Firm Secures Dismissal of Medi-Cal and Medicare Fraud Charges

 

September 23, 2016:  Following a two-day preliminary hearing, a Kern County Superior Court Judge dismissed all charges against a physician accused by the California Attorney General of Medi-Cal and Medicare fraud and related theft and tax offenses.  Led by Steven Goldsobel, the firm fought a more than two-year long battle to establish that there was no support for the Attorney General’s accusation that the firm’s client intended to defraud state and federally funded payors of health care services.  During the litigation, the Attorney General’s Office unsuccessfully attempted to thwart the firm’s efforts to obtain exculpatory information from the California Medical Board which the court subsequently ordered to be produced.  At the preliminary hearing, the firm convinced the court that the Attorney General would be unable to prove any of its allegations at trial and dismissed the case in its entirety.

 

 

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Supreme Court Imposes New "materiality" Requirement for False Claims Act Liability 

 

In an opinion on June 16, 2016, the United States Supreme Court took the False Claims Act in yet another direction, imposing a "materiality" requirement on the providers who submit bills to federally funded healthcare programs.  Specifically, the nation's highest court held that providers must "know" that a condition of payment is "material" to the Government's payment decision.  Although a provider may be held liable for both express and implied certifications with laws, False Claims Act enforcement should be limited to compliance with laws that have a "natural tendency to influence, or be capable of influencing, the payment or receipt of money or property."  In other words, a provider may be liable (1) if a reasonable person would attach importance to the billing requirement in determining his or choice of action in the transaction or (2) if the provider knew or had reason to know that the Government attaches importance to the specific matter in determining his or her choice of action.  Of course, only time will tell how the lower circuits will apply "materiality" to the cases at hand. 

 

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April 20, 2016:  Steven Goldsobel presented at the California Society of Physical Medicine & Rehabilitation’s annual meeting in Long Beach, California.  Mr. Goldsobel’s presentation was entitled, "Navigating the Criminal Enforcement Minefield for Physicians.”  Mr. Goldsobel shared his experience representing physicians and medical groups in investigations and prosecutions by federal and state law enforcement to avoid becoming targeted by law enforcement and the “rules of the road” to follow if an investigation is initiated.

 

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Steve Goldsobel  Again Named Super Lawyers for 2016 

 

What is a Super Lawyer?  Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.  The selection process includes independent research, peer nominations and peer evaluations.

 

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Ninth Circuit Upholds Insider Trader Conviction Despite Absence of Personal Relationship Between Tipper and Tippee

 

By its holding in United States v. Salman, 792 F.3d 1087 (9th Cir. 2015), the Ninth Circuit rejected the Second Circuit's requirement of a meaningful close personal relationship between the insider (tipper) and the tippee that represents at least a potential pecuniary gain or something similarly valuable.  United States v. Newman, 773 F.3d 438, 452 (2d. Cir. 2014).   In rejecting Mr. Salman’s argument that he lacked knowledge of the tipper’s personal gain, the Ninth Circuit relied on Dirks v. S.E.C.’s holding that the test is whether the insider personally will benefit, directly or indirectly, from his disclosure, and the tippee (Mr. Salman) knows or should know of this personal benefit, which can include the gift of confidential information to a relative who trades on it.   See 443 U.S. 646, 660 (1983).

 

 

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Supreme Court to Review False Claims Act Requirements for Second Year in a Row

 

On December 4, 2015, the Supreme Court granted certiorari in Universal Health Services, Inc. v. United States ex rel. Escobar, on the issue of the “implied certification” liability under the False Claims Act (FCA).  This theory holds that a defendant may be held liable for impliedly certifying compliance with material, attendant contractual, legal or regulatory requirements, as opposed to the traditional test requiring a defendant to submit a "factually false" claim for goods or services that were never provided.  The circuits are divided on this issue, with the Seventh Circuit largely rejecting the theory.  The Second and Sixth Circuits require that a statute, regulation or contractual provision be a condition of payment, whereas the First, Fourth, Ninth and D.C. Circuits do not impose such a requirement.  The danger in upholding the implied certification liability theory is that it would give ammunition to plaintiffs seeking the qui tam reward, who can easily plead that defendants failed to comply with some minor requirement of a complex contractual or regulatory regime.  The Firm regularly defends whistleblower lawsuits and will closely monitor the Court’s consideration of this issue.

 

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Federal Government Formalizes Plan to Share Qui Tam/Whistleblower Cases with Prosecutors for Review and Potential Criminal Investigation

 

On Wednesday, September 17, 2014, Assistant Attorney General for the Criminal Division of the U.S. Department of Justice Leslie R. Caldwell announced the federal government’s new “procedure so that all new qui tam complaints are shared by the Civil Division with the Criminal Division as soon as the cases are filed.”  Ms. Caldwell also indicated that “[q]ui tam cases are a vital part of the Criminal Division’s future efforts.”

 

Ms. Caldwell’s speech clearly demonstrates the federal government’s intent to devote significantly more resources to civil and criminal investigations of alleged fraud on the government, in areas such as health care, securities and tax.  This new policy makes it significantly more likely that an individual or entity alleged to have defrauded the government could face parallel civil and criminal investigations, which raises a host of complex legal issues.  For example, any factual admissions in a civil matter could be used against an individual or entity in a later criminal proceeding, even if the government did not disclose the existence of the criminal proceeding when the admissions were made.

 

Steve Goldsobel and his team regularly represent clients in qui tam/whistleblower actions and parallel criminal investigations and are available to answer questions you may have.

 

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Federal Whistleblower Protection Extended to Private, Outside Contractors of Public Companies

 

On March 4, 2014, in Lawson v. FMR LLC, __ U.S. __, 2014 WL 813701 (Mar. 4, 2014), the United States Supreme Court held that private, outside contractors that work for public companies are protected as whistleblowers under the Sarbanes-Oxley Act of 2002 (which was enacted in response to the Enron/Arthur Andersen LLP scandal). 

 

In Lawson, the plaintiffs were two “former employees of private companies that contract to advise or manage mutual funds.  The mutual funds themselves [were] public companies that have no employees.”  Nonetheless, in the Supreme Court’s landmark ruling, the Court held that whistleblowers that are “employees of private contractors and subcontractors” are also protected under the Sarbanes-Oxley Act of 2002.

 

Lawson surely will impact public companies, particularly those companies which not only report to the Securities and Exchange Commission but also operate in a regulatory environment, such as health care services and defense.  External services providers to public companies, including attorneys, accountants and other outside professionals are protected from retaliation by Lawson.

 

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Sweeping Charges Relating to Pacific Hospital of Long Beach and Workers Compensation Insurance Fraud

 

In February 2014, Michael Drobot, the former owner and operator of Pacific Hospital of Long Beach, pled guilty to charges related to a scheme in which he defrauded state and federal agencies of over $500 million.  As a part of his plea agreement, Mr. Drobot agreed to cooperate and provide information for continued government investigations into Pacific Hospital and individuals and entities doing business with Pacific Hospital.   Under his cooperation agreement, Drobot is incentivized to help the government investigate and prosecute as many entities and individuals as possible.

 

As a result, health care providers who have done business with Pacific Hospital may face intense scrutiny, not only from the U.S. Attorney’s Office, but from Workers’ Compensation Insurance carriers and others who are closely monitoring the government’s prosecution efforts.

 

The issue for all companies and individuals who have done business with Pacific Hospital is what is the best strategy for you and/or your organization in what appears to be an ongoing investigation of importance to the government and workers’ compensation insurance carriers.

 

Steve Goldsobel and his team regularly represent clients in health care fraud matters and are available to answer questions you may have.

 

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Trial Courts in California Cannot Modify Restitution Once a Defendant’s Probation has Ended 

 

On February 25, 2014, in Hilton v. Superior Court, B248654, (Cal. Ct. App. Feb. 25, 2014), the California Court of Appeal held that “a trial court does not have jurisdiction to modify a defendant’s probation to impose restitution after the defendant’s probationary term has expired.”  In Hilton, the defendant was convicted of drunk driving and unlawful use of a license and was sentenced to three years of probation with various conditions, including that he pay restitution to the victim.

 

Within three years of the defendant’s sentencing, the defendant paid the $3,215 in restitution the trial court ordered him to pay.  The victim later filed a civil suit against the defendant before the defendant’s probation expired, but the case settled for $3.5 million over a year after the defendant’s probation had expired.  Approximately one and a half years after the defendant’s probation expired, the victim filed a motion in the criminal case seeking an additional $886,000 in restitution (less the $3,215 already paid), which included a request for costs and fees related to the civil case. 

 

The trial court held that it had jurisdiction to modify the restitution order because the $3,215 was not full restitution, even if the amount was believed to be full restitution at the time it was requested.  Based on the California Constitution, California statutes and California legal precedents, the California Court of Appeal concluded that modifying a defendant’s restitution obligation following the expiration of probation is “an act in excess of the trial court’s jurisdiction.” 

 

The Court noted that whether a trial court can award (not modify) restitution to a victim after a defendant’s probation has expired is an open question which is pending before the California Supreme Court in People v. Ford, review granted October 23, 2013, S212940.

 

Because restitution in financial crimes cases is an important consideration, we will continue to monitor the court’s rulings affecting the rights of clients faced with restitution orders.

 

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A Factually True Statement, if Misleading or Evasive, Constitutes Obstruction of Justice

 

On September 13, 2013, in U.S. v. Bonds, __ F.3d __ (9th Cir. 2013), the Ninth Circuit held that a factually true statement, if evasive or misleading, constitutes obstruction of justice under 18 U.S.C. § 1503.  In Bonds, the defendant (the famous baseball player Barry Bonds) testified before a federal grand jury investigating potential money laundering in connection with the sale of performance enhancing drugs. 

 

When the government asked the defendant whether his trainer had provided him with drugs that he could inject himself, Bonds responded by describing himself as “a celebrity child with a famous father” who did not involve himself in other people’s personal matters.  The Ninth Circuit concluded that Bonds’ response was factually true but was evasive and did not provide an answer to the question asked.  Therefore, he obstructed justice.

 

Attorneys must fully prepare their clients who testify in light of the minefield of potential dangers when questioned by the government.  Telling the truth still can constitute obstruction of justice.

 

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Ninth Circuit Narrows Definition of “Official Proceeding” Under Obstruction of Justice Statute

 

On August 14, 2013, in U.S. v. Ermoian, __ F.3d __, 2013 DAR 10858 (9th Cir. 2013), the Ninth Circuit held that a criminal investigation does not qualify as an “official proceeding” under the obstruction of justice statute (18 U.S.C. § 1512).  In Ermoian, the defendants could not be convicted for obstruction of justice under 18 U.S.C. § 1512(c)(2) for warning the targets of a pending FBI criminal investigation, aiding the targets in conducting counter-surveillance to identify informants and otherwise generally helping the targets evade the investigation.

 

Several legal analysts have suggested that the Ninth Circuit’s decision will have a broad impact on the reach of the obstruction of justice statute.  A closer analysis of Ermoian makes clear that its impact could be far narrower because federal criminal investigations often occur concurrently with a grand jury proceeding or other type of “official proceeding,” such as a parallel SEC or OIG proceeding.   In addition, Ermoian has limited application because the federal government can still utilize section 1512(f)(1) to prosecute obstruction that occurs prior to the initiation of an “official proceeding.” 

 

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Steve Named to List of “Super Lawyers”

 

Steve was named "Super Lawyer" by the Southern California 2013 edition of Super Lawyers, a Thomson Reuters publication.

 

According to the Super Lawyers website, "Super Lawyers selects attorneys using a rigorous, multiphase rating process. Peer nominations and evaluations are combined with third party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement."

 

This is the seventh annual designation as a Super Lawyer for Steve Goldsobel (2009-2015) which follows Steve’s designation as a Super Lawyers’ Rising Star from 2005 through 2007.

 

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Steve Speaks to Orange County Bar Healthcare Section

 

On February 14, 2013, Steve and Jeremy Miller jointly presented a program on “Health Care Compliance: ‘Your Client Has Been Billing Improperly: Now What?’” The topics included how to conduct an internal investigation, protecting the attorney-client privilege, how to deal with the staff and potential whistleblowers, repayment of improper billings, and indemnification rights.  

 

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Sixth Circuit Overturns False Claims Act Judgment Based on Ambiguous Regulations Where Provider Made Reasonable Attempts to Comply

 

The U.S. Court of Appeals for the Sixth Circuit has reversed a summary judgment that held a business liable for violating the False Claims Act by using regulatory loopholes to maximize profits under the Medicare program.  In the decision, United States ex rel. Williams v. Renal Care Group Inc., (6th Cir., No. 11-5779), which was issued on October 5, 2012, the court ruled that a company will not be found to have acted with reckless disregard of its obligations when it actively attempts to comply with and understand the intent behind ambiguous regulations.

 

The Circuit’s analysis of Renal Care Group’s efforts at compliance and its criticism of the government’s evaluation of those efforts serve as useful tools in responding to alleged statutory and regulatory violations in an environment where there is greater incentive for whistleblowers to bring False Claims Act suits against health care providers and other recipients of federal funds.

 

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Newly Revised Sentencing Guidelines for Health Care Fraud Prosecutions

 

As part of the nation’s health care overhaul, the Patient Protection and Affordable Case Act of 2010, Pub. L. 111-148 (“the Act”), directed the United States Sentencing Commission to ensure that the Sentencing Guidelines and policy statements “reflect the serious harms associated with health care fraud” and “provide increased penalties for persons convicted of health care fraud offenses in appropriate circumstances.”[1]       

 

In response to a specific directive in the Act, the Sentencing Commission amended the Guidelines effective November 1, 2011 to increase the offense level for health care fraud with losses in excess of $1 million.[2]  In addition, by statutory directive, the Guidelines now include a rebuttable presumption that the intended loss for health care offenses is derived from the “aggregate dollar amount of fraudulent bills submitted to the Government.”[3]  Finally, pursuant to a more general directive to ensure that any aggravating or mitigating circumstances are accounted for, the Guidelines have been amended to specify that a defendant in a health care scheme who played a limited role and who received little personal gain may be eligible for a mitigating role reduction under U.S.S.G. §3B1.2.[4]

 

Given that health care fraud enforcement continues to be a priority of the Justice Department, these important changes in the federal sentencing scheme will play a key role as new cases emerge. 


[1] Section 1606(a)(3) of the Act.

[2] U.S. Sentencing Guidelines Manual (“U.S.S.G.”) § 2B1.1(b)(8)(2011).

[3] U.S.S.G. § 2B1.1cmt.n. 3(F)(viii)(2011).

[4] U.S.S.G. § 3B1.2cmt.n. 3(A)(2011).

 

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On April 17, 2012, the U.S. Court of Appeals for the Ninth Circuit held in In re Pacific Pictures Corporation, __ F.3d __ (9th Cir. 2012), that a party may not selectively waive the attorney-client privilege by voluntarily producing privileged materials to the government while maintaining the privilege in civil litigation.   

 

Prior to Pacific Pictures, it was still unsettled whether targets and subjects of criminal investigations could share with prosecutors the results of internal investigations, including witness interviews, analyses of any alleged violations and privileged communications relating to the conduct under investigation, without fear that such disclosures would waive the attorney-client privilege.  With Pacific Pictures, the issue is now settled and counsel must continue to be vigilant in identifying ways to meaningfully communicate with the government without waiving the attorney-client privilege.

 

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The Ninth Annual Healthcare Law Compliance Symposium sponsored by the Los Angeles County Bar Association is set for October 4, 2012.  Steve Goldsobel had been a member of the Planning Committee since this key symposium, which features the latest hot button compliance issues, got underway.

 

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Steve was named "Super Lawyer" by the Southern California 2012 edition of Super Lawyers, a Thomson Reuters publication.

 

According to the Super Lawyers website, "Super Lawyers selects attorneys using a rigorous, multiphase rating process. Peer nominations and evaluations are combined with third party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement."

 

This is the fourth annual designation as a Super Lawyer for Steve Goldsobel (2009-2012) which follows Steve’s designation as a Super Lawyers’ Rising Star from 2005 through 2007.

 

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June 2010:  Steve Goldsobel was published in The Federal Lawyer, “Focus On:  Ninth Circuit Requires Search Protocols for Electronic Evidence.”  

 

 

 

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