HEALTHCARE FRAUD DEFENSE JOURNAL
The United States District Court in the Middle District of Tennessee reversed a murder conviction and granted a new trial in the case of United States v. Maurice Burks, 2021 WL 2209334, due to the prosecutor’s failure to disclose Brady evidence prior to trial.
The Burks case was tried over 25 days where 85 witnesses testified, and more than 1,200 documents were introduced into evidence. Most of the evidence at trial was tied to Burks’ five co-defendants’ involvement in the Gangster Disciples – a criminal organization. The co-defendants were charged with a RICO conspiracy among other things.
Burks was charged with the murder of Malcolm Wright. The government’s key evidence was a .45 caliber gun that was recovered. The government presented three witnesses against Burks, but the star witness was Danyon Dowlen a/k/a Danger Dan. Dowlen testified that Burks used a .45 caliber gun to murder Wright, thus, linking Burks to the murder weapon.
However, Dowlen was a less than credible witness with many motives to lie and garner favor with the government. Particularly, Dowlen was facing his own murder charge at the time of his testimony. In fact, in its opinion reversing Burks’ conviction, the District Court noted that “having had the opportunity to watch the manner, tone, facial expression and over all tenor of Dowlen’s testimony” it was apparent that “Dowlen would say whatever he thought the Government needed, or wanted, to hear.”
After the trial, while the parties litigated and appealed an initial motion for new trial, which was granted, and a second motion for new trial, which was denied, the government disclosed a Report of Investigation (“ROI”) for the first time. The ROI memorialized a pre-trial interview of Dowlen where he tells two agents and the lead prosecutor that Burks may have used a .40 or .45 caliber gun to murder Wright. The type of weapon was a central feature of the government’s case. The government claimed it inadvertently failed to disclose the ROI, and Burks moved for a new trial claiming that the ROI was Brady evidence that should have been disclosed.
The District Court agreed and granted Burks’ motion due to the prosecutor’s Brady violation. In its opinion, the Court noted that it had a role as the thirteenth juror to judge the credibility of the witnesses and the weight of the evidence to ensure there is not a miscarriage of justice. The Court found that if the ROI had been disclosed timely, the result at trial would have been different.
The Burks case is interesting not only because a new trial was granted, but also because of the Court’s description of its role as the thirteenth juror.
The Fifth Circuit Court of Appeals has reversed the defendant’s conviction in United States v. Jonathan Nora, 988 F.3d 823 (5th Cir. Feb. 24, 2021) – a case wherein Nora was convicted of conspiracy to commit health care fraud, payment of illegal kickbacks, and aiding and abetting health care fraud.
The government had indicted 23 individuals in connection with a scheme involving Abide Home Health Care Services, Inc., a home health agency. Many co-defendants pleaded guilty prior to trial, including Abide’s owner, Lisa Crinel. Crinel was one of the government’s star witnesses at trial. Nora and five co-defendants stood for trial.
According to the allegations, Abide employed four physicians aw house doctors who referred patients to Abide for home healthcare services. Another employee, Paula Jones, processed Medicare billing for Abide. Nora was an office manager.
The case against Nora focused on his job duties, including scheduling nurse visits, physician appointments, and processing vouchers for referral payments. The government further alleged that Nora’s job duties, coupled with testimony from a co-defendant that “everyone in the office knew” there was fraud, was sufficient to convict.
The government alleged that Abide billed Medicare for home healthcare services for beneficiaries who did not need such services, but who had been fraudulently certified to receive them. The government also alleged Abide paid physicians, directly or indirectly, to refer patients. The government alleged Abide disguised the payments as compensation for services.
During her testimony, Crinel explained that Nora worked for Abide as an office manager, up through the date the government executed a number of search warrants. In this role, Nora coordinated new patient intake and admissions. His tasks included fielding calls, verifying insurance coverage, assigning nurses to conduct evaluations and make home health visits, and helping with data entry.
Nora also contacted potential patients identified by recruiters to ascertain their interest and eligibility for home healthcare services. If a patient expressed interest in home health services, but her doctor did not approve it, Nora would inform the patient that she would have to see a different physician to obtain approval. If the patient remained interested in Abide’s services notwithstanding her own doctor’s recommendation, Nora would offer to assign the patient to one of Abide’s house doctors for a separate evaluation of her eligibility.
Nora’s responsibilities entangled him in various aspects of the kickback scheme. First, Nora connected prospective patients with the “house doctors” who referred patients to Abide for home health services. The government alleged that this made Nora complicit in the scheme. The government also alleged that Nora processed the patient referral payments, which it characterized as illegal kickbacks.
All five defendants were convicted and appealed, but Nora appealed separately.
In his appeal, Nora argued that his convictions were not supported by sufficient evidence. The Fifth Circuit agreed, finding the evidence presented at trial did not prove that Nora understood Abide’s various practices and schemes to be fraudulent or unlawful, and thus there was insufficient evidence to conclude that Nora acted with “bad purpose” in carrying out his responsibilities at Abide.
The Fifth Circuit concluded that, even under the court’s extremely deferential review of jury verdicts, there was insufficient evidence put forth at trial for a rational juror to conclude beyond a reasonable doubt that the defendant acted with the knowledge that his conduct was unlawful. The court further found that the government had failed to prove the defendant acted “willfully” with respect to each count. The court vacated the defendant’s sentence.
The court further noted that while one witness testified that “everyone” knew about the home health services scheme, she provided no other details. The court could not determine whether everyone in the office knew about the practice, or whether everyone knew the practice violated Medicare regulations. The court acknowledged that the practice of providing services while not billing Medicare was inherently suspicious. However, even if a reasonable person in Nora’s shoes should have known (or at least suspected) that this practice was unlawful, the court reasoned that would only make Nora guilty of negligently participating in a fraud. It did not prove that Nora acted “willfully” in facilitating the practice or the fraud.
The opinion can be found HERE
I had the opportunity to speak to Nicole Hughes Waid a partner at Fisher Broyles, following her trial in the case of United States v. Casey David Crowther, Case No. 20-cr-00114 (M.D. Fla.). Crowther was one of the first people charged by the federal government with fraud related to the receipt of Paycheck Protection Program (“PPP”) funds.
Crowther is the owner of a roofing business. His Company applied for and received a $2.1 million loan from a lender pursuant to the PPP. Following receipt of the funds, Crowther purchased a boat valued at approximately $689,417 and made a $100,000 payment on a promissory note to a prior business partner. During the covered period, Crowther paid over $2.1 million in salaries to employees.
Before Crowther applied for forgiveness of the loan, and before the loan became due, Crowther was indicted. The government alleged that Crowther used PPP funds to purchase a boat. Crowther maintained that he used the sum of the loan on allowable expenses, including payroll.
As part of a global defense strategy, Ms. Waid opted to go to trial quickly. Because the case involved complicated legal issues, Ms. Waid also requested a bench trial. The government refused and insisted on a jury trial.
At trial, the government’s theory was that money is not fungible and that it is criminal for the recipient of a PPP loan to purchase a boat even though there is no loss to the bank. The defense’s theory was that Crowther complied with the CARES Act and the government cannot create additional restrictions that do not exist in the enabling statute.
The most important testimony at trial came from a bank representative and a government witness. The bank representative testified that the loan to Crowther remains on the books as a performing loan and that the bank does not consider itself a victim. The bank representative also testified that the PPP loan funds are bank funds that areonly guaranteed by the Small Business Administration in the event of a default on the loan or if the borrower is eligible for forgiveness.
John Miller, the Associate Administrator at the Office of Capital Access for the SBA, testified that financial need is subjective and in the eye of the beholder at the time of the PPP application. This is a key statement for defense practitioners defending clients against allegations of PPP fraud. It also provides a comfort level to those entities that have sought and obtained PPP funds despite a stable economic position.
Unfortunately, Crowther was found guilty. The jury only deliberated for 2 hours. A clear indication that they did not understand the complicated legal issues presented by the case. Additionally, it is also a sign that the jury convicted Crowther based on the overwhelming “bad act” evidence the government was permitted to introduce.
But all is not lost for Crowther. He has very strong legal issues for appeal. Particularly, this is a statutory construction case and the issue of notice will likely feature prominently in the appeal. The government could not keep the CARES Act straight in the superseding indictment or trial and misstated the CARES Act throughout the trial. A law that the government cannot properly articulate is surely too vague and confusing for a businessman to properly interpret and understand.
The Eleventh Circuit’s decision in United States v. Takhalov, 827 F.3d 1307, 1310, (11th Cir. 2016) is instructive for the appeal in Crowther. In Takhalov, the 11th Circuit held that the panel reversed the wire fraud convictions, holding that a defendant may not be convicted of fraud merely because he deceives another to cause him to engage in a transaction, if the transaction otherwise provides the customer with exactly what he paid for (in this case, expensive drinks at a bar). Here, the bank representative made clear that the bank received exactly what it bargained for during the loan transaction.
The government’s issues in Crowther will not be limited to a reversal on appeal. Because the bank representative testified it was not a victim and the loan was still performing on its books, there is no loss. The government might try to argue that the loss was “intended,” but this would be inconsistent with the hard facts – the loan has not become due.
Crowther is a good example of the fact juries don’t always get it right. The good news for Crowther is that Ms. Waid did an excellent job of creating a record for the appeal of the conviction.
Amina Abbas, of Taylor, was charged by indictment Wednesday in the Eastern District of Michigan with embezzlement of government property.
The indictment includes the first criminal charges for the intentional misuse of funds intended to provide relief to health care providers and maintain the access to medical care during the pandemic, money set aside to help Americans get needed medical care in a global health and economic crisis.
The indictment alleges that Abbas previously owned 1 on 1 Home Health (1 on 1), which she had closed in early 2020 after Medicare issued an overpayment demand for $1,619,967.08. Medicare was demanding overpayment because 1 on 1 had submitted claims for patients who did not qualify for home health services. According to the indictment, 1 on 1, which was never operational during the pandemic, received approximately $37,656.95 designated for the medical treatment and care of COVID-19 patients. Abbas then allegedly misappropriated the funds by issuing checks to her family members for personal use.
News just broke that the Acting AG, Monty Wilkinson, has rescinded the infamous Sessions‘s charging policy, and reinstated AG Holder’s charging policy, which directs prosecutors to conduct an individualized assessment of relevant facts in making charging and sentencing decisions. The Wilkinson memo “supersedes any conflicting Justice Manual provisions.”
Today’s guidance ends Sessions’s mandate that prosecutors should, as a “core principle,” “charge and pursue the most serious, readily provable offense.” Although the 2010 Holder memo also directs prosecutors to “ordinarily charge” the most serious offense, it emphasizes that charging determinations should be made in the context of an “individualized assessment of the extent to which particular charges fit the specific circumstances of the case, are consistent with the purpose of the Federal criminal code, and maximize the impact of Federal resources on crime.”
For more information, click HERE
In a blow to prosecutors, Judge Middlebrooks has ruled that prosecutors cannot tactically use Rule 48 when faced with an expiring statute of limitations.
During the pandemic, I have heard of several instances where prosecutors facing the expiration of a statute of limitations period will file an Information, only to then seek dismissal of the Information without prejudice in order to “stop the clock” from running. The government is in essence playing a game in order to skirt a fundamental constitutional right.
In United States v. B.G.G., No. 20-80063-CR-Middlebrooks (D.E. 19) (S.D. Fla. Jan. 11, 2021), David Markus and Lauren Doyle decided they were not going to take this lying down and challenged the government.
In United States v. B.G.G., the government filed an Information on August 28, 2020. The statute of limitations for the charged offense expired on August 31, 2020. On September 2, 2020, the government emailed a proposed order to the Court, proposing dismissal of the Information pursuant to Rule 48 allowing voluntary dismissal without prejudice. The defense promptly responded, requesting that the Information be dismissed with prejudice. Upon review, the Court held that the government’s tactical use of Rule 48 was inappropriate.
While the briefing in the case is sealed, the Court’s Order is not. The Order confirms that the government affirmed that it sought to file the Information in order to “institute” the action within the meaning of 18 U.S.C. § 3282(a), the statute of limitations, believing that it could later file an indictment. Section 3282 provides: “Except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years after such offense shall have been committed.” The limitations period may be tolled for six months after dismissal of the indictment or information, or six months from the date the first grand jury is reconvened if the “indictment or information charging a felony is dismissed for any reason after the period prescribed by the applicable statute of limitations has expired.”
The Court held that the filing of the Information did not “institute” the action within the meaning of Section 3282 because the Information was not a viable vehicle for prosecution. The Court reasoned that allowing the government to “tactically” use Rule 48 “would not serve the strong public interest of upholding statutory and constitutional protections.” The Court further stated that the government’s proposed action would also have “the effect of eroding the fundamental purpose of the statute of limitations – “to limit exposure to criminal prosecution to a certain fixed period of time following the occurrence of those acts the legislature has decided to punish by criminal sanctions.” The Court went on to say that a criminal statute of limitations could not serve its purpose if the prosecution could just extend the limitations period whenever it felt convenient by filing a charging instrument that was not viable for prosecution.Following the Order, the government quickly filed its notice of appeal. This is a case to monitor in 2021!
This week brought two new Paycheck Protection Program (“PPP”) fraud indictments.
The first indictment is out of the Southern District of Texas. The case is United States v. Amir Aqeel, et al., Case No, 4:20-cr-583 (S.D. Texas). In Aqeel, seven individuals were charged with filing over 80 fraudulent loan applications worth $16 million. The defendants were charged with conspiracy to commit wire fraud, wire fraud, and money laundering.
According to the Indictment, the defendants falsified their PPP loan applications by faking the number of employees and average monthly payroll. The defendants also used third parties to submit applications and paid kickbacks for that service. The loan proceeds were funneled to family members posing as employees. The defendants used the money to purchase luxury cars and other items.
Interestingly, all the companies the defendants used to perpetrate the fraud were in business prior to the pandemic. The defendants used different banks and kept the loan values relatively low to avoid detection.
Over in Los Angeles, four individuals were charged with PPP fraud in the case of United States v. Richard Ayvazyan, Case No. 20-mj-03857. The charges brought in Ayvazyan were slightly different than those in the Texas case. In Ayvazyan, the defendants were also charged with conspiracy to commit bank fraud and substantive bank fraud counts in addition to conspiracy to commit wire fraud and wire fraud.
In Ayvazyan, the Indictment alleges that the defendants submitted fraudulent information in order to get loans. The loan proceeds were used to purchase residential property, among other things.
It seems the government went to great lengths to investigate the Aqeel and Ayvazyan cases, including executing search warrants and collecting emails. The government is likely using data analytics to identify outliers as it does in health care cases to pick the low hanging fruit.
These prosecutions are just the beginning though. The Small Business Administration (“SBA”) announced in FAQ No. 39 that it will review all PPP loans in excess of $2 million. The SBA is also requiring companies that sought in excess of $2 million to complete a questionnaire with questions geared toward determining whether the loan applications’ certification of economic uncertainty was made in good faith. While not disclosed, the SBA will likely use these questionnaires to continue to identify outliers to investigate.
Last week, the U.S. House of Representatives passed H.R. 5546, the Effective Assistance of Counsel in the Digital Era Act.
The Legislation extends the attorney-client confidentiality to emails sent to and from federal prisons. The bill requires the Bureau of Prisons to exclude from monitoring the contents of any privileged electronic communications. The bill also requires the contents of electronic communication to be destroyed when an inmate is released. The protections would apply to all federal prisoners both pre-trial and post-conviction.
Currently, prisoner emails were regularly monitored by prosecutors and not considered privileged. This legislation will be a welcome relief for defense attorneys that already face obstacles in communicating with clients. The legislation is headed to the Senate now. The National Association of Criminal Defense Lawyers is in the process of seeking support in the Senate for the legislation.
A copy of the legislation can be found here.
On August 31, 2020, the White House quietly released a memorandum that could significantly change the way civil and administrative enforcement actions proceed. The memorandum can be found here.
The memorandum is directed to Deputy Secretaries of Executive Departments and Agencies. This means it applies to the Securities and Exchange Commission, the Federal Trade Commission, the Federal Reserve, and any other government agency with civil or administrative enforcement authority.
The memorandum directs agencies to provide much greater due process to individuals and companies being investigated. The memorandum specifically provides the following best practices to be followed by the agencies:
- The government bears the burden of proving an alleged violation of the law.
- The subject of enforcement should not bear the burden of proving compliance with the law.
- A cause of action must be based on actual misconduct and not on what should have been done.
- Regulatory ambiguities should be read in favor of subjects of enforcement.
- Agencies should seek approval from an Officer of the United States before entering into a tolling agreement to extend the statute of limitations.
- Investigations should end within a defined time period and/or end with formal declination. This will avoid subjects wondering for years whether there will be a knock on the door.
- Agencies should confirm their civil adjudicatory evidence disclosure practices similar to those described in Brady v. Maryland, 373 U.S. 83, 87 (1963), Giglio v. United States, 405 U.S. 150, 154 (1972), and Kyles v. Whitley, 514 U.S. 419, 432-33 (1995). This means that agencies should turn over exculpatory evidence similar to the procedures laid out in the Justice Manual of the U.S. Department of Justice.
- All rules of evidence and procedure should be public, clear, and effective.
- Penalties should be proportionate and transparent.
- Liability should be imposed only for violations of statutes or duly issued regulations, after notice and an opportunity to respond. The element of surprise should be eliminated.
While the memorandum is tied to the coronavirus and the Trump administration’s attempt to have an economic recovery, the implementation could have lasting effects on the way these agencies operate. Particularly, the memorandum provides for transparency, accountability, and fairness in administrative and civil enforcement proceedings. This is a huge change from the current states of affairs and should provide companies that are in regulated entities a great deal of comfort.
On September 16, 2020, a Manhattan federal judge – Judge Alison J. Nathan – issued a scathing order critiquing prosecutors of misleading the court about the disclosure of potentially exculpatory evidence. The court further ordered two Southern District of New York unit chiefs and all the line prosecutors in the case to answer questions under penalty of perjury regarding their conduct in the case.
The case is United States v. Ali Sadr Hashemi Nejad, Case No. 18-cr-224(AJN) (S.D.N.Y. Sep. 16, 2020). Mr. Sadr was indicted in 2018 in connection with a purported scheme to evade U.S. sanctions against Iran and launder money. The indictment alleged that Sadr’s company contracted with a unit ofs Venezuelan state-owned oil company, Petroleos de Venezuela SA, to build an infrastructure project. It was further alleged that Sadr and others had Venezuela send U.S. dollars to the Swiss bank accounts of a trading house that Sadr had incorporated in Switzerland and a Turkish construction company, using lenders in New York as intermediaries. The government then claimed that Sadr transferred the money around the world, including to Iran. Sadr maintained his innocence and testified at trial that he never believed his connection to the construction project in Venezuela violated any laws and he further denied sending money to Iran. After a two-week trial, a jury found Mr. Sadr guilty on all counts except the money laundering conspiracy charge.
Following the trial, while Mr. Sadr’s motion for a new trial was pending, a U.S. Attorneys Office Criminal Discovery Coordinator and Office of Professional Responsibility Officer began looking into the disclosures made in the case. As a result of the inquiry, the government decided it was not in the “interest of justice” to further prosecute this case. The government was seeking to make the case go away, hoping it wouldn’t have to address its misconduct.
The government took the extraordinary step of asking the Court to enter an order of nolle prosequi against Mr. Sadr and his co-defendant. Mr. Sadr did not agree that the case be nolle prosequi and demanded that the verdict be vacated, a motion for new trial granted, and the indictment dismissed. The government agreed.
When the court received the request for dismissal, it announced that while the dismissal ended the criminal proceeding as to Mr. Sadr, the government’s failures and misconduct would need to be addressed separately. The court noted that the “dismissal of charges is not a basis for sweeping the government’s repeated failures under the rug.” The court directed the government to provide more information about its disclosure failures and misstatements.
Following are some of the more egregious behaviors disclosed in the government’s response:
- Federal investigators were mining electronic evidence without a valid warrant to find materials to aid FBI interviews. This was contrary to claims made during the pre-trial litigation.
- Prosecutors realized in the middle of trial that they had not turned over a document that was exculpatory to the defense. Instead of immediately turning over the document, the prosecutors strategized for over 20 hours how best to turn it over. The strategies included “burying” it in evidence of already disclosed documents, which after looping in more prosecutors, is exactly what they did.
- Prosecutors failed to identify the document as newly produced to the defense in order not to draw attention to it.
- The government misled the court by claiming it had identified the document as newly discovered to the defense.
- The government produced exculpatory documents after the trial in the case had ended.
- The government failed to produce FBI interview memoranda that may have contained exculpatory information.
The court noted its concern that the issues raised in this case were part of a larger pattern. The court intimated that similar issues may have gone undetected in countless other cases. The court suggested that the prosecutors involved should be the subject of a referral to the Department of Justice’s Office of Professional Responsibility. Additionally, the court ordered that the acting U.S. Attorney Audrey Strauss make all line prosecutors in the Southern District of New York read the opinion and provide certification to the court that they done so.
The court further suggested that the Department of Justice must implement policy and training procedures that instill in FBI agents the permissible limits of conducting electronic searches pursuant to warrants in a way that conforms to constitutional requirements. Judge Nathan also ordered that AUSAs must be trained to conduct proper due diligence before making misleading representations to the Court about their conduct.
To be fair, the court repeatedly commended the prosecutors for ultimately doing the right thing and dismissing the case. Far too often, when faced with misconduct allegations, prosecutors decide to dig in their heels in further. This Order shines a light on alarming misconduct. Hoepfully, this scruity will breathe life back into the public faith in criminal justice that has been slowly eroding across the nation as a result of government misconduct. Every single prosecutor and every single criminal defense attorney should read this opinion. It is a haunting reminder that prosecutors should be out to accomplish justice and not a victory at all cost.