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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.

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    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.



    South Carolina Legislature Sends Overhaul of its Telemedicine Laws to Governor Haley for Her Approval

    South Carolina, in a move that is becoming increasingly common among various state legislatures (or their medical boards), is on the verge of completely re-writing its telemedicine law – including the often murky issue of when it is appropriate for physicians to prescribe medications (especially non-narcotic) via telemedicine visits in the absence of a prior in-person physical exam being performed by the prescribing physician.

    On May 25, 2016, the South Carolina legislature sent to Governor Nikki Haley Senate Bill 1035, which facilitates the use of telemedicine by establishing certain recordkeeping requirements.  SB 1035 also defines “telemedicine” and details the requirement of a physician-patient relationship, so as to allow the prescribing of medication when the physician-patient relationship is established solely via telemedicine. 

    More specifically, the bill provides the following details:

    • ‘Telemedicine’ means the practice of medicine using electronic communications, information technology, or other means between a “licensee” in one location and a patient in another location with or without an intervening practitioner.
    • A physician may prescribe for a patient whom the physician has not personally examined, when the physician has established a physician-patient relationship solely via telemedicine, and so long as the physician complies with Section 40-47-37 of the act.
    • A physician who establishes a physician-patient relationship solely via telemedicine shall adhere to the same standard of care as a physician employing more traditional in-person medical care and shall be evaluated according to the standard of care applicable to the physician’s area of specialty. 
    • A physician shall not establish a physician-patient relationship via telemedicine for the purpose of prescribing medication when an in-person physical examination is necessary for diagnosis.
    • A physician who establishes a physician-patient relationship solely via telemedicine shall generate and maintain medical records for each patient in compliance with any applicable state and federal laws, rules, and regulations.  Records shall be accessible to other practitioners and to the patient in a timely fashion when lawfully requested.
    • Prescribing of lifestyle medications is expressly prohibited (i.e. erectile dysfunction drugs or abortion inducing drugs) unless permitted by the medical board.
    • A simple questionnaire without an appropriate evaluation is prohibited.
    • A physician, practitioner, or any other person involved in a telemedicine encounter must be trained in the use of the telemedicine equipment and competent in its operation.
    • Moreover, a physician who establishes a physician-patient relationship solely via telemedicine has numerous additional requirements:    
    1. adhere to current standards for practice improvement and monitoring of outcomes and provide reports containing such information upon request of the board;
    2. provide an appropriate evaluation prior to diagnosing and/or treating the patient utilizing technology sufficient to accurately diagnose and treat the patient or, in the alternative, use of a licensed healthcare professional as a telemedicine presenter is permitted in order to provide various physical findings the physician may need to complete an adequate assessment;
    3. verify the identity and location of the patient and be prepared to inform the patient of the physician’s name, location, and professional credentials;
    4. establish a diagnosis through the use of accepted medical practices, which may include patient history, mental status evaluation, physical examination, and appropriate diagnostic and laboratory testing in conformity with the applicable standard of care;
    5. ensure the availability of appropriate follow-up care;
    6. Schedule II and Schedule III prescriptions are not permitted unless specifically authorized by the board;
    7. maintain a complete record of the patient’s care according to prevailing medical record standards that reflects an appropriate evaluation of the patient’s presenting symptoms;
    8. maintain the confidentiality of the patient’s records;
    9. have a valid, current South Carolina medical license;  and
    10. discuss with the patient the value of having a primary care medical home and provide assistance in identifying available options for a primary care medical home.

    SB 1035 is set to take effect upon approval by the Governor (which, at the time of this entry, has not yet occurred).

    How does the recent activity in South Carolina, and several other states, impact the bigger picture of telemedicine?  For starters, as more states adopt standards for conducting telemedicine, a loose uniformity emerges amongst the states as to what the appropriate standard of care is when conducting telemedicine visits.  The more familiar themes are: (1) stating exactly what is not permitted; (2) a telemedicine encounter must approximate an in-person visit (i.e. sufficient information must be secured in order to render a diagnosis and/or prescribe a medication for the patient); (3) the type of communication system that is required to be used; and (4) failure to adhere to the standard of care will be subject to discipline (which initially may result in a physician being subjected to more harsh penalties).  Second, it appears that for most states (but not all) a reasonable recognition is taking hold that telemedicine is not a different form of medical care, but rather a different method of delivery of the same medical care (with the same standard of care) that would have, in the absence of modern technology, been provided in-person.  

    Which state is next and what approach will they take?  Stay tuned!


    Trials Must Be Speedy, Sentencings Not So Much

    The Sixth Amendment to the U.S. Constitution guarantees the “right to a speedy and public trial” to those accused in criminal proceedings.  Federal and state courts have long grappled with the question whether speedy trial rights protect defendants from inordinate delays in sentencing.  Recently, in Betterman v. Montana, Case No. 14-1457, the U.S. Supreme Court answered that question in the negative.

    The Trial in “Speedy Trial” Means Trial (or Plea)

    Brandon Betterman pleaded guilty to bail-jumping in Montana state court and was held in county detention for fourteen months between the entry of his plea and sentencing date, largely because of institutional issues and through no fault of his.  Although Betterman was sentenced to seven years’ imprisonment, with four of those years suspended, he argued that the fourteen-month delay offended his Sixth Amendment rights because, had he been sentenced in a timely fashion, he could have been eligible for conditional release through the state prison system’s procedures.

    But the Supreme Court decided unanimously that the Sixth Amendment guarantee to a speedy trial cuts off at, well, trial, or the defendant’s entry of a guilty plea.  It does not govern post-conviction or pre-sentencing delays.

    If the result was not a surprise, the 8-0 final score was. At oral argument, some Justices seemed supportive of Betterman’s argument that the Court should apply the balancing test it uses in evaluating pre-trial delays to the sentencing context.  That test, which the Court announced in Barker v. Wingo more than four decades ago, considers the length of the delay, the reason for the delay, the prejudice that the delay imposed on the defendant, and the manner in which the defendant has asserted his right.  Regarding the application of the test post-conviction, Justice Kagan said, “I guess I just wouldn’t see why there’s any need for a different rule, especially given the level of flexibility that Barker gives.” Apparently, it is not flexible enough to stretch past the point of conviction.

    What Could Have Been?

    The majority of states and the federal courts were operating as though the Sixth Amendment had nothing to say about sentencing delays, so Betterman will mostly preserve the status quo.  In most jurisdictions in the federal system, local rules require (or local practices compel) the court to set a sentencing date a certain number of days – typically 90 or 120 – from the entry of a guilty plea or a guilty verdict at trial.  But in some jurisdictions, sentencing is not set until the U.S. Probation Office completes the defendant’s presentence report – a practice that can drag on for months if the Court does not impose deadlines.  In the Western District of North Carolina, for instance, defendants can wait a year or more between entry of plea (or loss at trial) and sentencing. And that timeframe can expand for defendants involved in complex fraud cases or expansive conspiracies.  A contrary outcome in Betterman could have put an end to such systematic delay.

    Lengthy lapses between findings of guilt and sentencings have the most profound effect on defendants who are detained pending the resolution of their cases. For every day they are not sentenced (and thus not designated to the agency that administers their punishment), those individuals face time in county facilities, which generally have far fewer resources than federal or even state prisons. The result is typically poorer medical care, less or non-existent programming, and little if any recreation.

    But delay can negatively impact even defendants on bond pending sentencing as well.  It elongates a stressful period – often the most stressful period in one’s life; it forestalls closure. And, where a sentence of imprisonment is possible or likely, an uncertain sentencing date, or a sentencing date subject to continuance because of institutional delay, makes it difficult to finalize the arrangements of one’s affairs.

    And, for all defendants, an extended delay in sentencing can complicate presenting a case for mitigation. In the federal system and in many states, sentencing courts consider a defendant’s history and characteristics and the circumstances surrounding the offense in fashioning a punishment. As time passes, recollections fade, and it can become more difficult to locate witnesses that could provide the court with information supporting a favorable outcome.

    To be sure, a defendant can find ways to use the delay in sentencing to his advantage – by engaging in conduct that demonstrates rehabilitation or that the offense he committed was uncharacteristic. But, for most, the negative impact of delay overwhelms the positives that can be drawn from it.  Thus, courts and legislatures should endeavor to provide speedy sentencing, even if the Sixth Amendment does not.



    Calling All Wrongdoers! 

    On Thursday, April 28, 2016 Assistant Attorney General Leslie Caldwell addressed the American Bar Association’s Institute on Internal Corporate Investigations regarding the Department of Justice’s Voluntary Disclosure Program.  In a room full of defense attorneys, this pilot program was surely received with some skepticism.  This new initiative is aimed to encourage corporate counsel to report potential wrongdoing under the Foreign Corrupt Practices Act.  The Department assumes that counsel will have conducted an internal investigation and implemented remedial procedures when it received notice of potential violations.  But instead of shelving the report of the investigation in the hopes that the government never finds out, the Voluntary Disclosure Program provides an incentive for prompt disclosure.

    The prize for a company participating in this program could be fines cut in half from the lowest amount recommended by the federal sentencing guidelines, as well as a dispensation from hiring an expensive compliance monitor.  Assistant Attorney General Caldwell was clear to point out that reporting potential violations on the eve of a government investigation is not sufficient.  However, the government will not punish companies for failing to report potential violations that were unknown – for example, if a whistleblower reported directly to the government without notifying the company first.

    The defense bar has been on guard following the so-called Yates Memo written by Deputy Attorney General Sally Quillian Yates directing the government’s civil and criminal attorneys to pursue individuals and discouraging corporate settlements in exchange for immunity for executives.  How does a company self-disclose and cooperate fully knowing the government would like to prosecute individual executives?  How is a company to cooperate while maintaining the sanctity of the attorney-client privilege?  Assistant Attorney General Caldwell acknowledged these issues during her remarks.  And although she was not in a position to propose specific solutions, Assistant Attorney General Caldwell credited the defense bar and its skilled attorneys with the capacity to structure cooperation in a way that does not waive the privilege. 

    Given the relatively recent publication of the Yates Memo and introduction of the Voluntary Disclosure Program, only time will tell how successful counsel will be in negotiating this new terrain.


    Twenty-Five Individuals Indicted in “Ground Zero” for Medicare Fraud

    The United States indicted twenty-five defendants in three Medicare Fraud cases, recently filed in the U.S. District Court for the Southern District of Florida.  William Maddalena, Assistant Special Agent in Charge of the FBI’s Miami Division, dubbed South Florida “ground zero” for health care scams.

    These indictments detail two purported schemes involving Medicare Part D, the voluntary prescription drug benefit. In the first, alleged in U.S. v. Hevia et al. (Case No. :16-cr-20267) and U.S. v. Fernandez (Case No. :16-cr-20268), the government claims that two defendants hired co-conspirators to run pharmacies and employed other co-conspirators as “patient recruiters.” The recruiters referred Part D beneficiaries to the pharmacies, which filled prescriptions that were not medically necessary and submitted false and fraudulent claims for the prescriptions to Medicare.  Twenty-two defendants are charged with various offenses, including Conspiracy to Commit Health Care and Wire Fraud, in violation of 18 U.S.C. § 1349; Health Care Fraud, in violation of 18 U.S.C. § 1347; Conspiracy to Pay and Receive Kickbacks, in violation of 18 U.S.C. § 371; and Receipt of Kickbacks from a Health Care Provider, in violation of 18 U.S.C. § 1320a-7(b)(1)(A). In addition to the criminal charges, the government filed notices of forfeiture seeking in excess of $16 million from the defendants. The government claims that figure represents the total loss to the Medicare program resulting from the conspiracy, and it seeks to hold the defendants jointly and severally liable for the sum.

    The second scheme, alleged in U.S. v. Diaz (Case No. 1:16-cv-20251), involves similar, though unrelated, claims that a pharmacy owner and co-conspirators bilked Medicare for beneficiaries’ medically unnecessary prescriptions. Three defendants are charged with Conspiracy to Commit Health Care and Wire Fraud;  Health Care Fraud; and Money Laundering, in violation of 18 U.S.C. § 1957. The government seeks forfeiture of approximately $10.5 million. 

    The government has identified Part D, the fastest-growing component of the Medicare program, as a vulnerable target for fraud.  According to the Government Accountability Office, of the $120 billon that the government spent on Part D in Fiscal Year 2015, up to $10 billion was for fraudulent claims.  Because of the money expended on Part D and its susceptibility to fraud, the Department of Justice and the Office of the Inspector General, Department of Health and Human Services have signaled efforts to ramp up Part D prosecutions through various press releases and policy statements, as well as the 2016 OIG-HHS Work Plan.