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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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    Supreme Court Update – A “DIG” in Fifth Amendment Case City of Hays, Kansas v. Vogt

    What Happened?
    Back in February, I wrote on the blog about the Supreme Court oral argument in City of Hays, Kansas v. Vogt, which sought to address whether the government’s introduction of a compelled statement at a probable cause hearing violated the Fifth Amendment.  Last week, the Supreme Court issued a one-sentence order dismissing the case as improvidently granted (known as a “DIG”). 

    The Rundown
    During Vogt’s application process for a job with the Haysville Police Department he disclosed that he had kept a knife he obtained in the position he held at the time with the Hays PD.  Vogt told the Hays PD about the knife because Haysville conditioned his job offer upon the requirement that he do so, and Hays then demanded that Vogt provide more information or else he would lose his job.  Vogt provided the additional information and then accepted the job with Haysville, which rescinded his offer after he was charged with a crime in connection with the information he told Hays.  The state introduced Vogt’s statement to the Hays PD at his preliminary hearing, but it ultimately dropped the charges against him.

    Vogt sued both Hays and Haysville, claiming that the use of his compelled statements against him in his preliminary hearing violated the Fifth Amendment.  The trial court granted the defendants’ motion to dismiss and the Tenth Circuit reversed.

    The discussion anticipated at the February 20th oral argument would have focused on the Fifth Amendment’s use of the term “criminal case,” and whether previously held compelled statements can be introduced at various types of proceedings, including for example, preliminary hearings and suppression hearings.  But the Supreme Court, however, emphasized throughout the argument that the case’s procedural posture was odd, and hinted that some information outside of the record called the truth of Vogt’s factual allegations into question.  Those concerns, combined with the gravity of the constitutional issue at question, which Justice Ginsburg suggested had the potential to “shrink” the Fifth Amendment to “almost a vanishing point” since courts resolve most criminal cases without a trial, may have led the Court to dismiss the case. 

    The Take-Away
    The Supreme Court’s DIG means the Tenth Circuit’s finding that the Fifth Amendment applies to preliminary hearings stands, leaving open a circuit split.  Additionally, the three month delay between the argument and the Court’s eventual DIG may indicate discord between the Justices on substantive Fifth Amendment issues that could eventually come to a head if another petitioner presents a more factually clear and developed petition to the Court.


    Former Nurse Gets Stiff Sentence for Medicare Fraud

    What Happened?
    On May 9, 2018, Joan Cicchiello, a 67-year-old former registered nurse, was sentenced in the U.S. District Court for the Middle District of Pennsylvania to 72 months’ imprisonment for aiding and abetting health care fraud in violation of 18 U.S.C. §§ 1347 and 2.

    The Rundown
    Cicchiello pleaded guilty to one count of aiding and abetting health care fraud on October 5, 2017, pursuant to a written agreement. According to the government, Cicchiello, the former owner and operator of a mental health services provider, recruited and hired unlicensed or otherwise unqualified individuals to administer psychiatric care to elderly patients throughout central and northeastern Pennsylvania, as well as to adolescents at her Mount Carmel, Pennsylvania office.  Among the counselors Cicchiello employed were a convicted Megan’s Law offender, an 80 year-old chiropractor, and social worker whose license had been suspended due to felony drug convictions. Cicchiello created false records indicating that her counselors had proper training and represented via bills submitted to Medicare that she, a licensed and qualified practitioner, was providing the psychotherapy services.   

    Based in part on a loss amount of more than $150,000 and the vulnerability of the victims, Cicchiello’s advisory range under the U.S. Sentencing Guidelines was the statutory maximum of 10 years’ imprisonment.  She requested a probationary sentence to enable her to make restitution payments and due to her advanced age and the low probability of recidivism.

    Before imposing a sentence, the Court, Judge John E. Jones II, noted that the fraud was particularly disturbing, given that it was largely perpetrated on the elderly, the infirm, and adolescents. Nevertheless, accounting for her age, he varied downward from the guidelines range to 72 months’ imprisonment.

    For the Record
    “This brazen fraud was compounded by the fact that it was perpetrated on some of our most vulnerable citizens,” said U.S. Attorney David J. Freed.  “The hard-working agents of HHS-OIG and the FBI should be commended for their tireless work on this investigation.  The outstanding efforts of these investigators resulted in appropriate punishment for the offender, recovery of taxpayer funds and the opportunity for the victims to receive the legitimate help that they need.”

    The Take Away
    Although Cicchiello received a downward variance, it is difficult to count 72 months’ imprisonment as a defense victory. The substantial sentence reflects the brazenness of the offense and the susceptibility of those affected by the conduct.


    John Schwab Speaks on Opioid Enforcement

    On April 27, 2018, John Schwab spoke at The New York State Pain Society: 2018 Annual Meeting & Scientific Sessions. Mr. Schwab presented on "Opioid Enforcement in 2018: DOJ, HHS, DEA, FBI - Who Does What?" during the Legislative Update Session. This conference was held at the Renaissance Westchester Hotel in West Harrison, NY. 


    DOJ Rolls out New Initiatives for Opioid Enforcement

    What Happened
    In mid-April, the Department of Justice announced several new initiatives in the war on opioid-related crime:
    • On April 17, 2018, Attorney General Jeff Sessions announced that the DEA reached information sharing agreements with 48 states to exchange prescription drug information to aid law enforcement investigations.  These agreements will allow states to share information gathered through programs like state-run Prescription Drug Monitoring Programs.  In turn, the federal government will share information with states, including the data gathered by the DEA Automation of Reports and Consolidated Orders System (“ARCOS”) program, which collects information on the 80 million transactions for distributors and manufacturers.  This information – from both state and federal governments – will be used by law enforcement to, in DOJ’s words, “find the tell-tale signs of crime.”
    • Also on April 17, 2018, DOJ announced the DEA’s proposed rule change which will set limits on opioid production in the United States.  The proposed rule is in response to the belief that the United States produces far more prescription opioids than necessary, far more than other countries and, thus, is more susceptible to drug diversion.
    For the Record
    Attorney General Sessions indicated, “Under the proposed rule, DEA’s opioid production limits would be more responsive to the risk of drug abuse by explicitly taking diversion into account. It’s a common sense idea: the more a drug is diverted, the more its production should be limited. Today’s proposed rule will give DEA more information to help the agency protect law-abiding Americans from the threat of drugs—and that makes all of us safer.”

    A Quick Look at the President’s 2019 Budget Request for DOJ


    What Happened
    President Trump requested $28 billion for the Department of Justice in his budget proposal for the 2019 fiscal year.  

    The Rundown
    The request reemphasizes this administration’s priorities in fighting violent crime and crimes related to immigration, and of course in combating the opioid epidemic. 

    $295 million of the total budget request is slotted for program enhancements related to the opioid epidemic.  This amount includes $31.2 million to fund eight new heroin enforcement groups that will target DEA field divisions that have identified heroin as the first or second greatest threat to the area.  It would also provide for $6.8 million to expand the DEA’s Fentanyl Signature Profiling Program and $2.5 million for identification technology and protective equipment for agents to prevent exposure to deadly opioids in the field.  The vast majority of the $295 million will go to facilitating coordination of the DEA’s High Intensity Drug Trafficking Area Programs with other DEA programs to focus resources where drug trafficking poses the greatest threats. 

    $65.9 million of the budget would focus on immigration-related enhancements, such as border security and enforcement and the hiring of 76 additional immigration judges and their support staff.  Other budget highlights include $109.2 million for combating violent crime; $10 million for BOP’s apprentice program; $3 billion for the Crime Victims Fund, including $486 million for Violence Against Women programs and $45 million for victims of human trafficking; and $3.9 billion in discretionary and mandatory funding for Federal grants to State, local, and tribal law enforcement.

    The Take Away
    Given the political conflict over the budget for the remaining portion of 2018, which almost led to a government shutdown in mid-March, the President’s proposed 2019 budget, which was introduced in mid-February, may not carry much weight by the time Congress acts on it.  Though some political commentators have argued that the 2019 budget proposal is nothing more than a political document, it does provide criminal practitioners with some insight into the administration’s law enforcement priorities. 


    DEA’s 45-day “surge” nets 366 leads and 28 arrests

    What Happened
    In the “surge” announced in late-January 2018, the DEA focused its enforcement and administrative resources on prescribers and pharmacies for 45 days in February and March.  The results – announced on Monday, April 2 – included 28 arrests stemming from 366 leads and 188 active investigations.

    The Rundown
    As in February covered by here, DOJ announced the planned “surge” of DEA agents and investigators targeting pharmacies and prescribers dispensing an unusual or disproportion amount of drugs, including opioids.  The DEA aggregated the 80 million transaction reports collected annually from manufacturers and distributors to identify statistical outliers and trends.  The data was to be used – as Attorney General Jeff Sessions described it – in “targeting packages” by the DEA.

    On Monday, April 2, the DEA announced the results of the “surge:”  366 leads to DEA field offices, 188 of which or 51% resulted in active investigations by the DEA.  The data gathered by the DEA went beyond the transaction reports and included reports on suspicious orders and drug thefts, as well as leads from federal partners like HHS.

    The result of the investigations also included 28 arrests, 54 “other law enforcement actions” like search warrant executions, administrative inspection warrants, and 283 administrative actions of other types, such as inspections, surrender of DEA registrations, and suspension orders.

    For the Record
    Attorney General Jeff Sessions:  “Over the last 45 days, the DEA has surged resources and personnel to prevent the diversion of opioids, arresting dozens of people and taking away drug dispensing authority from nearly 150 medical professionals.  And our efforts are just getting started.  …These new resources will help us catch and convict more of the drug traffickers and corrupt medical professionals who are fueling the opioid crisis.”


    Supreme Court Limits Tax Obstruction

    What Happened
    This week, the United States Supreme Court in Marinello v. United States held that in order to sustain a tax obstruction conviction, there must be a nexus between the defendant’s conduct and a particular administrative proceeding.  The ruling overturns the Second Circuit’s holding that a tax obstruction charge did not require a defendant’s action to be directed at an ongoing IRS audit or proceeding.

    The Rundown
    Carl Marinello, who ran a cash courier freight business, did not pay taxes and, for years before hearing from the government that he was under audit, systematically destroyed records.  An investigation by the IRS was open and ongoing during a portion of these years.  The government charged him with violating a number of criminal tax statutes, including the Omnibus Clause of the Internal Revenue Code.  The Omnibus clause forbids:

    Corruptly or by force or threat of force (including any threating letter or communication), obstruct[ing] or imped[ing], or endeavor[ing]to obstruct or impede the due administration of the [Internal Revenue Code].

    26 U.S.C. §7212(a).

    To determine the scope of the Omnibus clause, the Supreme Court looked to its prior decision in the United States v. Aguilar, 515 U.S. 593 (1995), which discussed the obstruction statute.  In Aguilar, the Court adopted a “nexus” requirement, which required that a defendant’s actions “must have a relationship in time, causation or logic with the judicial proceeding.”  In Marinello, the Court found that the Omnibus Clause was not intended to serve as a “catchall” and held that the same nexus requirement applied.

    The Take Away
    The Court’s decision, which limits what could otherwise be interpreted as a broadly sweeping catchall statute, is a win for the criminal defense bar.  Accordingly, the nexus requirement will be an obstacle for the government to overcome before it can prevail on tax obstruction charges in the future.


    John Schwab to Speak on Opioid Enforcement at New York Pain Society Conference

    John Schwab will be speaking at The New York State Pain Society: 2018 Annual Meeting & Scientific Sessions on April 27, 2018. Mr. Schwab will be presenting on "Opioid Enforcement in 2018: DOJ, HHS, DEA, FBI - Who Does What?" during Session Two - Legislative Update. This conference will be held at the Renaissance Westchester Hotel in West Harrison, NY. 

    For more information, please click here.


    DOJ Takes New Steps in Opioid Enforcement

    What Happened
    In the last few weeks, the Department of Justice has announced new initiatives in the fight against the opioid crisis.  These initiatives included the creation of the Prescription Introduction & Litigation Task Force and a directive that the DEA review regulations regarding production quotas for prescription opioids.

    The Rundown
    In late February, Attorney General Jeff Sessions announced the creation of the Prescription Introduction & Litigation Task Force – termed the “PIL Task Force” – which will focus DOJ’s civil and criminal enforcement tools on manufacturers, distributors, prescribers and pharmacies.  For manufacturers, the task force will use “all available criminal and civil remedies” to hold them liable for illegal activities, including false or misleading marketing of opioids.  DOJ will also examine pending litigation against manufacturers filed by state and local governments to determine if federal law can assist the litigation.

    For prescribers, pharmacies, and distributors, the PIL Task Force will investigate whether DEA regulations are being followed and if the federal False Claims Act can be used to “crack down on pain-management clinics, drug testing facilities and physicians that make opioid prescriptions.”

    The PIL Task Force will also partner with HHS to (1) improve coordination and data sharing against the federal government to better identify violations of law and patterns of fraud related to the opioid epidemic; (2) evaluate possible changes to the regulatory regime governing opioid distribution; and (3) recommend changes in laws.

    Additionally, on March 1, the Attorney General issued a memo directing the DEA to evaluate its regulations concerning production quotas for prescription opioids.  As readers may know, the DEA is charged with regulating the amount of opioids that manufacturers are allowed to produce as set forth in DEA regulations establishing these production and manufacturing quotas.  However, as the Attorney General’s memo notes, “the United States is an outlier in the number of opioid prescriptions issued each year.”  The Attorney General directed the DEA to revisit the quotas and accompanying regulations to determine if they are appropriate in light of the opioid crisis.

    For the Record
    Remarks by Attorney General Sessions

    PIL Task Force:  “The PIL Task Force will aggressively deploy and coordinate all available criminal and civil law enforcement tools to reverse the tide of opioid overdoses in the United States, with a particular focus on opioid manufacturers and distributors.”  (February 27, 2018).

    Opioid production quotas:  “Time is of the essence.  Given the urgency of this crisis, with an estimated 175 Americans dying per day, we need DEA to act quickly to determine if changes are needed in the quotas.”  (March 1, 2018).


    DOJ Expands FCPA Declination Policy to Other Criminal Matters

    What Happened
    The Department of Justice suggested last month that it will decline prosecution in corporate criminal matters in which the corporation engages in voluntarily disclosure.

    The Rundown
    On February 28, 2018, DOJ sent a letter declining to prosecute Barclays in connection with crimes involving a foreign exchange front running scheme.  Though several Barclays executives were charged, DOJ declined to prosecute the corporation.  Barclays had agreed to pay back $13.9 million in profits after cooperating with DOJ in an extensive investigation of the alleged wrongdoing.

    The declination signals a policy shift toward presuming declination in cases where the corporation voluntarily discloses, which is DOJ’s default position in all FCPA matters.  John Cronan, the acting head of DOJ’s Criminal Division and Benjamin Singer, chief of the securities and financial fraud unit confirmed the move, telling attendees at the ABA’s white collar conference in the beginning of the month that DOJ will use the FCPA Corporate Enforcement Policy as nonbinding guidance in other criminal cases.  Pursuant to that policy, unless certain aggravating factors are present, DOJ will decline to prosecute corporations who cooperate and proactively disclose and remedy FCPA issues.

    For the Record 
    In the declination letter to Barclays, Deputy Attorney General Rod Rosenstein wrote that one aspect of DOJ’s commitment to “finding effective ways to ensure that individual wrongdoers are held accountable for corporate criminal behavior . . . is to punish the people who make or knowingly participate in decisions that violate the law” but the Department also wants “to avoid imposing penalties that disproportionately punish innocent employees, shareholder, customers and other stakeholders.”