Fraud Cases

The Federal Docket

United States v. Gatto, et al (2d Cir. January 2021)

The Second Circuit affirmed the convictions of three men who had recruited college basketball players to certain universities by giving their families secret cash payments and then lying to the NCAA about it. The Court held that the elements of wire fraud were met because, through the defendants’ misrepresentations, they had deprived the universities of scholarship money paid to the college athletes that could have gone to eligible athletes that did not receive cash payments.

United States v. Richard Lee Graham (11th Cir. December 2020)

The Eleventh Circuit affirmed a defendant’s conviction for corruptly endeavoring to obstruct the Internal Revenue Code by submitting a fraudulent check to the IRS. The Court held that the IRS’s “collection activity” constituted a “particular administrative proceeding” which is a required element of the offense since SCOTUS’s decision in Marinello v. United States. The Court also rejected evidentiary challenges from the defendant based on the district court limiting the testimony of a witness who connected the defendant to others who prepared the false check.

Biden’s Pick for HHS Signals Aggressive Approach to Prosecuting Healthcare Fraud During COVID-19 Pandemic

President Biden has nominated Xavier Becerra, California’s Attorney General, to lead the Health and Human Services Department. Based on his experience as a prosecutor and the substantial stimulus money paid out to healthcare providers during COVID-19, legal observers are predicting an aggressive new approach in healthcare fraud enforcement by the government.

Feds Allege Big Increase in PPP Loan Fraud

Government officials and public data indicate there has been a dramatic increase in investigations and prosecutions of “PPP Loan Fraud,” including over 500 investigations and 73 criminal prosecutions. The Wall Street Journal reports in detail how Congress created the program to facilitate quick relief to businesses by allowing business’s to “self-certify” their need for PPP loans, and how the federal government has aggressively pursued businesses they suspect of committing PPP loan fraud by identifying certain business activities as “suspicious.”

United States v. Scott Capps (3rd Cir. October 2020)

In a matter of first impression, the Third Circuit vacated a defendant’s sentence, holding that the abuse of trust adjustment under 3B1.13 applies only to the actual money laundering conduct and not to the underlying offense from which the funds are derived. The Court held that the enhancement did not apply where the defendant stole passwords at his job to issue checks from abandoned accounts, since that was not the basis of the money laundering count, and did not apply to the defendant sending the checks to his friends for deposit into their bank accounts or the defendant’s bank account, since the defendant did not occupy a position of trust in relation to that conduct.

Purdue Pharma Pleads Guilty to Violating Anti-Kickback Laws & Defrauding the U.S.

The DOJ has announced that Purdue Pharma, the pharmaceutical corporation best known for making the opioid pain killer Oxycotin, will plead guilty to three federal criminal charges relating to its role in creating to the opioid crisis. Purdue Pharma will be pleading guilty to conspiracy to defraud the U.S. and violate the Food, Drug and Cosmetic Act and two counts of conspiracy to violate the Federal Anti-Kickback Statute based on payments to healthcare providers and a cloud-based electronic health records company that Purdue worked with in relation to its distribution of opioid pain medication. The plea agreement calls for over $8 billion in fines and fees and will require the company, which previously filed for bankruptcy, to dissolve.

United States v. Mohammed Jabateh (3rd Cir. September 2020)

In a matter of first impression, the Third Circuit affirmed a defendant’s conviction of immigration fraud and perjury for lying during his oral interview with a USCIS officer about his involvement with organizations and killing others in his home county. Although the Court held that the statute applied only to written documents, the defendant’s conviction was not plain error since the statutory interpretation was not clear and no other court had considered the statute’s ordinary meaning before.

United States v. Volvy “Zev” Smilowitz (2d Cir. September 2020)

The Second Circuit affirmed defendant’s conviction for bribing individuals to register to vote and submitting false voter registrations, holding that the federal election statute applied to defendant influencing a strictly local election since voter registration is part of a unitary system that governs local, state and federal elections regardless of the defendant’s intent to affect only a local election.

South Georgia Feds Target Telemedicine Fraud in Operation Rubber Stamp

On October 7, 2020, the DOJ and U.S. Attorney’s Office for the Southern District of Georgia announced several prosecutions of “telemedicine fraud” as a result of the federal government’s aggressive approach in Operation Rubber Stamp, including one case involving $1.5 billion in allegedly fraudulent bills to government health insurance programs. The feds allege that several individuals and companies involved in “telemedicine,” where patients can attend virtual appointments with their doctors, were collecting patient data and selling it to pharmacies, labs, and durable medical equipment (DME) suppliers. These “telemedicine executives” are accused of paying doctors and other healthcare providers to order unnecessary DME, lab tests, or prescription pain medication after brief telemedicine appoints or for patients they never actually saw, and bill the government for those allegedly unnecessary services. Hence, the rubber stamp.

COVID-Fueled Growth in Telemedicine Could Lead to More Fraud Prosecutions

Recent growth in the telemedicine field as a result of COVID-19 has prompted the government to take an aggressive approach in targeting suspected healthcare fraud. As more healthcare providers adapt to the new environment under COVID-19 and try to provide telemedicine services to their patients, there is a real risk that the government ends up targeting providers who are new to telemedicine and are simply making mistakes due to a lack of familiarity with the regulations. Further increasing this risk is the fact that the federal government has created “dozens of new billing codes” and waived certain limitations and regulations given the COVID-19 pandemic, making it harder for healthcare providers to know what is and isn’t allowed in the rapidly changing new world of telemedicine.

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