In a case that spotlights the importance of comprehensive financial controls in medical offices,
Michael Lucchesi, MD, who had served as chairman of Emergency Medicine at SUNY Downstate Medical Center in New York City, was arraigned on July 9 and pleaded not guilty. Dr. Lucchesi’s attorney, Earl Ward, did not respond to messages from this news organization, but he told the New York Post that “the funds he used were not stolen funds.”
Dr. Lucchesi, who’s in his late 60s, faces nine counts of first- and second-degree grand larceny, first-degree falsifying business records, and third-degree criminal tax fraud. According to a press statement from the district attorney of Kings County, which encompasses the borough of Brooklyn, Dr. Lucchesi is accused of using his clinical practice’s business card for cash advances (about $115,000), high-end pet care ($176,000), personal travel ($348,000), gym membership and personal training ($109,000), catering ($52,000), tuition payments for his children ($46,000), and other expenses such as online shopping, flowers, liquor, and electronics.
Most of the alleged pet care spending — $120,000 — went to the Green Leaf Pet Resort, which has two locations in New Jersey, including one with “56 acres of nature and lots of tail wagging.” Some of the alleged spending on gym membership was at the New York Sports Clubs chain, where monthly membership tops out at $139.99.
The alleged spending occurred between 2016 and 2023 and was discovered by SUNY Downstate during an audit. Dr. Lucchesi reportedly left his position at the hospital, where he made $399,712 in 2022 as a professor, according to public records.
“As a high-ranking doctor at this vital healthcare institution, this defendant was entrusted with access to significant funds, which he allegedly exploited, stealing more than 1 million dollars to pay for a lavish lifestyle,” District Attorney Eric Gonzalez said in a statement.
SUNY Downstate is in a fight for its life amid efforts by New York Governor Kathy Hochul to shut it down. According to The New York Times, it is the only state-run hospital in New York City.
Dr. Lucchesi, who had previously served as the hospital’s chief medical officer and acting head, was released without bail. His next court date is September 25, 2024.
Size of Alleged Theft Is ‘Very Unusual’
David P. Weber, JD, DBA, a professor and fraud specialist at Salisbury University, Salisbury, Maryland, told this news organization that the fraudulent use of a business or purchase credit card is a form of embezzlement and “one of the most frequently seen types of frauds against organizations.”
William J. Kresse, JD, MSA, CPA/CFF, who studies fraud at Governors State University in University Park, Illinois, noted in an interview with this news organization that the high amount of alleged fraud in this case is “very unusual,” as is the period it is said to have occurred (over 6 years).
Mr. Kresse highlighted a 2024 report by the Association of Certified Fraud Examiners, which found that the median fraud loss in healthcare, on the basis of 117 cases, is $100,000. The most common form of fraud in the industry is corruption (47%), followed by billing (38%), noncash theft such as inventory (22%), and expense reimbursement (21%).
The details of the current case suggest that “SUNY Downstate had weak or insufficient internal controls to prevent this type of fraud,” Salisbury University’s Mr. Weber said. “However, research also makes clear that the tenure and position of the perpetrator play a significant role in the size of the fraud. Internal controls are supposed to apply to all employees, but the higher in the organization the perpetrator is, the easier it can be to engage in fraud.”