Fraud Cases

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.

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.

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.

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.

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.

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.

Recent developments in the DOJ’s approach to targeting PPP loan fraud offenses suggest that the DOJ is going to increase its use of criminal “conspiracy” laws to charge multiple defendants together for schemes involving PPP loans.

The Second Circuit upheld a conviction for using fictitious government documents because 18 U.S.C. § 514 applies to both fake versions of existing documents and wholly contrived, fake documents. The Court held that evidence that a defendant used inauthentic documents, misrepresented government employment, and paid with fake purchase orders is sufficient to uphold a conviction.

The Eleventh Circuit vacated a conviction for conspiracy to receive illegal kickbacks in relation to a federal health care program, holding that the government must prove that a defendant charged under 42 U.S.C. § 1320(a)-7b(b) in conjunction with conspiracy under 18 U.S.C. § 371, the government must prove that federal funds passed through the conspiracy.

Throughout July, the Department of Justice has been announcing an increasing number of prosecutions against individuals accused of “COVID Relief Fraud,” also referred to as CARES Act Fraud. Most cases involved the CARES Act’s Paycheck Protection Program (PPP). The past week saw cases brought across the country from California to Florida and included charges for wire fraud, bank fraud, false statements, money laundering, and healthcare fraud.