More Prosecutors Accused of Reviewing Privileged Attorney-Client Communications

A developer accused of defrauding foreign investors in an alleged EB-5 visa scheme has filed a motion to dismiss his indictment, or in the alternative, a request for a Kastigar hearing in United States v. Quiros.  The defendant is alleging that prosecutors reviewed communications with his counsel.

SEC Investigation by Attorney David Gordon

The developer, Ariel Quiros, was indicted in May 2019.  Prior to the indictment, Quiros was represented by attorney David Gordon in response to an SEC investigation.  As part of the investigation, an SEC receiver turned over Quiros’s laptop and other materials in his office to prosecutors in the criminal case.,  The prosecutors hired a third-party vendor to divide the privileged emails from other documents, however, despite these controls, the vendor turned over at least 2,000 emails between Quiros and Gordon.

All parties were well aware that Gordon represented Quiros; in fact, Gordon accompanied Quiros to one interview with the SEC.

Quiros alleges in his motion to dismiss that the government reviewed the privileged emails and relied on them in bringing its indictment against him.

Quiros also accuses the government of executing a search warrant on his email account without assigning a taint team to review and segregate privileged emails.

Quiros has threatened filing additional motions to suppress evidence.

The District of Vermont’s order on Quiros’s motion will be telling.  The government would be well advised to institute taint protocol when reviewing emails to avoid potentially fatal flaws in its prosecutions.

Charges dismissed

In the highly contested Theranos prosecution, U.S. District Court Judge Davila dismissed three counts from the indictment.

About Theranos Company

Theranos is a health care and life sciences company founded by CEO Elizabeth Holmes. Theranos’ mission was to revolutionize medical laboratory testing through innovative methods of drawing blood, testing blood, and diagnosing patients. Theranos sought to develop a device termed the Theranos Sample Processing Unit, Edison, or minilab that could quickly and accurately analyze blood samples.

The Indictment charges Holmes and her COO Ramesh Balwani with eleven counts alleging that they defrauded doctors, insured patients, and investors about the viability of Theranos’ blood testing technology. The government claims that the promises of the devices were never realized and that the device created “consistently” produced inaccurate and unreliable results. The government further claims that despite these failures, Theranos began a publicity campaign to promote the technology and sold the tests at Walgreens in California and Arizona.

After hearing oral argument on defendants’ motions to dismiss, Judge Davila issued an order directing the government to clarify in a bill of particulars the specific fraudulent representations at issue and to detail who made the misrepresentations to doctors and patients and how they were made. Judge Davila stated that he wanted to avoid the defense team facing surprise at trial. Judge Davila also held that the government had failed to allege how Holmes and Balwani had a “specific intent” to defraud doctors and patients whose insurance paid for the test because the indictment doesn’t specify how those patients and doctors were deprived of money or property. As a result, the judge dismissed one conspiracy count and two wire fraud counts involving insured patients and doctors.

Judge Davila, however, rejected defendants’ argument that they never misrepresented the accuracy and reliability of the blood tests to patients. The judge stated that it was clear from the indictment that patients did not receive the benefit of the bargain.

Even though defendants will face trial on the eight remaining counts, Judge Davila’s order will provide them with better tools to fight. Particularly, the bill of particulars will provide a roadmap of the government’s case and permit Holmes and Balwaini to strategize a defense case.

More telemedicine prosecutions

About Two Telemedicine Companies

Yesterday, prosecutors in New Jersey unsealed an Indictment against a husband and wife owned two telemedicine companies. The Indictment alleges a $56 million fraud. Prosecutors claim that Reinaldo and Jean Wilson orchestrated a national kickback scheme involving unnecessary prescriptions for orthotic braces that were submitted to Medicare for reimbursement.

The Indictment alleges that the Wilsons solicited and received bribes from patient recruiters and pharmacies for patient referrals. Wilsons companies – Advantage Choice Care LLC and Tele Medcare LLC – hired doctors to order the braces.

The Indictment can be found here.

This Indictment comes on the heels of Operation Brace Yourself. That prosecution involved an investigation and prosecution of an alleged $1.2 billion telehealth scheme that involved similar allegations, but charged doctors and business executives of Durable Medical Equipment companies, among others.

Sometimes it pays to go to trial

If the recent Insys prosecution taught us anything, it is that sometimes it pays to go to trial. The defendants in that case were facing life sentences before trial.

Insys prosecution in 2019

The Insys prosecution started in 2019. The government brought the cases under the Controlled Substance Act and the RICO statute against doctors and corporate executives. The most closely watched case was the one involving the executives of Insys Therapeutics. In that case, the government alleged that seven executives at Insys Therapuetics conspired to violate the RICO statute by paying kickbacks to doctors who heavily prescribed Subsys, a fentanyl spray manufactured by Insys, and by making false statements to insurance companies.

Defendants Went to Trial

Two defendants – Babich and Burlakoff – decided pled guilty and cooperate right before trial. Five defendants went to trial.

After a 10-week trial and nearly four weeks of deliberations, the jury found that the defendants had committed predicate acts of illegal distribution of a controlled substance, honest services fraud, and mail and wire fraud. After trial, the court granted the defendants’ motion for acquittal as to the CSA and honest services fraud predicates, concluding that there was insufficient evidence to prove that the defendants “specifically intended … that healthcare practitioners would prescribe Subsys to patients that did not need it or to otherwise abdicate entirely their role as healthcare providers.

List of seven defendants went to trial - Insys Prosecution

At the sentencing hearing for the cooperators, the Government requested a 20-month sentence for Burlakoff and a 24-month sentence for Babich.

The final sentences ordered by the Court for each defendant are outlined below:

Defendant Ordered by Court - Insys Prosecution

When sentencing the cooperators, Judge Burroughs stated that she worried about sending the message that you can “do the very worst thing and then erase it by cooperating.” She also stated that “I worry about the message that you can be at the top of the criminal food chain, recruit all of these people into the operation, maximize your profits, and then turn around and cooperate against all of those people as if that conduct never happened.”

Given the ultimate sentences and the likely exposure to a life sentence pre-trial, the Insys case is a good example that it sometimes pays to go to trial.

Sober Home Task Force Will Make More Arrests in Next 30 to 45 Days

Big Players Arrested In Drug Recovery Industry

Yesterday, Palm Beach State Attorney Dave Aronberg spoke to a reporter from the Sun Sentinel, announcing that his office will be making arrests in the next 30 to 45 days in the drug recovery industry. These arrests are related to investigations by the Sober Home Task Force, which has been investigating the drug recovery industry since 2016.

The State Attorney further stated that the arrests will target big players such as pharmacies, physicians, and laboratories because all the “low hanging fruit” have been arrested.

The Sun Sentinel article can be found here.

The Sober Home Task Force investigation has been aggressive and far reaching. Worse, the State Attorney has sought to eliminate any defenses available to defendants by filing motions in limine to preclude the advice of counsel defense. The inability to assert an advice of counsel defense in these cases, wherein legal advice was sought and followed for the most part, makes the charges against defendants akin to a strict liability charge. As a result, the State Attorney has been largely successful in obtaining plea agreements from those arrested thus far. However, this might change if the State Attorney does in fact arrest bigger players with more resources to fight these cases through motion practice and trial.

Reciprocal Discovery does not require early disclosure of evidence by the defense

Early Disclosure Of Evidence

Federal Criminal Rule of Procedure 16 provides that a defendant must do disclose to the government any evidence the defendant intends to use in the defendant’s case-in-chief at trial. Recently, prosecutors around the country are interpreting Rule 16 to require an “early” disclosure of discovery from the defense, including disclosure of an intent to proceed with an advice of counsel defense. These demands from the government are being made through motions in limine, in advance of trial. The demands are coupled with a request for sanctions in the form of inability to use evidence that is not disclosed “early”. Interestingly, these demands for early disclosure of defense exhibits and defenses are being made before the government has disclosed its witness and exhibit list. The good news is that some judges are siding with the defense.

United States v. Wilkerson, 388 F.Supp.3d 969, 970-76 (E.D. Tenn. 2019)

For instance, in United States v. Wilkerson, 388 F.Supp.3d 969, 970-76 (E.D. Tenn. 2019) the district court denied the Government’s request to compel defendants to disclose in advance of trial an advice of counsel defense and for sanctions for failure to comply. Wilkerson involved allegations of health care fraud and violations of the Anti-Kickback Statute (AKS) related to certain sales and marketing arrangements involving compounded medications, including pain and wrinkle creams. Wilkerson, (at 971-972.)

Wilkerson not only denied the government’s request, but made clear that the government’s requests violated the United States Constitution:

  • The next presumption underlying the Government’s motion is that if Defendants are going to present an advice of counsel defense, that they ought to be required to make up their minds and tell everyone sometime ahead of trial. But other than a seemingly arbitrary, unspecified sentiment about when a proper defense must be formulated, the Court does not know why a criminal defendant must decide what defense (if any) to pursue in advance of trial or risk losing the option altogether.The Defendants here, for example, could wait and decide what defenses to raise once they see what evidence the Government presents at trial. Or perhaps they believe the Government is, in any event, unable to put on a case that will survive a motion for a directed verdict. If that is the case, it would be untenable—and, most likely, unconstitutional—to require Defendants to turn over potential evidence (most of which is currently privileged) to the Government or risk forfeiting a defense. The source of that concept, whatever it might be, is fundamentally foreign to the adversarial system of criminal justice contemplated by the United States Constitution.

Wilkerson, at 975.
There are also decisions in the Southern District of Florida that support the sentiment in Wilkerson:

  • United States v. Young, 19-cr-60157, (S.D. Fla. November 21, 2019) (D.E. 96). Honorable Rodolfo Ruiz agreeing with the Court in Wilkerson and denying the Government’s request for early disclosure of the advice of counsel defense.
  • United States v. Phillip Esformes, et al., 16-cr-20549-RNS (S.D. Fla. May 24, 2017) (D.E. 366 at 4), Honorable Robert Scola concluded that “the government has not provided neither binding precedent nor persuasive authority for its demand that Defendants be compelled to disclose whether they intend to rely on advice of counsel or good faith defenses at trial or that, absent such disclosure, they be precluded from raising the defenses.”
  • United States v. Pisoni, Case No. 19-CR-20399-Gayles (D.E. 108) (S.D. Fla. Dec. 10, 2015) (“The Court will not conduct a pre-trial hearing to determine the admissibility of evidence related to an advice of counsel defense. However, at trial, a defendant must testify or present other evidence of reliance on the advice of counsel before an attorney/expert may testify related to the advice provided to that defendant.”

The bottom line is that the defense is not in a position to determine whether it will even present a defense case, much less assert an advice of counsel defense, until it has an opportunity to evaluate the government’s case.

DOJ busy targeting genetic testing last week.

Alleged Fraud Via Unnecessary Genetic Tests

The week of September 23rd, 2019 proved to be a busy week for the health care strike force.  In a continued effort to target individuals participating in genetic testing, the Department of Justice charged 35 people alleging fraud using telemedicine companies to recruit patients for unnecessary genetic tests that cost Medicare a purported $2.1 million.

Operation Double Helix

The “takedown” was dubbed Operation Double Helix and involved prosecutors in Georgia, Florida, and Louisiana.  Doctors, telehealth companies, a marketer, and lab executives were among those charged.

One of the individuals charged in the Southern District of Florida is Minal Patel, CEO of genetic testing company LabSolutions.  The Patel indictment alleges that patients were recruited via telemarketing campaigns and health fairs.  Patel is accused of paying at least three individuals up to 50% of the cost of the genetic tests as a kickback for patient referrals.  It appears that the three individuals that allegedly received kickbacks are cooperating with authorities.

Patel’s attorney has announced that he is proceeding to trial and will assert an advice of counsel defense.

Telehealth company owners Richard Garipoli of Lotus Health and Jamie Simmons of MedSymphony Meetmydoc were also charged in the Southern District of Florida, but by individual indictment.  Garipoli and Simmons are accused of having doctors write “bogus orders” for genetic testing.

A marketer, Ivan Andre Scott, was charged in the Middle District of Florida.  Scott’s indictment alleges that he recruited Medicare beneficiaries and provided these beneficiaries with self-administered genetic tests.  Scott would pass the recruited beneficiaries’ Medicare information to doctors and telehealth companies so that they could bill for the unnecessary self-administered genetic tests.

Doctors were charged in Texas and Georgia with taking kickbacks and ordering unnecessary tests.

Operation Double Helix makes clear that genetic testing continues to be a hot spot for the DOJ.  The takedown demonstrates that the DOJ is increasingly criminalizing what traditionally was a civil enforcement area.  More alarming is that advice of counsel doesn’t even seem to be a barrier to criminal charges.  The only way to combat this patent overcriminalization of civil regulatory violations is to file motions to dismiss, proceed to trial, file Rule 29s, and win.

Eleventh Circuit opinion creates an avenue to win criminal prosecution charging lack of medical necessity.

Difference Of Opinion Is Insufficient to Prove False Billing

Today, the Eleventh Circuit ruled in United States v. AseraCare, Inc. that a mere difference of reasonable opinion among doctors is insufficient to prove objectively false billing. Unfortunately, the opinion significantly curtails an FCA win by hospice chain AseraCare, Inc. in the trial court.

United States v. AseraCare, Inc

The underlying case began in 2008, when three former AseraCare employees, acting as qui tam relators, filed a complaint against AseraCare alleging submission of unsubstantiated hospice claims. The Government intervened and filed a complaint based on a false certification theory. The complaint alleged that AseraCare submitted documentation that falsely represented that certain Medicare recipients were terminally ill when, in the Government’s view, they were not.

In developing its case, the Government identified a universe of approximately 2,180 patients for whom AseraCare had billed Medicare for at least 364 continuous days of hospice care. The Government then had its expert focus on 223 patients of that subset. The Government’s expert determined that 123 patients from the sample pool were, in her opinion, ineligible for hospice benefits. At trial, the Government intended to extrapolate from the sample to impose further liability on AseraCare for a statistically valid set of additional claims within the broader universe of AseraCare patients.

The Government’s allegations were narrowly focused and there were no claims that AseraCare billed for phantom patients or that documentation was forged. The sole issue was the sufficiency of the clinical judgments, i.e., whether or not the patients were terminally ill.

Ultimately, the expert testimony at trial revealed a fundamental difference of professional opinion regarding whether the patients presented were “terminally ill.”

The Eleventh Circuit concurred with the trial court’s post-verdict conclusion that “physicians applying their clinical judgment about a patient’s projected life expectancy could disagree, and neither physician [would] be wrong.” The Court further held that the Government must show something more than the mere difference of reasonable opinion concerning the prognosis of a patient’s likely longevity.

The opinion further holds that the trial court judge overlooked evidence showing that the company withheld crucial information about patient health from doctors who certified hospice eligibility.

In criminal cases that go to trial where real services are provided, the issues at trial usually come down to a difference of opinion among experts. This decision makes it clear that a difference of opinion among experts is insufficient to conclude that billings are false, creating an argument for criminal defendants in cases were Government is alleging a lack of medical necessity.

The Twenty-Eighth Annual National Seminar on Federal Sentencing

Marissel Descalzo














Marissel Descalzo

Marissel Descalzo esteemed panel included David Debold (GibsonDunn), Mark Rankin (Shutts and Bowen), Jean-Jacques Cabou (Perkins Coie), and Ben Au (Durie Tangri).  The panel discussed recent changes to the Sentencing Guidelines and their implications in economic crime cases.  I discussed loss calculation in health care fraud cases and how to cut down the loss number to zero at sentencing.

Lots of DOJ settlements this month

Department Of Justice Settlements In July

July has been a busy month for the Department of Justice. The DOJ announced several large settlements this month.

  • Suboxone settlement. Reckitt Benckiser Group plc has agreed to pay $1.4 Billion to resolve criminal and civil liability for the marketing of Suboxone, an opioid drug used by recovering addicts. This is the largest settlement reached by the federal government in a case related to opioids.
  • Universal Health Services has reached a “tentative” settlement to resolve criminal, civil, and state attorneys general claims for $127 million. The alleged bad conduct is related to unusually high admission rates and long patient stays at Universal behavioral health facilities. Presumably, a corporate integrity agreement will also be required as part of the settlement.
  • A Philadelphia-area addiction treatment center has agreed to$2.85 million to end whistleblower claims that the center billed Medicaid and other federal programs for detoxification treatment for patients who did not meet the medical criteria set by the government. The center also signed a 5-year corporate integrity agreement.
  • Millcreek Community Hospital agreed to pay $2,451,000 and enter a 5-year corporate integrity agreement to resolve FCA violations, including that the Hospital billed Medicare and Medicaid for medically unnecessary inpatient rehabilitation services.

These settlements clear make that whistleblowers stand to profit handsomely from reporting bad conduct. The settlements also reinforce that anyone operating the health care industry must have a robust compliance program that monitors the conduct of the corporation.


I represent doctors, hospitals, skilled nursing facilities, pharmacies, and other health care providers, during government investigations and defend them in qui tam (whistle-blower) actions. I also regularly counsel companies from a variety of industries on the adoption and operation of their compliance programs and related due diligence issues.

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