The owners and operators of two Dallas, Texas-based durable medical equipment companies recently were convicted of one count of conspiracy to defraud the United States and to pay and receive healthcare kickbacks and one count of conspiracy to commit money laundering. They now face up to 25 years behind bars.
Leah and Michael Hagen, owners of Metro DME Supply LLC and Ortho Pain Solutions, billed Medicare Parts B and C approximately $59 million and were paid approximately $27 million.
According to the government, the couple paid a fixed rate per DME item in exchange for prescriptions and paperwork completed by telemedicine doctors that were used to submit false claims to Medicare. It was alleged that defendants paid illegal bribes and kickbacks and wired money to their co-conspirator’s call center in the Philippines that provided signed doctor’s orders for orthotic braces.
The couple was indicted in March 2019 on one count of conspiring to defraud the United States and to pay and receive healthcare kickbacks under the Anti-Kickback Statute. On September 12, 2019, the government filed a superseding indictment that added a count against the Hagens for conspiring to commit money laundering. Evidence at the trial showed that the defendants wired millions of dollars in proceeds into their personal bank accounts, in the U.S. and overseas.
The superseding indictment alleged that the doctors’ orders that the Hagens received from their agreement with the call center were “generated often in the absence of any pre-existing doctor-patient relationship or physical examination, and frequently based solely on a short telephonic conversation.” It further alleged that the Hagens, with the help of others, attempted to conceal their scheme from Medicare and state regulators by creating “sham contracts, invoices, and other documentation that disguised the payments as for marketing and business process outsourcing.”
On April 6, 2020, the Hagens filed a motion to suppress the recordings of a pre-indictment conversation they had with the call center’s operator who, unbeknownst to the Hagens, recorded them for approximately three hours. The court denied their request.
Another interesting issue that presented itself in this case is that prior to trial, the court ordered the Hagens to provide notice of their intent to assert an advice-of-counsel defense, or any good faith defense that related to advice of counsel. They indicated they did not intend to use that defense. The reason behind pretrial disclosure of an advice-of-counsel defense is to allow the government’s discovery of previously privileged materials from the defendant.
However, the Hagens later decided to call to testify four former attorneys who represented the call center’s owner, even though those attorneys neither represented them, nor provided them with legal advice.
The court wrote: “The gravamen of the dispute is a novel one. The issue is whether a good-faith defense premised on legal advice received by a non-defendant co-conspirator, and relayed to the criminal defendant, constitutes an advice-of-counsel defense.” Click here to read the order.
The government sought to exclude their testimony stating that “the only plausible need for these witnesses and exhibits is to raise an advice-of-counsel defense, or a defense based on good faith reliance on legal advice, and the time to assert such a defense has passed.”
While the court ruled it could not create an advice-of-counsel defense, it also ruled that because the couple did not have an attorney-client relationship with the four attorneys representing the call center’s owner, they could present evidence that they were acting in good faith and therefore did not intend to break the law. As an aside, the call center’s owner was cooperating with the government.
Neither the court nor the parties found case law on point for the particular issue of whether a defense premised on legal advice received by a person other than the criminal defendant constitutes an advice-of-counsel defense warranting pretrial notice and disclosure of materials. However, the court pointed out that the rationale for requiring pretrial notice of an advice-of-counsel defense is instructive.
Whether or not to allow the testimony is within the judge’s discretion. In this case, it will not set a precedent. However, other trial court judges may find the argument to be persuasive.
The Health Law Offices of Anthony C. Vitale represents clients who become targets of Anti-kickback and fraud investigations. For more information contact us at 305-358-4500 or email firstname.lastname@example.org.