Meet Our Contributors

Pietragallo's White Collar Criminal Defense Group

In today's environment, the government has never more aggressively regulated, investigated, pursued and prosecuted white collar crime. If you or your company becomes embroiled in any type of federal or state government investigation, you need experienced trial lawyers who have gone toe-to-toe with prosecutors and government agents.

E-Mail Alerts
This form does not yet contain any fields.
    Subscribe to RSS Feed
    Follow Us On Twitter
    Archives by Category

    Odebrecht and Braskem to Pay Record-Setting FCPA Penalty

    Brazilian conglomerate Odebrecht S.A., and its affiliated petrochemical company, Braskem S.A., agreed to pay at least $3.2 billion combined to resolve criminal charges that the companies conspired to violate the anti-bribery provisions of the Foreign Corrupt Practices Act.  The scheme, as described by the government in documents filed in the U.S. District Court for the Eastern District of New York, ran from 2001 to 2015, during which time the companies employed “an elaborate, secret financial structure” to pay almost $800 million in bribes on three continents. Odebrecht kept Brazilian politicians on retainer, and the politicians favored the company with the passage of friendly tax legislation and contracts with the state-owned oil firm, Petrobras. Set forth below are the most interesting aspects of the largest anti-corruption settlement history:

    • The U.S. Sentencing Guidelines call for an even larger payout. The parties agreed that, under the Guidelines, Odebrecht’s base penalty is $3.336 billion and the appropriate multiplier is between 1.8 and 3.6, for a total range of between $6.0048 and $12.0096 billion. For Braskem, the Guidelines establish a base penalty of more than $465 million, a multiplier of between 1.6 and 3.2, and a total penalty of between $744 million and almost $1.5 billion.
    • The government agreed to a below-Guidelines fine based on cooperation and ability to pay. Because of Odebrecht and Braskem’s cooperation in ongoing investigations, the government agreed to recommend reductions for both companies. Odebrecht got a 25% reduction beyond the bottom end of the Guidelines range to $4.5 billion, while Braskem received a 15% discount to $632 million.  The government agreed to further reduce Odebrecht’s penalty based on the company’s attestation that it cannot pay all $4.5 billion and stay afloat.
    • The exact amount of the fine will not be determined until sentencing. To secure the ability-to-pay settlement, Odebrecht has opened its books to the government, which could advocate for a larger amount at sentencing if it feels the company can pay more while remaining in business.  During the plea hearing, U.S. District Judge Raymond Dearie expressed skepticism about letting the company plead guilty without knowing what the penalty would be, but defense counsel assured the Court that Odebrecht understood the parameters of the deal.
    • Braskem also resolved a civil case filed by the SEC based on the same allegations. The company agreed to disgorgement of $325 million in profits, bringing the total recovery from Odebrecht and Braskem to approximately $3.6 billion.
    • Most of the recovery will go to Brazil. As Brazilian authorities led the investigation and the Brazil suffered most of the loss, the Brazilian government will recoup more than 70% of the total penalty.  The rest will be split between the United States and Switzerland. 

    SCOTUS Asked to Determine Third Party Subpoena Standard in Criminal Cases

    A petition for writ of certiorari to the U.S. Supreme Court filed on October 18 could lead to much-needed guidance on the circumstances under which criminal defendants can serve subpoenas on third parties. Michael T. Rand, a former Beazer Homes USA executive convicted of conspiring to commit securities and accounting fraud and sentenced to 10 years’ imprisonment, asked the Court to consider whether the standards set forth United States v. Nixon, 418 U.S. 683 (1974), apply to subpoenas served on third parties pursuant to Federal Rule of Criminal Procedure 17.

    Under Rule 17(c)(1), “[a] subpoena may order the witness to produce any books, papers, documents, data, or other objects the subpoena designates.” On a timely filed motion, “the court may quash or modify the subpoena if compliance would be unreasonable or oppressive.” Id. 17(c)(2).

    In Nixon, the Supreme Court articulated a heightened standard for subpoenas served on the prosecuting authority, requiring that such subpoenas seek specific, relevant, and admissible evidence. 418 U.S. at 700.  In so holding, the Court recognized that Federal Rule of Criminal Procedure 16 entitles the defendant only to limited discovery from the government. If Rule 17 expanded those limits, it reasoned, Rule 16 would have no meaning.

    The Nixon Court expressly left open the question whether “a lower standard exists” when the subpoena “is issued to third parties.” Id. at 699 n.12.  However, many – if not most – courts have applied the heightened Nixon standard to third party subpoenas.  That includes the U.S. District Court for the Western District of North Carolina, which denied Rand’s request to subpoena accounting records from his former employer, and the U.S. Court of Appeals for the Fourth Circuit, which affirmed the denial of the subpoena and Rand’s conviction and sentence.

    Other courts have applied a more permissive standard – i.e., the plain language of Rule 17(c) – when evaluating requests to issue third party subpoenas. While no Circuit Court has held that Nixon does not extend to such subpoenas, there are intra-circuit disagreements as to the appropriate standard.  Indeed, even intra-district divisions persist, with judges in districts that handle a substantial number of white collar criminal matters, such as the Southern District of New York and the Western District of North Carolina, imposing different standards on third party subpoenas.

    Moreover, there is a strong textual argument that the Fourth Circuit and the other cases that have applied Nixon to third party subpoenas have gotten it wrong. Rule 16’s limitations apply only to the defendant’s right to seek discovery from the government and the government’s reciprocal right to seek discovery from the defendant.  No rule curbs the parties’ ability to seek discovery from third parties; indeed, as stated above, Rule 17 requires the production of “any books, papers, documents, data, or other objects the subpoena designates” and permits court intervention, on timely motion, only when “compliance would be unreasonable or oppressive.”  

    The Supreme Court declines many more cases than it hears.  In the last decade, it has granted between 1% and 7% of petitions for a writ of certiorari in criminal cases, depending on the year.  While any individual case is a long shot for high court review, (1) the division among lower courts on whether to apply Nixon to third party subpoenas, and (2) the viable argument that such an application offends the plain language of Rule 17 – and impermissibly curbs a defendant’s right to acquire evidence that would assist in his defense – hopefully will increase the odds that the Court considers this important issue.         


    The Yates Memo in Healthcare: Pursuing Civil, Criminal, and Administrative Penalties

    It has been a year since the Yates Memo memorialized and clarified the government’s policy on individual accountability for corporate wrongdoing.  Initially, there was some debate whether the Yates Memo would change government practice, as many government officials and others saw it as a continuation of policy, rather than a significant departure from prior practice.  But a year in, it has become apparent that the government has placed a greater emphasis on pursuing individuals.  One arena where that emphasis is particularly apparent is healthcare. Below is a brief summary of some of most significant actions – both criminal and civil – that the government has taken against individuals in the healthcare industry. 

    In United States v. Facteau, Case No. 1:15-CR-10076 (D. Mass.), the government charged former Acclarent executives, William Facteau and Patrick Fabian, with felonies relating to the off-label marketing of a nasal device, which the defendants allegedly promoted in an aggressive fashion to make the company attractive for purchase or an initial public stock offering.  On July 20, 2016, Facteau and Fabian, who succeeded in selling the company to Johnson & Johnson, were acquitted of the felony charges but convicted of misdemeanors.

    On September 27, 2016, the former CEO of Tuomey Healthcare System, Ralph J. Cox, III, agreed to pay $1 million and to a four-year exclusion from participation in federal healthcare programs to settle claims involving his role in that system’s violation of the Stark Law.  As part of the settlement, Cox did not admit liability.  The resolution against the individual came after Tuomey suffered defeat in a jury trial and the district court entered a judgment under the False Claims Act in favor of the United States for $237.4 million. United States ex rel. Drakeford v. Tuomey Healthcare System, Inc., Case No. 3:05-CV-02858 (D.S.C.). The government later agreed to resolve the judgment against Tuomey for $72.4 million. 

    On October 12, 2016, four former executives of American Senior Communities, an Indiana nursing home chain, were indicted for their alleged roles in a kickback and fraudulent overbilling scheme. United States v. Burkhart, Case No. 1:16-CR-212 (S.D. Ind.).  It is unclear whether an investigation against the corporate entity persists.

    June 22, 2016, saw an unprecedented nationwide sweep led by the multi-agency Medicare Fraud Strike Force that resulted in the arrest of 301 individuals, including 61 healthcare professionals, in 36 districts.  The individuals were all charged with participating in various fraudulent schemes, which allegedly resulted in approximately $900 million in false billings to Medicare.

    Finally, though the case has not yet yielded actions against individuals, Pfizer and Wyeth’s $785 million settlement to resolve allegations of reporting false drug prices to Medicaid included cooperation provisions. United States ex rel. Kieff v. Wyeth Pharmaceuticals Inc., Case Nos. 03-CV-12366, 06-CV-11724 (D. Mass.) Under those provisions, the companies must: cooperate with investigations concerning “individuals and entities not released” from liability in the settlement; make “former directors officers and employees available for interviews and testimony”; and produce to the government non-privileged documents concerning the conduct covered in the settlement.  Thus far, the government has required cooperation provisions in 46% of all corporate settlements in Fiscal Year 2016. 


    Telemedicine- Just a Fancy Word for Plain Old Medicine?

    Although “telemedicine” is not some new type of medical breakthrough but rather a vehicle for the delivery of “medicine”, its wide-spread use in delivering medical care in many different scenarios can get bogged down by serious regulatory issues such as: the lack of medical license reciprocity among the states (notwithstanding an increasing number of states adopting the Federation of State Medical Boards Interstate Medical Licensure Compact); the type of informed consent that needs to be given before care is rendered via telemedicine; differing opinions from state-to-state about the standards of care specific to medical care delivered via “telemedicine”; inefficient availability of patient’s medical records and the privacy of those records from state-to-state; requirements for certificates of need in some states to practice even basic forms of medicine; even the types of entities that can legally employ doctors varies among the states.  A high profile example of the challenge of standard of care issue’s confronting medical boards is well documented in the high-profile Texas cases involving Teladoc.

    But numerous other states are having their own challenges that are not much different from Texas.  For example, Ohio and Arkansas have had their own challenges.

    Even in the absence of these regulatory issues in some states, you still have the fact that health insurers’ payment for telemedicine services currently amounts to less than 1 percent of all of the reimbursements paid to health care providers and health care facilities, although there is some movement on these fronts too.

    While the promise of telemedicine technology as a form of connecting providers with their patients continues to innovate exponentially, adoption is way behind innovation.  The hot topic for the past several years that garners the most news coverage is “convenience care”, but that is just one aspect of the true value that telemedicine can bring to the table in the delivery of medical care.  The real value of telemedicine can already be seen in “tele”stroke, “tele”pathology, and “tele”radiology programs that have well-documented success in larger health systems and even smaller ones too.  And the good news about the “non-convenience care” telemedicine programs is that they have fewer regulatory hurdles to address.  Curiously though, even these programs have not had universal adoption.

    Still, there is one place in the United States where telemedicine is really taking off unencumbered and leading the way.  The United States Department of Veterans Health Administration (“VA”). 

    In a recent article written by Greg Slabodkin and published in Health Data Management, it was reported that “2015 was a banner year for telemedicine at the VA, which conducted 2.14 million telehealth visits, reaching more than 677,000 veterans—or 12 percent of all vets—using real-time telemedicine, home telehealth care, and store-and-forward telemedicine”.  The article also points out that the “VA reported that home telehealth reduced hospital bed days of care by 58 percent, hospital admissions by 32 percent, while telemental health reduced psych bed days of care by 35 percent” and, according to the acting Executive Director of telehealth at the VA, Dr. Kevin Galpin, telemedicine is “mission critical”.

    Mr. Sladbodkin’s article also points out the skepticism of some members of Congress about the VA’s telemedicine program.  Skepticism notwithstanding, it is nonetheless remarkable that the VA can even consider such an ambitious telemedicine program at all, let alone deem it to be “mission critical”.   Yet, when you think about it for a moment, it is not really that remarkable at all, because unlike everyone else, the regulatory hurdles that the VA faces in its embrace of telemedicine are few. 

    For example:    

    • Cross-Border Licensure:  VA providers are only required to have one state-issued medical license to practice in any state if both the physician and patient, at the time of the telemedicine visit, are located in federally-owned facilities.
    • Other Regulatory Issues: Either non-existent due to federal preemption or certainly less of a hindrance.
    • Medical Records Interoperability: For the most part, active military and veteran medical records are available regardless of where they are located at the time care is sought.
    • Reimbursement:  The VA is funded by an annual budget from Congress enabling the VA to utilize telemedicine in the absence of reimbursement concerns.     

    The early success of the VA’s telemedicine program is not really all that surprising.  It is the same type of care that you would receive had it been done in-person, but in this case, delivered via a different (and more modern) method of communication.  It enables the VA to harness telemedicine’s potential for efficiencies and better quality of care, which the VA desires to demonstrate and achieve.  The VA’s telemedicine program is detailed at  

    If you would like to watch just one aspect of the VA’s use of “telemedicine” in the context of veteran’s continued mental well-being while in a VA facility, watch this VA produced video.

    As the VA continues to document the successes of telemedicine across many different disciplines of medicine, their successes should advance telemedicine as being “mission critical” for all health care providers throughout the United States.       


    SEC Announces Enforcement Results for FY 2016

    This week, the Securities and Exchange Commission (“SEC”) announced its enforcement statistics for Fiscal Year (“FY”) 2016.  All told, the agency filed 868 enforcement actions, including a record 548 independent actions for violations of federal securities law, and recovered more than $4 billion in disgorgement and penalties.  The number of independent enforcement actions represents an 8% increase over the number of such actions filed in FY 2015 (507) and a 32% increase over those filed in FY 2014.

    The agency has yet to release its Select SEC and Market Data, the report that will break down the quantity and types of enforcement actions pursued.  However, the overview contained in this week’s announcement provides some insight into the agency’s foci for the past year, and likely going forward. 

    Foreign Corrupt Practices – The SEC filed 21 actions to enforce the Foreign Corrupt Practices Act (“FCPA”) and announced two non-prosecution agreements with companies that self-reported FCPA violations.  The 21 actions are a high-water mark for FCPA enforcement for the SEC.  The agency’s increased efforts to pursue American companies for conduct committed overseas is consistent with public statements made by SEC officials throughout FYs 2015 and 2016.  Businesses should anticipate that the SEC will increase its FCPA enforcement in the upcoming fiscal year.

    Rewarding Whistleblowers – The SEC whistleblower program distributed to 13 recipients more than $57 million – more money than the program has distributed in all other years combined since its 2011 inception, and a 50% increase over its payouts from FY 2015 ($38 million). 

    The SEC also brought the agency’s first-ever standalone action for retaliation against a whistleblower and charged three companies with violating Exchange Act Rule 21F-17, which prohibits the use of confidentiality agreements to impede a whistleblower from communicating with the SEC.  These protective actions on behalf of whistleblowers, coupled with ever-growing distributions, signal that the SEC has an increased sense of purpose surrounding the development of its whistleblower program.

    Gatekeepers – The SEC publicized its efforts to hold so-called “gatekeepers,” such as attorneys, accountants, and auditors, accountable for the failure to comply with professional standards.  It filed actions against auditing firms for violating auditor independence rules and conducting deficient audits; it sanctioned a consultant for improperly evaluating the severity of the company’s internal control deficiencies; and it charged attorneys with allegedly offering EB-5 investments while not being registered brokers. 

    The agency’s emphasis on such actions furthers a trend that began in 2014 with the SEC “Gatekeeper Enforcement Initiative.” The focus on gatekeepers also aligns with the SEC’s recent public statements regarding the importance of ensuring that these individuals are satisfying their professional obligations.



    Georgia-Based Hospital Group to Pay Over $513 Million to Resolve Civil and Criminal Allegations Related to Illegal Payments for Patient Referrals

    On Monday, the DOJ announced the resolution of criminal allegations and a False Claims Act (“FCA”) lawsuit a relating to a scheme to defraud the United States and obtain kickbacks in exchange for patient referrals.  A major U.S. hospital chain, Tenet Healthcare Corporation and two subsidiaries, Atlanta Medical Center, Inc. and North Fulton Medical Center, Inc., will pay over $513 million pursuant to a series of agreements, including a civil settlement agreement, non-prosecution agreement, and plea agreements:

    FCA settlement:  Tenet Healthcare and related entities – described in the settlement as “the Tenet Entities – agreed to pay $368 million to the federal government and to Georgia and South Carolina to resolve claims brought by a Georgia whistleblower.  The FCA suit was filed in the Middle District of Georgia and claimed that Tenet Healthcare paid bribes and kickbacks to pre-natal clinics to unlawfully refer Medicare and Medicaid patients to its hospitals.  The whistleblower will receive $84 million under the agreement.  The agreement stated that the Tenet Entities denied any liability regarding the false claims allegations.

    Non-prosecution agreement:  Tenet HealthSystem Medical Inc., the corporate parent of Tenet Healthcare, entered into a non-prosecution agreement (“NPA”) with DOJ based on similar allegations to those within the FCA case.  The NPA allows the two companies to avoid criminal prosecution in exchange for following the agreed-upon terms.  The criminal allegations at the heart of the NPA focused on an alleged conspiracy to defraud the United States and to violate the Anti-Kickback Statute, which bars illegal payments that induce patient referrals for services paid for by federal health care programs.  Under the NPA, Tenet HealthSystem and Tenet Healthcare will avoid criminal prosecution if they cooperate with the government’s prosecution and strengthen their internal controls, including their compliance and ethics programs.  The NPA is effective for three years, although it may be extended for an additional year if necessary.

    Plea agreements:  Two subsidiaries of Tenet Healthcare, Atlantic Medical Center and North Fulton Medical Center, agreed to plead guilty to a criminal information for their role in the conspiracy, as referenced above, to defraud the United States and violate the Anti-Kickback Statute.  Under the plea agreements, the two healthcare will forfeit over $145 million to the United States, collectively representing the amount paid to the two entities by the federal Medicare and Georgia Medicaid programs for services paid to patients referred as part of the conspiracy.

    Additional information, including the FCA settlement agreement, NPA, and criminal information can be found here.


    Menendez Trial Will Wait on Supreme Court Petition

    The U.S. Court of Appeals for the Third Circuit granted Senator Robert Menendez’s motion to stay its mandate while he petitions the U.S. Supreme Court to review whether the political corruption charges against him are based on constitutionally protected legislative acts.  As previously documented on this blog, Menendez moved to dismiss the indictment filed in the U.S. District Court for the District of New Jersey. He argued in part that the Speech and Debate Clause of the U.S. Constitution insulated him from prosecution on his alleged efforts to influence various government actions on behalf of prominent Democratic Party donor, Dr. Salomon Melgen.

    After the district court denied the motion as to the bulk of Menendez’s charges, Menendez appealed to the Third Circuit.  On July 29, 2016, the Court found that Menendez’s acts were “ambiguously legislative” and thus subject to the district court’s determination as to whether they were protected activity based on its evaluation of Menendez’s motive and purpose.  The Court then found “a sufficient basis for the [district] court’s conclusion that the predominant purpose of the challenged acts was to pursue a political resolution to Dr. Melgen’s disputes,” and affirmed the denial of the motion to dismiss.

    The affirmance green-lighted Menendez’s trial, but the stay will put the brakes on any further proceedings until (1) Menendez petitions the Supreme Court for a Writ of Certiorari – i.e., the opportunity to be heard – and (2) the high court decides whether to grant cert.  In a typical year, the Supreme Court agrees to review between 1% and 6% of the criminal cases in which a cert petition is filed.  Most successful cert petitions present important questions of federal law that lower courts have answered inconsistently.

    In opposing Menendez’s motion for a stay, the government contended that Menendez’s claim was highly unlikely to engender Supreme Court review. “Where, as here, a defendant lacks a meritorious claim to advance further on appeal, the public gains nothing, and potentially loses material evidence, by further delaying trial,” it said.  Menendez, in contrast, characterizes the issue as “a substantial [Speech and Debate Clause] question that has divided the courts of appeals and that is of fundamental importance to bedrock constitutional principles of separation of powers.”


    Alleged Menendez Gift-Giver Loses Bid for Rehearing of Medicare Overpayment Suit

    In a prior post, we blogged about the Third Circuit’s ruling that the political case against Senator Bob Menendez can proceed to trial.   Now, in a separate civil matter, the U.S. Court of Appeals for the Eleventh Circuit has denied a rehearing en banc to the Florida opthamologist from whom Menendez allegedly solicited and received bribes.

    Vitero Retinal Consultants, a clinic owned by Dr. Salomon Melgen, challenged a Medicare Appeals Council decision that the Centers for Medicare & Medicaid Services overpaid the clinic more than $9 million by extracting multiple doses of the macular degeneration drug, Lucentis, from a single-dose vial. In September 2014, the U.S. District Court for the Southern District of Florida (Judge Marcia G. Cooke) upheld the Council’s decision.  A three-judge panel affirmed, rejecting the clinic’s argument that Medicare has established a practice of reimbursing for other multi-dosed drugs with a “single use” instruction.   According to the Court, the “single use” instruction for those other drugs was intended to prevent doctors from administering medications stored past the acceptable eight-hour timeframe.  Lucentis, in contrast, has a label that states each vial should, under all circumstances, be used just once, and any excess should be drawn into a syringe and expelled.

    The clinic petitioned the Court for a rehearing en banc, arguing in part that the panel’s ruling permitted CMS to supervise the “manner in which medical services are provided . . . ,” in violation of the Social Security Act, by making a determination as to the propriety of administering multiple doses of Lucentis. The Eleventh Circuit (Judge Robin S. Rosenbaum) issued an order denying the petition without an accompanying opinion. 

    Melgen faces separate criminal charges for the alleged overbilling and bribery of Senator Menendez in the U.S. District Court for the Southern District of Florida. 



    U.S. Tax Court Includes Criminal Fines and Civil Forfeitures in $74 Million Recovery Under IRS Whistleblower Program  

    In Whistleblower 31276-13W v. Commissioner, 147 T.C. No. 4 (Aug. 3, 2016) filed last week, the U.S. Tax Court held that criminal fines and civil forfeitures constitute “collected proceeds” for the purposes of determining an award under IRS’s Whistleblower program.  Husband and wife whistleblowers – described only as “Ps” as their identities were under seal – reported tax offenses by the targeted taxpayer to the IRS Whistleblower Office which led to a guilty plea for tax evasion and payment of $74,131,694 in tax restitution, criminal fines, and civil forfeitures. 

    The $74 million collected from the taxpayer included $20 million in tax restitution, $22 million in criminal fines, and $32 million in civil forfeitures.  The IRS claimed that criminal fines and civil forfeiture amounts – totaling roughly $54 million – were not “collected proceeds” under the IRS whistleblower program and, thus, were not subject of an award to the whistleblower.

    Based on federal laws enacted in 1867, the IRS whistleblower program allows a whistleblower – also termed “claimants” or “informants” – to receive a portion of the money received by the IRS based on the whistleblower’s information.  The key provisions of the whistleblower program are found in Section 7623 of the Internal Revenue Code, which allows for either a mandatory or discretionary payment of an award depending on the amount of “collected proceeds.”  For instance, under Section 7623(a), a whistleblower may receive a discretionary award of up to 15% of the collected proceeds, capped at $10 million, for tax violations less than $2 million.  On the other hand, under Section 7623(b), a whistleblower is entitled to a mandatory award of 15% to 30% of the collected proceeds if the tax violation exceeds $2 million.  The IRS determines the amount of the award with limited input from the whistleblower. Only a mandatory payment under Section 7623(b) is subject to review by the U.S. Tax Court, provided the whistleblower appeals within 30 days of the IRS’s decision.

    A tax whistleblower claim typically begins with the filing of IRS Form 211 and supporting information with the IRS Whistleblower Office in Ogden, Utah.  The IRS performs an initial screening to determine whether to initiate an investigation of the allegation.  If so, the matter is forwarded to one of the IRS branches for further investigation, including potential administrative or judicial action.  The process typically takes several years from the initial filing until all proceeds are collected.  An award is not paid until all taxes, penalties, interest, or other amounts owed to the IRS are collected.

    In its ruling for the whistleblower, the Tax Court concluded that the statutory language requiring an award based on the “collected proceeds (including penalties, interest, additions to tax, and additional amounts)” extended to criminal fines and civil forfeitures.  The Court stated that permitting an award based on funds obtained via the criminal prosecution process was consistent with the purpose of the IRS whistleblower program – detecting tax underpayments and holding persons accountable through criminal prosecution.

    The IRS unsuccessfully argued that only amounts collected under Title 26 should be used to calculate an award and, thus, criminal fines and civil forfeitures are not relevant because they are based on Title 42, Section 10601 (criminal fines) and Title 31, Section 9703.1 (civil forfeitures).  However, the Court held that the whistleblower statute was “straightforward and written in expansive terms” with the intent of paying an award based on “administrative or judicial action.”  The Tax Court also relied on “broad and sweeping” nature of Section 7623 which uses phrases like “any administrative or judicial action”, “any related actions”, and “any settlement in response to any such action.”

    A full copy of the Tax Court’s opinion can be found here.   


    Informal Efforts to Influence Executive Action Are “Ambiguously Legislative,” Says the Third Circuit in Declining to Toss Menendez Case

    Senator Bob Menendez’s political corruption case will go forward under a ruling from the U.S. Court of Appeals for the Third Circuit.  In a 22-count indictment, the government alleges that, from 2006 to 2013, Menendez solicited and accepted gifts from a Florida opthalmologist in exchange for, among other favors, (1) influencing an $8.9 million enforcement action against the doctor by the Centers for Medicare and Medicaid Services (“CMS”), and (2) encouraging the U.S. Customs and Border Patrol to intervene on the doctor’s behalf in a contract dispute with the Dominican Republic.  Menendez allegedly wielded that influence by meeting with and speaking to – either personally or through staff – high-ranking Executive Branch officials, including then-Secretary of Health and Human Services, Kathleen Sebelius, and Assistant Secretary of State, William Brownfield, on the doctor’s behalf.

    Menendez moved the U.S. District Court for the District of New Jersey to dismiss the indictment.  He argued, in part, that his interventions were legislative acts protected from prosecution by the Speech and Debate Clause of the U.S. Constitution.  The district court denied the motion, and the Third Circuit affirmed.

    Before the Third Circuit, Menendez contended that the Speech and Debate Clause protects any effort by a legislator “to oversee the Executive Branch.” Conversely, the government argued that legislative attempts to impact executive action are never protected by the Speech and Debate Clause.  The Court spurned both “all-encompassing” positions, holding that informal efforts to influence executive action are “ambiguously legislative in nature and therefore may (or may not) be protected legislative acts depending on their content, purpose, and motive.”

    Applying “clear error” review to the district court’s factual findings, the Court rejected Menendez’s characterization of his conduct as legislative fact-finding and efforts to change executive policy.  The district court found that Menendez’s actions were tied to a specific individual, and the Third Circuit panel determined that ample record evidence supports that conclusion.  Thus, under the deferential standard of review given to findings of fact, the conduct alleged in the indictment amounts to lobbying on the behalf of an individual, activity that the Speech and Debate Clause does not protect.

    According to a statement on his defense counsel’s website, Menendez plans to petition the Third Circuit for a rehearing en banc.  Such petitions are rarely granted and even more rarely result in a different outcome. Thus, Menendez likely will have to pursue an acquittal before a jury.