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Opioid Fraud and Diversion Prosecutions Continue to Hit Hard

Opioid fraud and diversion prosecutions continue to hit hard. The Firm represents organizations, pharmacies, and medical professionals accused of or under investigation for opioid fraud and/or diversion of opioids. Since the inception of the Opioid Fraud Unit established by Jeff Sessions the Government has been pretty busy. In October, the DOJ returned the first of its kind indictment against 2 Chinese nationals for the internet sales of millions of dollars in synthetic opioids, including fentanyl.

In the first case originated  from Opioid Fraud Unit, the Government has alleged that a doctor operating a holistic pain management practice prescribed methadone, oxycodone, and hydrocodone outside the usual course of professional practice and not for legitimate medical purpose and that there was a pattern of illegally prescribing opioid painkillers to patients with no legitimate medical purpose and without examination, evaluation or testing. The criminal complaint also makes it clear that the Government had interviewed former and current employees and had relied heavily on data mining in its investigation before filing charges.

In another case, which targeted violations of the Anti-Kickback statute for prescriptions of a fentanyl-based spray, known as Subsys,  the operator of a defunct pain management practice in Rhode Island, pleaded guilty. In his plea, Dr. Rosenberg admitted to soliciting and receiveing kickbacks in return for the prescribing of the drug Subsys, a fast-acting, powerful, and highly-addictive version of the opioid drug Fentanyl that is administered as an under-the-tongue spray.

Subsys is manufactured by Arizona based company Insys Therapeutics, Inc. (“Insys”). This spray was approved by the U.S. Food and Drug Administration in 2012 exclusively for “the management of breakthrough cancer pain in . . . patients who are already receiving and who are already tolerant of opioid therapy for their underlying persistent cancer pain.” Dr. Rosenberg falsely and fraudulently indicated that his patients had breakthrough pain from cancer in order to secure insurance approvals for prescriptions of Subsys. Dr. Rosenberg also conceded that he conspired with Insys officials to receive speaker fees amounting to $188,000 in return for prescribing a high volume of Subsys to patients. As an aside, his son was also a sales representative for Insys whose commissions were, in part, derived from his Subsys prescriptions.

The doctor’s plea also fell on the heels of the indictment against the CEO of Insys, John Kappor, in what the Government hopes will be a successful Yates prosecution against Mr. Kapoor in the District of Massachusetts.  Although Mr. Kapoor’s indictment is largely based on allegations related to violations of the Anti-Kickback statute related to speaker fees and heavy prescribing of Subsys fentanyl spray, a central theme in that prosecution is that Kapoor and the sales representatives who operated under the umbrella of Insys throughout the United States peddled a heavily addictive opioid based spray to doctors in exchange for lucrative speaker fees, resulting in patients receiving addictive, potentially life threatening sprays that were intended to treat cancer.

Since then, in December, there have been additional indictments related to opioid fraud or diversion, including a recent indictment against another Pennsylvania doctor, Dr. Gartland. The indictment alleges that the doctor perpetrated a scheme to defraud two health care benefit programs, WellSpan Health of York, PA and Medicare, by writing 221 prescriptions between September 2014 and August 2017, for Hydrocodone, Oxycodone, Fentanyl, Morphine and other controlled substances. According to the indictment, the prescriptions were issued by Gartland and were never intended for the medical care or treatment of the family members, but instead were intended for Dr. Gartland’s personal use. The indictment further alleges that  Gartland deceived the pharmacies into giving him the pills by making them believe they were intended for his family member and that WellSpan and Medicare were allegedly defrauded when they paid claims submitted by the pharmacies for the prescriptions.

The takeaway from these prosecutions is straightforward – there will be an uptick in investigations and prosecutions related to opioids and opioid fraud. The ongoing nationwide investigation into speaker fees received from doctors prescribing Subsys is also continuing and will only ramp up as the Government edges closer and closer to a trial against the CEO of Insys and seeks to collect as much data and information from witnesses – sales reps and doctors – to avoid, in the aftermath of Yates, another humiliating trial loss against an executive in that District.

 

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Compounding Pharmacy Settles Lawsuit Related to Pain Creams

Compounding pharmacy fraud related to Tricare is still alive and well. In a recent settlement, Express Plus Pharmacy, LLC, a Florida pharmacy, and its owner, agreed to pay $170,000 to resolve allegations that they violated the False Claims Act by submitting fraudulent claims to Tricare for compounded medications such as pain creams. According to the Settlement Agreement, Express Plus Pharmacy knowingly submitted claims to TRICARE for compounded medications that were not reimbursable because they were not issued pursuant to valid physician-patient relationships; the prescriptions were issued after brief phone calls with patients that violated applicable laws on telemedicine; the prescriptions were medically unnecessary; and/or the prescriptions were tainted by kickbacks to marketers.

John F. Khin, Special Agent in Charge, DCIS Southeast Field Office said  “[t]he Defense Criminal Investigative Service is committed to protecting the integrity of the U.S. military health care program to provide top quality medical care to America’s warfighters and their families, while ensuring that health care providers and facilities comply with Federal laws.”

Benjamin G. Greenberg, Acting United States Attorney for the Southern District of Florida also underscored that   “[t]his case demonstrates the United States Attorney’s Office’s commitment to combat compounding pharmacy fraud, which targets federal health care programs and especially TRICARE,” said “Our office will aggressively pursue those who abuse federal health care programs for personal profit.”

            Unlike many of the previous compounding pharmacy fraud investigations in the Southern District of Florida (and elsewhere) which have brought about dozens of indictments, this case resulted in a civil settlement. The civil settlement may have been due to the amount of funds at issue in this case – a mere $170,000.00 which pales in comparison to some of the multi-million dollar compounding pharmacy frauds previously reported. Another reason that DOJ might have stayed civil with this case is that, although the press release indicates that there were “kickbacks,” the remaining conduct appears to be conduct based on the violation of state laws relating to telemedicine and/or to medically unnecessary procedures but does not include details about false documentation or false diagnoses. In addition, pharmacies and pharmacists typically maintain a corresponding responsibility by statute to ensure that a prescription is for a legitimate purpose but a pharmacy or pharmacist is not tasked with the responsibility of validating whether a doctor had a legitimate doctor-patient relationship. 

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Government Interviews of Employees of Represented Organizations: Know the Rules

Attorneys representing organizations or health care providers frequently come across a scenario during which federal law enforcement officers seek to interview employees of the corporation. As an advocate, the attorney for the organization has an obligation to vigorously represent the interests of the organization. See ABA Model Rule of Professional Responsibility 1.13, Organization as Client (“A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.”)’ So, the notion of permitting federal law enforcement officers to swarm an office building and go hog wild with the client’s employees and proceed with interviews which more closely resemble interrogations is probably not in the best interests of that client. Obvious enough. But, witnesses do not belong to either party. Each party should be given equal access to witnesses and counsel for the organization does not want to act in any way that might be considered obstructive. See ABA Criminal Justice Defense Function Standards, Standard 4-4.3, Comment (“Because witnesses do not “belong” to either party, it is improper for a prosecutor, defense counsel, or anyone acting for either side to suggest to a witness that the witness not submit to an interview by opposing counsel.”)  But what happens when the Government or its agents insist on moving forward with certain interviews of employees when they know the corporation is represented?

  1. DOJ Guidelines and State Ethics Rules vs. Federal Courts

Department of Justice internal guidelines broadly address communications with employees of represented organizations:

The contacts rules vary from state to state in how they define a “represented person” when that “person” is an organizational entity. Some states prohibit communications only with those high-level employees who can bind the organization in the matter on which the organization is represented. Other states prohibit communications concerning the matter in representation with persons having managerial responsibility on behalf of the organization. Many states prohibit communications with any person whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability. And a number of states preclude contact with a corporate employee or constituent whose statement may constitute an admission on the part of the organization.

See Department of Justice Criminal Resource Manual 296, “Communications with Represented Persons – Issues for Consideration.”

One of those states is Florida. Florida Rules of Professional Conduct governing these scenarios state that

In the case of a represented organization, this rule prohibits communications with a constituent of the organization who supervises, directs, or regularly consults with the organization’s lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability.

See Florida Bar Professional Rule of Conduct 4-4.2, Comment

Despite these DOJ internal guidelines and state ethics rules specifically acknowledging that state rules of professional conduct governing communications with represented persons and organizations, including employees of represented organizations, apply to federal prosecutors, federal courts have consistently held that pre-indictment, non-custodial interviews with employees of represented organizations are not contrary to professional rules of conduct and do not warrant suppression of employee statements when the government agent or attorney does not know that the employee is represented by counsel at the time of the interview.  U.S. v. Powe, 9 F.3d 68 (9th Cir.1993); In Re Disciplinary Proceedings, 876 F. Supp. 265, 268 (M.D. Fla. 1993); See also United States v. Marcus, 849 F.Supp. 417, 422 (D.Md.1994) (citing United States v. Sutton, 801 F.2d 1346 (D.C.Cir.1986); U.S. v. Lemonakis, 485 F.2d 941 (D.C.Cir.1973); U.S. v. Heinz, 983 F.2d 609 (5th Cir.1993);U.S. v. Fitterer, 710 F.2d 1328 (8th Cir.1983);U.S. v. Ryans, 903 F.2d 731 (10th Cir.1990);United States v. Joseph Binder, 167 F. Supp. 2d 862 (E.D.N.C. 2001) ((pre-indictment discussion between agents and an employee represented by an attorney in a matter separate and apart from the criminal investigation).

Remarkably, in Powe, the Ninth Circuit concluded that a professional rule was not violated and that the tape recording of defendant’s conversation with a confidential informant was admissible when the government used that same informant to obtain statements from defendant prior to an indictment but after counsel for the defendant sent a letter to the AUSA stating that all contacts by investigators with defendant must be made through counsel.

Similarly, in In Re Disciplinary Proceedings, the court held that the professional rule was not violated when agents interviewed a current employee of a corporation that was the ongoing subject to a grand jury investigation even though agents knew that the corporation was represented by counsel. Yet, the district court also highlighted that the agents specifically informed the employee that she had a right to an attorney prior to conducting the pre-indictment interview.

  1. Statements Can Be Imputed to the Organization

Employees of a represented organization, especially managers, may be in a unique position to make statements that will later be imputed to the organization to establish civil or, worse yet, criminal liability. For instance, employee statements under the Federal (and state) rules of evidence may be directly imputed to the organization. See Federal Rule of Evidence 801(d)(2)(D) (a statement is a non-hearsay statement if the “statement is offered against an opposing party and was made by the party’s agent or employee on a matter within the scope of that relationship and while it existed.”).

Further, in many employee interview scenarios, the employee is not in custody and is free to leave. The employee might be in his home. Notwithstanding the fact that they may legally “out of custody,” these uninformed, random employee interviews have the potential to seriously undermine the corporation’s critical interests given that acts or omissions of most employees – especially managers – may be imputed to the organization, One act of course that may be imputed is the act of making an incriminating or inculpatory statement to a federal law officer.

Therefore, because of this incongruity between DOJ standards and federal jurisprudence, counsel for the corporation should put the AUSA assigned to the investigation on notice of the representation as soon as possible and remind the AUSA, if necessary, to advise all agents assigned to the case that the corporation is represented. If the AUSA or a government agents forges ahead, then he or she must be advised that the ethics rules specifically prohibit the proposed communications, that you are not attempting to obstruct or preclude the interview, but that such interview should not be had until the employee has the opportunity to obtain separate counsel.

But, what if the employee wants to speak to the agents, is a possible whistleblower, or has interests which are likely adverse to those of the organization? Those are all complex issues and counsel for the organization should not act in any way to “block” an interview of an employee who wants to freely speak with the government. Nor should counsel attempt to knowingly impede an interview of an employee with interests adverse to the organization. But these points are subordinate to the critical point here which is that Government efforts to interview employees of represented organizations are a clear violation of established DOJ Guidelines tethered to state ethics rules. For example, in Florida, no “communications” are permitted with employees of represented organizations regardless of whether that organization has been indicted or not. See Florida Bar Professional Rule of Conduct 4-4.2. That means no interviews period and Florida is not alone.

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Under Investigation Part II

UNDER INVESTIGATION PART II: AM I A TARGET, SUBJECT, OR WITNESS?

Am I a target, a subject, or a witness? In this Article which is Part II in the “Under Investigation” series, we will discuss these various designations used by the Government to describe a person’s relative culpability during the course of a criminal investigation and will focus on targets and subjects. Such designations are a harbinger of robust investigations targeting businesses operating in regulated industries such as health care, securities, banking, mining, transportation, logistics, insurance, aviation, and telecommunications.

 

Targets and Target Letters

If someone or something (a corporation) is a target, then this means that the Government has substantial evidence linking the person or thing (a corporation) to a federal crime and the chances are greater that the Government will present evidence before a grand jury to return an indictment.

The Government has a few ways of telling (or not telling) someone or something that they are a target.

The US Attorney’s Office responsible for the investigation can send a target letter to that person in the mail.

The federal agents primarily responsible for the investigation of the target, can show up at the targets business or home and hand her the target letter.

The federal agents can show up at the target’s home or business and try to interview her during which they may or may not tell the target she is in fact a target.

The target may receive a grand jury subpoena to appear for testimony or produce documents.

In the third and fourth scenarios, notice that the Government has not come right out and said “you’re a target” and these are the situations where even sophisticated, highly educated professionals might make the biggest tactical error they can make during the investigation and predetermine their fate.

To ensure this does not happen, a person receiving the subpoena or a visit from federal agents should retain an experienced government investigations lawyer before making any statements to federal law enforcement or responding to a subpoena. Once retained, the attorney will contact the federal prosecutor assigned to the investigation and ask her whether the client is a target, subject, or witness.

Sounds simple enough, right? In practice, however, there have been (and will continue to be) countless episodes where the person receiving the subpoena or the visit will employ a “do it yourself” approach to the investigation and decide to speak to the agents or respond to the subpoena without consulting an attorney first.

This mistake should be avoided at all costs.

Subject- You are Within the Scope of the Investigation

A subject is someone who is within the scope of the Government’s investigation. If that seems vague and confusing to you then you are not alone.

What if the scope of the investigation spans three continents and involves 25 companies?

If I work at one of the companies then am I “within the scope of this investigation?”

What if I am only a former employee or executive of one of the companies?

These questions abound in this context, but the bottom line is: if a person were designated by a federal prosecutor as a “subject” then that person has potential exposure to criminal charges. That does not mean that federal agents will arrive at your doorstep armed and ready to make an arrest next week. Nor does it mean that a person designated as subject may not be in a position to obtain a redesignation to a witness. Rest assured though, depending on the factual nuances in the particular case, the Government may send subpoenas, request interviews with counsel, and/or request active cooperation with the Government from a subject.

Whether a person is a subject or a target, it is incumbent upon that person to consult with an experienced government investigations attorney when it becomes clear that a government investigation is underway.

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Under Investigation Part I

UNDER INVESTIGATION PART I: HOW IS THE GOVERNMENT INVESTIGATING ME OR MY BUSINESS?

In this Article which is Part I in the “Under Investigation” series, we will discuss some of the investigative tools which are available to the government in the course of a criminal (or civil) investigation targeting businesses operating in regulated industries such as health care, securities, banking, mining, transportation, logistics, insurance, aviation, and telecommunications.

 

Subpoenas and Other Things Demanding Documents and Appearances

The Government can send subpoenas to the financial institution where the company under investigation maintains business and/or personal accounts demanding that those institutions produce financial account information. They can send subpoenas to the company under investigation demanding production of documents or they can send the subpoena to a specific person demanding that she testify before a grand jury. Frequently though, the recipient of that subpoena can produce the requested documents by a specific date to avoid having to appear for testimony.

In anti-trust, consumer protection (banking), and health care fraud investigations, the Government can also send something called a civil investigative demand requiring a company or a person to produce documents, submit sworn answers to written questions, or in some cases, appear for testimony before a federal prosecutor.

In investigations related to violations of federal tax laws, the IRS frequently uses summonses demanding the production and/or appearance of the taxpayer. Sometimes those summonses will be issued by a special agent or “IRS-CI” and demand an appearance before that special agent to answer questions about specific tax years and/or tax returns. That is an unequivocal “tip off” that the investigation is criminal.

In investigations related to violations of federal securities laws, the SEC may send a subpoena to produce documents and/or appear for sworn testimony based on a formal order of investigation authorizing SEC enforcement attorneys to demand production of documents and testimony.

“Interviews”

Beyond these written demands for paper or people, the Government conducts “interviews” with employees, former employees, competitors, etc. Anyone approached by a government agent for an “interview” should politely decline the interview until they have had an opportunity to talk to an experienced government investigations attorney. Interviewers are trained, highly educated, and generally familiar with the particular industry they are investigating. Diving right into an interview without counsel – even if you have nothing to hide or have gained a reputation for being persuasive – is, at best, a very bad choice, and, at worst, the equivalent of gift-wrapping a roadmap to an indictment.

Informants

The Government can also embed an informant, whistle-blower, or “cooperator” at your business to unearth information they believe will corroborate their theory of what happened and who did what and when. The informant will likely be wired with audio and video recording equipment and has the ability to record what people are doing or saying in real time. The informant can also work for law enforcement at a distance by making controlled calls or emails or communicating via text message. All of these surreptitious investigative techniques are designed for one purpose: to gather more possible evidence of guilt.

The informant might also do things he should not do. He might go “rogue” and begin his own investigation and have a momentary identity crises believing that he is 007 on a top secret mission. Or, he might attempt to actively upload or download proprietary information from company servers without the company’s authorization or consent.

Data Mining

Data mining is a commonly used investigative tool in health care fraud investigations. Indeed, very recently, Attorney General Jeff Sessions announced that a new, specialized Opioid Fraud Unit would rely heavily on data mining to detect and prosecute fraud. Further, both specialized investigative units (SIUs) working for private health care plans and private government contractors known as Zone Program Integrity Contractors (ZPICs) responsible for auditing specific Medicare providers, depending on their geographic region, rely on and employ data mining to investigate health care fraud and abuse.

Search Warrants

The Government can also apply for and obtain search warrants which give government agents the authority to enter a business and search for documents, computers, hard drives, cell phones, thumb-drives, and any other electronic data or communications within the scope of the search warrant. Search warrants should be more of a last resort for the agency responsible for the investigation but they are increasingly common tools employed by law enforcement in investigations involving highly regulated industries and they are nerve-wrecking. It is important that employees know their rights prior to any search. Government agents are on the premises to conduct a search and to “interview” people. But, the warrant only authorizes a search, not a full blown interrogation. So while being cooperative might expedite a search. Cooperation should never include volunteering for an interview without an experienced government investigations lawyer at your side.

Given these seemingly unlimited resources, it is incumbent upon professionals and employees operating in regulated industries to consult with an experienced government investigations attorney when they are confronted with a government investigation.

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