The Clinton Herald, Clinton, Iowa

October 3, 2013

Attorney: Clinton city leaders pondered potential of city bankruptcy

Day 4 of the city's malpractice lawsuit includes testimony from Attorney Michael Walker.

By Katie Dahlstrom
Assistant Editor

WASHINGTON — City of Clinton officials discussed filing for bankruptcy after learning the city was being sued for Medicare fraud, court testimony Thursday revealed.

Attorney Michael Walker, who the city is suing for legal malpractice, returned to the stand Thursday morning as the city's legal malpractice suit continued. Through his testimony, jurors learned city officials feared devastating effects as a result of the 2008 Medicare fraud lawsuit. Walker, along with his firm Hopkins and Huebner, represented the city in the Medicare fraud case that former firefighter and whistleblower Timothy Schultheis brought upon the city, claiming the city had knowingly billed Medicare and Medicaid incorrectly for ambulance calls in order to receive a higher reimbursement rate.

The first time Walker spoke to the Clinton City Council was during a closed session meeting on Sept. 29, 2009, shortly after the case was unsealed in federal court. At that time, Walker told the city of the

potential risk it faced in the worst-case scenario.

If all ambulance calls had been improperly coded at the higher advanced life support code instead of the lower basic life support code during the six-year period under scrutiny, the city could have faced a $100 million penalty, Walker told council members at that meeting. Although, he testified Thursday, he and the city knew that not all of the records had been improperly coded and therefore the $100 million fine was not a real threat.

However, based on a ratio from billing and coding expert Douglas Wolfberg, a worst case scenario of $40 million was a potential risk. During the initial meeting in September 2009, one council member asked if the citizens would be able to file for bankruptcy because of the suit. Walker testified Thursday he told the council during that meeting he could not answer that question because he did not work with bankruptcy law.

The issue of bankruptcy again surfaced in a letter to John Nahra, who served as the mediator during a mediation session on Aug. 2 and 3, 2010 when the $4.5 million settlement was tentatively reached subject to council and federal approval.

"It is my goal to keep the city from filing a bankruptcy petition," Walker wrote in a letter to Nahra dated July 28, 2010.

Walker testified in his deposition taken last year that the city was not considering bankruptcy at that point, but had visited as to whether it was an option for the future.

Walker will continue to testify Thursday afternoon.