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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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    Tuesday
    Mar132018

    No Downward Variance for ex-Akin Gump Partner in DOJ Suit-Selling Case

    What Happened?
    Jeffrey Wertkin, a former Akin Gump Strauss Hauer & Feld LLP partner who previously had worked at the Department of Justice (“DOJ”), received 30 months’ imprisonment for offenses related to his theft and attempted sale of a sealed government whistleblower complaint to a cyber-security company being investigated by the DOJ. The sentence was at the low end of Wertkin’s 30-37-month range under the U.S. Sentencing Guidelines and far more than the year-and-a-day sentence that his attorney had requested.

    The Rundown
    In November 2017, Wertkin pleaded guilty in the U.S. District Court for the Northern District of California to two counts of obstruction of justice, in violation of 18 U.S.C. § 1505; and one count of interstate transportation of stolen goods, in violation of 18 U.S.C. § 2314.  As he transitioned from his role as a civil prosecutor at the DOJ to Akin Gump’s Washington D.C. office, Wertkin stole approximately 40 sealed complaints. In November 2016, he cold-called general counsel at a Silicon Valley company and left a voicemail offering to provide information about a complaint that implicated the company for a fee.  The general counsel called the FBI, and, after a series of monitored phone calls with the general counsel, Wertkin – dressed in a wig and sunglasses – was arrested in a Sunnyvale, California hotel, at which he intended to exchange the complaint for more than $300,000 in cash.

    In a lengthy and well-crafted sentencing memorandum, Wertkin’s counsel, Cristina Arguedas of Arguenda Cassman & Headley LLP focused on his undiagnosed anxiety and depression, the personal struggles caused by a taxing career, the aberrant nature of his misconduct, and the steps he had taken towards rehabilitation, including his cooperation and his embrace of mental health treatment. Arguedas submitted 85 character letters on Wertkin’s behalf.

    In its filing, the government, which requested a mid-guidelines sentence of 34 months, focused its attention on Wertkin’s position of public trust when he stole the complaints and the continuing nature of his course of conduct. At the sentencing hearing, the government keyed in on the number of potential victims, noting that, after being charged, Wertkin had staged his office at Akin Gump to make it look as though the complaints had been mailed to him by the DOJ.  That act of obstruction initiated an investigation into blameless DOJ attorneys. 

    The Take Away
    Though crediting Wertkin’s struggles with mental health issues and his significant support from the community, the Court fashioned a guidelines sentence. Among other factors, the need for general deterrence weighed heavily on the Court. While Wertkin, who had forfeited his law license, would never engage in this kind of activity again, the Court had to send a message that these matters are taken seriously.

    Thursday
    Mar082018

    Elder Fraud Sweep by DOJ Targets More than 250 Defendants

    What Happened
    In a joint press release by Attorney General Jeff Sessions and representatives from the FBI, Postal Inspectors and Federal Trade Commission, it was announced that the largest coordinated sweep of elder fraud cases in history was conducted related over half a billion dollars in losses.  The cases included criminal, civil and forfeiture actions across more than 50 federal districts.  The fraud schemes took a variety of forms from mass-mailing, telemarketing and investment fraud schemes to individual incidents of identity theft and theft by guardians and caretakers.  Many of the cases involved transnational criminal organizations that defrauded hundreds of thousands of elderly victims but other schemes involved a single relative or guardian who took advantage of an individual victim.

    Actions by the federal government involved the following:

    • Mass-mailing fraud industry:  DOJ’s Consumer Protection Branch worked in conjunction with the U.S. Attorney’s Office for the Eastern District of New York, brought cases against over 40 mass-mailing fraud operators, including criminal charges against six individuals.  Law enforcement executed search warrants at 14 premises from Las Vegas to Florida, even coordinating with Vancouver Police in Canada, who executed over 20 search warrants.
    • Other elder law fraud schemes were targeted by DOJ’s Fraud Section and the Consumer Protection Branch involved a variety of schemes including “lottery phone scams,” in which callers convince seniors that a fee or tax must be paid before they can receive lottery winnings; “grandparent schemes” which convince seniors that a grandchild has been arrested and needs bail money; and “IRS imposter schemes” which defraud seniors by bad actors posing as IRS agents and claiming that victims owe back taxes.

    Beyond the historic number of defendants targeted, the sweep was also noteworthy due to the degree of coordination between United States and foreign law enforcement.  General Sessions announced that the sweep benefited greatly from the work of the International Mass-Marketing Fraud Working Group (IMMFWG), a network of civil and criminal law enforcement agencies from a variety of nations including Australia, Belgium, Canada, the Netherlands, Nigeria, Norway, the United Kingdom, and the United States. 

    For the Record
    Attorney General Sessions:  “The Justice Department and its partners are taking unprecedented, coordinated action to protect elderly Americans from financial threats, both foreign and domestic … when criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal – criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains.  Today is only the beginning.  I have directed Department Prosecutors to coordinate with the domestic law enforcement partners and foreign counterparts to stop these criminals from exploiting our seniors.”
    Monday
    Feb262018

    Supreme Court Hears Oral Argument About Fifth Amendment Rights at Pretrial Proceedings

    What Happened
    On February 20 the Supreme Court heard oral argument in City of Hays v. Vogt, a case addressing whether the government’s introduction of a compelled statement at a probable cause hearing violates the Fifth Amendment.

    The Rundown
    Vogt was an officer with the Hays Police Department in Kansas when he applied for a different job with the Haysville Police Department.  Haysville offered Vogt the position, but conditioned acceptance on Vogt’s disclosure to the Hays PD that he kept a knife he obtained while on the job.  Vogt disclosed this information to Hays, which demanded that he make a more detailed statement or he would lose his job.  Vogt made the detailed statement requested, resigned, and accepted the job with Haysville. 

    The Hays PD referred Vogt for prosecution based on his disclosure. The State charged him with a crime and the Haysville PD rescinded his job offer. The State introduced Vogt’s statement to the Hays PD at his preliminary hearing, though it ultimately dropped the charges against him.

    Vogt sued both cities.  Relying on the Supreme Court’s 1967 holding in Garrity v. New Jersey that public employees’ statements are compelled when made under threat of termination, Vogt argued that the use of his compelled statements against him in the preliminary hearing violated the Fifth Amendment.

    The District Court dismissed Vogt’s civil lawsuit because in its view, Vogt’s Fifth Amendment right was not violated because the compelled statements were never used against him at a criminal trial.  The Tenth Circuit reinstated the case, finding that the Fifth Amendment’s use of “criminal case” includes probable cause hearings. 

    At oral argument last week, the City of Hays argued that the Fifth Amendment only applies “during a proceeding where that person’s guilt or punishment are adjudicated.”  An attorney for the United States clarified their position that while a defendant cannot be compelled to incriminate themselves at a preliminary hearing, the admission of their previously compelled statements in that type of proceeding would not violate the Fifth Amendment.  Vogt’s attorney maintained their position that compelled statements can never be used in a preliminary hearing or any other part of a criminal case.

    Oral argument proved complicated as the Justices had genuine concerns about major factual issues in the case, including whether Vogt objected to the use of the statements at the preliminary hearing; whether Vogt’s statements were actually compelled; whether the statements were even used adversely; and whether any causation theory supported Section 1983 damages.  These issues led the Court to suggest that maybe they should not have taken the matter at all and that they may consider dismissing the case as improvidently granted (known as issuing a “DIG”). 

    For the Record
    Justice Ginsburg noted that the City of Hays’ position “shrink[s] to almost a vanishing point the possibility of using the Fifth Amendment . . . because . . . upwards of 95 percent of cases are disposed of by plea bargaining.”  She added that by making this argument “you’re saying effectively the Fifth Amendment, which is considered very important, is out of the picture in most criminal cases.” 

    The Take Away
    The Court’s ruling in this case—if they issue a substantive decision—will have significant implications for criminal prosecutions.  A broad holding for Vogt, for example, could necessitate trial-type suppression hearings for all pretrial proceedings in which statements are admitted.
    Tuesday
    Feb132018

    New DOJ Policy Changes Impact FCA Enforcement 

    What Happened?
    The Department of Justice kicked off the year with a shift in its policy affecting the False Claims Act and other civil fraud enforcement.  In two separate memoranda issued in January, DOJ addressed first its policy on FCA dismissals, and second, restricted the evidence on which it can rely to prove FCA and other fraud cases. 

    The Rundown
    The Granston Memo – Reconsidering FCA dismissals
    On January 10, 2018, DOJ issued a memorandum (dubbed the “Granston Memo”), that provided attorneys in the Fraud Section of the Commercial Litigation Branch, as well as all AUSAs handling FCA matters, with guidelines for dismissing FCA cases under 31 U.S.C. § 3730(c)(2)(A).  That section allows the government to dismiss a qui tam action notwithstanding the objections of the person initiating the action if the person has been notified by the government of the filing of the motion to dismiss and the court has provided the person with an opportunity for a hearing on the motion.  31 U.S.C. § 3730(c)(2)(A). 

    The government has used this provision sparingly in the past, often opting simply not to intervene rather than proactively move for dismissal.  But this memo recognizes that the government often expends substantial resources even in non-intervened cases, as it must monitor them and at times produce discovery.  And, because of the significant increase of FCA cases filed annually, the government’s expenditure of resources on what it sees as meritless FCA claims is increasing as well.  This is particularly true in light of the fact that while the number of FCA claims filed has grown, the number of FCA matters in which the government has intervened has remained stable.  The memo therefore directs attorneys to consider whether dismissal pursuant to 31 U.S.C. § 3730(c)(2)(A) rather than simple declination would better serve the government’s interests in preserving limited resources and avoiding adverse precedent.

    The Brand Memo - Limiting Use of Agency Guidance Documents
    On January 25, 2018, the Office of the Associate Attorney General issued a new policy relating to its attorneys’ enforcement of affirmative civil cases, which includes the False Claims Act as well as all other civil lawsuits to recover money lost to fraud or other misconduct or to impose penalties for violations of Federal health, safety, civil rights or environmental laws.  The memorandum prohibits DOJ from using its enforcement authority to convert agency guidance documents into binding rules.

    Department attorneys are not to use noncompliance with agency guidance, defined as “any agency statement of general applicability and future effect…that is designed to advise parties outside the federal Executive Branch about legal rights and obligations,” as a basis for proving violations of applicable law.  While the Department may continue to use evidence that a party read an agency document that explained certain statutory provisions as a basis for proving requisite knowledge of the provision, the Department should not treat a party’s noncompliance with an agency document as establishing that the party violated the statute or regulation at issue.  The memorandum emphasizes that agency guidance documents cannot create additional legal obligations and that a party failed to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying laws.

    The Takeaway
    In sum, the memorandum provides valuable insight to both private defense attorneys and the relators’ bar.  The Granston memo gives defense counsel talking points for meetings with DOJ attorneys who may not have had the opportunity to consider each of these factors, as well as a basis for advocating for dismissal in the case of government declination.  On the plaintiffs’ side, the memo offers critical insight into case weaknesses that previous administrations may have overlooked, yet may now face heightened scrutiny through motions for dismissal under § 3730(c)(2)(A).

    The Brand memo supplies guidance as well.  Attorneys defending DOJ affirmative civil enforcement matters should challenge any assertion of wrongdoing based on agency guidance rather than on a strict interpretation or analysis of the statutory or regulatory language itself.  Companies should also re-evaluate their policies to ensure that they are based on interpretation of the actual statutory provision instead of agency guidance that may ultimately be more restrictive.  While agency guidance may remain a valuable source of assistance and clarification, it should no longer be considered binding authority.  Overreliance on agency guidance that imposes stricter burdens than the statutory language may lead to policies that cut against a business’s best interests without any corresponding legal purpose.

    Monday
    Feb122018

    Health Care Compliance in 2018

    This past Friday, February 9, John Schwab presented on Health Care Compliance in 2018: Government Enforcement & Opioids to the Health Law Section of the Allegheny County Bar Association in Pittsburgh. The presentation covered federal and state enforcement actions in health care, including those regarding opioids. Mr. Schwab also discussed recent DOJ initiatives announced in January like the Joint Criminal Opioid Darknet Enforcement team (J-CODE) targeting internet drug sales and the DEA's "surge" of agents to analyze pharmacy and prescriber data to identify patterns and statistical outliers for developing "targeting packages" for future prosecutions.

    If you would like more information about this presentation, please contact John Schwab at JAS@Pietragallo.com.

    Thursday
    Feb082018

    Beginning of Year Check Up: Are You Title IX Compliant Given The Department Of Education’s Recent Guidance?

    What Happened?
    On September 22, 2017, Candace Jackson, Acting Assistant Secretary for Civil Rights of the United States Department of Education (“DOE”) issued a Dear Colleague Letter that withdrew the policy guidance reflected in the Dear Colleague Letter of April 4, 2011 and the Questions and Answers on Title IX and Sexual Violence dated April 29, 2014. In one swift stroke, the Department of Education's pronouncement overturned much of the guidance and regulations promulgated by the Obama administration since 2011. What does this mean for educational institutions, both Higher Education and Secondary Schools?

    The Rundown
    The following are the anticipated ramifications from the DOE's announcements:

    • There likely will be fewer civil rights investigations of educational institutions;
    • The investigations currently being conducted will continue, will likely take four to six years, and, outside of stark conduct, will likely end with little negative consequence;
    • Due Process to Respondents, which the Department of Education has already indicated was a perceived weakness of the Obama administration’s Title IX guidance and regulations, will be the likely subject of additional Department of Education Guidance in the year to come.  In the interim, the DOE’s September 2017 Q&A on Campus Sexual Misconduct (“2017 Q&A”) offers some guidance on what due process it expects to occur in Title IX investigations and processes;
    • Individual educational institutions will have more discretion concerning which burden of proof it will employ for Title IX hearings; and
    • Currently, a clear and convincing standard may be used for Title IX hearings.

    Does this mean that educational institutions have to be less invested in, or concerned about, their investigation and resolution of complaints under Title IX? Absolutely not.

    For the Record
    The DOE still places the burden on the educational institutions to investigate allegations of Title IX covered conduct. Further, students, faculty and parents have a heightened awareness of sexual harassment and sexual assaults, domestic violence, stalking and dating violence, and will employ significant energy to ensure that the school continues to address these issues with focus and zeal. Further, the repeal of the Obama administration’s rules and regulations does not obviate the school's obligation to continue to address Title IX concerns; it just needs to do them under the pre-2011 rules and regulations and in line with the DOE’s pronouncements in its 2017 Q&A.

    What Happens Next?
    Schools should be revisiting their policies to ensure that adequate due process is provided to the Respondents. This requires meaningful notice and an opportunity to be heard, the right to an adviser of choice at the Title IX investigation and hearing stages, and the opportunity to present a defense to Complainant’s allegations. Individual educational institutions will, at the moment, be given discretion, based on their institutional culture, to choose a burden of proof for Title IX matters that each institution considers most appropriate. However, institutions will have to remain mindful of the expectations of the community for safety, fairness, and the prompt addressing and resolution of these issues.

    While the DOE promulgations seem like a “game changer”, very little will likely change in how higher education institutions address Title IX covered conduct, with the exception of a potentially greater focus on due process for the Respondents. Those of us who have represented institutions over the years have identified due process as a concern, and our clients therefore have already addressed these concerns. Educational Institutions should revisit their procedures to satisfy themselves that the Respondents get appropriate due process, so as to avoid both review by the DOE and to prevent civil litigation by Respondents because of perceived unfairness in the Title IX process.

    Wednesday
    Feb072018

    2018 Brings New Opioid Enforcement Tools to the U.S. Department of Justice and Pennsylvania State Government

    What Happened?
    The first month of 2018 brought significant attention to the opioid crisis facing the United States.  Both the U.S. Department of Justice and Pennsylvania’s state government have recently made announcements that they are developing new tools to combat this multi-faceted problem.

    The Rundown
    Most prominent of the January 2018 enforcement opioid-related efforts are those brought to bear by the U.S. Department of Justice:

    • On January 29, 2018, Attorney General Jeff Sessions announced to a Pittsburgh audience the formation of the Joint Criminal Opioid Darknet Enforcement team (J-CODE), a new resource to target internet-based drug traffickers.  The J-CODE team will coordinate across the FBI’s offices worldwide and “target and disrupt the sale of synthetic opioids and other drugs on the darknet.”  General Sessions stated that this resource will allow the federal government to make more arrests of those selling drugs over the internet and shut down the marketplaces used by online drug dealers.  Additional details of this program are discussed in White-Collared’s January 30 post here.
    • On January 30, 2018, Attorney General Sessions announced a “surge” by the DEA focusing its efforts on pharmacies and prescribers dispensing an unusual or disproportionate amount of drugs.  Through the surge, the DEA’s special agents, diversion investigators, and intelligence research specialists will aggregate the 80 million transaction reports collected annually from manufacturers and distributors and identify trends and statistical outliers.  This data will then be used in – as General Sessions described it – “targeting packages” for the DEA’s investigative and prosecutorial efforts.

    Governor Tom Wolf has spent early-2018 announcing efforts to step up Pennsylvania’s response related to the opioid crisis:

    • On January 10, 2018, Governor Wolf signed a state-wide disaster emergency declaration to enhance the Commonwealth’s response to the opioid epidemic and increase access to treatment.  The Governor’s declaration recognized the opioid crisis as a public health emergency mandating new enforcement efforts at all levels of state government.
    • Also on January 10, 2018, Governor Wolf announced the creation of Pennsylvania’s Opioid Operational Command Center to gather and analyze data from the Department of Health’s Prescription Drug Monitoring Program.  This program collects data from hospital emergency departments across the state.  Of the 171 hospital emergency rooms in Pennsylvania, 152 are reporting as part of the system.
    For the Record
    “This data is critical to not only determining where resources are needed, but to identify localized prescribing trends.  We will be able to use this tool to improve education and resources and prescribers to insure that opioids are being prescribed judiciously to patients,” said Pennsylvania’s Acting Heath Secretary and Physician General Dr. Rachel Levine.

    Monday
    Feb052018

    Third Circuit Rejects Concert Promoter’s Challenge to Guilty Plea and Sentence

    What Happened?
    The Third Circuit has affirmed the conviction and 78 month prison sentence of concert promoter Mark Hubbard, who had been convicted after pleading guilty to wire fraud for his role in the fraudulent sale of investments in a concert promotion business – rejecting Hubbard’s claims that his plea guilty was not voluntary, and that the District Court had committed numerous errors in the conduct of his sentencing hearing.

    The Rundown
    Mark Hubbard was convicted in the U.S. District Court for the Eastern District of Pennsylvania on one count of conspiracy to commit wire fraud and several individual counts of wire fraud, and sentenced to 78 months in prison. The charges stemmed from Hubbard’s fraudulent sale of investments in his concert promotion business, including the use of fraudulent documents in making his sales pitch, where, among other things, he promised 25% - 30% returns and falsely assured investors that their investments were secured by a $10 million security bond.

    In his appeal, Hubbard claimed that the District Court should not have accepted his guilty plea because (1) it was entered with the faulty expectation that his sentencing guideline range would be 33-41 months; and (2) he pleaded guilty reluctantly. He argued further that his sentence of 78 months should be reversed because the District Court (1) erroneously considered his guilty plea for similar conduct in a case pending in the District Court of Hawaii; (2) failed to seal the courtroom, purportedly curtailing his presentation of information to mitigate his sentence; and (3) effectively denied him the right to allocute by repeatedly interrupting him.

    Applying a plain error standard, the Court found that Hubbard, who entered his plea without a plea agreement, had demonstrated that he was fully aware of his potential sentence, which included a maximum penalty of 160 years in prison. In disposing of Hubbard’s argument that he expected a lower sentence because the government led him to believe his sentencing guideline range could be as low as 33-41 months, the Court specifically rebuffed Hubbard’s reliance on the Second Circuit’s decision in U.S. v. Palladino, 347 F.3d 29 (2nd Cir. 2003). In Palladino, the Second Circuit found that the government’s pursuit of a 6 point enhancement at sentencing was inconsistent with the language and spirit of the parties’ plea agreement, and invalidated the plea. In contrast, Hubbard had agreed to plead guilty without an agreement. As a result, any representation by the government regarding what sentence it believed Hubbard would likely receive was irrelevant. The Court illustrated this point, noting the District Court’s unequivocal statement to Hubbard during sentencing that there were no guarantees as to sentence, and that the court could sentence him to the maximum.

    The Court also rejected Hubbard’s reluctant guilty plea argument, finding that the District Court sufficiently explored his claimed anxiety disorder. Again, the Court noted the record of the change of plea hearing, where Hubbard indicated that though he had been injured in an electrocution accident seven years prior to his guilty plea, the only condition from which he continued to suffer was anxiety. When questioned further by the District Court about his anxiety, Hubbard told the District Court that he was absolutely fine.

    Regarding Hubbard’s claims of sentencing error, the Court began by rejecting his claim that the Court erred in considering Hubbard’s plea of guilty to similar charges in the District Court in Hawaii just one week before his sentencing. The Court found that it was appropriate, and certainly not plain error, to consider that plea of guilty under the rubric of the 18 U.S.C. § 3553(a) factors, particularly in light of the fact that those charges also related to fraudulent concert promotion.

    The Court also found no basis for Hubbard’s claim that the District Court should have sealed the courtroom because of the presence of another individual who had been in some way involved in the scheme, and against whom Hubbard claims that he had cooperated. Although the record indicated that the government confirmed that Hubbard had participated in surveillance and communications with that individual, the District Court found that the individual was also a victim, with the right to be present and participate in the hearing. Nonetheless, the District Court did allow Hubbard’s counsel to present evidence regarding Mr. Hubbard’s cooperation at side bar, away from the hearing of any other individuals within the courtroom. Ultimately, Hubbard’s counsel at sentencing agreed that it would be worse for the defendant to seal the courtroom with the individual there.

    Finally, the Third Circuit rejected Hubbard’s claim that he was denied meaningful allocution at sentencing based on his allegation that the District Court interrupted and questioned him. The Third Circuit found that Hubbard’s reliance on the Second Circuit’s decision in U.S. v. Li, 115 F.3d 125 (2nd Cir. 1997), was unavailing – pointing out that in Li, the sentencing judge was dismissive of the defendant throughout his allocution, ultimately ending the allocution by stating that if the appeals court disagreed with his conduct, they could send it back to me and tell me how long I have to listen. In contrast to Li, the Court found that at Hubbard’s sentencing, the District Court’s interjection into his attempt at allocution demonstrated that the Court was seeking clarification of Hubbard’s explanations, and exploring the veracity of the justification of his conduct – all of which the Court found to be appropriate.

    For the Record
    Hubbard claims that his plea was neither knowing nor voluntary because the Government led him to believe that his sentencing guideline range could be as low as 33-41 months. “However, all that the law requires is that the defendant be informed of his/her exposure…[T]he law does not require that a defendant be given a reasonably accurate ‘best guess’ as to what his/her sentence will be; nor could it, given the vagaries and variables of each defendant’s circumstances and offending behavior.” U.S. v. Mark Hubbard, (3rd Cir. slip op., No. 16-397, January 29, 2018), quoting U.S. v. Dixon, 308 F.3d 229, 234 (3rd Cir. 2002).

    The Takeaway
    Appellate challenges to the voluntariness of a guilty plea will more than likely be summarily dismissed when the defendant proceeds without a written agreement, and fails to raise concerns regarding the decision to plead guilty at the time of the change of plea hearing. In addition, objections to the manner in which a district court is conducting a sentencing hearing, particularly at the time of allocution, must be raised and preserved at the time of sentencing. 

    A full copy of the Court’s non-precedential decision and opinion can be found here.

    Thursday
    Feb012018

    When Is a Kickback Not a Kickback? Third Circuit Says It Must Be Linked to Specific False Claim

    What Happened?
    In affirming the district court’s entry of summary judgment in favor of Accredo Health Group, Inc., and its co-defendants, the U.S. Court of Appeals for the Third Circuit held that a plaintiff alleging a False Claims Act (“FCA”) violation based on an anti-kickback theory must show that (1) a particular patient was exposed to a kickback-tainted referral, and (2) a provider submitted a claim for reimbursement pertaining to that patient. 

    The Rundown
    In United States ex rel. Greenfield v. Medco Health Solutions, Inc., et al., the relator sued Accredo Health Group, a specialty pharmacy that provides home health care for hemophilia patients, and its affiliates (collectively, “Accredo”). Accredo made donations to numerous hemophilia-related charities, two of which, according to the relator’s allegations, recommended Accredo as a provider for hemophilia patients. Relator Greenfield moved for summary judgment before the district court, arguing that Accredo’s donations-for-referrals scheme violated the Anti-Kickback Statute (“AKS)), 42 U.S.C. § 1320a-7b(b), and that the scheme ran afoul of the FCA, 31 U.S.C. § 3729 et seq., because (1) some of the referrals were directed towards Medicare patients, and (2) when submitting Medicare claims for payment, Accredo falsely certified that it had complied with the AKS. Accredo cross-moved for summary judgment on the ground that the record lacked evidence that any Medicare patient had purchased prescriptions because of Accredo’s donations to specific charities.

    Without reaching the question whether Greenfield had established a kickback scheme, the district court granted Accredo’s motion for summary judgment, while denying the relator’s motion for the same relief.  It held that an FCA claim based on an anti-kickback theory requires the plaintiff to show that, as a result of the AKS violation, the defendant received payment from the federal government in violation of the FCA. Greenfield could not do that, in the Court’s view, because there was no evidence that any Medicare patient chose Accredo due to its charitable donations.

    Greenfield appealed, and the U.S. Court of Appeals for the Third Circuit affirmed the district court’s grant of summary judgment in favor of Accredo. But it rejected the district court’s imposition of a “but-for” causation requirement. The Court analyzed the language of the AKS, amended in 2010 to provide that “a claim that includes items or services resulting from a violation of [the statute] constitutes a false of fraudulent claim for the purposes of [the FCA].”  According to the Court, the “resulting from” language was too broad to require proof that the Medicare patient would not have chosen the provider but for the kickback. Were the district court’s interpretation correct, the both AKS drafters’ intention to strengthen the government’s ability to punish fraudulent activities, and its revisers’ intention to bolster whistleblower actions based on medical care kickbacks would have been thwarted.

    However, the Court held that a plaintiff must still provide evidence of the actual submission of a false claim to prevail at trial.  Demonstrating that a kickback scheme exists is not enough; a plaintiff must establish that the underlying medical care is connected to the breach of the AKS.  Because Greenfield could point to no “record evidence that shows a link between the alleged kickbacks and the medical care received by at least one of Accredo’s . . . federally insured patients,” the district court correctly entered summary judgment for Accredo.   

    The Take Away
    The Court rejected both (1) Greenfield’s position that that taint of a kickback scheme is enough to infect all referrals to Medicare patients, and (2) Accredo’s argument – adopted by the district court – that a plaintiff must prove that federal beneficiaries would not have used the relevant services absent the kickback scheme. Its middle-ground position, requiring evidence that shows a “link” between kickbacks and care, is sure to spawn future litigation regarding how strong and of what character that connection must be. 

    Tuesday
    Jan302018

    DOJ Launches New Darknet Enforcement Team

    What Happened?
    Yesterday Attorney General Jeff Sessions announced the creation of the Joint Criminal Opioid Darknet Enforcement (J-CODE) team, another new tool to fight against the opioid crisis.

    The Rundown
    The J-CODE team, which includes dozens of Special Agents, Intelligence Analysts, and professional staff, will focus on disrupting illicit online sales of opioids.  The team more than doubles the FBI’s investment in thwarting online opioid sales.

    The team will build on DOJ’s already significant efforts against opioid sales on the darknet.  In July 2017 for example, DOJ announced its shutdown of AlphaBay, the largest darknet marketplace in history.  AlphaBay operated for over two years and was used to sell illegal drugs, fraudulent identification documents, counterfeit goods, malware and computer hacking tools, firearms, and toxic chemicals all over the world.  At the time of the takedown AlphaBay serviced over 200,000 users and 40,000 vendors, and had over 250,000 listings for illegal drugs and toxic chemicals.

    J-CODE is just one of multiple initiatives DOJ has announced recently to combat the opioid epidemic, including the Opioid Fraud and Abuse Detection Unit, a data analytics program focusing specifically on investigating health care fraud related to opioid prescriptions and abuse, and the assignment of a designated opioid coordinator in each of the 94 U.S. Attorney offices.

    For the Record
    In a press release yesterday, Attorney General Sessions remarked that “criminals think that they are safe on the dark net, but they are in for a rude awakening.”