification Committee 84 Certain Inmates Favored 87 Inmate Given Key to the State 90 Free Phone at JJII orven 90 Record Keeping Atrocious 91 Expert Opinion 93 The Control Unit Concept 95 The Co'rnmission's Final Recommendations. 96 Closing Statement 114 NURSING HOMES PARTICIPATING IN NEW JERSEY'S MEDICAID PROGRAM 116 Introduction 116 A Key Witness 117 Selling Beds 121 Private Patients Favored 123 PAGE An Investment Profit of $1.2 Million 124 $1.580 Million for $75,000 138 "More Than They Deserve". 140 Exit Mr. Cohen 143 What Mr. Kruvant ])idn't Know 146 Exit Mr. Kr'u,vant 149 Experts Confirm Gross Excess Payments 150 Edison Nursing Home 154 Lincoln Park Care Center 160 The Audit Function 171 On Some Homes, No Audits 174 More A~!ditors, More Auditing 175 Swift Corrective Action 178 Another Call for Audit Reform. 180 Special Probe Unit .. 180 Millions of Dollars CoUld Be Saved 181 "Character and Fitness". 184 InC onclusion 186 The Final Report 187 Continuing Elf arts 189 PRACTICES AND PROCEDURES OF PRACTITIONER GROUPS PARTICI- PATING IN THE NEW JERSEY MEDICAID PROGRAM 190 Introdttction and Summary 190 Medicaid Group Practice-Aspects of Mills 192 Affiliated Radiology Services 196 Not Getting Your Money's Worth 203 Alliances Between Mills and Pharmacies 216 Recommendations 222 RECOMMENDATIONS, CORRECTIVE STEPS AND PUBLIC REACTIONS AS A RESULT OF S. C. 1. INVESTIGATIONS 225 Medicaid 225 The Prison System 229 Green Acres Appraisals 230 PAGE Conflicts of Interest. 231 Other Prior Actions 231 COLLATERAL RESULTS FROM S. C. 1. INVESTIGATIONS. 234 Alleged Medicaid Crimes 234 Prison" Furloughs" 235 Land" Appraisals" 235 Lindenwold Officials Indicted. 236 Attorneys Charged in Fraud Indictments. 237 Passaic School Official Convicted 237 For'mer Building Inspector Fined 238 Fines Paid in Anti-Tnl.st Action 238 ApPENDICES 1) Act Creating the Commission 239 2) Members of the Commission 245 3) Code of Fair Procedure 247 FOREWORD This Annual Report for 1976, covering a period of unusually diversified activity by the New Jersey State Connnission of Investi­ gation (S.C.I.), illustrates the Commission's statutory obligation to expose to public view improprieties and abuses of both a non-criminal and a criminal nature. The year's work was marked by the culmination of one of the Oommi.ssion's most intensive and complicated investigations, into almost every facet of New Jersey's $400 million-a-year Medicaid health care service for the poor. This monumental task gained national attention and, even before its conclusion, generated sub­ stantive lawmaking improvements in the original program.. Mean­ while, the Commission completed probes and hearings on the shocking misconduct of the New Jersey prison system's pre-parole release programs and on the huge waste of taxpayer dollars in a county land acquisition scandal. The public airing of these revela­ tions by the S.C.I.also spurred statutory and regulatory remedies as, well as prosecutorial follow-ups by state and county law en­ forcement officials. The report highlights almost simultaneous yet unrelated in­ vestigative burdens which at times severely tested the limited financial and physical resources of the S.C.I. The various com­ plicated assignments required the Oo=ission and its small staff to collect and collate tons of records, conduct hundreds of in­ dividual interrogations and field assignments and sponsor a succession of private and public hearings. All this, however, em­ phasized the S.O.I.'s intention to live up to the promise by the bipartisan legislative commission which recommended its forma­ tion-that "the State will benefit immensely from the continued presence of such a small but expert investigative body." The S.C.I.'s 1976 record recalls a statement by State Attorney General ·William F. Hyland on the need for an agency such as this Co=ission, obligated by law to cooperate with law enforcement and civil agencies of the government in an effort "to see that the people are getting the kind of government and the kind of value they are expected to get." Mr. Hyland, who was the first chairman of the S.C.I., conceded the restraints on strictly prosecutorial bodies "in discussing at length or in detail specific criminal 1 cases. .. .There are no public eduootion cwpabilities on the part of my office or other prosecutorial agencies comparable to those of the S.C.I." The Commission believes this report appropriately reflects the findings of the Governor's Committee to Evaluate the New Jersey State Commission of Investigation, which climaxed a .study of almost six months' duration in late 1975 by concluding : "We are satisfied that the S.C.I. has performed effectively and has signifi­ cantly advanced the public interest." Subsequently, the Pennsylvania Crime Commission, in a report on its inquiry into" syndicated gambling" in Bucks County, Penn­ sylvania, dated July, 1976, attributed a migration of crime figures from New Jersey into Pennsylvania in part to the anti-crime activities of New Jersey's S.O.I., emphasizing that one factor in this continuing influx is that "many pemons considered members of organized crime operations in New Jersey are fearful of being subpamaed by the New Jersey State Commission of Investiga­ tion.' '* * From Pennsylvania Crime Commission Report, July, 1976: "Migration of Organized Crime Figures From New Jersey Into Pennsylvania: A Case Study of Syndicated Gambling in Bucks County." See also Pages 11 to 13 of this Annual Report. 2 ORIGIN AND SCOPE OF THE COMMISSION (Despite the range and impact of the Commission's achievements, inquiries continue to be made about its jurisdiction, the way it functions and its impor­ tance to a better New Jersey. The Cmnmission believes this important information should be con­ veniently available. Accordingly, the pertinent facts are again summarized below.) The New Jersey State Commission of Investigation was an outgrowth of exteusive research and public heariugs couducted in 1968 by the Joint Legislative Committee to Study Crime and the System of Criminal Justice in New Jersey. That Committee was under direction from the Legislature to find ways to correct what was a serious and intensifying crime problem in New Jersey. Indeed, by the late 1960s New Jersey had the embarrassing and unattractive image of being a corrupt haven for flourishing orga­ nized crime operations.
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