The Wall Street Journal recently featured the story of Kenneth Kassab, an individual who, almost as an afterthought, withdrew his plea of guilty to federal explosives charges, and ended up being acquitted by a jury. Gary Fields and John Emshwiller, Federal Guilty Pleas Soar as Bargains Trump Trial, Wall Street Journal, September 24, 2012, A1. The article zeroed in on the real-world peril of overwhelming sentencing consequences that individuals charged with federal crimes face, highlighting the fact that even those who may believe in their innocence, plead guilty as a way of choosing the lesser of two evils.
Mr. Kassab was a handy man at a local hotel in Sault Ste. Marie in Michigan’s Upper Peninsula. In the course of his duties, he was asked by the hotel owner, John Lechner, to move several dozen 50 pound bags that he believed were fertilizer. The problem was that Mr. Lechner was under investigation for making statements about becoming a mercenary if the government ever failed. The bags actually contained ammonium nitrate fuel (ANFO) , the same compound used in the bombing of the Alfred P. Murrah Building in Oklahoma City in 1995.
Mr. Kassab had maintained his innocence, believing he had done nothing wrong. Nonetheless, after discussing the potential sentence that he was facing, the complicating factors that included a prior criminal history, as well as the fact that he would be tried alongside Lechner, he decided to enter a plea of guilty. It was only after the Court held a bond revocation hearing for violation of the conditions of his pretrial release, that he, without prior planning or warning to his counsel, declined the magistrate judge’s request that he reaffirm his prior guilty plea. After a jury trial, the defense of which had to be prepared hastily (the trial was four days away when he changed his plea), he was acquitted of all charges following 2 hours of deliberation. Read More
Marc S. Raspanti, Meredith S. Auten and Christopher R. Hall, along with Washington, D.C. attorney Janet Goldstein, and Assistant U.S. Attorney Jeffrey W. Dickstein, have been appointed to serve as Co-Chairs of the ABA Qui Tam Substantive Committee of the Criminal Justice Section’s White Collar Crime Committee. They will serve a two-year term.
The Qui Tam Substantive Committee focuses its members on the many areas affected by the False Claims Act and its unique qui tam enforcement provisions. It offers training and publications related to important case decisions and settlements; FCA enforcement initiatives in various industries; and defense and plaintiff strategies in FCA cases.
Marc S. Raspanti is a name partner of Pietragallo Gordon Alfano Bosick & Raspanti, LLP. He practices in the areas of White Collar Criminal Defense; Federal and State Qui Tam Litigation; Criminal, Civil and Administrative Health Care Fraud Litigation; and Complex Commercial Litigation. Mr. Raspanti is the founder of the firm’s national Affirmative Qui Tam practice group.
Christopher R. Hall is a partner in the Philadelphia office of Saul Ewing LLP and serves as Chair of the firm’s White Collar and Government Enforcement Practice. He assists clients during internal investigations, government criminal investigations, government civil enforcement actions, and related civil proceedings such as False Claims Act and securities fraud proceedings.
Meredith S. Auten is a partner in the Philadelphia office of Morgan Lewis and is a member of the White Collar Litigation and Government Investigations Practice. Ms. Auten concentrates her practice on the representation of corporations and individuals in all aspects of white collar litigation. A significant portion of her practice involves defending Civil False Claims Act/qui tam actions.
Janet L. Goldstein is a named partner in the Washington, D.C. law firm Vogel, Slade & Goldstein, LLP. For over 20 years, Ms. Goldstein has represented whistleblowers in major procurement, health care, and financial fraud cases under the qui tam provisions of the False Claims Act and related wrongful termination lawsuits. Read More
Background Facts of Case
Claimant sustained a foot injury at work on August 12, 2009. Claimant’s regular job at the employer was confined to being a pallet jack driver. He was trained regarding this position and the operation of the pallet jack, he was tested concerning the operational aspects of the job, and he was made aware of safety concerns pertaining to that position as well. However, on August 12, 2009, he was driving a different piece of equipment at work, a forklift, that ran into a pole. The claimant’s foot had been sticking out of the forklift and was crushed upon impact.
It turns out that on the day of the injury, before the end of his shift, claimant jumped on the forklift and drove it around for a while before driving it to the punch-out area. He stated that he drove the forklift because it was “fun to drive.” He said that sometimes he would spontaneously operate a forklift at work. Certification and authorization to operate the forklift, though, was required, and claimant was neither certified nor authorized. Claimant knew unauthorized personnel were not permitted to operate the forklift. Claimant testified that his supervisor saw him drive the forklift and never told him that he was prohibited from operating it. Claimant asserted that it was a common practice for employees to drive the forklifts to the punch-out area and that supervisors said nothing about it.
Claimant’s supervisor testified, though, that claimant was not permitted to use the forklift, was not allowed to use it if he was non-certified to drive it, and that claimant was not certified. The supervisor testified that claimant was told not to be operating equipment for which he was non-certified. He said that he did not see claimant driving the forklift on August 12, 2009. Read More
The U.S. Court of Appeals for the Third Circuit recently affirmed the denial of a criminal defendant’s claim for interest on an excess payment of restitution under the Civil Asset Forfeiture Reform Act (CAFRA), 28 U.S.C. §2465. U.S. v. Craig, No. 11-1697, slip op. (3rd Cir., September 17, 2012).
Ryan James Craig was convicted on charges of wire fraud and failure to appear at trial in the U.S. District Court for the Middle District of Pennsylvania. His sentence included an order to pay $12,411 in restitution and a $300.00 special assessment, which the government sought to satisfy from funds ($16,342) seized in the case.
While Craig acknowledged that the previously seized funds could be used for that purpose, he filed a motion for the return of the remaining $3,631. He ultimately prevailed on the request when an earlier appeal the Third Circuit reversed the district’s order that the remaining fund be applied to an unsatisfied restitution order in the District of Rhode Island. When the matter was then returned to the Middle District, Craig filed a motion requesting that he receive interest on the amount to be returned.
On appeal of the district court’s denial of his motion, Craig argued that the United States should be liable for interest under CAFRA because he prevailed in his challenge to the government’s attempt to divert the funds to satisfy the Rhode Island restitution order. The Third Circuit rejected Craig’s argument reasoning that Craig had obtained neither a judgment on the merits, nor any relief specific to the forfeiture action.
The court noted that in order to prevail on his claim, Craig must have established that he substantially prevailed in a civil proceeding to forfeit property. 28 U.S.C. §2465(b)(1). It found that the criminal restitution order issued by the district court at the government’s request did not qualify as a civil proceeding to forfeit property, reasoning that Craig’s argument could not be reconciled with the fact that an order of restitution is a component of a criminal sentence, citing U.S. Read More
Pam G. Cochenour will make a presentation on HR Law at the 2012 Pittsburgh Legal Administrators Association Education Conference held in Pittsburgh, PA.
Related Information:
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On September 13, 2012, Laura Pendergest-Holt, the former Chief Investment Officer of Houston-based Stanford Financial Group, was sentenced in U.S. District Court for the Southern District of Texas to 36 months in prison for her role in obstructing the SEC’s investigation of the Stanford International Bank (SIB), the Antiguan off-shore bank owned by convicted financier Robert Allen Stanford. U.S. v. Pendergest-Holt, No. H-09-342 (S.D. Tx.) Earlier this year, Mr. Stanford was sentenced to 110 years in prison after his conviction on charges of financial fraud relating to his orchestration of a $7 billion ponzi scheme.
The obstruction of justice charge was based on testimony that Pendergest-Holt provided to the SEC in its inquiry regarding SIB’s investment portfolio. Pendergest-Holt acknowledged that her eventual appearance and sworn testimony before the SEC was a stall tactic designed to frustrate the SEC’s efforts to obtain important information about SIB’s investment portfolio. Read More
On September 10, 2012, the United States filed a strong Statement of Interest in one of the first and largest suits involving fraud against the Medicare Part D Prescription Drug program (“Part D”), U.S. ex rel. Spay v. CVS-Caremark Corp, 2:09-cv-04672-RB (E.D. Pa) (Doc. No. 73). This statement, which describes the position of the U.S. with regard to the application of the federal False Claims Act (“FCA”) to the Part D program, will have major implications not only for the outcome of this case and future whistleblower cases, but also for the integrity of the Part D program as a whole.
Background of Case and Part D Program
The Medicare Part D program was established in 2006 to subsidize the cost of prescription drugs for eligible Medicare beneficiaries. The Part D program relies on private contractors called Part D Sponsors to provide prescription drugs to Medicare beneficiaries and then submit claims to the Center for Medicare and Medicaid Services (“CMS”) for the cost of these services. CMS pays the Part D Sponsors based on their estimated cost of providing Part D benefits to beneficiaries in a particular area and then reconciles the Part D Sponsor’s actual cost of providing Part D Services at the end of the year. It accomplishes this reconciliation by requiring the Part D Sponsor to submit actual cost information to CMS in the form of Prescription Drug Event (“PDE”) data. PDE data is electronic data that is submitted to CMS for each prescription that is filled for a Part D Sponsor’s members. CMS requires the submitting Part D Sponsor or contracting entity to certify to the accuracy, completeness, and truthfulness of the PDE data it submits.
This case arose from a qui tam suit filed under the FCA by Anthony Spay, a former pharmacist whose company was hired to audit the Part D claims processed by Caremark on behalf of Medical Card System (“MCS”), a Puerto Rican health insurance company. Read More
On July 31, 2012, the U.S. Court of Appeals for the Fifth Circuit rendered an opinion in a case of first impression. The Court held that a federal employee, even one whose job it is to investigate fraud, is a “person” under the False Claims Act and may maintain a qui tam action. While other Circuits have found limited circumstances in which government employees may maintain qui tam actions under the False Claims Act, the fifth Circuit has broadened the opportunities for public servants.
Factual Background
U.S. ex rel. Little and Arnold v. Shell Exploration & Prod., et al., ____ F.3d ____, 2012 WL 3089777 (5th Cir. 2012) was initiated by whistleblowers Randall Little and Joel Arnold in early 2006. At the time of filing, Little and Arnold were Senior Auditor and Supervisory Auditor for the Minerals Management Service (“MMS”), respectively. Little and Arnold alleged that Shell defrauded the U.S. Department of the Interior of at least $19 million by taking unauthorized deductions for expenses to gather and store oil on twelve offshore drilling platforms. MMS is charged with uncovering theft and fraud in royalty programs, and Little and Arnold do not dispute that their allegations against Shell came to light in the course of their official duties. Little and Arnold reported their allegations to their supervisor, as required by their jobs. These allegations were reported prior to the filing of their qui tam action, and neither MMS nor any other federal agency acted on the information. The government declined to intervene in this case, and Little and Arnold proceeded on their own.
Analysis By The Court
The District Court granted summary judgment in favor of Shell, finding that the suit was prohibited by two distinct provisions of the False Claims Act. First, the Court found that Little and Arnold were not permitted to bring suit under 31 U.S.C. Read More
Recently, in WEC Carolina Energy Solutions LLC, v. Willie Miller, et al., the U.S. Court of Appeals for the Fourth Circuit held that an employee’s misappropriation of his employer’s trade secrets is not a violation of the federal Computer Fraud and Abuse Act (“CFAA”). By adopting a narrow interpretation of the CFAA, the Court contributed to a deepening split among the federal appellate courts regarding the proper construction of the Act.
The CFAA was passed by Congress in 1986 to address computer crime. Today, it remains principally a criminal statute designed to combat computer hacking, although it does allow injured private parties to sue for compensatory damages and injunctive relief.
The WEC case involved a civil action brought by WEC against its former employee and Project Director, Mike Miller. When Miller worked at WEC, he was authorized to access confidential and trade secret documents stored on the company’s computer servers, including WEC’s price terms and technical capabilities. According to WEC’s corporate policies, however, Miller was prohibited from downloading that confidential information to his personal computer or otherwise using the information without authorization.
WEC alleged that, before resigning from WEC, Miller downloaded confidential documents to a personal computer. WEC further claimed that Miller later used that confidential information when making a presentation to a potential WEC customer on behalf of a competitor. After that customer awarded two projects to the competitor, WEC filed suit against Miller, asserting violations of several state statutes as well as the CFAA.
After the trial court dismissed WEC’s CFAA claim, WEC appealed to the Fourth Circuit, which affirmed. The Fourth Circuit first noted that while the CFAA permits a private party to bring a claim for violations of the Act, it is “primarily a criminal statute designed to combat hacking.” The Court further observed that because the CFAA has both civil and criminal application, its interpretation of the statutory language would apply uniformly in both contexts. Read More
