Argued June 7, 1977
Decided July 7, 1977
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, WILLIAM C. BRENNAN, J.
Robert A. Goldschlag and Jack S. Hoffinger for appellant.
Charles J. Hynes, Deputy Attorney-General (T. James Bryan of counsel), for respondent.
The issues on this appeal are whether the Special Prosecutor has established a sufficient factual basis for the issuance of an office subpoena duces tecum and, if he has, whether it entitles him to retain possession of the books and records so subpoenaed for his private examination and audit.
The Special Prosecutor served an office subpoena duces tecum upon a partner in petitioner Windsor Park Nursing Home, which thereupon moved to quash, contending, in the main, that the prosecutor has failed to establish relevancy of the items he seeks and that, in any event, he is not entitled to "seize and examine" them.
On the question of relevancy the prosecutor relied, among other things, on the results of a 1969 audit by the State Department of Health which revealed that "$21,077 in expenses claimed by petitioner to have been incurred in patient care had been wrongfully claimed." Petitioner asserts that the disallowances were caused by the imposition of cost ceilings upon legitimate patient-related expenses. But the Special Prosecutor counters that some of the disallowed items included payments for personal items of the directors and partners.
Criminal Term denied the motion, except that, in a resettled order, it provided "that a representative of Windsor Park or its counsel may be present during the audit, inspection, photocopying, and examination of its books and records produced * * * pursuant to the subpoena duces tecum. The documents may not be retained beyond a reasonable time and petitioner's representative is entitled to access to them during normal weekday business hours." On cross appeals, the Appellate Division unanimously modified the resettled order by striking the provision permitting petitioner or its representative to be present during the "audit".
Preliminarily, it appears clear that the relevancy question need not long detain us. Nonjudicial office subpoenas must bear only a "reasonable relation to the subject-matter under investigation and to the public purpose to be achieved" (Matter of Sussman v New York State Organized Crime Task Force, 39 N.Y.2d 227, 231; Myerson v Lentini Bros. Moving Stor. Co., 33 N.Y.2d 250, 257). Probable cause that there has been wrongdoing is not essential. The records sought here obviously concern a nursing home. Given the Department of Health audit, it cannot be said that the possible fiscal and recordkeeping irregularities to which the Special Prosecutor points do not meet the necessary standard (cf. Matter of Lewis v Hynes, 82 Misc.2d 256, affd 51 A.D.2d 550). As we observed in rejecting an analogous challenge in Matter of Alexander v New York State Comm. to Investigate Harness Racing ( 306 N.Y. 421, 426), the prosecutor "will, of course, be restricted to such material as is relevant to the subject of the inquiry, but [he] is not obliged to take petitioners' word for what is or is not relevant."
Turning now to the core issue of whether the prosecutor may take possession of the records, we note that his subpoena was issued pursuant to subdivision 8 of section 63 of the Executive Law, which authorizes the Special Prosecutor, in his nursing home inquiry (see Matter of Sigety v Hynes, 38 N.Y.2d 260), "to subpoena witnesses, compel their attendance, examine them under oath before himself or a magistrate and require the production of any books or papers which he deems relevant or material to the inquiry" (emphasis supplied).
Authorization to conduct an inquiry and issue subpoenas is not authorization to take possession of books and records for examination and audit (see Matter of Heisler v Hynes, 42 N.Y.2d 250 [decided herewith]). Even when the Legislature has authorized a government agency to examine or audit records, the enabling statute has expressly spelled out that power (e.g., Agriculture and Markets Law, § 256-a [commissioner granted "power to inspect and copy and audit"]; Alcoholic Beverage Control Law, § 43, subd 4 [local board given power "to examine or cause to be examined the books and records"]; Banking Law, § 471, subd 2, par [d] [supervisory committee of credit union given power to "audit" books and records]; Executive Law, § 758, subd 9, par [c] [Board of Social Welfare given power to "examine books and records"); Public Health Law, § 2803, subd 1, par [b] [Commissioner of Health given power to conduct examinations and audit financial records]; Pari-Mutuel Revenue Law, L 1940, ch 254, § 36, subd 2, as amd by L 1959, ch 881, § 3 [State Harness Racing Commission empowered "to visit, investigate, and place expert accountants * * * in the offices [and] tracks"). And, even in civil litigation, the right of a party to "inspect, copy, test or photograph" documents is expressly provided for in CPLR 3120.
Many of the agencies given the power to conduct audits also have subpoena power (e.g., Alcoholic Beverage Control Law, § 43, subd 4; Executive Law, § 752). It is logical to assume, therefore, that the Legislature intended even these statutes for separate purposes. Similarly, attorneys for parties in civil litigation are granted the power to issue a subpoena duces tecum (CPLR 2302); there too, were the power to inspect and copy books and records synonymous, CPLR 3120 would be superfluous.
In sum, the statute under which the Special Prosecutor issued the subpoena does not authorize him to retain custody of the documents for the purpose of audit and examination. It would take an enlargement of his power for him to do so; that would require legislative, not judicial, sanction.
Accordingly, while petitioner must produce the books and records, we conclude it may not be required to relinquish them and the order of the Appellate Division must be modified, accordingly.
While I agree with the court that the inquiry is within the jurisdiction of the Deputy Attorney-General and that documents subpoenaed bear a reasonable relationship to the subject matter under investigation, I cannot agree with the majority's conclusion that the Deputy Attorney-General lacks authority to take temporary custody of the relevant documents in pursuance of his lawful investigatory authority.
In contrast to Matter of Heisler v Hynes ( 42 N.Y.2d 250, decided herewith), which dealt with the plenary investigatory authority of Grand Juries, the issue in this case turns on authority conferred on the Deputy Attorney-General by virtue of subdivision 8 of section 63 of the Executive Law. The statute provides that, whenever required by the public interest, the Attorney-General may, with the approval of the Governor, and when directed by the Governor, shall "inquire into matters cncerning the public peace, public safety and public justice." In 1975, in response to growing concern as to the quality of care provided by private nursing homes receiving public financial assistance, a Deputy Attorney-General was appointed to conduct an inquiry into possible criminal violations in connection with or related to the management, control, operation or funding of any nursing home or health-related facility. We have concluded that this investigation is a proper exercise of the authority conferred by subdivision 8 of section 63 of the Executive Law. (Matter of Sigety v Hynes, 38 N.Y.2d 260.) In pursuance of his statutory authority, the Deputy Attorney-General is explicitly authorized "to subpoena witnesses, compel their attendance, examine them under oath before himself or a magistrate and require the production of any books or papers which he deems relevant or material to the inquiry."
I cannot agree with the court's conclusion that the right to compel the production of relevant books and records does not include the right to inspect such records and retain them for a reasonable time in furtherance of the lawful investigation. The Legislature did not intend the right to produce be as hollow and barren as it is interpreted by the majority. In my view, the great legislative concern with matters of peace, safety and justice indicates an intention to confer sufficient authority on the Attorney-General and his designated deputies to permit them to conduct meaningful inquiries in conjunction with lawful investigations. Thus, the Legislature provided that the Deputy Attorney-General should have access to any books or papers he deems relevant or material to the inquiry. Without authority to inspect, study, analyze and retain relevant or material documents, most investigations would surely fail. Yet, this, I submit, is the consequence of the court's decision.
The fact that, in several instances, the Legislature explicitly conferred upon established regulatory agencies the authority to audit the books and records of the enterprises to be regulated is scarcely relevant to this case. We do not deal here with regulatory agencies, whose jurisdiction is very limited, but with the office of the Attorney-General and his power and duty to investigate into matters touching the public peace, safety and justice. There are obvious differences between a statute authorizing exceptional investigations and statutes authorizing regulatory agencies to conduct positive audits. In fact, the point made by the majority is actually favorable to the argument advanced by the Deputy Attorney-General. If the Legislature was sufficiently concerned to authorize limited audits of various race tracks, as noted by the majority, then how much more was the Legislature concerned when it authorized the Governor to direct full-scale investigations directly necessitated by the public welfare? Further, we are not concerned here with the power to audit. The Deputy Attorney-General seeks access to the records of the petitioner in order to assist him in his search for possible criminal violations.
The operation of nursing homes is a matter of grave public concern. Particularly in the past few years, attention has been focused on the maltreatment of elderly and infirm patients on the part of nursing home operators more interested in profit-making than in delivering quality health care services. The State has an important interest in protecting a particularly vulnerable class of citizens from the consequences of fraud and overreaching. Indeed, the State itself has been victimized by fraudulent claims made on the public treasury by nursing home operators. The State presently stands to lose substantial amounts in Federal assistance because of allegedly inadequate supervision of nursing home operators. As we said in Matter of Sigety v Hynes ( 38 N.Y.2d 260, 266, supra), "[w]idespread corruption in the nursing home industry, care of the elderly and infirm and compensation for that care from the public treasury are `matters concerning the public peace, public safety and public justice'". It is regrettable, therefore, the court has strained to so construe the provisions of subdivision 8 of section 63 of the Executive Law as to strangle an inquiry of manifest public importance. The statute should be read in a commonsense manner and, in my view, the public interest requires nothing less.
Accordingly, I dissent and vote to affirm the order of the Appellate Division.
Chief Judge BREITEL and Judges GABRIELLI, JONES and WACHTLER concur with Judge FUCHSBERG; Judge JASEN dissents in part and votes to affirm in a separate opinion in which Judge COOKE concurs.
Order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed.