Criminal Prosecutions for Medicare and Medicaid Fraud

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Criminal Prosecutions for Medicare and Medicaid<br /> Fraud

PRESENTED BY:

Mark L. Bennett, Jr.

BENNETT & DILLON, L.L.P.

1605 SW 37th Street

Topeka, KS 66611

(913-267-5063)

(913-267-2652 – Fax)

I

INTRODUCTION

Having served as a prosecutor for several years during
my
early practice, I acquired some ability in the field of
criminal
law that I did not care to just discard upon leaving
the
prosecutor’s office, so although the majority of my practice
now
consists of a civil practice, I also maintain some
criminal
practice, which consists mainly of the defense of “white collar
crimes.” In the course of that criminal practice, I have
observed
a trend with regard to the filing of criminal cases,
particularly
cases filed by the United States Attorney’s Office. It seems
that
with each administration, there are prosecutions of choice,
that
is, prosecutions of particular types of crimes that are near
and
dear to the hearts of Congress and the particular
administration
in office. At one point in time, drugs and drug offenders got
the
most attention from the authorities, then it was banking
and
savings and loan violations. Now, some of my friends in
the
various U.S. Attorney’s offices tell me that one of
the
prosecutions of choice is fraud relating to the provision
of
medical services. This trend has also been noticed by
others.
One authority in the field, David S. Nalveen, has observed
that
“The federal government is aggressively prosecuting fraud
and
abuse by health care providers for the same reason that
Willie
Sutton robbed banks: That’s where the money is.”

Recent legislation enacted both in Congress and in the
Kansas
legislature bear out this prosecutorial trend. Not only
has
Congress created new crimes specifically concerning health
care
fraud in the new Kennedy-Kassebaum sponsored legislation, but
the
State of Kansas has recently enacted the Kansas Medicaid
Fraud
Control Act. These acts increase the already numerous avenues
for
criminal actions against health care providers.

II

CRIMINAL STATUTES

A variety of both federal and state statutes address
Medicare
and Medicaid fraud. They provide prosecutors with many
options,
and correspondingly subject health care providers to
many
different types of liability. The following list attempts
to
provide an overview of the possible avenues of
criminal
prosecution relating to health care fraud.

A. Federal Criminal Statutes

1. False Claims Act, 18 U.S.C. § 287.

Under this statute, any health care provider who presents a
false
or fictitious claim or demand to the government seeking
reimbursement for medical goods or services can be liable.
The
prosecutor need only prove that the provider
intentionally
submitted the claim knowing that it was false, fictitious
or
fraudulent. This can be shown by showing that the claim was
for goods or services that were not provided, were not provided
as
stated, or were provided but not medically necessary.

The punishment for a conviction under the False Claims Act
is
up to five years imprisonment and a fine of $250,000.00 for
an
individual and $500,000.00 for a corporation for a
felony
conviction; or $100,000.00 for an individual and $200,000.00 for
a
misdemeanor conviction. It should be noted that this penalty
is
per occurrence. Thus, liability for numerous false claims is
very
heavy. In light of the new specific provisions concerning
false
statements in connection with health care fraud found in
the
recently enacted Health Insurance Portability Act, it
is
questionable whether this section is applicable to actions
that
would be covered by the new legislation.

2. False Statements Act, 18 U.S.C. §1001

This act imposes liability on a health care provider that in a
communication submitted to the government, makes false or
fraudulent statements or representations, false writings
or
documents, or that falsifies or covers up a material fact.
Like
the false claims act, the health care provider need
not
necessarily have made the statement directly to the
federal
government; it is enough that the false statement was made to
a
state agency or insurance company and submitted to the
government.
See United States v. Huber, 603 F.2d 387 (2nd Cir. 1987)
(hospital supply company violated act where it marked up
supplies to hospitals, who then submitted the marked up costs to
the insurance companies acting as fiscal intermediaries for the Medicare
and
Medicaid programs.)

In order to show a violation of this act, the government
must
prove that the health care provider willfully submitted the
false
statement or representation to the government, knowing it to
be
false, and that the statement was material i.e. that the
statement
was of the type that has the natural tendency to influence
the
agency’s action. See United States V. Greber, 760 F.2d
68, 72-73 (3rd Cir. 1985).

The penalty for a conviction under the False Statement Act
is
a fine of not more than $10,000.00 or imprisonment of more than
5
years, or both. As with the False Claims Act, this penalty can
be
assessed for every violation.

3. Social Security Act

In addition to the general federal crimes listed above,
the
Social Security Act itself contains several provisions that
could
apply to health care providers. These provisions criminalize
a
variety of conduct.

a. Social Security Act: 42 U.S.C. §
132Oa-7b(a)

The first of the provisions, 42 U.S.C. S1320a-7b(a),
concerns false statements in connection with services which
are
paid for in whole or in part by a “Federal Health Care
Program”,
which definition includes a state health care program
receiving
some federal funds.

42 U.S.C. §1320a-7b(a)(1) states that whoever knowingly
and
willfully makes or causes to be made any false statement
or
representation of material fact in any application for any
benefit
or payment under a Federal Health Care Program shall be guilty
of
a felony. In order to convict a health care provider under
this
section, the Government must prove that the statement
or
representation was knowingly made, that the statement
or
representation was false, and that the provider knew the
statement
or representation to be false when made.

42 U.S.C. 1320a-7b(a)(2) concerns false statements or
representations made in determining rights to a benefit or
payment
under the Medicaid Act. The elements that the government
must
prove are the same as those in (a)(1) discussed above.

42 U.S.C. 1320a-7b(a)(3) concerns the covering up of an
event
which affects the providers right to a benefit or payment or
the
person on whose behalf the provider has applied for or
is
receiving payment. In order to obtain a conviction under
this
section, the Government must show that the provider concealed
or
failed to disclose the information with the intent of
securing
payment or benefit when none was authorized, or of
securing
payment in an amount greater than authorized.

42 U.S.C. S1320a-7b(a)(4) proscribes presenting a claim for
a
physician’s service under the Medicaid Act or a State Health
Care
Program knowing that the person furnishing the service was
not
licensed as a physician. Hopefully, this will not be a
big
problem in Kansas.

The penalty for any violation of 42 U.S.C.
§§1320a-7b(a)
through (h) is a fine of not more than $25,000.00 or
imprisonment
of not more than 5 years, or both.

b. Social Security Act: 42 U.S.C.
132Oa-7b(b)

This provision is otherwise known as the
“anti-kickback”
provision. It prohibits anyone from knowingly and
willfully
soliciting or receiving any renumeration such as kickbacks,
bribes
or rebates, directly or indirectly in return for referring
an
individual to a person for the furnishing or arranging
of
furnishing any item or service for which payment is made under
the
Medicaid Act or a State health care program, or in return
for
purchasing, leasing, ordering, or arranging for or
recommending
any good, facility, service or item for which payment may be
made,
in whole or in part under the Medicaid Act or a State health
care
program. Any such violation is a felony. Further, this
provision
makes it a misdemeanor to knowingly and willfully offer to pay
or
to pay such renumeration in connection with these activities.

However, the provision exempts some legitimate business
transactions from its application. The anti-kickback
provision
states that it does not apply to: 1) Discounts or other
price
reductions obtained by health care providers if the reduction
is
properly disclosed and reflected in costs claimed or charges
made;
2) an amount paid by an employer to an employee in a bona
fide
employment relationship; 3) an amount paid by a vendor of
goods
or services to a person authorized to act as a purchasing
agent for entities furnishing services reimbursed under the
Medicaid
Act, so long as the amount is established by written contract
and
fully disclosed; waivers of coinsurance payments under
Medicare
Part B; and any arrangement covered by the so-called “safe
harbor”
regulations promulgated by the Secretary pursuant to section
14(a)
of the Medicare and Medicaid Patient and Program Protection Act
of
1987.

The “safe harbor” regulations are provisions of federal
law
which protect physicians from criminal prosecutions or
civil
liability for practices that would otherwise be covered by
the
anti-kickback laws. These practices include certain
investments
in health care entities; space and equipment rental;
personal
services and management contracts; the sale of a
practice;
legitimate referral services; warranties; discounts; bona
fide
payments made to employees; payments to a group
purchasing
organizations; waiver of beneficiary coinsurance and
deductible
amount; formation of health plans which offer
nondiscriminatory
incentives to enrollees; providers who offer reduced prices
to
health plans in compliance with certain specified standards,
and
some risk sharing arrangements.

Violations of the anti-kickback provision can result in
a
fine of not more than $25,000.00 or imprisonment for not more
than
5 years, or both.

c. Social Security Act: 42 U.S.C.
132Oa-7b(c)

This provision covers false statements or representations
with
respect to the condition or operation of health care facilities. It provides that whoever makes or induces a
false
statement or representation of material fact of the conditions
or
operations of an institution so that the institution may
qualify
as a hospital, rural primary care hospital, skilled
nursing
facility, nursing facility, intermediate care facility for
the
mentally retarded, home health agency, or any other agency
for
which certification is required under a Federal Health
Care
Program, or who makes false statements with respect to
information
required under Part B Medicare disclosure requirements shall
be
guilty of a felony. Any such violation is punishable by a fine
of
not more than $25,000.00 or imprisonment for not more than
five
years, or both.

d. Social Security Act: 42 U.S.C.
§l32Oa-7b(d)

This provision covers illegal patient admittance
and
retention practices. It provides that anyone who
willfully
charges a greater amount than allowed under a State plan
approved
by the Medicaid Act or who solicits a gift or donation as
a
precondition of admitting a patient to a health care facility
or
as a requirement for continued stay in the facility shall
be
guilty of a felony. As with the other violations of 42 U.S.C.
§1320a-7b, each violation is punishable by a fine of not more
than
$25,000.00, imprisonment for five years, or both.

4. Federal Mail and Wire Fraud: 18 U.S.C.
§§1341,
1343

In addition to the charges above, prosecutors can also make use
of the Federal Mail Fraud and Federal Wire Fraud statutes. These statutes proscribe the use of the mail,
interstate
television, radio and wire communications in furtherance
of
fraudulent schemes. Because many alleged fraudulent acts
in
connection with Medicare and Medicaid make use of the mail
or
other forms of communication, these statutes are
particularly
important.

In order to obtain a conviction under these statutes, it
must
be shown that the health care provider was involved in a scheme
to
defraud with the intent to defraud, and that the provider used
the
mail or other form of communication in furtherance of that
scheme.
It is important to remember that each use of the mails or
other
communication constitutes a separate offense, and that
these
offenses are in addition to any charges that may be brought
in
connection with the fraudulent scheme itself under any of
the
statutes addressed above. Each conviction for mail or wire
fraud
is punishable by a fine of up to $1,000.00, a prison term of up
to
five years, or both.

5. The New Frontier: Recent changes to Federal
Criminal
Law

Concerning Health Care Fraud.

Recent legislation has provided a new avenue for prosecution of
Medicare and Medicaid fraud. In the last session, as a part of
the
new Kennedy-Kassebaum sponsored Health Insurance Portability
Act,
Congress established a number of new federal crimes
concerning the Health Care industry. The first of these is
Health
Care Fraud, 42 U.S.C. §1347. Under this statute, anyone
knowingly and willfully executing or attempting to execute a scheme
to
defraud any health care benefit program or to obtain by
fraudulent
pretenses, representations or promises any money or property
owned
by or under the control of, any health care benefit program
faces
a fine or imprisonment for not more than 10 years, or both.

An interesting provision of this statute covers schemes
which
result in the bodily injury or death of another. In the case
of
bodily injury, imprisonment of up to 20 years is allowed, while
in
the case of death, imprisonment for any term of years, or
for
life, is authorized.

Another new crime created by Congress in connection with
the
health care field is Theft Or Embezzlement in connection
with
health care, 18 U.S.C. §669. Under this section, anyone
knowingly
and willfully converting or intentionally misapplying the
assets
of a health care benefit program is liable for a fine
or
imprisonment of not more than 10 years, or both.

42 U.S.C. §1035 is another new statute governing False
Statements relating to health care matters. Under this
provision,
whoever knowingly and willfully falsifies, conceals or covers
up
by any trick scheme or device a material fact or makes
any
materially false, fictitious or fraudulent statements
or
representations, or uses any materially false writing or
document
with knowledge of the falsity, in connection with the delivery
of
or payment for health care benefits, items or services is
liable
for a fine, imprisonment of not more than 5 years, or both. It
is
arguable that the existence of this more specific
section prohibits prosecution under the False Statements Act, 18 U.S.C.
§1001 for the same conduct.

B. State Law: Kansas Medicaid Fraud Control
Act

In addition to and in cooperation with federal
laws
regulating health care, Kansas has recently enacted the
Kansas
Medicaid Fraud Control Act. This act prohibits knowingly making
a
false claim, statement or representation to the Medicaid
program
or its fiscal agent with the intent to defraud. The definition
of
a false claim, statement or representation is expansive,
and
includes any false or fraudulent claim for payment for goods
or
services, false information for use in determining payments
or
rate of payments, or fraudulent entries in records that
are
required to be kept as part of participation in the medic
aid
program. The making of a false statement where the
aggregate
amount of payments illegally claimed is $25,000.00 or greater is
a
severity level 7 nonperson felony, while the making of a
false
statement where the aggregate amount of payments illegally
claimed
is between $500.00 and $25,000.00 is a severity level 9
nonperson
felony. Where the aggregate amount of payments is less
than
$500.00, the making of a false statement is a class A
misdemeanor.

The Kansas Medicaid Fraud Control Act also prohibits the
making or presenting any wholly or partially false or
fraudulent
book, record, document, data or instrument to a law
enforcement
officer, employee or representative of the attorney general,
or
employee or agent of SRS in connection with any audit
or investigation regarding claims for payment under the
Medicaid
program; and any false or fraudulent statement made with intent
to
influence any acts or decision of any federal or state employee
of
an agency having regulatory or administrative authority over
the
Kansas medicaid program. This activity is a severity level
9,
nonperson felony.

Another section of the Kansas Medicaid Fraud Control
Act
covers the same activity prohibited by the federal
anti-kickback
legislation, 42 U.S.C. §1320a-7b(b). It incorporates the
same
exemptions as those in the federal statute, as well as many of
the
safe harbor provisions found in 42 C.F.R. §1001.952. Any
safe
harbor provisions in 42 C.F.R. §1001.952 that are not
expressly
included in the Kansas Medicaid Fraud Control Act are
also
probably exempted.

An interesting provision in the Act is a section which
provides that the negligent failure to maintain adequate
records
which disclose fully the nature of the goods, services,
items,
facilities or accommodations for which a claim is submitted
or
payment received, or the income or expenditures upon which
rates
of payment were based is a class A nonperson misdemeanor.
This
section also requires that, upon submitting a claim or
receiving
payment under the Medicaid Act, the provider must
maintain
adequate records of the transaction for five years after
payment
was received, or five years after the claim was submitted
if
payment was not received.

Yet another section of the new Act governs the intentional
destruction or concealment of records. It provides that
any destruction or concealment of records necessary to document
a
transaction under the Medicaid Act within the five year
period
previously described is a severity level 9 nonperson felony.

The Act specifically provides that offers of repayment
or
repayment itself, if occurring after the filing of
criminal
charges do not constitute a defense against such charges.
In
addition to the criminal penalties specified, the Act
also
provides for payment of full restitution, with interest,
and
payment of reasonable expenses in the enforcement of the
action,
including reasonable attorney fees.

To provide enforcement, the Act creates a medicaid fraud
and
abuse division within the Attorney General’s office. The
Act
further provides that the Attorney General shall be allowed
access
to all records in the hands of the provider relating to
the
transaction under investigation, and that no provider may
refuse
to provide access to the records on the grounds that such
access
would violate any recipient’s right of privacy or
privilege
against disclosure or any other privilege or right. The Act
does
absolve the provider from liability for any breach of
confidential
relationship between provider and patient as the result of
the
production of those records.

III

CIVIL PENALTIES

In addition to possible criminal liability, providers are
also
exposed to substantial civil liability for health care fraud under the Civil False Claims Act and the Civil Monetary
Penalties
Law. As previously stated, the government in many cases
will
pursue both civil and criminal liability for the same action
in
hoping to force a settlement.

A. Civil False Claims Act

31 U.S.C. §3729(a), the Civil False Claims Act, provides
that
anyone who presents to a government employee a false or
fraudulent
claim is liable for a civil penalty of not less than $5,000.00
and
not more than $10,000.00 plus three times the amount of
damages
that the government sustains because of the action.
This
liability is per occurrence.

An often cited recent example of the huge potential liability
exposure under the Federal Civil False Claims Act is United
States V. Krizek
, 859 F. Supp. 5 (D.C. 1994). In
that
case, the government filed suit against a psychiatrist and
his wife for submitting and conspiring to submit false claims to
Medicare and Medicaid. The government alleged that Dr. Krizek
billed for 45-50 minute psychotherapy sessions when, based on the
time spent, he should have billed for 20-30 minute
sessions. Because this alleged billing practice took place over
a six year period and involved 8,000 claims, the
potential
liability for Dr. Krizek under the Federal Civil False Claims
Act
was in excess of 80 million dollars. Although the court
eventually found that the alleged damages were unreasonable and
submitted the case to a master for calculation of damages,
this case is a good example of the lengths to which the government may be allowed to go under
the
statute, and the lengths to which the government may in fact go
to
force a plea.

B. Civil Monetary Penalties Law

42 U.S.C. §1320a-7a, the Civil Monetary Penalties
Law,
establishes an administrative action that may be pursued in
lieu
of a criminal or civil action. The law provides that any
person
presenting or causing the presentation of, a claim for Medicaid
or
Medicare benefits for medical items or services that the
provider
knows or should know is false is subject to a penalty
of
$10,000.00 per item or service. In addition, the provider
is
subject to an assessment of not more than three times the
amount
claimed for each item. The provider is also subject to
being
excluded from the Medicaid and Medicare programs.

Because a proceeding under the CMPL is administrative
in
nature, the provider does not have the right to a jury
trial.
Instead, the determination of liability is made by
an
administrative law judge. Because the penalties under the
CMPL
are per occurrence, the total amount can be quite large.
It
should be noted, however, that the recent Kennedy-Kassebaum
bill
changes the burden of proof under this section. Where before
a
health care provider could be subject to liability where
the
provider simply should have known that the information
submitted
was false, now the government is required to prove at
least
deliberate indifference.

IV

EXCLUSION FROM THE MEDICARE AND MEDICAID
PROGRAMS

In addition to all the other penalties mentioned above,
the
health care provider is subject to expulsion from the Medicare
and
Medicaid programs. 42 U.S.C. 1320a-7(a)(3) now provides
for
mandatory exclusion upon a felony conviction of fraud
in
connection with the delivery of health care item or service,
or
with respect to any act or omission in a government health
care
program. Such exclusion from participation is for a period of
not
less than five years. Also, 42 U.S.C. §1320a-7(b) provides
for
the permissive exclusion of a provider for a conviction
relating
to the obstruction of an investigation; submitting claims
for
excessive charges that do not rise to the level of fraud,
failure
to disclose statutorily required information and failure
to
provide required access to records. Such exclusion is for
a
minimum of three years.

One of the most potent weapons in the prosecutor’s arsenal,
however, is the power to suspend and withhold a
provider’s
payments under Medicare upon indictment or other reliable
evidence
of fraud. Under 42 C.F.R. §405.370 and 42 C.F.R. §405.370
such
payments can be suspended without a hearing once the
prosecutor
has obtained an indictment. As a result, the government is
able
to exert tremendous pressure on health providers it has targeted.

III

ENFORCEMENT

Enforcement of Medicaid and Medicare Fraud is a
coordinated
effort of three federal agencies: The Office of the
Inspector
General, the Department of Justice and the Federal Bureau
of
Investigation. Also involved are state-based federally
funded
Medicaid Fraud Control Units.

Investigations into Medicare and Medicaid Fraud begin
with
the Office of the Inspector General. OIG investigators have
the
power to execute search warrants and serve subpoenas in
connection
with their investigation. In cases involving suspected
Medicaid
Fraud, the OIG has delegated most of its investigative
activities
to Medicaid Fraud Control Units established by individual
states
with federal funding. Kansas’s new Medicaid Fraud Control
Act
establishes a MFCU through the state Attorney General’s
Office.
This agency has the power to issue subpoenas, serve and
execute
search warrants, and take sworn statements.

Once the investigators have determined that there is
reason
to believe a law has been broken, the situation is reported to
the
United States Attorney General and the FBI. The
Attorney
General’s Office coordinates further investigation and
determines
whether to submit the case to a grand jury. If the
investigation
is conducted by a Medicaid Fraud Control Unit, the MFCU has
the
authority to prosecute criminally, or refer the matter to
the
applicable district or county attorney for prosecution. The
MFCU
may also coordinate its activities with federal investigators.

IV

SEARCH WARRANTS AND GRAND JURY SUBPOENAS

With the foregoing in mind, I then get to the “nuts
and
bolts” of this presentation. What should you do as a health
care
provider if someone appears at your office or home, with a
search
warrant or a subpoena to appear before a grand jury.

A. Search Warrants

The Fourth Amendment, as applied to the states through
the
Fourteenth Amendment governs the law of search and seizure.
In
order to claim protection under the Fourth Amendment, a party
must
have a legitimate expectation of privacy in the property
searched.
Rokas V. Illinois, 439 U.S. 128, 143 (1978). The
amendment only forbids unreasonable searches and seizures. The
reasonableness or unreasonableness of a particular search
depends
on the particular facts and circumstances surrounding the conduct
of the search.

The Fourth Amendment’s search warrant provisions require

  1. that the warrant be issued by a neutral
    disinterested magistrate. Steagold V. United
    States
    ,
    451 U.S. 204, 216 (1981);

  2. that those requesting the warrant establish to the
    magistrate’s satisfaction that there is probable cause to
    believe
    that the evidence being sought will aid in apprehending
    an
    individual for a particular crime. Illinois v.
    Gates
    ,
    462 U.S. 213 (1983); and

  3. that the warrant describes with particularity the
    place
    to be searched and the items to be seized . Dalia V.
    United

Under the provisions of Rule 41 of the Federal Rules of
Criminal Procedure, a warrant may be issued to search for
and/or
seize:

  1. property that constitutes evidence of the
    commission of a crime;

  2. contraband or the fruits of a crime;
  3. property designated or intended for use, or which
    is, or has been, used as the means of committing a crime or;

  4. for a person for whose arrest there is probable
    cause, or whose is unlawfully restrained.

The term “property” as used in the rule includes
documents,
books, papers, and any other tangible objects that a business
may
have on its premises. United States V. New York Telephone
Co.
, 434 U.S. 159 (1977).

In the event that you are confronted with a
“surprise”
federal or state search there are a number of procedures or
steps
that can be taken in order to minimize the disruption to
your
practice and to protect the interests of the provider and
its
employees. Once the law enforcement officers have
presented
themselves on the property to be searched the following should
be
adhered to:

  1. CALL YOUR ATTORNEY. You should immediately request
    of
    the officers conducting the search permission to call
    your
    attorney before the officers proceed with the search. If
    your
    attorney feels that he or she does not have the necessary
    criminal
    law expertise to advise you how to proceed, you should contact
    an
    attorney with that expertise. It is absolutely imperative
    that this be done immediately, even if the officers conducting
    the
    search refuse to delay the search or attempt to persuade you
    to
    delay contacting an attorney.

  2. ASK THE OFFICERS TO PROVIDE YOU WITH A COPY OF
    THE SEARCH WARRANT AND ANY AFFIDAVIT FILED IN SUPPORT OF THE
    WARRANT PRIOR TO THEIR CONDUCTING THE SEARCH.
    Federal Rules
    of Criminal Procedure require that the officers provide you with
    a copy of the search warrant which must specifically describe the
    premises to be searched and the documents or items to be
    seized.
    They are not authorized to search any premises or property not
    specifically described in the warrant. You should always ask
    for
    and obtain a copy of the affidavit filed in support of the
    warrant as well, particularly if the warrant is very broad
    in
    its description of the premises to be searched or the items to be
    searched for.

  3. FIND OUT WHAT CRIME AND WHAT CONDUCT IS UNDER
    INVESTIGATION.
    As the person whose property is being
    searched,
    you have a right to know what crime or offense is being
    investigated and what items are being searched for. If any
    items are seized and removed from the property as a result of
    the search, the Federal Rules of Criminal Procedure require
    that the searching officers make a written inventory of any
    property that they seize. That list is to be prepared in the
    presence of the person from whom the property is to be seized and
    a copy of the inventory should be provided to you.

  4. REQUEST THAT THE OFFICERS EXECUTING THE SEARCH WARRANT
    REFRAIN FROM INTERVIEWING EMPLOYEES UNTIL YOUR ATTORNEY
    ARRIVES
    AND CAN BE PRESENT DURING SAID INTERVIEW.
    Officers often
    use
    the shock of a surprise search to interview unsuspecting
    and
    unprepared employees. You have a right to have counsel
    present
    when any interviews take place. If the officers refuse to
    wait
    until counsel arrives, the employee has the right to refuse to
    be
    questioned and the right to set conditions before
    being
    interviewed.

  5. DESIGNATE ONE PERSON TO SPEAK ON BEHALF OF YOURSELF AND/
    OR
    THE ENTITY BEING SEARCHED.
    It is the better practice
    to
    designate one individual to be the person speaking for you
    and/or
    the entity being searched and to deal with the officers
    conducting
    the search. If more than one person is speaking on behalf of
    you
    and/or the entity being searched, it inevitably results
    in
    contradictory or conflicting statements, confusion
    and
    misstatements. If a prosecution ensues, such contradictions
    and
    misstatements may well be used by the prosecution in such a way
    as
    to imply deliberate falsification.

  6. IMMEDIATELY ADVISE ALL SUPERVISORY PERSONNEL OF THE FACT
    THAT A SEARCH IS BEING CONDUCTED AND HOW THEY SHOULD
    CONDUCT
    THEMSELVES.
    Advise them as follows:

    (a) That a search warrant is being executed by whatever
    law enforcement agency is conducting the same;

    (b) Your understanding of what crime or alleged crime
    is being investigated;

    (c) That the health care provider will furnish
    attorneys to advise all employees with regard to statements
    and
    how to conduct themselves; (d) That all employees have a right to decline to be
    interviewed without an attorney being present;

    (e) That the supervisors should advise each employee
    under their supervision of the information set out in (a) –
    (d)
    above.

  7. SEND HOME ALL NON-ESSENTIAL PERSONNEL, PARTICULARLY
    THOSE PERSONS WORKING IN THE AREAS WHICH ARE TO BE SEARCHED.

    The more individuals that remain at the place of business
    during
    the course of the search, the better the opportunity for the
    searching officers to take employees aside and attempt to
    obtain
    damaging statements or admissions with regard to you or the
    entity being searched. Additionally, the more persons present,
    the greater the confusion that ensues and the greater the
    opportunity for the officers to locate particular documents
    that are being searched for by asking questions of employees.

  8. ASSIGN AN INDIVIDUAL IN EACH SEARCH AREA TO INVENTORY
    AND
    LIST WITH SPECIFICITY ANY AND ALL DOCUMENTS OR ITEMS BEING
    REMOVED.
    Although the Federal Rules require that the
    officers conducting the search prepare and provide a written
    inventory, the inventories prepared by searching officers are
    always sketchy, uninformative, nonspecific and never clearly
    identify what items have been seized. You, or someone on your
    behalf, should make your own inventory in sufficient detail
    to enable you and your attorney to know exactly what has been
    taken.

  9. REQUEST THAT YOU, OR SOMEONE ON YOUR BEHALF, BE ALLOWED
    TO
    COPY ALL DOCUMENTS AND ITEMS THAT ARE BEING SEIZED.
    Once
    items
    have been seized by law enforcement pursuant to a search, it
    will in all likelihood be many months before those documents
    are
    returned, if ever. In the meantime, you will want to
    proceed
    operating your practice and you will find that many of
    the
    documents seized are essential in order to do so. If your
    request
    to make copies of the documents is refused, immediately make
    a
    written record of the time and date of the refusal, the name
    of
    the officer making the refusal, and an itemization of
    the
    documents that you were not allowed to copy. This
    information
    will be crucial to any defense effort to obtain the return of
    the
    seized documents or copies of those documents.

  10. COOPERATE WITH THE OFFICERS IN THE DOCUMENT
    PRODUCTION.

    Under no circumstances should you try to conceal or
    destroy
    documents. If you have established a policy whereby documents
    are
    regularly destroyed in the course of your business, cease
    that
    practice. Do not erase anything from the company’s computers.
    Do
    not make any changes by interlineation or otherwise in
    documents.
    Your failure to follow this practice could result in the filing
    of
    felony charges against you for obstruction of justice.

  11. DEBRIEF ANY AND ALL EMPLOYEES WHO HAVE BEEN INTERVIEWED
    OR
    QUESTIONED AS SOON AS POSSIBLE.
    Immediately following
    the
    conclusion of the search, you and/or your attorney should
    debrief
    any employees who were interviewed by the searching officers and
    a
    written record should be made, even if your attorney attended
    the
    interview. The longer the delay between the time of the
    interview
    and the debriefing, the less accurate and complete will be
    the
    information obtained, and it needs to be as accurate and
    complete as possible as it will be invaluable to the preparation of
    a
    defense should charges result from the search.

  12. MAKE A RECORD OF EVERYTHING SAID BY ANY OFFICER INVOLVED
    IN
    THE INVESTIGATION AND SEARCH.
    If possible, use a tape
    recorder
    or make written notes of each and every statement made by any
    of
    the investigating officers. Be sure when making the notes
    that
    you have properly identified which officer made which
    statement.
    These notes will be invaluable to your attorney as he attempts
    to
    head off the filing of charges or to prepare to defend
    against
    charges.

  13. VIDEO TAPE OR PHOTOGRAPH THE SEARCH AND THE OFFICERS
    CONDUCTING THE SEARCH.
    Photos or video tape of items
    and documents seized are an extremely helpful addition to any
    written inventory that you have made with regard to the items
    seized. Additionally, video or photographic evidence of the
    conduct
    of the officers conducting the search may well be helpful
    at a suppression hearing should your attorney be attempting to
    suppress the search for the reason that it violated your privacy
    rights or the warrant’s limited scope.

  14. MAKE A LIST OF DOCUMENTS OR EQUIPMENT WHICH IS ESSENTIAL
    FOR
    YOUR TO HAVE IN ORDER TO CONDUCT AN ONGOING BUSINESS.

    This
    list should be compiled as soon as possible following
    the
    conclusion of the search and you should give a copy to
    your
    attorney so that he can make application to the court for
    return
    of items such as computers, computer tapes, computer disks,
    and
    other items which are not readily copied or duplicated.

  15. LIST ITEMS AND DOCUMENTS SEIZED BY THE OFFICERS WHICH
    WERE NOT PARTICULARLY DESCRIBED IN THE WARRANT OR AFFIDAVIT.

    It is a common occurrence for searches which are limited in
    scope
    as to the items that are to be searched for and seized to
    become broader in scope in the course of the search with the
    officers seizing items outside the scope of the validly issued
    warrant. If items that are not identified in the search
    warrant itself are seized, those items should be documented with
    as
    much detail and specificity as possible so that your
    attorney
    can seek to quash the seizure of such items.

  16. MAKE OR OBTAIN A BACKUP DISK FOR ALL COMPUTER
    SOFTWARE.

    Request that the officers conducting the search allow you to
    make
    a copy of any computer software that is to be seized before it
    is
    removed from the premises. If the request is refused, you
    should
    document the refusal noting the time and date of the refusal,
    the
    name of the officer making the refusal, and what items you
    were
    not allowed to make a copy of.

  17. BE POLITE. REMAIN CALM AND COOPERATIVE. Do
    not
    verbally or physically make any attempt to prevent or hinder
    the
    officers in the conduct of the search. At the same time, do
    not
    volunteer information. Do not make any statements or
    allow
    yourself or your employees to be questioned without your
    attorney
    being present. Indicate to the officers that you do wish
    to
    cooperate with them in the search. If you are polite, calm
    and
    cooperative, the officers are more likely to honor any
    requests
    that you make of them with regard to inventories of the
    property, the making or nonmaking of statements, etc. Be courteous
    and
    professional at all times.

  18. DO NOT MAKE STATEMENTS TO THE PRESS. If you
    receive
    calls or contacts from members of the press regarding the
    search,
    you should refuse to make any comment whatsoever. Do not try
    and
    explain what is happening or the reason that it is happening,
    and
    do not attempt to refute any allegations of wrongdoing.
    You
    should direct all requests for comments to your attorney.
    You
    should also advise all supervisors and employees to do the
    same.
    If a press release is going to be made, it should be done
    after
    you and your attorney have had time to discuss the matter
    and
    carefully craft whatever response is to be made.

Being confronted with a “surprise” federal investigation can be
a
very disturbing and frightening experience, yet the fact
remains that these type of medical fraud investigations
are
increasing. Anticipatory training and education of employees
and
management can neutralize the element of surprise and enhance
the
provider’s ability to safeguard its rights and the rights of
its
employees while at the same time enabling it to better
defend
against whatever criminal charges are brought against it.

B. Grand Jury Appearance

The Fifth Amendment to the United States Constitution provides
in
part that:

“No person shall be held to answer for a capital, or
otherwise infamous crime, unless on a presentment or
indictment of a grand jury. . “

and Rule 6 of the Federal Rules of Criminal Procedure sets
forth
the method by which the requirements of the Fifth Amendment
are to
be implemented. Paragraph (d) of Rule 6 deals with who
may be
present in the grand jury room and provides:

“Who May Be Present. Attorneys for the government,
the witness under examination, interpreters when needed
and, for the purpose of taking the evidence, a
stenographer or operator of a recording device may be
present while the grand jury is in session, but no
person
other than the jurors may be present while the grand
jury
is deliberating or voting.”

It is the grand jury, which, after considering
evidence
offered by the government, determines what individual or
company
should be charged with a criminal offense and further, what
crime
should be charged. The evidence upon which the grand jury
makes
its ultimate decision is only that evidence which the
prosecutor
chooses to share with the grand jury. The defendant or
potential
defendant is not allowed to be present nor to have his
attorney
present during the proceedings, is not allowed to cross
examine
the government’s witnesses, is not allowed to present evidence
on
his or her own behalf and is not allowed to address the members
of
the grand jury or argue the case.

Furthermore, although an individual or corporation may be
the
target of the investigation and may be subpoenaed to
testify
before the grand jury, that individual or corporation is
not
entitled to have an attorney present in the grand jury room
during
questioning.

Some people harbor romantic notions of the grand jury as a
fair,
independent tribunal. The sad fact is, however, that the modern grand jury is firmly under the government’s control.
The
prosecutor decides what casesto present, who to call as
witnesses, who should receive immunity and who should be targeted
for prosecution. The prosecutor draws up the charge and
presents
it to the grand jury, which routinely votes to return an
indictment. If the prosecutor wants an indictment of a particular
individual or corporation for a particular charge, he can
generally manipulate the evidence and the grand jury to reach
his
goal.

In such a world, every person subpoenaed to appear before a
grand
jury – without exception – needs competent representation. That
representation has two aspects:

  1. protecting the witness against later prosecution on
    the basis of his or her testimony; and

  2. ensuring that the witness’s rights and privileges
    are respected throughout the grand jury experience.

When an officer or employee of a health care
provider
receives a grand jury subpoena, it should first be determined
what
the government wants. A grand jury subpoena may only call
for
testimony, or it may require the production of
specified
documents.

Documentary subpoenas fall into two categories: those that
require testimony from the witness and those that do not.
Where
the government only wants the documents, the subpoena will
call
for their production before the grand jury on a particular
date
and will further state that furnishing them to a
particular government agency will make an actual appearance
unnecessary.
When the government also has questions for the witness about
the
documents, the subpoena will require the witness to testify and
to
bring the documents with him.

While documentary subpoenas can be important in the
overall
scheme of a potential prosecution, the more troublesome event
in
most grand jury representations is dealing with the
testimonial
subpoena. When you are confronted with a testimonial
subpoena,
the first step is a thorough interview of the witness/provider
by
the attorney. The attorney must learn as much as possible
about
the provider’s view and knowledge of the matter being
investigated
as soon as possible. The provider should have exercised
his
rights and decline to make any statement whatsoever. If
the
provider or any of his or her associates or employees have
made
statements that information should be immediately provided to
your
counsel in as much detail as possible. If a written or
recorded
statement has been given, you should request that you be
provided
with a copy and you should provide your attorney with a copy.

Furthermore, one interview area merits special emphasis. The
government may attempt to interview the provider long before
any
charges are considered or filed, such as at the time they served
a
search warrant, seized records or served a grand jury
subpoena.
The agents that normally serve grand jury subpoenas are often
the
same agents (FBI or otherwise) who are conducting the
criminal
investigation itself and when they serve the subpoena they have
a
habit and practice of being very pleasant while they have a
nice chat with the provider or its employees about that
person’s
knowledge of the event that is under investigation while
that
individual is unwary, unsettled, frightened and
unrepresented.
This is not 3ust civility; it is a calculated attempt by
the
investigator to obtain useful statements and damaging
admissions.
While the witness may think the discussions were
insignificant,
they are not. Your attorney must know everything that was
said.
Statements made to government representatives in a criminal
case
never lack significance.

Once you have provided all the information that you can to
your
attorney, it is then time for your attorney to talk to the
prosecutor to see what he can find out regarding the focus of
the
investigation and what the government’s interest is in
the
provider that you represent. Only after it is determined what
the
government’s interest is in the provider can the
attorney
intelligently determine how to proceed and what to advise
the
provider. Is the provider a “target” of the investigation,
a
“subject” of the investigation, or just a “witness.” These
terms
pretty much mean just what they seem to mean. A “target”
is
someone the government intends to indict using its influence
over
the grand jury to do so. A prosecutor knows that a
person
identified as a target, if actually required to appear before
the
grand jury, will in most, if not all cases, invoke his or
her
privilege against self-incrimination. Since the government
knows
it will not get testimony from such a witness, his or her
grand
jury appearance will most likely be excused if
requested. ”Targets” do not talk their way out of indictments and they
should
not testify under any circumstances.

What if the prosecutor says the provider is not a target
but
is a “subject” of the investigation? The U.S. Attorney’s
Manual
and other Justice Department statements draw a distinction
which
is mostly technical, between “targets” and “subjects.” Whereas
a
“target” is someone the government expects to indict, a
“subject”
is a person the prosecutor thinks may be indicted, but
against
whom sufficient evidence may not exist at that time.

Since the decision to indict a “subject” has not been
finally
made, there is a greater chance that a “subject” will actually
be
called before the grand jury. In these situations where
the
provider is deemed to be a “subject”, that provider must
consider
himself as if he is a “target” and conduct himself
accordingly.
If the only thing between the provider and an indictment is
more
evidence, the last thing the provider wants to do is to
provide
that evidence. A “subject” who testifies can rarely, if ever,
do
anything but harm himself, by creating a trail of testimony
that
may return to haunt him or her, possibly in the form of a
perjury
or obstruction of justice indictment.

The normal practice for an attorney representing a
“target”
or a “subject” is to advise the prosecutor that the witness
does
not wish to appear and if an appearance is required it is his
or
her intention to invoke the Fifth Amendment privilege against
self-incrimination. If the appearance is not excused, then
the
witness, with his attorney’s guidance, should assert
the
privilege.

One practical consideration for an attorney to keep in
mind
here, is that if his client is the health care provider who
may
also be a “target” of the investigation and at the same time he
is
requested by that same provider to represent one or more of
the
provider’s officers who have been subpoenaed to testify before
the
grand jury the attorney may be in an irreconcilable conflict
since
the government may offer one immunity in return for
testimony
against the other. Thus, if it is anticipated that the
provider
is or may be a criminal target or defendant, the attorney for
that
provider should decline to also represent a potential
witness,
e.g., the chief financial officer for the provider.

In representing a provider, the most important way for
an
attorney to protect that client is to insist on immunity as
a
price for his or her testimony. For me, the rule is absolute

Before allowing a witness/provider to testify, I insist that he
or
she be granted immunity or a letter of non-prosecution. If
the
government is unwilling to do that, then I advise the
witness/
provider to invoke the Fifth Amendment. While law abiding
people
believe that their innocence will protect them, this confidence
is
unjustified. Even innocent people often appear guilty to
the
government. Prosecutors also make mistakes, and most
witnesses
aren’t sufficiently detached or informed to decide
whether
particular conduct on their part has crossed the line
into
criminality.

If you get immunity, what form should it take? The federal
immunity statute, 18 U.S.C. S 6002, confers only “use plus
fruits” immunity and not the broader “transactional” immunity
recognized
by many of the states. See Hastiqar V. United
States
,
406 U.S. 441 (1972). Use immunity, which leaves a witness
subject to prosecution for the matter under investigation

may seem inadequate. In practice, however, the
government rarely prosecutes those to whom it extends use
immunity. This is because, where it does, the prosecution
bears the substantial burden of showing that the case is
untainted by prior immunized testimony.

Should such immunity be formal, or will informal
letter
immunity suffice? Formal immunity has the advantage of
clarity;
its protection is exactly that defined in the immunity
statute.
However, if it tracks the statute, informal letter immunity
is
usually satisfactory. An undertaking by letter not to use
the
testimony or its fruits will bind the prosecution. However,
if
the client/provider is exposed to prosecution in other
federal
districts or jurisdictions – which would not be bound by
letter
immunity – the prudent course is to insist on formal
statutory
immunity.

Once a decision has been made that a client/provider will
appear and testify before the grand jury, he or she must
be
thoroughly prepared and that preparation will differ
from
preparing a witness for deposition or trial. The reason for
the
difference is that the provider/witness’ attorney, will not
be
able to attend the grand jury proceeding. This places a
greater
burden on the witness, and thus, a more careful and
detailed preparation is required. Areas of known inquiry and
anticipated
questions should be fully discussed. The witness should
be
repeatedly and forcefully reminded to:

  1. answer simply and directly;
  2. answer only the question asked without any
    embellishment or speculation;

  3. make sure the question is fully and completely
    understood before answering;

  4. if he or she doesn’t know the answer don’t guess;
  5. don’t volunteer information.

Since the witness/provider’s attorney cannot be in the
grand
jury room during the testimony, it is absolutely crucial that
each
of these caveats is drilled into and understood by the
witness/
provider before his or her grand jury appearance.

While the attorney may not be in the grand jury room
during
the testimony, he or she may be present just outside the room
and
the client should be aware of this. If, during the testimony,
the
provider/witness is uncertain about the meaning or propriety of
a
question, what the answer should be, whether or not it should
be
answered or whether or not the Fifth Amendment privilege should
be
asserted, the witness has the right to request that he or she
be
excused to consult with counsel, and should do so.
Prosecutors
don’t like this, but it must be done if the provider/witness is
to
be properly represented, such a request is almost always granted.

Additionally, in preparation of the witness for the
grand
jury appearance, the need to be absolutely 100% truthful must
be emphasized. Immunity does not protect against a prosecution
for
perjury.

Despite all the preappearance work, there may well
be
instances where the Fifth Amendment privilege must be
asserted
before the grand jury. A witness who might face this
necessity
should be instructed on and understand when and how to assert
the
privilege. As a general rule, absent immunity, the
privilege
should be claimed in response to all questions other than
those
relating to the witness’ name, age and address. The
witness
should not attempt to pick and choose among the questions.
This
is a disastrous approach that inevitably leads to waiver
problems
and can result in the complete loss of the privilege with
no
compensating immunity. If any doubt exists, the witness
should
request an opportunity to consult with counsel about invoking
the
privilege and do so after every question if need be.

IV

CONCLUSION

Recent legislation has given both federal and state
agencies
a tremendous amount of power in dealing with fraud in the health
care industry. The potential liability for a health care provider
under these statutes is staggering. Further, the ability of
the
government to exclude a provider from federal programs
based
simply on an indictment or other evidence means that the
provider
need not even be found guilty to face ruinous damages.

Because of the new federal focus on Health Care fraud, it
is
imperative that health care providers, their officers
and
employees and counsel representing health care providers be
aware
of the potential exposure to a variety of criminal charges and
be
prepared to respond or react carefully and appropriately when
that
exposure is manifested through either the service of a
search
warrant or a grand jury subpoena. I hope that this
presentation
has aided you to some degree in this regard.

PRESENTED BY:

Mark L. Bennett, Jr.
BENNETT & DILLON, L.L.P.
1605 SW 37th Street
Topeka, KS 66611
(913-267-5063)
(913-267-2652 – Fax)

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