Employee Exception is a Jury Issue in Criminal Anti-Kickback Trial
In United States v. Novak, Case No. 13-CR-00312 (June 30, 2014), the district court’s recent denial of defendants’ motions to dismiss the government’s superseding indictment reinforces that as long as the four corners of the indictment adequately allege a violation of a federal criminal statute, a motion to dismiss will likely be denied. In Novak, this was true even though defendants argued that they were entitled to an affirmative defense (statutory bona fide employee exception) to a violation of the Federal Anti-Kickback Statute.
Facts
More specifically, in Novak, government filed a superseding against several medical doctors and a podiatrist alleging that, among other things, they violated the Federal Anti-Kickback Statute. The crux of one of the government’s kickback allegations against one of the co-defendants, Dr. Venkateswara Kuchipudi (“Dr. Kuchipudi”), is that a physician assistant (listed as Employee A and likely a government witness) working for Sacred Heart hospital received checks which were, indirectly, paid to Dr. Kuchipudi in return for Dr. Kuchipudi referring patients, i.e., Medicaid and Medicare business, back to Sacred Heart.
In response to the kickback allegations in the indictment, Dr. Kuchipudi and his co-defendants filed motions to dismiss the indictment contending that the Counts in the indictment alleging violations of the Federal Anti-Kickback Statute fail to state an offense because any remuneration (including the checks) received by the physicians constitutes remuneration received by employees. Therefore, as employees, they are entitled to the protections provided by the statutory exception to the Federal Anti-Kickback statute, which states that violations of the Federal Anti-Kickback Statute “shall not apply to …any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services. . . .” See 42 U.S.C. § 1320a-7b(b)(3)(B).
District judge Matthew F. Kennelly of the Northern District of Illinois, however, was not convinced and underscored:
Their [Defendants’] contention is that the indictment fails to negate, or affirmatively concedes, the application of the safe harbor [Note: the district judge is mistakenly referring to the regulatory safe-harbor for employees found at 42 C.F.R. § 1001.951(i) as opposed to the statutory exception for employees found at 42 U.S.C. § 1320a-7b(b)(3)(B)]. A great deal of ink has been spilled on these motions, but their resolution, in the Court’s view, is fairly simple.
It is settled law that an indictment is sufficient if it states all the elements of the crime charged, adequately informs the defendant of the nature of the charges so that he may prepare a defense, and allows him to plead the judgment as a bar to future prosecutions. (other citation omitted). The offense charged in the counts at issue is violation of the anti-kickback statute. There is no question that the government has alleged each of the elements of an offense under the pertinent provision and that it has done so by essentially adopting the language of the statute itself
Takeaway
Affirmative Defense in Pre-Trial Motion to Dismiss. While defendants will very likely raise the employee exception or employee safe-harbor as an affirmative defense at trial, the district court in Novak further demonstrates that an indictment that ‘parrot[s] the language of a federal criminal statute’ is sufficient except in extraordinary circumstances.
Comparison to False Claims Act.In a civil False Claims Act action, defendants would have an opportunity to depose witnesses and to develop their affirmative defense that defendants are bona fide employees to position themselves to potentially prevail on a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. Here, however, as the district court strongly emphasized, “for better or worse there is no such thing as a motion for summary judgment in a criminal case” and the employee defense raised in the motion was premature.
Jury Instructions. In light of the recent Halifax trial where the jury was permitted to extensively analyzed the employee exception to Stark, defense counsel should be granted substantial flexibility in fashioning jury instructions that concisely convey what constitutes a bona fide employee so that the jury may properly render a verdict. Also, two questions remain: (i) whether, and to what extent, the court will permit the jurors to methodically review each and every factor relevant to a determination of whether a person is a bona fide employee and (ii) whether defense counsel will also request an alternative instruction with respect to the employee safe harbor.
