Claims of Padded Charges May Stick to Spitzer Staff

BROOKLYN, N.Y. (CN) - A dentist who beat bogus charges of a $1 million Medicaid fraud can take his alleged persecutors in the state to trial, a federal judge ruled.

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Dr. Leonard Morse claims in his federal complaint that he had a clean record in treating more than 30,000 patients for three decades until prosecutors targeted him in a politically motivated crackdown.

In 2005, a New York Times investigation found that then-Attorney General Eliot Spitzer had a blind spot when it came to Medicaid fraud, despite his reputation as a tireless watchdog against corporate crime.

Morse said the case against him developed as Spitzer tried to overcome that image to make a strong showing in the gubernatorial race a year later.

Eyeing a high-profile prosecution, Spitzer's prosecutors allegedly dusted off a four-year-old case file on Morse that had survived multiple audits.

Morse claims that he was a convenient target because 95 percent of his clients were Medicaid recipients, but prosecutors also tampered with the record to get their case off the ground.

In particular, Morse accused Special Assistant Attorney General John Fusto and Medicaid Fraud Control Unit investigators Jose Castillo and Robert Flynn of perjuring themselves and manufacturing evidence before a grand jury.

In 2007, Morse was acquitted of all charges, and he filed a $50 million lawsuit against Spitzer, the prosecutors, the investigators and the dental studio that handled his records.

Fusto, Flynn and Castillo subsequently claimed immunity, but Chief U.S. District Judge Carol Bagley Amon dismissed only those claims against Flynn in 2011.

Amon found that Fusto and Castillo could have violated Morse's right to a fair trial by allegedly fabricating evidence.

She dismissed the malicious prosecution charges, however, because she found that the state could have had probable cause to indict Morse even without the allegedly forged billing documents.

A footnote of that ruling says that the charges against Spitzer remain standing.

"The defendants did not move for summary judgment on three claims asserted by Morse against defendants Spitzer and Fusto, which are based on extrajudicial statements allegedly made to the press about Morse," the footnote states. "Accordingly, those claims still stand."

Both sides moved for reconsideration, but Judge Amon shot down the maneuver on Friday.

She rejected Morse's claim that he has a case for malicious prosecution claims because prosecutors allegedly manufactured the probable cause to indict him.

"That is not the case here, where the undisputed non-fabricated evidence available to Castillo and Flynn gave rise to an objectively reasonable belief that there was probable cause to prosecute," Amon wrote, though she acknowledged in a footnote that the matter was a "close question."

Fusto and Castillo also failed to overturn the fair trial charges by claiming the broad immunity afforded to prosecutors as "advocates" of their case.

"A genuine issue of material fact remains as to whether the allegedly false billing documents were created during this investigatory phase or only in preparation for presentation of evidence to the grand jury after the decision to indict had already been made," Amon wrote.

The court gave the parties two weeks to inform her how they plan to proceed with the case.

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