Third Circuit Eliminates Intended Loss from Fraud Sentencings

Last month, the Third Circuit Court of Appeals issued a significant decision affecting sentencing in white collar crime cases. In United States v. Banks, the defendant was convicted on fraud and other related charges. As alleged by the government, the defendant’s fraudulent scheme involved opening accounts with an investment firm and making deposits into those accounts. Because those deposits were drawn on other accounts with insufficient funds, the defendant unsuccessfully attempted to quickly withdraw the funds before the shortage was detected.

Because there was no actual monetary loss to the investment firm, the defendant argued at sentencing that there should be no increase to the offense level under Section 2B1.1(b) of the United States Sentencing Guidelines (USSG), which states that if the loss exceeds $6,500, the offense level should be increased in two-point intervals depending on the exact amount of loss. However, the defendant’s pre-sentence report (PSR) provided that the defendant’s offense level should be increased by 12 under Section 2B1.1(b), because the “attempted loss” was between $250,000 and $550,000.

The District Court adopted the PSR’s recommendation and increased the defendant’s offense level by 12 under Section 2B1.1(b)(1)(G). The District Court noted that the Sentencing Guidelines contains commentary in an application note, which defines the word “loss” as “the greater of actual loss or intended loss.” Section 2B1.1 App. Note 3(A). Because the defendant intended a loss greater than $250,000, that was a proper measure of loss under Section 2B1.1(b). The defendant was sentenced to 104 months in prison.

On appeal, the Third Circuit reversed, finding that the Sentencing Guideline’s Application Note commentary improperly expanded the definition of “loss” and, therefore, was entitled no weight. Because the Sentencing Guidelines themselves (sans commentary) do not define the word “loss,” the Third Circuit looked to the word’s ordinary meaning which, according to the Third Circuit, is limited to actual loss. Because the victim suffered no actual loss, the Third Circuit remanded the case for re-sentencing, and instructed the district court to re-sentence the defendant without the 12-point enhancement for loss.

While it is rare that the federal government pursues a fraud case that does not include some sort of actual loss such as the Banks case, what is very common is the government arguing that a defendant should be sentenced based on intended loss where the intended loss is higher than the actual loss (e.g., in a healthcare fraud case where a laboratory fraudulently bills Medicare $10 million, but Medicare only pays $5 million). In those cases, it will be crucial for defendants to cite the Third Circuit decision in Banks in their objections to PSRs and in sentencing memos.

Baltimore Businessman Sentenced to Prison for Employment Tax Crimes

Earlier this month, the Department of Justice (DOJ) announced that Jonas Purisch, of Baltimore, Maryland, was sentenced to three years in prison for not paying over more than $2 million in payroll taxes to the IRS on behalf of his companies’ employees.

Purisch purportedly operated two employee staffing companies, Titan Staffing Network, Inc and Titan Services, LLC. According to the DOJ, “both companies provided workers for third-party manufacturing businesses in Maryland.” As the owner and operator of the two companies, Purisch was required to withhold and pay over employment taxes to the IRS on behalf of their employees. Over a span of three years, Purisch withheld but did not pay more than $2 million in such taxes to the IRS.

This is not Purisch’ s first tax-related conviction and prison sentence. In April 2013, Purisch was convicted of filing a false individual income tax return and for willful failure to file a tax return, and was sentenced to three months in prison for those offenses.

In addition to the three-year term of imprisonment, Purisch will serve another three years of supervised release and must pay approximately $3.4 million in restitution to the United States.

Unlicensed Medical Assistant Faces up to 10 Years in Prison for Medicare Fraud

The DOJ recently announced that a federal jury convicted Rhonda Sutton, an unlicensed medical assistant, for conspiracy to commit health care fraud. According to evidence presented at trial, Sutton conspired to certify Medicare beneficiaries for illegitimate home health services.

From approximately 2009 to 2012, Sutton worked as an unlicensed medical assistant in the Chicagoland area. Sutton routinely forged her physician employer’s signatures on certification forms which enrolled Medicare beneficiaries in over 2,000 episodes of home health care at A&Z and Dominion home health agencies. Sutton conspired with, and provided the forged forms to, A&Z and Dominion. In turn, the two home health care agencies submitted claims to Medicare for services the beneficiaries neither qualified for nor needed. Evidence at trial showed A&Z and Dominion received over $6 million from Medicare in connection with Sutton’s scheme. A&Z and Dominion paid Sutton kickbacks for the forged documents.

Chilivis Grubman attorneys previously reported that the owners of A&Z and Dominion, Patricia Omorogbe and Felix Omorogbe, were sentenced to 2 years and 18 months in prison, respectively. They were also collectively ordered to pay over $8 million in restitution. Sutton is scheduled to be sentenced on March 16, 2023, and she faces up to 10 years in prison.

Alleged Improper Billing for Lab Tests Leads to $13 Million False Claims Act Settlement

Health care provider Sutter Health, based out of Sacramento, California, has agreed to a $13 million settlement with the DOJ to resolve allegations that Sutter Health violated the False Claims Act (FCA) by billing Medicare, Medicaid and other federal health care programs for toxicology screening tests performed by outside labs that Sutter Health did not perform itself.  

According to the DOJ, Sutter Health submitted bills to various federal health care programs for reimbursement of both qualitative and quantitative testing that was performed on toxicology specimens, despite an outside lab performing the quantitative testing on thousands of the specimens. Sutter Health nevertheless allegedly sought reimbursement for the tests performed by the outside lab.

Sutter Health agreed to pay in excess of $13 million to settle these false claims allegations. Last year, Sutter Health entered into a separate settlement agreement with the DOJ for $90 million regarding allegations that Sutter Health had overcharged the Medicare Advantage Program by submitting inaccurate information which lead to improperly inflated payments.

Ohio Oil Industry Subcontractor Pays $300,000 to Resolve Allegations of Violating the False Claims Act

Last month, the DOJ announced that Wise Services Inc., an Ohio subcontractor serving the oil and gas industry, agreed to pay over $300,000 to resolve allegations that it violated the FCA by causing fraudulent invoices to be submitted to the Department of Energy (DOE). It was alleged that Wise submitted fraudulent invoices to MOX Services LLC, the prime contractor to the DOE, for non-existent materials.

Wise operated as a subcontractor of MOX for the construction of the Mixed Oxide Fuel Fabrication Facility at the DOE Savannah River Site in Aiken, South Carolina. According to the United States, Wise submitted hundreds of invoices charging for materials that did not exist. It was also alleged that Wise employees paid kickbacks to MOX employees for their involvement in this scheme that charged the Government millions of dollars. 

In March 2022, MOX agreed to pay $10 million for violating the FCA. The DOJ alleged that MOX knowingly submitted fraudulent invoices for non-existent materials and received improper kickbacks. As the DOE’s prime contractor, MOX violated its obligation to uncover Wise’s fraudulent invoices. MOX was specifically obligated to confirm receipt and acceptance of any materials before approving and submitting invoices to the Government. U.S. Attorney Adair F. Boroughs for the District of South Carolina commented that “[t]his settlement puts subcontractors on notice that they will be held accountable for submitting false invoices and paying kickbacks to contractors on federal contracts with the United States.”

Two New York Women Face up to 10 Years in Prison for Their Roles in Pharmacy Health Care Fraud Kickback Scheme

The DOJ also recently announced that Hua Huang, an employee of NY Elm Pharmacy Inc., and Huiling Wu, owner and employee of 888 Pharmacy Inc., were arrested for their roles in several schemes to defraud Medicare and Medicaid. Huang and Wu are alleged to have paid illegal kickbacks and bribes for unnecessary prescriptions which resulted in Medicare and Medicaid losing over $10.5 million.

Federal agents executed searches of both NY Elm and 888 Pharmacy concurrent with the arrests of Huang and Wu. The Anti-Kickback Statute (AKS) prohibits receiving or soliciting remuneration in exchange for any item or service paid in whole or in part by federal health care programs. In addition to the criminal penalties attached to violations of the AKS, claims submitted to Medicare and Medicaid in violation of the AKS also constitute false claims under the federal FCA.

According to the government, Huang referred an individual to a podiatrist who signed medically unnecessary prescriptions. In turn, Huang provided the individual with supermarket gift certificates for each prescription brought to NY Elm Pharmacy and billed to Medicare and Medicaid. Huang also allegedly provided cash to the individual in exchange for their monthly insurance allowance. Similarly, Wu is alleged to have referred an individual to a podiatrist who signed unnecessary prescriptions, and she provided store credit for each prescription brought to 888 Pharmacy and billed to Medicare and Medicaid. Wu also provided supermarket gift certificates in exchange for the individual’s monthly insurance allowance. 

Acting Special Agent in Charge Susan A. Frisco of the U.S. Department of Health and Human Services Office of Inspector General noted that their agency “[…]remain strong in our resolution to investigate and pursue individuals who allegedly operate counter to laws protecting federal health care programs.” The two New York women face up to 10 years in prison if they are found guilty of submitting claims for medically unnecessary prescriptions to Medicare and Medicaid.

Georgia Judge Refuses to Dismiss $400 Million Healthcare Kickback Case for Delay

Earlier this month, U.S. District Judge Amy Totenberg (Northern District of Georgia) denied a motion to dismiss a $400 million healthcare kickback case due to alleged speedy trial violations. 

Judge Totenberg explained that several factors played into the nearly six-year pendency of the case, including the coronavirus pandemic, a transfer from the Southern District of Florida in 2017, and the complex nature of the case. In fact, Judge Totenberg said that the “matter is one of the most complex criminal cases that the undersigned has encountered.” Further, the Florida judge who transferred the case had previously determined that the complexity of the case justified its exclusion from the Speedy Trial Act and had no expiration date.

Defendants John Holland, William Moore, and Edmundo Cota are former health executives who are accused of orchestrating a $400 million kickback scheme for the treatment of pregnant, mostly undocumented Hispanic women. The three defendants are accused of fraudulently billing federal health care programs for at least $400 million and fraudulently receiving at least $127 million on claims.

Judge Totenberg ruled that the defendants have only been moderately prejudiced by the delay, including the fact that some of the defendants’ witnesses are now unavailable to testify. However, the description of this testimony is not crucial to their defense, Judge Totenberg ruled.

The federal government’s investigation of the alleged kickbacks began in 2001, including a guilty plea and settlement with Tenet Healthcare, where Holland and Moore were executives. Holland was indicted in Florida in 2017, and Moore and Cota were added as co-defendants after the case was transferred to the Northern District of Georgia. Trial is set for April 2023 in Atlanta.

Kickbacks Result in 3-Year Federal Prison Sentence for Diagnostic Testing Facility Owners

In another kickback prosecution, earlier this month, the DOJ announced the sentencing of two facility owners who were convicted for their role in an $18 million healthcare fraud scheme. According to the government, Tea Kaganovich and Ramazi Mitaishvil, a married couple, owned several diagnostic testing facilities. In exchange for referrals, the couple paid over $18 million in illegal kickbacks. The federal government also noted that the couple underreported business income and improperly claimed deductions on their taxes.

Like many enforcement actions, this was a joint effort with several agencies helping with the investigation, including HHS-OIG, FBI, and IRS-CI. The New York Attorney General’s office was also involved and obtained a conviction for the couple in 2019. The 2019 conviction was for a similar healthcare fraud scheme involving the New York State Medicaid program. According to the NY Attorney General’s office, the couple (along with several other individuals) were convicted of fraudulently billing Medicaid for more than $8 million for fraudulent diagnostic testing services. Kaganovich and Mitaishvili have agreed to pay $18 million in restitution as part of a civil settlement agreement. As part of their plea agreement, Kaganovich and Mitaishvili agreed that they individually and through their corporations engaged in a “scheme to subject Medicaid recipients to a battery of diagnostic tests that were neither medically necessary and were fraudulently referred,” according to the NY Attorney General’s press release.  

While the DOJ’s December 2022 press release did not detail the investigation, the NY Attorney General’s office noted that its investigation “involved undercover operations and the execution of search warrants at Multi-Specialty locations” and revealed that Kaganovich and Mitaishvili conspired with medical providers and “street recruiters” to solicit Medicaid recipients for treatment. Once the beneficiaries were present at Multi-Specialty, a medical clinic, the medical provider would sign referral forms, sometimes without actually seeing the patients. The referral forms were for unnecessary diagnostic services to be fraudulently performed by Kaganovich’s and Mitaishvili’s technicians, according to the NY Attorney General. The entire scheme involved medical doctors, street recruiters, and an individual engaging in unauthorized practice of medicine to provide a façade of legitimacy. 

This case is a reminder that several states have laws that mirror federal laws, especially healthcare fraud and kickback laws. Providers should ensure compliance with both federal and state laws. As shown by the enforcement actions involving Kaganovich and Mitaishvili, federal and state governments (along with their respective agencies) often work together. Providers and business owners should know that the federal government and state governments may bring separate actions based on an investigation being handled jointly by the entities or based on the sharing of information between government entities. 

Father and Son Sentenced to Prison for PPP Fraud

Despite the fact that the COVID-19 pandemic seems all but behind us, the government continues its focus on pandemic-relief fraud. Earlier this month, the DOJ announced that a father and son were sentenced to prison for their roles in defrauding the Paycheck Protection Program (PPP). According to the government, Izzat Freitekh and his son, Tarik Freitekh, submitted several fraudulent PPP loan applications for four companies owned by Izzat. The loan applications misrepresented the number of employees used by the companies and payroll expenses. The fraudulent applications resulted in $1.7 million in PPP funds. The government noted that the Freitekhs also laundered money by making unlawful monetary transactions, including $30,000 in payments to family members. The father and son duo were convicted in North Carolina in March 2022. Izzat Freitekh was sentenced to four years in prison, while his son was sentenced to over seven years (87 months).

While the COVID-19 pandemic fades from mainstream media, the government continues to investigate, pursue, and prosecute individuals who defraud COVID-19 relief programs. Recently, the government successfully had COVID-19 conspirators extradited from Montenegro to serve their prison terms. The government’s enforcement actions will increase. And the government now has more time to bring civil and/or criminal enforcement actions. CG attorneys discussed how President Biden signed two bills into law that extend to ten years the statute of limitations for civil and criminal enforcement actions for fraud on the PPP and Economic Injury Disaster Loans (EIDL). The PPP bill (HR 7352) includes all PPP-related fraud, while the EIDL bill (HR 7334) includes both the initial EIDL advances and the targeted advances. 

Recipients of COVID-19 relief funds must ensure continued compliance. CG attorneys provided PPP practice tips and noted that recipients should keep documentation on how the funds are used and evidencing eligible expenses to maximize the percentage of the PPP loan ultimately forgiven. Similar intentional compliance efforts should be taken for other COVID-19 relief programs. 

Business Owner Sentenced to 5 Years in Prison for Fraudulently Marketing and Selling Pesticides as Effective Against COVID-19

Continuing on the trend of pandemic-related fraud enforcement, the DOJ also recently announced that Paul Andrecola, a New Jersey business owner, was sentenced to 5 years in prison for selling $2.7 million worth of unregistered pesticides. Andrecola was previously charged with one count of knowingly distributing or selling an unregistered pesticide in violation of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), one count of wire fraud, and one count of presenting false claims to the United States.

According to the Government, from approximately March 2020 through May 2021, Andrecola fraudulently misrepresented that his brand of various disinfectant products was able to disinfect against, and kill, SARS-CoV-2. Andrecola marketed GCLEAN products as being registered with Environmental Protection Agency (EPA), and on its “List N: Disinfectants for Use Against SARS-CoV-2” during the height of the COVID-19 pandemic. Per FIFRA’s guidelines, all pesticides must be registered with the EPA before sale and distribution. Furthermore, the EPA must review and authorize pesticides before they can be marketed as effective against pathogens. 

Andrecola and his team falsified EPA documents to make it appear as if GCLEAN was properly registered and authorized as effective against SARS-CoV-2. In turn, they sold more than 150 unregistered pesticides to unknowing purchasers, including a fire department, police department, and U.S. government agencies. U.S. District Court Judge Robert B. Kugler sentenced Andrecola to 5 years in prison, 3 years of supervised release, and forfeiture of $2.74 million. According to Special Agent in Charge Tyler Amon of EPA’s Criminal Investigation Division in New Jersey, Andrecola’s sentence “holds the defendant accountable for perpetrating the largest pandemic fraud case related to the sale of unregistered pesticides charged nationwide.”

COVID-19 Fraud Conspirators Extradited from Montenegro to Serve Prison Term

And in another such enforcement action, the DOJ recently announced that Montenegro extradited Richard Ayvazyan and his wife, Marietta Terabelian, to the U.S. to serve multi-year prison sentences for conspiring to defraud COVID-19 relief programs.

According to the DOJ, Mr. Ayvazyan and Mrs. Terabelian were members of a fraud ring in Los Angeles that illegally obtained at least $20 million in Covid-19 Relief funds, particularly from the PPP and EDIL programs.  

According to the DOJ press release, citing evidence at the June 2021 trial, Mr. Ayvazyan and Mrs. Terabelian (along with other members of the scheme) used fake, stolen, or synthetic identities to submit fraudulent applications for PPP funds and EIDL loans. About 150 fraudulent PPP and EIDL applications were submitted, according to the government. Like other schemes to defraud COVID-10 relief programs, Mr. Ayvazyan and Mrs. Terabelian submitted false or fake documents supporting the fraudulent applications, including false tax returns, fake identification documents, and false payroll records. Also similar to other COVID-19 schemes, Mr. Ayvazyan and Mrs. Terabelian bought luxury items with the fraudulently obtained relief funds, including homes, watches, diamonds, gold coins, designer handbags, fine imported furnishings, and a Harley-Davidson motorcycle. 

In June 2021, Mr. Ayvazyan and Mrs. Terabelian were convicted of leading a conspiracy to fraudulently obtain $20 million in COVID-19 relief funds. The couple then fled the United States to Montenegro in the Balkans. On November 15, 2021, the couple was sentenced in absentia. Mr. Ayvazyan received a 17-year prison sentence, while his wife, Mrs. Terabelian received a five-year prison sentence. The government located the couple in Montenegro and the Justice Department’s Office of International Affairs assisted with securing the arrest and extradition of the couple. The DOJ also noted that the government of Montenegro provided significant assistance in the extradition process.  

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Chilivis Grubman Secures Dismissal of Murder Indictment

Chilivis Grubman attorneys Scott Grubman and Serreen Meki represent Kenesia Strowder, a former Fulton County jail employee who, along with other Fulton County jail employees, was indicted for murder in the death of an inmate in 2019.

On behalf of Ms. Strowder, Chilivis Grubman filed a motion to quash the indictment, arguing that the Fulton County District Attorney's Office violated state law by failing to provide Ms. Strowder with notice of the indictment and an opportunity to present testimony to the grand jury; rights that "peace officers" are given under Georgia law. The State argued that Ms. Strowder and her co-defendants were not "peace officers" at the time of the incident and, therefore, were not entitled to such protections.

Last month, Fulton Superior Court Judge Robert C.I. McBurney agreed with the defense and granted Defendants’ Motion to Quash. “Here, it is undisputed that the State did not provide any such notice or opportunity to be heard to any of the six Defendants in this case,” McBurney ruled. “Nor is it disputed that the alleged crimes occurred while Defendants were performing their duties as detention officers at the Fulton County Jail.” In his six-page order, Judge McBurney reminded the State that O.C.G.A. § 17-7-52 reduces the likelihood of a “frivolous or harassing indictment being pursued” against peace officers and helps “ensure that the peace officer’s split-second decisions can be fully explored in a more deliberative fashion.”

Former Georgia State Employee Sentenced to Prison for Conspiring to Commit Federal Program Theft

Earlier this month, a former counselor for the Georgia Vocational Rehabilitation Agency (GVRA) was sentenced to five years in federal prison for stealing more than $1.3 million in funding from the GVRA that was intended to help state residents with disabilities. In addition to her prison sentence, the court ordered her to undergo three years of supervised release and pay over $1.3 million in restitution.

Karen C. Lyke and her husband, Kevin M. Gregory, admitted to falsifying records and created accounts for 13 fake disabled students seeking tuition assistance from GVRA. They opened P.O. Boxes in their own names, and after receiving the checks, the defendants deposited them in their own bank accounts or gave the checks to friends and family who funneled the money back to them. They used the stolen funds for personal expenses, including cars, jewelry, and a house down payment. They also stole computers and other equipment from GVRA and resold them on eBay. 

Ms. Lyke in September and Mr. Gregory in October each pleaded guilty to one count of conspiring to commit federal program theft. Mr. Gregory is scheduled to be sentenced in January 2023.

Georgia Men Exonerated of Murder Charges After 25 Years

In 1996, Darrell Lee Clark and Cain Joshua Storey were accused of murder in the shooting death of their friend 15-year-old Brian Bowling. Despite evidence that Bowling had unintentionally shot himself, Storey was charged with murder and Clark was alleged to be a co-conspirator. They each spent 25 years behind bars as a result.

On December 8, 2022, Clark and Storey were released after Rome Judicial Circuit District Attorney’s Office and Floyd County Superior Court Judge John Neidrach agreed the murder conviction should be overturned in light of new evidence. The evidence leading to Storey and Clark’s exoneration was uncovered as part of a podcast and investigation undertaken by Susan Simpson and Jacinda Davis.

Some of the evidence Simpson and Davis uncovered was that police had threatened a key witness, telling the witness they would take her children from her if she refused to testify against Storey and Clark. With the new evidence, the Georgia Innocence Project was able to secure Storey’s and Clark’s freedom.

Georgia Business Court Forced to Transfer $18 Million Development Dispute

On Monday, November 21, 2022, Georgia’s State-wide Business Court agreed to transfer an $18 million development contract dispute to the Superior Court of Bryan County. The defendants, Ford Field & River Club Inc. and Ford Field & River Association Inc., requested the transfer. They have been sued for breach of contract by Northcap Savannah LLC, who alleges that the Ford Field Entities fabricated a non-existent contract provision to get out of a development agreement in Richmond Hill, Georgia.

Georgia’s State-Wide Business Court opened in August 2020 with the goal of resolving business disputes in a dedicated forum within the state that would be easier and faster than in other courts. However, a statutory provision has hampered the growth of the new court. The Georgia Legislature included in the statutory scheme a provision that requires the consent of both the plaintiff and defendant before a case can proceed in the GSBC. A defendant has 30 days to request to opt-out of the court’s jurisdiction and transfer the case to another appropriate court. The GSBC must honor such a request.

When he resigned from the position in June 2022, the court’s prior and inaugural judge, Walter W. Davis, expressed concern about the mutual consent rule the Legislature had imposed on the court, saying that the rule must be scrapped for the business court to reach its full potential.

And now let us believe in a long year that is given to us, new, untouched, full of things that have never been ...

– Rainer Maria Rilke, Poet

(Letter to Clara Rilke)

Supreme Court Hears Case Involving Alleged Bribery, Public Corruption, and Honest Services Doctrine

Last month, the U.S. Supreme Court heard Percoco v. United States, a case involving the “honest-services fraud statute” and whether a private citizen can be convicted for bribery and fraud. The case involves a former New York state official, Joseph Percoco, who at the time managed the campaign of then-Governor Andrew Cuomo. Before managing the campaign, Mr. Percoco previously served as an aide to Governor Cuomo for five years and then returned to work for Governor Cuomo after the acts in question.

A real estate developer paid Mr. Percoco $35,000, allegedly seeking Mr. Percoco’s help to obtain approval for a project. In 2014, just days before Mr. Percoco returned to work for Gov. Cuomo again after the campaign, Mr. Percoco called a state development agency and requested that the agency proceed with the project. According to some coverage of the case, “after the call, the agency head told another agency executive that he was receiving ‘pressure’ from his ‘principals.’ The next day, state officials reversed the decision that the developer needed to reach an agreement with the unions.”

Though Mr. Percoco was no longer a government official at the time of the alleged bribes, the prosecutors’ case argued that he was essentially a public official. According to one news report “Prosecutors say Mr. Percoco was ‘functionally a public official’ because he commanded clout with state agencies and therefore committed honest-services fraud by allegedly accepting a bribe. Congress defined a ‘scheme or artifice to defraud’ to include ‘a scheme or artifice to deprive another of the intangible right of honest services.'”

Coverage of Mr. Percoco’s conviction explained that: “The New York-based 2nd U.S. Circuit Court of Appeals in 2021 upheld his conviction, finding that Percoco had a guaranteed job in Cuomo’s administration post-election and in the interim exercised enough influence over government decision-making to owe a duty to the public.

Percoco’s lawyers have taken the position that because Mr. Percoco was a private citizen, even if he had served in government and still had strong connections with elected officials, his work was as a lobbyist, and that affirming the conviction could lead to criminal charges being brought against former government officials who later serve as lobbyists. According to some coverage “Percoco also cautions that the 2nd Circuit’s rule could have sweeping implications not only for lobbyists and donors but also for the family members of public officials, who “hold unparalleled access and influence” and whose “independent business interests may be in a position to benefit from state action.”

In 2018, Mr. Percoco was sentenced to six years in prison. The Supreme Court is expected to rule by June 2023.

U.S. Supreme Court Will Consider Whether Health Care Fraud Perpetuated Using Patient Information Also Constitutes Identity Theft

The Supreme Court also agreed to hear the case David F. Dubin v. United States, out of the Fifth Circuit Court of Appeals. David Dubin was convicted of healthcare fraud for overbilling Medicaid for the healthcare services provided to one of his patients. Because Mr. Dubin included the patient’s identifying information with the fraudulent submission to Medicaid, he was also charged with and convicted of identity theft.

Mr. Dubin’s identify theft conviction was pursuant to the federal aggravated identity theft statute, which provides that anyone who “during and in relation to any felony violation . . . knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person, shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.” 18 U.S.C. § 1028A(a)(1).

Mr. Dubin contends that recitation of someone’s name, in his case on the Medicaid submission, should not be sufficient to warrant the add-on conviction of identity theft, which nearly tripled his sentence. He points out that the “government disputed neither that petitioner in fact treated [the patient] nor that petitioner had the authority to use [that patient]’s name in billing. Nor did the government contend that the bill was false because of anything petitioner said (or didn’t say) about [the patient]’s identity.” (parenthesis in original).

The National Association of Criminal Defense Lawyers submitted an amicus, or “friend of the court,” brief to the Supreme Court arguing that the additional identity theft charge marks another example of overcriminalization by the federal government. Oral arguments have not been set by the Court, and a decision in this case is not expected until next year.

The FBI and HHS-OIG investigated this matter. The DOJ noted that the Health Care Fraud Strike Force, operating in 24 federal districts, has charged more than 4,200 defendants for health care fraud since March 2007.

Pastor Found Guilty of Fraud Relating to Bible-Themed Amusement Park

Last month, a North Carolina federal jury found Michael Mandel Baldwin guilty of securities fraud and wire fraud. Baldwin, a 53-year old Virginia-based pastor, was found to have fraudulently coaxed investors into giving him money for a purported Bible-themed amusement park called Miracle Mansion when he actually used a substantial portion of the money for himself.

Baldwin’s indictment alleged that he obtained $740,000 from investors but used significant portions of it on himself for personal expenses, such as travel, restaurants, and credit card payments. He also told investors that he had secured endorsements from prominent Christian companies, including Hobby Lobby and Chick-fil-A, when he had not obtained any such endorsements. Executives from the companies testified at trial that they did not know Baldwin. 

One unnamed victim was the pastor of a church in Charlotte, North Carolina, who invested $60,000 from his retirement fund into Miracle Mansion and also collected $10,000 for the project from his employees. Other victims are located in Virginia, Arkansas, Florida, and Georgia. Baldwin’s sentencing has not yet been scheduled.