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12/02/1999 |
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Sanford V. Teplitzky Appeared in Andrews Government Contract Litigation Reporter DOJ Memorandum: Guidance on
the Use of the False Claims Act in Civil Health Care Matters (June 3, 1998) National Initiatives. The DOJ instructed that national initiatives be handled in a manner that promotes consistent adherence to the DOJ's policies on the enforcement of the False Claims Act while avoiding rigid approaches that fail to take into consideration the facts particular to a case. The DOJ instructed that, before alleging violations of the False Claims Act, whether those violations are in connection with a national initiative or otherwise, DOJ attorneys must evaluate whether the particular provider: (1) submitted false claims to the government and (2) submitted false claims or made false statements to get the false claims paid with "knowledge" of their falsity, as defined in the Act. The DOJ stated that these are separate inquiries which when, evaluated, must indicate there is sufficient legal and factual predicate for proceeding with a prosecution under the Act. In determining whether false claims exist, the Memorandum instructs the DOJ attorneys to first examine relevant statutory and regulatory provisions, as well as any applicable guidance from the program agency or its agents. The Memorandum further instructs DOJ attorneys to take steps to verify the accuracy of data upon which they were relying in asserting that there are false claims. The Deputy Attorney General states that DOJ attorneys should verify the information either independently, or with the assistance of the fiscal intermediaries and carriers, the Department of Health and Human Services-Office of Inspector General, the Federal Bureau of Investigation or another investigative agency. Finally, the Memorandum instructs DOJ attorneys to conduct investigations, if necessary, to determine whether false claims exist. In the event that DOJ attorneys are able to determine that false claims do exist, the Deputy Attorney General states that DOJ attorneys must also evaluate whether health care providers "knowingly" submitted the false claims or "knowingly" made false statements to get the false claims paid. The Memorandum lists certain factors which the DOJ attorneys are to consider, although the list is not meant to be complete. For example, one relevant factor is whether the provider has actual or constructive notice of the rule of policy upon which a potential case would be based. Importantly, another factor includes whether it was reasonable to conclude that the provider understood the applicable rule or policy. The Memorandum instructs the DOJ attorneys to consider whether the magnitude of the false claims indicates that they resulted from deliberate ignorance or intentional or reckless conduct rather than from providers' mistakes. The DOJ attorneys are instructed to consider whether the particular health care provider had a compliance plan in place and whether the provider was adhering to that plan. Related to the existence of a compliance plan, the DOJ attorneys are also instructed to consider whether the provider has previously identified the wrongful conduct currently under examination and has taken steps to solve the problem. The DOJ attorneys are further instructed to also to consider whether the provider has contacted either the program agency or its agents regarding the billing rule at issue. In making that inquiry, the DOJ attorneys are to determine whether the provider has disclosed all material facts regarding the billing question at issue and whether the program agency or its agents had disclosed provided clear guidance. Finally, the Memorandum states that the DOJ attorneys should consider whether the provider had prior notice, through audits or otherwise, of the wrongfulness of its billing practice. Oversight by National Initiatives Working Groups. With respect to national initiatives, the Memorandum states that the Attorney General's Advisory Committee and the Civil Division will establish a working group to coordinate the development of each national initiative. The working groups are to be comprised of Assistant United States Attorneys and Civil Division attorneys with particular expertise in health care fraud. In accordance with the Health Care Guidelines promulgated in January of 1997, the working group is to coordinate and plan, as necessary, the national initiatives with the DOJ's Criminal Division. Each working group will (1) examine the initiative to verify that there is an adequate factual and legal basis for implementing the initiative; (2) prepare initiative guidance as well as documents to be used in the initiative; and (3) prepare a general investigative plan which sets forth the steps that each office should undertake prior to proceeding under the national initiative. Use of Contact Letters in National Initiatives. The Memorandum notes that DOJ attorneys should make reasonable efforts to notify opposing parties, through contact letters, about the nature of allegations to resolve the dispute without litigation. The Memorandum acknowledges that the type of contact used would depend on the nature of the allegations and the stage of the investigation. Nonetheless, the Deputy Attorney General instructs the DOJ attorneys to ensure that health care providers are afforded an adequate opportunity to discuss the matter before a demand for settlement is made, and an adequate time to respond. Additionally, the Memorandum instructs the DOJ attorneys to grant reasonable requests for extensions of time to the extent that such extensions do not jeopardize the government's pursuance of the claim. Alternative Remedies. The Memorandum states that, after reviewing the legal and factual circumstances of a particular case, DOJ attorneys should consider alternate remedies, including administrative remedies such as recoupment of overpayments, program exclusions and civil monetary penalties. If the DOJ determines that recoupment of an overpayment is the most appropriate remedy, the DOJ attorneys are instructed to consider referring the matter to the appropriate carrier/fiscal intermediary for appropriate action. Ability to Pay and Concerns with Rural Providers. The DOJ states that its attorneys should consider the existence of financial constraints which can be supported by adequate documentation, in determining a fair and reasonable, as well as feasible, settlement between the government and the provider. In dealing with rural and community hospitals, the DOJ instructs its attorneys to consider the impact of any action on a community being served by such rural and community hospitals. Legal Counsel, Disruption of Operations and Cooperation of Provider. With respect to those hospitals who choose not to hire legal representation, for financial reasons or otherwise, DOJ attorneys are instructed to take special precautions to ensure there are no appearances of coercion or other overreaching because of the absence of opposing counsel. The DOJ instructs its attorneys to be ever mindful of the multitude of ways in which investigations and audits can disrupt the day-to-day operations of a provider. For example, the Memorandum states that DOJ attorneys should consider a provider's request to accept the results of an audit of a sample of claims in lieu of completing an audit of all claims. Finally, in determining an appropriate settlement amount, the DOJ instructs its attorneys to consider the amount of cooperation which was given by the provider in resolving the matter. OIG Memorandum: National
Project Protocols-Best Practice Guidelines (June 3, 1998) As an initial step, the OIG will review applicable law and Medicare and/or Medicaid program guidelines, as well as applicable provider data, in order to set a minimum monetary threshold and/or percentage error rate for its participation in each national project. The OIG will use the minimum threshold to determine which health care providers to refer to the appropriate contractor (carrier or fiscal intermediary) for an overpayment recoupment. The OIG may refer cases involving providers which exceed the project threshold to the Department of Justice or other appropriate enforcement agencies for consideration under a civil or criminal authority. The Inspector General notes that the OIG supports the equitable treatment of providers in national projects and that investigative protocols, settlement agreement terms, and compliance or corporate integrity provisions should be consistently applied to providers in different judicial districts. The Inspector General states that, if a particular matter involves a criminal conviction or civil penalty, the OIG will develop and require appropriate and measured compliance obligations. In contrast, when the OIG refers a matter to the contractors for an overpayment recoupment, no compliance obligations will be imposed by the OIG in most cases. Before referring any national initiative to the DOJ or any other law enforcement agency, the OIG will determine what amount of resources it can commit to the national project. In making the referral to the appropriate agency, the OIG will then inform that agency of the resources which the OIG is able to commit to the particular national initiative. Prior to initiating any national project, the OIG will try to provide information to the representatives of the affected segment of the health care industry. However, this prior contact with the provider community will only occur with the concurrence of all appropriate law enforcement agencies. Additionally, provided all appropriate agencies concur, the OIG will attempt to obtain input from the Health Care Financing Administration regarding its views on the proposed national project. Prior to referring any data or information concerning the formation of a national initiative to the DOJ, the OIG will assess the legal basis supporting the enforcement initiative. In assessing that basis, the OIG will consider applicable statutes, regulations, program guidance and communications, diminimus thresholds, sufficiency and availability of data, case law, statute of limitation issues, appropriate documentation and burden of proof issues. Finally, the OIG will designate an essential point of contact from each of its components participating in a national project in order to coordinate responses to questions or issues related to the national project. Snider v. Inspector General.(1) In December of 1996, the Inspector General ("I.G.") of the United States Department of Health and Human Services ("DHHS") notified Dr. Snider that, as a result of his conviction in December of 1995, he was being excluded from participation in the Medicare, Medicaid, Maternal and Child Health Services Block Grant, and Block Grants to States for Social Services programs for a minimum of ten (10) years. The I.G. advised Dr. Snider that exclusion was mandated by §1128(a)(1) of the Social Security Act ("Act"). Although § 1128(c)(3)(B) of the Act requires that the minimum period of exclusion will not exceed five years, the I.G. imposed upon Dr. Snider an additional five-year period of exclusion based on a finding that there were certain specific aggravating factors. Dr. Snider then filed a request for hearing, asserting that the ten-year period of exclusion imposed by the I.G. was unreasonable and excessive. The Administrative Law Judge ("ALJ") concluded that the I.G. had proved four aggravating factors which, according to 42 C.F.R. § 1001.102(b)(1), (2), and (4), may be considered as bases for lengthening the period of Dr. Snider's exclusion from the Medicare program beyond the mandatory five years. In reaching his conclusion, the ALJ considered each of the bases for lengthening the period of exclusion. The ALJ first considered whether the act resulting in the conviction caused a loss to Medicare of $1,500 or more. In evaluating this basis for lengthening exclusion, the ALJ noted that the regulation provides that the entire amount of the loss to the program must be considered, including any amounts from similar acts not adjudicated, and regardless of whether full or partial restitution has been made. In giving weight to this aggravating factor, the I.G. relied upon the Court's initial judgment that Dr. Snider should make restitution to the Health Care Financing Administration in the amount of $190,000. The Court later amended the judgment to correct a clerical error and ordered that Dr. Snider make restitution in the amount of $119,532. The I.G. argued that the restitution amount should be deemed the amount of damages sustained by the Medicare Program as a result of the acts resulting in Dr. Snider's conviction. The ALJ reasoned, however, that while the Court's initial restitution figure of $190,000 was evidence which must be considered in determining the amount of loss to Medicare, the cases cited by the I.G. indicated that it was not the only evidence which the Administrative Law Judge could consider. For example, in Scott Gladstone, M.D.(2), the ALJ considered evidence of unadjudicated felony counts and photocopies of Medicaid reimbursement checks in addition to the restitution order. Dr. Snider asked the ALJ to consider that, despite the order of restitution, the amount of loss to the Medicare Program has never been determined. Dr. Snider asserted that, because some of the patients whom he referred actually did receive psychological testing services, Medicare suffered no losses to the extent that services were actually performed. Further, Dr. Snider asked the ALJ to consider that, even if the amount of restitution was considered to be dispositive of the amount of loss suffered by the Medicare Program, here the amount of restitution had been reduced from $190,000 to $119,532. The ALJ considered statements contained in the Presentence Investigation Report ("PIR"). In that report, it was noted that Dr. Snider's role in the overall conspiracy was minor in comparison to that of Dr. Moore. The PIR stated that Dr. Moore recruited Dr. Snider to participate in the referral arrangement and there was no evidence that the referral agreement contemplated extensive fraudulent billings for services that were never provided. Further, the PIR noted that Dr. Snider lacked knowledge of the overall conduct of Dr. Moore. Importantly, however, the PIR noted that Dr. Snider, in his capacity as Medical Director for several nursing homes, had exclusive authority to determine whether referrals for psychological services were appropriate and necessary. The PIR concluded that Dr. Snider abused his discretion and significantly facilitated the commission of the offense by making inappropriate referrals. The ALJ concluded that, because Dr. Snider was aware, by virtue of his agreement with Dr. Moore, that some psychological testing would be performed on the referrals and but for Dr. Snider's illegal referrals, Dr. Moore could not have submitted any fraudulent claims, the evidence supported the conclusion that Dr. Snider's illegal kickback agreement with Dr. Moore actually resulted in a financial loss to Medicare in the amount of $241,952. Therefore, the ALJ, in determining the financial loss to the Medicare Program, considered the amount which Dr. Moore received from the Medicare Program instead of the amount which Dr. Snider was ordered to pay in restitution costs. In considering the weight to be given to this factor, the ALJ considered that Dr. Snider benefited little from the agreement with Dr. Moore. It was clear from the evidence, according to the ALJ, that Dr. Moore was the principal perpetrator of the fraud. Therefore, the ALJ imposed an exclusion of one additional year, over the five years mandated by the Act, based on this aggravating factor. The ALJ then considered the next aggravating factor, whether acts resulting in the conviction were committed over a period of one year or more. The PIR which was offered into evidence indicated that Dr. Snider referred patients to Dr. Moore during the period from January of 1991 to August of 1992. The ALJ concluded that the acts which formed the basis of Dr. Snider's conviction were committed over a period of twenty months. Therefore, the duration of the acts resulting in Dr. Snider's conviction were in excess of one year and may be considered an aggravating factor. The ALJ noted that the purpose of the exclusion provision is remedial and not punishment. Here, the ALJ reasoned that remedial action was necessary. Dr. Snider, as Medical Director for four nursing homes, had a high degree of responsibility to his patients. The ALJ noted that Dr. Snider had breached both the public and private trusts placed in him and that such conduct cannot be tolerated. Accordingly, based on this aggravating factor, the ALJ concluded that Dr. Snider should be excluded for an additional period of one and one-half years beyond the five year mandatory exclusion period. Medicare regulations further provide that if incarceration is included in the sentence, that factor may be considered an aggravating factor as a basis for lengthening the period of exclusion. The ALJ noted that Dr. Snider had been sentenced to one year and one day of incarceration. Therefore, the ALJ reasoned, a third aggravating factor had been established. Noting that the Court's choice to incarcerate Dr. Snider illustrated the seriousness of the offense, the ALJ concluded it was also important to note that the Court failed to impose the maximum sentence of five years. The Court instead chose to impose the minimum sentence of 12 months and added one day in order to make Dr. Snider eligible for "good time" and early release. The ALJ found that the Court's decision to impose only the minimum sentence and its action to facilitate Dr. Snider's early release diminished the weight to be assigned to this factor. Accordingly, the ALJ reasoned that, based on this factor, Dr. Snider should be excluded for an additional period of one-half year. The ALJ next considered the fourth aggravating factor, a prior record of administrative sanction. In May of 1997, the I.G. filed a motion to supplement the record on the basis of newly discovered evidence, a corrected final order issued by the Oklahoma State Board of Medical Licensure and Supervision ("Oklahoma State Board"). While both parties agreed that, pursuant to the Medicare regulations, one aggravating factor which may be considered is whether Dr. Snider had a prior criminal, civil or administrative sanction record, the parties disagreed as to the meaning of the word "prior". Dr. Snider argued that the intent behind including this aggravating factor was to allow the courts to increase punishment for those who had previously broken the law, been punished, but had nevertheless broken the law again. Dr. Snider contended that the criminal acts which resulted in his exclusion occurred between January of 1991 and August of 1992, while the reprimand from the Oklahoma State Board was issued on August 26, 1993, after the events which are the subject of the pending action. Therefore, Dr. Snider argued that the Oklahoma State Board reprimand was not a prior sanction as contemplated by the regulations. The ALJ contended that the purpose of the exclusion provisions was remedial, and not punitive. Here, noted the ALJ, the I.G. is not seeking to punish Dr. Snider, but is seeking to protect federally-funded health care programs. The regulations, reasoned the ALJ, therefore focus on Dr. Snider's trustworthiness to participate in a voluntary program in which he may receive large sums of federal money. Because the purpose of the Act is to determine an individual's trustworthiness, the ALJ concluded that the examination of Dr. Snider's entire record, up to and including the day upon which a decision on that trustworthiness is rendered, is in keeping with the spirit and plain language of the law. The ALJ next considered the weight to be given to this aggravating factor. Dr. Snider had been formally reprimanded by the Oklahoma State Board for his excessive prescribing of controlled dangerous substances without documentation of medical need. Dr. Snider argued that the reprimand had not been based on any intentional or fraudulent conduct and the level of the sanction, formal reprimand, was modest. The ALJ agreed, noting that the Oklahoma State Board had only urged Dr. Snider to obtain independent consultation and had not ordered him to do so. Therefore, the ALJ concluded that the Oklahoma State Board must have reasoned that Dr. Snider was trustworthy enough to continue to prescribe narcotic medications for his patients. Although finding that this administrative action was admissible for purposes of considering an aggravating factor, the ALJ concluded that this fact alone does not require any further period of exclusion. Dr. Snider asked the ALJ to take into consideration the circumstances surrounding his conviction as mitigating factors which should reduce the amount of time he is excluded from participating in Medicare. Dr. Snider argued that the ALJ should consider that his motivation for entering into the agreement with Dr. Moore was to ensure that his patients were not evicted from nursing homes because of government-required pre-admission screenings and annual resident reviews. He also noted that he had only entered into his agreement with Dr. Moore after consulting with legal counsel who assured him he was not violating the law by entering into the agreement with Dr. Moore. The I.G. argued that Dr. Snider was attempting to mount a collateral attack on the underlying conviction. The I.G. contended that Dr. Snider had an opportunity to raise these arguments with the Court. Agreeing with the I.G., the ALJ noted that the regulations prohibit any collateral attack on the underlying determination, either on substantive or procedural grounds. The ALJ further noted that the term "mitigating factors" for purposes of this proceeding have the defined meaning as set forth in 42 C.F.R. § 1001.102(c). Specifically, that regulation provides that only the following factors may be considered: (1) three or fewer misdemeanor offenses, and loss to the program of less than $1,500; (2) a mental, physical or emotional condition reducing culpability; or (3) cooperation with the government resulting in others being convicted or excluded or the imposition of a civil money penalty or assessment by the I.G. The ALJ found that none of the mitigating factors were applicable in this case. Finally, the ALJ considered whether Dr. Snider's ten year exclusion was reasonable. Citing prior ALJ decisions upholding a ten year exclusion in cases with three aggravating factors, the I.G. argued that, because there are four aggravating factors in this case, the ALJ should increase the exclusionary period beyond the ten year period originally imposed. Agreeing with Dr. Snider, the ALJ concluded that the issue is not the number of aggravating factors that have been proven in a given case, but what the evidence relating to any of the factors says about Dr. Snider's trustworthiness. Here, the ALJ found that Dr. Snider was not as untrustworthy as the I.G. contended. However, the ALJ found that Dr. Snider was without risk as he contended. Considering the evidence as a whole, the ALJ determined that a reasonable exclusion period was eight years. The I.G. appealed the August 1, 1997 decision of the ALJ to the Appellate Panel. The I.G. argued that the ALJ had failed to consider whether a ten-year exclusion was within a reasonable range of possible exclusion periods under the circumstances. Further, the I.G. contended that the ALJ had impermissibly determined that a different exclusion period was proper based on his own weighing of the aggravating factors. The Appellate Panel reversed the ALJ decision and reinstated the exclusion period that the I.G. originally imposed. The Appellate Panel stated that the relevant issue was whether the ALJ could have properly concluded on the record before him that the ten-year exclusion imposed by the I.G. fell outside of the reasonable range of possible exclusion periods. The Appellate Panel noted that the ALJ had described his analysis as including a determination of the appropriate weight to be assigned to each of the aggravating factors. The Appellate Panel noted, however, that federal regulations direct that, so long as the amount of time chosen by the I.G. is within a reasonable range, the ALJ is without authority to alter the I.G.'s determination. Accordingly, the Appellate Panel concluded that the ALJ had misstated his role in evaluating the reasonableness of the length of exclusion. The Appellate Panel also concluded that the ALJ misapplied the regulations in determining the weight to be given to three of the aggravating factors. The ALJ had determined that the first aggravating factor, that Dr. Snider's acts caused losses of more than $1,500, warranted an exclusion of only one additional year over the five years required by the act. The Appellate Panel noted that the ALJ had taken into consideration the fact that Dr. Snider had received a relatively small portion of the money lost by the Medicare Program. However, the Appellate Panel stated that the focus of the ALJ's analysis should have been the financial loss incurred by Medicare and the state health care programs which was caused by Dr. Snider's offense. The ALJ had also determined that the second aggravating factor, that the acts resulting in the conviction occurred over a period of more than one year, warranted an exclusion of only an additional one and one-half years over the five years mandated by the act. The ALJ had noted that Dr. Snider's failure to take any interest in the patients whom he referred to the other physician increased the other physician's ability to engage in fraudulent activity. Further, the ALJ had noted that Dr. Snider had breached both the public and private trust placed in him as Medical Director of a nursing home. Based on the ALJ's discussion, the Appellate Panel concluded that there was no basis for giving reduced weight to the second aggravating factor. The ALJ had determined that the third aggravating, that the sentence imposed by the court included incarceration, warranted an exclusion of an additional one-half year. The ALJ had noted that the maximum sentence which could have been imposed for Dr. Snider's offense was five years, and the court's decision to impose the minimum sentence with one day added in order to make Dr. Snider eligible for early release, greatly diminished the weight to be assigned to this aggravating factor. The Appellate Panel reasoned that the focus of this aggravating factor is whether the sentence included incarceration. There is no threshold figure, noted the Appellate Panel, below which this aggravating factor does not exist. Accordingly, the Appellate Panel concluded that the ALJ improperly determined that this factor should have reduced weight. The Appellate Panel also determined that the ALJ had erred in determining that the fourth aggravating factor, that Dr. Snider had a prior administrative sanction record, was entitled to no additional weight. The ALJ diminished the weight to be given to this factor on the basis that the Oklahoma State Board did not restrict Dr. Snider's ability to write prescriptions and that Dr. Snider was only reprimanded without more serious sanctions. The Appellate Panel noted that the preamble to the regulations states that, "[a]n aggravating factor is one that does not automatically exist in every case, but when it does exist, justifies a longer period of exclusion." Having concluded that this aggravating factor existed, the Appellate Panel reasoned that the ALJ could not have concluded that the factor did not support a further period of exclusion. U.S. v. Bapack(3) After an investigation, Bapack and her co-defendant, the other co-owner of the home health agency responsible for Medicare billing, were indicted. At trial, several nurses testified that they had falsified records of nursing visits made at the direction of Bapack. The jury returned a general verdict, finding both Bapack and her co-defendant guilty on all counts. During Bapack's sentencing, the U. S. District Court concluded that Bapack's offenses involved more than minimal planning. The court therefore enhanced her sentence by two levels pursuant to § 2F1.1(b)(2)(A) of the United States Sentencing Guidelines (the "Guidelines"). The District Court also found that, under § 3B1.1(c) of the Guidelines, an additional two-level enhancement was appropriate for Bapack's role as organizer, leader, manager or supervisor. The District Court ordered that Bapack pay restitution in the amount of $100,506. In ordering payment of that restitution amount, the District Court noted that, in a companion forfeiture case, the prosecution was likely to recover $38,000. The District Court therefore ordered restitution in the amount of $62,294.50.(5) In her appeal to the Fifth Circuit Court, Bapack first contended that, because there was no evidence to establish her role as a supervisor or manager of another participant in the crime with which she was charged, the District Court erred in enhancing her sentence pursuant to § 3B1.1(c) of the Guidelines. The Court noted that the government has the burden of demonstrating, by a fair preponderance of the evidence, that an enhancement is warranted. Further, the Court noted that the Guidelines direct that the sentencing judge is to consider several factors in determining whether an aggravating role enhancement is due, including the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning and organizing the offense, the nature and scope of illegal activity and the degree of control and authority exercised over others. The Court noted that mere control over a scheme, rather than over a participant in a scheme does not warrant a sentencing adjustment pursuant to the Guidelines.(6) A "participant," noted the Court, is a person who is criminally responsible for the commission of the offense, even if that person is not convicted. In turn, a person is "criminally responsible" if the person commits all of the elements of a statutory crime with the requisite mens rea. To qualify as a participant, reasoned the Court, a person need not be found criminally responsible as a principal or culpable in the same crime of which the supervising defendant was convicted.(7) Bapack argued that none of the nurses who falsified treatment records at her instruction could be considered criminally responsible for the crimes of which Bapack had been convicted because (1) none of the nurses were involved in the billing and (2) the falsified records were not used to bill Medicare or Medicaid, but instead were used only to meet a certification survey. Therefore, reasoned Bapack, none of the supervised nurses had a specific intent to facilitate Medicare or Medicaid fraud.(8) The Court reasoned that the Guidelines allow the District Court to consider Bapack's role with respect to all crimes, charged or otherwise, that were part of the same course of conduct or common plan or scheme as the offense of conviction. Therefore, reasoned the Court, it was sufficient that the "participants" which Bapack was supervising, were culpably involved in uncharged crimes that were part of the same course of conduct as the offense of the conviction. The Court concluded that the testimony of two nurses established, by more than a fair preponderance of the evidence, that Bapack supervised the knowing creation of a materially false document. Although the government decided not to pursue the knowing falsification of records, the Court noted that the offense constituted a crime under 18 U.S.C. § 1001. The Court concluded that the District Court had not erred in finding that Bapack had played an aggravating role in the offense.(9) Bapack next contended that, by cumulatively enhancing her sentence for her managerial role and for more than minimal planning, the sentencing court punished her twice for the same conduct. Because Bapack had not raised the double-counting argument in the District Court, the Court reviewed the decision for plain error.(10) The Court noted that, according to the Guidelines, absent an instruction to the contrary, the adjustments from different Guideline sections are to be applied cumulatively. Bapack argued that, despite the Guideline language, her position is supported by U.S. v. Gottfried.(11) The Court noted that, in Gottfried, the issue was whether enhancements for more than minimal planning and abuse of a position of trust were duplicative. The Gottfried court held that, because the two enhancements were based on separate elements of the defendant's offense, their cumulative application did not punish him twice for the same conduct. The Court distinguished Bapack's case, in which her sentence was enhanced for her managerial/supervisory role and for more than minimal planning. Contrary to Bapack's contention, the Court noted that she was not found to have engaged in more than minimal planning because she supervised or managed a participant. Nor was she found to have supervised or managed a participant because she had engaged in more than minimal planning. The aggravating role enhancement, reasoned the Court, was based on her directing nurses to falsify records. The more than minimal enhancement was based on a different element of the offenses of which she was convicted, the overarching fraudulent billing scheme which Bapack and her co-defendant engineered. Accordingly, the Court concluded that the District Court had not erred in cumulatively applying different Guidelines sections.(12) Finally, Bapack contended that the District Court had erred in ordering restitution because it had failed to consider her ability to pay and because the available evidence demonstrated that she could not make restitution. Bapack contended that she has four minor children living with her, her debts exceed her assets and she subject to deportation proceedings upon her release from federal custody. The Court noted that the Guidelines direct, that in determining whether to order restitution and the amount of restitution, the Court must consider the amount of loss the victim suffered as a result of the offense, the financial resources of the defendant, the financial needs of the defendant and his dependents and other factors the Court deems appropriate. The Court noted that the Guidelines do not, however, require a sentencing judge to make specific factual findings regarding the factors. In applying this rule, the Court noted that it joined a clear majority of sister circuits, but rejected the approach of the third and fourth circuits.(13) Based on the record, the Court concluded that the evidence adequately shows the District Court's consideration of Bapack's ability to pay, the only one of the required factors she challenges. The Court noted that the District Court had adopted the unchallenged ability-to-pay findings of the presentence investigation report, which discussed Bapack's financial worth, past work history and future ability to pay. The Court also did not find plain error in the sentencing court's conclusion that Bapack should be ordered to pay restitution in the amount of $62,294.50. The Court noted that Bapack had the burden, at sentencing, of demonstrating, by a fair preponderance of the evidence, her financial condition. Therefore, concluded the Court, to prevail on appeal, Bapack must show that the record is absent of any evidence that she is able to satisfy the restitution order. The Court reasoned that Bapack had not satisfied her appellate burden. Khurana v. Innovative Health
Care Systems, Inc.(14) Dr. Khurana originally filed suit in a Louisiana state court. The suit was later removed to federal court. There, Dr. Khurana filed an amended complaint alleging that the defendants committed a variety of acts violating the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The defendants named in the action included River Region, River Region's parent company, Innovative Health Care Systems, Inc. ("Innovative"), officers of River Region and Innovative, and a River Region administrator. Dr. Khurana alleged that the defendants' acts constituted a pattern of racketeering activity in violation of 18 U.S.C. § 1962(b) and § 1962(c). Dr. Khurana also alleged a conspiracy in violation of 18 U.S.C. § 1962(d) to violate 18 U.S.C. § 1962(b) and § 1962(c). In his complaint, Dr. Khurana contended that (1) he was fraudulently induced into "harmful employment associations" which caused him a loss of legitimate business opportunity and damage to his professional reputation, (2) he was wrongfully discharged causing him a loss in earnings, benefits and reputation, and (3) the defendants' illegal competition with him in his private and hospital practices caused him to lose business income.(16) The defendants filed a motion to dismiss Dr. Khurana's RICO claims pursuant to Fed. R. Civ. P. 12(b)(6). The defendants argued that (1) Dr. Khurana did not have standing to assert the RICO claims and that (2) Dr. Khurana failed to allege a RICO "enterprise" separate and distinct from a RICO "person". The Louisiana U. S. District Court granted the defendant's motion and Dr. Khurana appealed to the U. S. Court of Appeals for the Fifth Circuit.(17) In his appeal, Dr. Khurana argued that U. S. District Court had erred in dismissing his RICO claims because he had alleged proper causation between his injuries and RICO violations, giving him standing to assert a RICO claim. The defendants ("appellees") on the other hand, combined Dr. Khurana's injuries into one mass of discharge complaints and contended that Dr. Khurana could not have standing for any of his claim because he was not the target of any Medicare/Medicaid fraud scheme. The Court disagreed with the appellees that Dr. Khurana's injuries may be viewed as one group. Instead, the Court considered the injuries individually, reasoning that Dr. Khurana's standing for each injury turns on a proximate causation inquiry.(18) The Court considered that 18 U.S.C. § 1964(c) allows any person injured in his business or property, by reason of a violation of § 1962, to sue in a U. S. district court and recover threefold the damages he sustains and the cost of the suit, including reasonable attorneys' fees. The Court noted that, in order to establish standing under § 1964(c), a plaintiff must show (1) a violation of § 1962, (2) an injury to his business or property, and (3) that his injury was proximately caused by a RICO violation.(19) The Court noted that Dr. Khurana challenges the District Court's determination that his injuries were not proximately caused by RICO violations. Relying on Holmes v. Securities Investor Protection Corp.,(20) the Court noted that it was difficult to define "proximate cause" for purposes of § 1964(c) standing analysis. The Court further noted that the purpose of performing the proximate cause inquiry is to prevent administratively inconvenient and unmanageable litigation. Quoting the opinion in Chisholm v. TransSo. Fin. Corp.,(21) the Court noted that the important inquiry in determining the existence of proximate cause is "whether the conduct has been so significant and important a cause that the defendant should be held responsible."(22) The Court first noted that Dr. Khurana claimed that he was discharged from his position as Medical Director of River Region because he refused to participate in and attempted to stop the appellees' RICO activities and that Dr. Khurana's discharge was in furtherance of the appellees' fraud scheme. The Court stated that, in Cullom v. Hibernia Nat'l Bank,(23) the Court had held that, an employee who refuses to participate in an activity violating RICO and is constructively discharged for such refusal, does not have standing to sue under § 1964(c). In Cullom, the Court had reasoned that the situation lacked the necessary "causal connection" between the discharge and the predicate acts. The Court concluded that Dr. Khurana had failed to show his termination flowed from the predicate acts. Accordingly, the Court reasoned that Dr. Khurana lacked standing to bring a civil claim asserting termination injuries resulting from a § 1962(b) or § 1962(c) violation.(24) The Court next considered whether Dr. Khurana had standing to sue because of his loss of business income which resulted from "illegal competition" by the appellees. The Court reasoned that, in order to have standing to bring a civil RICO claim for illegal competition, there must be an alleged injury to property or business which is proximately caused by a RICO violation. Dr. Khurana alleged that the appellees had treated psychiatric patients for which they received illegal Medicare and Medicaid reimbursement. Dr. Khurana contended that the appellees thereby depleted the available number of reimbursable patients in the region, some of whom may have been treated by Dr. Khurana. The Court reasoned that Dr. Khurana's loss of business income was too remote to satisfy the proximate causation requirement. The Court concluded that there were intervening factors between the appellees fraudulently obtaining Medicaid and Medicare reimbursement and Dr. Khurana's loss of business income. For example, Dr. Khurana's loss of business could be attributed to patients' choices of physicians or Dr. Khurana's ability to accommodate additional patients.(25) The Court next considered Dr. Khurana's contention that the appellees had caused him injury by fraudulently inducing him to accept employment by way of mail and wire fraud, thereby damaging his reputation through association with their fraudulent activities and depriving him of other business opportunities. The Court noted that Dr. Khurana had relocated himself and his medical practice, because of the appellees' misrepresentations regarding the legitimacy of the hospital's operations. In his pleadings, Dr. Khurana alleged that he had detrimentally relied on the appellees' misrepresentations in taking his position at River Region. The Court reasoned that Dr. Khurana's reliance on the appellees' fraudulent acts exhibited the necessary proximate relationship between the injury asserted and the injurious conduct. The Court reasoned that damage to Dr. Khurana's professional reputation was a foreseeable consequence of the racketeering acts perpetrated by the appellees. Noting that Dr. Khurana, as River Region's Medical Director, was the figurehead of the now-defunct institution, the Court concluded that the act of fraudulently hiring him was the proximate cause of any damage that his professional reputation now suffered. Therefore, the Court concluded that Dr. Khurana's pleadings presented necessary proximate cause for his standing.(26) In examining Dr. Khurana's claim to loss of legitimate business opportunity, the court noted that it was not necessary that Dr. Khurana be an immediate victim of the appellees' alleged racketeering acts. The Court noted that although Dr. Khurana may not have been the intended target of the fraud scheme orchestrated by the appellees, he may nonetheless have suffered some legitimate business opportunity losses. The Court noted that, in the past, it had rejected a direct versus indirect injury test as the dispositive standing inquiry for civil RICO claims.(27) The Court noted that Dr. Khurana had pleaded his own injury or loss of legitimate business opportunity and was not trying to vindicate the claims of other victims. It was important, noted the Court, that Dr. Khurana had pleaded reliance on the appellees' racketeering acts as the cause of his lost business opportunities. Such a reliance, reasoned the Court, indicates that the racketeering acts proximately caused Dr. Khurana to forego other business opportunities. The Court reasoned that Dr. Khurana sufficiently pleaded that the alleged substantive violations of § 1962(b) and § 1962(c) proximately caused his business opportunity loss. The Court next considered whether Dr. Khurana had standing for a § 1962(d)-based civil RICO claim for loss of business opportunity and damage to professional reputation. The Court distinguished Dr. Khurana's case from the case in Cullom, in which the court held that a retaliatory discharge lacks sufficient causation for a § 1964(c) standing for a substantive RICO violation. The Court reasoned that Cullom was limited to a causation inquiry and did not address standing for a RICO civil claim premised on conspiracy acts. The Court noted that there is a division of circuit authority on whether § 1964(c) civil RICO standing for a § 1962(d) violation may be premised on injury proximately caused by overt acts in furtherance of a conspiracy that are not § 1961(1) predicate acts. The Court noted that § 1962(d) provides that it is illegal for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of § 1962. Because § 1962(d) does not require a predicate racketeering act to have been committed, the Court reasoned that the act causing a § 1964(c) plaintiff's injury does not need to be a predicate act of racketeering. Instead, reasoned the Court, a person injured by an overt act in furtherance of a RICO conspiracy has been injured by reasoned of the conspiracy and, therefore, has § 1964(c) standing. The Court noted that, by hiring Dr. Khurana, the defendants were able to pose as a medical facility qualifying for federal funds which enabled them to fraudulently obtain Medicare and Medicaid reimbursement. The hiring of Dr. Khurana, therefore, was an overt act critical to the conspiracy. The Court concluded that any lost opportunity for legitimate employment and damage to professional reputation resulted from the RICO predicate acts and Dr. Khurana had pleaded the necessary proximate cause for his claim of hiring injuries based on a § 1962(d) violation.(28) Although the Court had earlier ruled that Dr. Khurana did not have standing under § 1964(c) to pursue a § 1962(b) or § 1962(c) claim for termination injuries, the Court considered whether Dr. Khurana may have § 1964(c) standing to pursue a claim for termination injuries as a result of an act in furtherance of a conspiracy. Dr. Khurana had alleged that he was terminated in order to eliminate his access to information concerning the appellees' illegal activities. Further, Dr. Khurana contended that his termination had the effect of rescinding his order in which he suspended the hospital admission of illegal Medicaid patients. The Court reasoned that Dr. Khurana had presented the necessary proximate causation for standing to pursue his claim for termination injuries because the termination was an alleged overt act in furtherance of the conspiracy.(29) As an alternative basis for dismissing Dr. Khurana's claims, the U. S. District Court had also concluded that Dr. Khurana had failed to plead a RICO enterprise which was separate and distinct from the RICO person referenced in Dr. Khurana's § 1962(c) claims. The Court noted that § 1962(c) provides that it is illegal for any person employed by, or associated with, an enterprise engaged in interstate or foreign commerce, to conduct or participate in the conduct of such enterprise's affairs through a pattern of racketeering activity. The statutory definition of enterprise includes "any individual, partnership, corporation, association or other alleged legal entity, in any union or group of individuals associated in fact although not a legal entity."(30) Dr. Khurana had alleged that the enterprise in this case was an association of all five appellees. The court noted that for purposes of sustaining a claim based on § 1962(c), RICO persons associated with or employed by an enterprise must be distinct from the RICO enterprise. Employees or associates of an enterprise conducting affairs of an enterprise through racketeering activity may be liable under § 1962(c). The Court reasoned that Dr. Khurana's claims which are based on §1962(c) fail because they do not contain a sufficient distinction between the persons allegedly committing the unlawful acts and the enterprise with which those employees are employed or associated. The Court noted that where employees of a corporation associate in order to commit the racketeering acts on behalf of the corporation, the employees in association with the corporation are not an enterprise distinct from the corporation.(31) Because the association-in-fact pleaded by Dr. Khurana was really the corporate entity, the Court affirmed the District Court's dismissal of the claims against the corporate entities because the distinctive requirement was not met in relation to River Region or Innovative. The Court concluded that Dr. Khurana had not alleged that the appellees, River Region or Innovative, had any active role in the activities of its affiliated entity, employees or officers. The Court further reasoned that Dr. Khurana had not satisfied the distinctiveness requirement by pleading River Region as the perpetrator/defendant when the parent corporation, Innovative, did not act sufficiently distinct from its subsidiary.(32) The Court finally considered the claims in relation to the other named defendants, the officers and employees of River Region and Innovative. The Court reasoned that § 1962(c) imposes liability on individual corporate officers and employees who conduct the corporate enterprise which employs them through a pattern of racketeering activity. Therefore, the Court reversed the dismissal of the § 1962(c)-related claims against the three individual officers and employees.(33) 1. Snider v. Inspector General, DAB CR484 (1997). 2. DAB CR331 (1994). 3. U.S. v. Bapack, 129 F.3d 1320 (DC Cir. 1997). 4. See id at 1322. 5. See id. at 1323. 6. See id. 7. See id. at 1325. 8. See id. 9. See id. at 1326. 10. See id. 11. 58 F.3d 648 (DC Cir. 1995). 12. See Bapack, 129 F.3d at 1327. 13. See id. at 1328. 14. Khurana v. Innovative Health Care Systems, Inc., 130 F.3d 143 (5th Cir. 1997) 15. See id. at 146. 16. See id. at 146-47. 17. See id. at 147. 18. See id. 19. See id. 20. 503 U.S. 258 (1992). 21. 95 F.3d 331, 336 (4th Cir. 1996). 22. Id. quoting Prosser & Keeton on Torts § 42, p. 272 (5th ed. 1984). 23. 859 F.2d 1211 (5th Cir. 1988). 24. See Khurana, 130 F.3d at 149. 25. See id. 26. See id. at 150-51. 27. See id. at 151. 28. See id. at 153. 29. See id. at 154. 30. See id. at 154 citing 18 U.S.C. § 1961 (4). 31. See id. at 154-55. 32. See id. at 155. 33. See id. at 156. |
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Ober, Kaler, Grimes & Shriver Maryland
Washington, D.C. Virginia |
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