Tennessee Federal Criminal Lawyer Blog

A conviction for healthcare fraud under 18 U.S.C. Section 1347 can carry sentences that range from no jail time to lifetime imprisonment. This vast range of punishment can leave clients (and healthcare fraud defense lawyers) with tremendous uncertainty regarding the potential outcomes of healthcare fraud case. To complicate matters more, the United States Federal Sentencing Guidelines (specifically Section 2B1.1) allow for a similar range of punishment.

Two recent sentences show the potentially devastating sentences which can be given for healthcare fraud convictions:

1. Last week, a federal court judge handed down a 30-year sentence for a Kansas doctor and a 33-year sentence for his wife after a federal district court jury found the couple guilty of unlawful prescription of drugs, healthcare fraud and money-laundering in a scheme that prosecutors said led to 68 overdose deaths.

2. The Eleventh Circuit Court of Appeals recently upheld a 30-year sentence for a Miami doctor convicted of healthcare fraud, even though the Sentencing Guidelines had provided a maximum punishment of 22 years. Retired U.S. Supreme Court Justice Sandra Day O'Connor, who was a guest judge for the Eleventh Circuit, wrote, " A doctor should be punished more severely than other participants because the doctor is breaching a position of trust and an ethical obligation to put the patient's interest first."

These two cases are definitely at the "high end" of sentences that are handed out for healthcare fraud, but they illustrate the risk that clients encounter when facing healthcare fraud charges. As I indicated in a prior blog post called Healthcare Fraud Investigations to Increase Due to Affordable Care Act, the Government is dedicating more resources to pursue medical providers for healthcare fraud violations, and it appears that they are pursuing maximum possible punishment, both criminally and civilly, for alleged offenders.

Additional Resources
Pill Mill Doctor Gets 30-Year Sentence, UPI.com, October 20, 2010
Ex-high court judge: 30-year term is fair, Miami Herald (Online), October 21, 2010

Healthcare fraud attorneys spend much of their time dealing with investigations and pre-charge or pre-indictment activities of violation of 18 U.S.C. Section 1347, which says:

Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice-- (1) to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.

In an article written by Bob Gatty with Modern Medicine, he writes about the statements of Daniel R. Levinson, inspector general at the Department of Health and Human Services, who claims that "the new Affordable Care Act (ACA) provides additional resources and authority designed to crush healthcare fraud schemes that contribute to the skyrocketing cost of healthcare in the United States. Gatty writes that in the last year, the Office of Inspector General has opened more than 1,300 healthcare fraud investigations and obtained more than 500 convictions, resulting in nearly $3 billion in expected civil and criminal recoveries. While these numbers are staggering, those in the medical field should anticipate increased investigation, litigation, and financial and criminal penalties.

Medical providers need to a) be vigilant in complying with all federal regulations, especially those providers who provide Medicare / Medicaid services, and b) employ the services of an experienced healthcare criminal defense lawyer immediately upon receipt of a summons or upon learning of a potential investigation. Oftentimes, clients mistakenly wait until a government investigation is well under way before beginning the process of obtaining a healthcare attorney to prepare his/her defense.

Criminal tax defense lawyers are often hit with questions about penalties for clients failing to file tax returns. 26 U.S.C. Section 7203 provides generally that a failure to file a tax return is a misdemeanor, which is punishable by a fine of up to $25,000 for individuals and up to $100,000 for corporations.

However, taxpayers (and attorneys) should be aware that a misdemeanor for failure to file tax returns can quickly grow in to a felony charge. The ultimate issue to determine whether a failure to file case turns into a felony revolves around the concept of "willfulness," which is addressed statutorily in 26 U.S.C. Section 7201.

In the case of United States v. Garland Miller, the Fifth Circuit provided a nice overview on criminal tax law as it relates to willfulness:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution. 26 U.S.C. § 7201. The elements of a violation of 26 U.S.C. § 7201 are: (1) existence of a tax deficiency; (2) an affirmative act constituting an evasion or an attempted evasion of the tax; and (3) willfulness. United States v. Nolen, 472 F.3d 362, 377 (5th Cir. 2006).

Affirmative acts that satisfy the second element may include keeping double sets of books, concealment of assets, or "any conduct, the likely effect of which would be to mislead or to conceal." Spies v. United States, 317 U.S. 492, 499 (1943); see also United States v. Robinson, 974 F.2d 575, 577 (5th Cir. 1992).

To prove willfulness, the third element, the government must show that: (1) the law imposed a duty on the defendant; (2) the defendant knew of that duty; and (3) the defendant voluntarily and intentionally violated that duty. Cheek v. United States, 498 U.S. 192, 201 (1990); United States v. Simkanin, 420 F.3d 397, 404 (5th Cir. 2005). The evidence at trial sufficiently demonstrates Miller's evasion. It is undisputed that he failed to file tax returns for tax years 2000 and 2001, as charged in the indictment. Further, Miller acted affirmatively when he converted payments made to the clinic to cash, money orders, and cashier's checks. Witnesses testified that Miller's practice of converting payments made to the clinic made it difficult for the IRS to determine his income. These affirmative acts had the "likely effect of mislead[ing]" the IRS, and precluded the agency from effectively assessing his tax liability. Spies, 317 U.S. at 399; Robinson, 974 F.2d at 577. Moreover, Wolff testified that the Medical Manager software on Miller's clinic's computers included double sets of billing records.

Non-filers and non-payers should pay special attention to the language that I placed in bold in the text from the Miller case. The Government has a lot of discretion in pushing for a felony tax case by the simple language of "any conduct, the likely effect of which would be to mislead or to conceal." Such conduct could include failure to file a tax return.

Additional Resources
United States v. Garland Miller, Fifth Circuit Court of Appeals, November 20, 2009
26 U.S.C. Section 7201
26 U.S.C. Section 7203

Criminal tax attorneys often spend most of their time defending clients from the federal government. However, many state governments, such as my home state of Tennessee, also have laws designed to address those persons who fail to pay sales or use taxes.

The Tennessee Department of Revenue defines "Sales Tax Evasion" simply as "knowingly and willfully failing to remit sales tax collected or failing to pay sales or use tax when due."

Tennessee Code Annotated Section 67-1-1440(g) adds a bit more:

It is a Class E felony for any person willfully to attempt in any manner to evade or defeat any tax due the state of Tennessee; provided, that if use tax of less than five hundred dollars ($500) is involved, the offense is a Class A misdemeanor. Each act done in violation of this subsection (g) is a separate offense.

Additional Resources
Tennessee Dept. of Revenue, Sales Tax Evasion
Tennessee Code Annotated Section 67-1-1440

As a Tennessee tax evasion attorney, I'm always interested when cases hit close to home. Tennessee residents Edward Eastwood and his Russian mail-order bride Elina Gromova-Eastwood were sentenced this week in Greeneville Federal Court for their convictions in a decade-long plot to commit tax evasion. U.S. District Judge Ronnie Greer sentenced Mr. Eastwood to a 97-month prison sentence and Mrs. Eastwood to a 60-month sentence. Mrs. Eastwood's daughter, Violetta Gromova, pleaded guilty earlier this year to committing perjury at the direction of her parents and will be sentenced at a later date.

To make matters worse, Elina Gromova-Eastwood confessed earlier this month to the location of over $200,000 in gold and silver coins, which had been hid in the Cherokee National Forest. These hidden assets have now been retrieved and are property of the United States.

While I personally enjoy learning of the (often frivolous) arguments from my clients about the reasons they believe they are not required to pay their taxes, Judge Greer apparently was not as enthused to hear of the Eastwood's position on failing to pay their taxes. Judge Greer stated:

You accept the services taxpayers pay for. You drive on the roads taxpayers pay for. You use the institutions taxpayers pay for, but, on the other hand, you take the position...the government has no right to collect income taxes from you.

In a move that usually ends with horrible results, the Eastwoods decided to represent themselves at trial. As the old saying goes, the person who represents himself, represents a fool.

Additional Resources
$200K in gold, silver coins linked to tax evader, Knoxnews.com, October 12, 2010

Being a federal criminal defense attorney, I often hear people complain about how criminal defense attorneys will have their clients escape responsibility based on "technicalities" or "loopholes." If you are such a person, you will not be pleased with the Sixth Circuit Court of Appeals decision in Ayers v. Hudson, which was decided on October 5, 2010.

Ohio resident David Ayers was convicted of murdering 76-year-old Dorothy Brown by striking her repeatedly with a small, black iron. Ayers stole $700 from the victim. Ayers' conviction was based in part on the testimony of a jailhouse informant, who claimed that Ayers had confessed his role in the murder. Ayers appealed his conviction on the basis that his Sixth Amendment right to counsel was violated by allowing the jailhouse informant to testify against him.

The Sixth Circuit summarizes this area of the Sixth Amendment:

The Sixth Amendment guarantees a criminal defendant the right "to have the Assistance of Counsel for his defence." U.S. Const. amend. VI. "This right has been
accorded, . . . 'not for its own sake, but because of the effect it has on the ability of the
accused to receive a fair trial.'" Mickens v. Taylor, 535 U.S. 162, 166 (2002) (quoting United States v. Cronic, 466 U.S. 648, 658 (1984)). Thus, "once the adversary judicial process has been initiated, the Sixth Amendment guarantees a defendant the right to have counsel present at all 'critical' stages of the criminal proceedings." Montejo v. Louisiana, 129 S. Ct. 2079, 2085 (2009) (citations omitted). "Interrogation by the State is such a stage." Id. at 2085 (citing Massiah v. United States, 377 U.S. 201, 204-05 (1964); Henry, 447 U.S. at 274). See also Cronic, 466 U.S. at 659 n.25 ("The [Supreme] Court has uniformly found constitutional error without any showing of prejudice when counsel was either totally absent, or prevented from assisting the accused during a critical stage of the proceeding.") (emphasis added).

The Sixth Circuit ultimately decided that the Government's use of the jailhouse informant in Ayers' case violated the Sixth Amendment, and they ordered that Ayers receive a new trial or be released. The Court's reasoning behind its decision rested greatly on the fact that the Court viewed the jailhouse informant as a government agent once the informant had spoken to the police and returned to Ayers for additional questioning.

Additional Resources
David Ayers v. Stuart Hudson, Sixth Circuit Court of Appeals, October 5, 2010