UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA, ) Civil Action No.

) 02 C 3310

Plaintiff, )

) Judge John W. Darrah

)

V. )

)

PETER ROGAN, )

)

Defendant. )

POST-TRIAL CLOSING BRIEF OF THE UNITED STATES

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-iTABLE OF CONTENTS

PAGE

I. FACTUAL SUMMARY .................................................. 3

A. Background ...................................................... 3

B. The Scheme ...................................................... 5

1. Payoffs to Dr. Barnabas ....................................... 6

2. Payoffs to Dr. Rao ........................................... 8

3. Payoffs to Dr. Cubria ........................................ 12

C. Rogan’s Efforts to Obstruct Justice .................................. 18

D. Criminal Convictions Arising Out of the Fraud at Edgewater . . . . . . . . . . . . . . . 20

E. False Claims and Damages ......................................... 21

II. ROGAN’S VIOLATIONS OF THE FCA .................................... 22

A. The Claims at Issue Here Are Actionable Under the FCA . . . . . . . . . . . . . . . . . 22

B. The Claims at Issue Here Are False Under the FCA . . . . . . . . . . . . . . . . . . . . . . 25

1. The Claims Certified Compliance with the Anti-kickback and/or Stark

Statues ................................................... 25

2. Rogan Violated the Anti-kickback Statute . . . . . . . . . . . . . . . . . . . . . . . . 29

3. Rogan Violated the Stark Statute ............................... 36

C. Rogan Caused the Submission of Knowingly False Claims . . . . . . . . . . . . . . . . 40

1. Rogan Caused Edgewater to Submit the Cost Reports and UB-92s . . . . 40

2. Rogan Knew the Claims Were False . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

D. Rogan Conspired with Others to Cause the Submission of False Claims . . . . . . 44

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-iiIII. DAMAGES AND PENALTIES ........................................... 45

IV. COMMON LAW CLAIMS ............................................... 48

VI. CONCLUSION ........................................................ 51

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-iiiTABLE OF AUTHORITIES 

CASES 

In re Cardiac Devices Qui Tam Litigation,

221 F.R.D. 318 (D. Ct. 2004) ............................................ 24

Hays v. Hoffman,

325 F.3d 982 (8th Cir. 2003) ............................................. 47

Indemnified Capital Investments, SA. v. R.J. O'Brien & Assocs., Inc.,

12 F.3d 1406 (7th Cir. 1993) ............................................. 48

Nursing Home Consultants, Inc. v. Quantum Health Servs. Inc.,

926 F. Supp. 835 (E.D. Ark. 1996) ........................................ 32

Peterson v. Weinberger,

508 F.2d 45 (5th Cir. 1975) .............................................. 23

Provident Life & Accident Ins. Co. v. Waller,

906 F.2d 985 (4th Cir. 1990) ............................................. 49

Taylor Woodrow Blitman Constr. Corp. v. Southfield Gardens Co.,

534 F. Supp. 340 (D. Mass. 1982) ......................................... 48

United States ex rel. Asch v. Teller, Levitt, & Silvertrust, P.C.,

2004 WL 1093784 (N.D. Ill. May 7, 2004) .................................. 43

United States ex rel. Augustine v. Century Health Servs., Inc.,

289 F.3d 409 (6th Cir. 2002) .......................................... 23, 25

United States ex rel. Barrett v. Columbia/HCA Healthcare Corp.,

251 F.Supp.2d 28 (D.D.C. 2003) .......................................... 25

United States ex rel. Bidani v. Lewis,

264 F. Supp. 2d 612 (N.D. Ill. 2003) ....................................... 25

United States ex rel. Chandler v. Cook County,

538 U.S. 119, 123 S. Ct. 1239 (2003) ................................... 44, 46

United States ex rel Lamers v. Green Bay,

168 F.3d 1013 (7th Cir. 1999) ............................................ 41

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-ivUnited States ex rel. Marcus v. Hess,

317 U.S. 537 (1943) ................................................. 23, 45

United States ex rel. McNutt v. Haleyville Med. Supplies, Inc.,

423 F.3d 1256 (11th Cir. 2005) ........................................... 26

United States ex rel. Murphy v. Baptist Medcare, Inc.,

No. 4:02-CV-440 (E.D. Ark. Oct. 27, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

United States ex rel. Pogue v. American Healthcorp. Inc.,

914 F. Supp. 1507 (M.D. Tenn. 1996) ...................................... 25

United States ex rel. Pogue v. Diabetes Treatment Centers of America,

238 F.Supp.2d 258 (D.D.C. 2002) ......................................... 26

United States ex rel. Riley v. St. Luke's Episcopal Hosp.,

355 F.3d 370 (5th Cir. 2004) ............................................. 40

United States ex rel. Thompson v. Columbia/HCA Healthcare Corp.,

125 F.3d 899 (5th Cir. 1997) ....................................... 23, 25, 26

United States ex rel. Tyson v. Amerigroup Ill., Inc.,

2005 WL 2667207 (N.D. Ill. Oct. 17, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

United States v. Bainbridge Mgmt,,Inc.

Nos. 01 CR 469-1, 01-CR 469-6,

2002 WL 538777 (N.D Ill. Apr. 11, 2002). .................................. 20

United States v. Bay State Ambulance & Hosp. Rental Serv.,

874 F.2d 20 (1st Cir. 1989) ........................................... 29, 30

United States v. Ekelman & Assocs.,

532 F.2d 545 (6th Cir. 1976) ............................................. 23

United States v. Emergency Medical Assocs. of Illinois, Inc.,

436 F.3d 726 (7th Cir. 2006) ............................................. 45

United States v. First Nat'l Bank of Cicero,

957 F.2d 1362 (7th Cir. 1992) .................................... 2, 33, 40, 44

United States v. Greber,

760 F.2d 68 (3d Cir. 1985)............................................... 29

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-vUnited States v. Hancock,

604 F.2d 999 (7th Cir. 1979), ............................................. 30

United States v. Hughes,

585 F.2d 284 (7th Cir. 1978) ............................................. 44

United States v. Kats,

871 F.2d 105 (9th Cir. 1989) ............................................. 29

United States v. Kimbell Foods, Inc.,

440 U.S. 715 (1976) .................................................... 48

United States v. Krizek,

111 F.3d 934 (D.C. Cir. 1997) ............................................ 40

United States v. Mackby,

261 F.3d 821 (9th Cir. 2001) ............................................. 40

United States v. McClatchey,

217 F.3d 823 (10th Cir. 2000) ............................................ 29

United States v. Mead,

426 F.2d 118 (9th Cir. 1970) ............................................. 49

United States v. Medco Physicians Unlimited,

2001 WL 293110 (N.D. Ill. March 26, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

United States v. Murphy,

937 F.2d 1032 (6th Cir. 1991) ............................................ 43

United States v. Neifert-White Co.,

390 U.S. 228 (1968) ................................................. 23, 45

United States v. Neufeld,

908 F. Supp. 491 (S.D. Ohio 1995) ........................................ 32

United States v. Norton,

2000 WL 33281703 (W.D. Va. Nov. 14, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

United States v. Polin,

194 F.3d 863 (7th Cir. 1999) ............................................. 30

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-viUnited States v. Teeven,

862 F.Supp 1200 (D. Del. 1992) .......................................... 40

United States v. Veneziale,

268 F.2d 504 (3d Cir. 1959).............................................. 23

REGULATIONS

28 C.F.R. § 85 .............................................................. 45

42 C.F.R. § 405.1801(b)(1) .................................................... 27

42 C.F.R. §§ 405.1803, 413.60 ................................................. 27

42 C.F.R § 411.351 .......................................................... 37

42 C.F.R. § 411.353 ......................................................... 39

42 C.F.R. 411.357(1) ......................................................... 38

42 C.F.R. § 413.20 ........................................................... 27

42 C.F.R. § 1001.952 ...................................................... 31, 32

64 Fed. Reg. 47099, 47103 (1999)............................................... 45

FEDERAL STATUTES

18 U.S.C. § 1341 ............................................................ 20

18 U.S.C. § 1347 ............................................................ 20

31 U.S.C. § 3729 ......................................................... passim

31 U.S.C. §§ 3729-3733 ....................................................... 3

42 U.S.C. § 1320a-7b(b) ...................................................... 29

42 U.S.C. § 1320a-7b(b) ...................................................... 28

42 U.S.C. § 1395g(a) ......................................................... 27

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-vii42 U.S.C. § 1395nn ................................................. 36, 38, 39, 45

42 U.S.C. § 1395nn(h)(5)(A) ................................................... 37

42 U.S.C. § 1395nn .......................................................... 37

Debt Collection Improvement Act, Pub. L. 104-134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

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UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA, ) Civil Action No.

) 02 C 3310

Plaintiff, )

) Judge Darrah

)

v. )

)

PETER ROGAN, )

)

Defendant. )

POST-TRIAL CLOSING BRIEF OF THE UNITED STATES

The trial of this case ended much as it began – with defendant Peter Rogan on the stand,

brazenly lying to this Court. As the government noted in its oral closing, Mr. Rogan’s testimony

in this case was so far from credible as to be incredible. Yet his own, self-serving testimony was

all that Rogan could muster in his own defense. In the face of overwhelming evidence of

culpability, Peter Rogan was unable to call a single other witness to support his version of events,

much less one to testify to his innocence. 

The bulk of this trial consisted of the United States presenting damning and highly

credible testimony from witness after witness, most critically from Rogan’s own co-conspirators:

Roger Ehmen, Ravi Barnabas and Andrew Cubria. In contrast to Rogan’s evasive and

dissembling answers, each of the government’s witnesses testified in a straightforward fashion,

and cross-examination by Rogan’s counsel failed to reveal any motive to lie. Tellingly, Mr.

Ehmen, Dr. Barnabas and Dr. Cubria made no attempt to minimize their own guilt in this matter,

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-2-

while consistently making clear that Rogan participated in the conspiracy that resulted in their

incarceration. Some of the most damaging testimony came from Rogan himself, who admitted

his knowledge of the Anti-kickback and Stark statutes, while also purporting to know nothing of

the ongoing violations of those statutes at his own hospital by some of his closest associates. 

Rogan’s co-conspirators were followed on the witness stand by a parade of former

Edgewater employees who confirmed crucial details of the government’s allegations –

everything from Rogan’s complete control over the hospital’s purse-strings, his pressure on

Roger Ehmen to generate admissions by calling physicians, right down to the location of the

shredder outside Rogan’s office. 

Frequently using the defense’s own exhibits, the United States confirmed, over and over

again, Rogan’s intimate involvement in the kickback scheme at Edgewater. Rogan approved

every payoff made and every improper financial relationship at this hospital, signing contract

after contract with Drs. Barnabas, Rao and Cubria, approving payment after payment to these

men – sometimes with a sham contract in place and sometimes without a contract even being

signed. The pattern, however, was the same: Rogan only approved contracts and payments after

he received assurances that the physicians would funnel patients to Edgewater. 

If there was any doubt that Rogan’s scheme harmed the Medicare and Medicaid

programs, the United States definitively established that fact in multiple ways. First, the

testimony of Drs. Barnabas and Cubria confirmed that patients were referred to and treated at

Edgewater as a result of the kickbacks and improper financial relationships engineered by Rogan.

Second, the physician statistics report (Defense Exhibit (“DX”) 286), a report that Rogan

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-3-

admitted receiving regularly, detailed the source of patients being admitted to Edgewater as a

result of payoffs. Third, the United States presented actual claims data from the Medicare

program’s official claims repository, showing that Edgewater, while under Rogan’s control,

received $14.6 million for Medicare patients treated by Drs. Barnabas and Cubria between 1995-

2000. Fourth, the United States presented evidence from Edgewater’s own records that the

Medicaid program made similar payments in the amount of $4.4 million. Rogan could not and

did not mount any serious challenge to this evidence.

As detailed below and in the accompanying proposed findings of fact and conclusions of

law, the United States has presented overwhelming evidence of Peter Rogan’s violations of the

False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. The United States has proven, by a

preponderance of the evidence, that Peter Rogan knowingly violated the FCA by causing the

submission of false Medicare and Medicaid cost reports and UB-92s for patients treated at

Edgewater by Drs. Barnabas and Cubria. Therefore, the United States is entitled to treble

damages and penalties under the FCA. 

I. FACTUAL SUMMARY

A. Background

Peter Rogan first became involved with Edgewater in the 1980's, when he worked in the

health care consulting practice of a major accounting firm in Chicago. He left the firm in 1983

and became the CEO of a Catholic hospital in Indiana. After being asked by that hospital’s board

to leave as CEO, Rogan returned to consulting work and eventually began advising Edgewater’s

board of directors. (United States’ Proposed Findings of Fact (“USPFF.”), ¶ 2). He purchased

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Edgewater in January 1989, and retained a majority ownership stake in Edgewater until he sold

the facility for approximately $31 million in August, 1994. (USPFF. ¶¶ 3-5). 

Rogan, however, had no intention of giving up control of Edgewater as part of the 1994

sale. As far back as 1992, Rogan planned that any future sale of Edgewater would provide for

the hospital to be run by a management company partly owned by Rogan, and for Rogan to

remain CEO. (USPFF. ¶ 9). And that is exactly what happened. The terms of the 1994 sale

ensured that shortly after the sale, a Rogan-controlled entity, Braddock Management, L.P.

(Braddock), would operate Edgewater, with Rogan serving as CEO of the hospital. (USPFF. ¶

10). 

Braddock then entered into a series of management contracts with Edgewater, providing

that Braddock would act as the exclusive manager of the day-to-day operations of the hospital,

which included the submission of claims to Medicare and Medicaid for services rendered to

patients, and would supervise and manage all billings, collections, cost reporting, and other

financial matters related to hospital operations. (USPFF. ¶ 11). The hospital’s senior

administrative staff, including Ehmen, were employees of Braddock from beginning in

approximately 1995. (USPFF. ¶ 16). Braddock changed its name to Bainbridge Management,

L.P. (Bainbridge) in March 2000; after that point, Bainbridge served in the role Braddock had

occupied previously. (USPFF. ¶ 15). 

Pursuant to these management contracts, Edgewater paid Braddock (and later Bainbridge)

a monthly fee and a monthly percentage of the hospital’s net patient service revenue —

essentially a commission-based payment. (USPFF. ¶ 12). Furthermore, the salaries and bonuses

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of Braddock’s hospital-based employees were reimbursed separately by the hospital – hence, the

full amount of the management fees went to Braddock’s owners. (USPFF. ¶ 16). Various entities

owned by Rogan and his family received 99% of Braddock’s revenues between 1995 and at least

March 2000. (USPFF. ¶¶ 17-19). Between 1995-2000, the management company’s distributions

to Rogan and his family totaled over $9.5 million. (USPFF. ¶ 20). As even Rogan admitted,

contrary to his counsel’s opening statement at trial, these were not “nominal” sums. (Id.). In

addition, Rogan received a personal salary from Braddock while serving as CEO of Edgewater,

as well as generous bonuses. In 1996 alone, Rogan received $283,336 in salary and bonus.

(USPFF. ¶ 16). 

Rogan never willingly relinquished control of Edgewater to anyone. Rogan personally

had full control of Braddock at all times between 1994 and 2001, thus ensuring that he

controlled the management company that in turn controlled Edgewater. (USPFF. ¶¶ 14-15).

Despite nominally having turned over the CEO position at Edgewater to a long-time employee of

his, Joann Skvarek, in late 1997, Rogan still held the reins at Edgewater, and both Roger Ehmen,

the Vice-President of Physician Relations, and Henry Zeisel, Edgewater’s CFO, continued to

report directly to him concerning physician relationships and financial matters. (USPFF. ¶¶ 27,

144). Rogan remained effectively in charge of Edgewater until May 2001, when the hospital

board terminated Braddock’s management contract. 

B. The Scheme

Edgewater was an old hospital and its physical structure and appearance were rundown in

comparison to its competitors. It was difficult to retain existing physicians, much less recruit

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new physicians. (USPFF. ¶ 24). Without physicians bringing their patients, however, Edgewater

could not survive. Thus, physician recruitment, one of Roger Ehmen’s primary tasks, was

critical to the hospital. Rogan was well aware of how important that mission was, and he closely

supervised Ehmen, a long-time Edgewater employee, as well as working directly with him to

recruit new physicians. Rogan’s theory, as he explained early on to Ehmen, was that if he and

Ehmen could tie a physician to Edgewater through some type of services contract, the physician

would be more likely to spend time at Edgewater and send his patients there. (USPFF. ¶ 25).

What quickly happened, however, is that Rogan began approving contracts with physicians for

the purpose of inducing referrals, with little or no expectation or concern about whether the

physician would actually render the services ostensibly contracted for. Ultimately, he and Ehmen

entered into a conspiracy with Drs. Barnabas, Rao and Cubria, to provide kickbacks and engage

in improper financial relationships in return for patient referrals. 

1. Payoffs to Dr. Barnabas

Ravi Barnabas, M.D. was an internist who had participated in Edgewater’s residency

program, but had joined his brother, also a physician, in practice at Methodist hospital, a

competitor of Edgewater’s. (USPFF. ¶¶ 28-29). Ehmen and Rogan viewed Dr. Barnabas as

an attractive candidate to recruit to Edgewater because, as a successful primary care physician,

Barnabas had a significant patient base, as did his brother. (USPFF. ¶¶ 29, 34-35). Barnabas

initially resisted Ehmen’s recruiting efforts. However, in 1993, Barnabas came to Ehmen and

suggested that Ehmen recruit a surgeon named Dr. Ramos, whose patients Dr. Barnabas had

been treating at another hospital. (USPFF. ¶ 30). Dr. Ramos informed Ehmen that he wanted

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Edgewater to assist with his malpractice premiums, possibly by putting Dr. Ramos on

Edgewater’s own insurance policy. Ehmen and Rogan were reluctant to do this, but wanted

Dr. Ramos’s business. (USPFF. ¶ 31). 

In a pattern that would be repeated with other physicians down the road, Rogan waited

to see if the referrals lived up to his expectations. During this initial period, Dr. Ramos

immediately began admitting upwards of 20-30 patients a month to Edgewater – a very

significant number for the hospital. (USPFF. ¶ 31). Ultimately, in order to secure Dr.

Ramos’s patients and to improve their chances of persuading Dr. Barnabas to send patients

from his own practice to Edgewater, Rogan and Ehmen agreed to pay Dr. Ramos $75,000 per

year as a “Hispanic physician liaison.” (USPFF. ¶ 33). Prior to creating this position for Dr.

Ramos, Ehmen and Rogan had never discussed the need for such a position at Edgewater.

(Id.). The real purpose of the contract was to induce Dr. Ramos’s referrals by paying Dr.

Ramos a sum sufficient to cover his high malpractice premiums, while at the same time,

inducing Dr. Barnabas to send more patients to Edgewater. (Id.). 

Later in 1993, in another attempt to secure patient referrals from Barnabas, Rogan and

Ehmen agreed to pay him $60,000 annually, ostensibly for physician recruitment services.

(USPFF. ¶ 37). In fact, the contract provided to (and signed by) Barnabas in 1993 was a

teaching contract, despite Barnabas’s express insistence that he did not want to teach medical

residents and would not do so. (USPFF. ¶ 35-36, 38). Barnabas’s contract was even

presented to the hospital’s Board of Directors in 1994 as a teaching contract, yet Dr. Barnabas

did no teaching in 1993 or 1994. (USPFF. ¶¶ 39-40). Nor did Dr. Barnabas teach in 1995; yet

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throughout the majority of 1995, Edgewater paid Dr. Barnabas pursuant to a teaching contract.

(USPFF. ¶ 40). 

Only in 1995 did Rogan and Ehmen create a contract that referenced his ostensible

physician recruiting duties. (USPFF. ¶ 43). This recruiting contract was renewed every year

through 1998. (USPFF. ¶ ¶46, 50). Rogan and Ehmen discussed these renewals annually with

an eye toward whether the contract would help retain and increase referrals from Dr. Barnabas

(referrals that Rogan and Ehmen were carefully tracking), and each time, Rogan approved the

renewal on that basis. (USPFF. ¶ ¶47, 50). Dr. Barnabas was not expected to perform all of

the obligations spelled out in the recruiting contracts, and was never expected to (nor did he)

perform any of the duties in the teaching contracts. (USPFF. ¶¶ 44, 46-48, 50, 53). Barnabas

was substantially overpaid for the little recruiting work that he actually did perform. Rogan

simply used these contracts as an inducement to Dr. Barnabas to refer his substantial base of

patients to Edgewater for their hospital needs. (USPFF. ¶¶ 43, 47, 50, 56). 

2. Payoffs to Dr. Rao

Dr. Ramos was not the only physician for whom Dr. Barnabas managed hospital inpatients. In connection with another illegal contract approved and signed by Rogan, Dr.

Barnabas also came to manage patients who were directed to Edgewater by Seshiqiri Rao

Vavilikolanu, M.D. (Rao), an anesthesiologist. Anesthesiologists typically do not refer

patients to hospitals; instead, they provide services to patients referred to the hospital by other

physicians. (USPFF. ¶ 58). In 1997, Edgewater was in the market for a new anesthesia group.

Through Barnabas, whom Rao knew from their work together at Doctor’s Hospital (another

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competitor of Edgewater), Rao sought an introduction to Ehmen and then Rogan in order to

make a pitch for receiving the anesthesia contract. (USPFF. ¶ 57). 

Dr. Rao did not make a favorable overall impression on Ehmen, and was not someone

whom Ehmen wanted to have administering anesthesia to Edgewater’s patients. (USPFF. ¶

59). What did catch Ehmen’s attention, however, was Rao’s representation that he controlled a

block of patients treated by other primary care physicians. Ehmen briefed Rogan, who was

intrigued enough to meet on his own with Dr. Barnabas and Dr. Rao together at a restaurant in

Chicago. (USPFF. ¶ 60). During this meeting, Rao informed Rogan that he controlled a

substantial number of patients that could be referred to Edgewater if Rao were awarded the

anesthesia contract. (Id.). Following this meeting, Rogan informed Ehmen that Edgewater

would pay Rao $15,000 per month, ostensibly for administrative duties and for providing

anesthesia services. (USPFF. ¶ 61). 

As with Dr. Ramos, however, Rogan wanted to see if Dr. Rao could generate the

promised level of referrals before Rogan paid out money. Although Rogan signed a contract

with Rao's company, Rao M.D., S.C., in February 1997, under which Rao’s company would

be the exclusive provider of anesthesia services at Edgewater, the contract did not become

effective until April 1997, thereby allowing for a March 1997, trial period. (USPFF. ¶ 62).

Because Rao lacked admitting privileges at Edgewater, part of the arrangement was that

Barnabas would serve as the admitting (and attending) physician for referrals from Rao’s

sources. (USPFF. ¶ 63). Rao, through Barnabas, admitted so many patients during the trial

period that he received payment before the actual contract even became effective. (USPFF. ¶

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62).

Shortly thereafter, Ehmen and Rogan learned that a major source of Rao’s patients was

Kumar Kaliana, M.D. (Kumar), a primary care physician who operated a clinic on Chicago’s

South Side. Rogan and Ehmen also learned that Rao had agreed to pay kickbacks to Kumar in

exchange for Kumar’s agreement to send his patients to Edgewater for treatment. (USPFF. ¶

68). Rogan was completely unconcerned about the fact that Rao was bribing Kumar in

exchange for patients to send to Edgewater; Rogan told Ehmen explicitly that what Rao did

with his money was Rao’s business. (Id). 

For many months, Rao referred approximately 20 to 30 patients a month to Edgewater

through Barnabas. (USPFF. ¶ 69). In order to monitor Rao’s referrals, Rogan asked Ehmen to

set up a tracking code in the hospital’s computer system that could be used to distinguish

Rao’s and Kumar’s patients from those that came from Barnabas’s own practice. (USPFF. ¶

64). Notwithstanding Rogan’s claim at trial that he did not know what “RKO” stood for,

Rogan and Ehmen tracked Barnabas’s admissions that came through Rao and Kumar under,

among others, a code known as “Barnabas RKO,” which stood for “Rao-Kumar

Organization.” (Id.). Barnabas in turn referred these same Rao and Kumar patients, including

Medicare and Medicaid patients, to other physicians at Edgewater for additional services and

procedures. Thus, some of the patients were listed under a code of “Barnabas/Cubria RKO,”

to distinguish patients for whom Dr. Cubria would provide cardiology services. (USPFF. ¶

65). Concerned that the RKO code might be a red flag given that Rao and Kumar lacked

admitting privileges and Rao’s status as the head of anesthesia (a specialty not associated with

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patient referrals), Rogan asked Ehmen to use a different code labeled, “APN,” ostensibly to

stand for “ambulatory physician network,” a more generic sounding name. (USPFF. ¶ 66).

The APN code, however, was used exclusively with respect to the patients sent by Rao and

Kumar. 

The deal with Rao began to go south in 1998, when Edgewater began receiving claim

denials for patients referred by Rao. (USPFF. ¶ 70). Rogan was furious given that he was

paying Rao $15,000 a month, and the hospital was simultaneously losing money on services

already provided to patients whose claims were denied. Rogan told Ehmen to fix the problem,

but despite efforts by Ehmen and Barnabas to rectify the situation, Rao’s referrals never

returned to the high water mark that he had achieved earlier. Based on the declining referral

levels and the claim denials, Rogan stopped paying Rao the $15,000 per month, but still

expected him to provide anesthesia services – further proof that the $15,000 had been in

exchange for referrals. (USPFF. ¶¶ 73-74). Rogan ultimately paid Rao’s companies more

than $200,000 for the anesthesia contract and a later, short-lived contract to ostensibly run the

hospital’s detoxification program that was awarded based on Rao’s promise of large detox

referrals. (USPFF. ¶ 82-88). As Ehmen confirmed on the stand, the contracts with and

payments to Rao would not have been awarded but for Rao’s promises to generate admissions

for Edgewater in return. (USPFF. ¶¶ 74, 87). 

While his deal with Edgewater was unraveling, Rao began cooperating with the

government and taped various conversations with Ehmen in the late Spring of 1998 and one

conversation with Rogan in August 1998. (USPFF. ¶¶ 76). Concerned about maintaining the

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fiction that the termination of payments to Rao had been based on inadequate services rather

than referrals, Ehmen told Rao that he did not have to bring patients to Edgewater. Both

Rogan and Ehmen, however, remained concerned about Rao, and when Rao insisted on

meeting with Rogan in August 1998, Rogan told Ehmen that he smelled a rat. (USPFF. ¶ 78).

During this taped conversation, Rogan made a great show of telling Dr. Rao, then

accompanied by Dr. Barnabas, that “Edgewater doesn’t pay for patients.” Even more oddly,

Rogan, after being told by Dr. Rao that Dr. Rao was paying kickbacks, expressed interest in

any “new programs” that Dr. Rao might want to bring to Edgewater. (USPFF. ¶ 79). 

Most tellingly, despite being told by Dr. Rao that Dr. Rao had been using Edgewater

money to bribe another doctor to send patients to Edgewater, Rogan never told any of the

hospital’s attorneys, nor did he ever report this information to the government. (USPFF. ¶

81). Given that Rogan had at his disposal the services of an experienced health care attorney,

Robert Hoban, the logical inference to be drawn here is that Rogan did not want counsel to

learn about irregularities involving the Rao contract. (Id.) According to Ehmen, Rogan did,

however, tell Ehmen to be on guard with Rao and Barnabas in the future. (Id.) Rogan’s

version of this same conversation with Ehmen, in which he testified that he asked Ehmen for

assurances that Ehmen had never behaved improperly, and upon receiving Ehmen’s alleged

assurances, never inquired on the topic again, is entirely at odds with the picture of Rogan’s

management style provided by Edgewater employees at trial.

3. Payoffs to Dr. Cubria

Andrew Cubria, M.D. was an invasive cardiologist who began practicing at Edgewater

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as a young doctor. Recruited by a fellow Cuban physician who had known Dr. Cubria’s

family for years in Chicago, Dr. Cubria initially was employed as a staff cardiologist when

Edgewater was owned and operated by the Masel family. Some years later, after Cubria had

left his employee position to focus on his private practice, Cubria became concerned about

Edgewater’s viability and began shifting his practice over to Illinois Masonic, a competing

hospital. At the time Rogan bought the hospital in 1989, Cubria resigned his cardiac

directorship position at Edgewater based on the hospital’s uncertain future, and treated most of

his patients at Illinois Masonic. (USPFF. ¶¶ 89-92).

Rogan and Ehmen were eager for Cubria to shift his business back to Edgewater.

Cubria had a substantial practice and controlled a heavy volume of cardiology patients. In the

early 1990’s, Edgewater paid for a build-out of office space for Cubria and other members of

his medical group, with the physicians supposed to pay for the build-out through increased

rent payments. After the build-out was finished, Cubria’s medical group split up, with two of

the physicians leaving for another hospital. In discussions with Cubria, Rogan offered to

waive Cubria’s portion of the remaining costs of the build-out (estimated by Cubria at

$40,000), if Cubria agreed to remain at Edgewater and increase his referrals to the hospital.

Cubria accepted the offer, remained at Edgewater, and began doing more procedures there.

(USPFF. ¶¶ 94-98). 

Cubria remained dissatisfied with Edgewater’s physical state, however, particularly the

catheterization lab. In 1994, Rogan had replaced the existing cath lab equipment with used

equipment that frequently broke down. For this and other reasons, Cubria continually

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threatened to move his patient base to other hospitals, and Rogan responded to these threats by

offering various inducements to Cubria to keep his patients at Edgewater. (USPFF. ¶¶ 111-

112).

In 1994, Cubria approached Rogan about increasing payments to Cubria and three

other cardiologists who held EKG reading contracts at Edgewater. Cubria wanted the

payments to increase from their previous rate of $1,500-$2,000 per month to $6,000 per

month, without any corresponding increase in duties. Cubria made clear to Rogan that if

Rogan did not agree, Cubria would move his business from Edgewater. Rogan agreed to pay

the $6,000, and signed a contract that ostensibly required Cubria to work 600 hours per year.

Rogan approved annual renewals of this contract with Cubria through 2000, without ever

inquiring whether Cubria worked anywhere near the hours required under the contract. Cubria

himself testified that he never worked more than about 91 hours per year, which translates into

an hourly rate of $720 – a sum far exceeding fair market value for the services. (USPFF. ¶¶

101-107).

Between 1995 and 2000, Rogan approved various contracts between Edgewater or

Braddock and Cubria, and also provided Cubria with loans and other benefits through a

variety of vehicles, all in return for Cubria’s promise to continue sending patients to

Edgewater. In 1996, Cubria asked Rogan to loan him money to enable Cubria to hire a

Hispanic cardiologist, Juan Diaz, M.D., for Cubria’s private practice. Rogan signed the loan,

which provided for payments before Cubria had even hired Dr. Diaz or incurred any salary

expenses. Cubria continued to receive loan payments even after he was in default on the note

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because Dr. Diaz did not join Cubria’s practice.

Cubria never hired a Hispanic cardiologist, but Rogan did not terminate the loan.

Instead, months after Dr. Cubria had hired a cardiologist named Dr. Goldstein, Rogan signed

an amended note. Edgewater never demanded repayment according to the schedule reflected

in the loan, and, as discussed later, when Cubria supposedly did repay the loan, he did so with

Edgewater’s own money. (USPFF. ¶¶ 113-116).

In addition to the loan, Cubria asked Rogan for more financial support to pay Dr.

Goldstein’s salary. Rogan then approved two contracts with Cubria’s professional corporation

for teaching and administrative services. While Dr. Goldstein did some teaching under the

contract, his teaching duties did not interfere with his ability to work several days a week in

Cubria’s private practice. Cubria never performed all the duties under the administrative

contract, and the contract exceeded fair market value on its face. Dr. Goldstein eventually

parted ways with Dr. Cubria, and in January 1998, Edgewater terminated the two contracts.

(USPFF. ¶¶ 117-119).

Unhappy about losing the income from the two contracts, Cubria asked Ehmen to

make him medical director for the cardiac rehabilitation program at Edgewater for $48,000 per

year. Ehmen briefed Rogan on Cubria’s demand and Rogan approved the contract. Cubria

never performed all the duties in the contract, and hospital personnel complained to Ehmen

and Rogan, but Rogan continued to pay Cubria under the contract. When asked at trial

whether he was ever concerned that Rogan would terminate his contract, Cubria explained that

he had no such worry – “I was far too valuable as far as admissions to the hospital.” (USPFF.

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¶¶ 132-134).

In 1997, in addition to the two Goldstein contracts, Cubria also asked Rogan for a

$150,000 loan to alleviate financial problems Cubria had due to a divorce and income tax

issues. Rogan agreed, and on April 14, the day before tax day, Cubria received a check from

Edgewater for $150,000. (USPFF. ¶ 120). During this same time frame, Cubria asked Rogan

to pay for advertising to benefit Cubria’s private practice. When Rogan subsequently asked

Cubria about possibly repaying some of the almost $250,000 that Cubria now owed

Edgewater, Cubria eventually responded that he could not come up with half the sum and

asked Rogan to pay him $80,000 to work on a “feasibility study” of the advertising that Cubria

had requested. Cubria would then use that money to cover a portion of the checks he would

write to Edgewater, ostensibly repaying half of the loans he’d been given. Without any

written contract specifying the work to be performed, the hours expected, etc., Rogan

proceeded to pay Cubria in two payments of $50,000 and $30,000. As the date of receipt on

both of Cubria’s checks to the hospital and the date of issuance of the first $50,000 check to

Cubria confirm, Cubria received the $50,000 from Edgewater before Edgewater’s accounting

department received Cubria’s checks, thus enabling Cubria to use Edgewater’s money to fund

his supposed loan repayment. (USPFF. ¶¶ 121-122, 124).

Cubria never performed anywhere near $80,000 worth of work on either the feasibility

study itself or the implementation. As demonstrated by the various drafts of the study, drafts

which Rogan admitted seeing, the vast bulk of the work was done by Edgewater employees,

including Roger Ehmen and one of his subordinates, Mary Wilbur. (USPFF. ¶ 123). Not

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surprisingly, Rogan decided to pay for the advertising that Cubria had requested. As shown at

trial, the commercials were filmed featuring Cubria himself and listing his own office number

for patients to call. During this same time frame, after counsel allegedly told Rogan that

paying for advertising would be legal if Edgewater purchased Cubria’s practice, Rogan agreed

to pay another $60,000 to Cubria for the option of purchasing his practice. Those discussions

ended in November 1997, but the commercials featuring Cubria nevertheless ran on television,

all courtesy of Rogan and Edgewater. The commercials benefitted Cubria with additional

patients to his private practice, to whom he then referred to Edgewater for any inpatient

hospital services. (USPFF. ¶¶ 126-130).

In 1999, Rogan gave Cubria a consulting contract with Braddock. Cubria never did

work commensurate with the payments made under the contract, and some of the “work”

consisted of Cubria pressuring other doctors about not sending patients to other hospitals if

they had contracts with Edgewater. (USPFF. ¶¶ 137-138). The loans he received were repaid

primarily with Edgewater’s own money, both through the feasibility study payments and when

Edgewater withheld the already inflated payments on his EKG contract. The cozy nature of

the relationship between Cubria and Rogan is well illustrated by Cubria’s testimony that when

Christmas rolled around and Cubria needed money, he simply asked Rogan to pay him the

$6,000 in December and January and Rogan agreed to do so. (USPFF. ¶ 136). In 2000,

Rogan provided Cubria with $5,000, supposedly in connection with the possible purcahse of

Cubria’s practice – money Cubria never repaid. (USPFF. ¶ 125). In February 2001, Rogan

also indirectly provided money to Cubria by giving approximately $9,800 in cash to another

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physician at Edgewater, who was told to and did give the cash to Cubria. (USPFF. ¶¶ 142).

In sum, Cubria never performed all or even a majority of the work required under his

contracts, and the contracts, loans and advertising were understood by both sides as a method

of funneling money to Cubria in exchange for his agreement to funnel patients to Edgewater. 

C. Rogan’s Efforts to Obstruct Justice

As he learned of the extent of the government’s investigation into the fraud at

Edgewater, Rogan undertook an increasingly desperate series of steps to conceal evidence of

his involvement in that fraud. Rogan’s efforts to cover up evidence of his fraudulent conduct

were blatant and egregious, and provide some of the most telling circumstantial evidence of

his involvement in illegal activity at Edgewater.

Ehmen had more direct contact with Rogan than any of the other co-conspirators, and

it stands to reason that Rogan knew that co-opting Ehmen was critical if Rogan was to avoid

being implicated in the government’s investigation. However, Rogan was aware that at least

one physician at Edgewater had worn a recording device, and needed to ensure that Ehmen

was not wired before speaking to him candidly. (USPFF. ¶ 161). Rogan solved this problem

by arranging to meet Ehmen at the Ritz-Carlton for a working lunch. After finishing the lunch

(and after another business colleague left), Rogan invited Ehmen to join him at the Ritz’s club

for a steam bath. The steam bath served Rogan’s purposes well – Rogan could watch Ehmen

disrobe to ensure that he was not wearing a wire, and Rogan and Ehmen could talk in privacy

inside the steam room. (USPFF. ¶¶ 162-163).

Rogan began the steam bath by speaking in metaphor – he relayed a story to Ehmen

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about a novel that he had purportedly read, in which the lead character had to take a fall for the

good of the organization if the organization was to survive. Rogan’s metaphor was hardly

subtle, and Ehmen picked up on its meaning immediately – that Ehmen needed to take

responsibility for the fraud at Edgewater if the hospital was to survive. Later in the steam

bath, Rogan dispensed with all abstract discussion, and told Ehmen explicitly that if Ehmen

would avoid implicating him, Rogan would see to it that Ehmen and his family were taken

care of forever. (USPFF. ¶ 164).

In 2001, Rogan repeatedly reiterated to Ehmen the point he had first made in the steam

bath – namely, that if Ehmen would take the fall for the fraud at Edgewater, Rogan would

ensure that Ehmen and his family were taken care of financially. Rogan conversed with

Ehmen about these topics in a unique manner. Rogan would conduct surface oral

conversations with Ehmen in which they would discuss innocuous topics, while Rogan passed

Ehmen written notes about the government’s investigation. Rogan was deeply concerned

about the possibility of hidden recording devices in his office, and used this method of

communicating to ensure that nothing inculpatory was ever stated orally. Rogan would

always take his written notes back after showing them to Ehmen, thus ensuring that they

would be destroyed. (USPFF. ¶¶ 165-167).

Rogan used the same bizarre modus operandi with Cubria – carrying on a surface oral

conversation about benign topics while passing Cubria written notes about the investigation.

In the notes he passed to Cubria, Rogan urged Cubria to destroy his computer, and told Cubria

not to share Rogan’s note-passing with anyone, including Cubria’s lawyer, as it could be

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construed as obstruction of justice. (USPFF. ¶¶ 168-173).

Rogan’s cover-up did not end with his efforts to co-opt Ehmen and Cubria. In August

2000, Rogan was aware that the hospital had received grand jury subpoenas seeking material

concerning his both his own and Braddock/Bainbridge’s financial relationships with

Edgewater. Despite his awareness of the government’s investigation into this issue, Rogan

authorized the destruction of 20 boxes of documents from Bainbridge’s Indiana offices in

August 2000 – boxes that may well have contained material responsive to the subpoenas.

(USPFF. ¶¶ 179-180). Given Rogan’s efforts – visible in his evasive testimony in this trial —

to obscure his financial connection to Edgewater’s fortunes, it is reasonable to infer that

Rogan’s destruction of these 20 boxes of documents were yet another attempt to frustrate the

government’s investigation into Rogan’s misconduct.

D. Criminal Convictions Arising Out of the Fraud at Edgewater

On May 17, 2001, a federal grand jury indicted Bainbridge (f/k/a/ Braddock), Roger

Ehmen, and Drs. Barnabas, Kumar, and Rao, for, among other things, “devising and

participating in a scheme to defraud health care providers and to obtain money and property by

means of false and fraudulent pretenses and to deprive certain individuals of the intangible

right of the defendant’s honest services in violation of 18 U.S.C. §§ 1341 and 1347.” United

States v. Bainbridge Management, et al., No. 01 CR 469 (N.D. Ill.). Cubria was charged in a

superseding indictment in October, 2001. All of the individuals and the corporate entity

eventually pleaded guilty to various criminal charges. Ehmen was sentenced to 78 months

imprisonment, Barnabas 52 months, and Cubria 151 months of incarceration. Braddock pled

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guilty to health care fraud, 18 U.S.C. 1347, and was ordered to pay $2.9 million in restitution.

(USPFF. ¶¶ 182-188).

By the end of April 2001, with the indictments imminent, the hospital’s board of

directors terminated Bainbridge’s management contract with the hospital, severing Rogan’s

ties to the institution. The hospital closed its doors to the public in December 2001 and filed

for bankruptcy protection in early 2002.

E. False Claims and Damages

Between 1995 and 2000, Rogan caused Edgewater to submit numerous claims for

payment to the federal Medicare and the state Medicaid programs. These claims took three

forms: (1) CMS form 2252s, or “cost reports;” (2) interim claims for reimbursement submitted

to the Medicare program on UB-92s for specific patients; and (3) “Hospital Statements of

Cost” submitted to the Illinois Medicaid program (Medicaid Cost Reports). Rogan supervised

Nancy Bryson and Henry Zeisel, the two individuals responsible for submitting Edgewater’s

claims to the Medicare and Medicaid programs. Rogan was fully aware that Zeisel and

Bryson were submitting the hospital’s claims to these programs for patients treated by

physicians to whom Rogan paid kickbacks. Rogan did nothing to stop these individuals from

filing Edgewater’s Medicare and Medicaid cost reports, and Medicare UB-92 claims, despite

knowing that they all falsely certified compliance with the Anti-kickback and/or Stark statutes.

At trial, the United States introduced into evidence Edgewater’s Medicare cost reports

and Medicaid Statements of Cost for the years 1995-1999. The United States also introduced

the UB-92 claims Edgewater submitted to the Medicare program for services provided at

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Edgewater to patients treated by Drs. Barnabas and Cubria. There are 1,812 UB-92 claims,

and the total amount reimbursed to Edgewater on those claims is $14,630,120. Edgewater’s

computer system tabulated the amount the hospital was reimbursed for Medicaid patients

treated at Edgewater by Drs. Barnabas or Cubria; that total is $4,469,115. (USPFF. ¶¶ 190-

234). 

II. ROGAN’S VIOLATIONS OF THE FCA

Peter Rogan violated the False Claims Act by causing Edgewater to submit false

claims for payment to the Medicare and Medicaid programs. The falsity of the claims derives

from Rogan having caused Edgewater to certify (both explicitly and implicitly) compliance

with the Anti-kickback and Stark statutes when billing Medicare and Medicaid for services

rendered by the hospital. In fact, Rogan knew that the hospital was in violation of these laws,

as he caused Edgewater to enter into arrangements with physicians that violated the plain

terms of one or both statutes. Rogan also violated the FCA by creating false records to

disguise the kickbacks and unlawful financial relationships with certain Edgewater physicians.

Finally, Rogan conspired with Roger Ehmen, Ravi Barnabas and Andrew Cubria to violate the

FCA by getting these false claims paid by the United States. As a result, the United States is

entitled to recover treble the amount it paid Edgewater in claims submitted in connection with

the payment of unlawful remuneration, plus penalties for each and every false claim. 

A. The Claims At Issue Here Are Actionable Under the FCA 

The FCA provides for liability on the part of any person who:

(1) knowingly presents, or causes to be presented, to an officer or employee of the

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United States Government . . . a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement

to get a false or fraudulent claim paid or approved by the Government;

31 U.S.C. § 3729. For the United States to recover from a defendant under the FCA, it must

prove by a preponderance of the evidence each of the following three elements:

1. That the defendant made, used, or caused another to make or use, a

false statement or document, or that the defendant caused to be

presented to the United States a false or fraudulent claim for payment;

and

2. That the defendant did so for the purpose of obtaining payment from the

government or approval of a claim against the government; and

3. That the defendant knew that the claim was false or fraudulent. 

31 U.S.C. § 3729; United States ex rel. Marcus v. Hess, 317 U.S. 537, 544-45 (1943).

A “claim” is a demand for the payment of government money or the transfer of

government property. United States v. Neifert-White Co., 390 U.S. 228 (1968); United States

v. Ekelman & Assocs., 532 F.2d 545 (6th Cir. 1976); United States v. Veneziale, 268 F.2d 504

(3d Cir. 1959). The Supreme Court has held that the FCA is intended “to reach all types of

fraud” and that the statute “reaches beyond ‘claims’ which might be legally enforced, to all

fraudulent attempts to cause the Government to pay out sums of money.” Neifert-White, 390

U.S. at 232. The FCA is not limited to cases where a person makes an actual

misrepresentation to the government. Rather, if appropriate knowledge on the part of the

defendant can be established, the FCA applies whenever someone wrongfully obtains money,

either directly or indirectly, from the government. Hess, 317 U.S. at 543-545. 

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False claims to Medicare, including Medicare cost reports and UB-92s, and false

claims to Medicaid are actionable under the civil FCA. Peterson v. Weinberger, 508 F.2d 45,

51 (5th Cir.), cert. denied, 423 U.S. 830 (1975); United States ex rel. Thompson v.

Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997) (claim that hospital falsely

certified compliance with the Stark statute in its cost report was actionable under the FCA);

United States ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d 409 (6th Cir. 2002)

(Circuit court affirmed liability under the FCA of provider who submitted false cost reports);

United States v. Medco Physicians Unlimited, 2001 WL 293110 (N.D. Ill. March 26, 2001)

(where provider knowingly included unallowable costs on cost report, claim was actionable

under the FCA); In re Cardiac Devices Qui Tam Litig., 221 F.R.D. 318, 343 (D. Ct. 2004)

(submission of UB-92 clearly constituted submission of “claim” to government); United

States ex rel. Tyson v. Amerigroup Ill., Inc., et al., 2005 WL 2667207 (N.D. Ill. Oct. 17, 2005)

(Medicaid claims submitted to a state are also “claims” to the federal government under the

FCA); United States ex rel. Murphy v. Baptist Medcare, Inc., No. 4:02-CV-440 (E.D. Ark.

Oct. 27, 2005) (same).

Between 1995 and 2000, Rogan caused Edgewater to submit numerous claims for

payment to the federal Medicare and the state Medicaid programs. These claims took three

forms: (1) CMS form 2252s, or “cost reports,” (2) interim claims for reimbursement

submitted to the Medicare program on UB-92s for specific patients; and (3) “Hospital

Statements of Cost” submitted to the Illinois Medicaid program (Medicaid Cost Reports). 

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B. The Claims at Issue Here Are False Under the FCA

The government’s core allegations in this case rest on the relationship between the

FCA and two statutory regimes – the Anti-kickback Statute and the Stark Statute – designed to

protect federal health care programs from fraud. As detailed below, the conduct prohibited by

these statutes is the precise conduct Peter Rogan engaged in repeatedly and regularly during

his ill-fated stewardship of Edgewater, at the same time he caused Edgewater to submit claims

certifying compliance with one or both statutes.

Rogan caused Edgewater to expressly certify compliance with the Anti-kickback and

Stark Statutes on the Medicare cost reports, and impliedly to do so on the hospital’s UB-92s

and Medicaid cost reports (the latter as to the Anti-kickback statute alone). Because the

hospital was not in compliance with these statutes at the time these claims were submitted, the

claims were false, and are actionable under the FCA. 

1. The Claims Certified Compliance with the Anti-kickback and/or

Stark Statutes

Express false certifications of compliance with the Anti-Kickback and Stark statutes

on a Medicare cost report are actionable under the FCA. See United States ex rel. Thompson

v. Columbia/HCA Healthcare Corp.,125 F.3d 899, 902 (5th Cir. 1997), on remand, 20 F.

Supp. 2d 1017 (S.D. Tex. 1998); United States ex rel. Bidani v. Lewis, 264 F. Supp. 2d 612

(N.D. Ill. 2003); United States ex rel. Pogue v. American Healthcorp. Inc., 914 F. Supp. 1507

(M.D. Tenn. 1996).

It is equally well established that the knowing submission of claims by a person who

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has violated a statute or regulation that contains, on its face, a direct nexus to the

government’s payment decision can also establish FCA liability. In such cases, liability

attaches notwithstanding the absence of an express certification. See, e.g., United States ex

rel. Augustine v. Century Health Svcs., Inc., 289 F.3d 409, 415 (6th Cir. 2002). Presentment

of the claim falsely represents an entitlement to payment that the claimant forfeited by

violating the other statute or regulation. See United States ex rel. Barrett v. Columbia/HCA

Healthcare Corp., 251 F.Supp.2d 28, 33 (D.D.C. 2003) (“[w]here the government pays funds

to a party, and would not have paid those funds had it known of the violation of a law or

regulation, the claim submitted for those funds contained an implied certification of

compliance with the law or regulation and was fraudulent.”).

Several courts have affirmed that the Stark and Anti-kickback statutes are in fact

conditions of payment, and that providers thus impliedly certify compliance with these statutes

when submitting claims to federal health care programs for reimbursement. See United

States ex rel. McNutt v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005)

(“compliance with [The Anti-kickback Statute] is necessary for reimbursement under the

Medicare program . . . .”); United States ex rel. Pogue v. Diabetes Treatment Centers of

America, 238 F.Supp.2d 258, 266 (D.D.C. 2002) (“The Stark laws . . . specifically state that

compliance is required in order to receive Medicare reimbursement.”); Thompson, 20 F.Supp

2d 1017, 1047-48 (defendants impliedly certified compliance with the Anti-kickback and

Stark Statutes when submitting claims to Medicare). In sum, by submitting claims to the

Medicare program, the provider implicitly certifies that it has complied with the Stark and

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Anti-kickback statutes with respect to those claims.

The express false certifications at issue in this case can be found on the face of the cost

reports that Edgewater submitted to Medicare annually for cost report years 1995-1999.

Hospitals are paid by Medicare on an interim basis (through the filing of electronic UB-92

claims forms, among other submissions) for services and items rendered; however, in order to

retain eligibility for those payments, CMS requires hospitals to submit annually a cost report. 

Cost reports are the final “claim” that a provider submits to the Medicare program for items

and services rendered to Medicare beneficiaries. After the end of each hospital’s fiscal year,

the hospital files its cost report with its designated Medicare fiscal intermediary, stating the

amount of reimbursement the provider believes it is due for the year. See 42 U.S.C.

§ 1395g(a); 42 C.F.R. § 413.20. See also 42 C.F.R. § 405.1801(b)(1). Medicare relies upon

the hospital’s cost report to determine whether the provider is entitled to more reimbursement

than already received through interim payments, or whether the provider has been overpaid

and must reimburse Medicare. 42 C.F.R. §§ 405.1803, 413.60 and 413.64(f)(1). 

Medicare cost reports, including those submitted by Edgewater, contain the following

language:

Misrepresentation or falsification of any information contained in this cost report may

be punishable by criminal, civil and administrative action, fine and/or imprisonment

under federal law. Furthermore, if services identified in this report were provided or

procured through the payment directly or indirectly of a kickback or where otherwise

illegal, criminal, civil and administrative action, fines and/or imprisonment may result.

Furthermore, providers certify on the face of the cost report that:

to the best of my knowledge and belief, it [the hospital cost report] is a true, correct

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and complete statement prepared from the books and records of the provider in

accordance with applicable instructions, except as noted.

I further certify that I am familiar with the laws and regulations regarding the provision

of health care services, and that the services identified in this cost report were provided

in compliance with such laws and regulations.

(USPFF. ¶¶ 147-148). 

Henry Zeisel signed the majority of these certifications, and testified that if he had

known about the kickbacks and improper financial relationships at Edgewater, he would never

have signed these certifications, and would have informed Ken Huff, his predecessor as CFO,

before Huff signed the 1995 cost report. (USPFF. ¶¶ 152-155). 

In addition to the cost reports, Rogan also caused Edgewater to submit interim UB-92

claim forms for reimbursement to the Medicare program, as well as annual Medicaid cost

reports to the Illinois Department of Public Aid, for services provided to patients of Doctors

Barnabas and Cubria. While these claims do not contain the same express certification of

compliance with applicable statutes found on the Medicare cost reports, the statutes at issue

make plain on their face that compliance with their terms is a condition of payment. 

In sum, Rogan caused Edgewater to submit claims to Medicare and the state Medicaid

program during the period in question. In submitting such claims, Rogan caused Edgewater to

explicitly and implicitly certify compliance with the Anti-kickback and Stark Statutes. As will

be described below, Rogan knew that such claims were false, because Rogan knowingly

caused the hospital to enter into arrangements with certain physicians that plainly violated

these statutes. Hence, Rogan knowingly caused the hospital to submit false claims, rendering

him liable to the government under the FCA. 

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2. Rogan Violated the Anti-kickback Statute

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (as amended), prohibits any

person or entity from offering, making or accepting payment to induce or reward any person

for referring, recommending or arranging for federally-funded medical services, including

services provided under the Medicare and Medicaid programs. In pertinent part, the Antikickback Statute reads:

(b) Illegal remuneration

* * *

(2) whoever knowingly and willfully offers or pays any

remuneration (including any kickback, bribe, or rebate) directly

or indirectly, overtly or covertly, in cash or in kind to any person

to induce such person --

(A) to refer an individual to a person for the furnishing

or arranging for the furnishing of any item or service for

which payment may be made in whole or in part under a

Federal health care program, or

(B) to purchase, lease, order or arrange for or

recommend purchasing, leasing or ordering any good,

facility, service, or item for which payment may be made

in whole or in part under a Federal health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined

not more than $25,000 or imprisoned for not more than five years, or

both.

42 U.S.C. § 1320a-7b(b). 

Payment of remuneration of any kind violates the statute if one or any purpose for that

remuneration was to induce referrals. United States v. Greber, 760 F.2d 68, 72 (3d Cir.

1985)(“If the payments were intended to induce the physician to use Cardio-Med’s services,

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the statute was violated, even if the payments were also intended to compensate for

professional services.”); United States v. Bay State Ambulance & Hosp. Rental Serv., Inc.,

874 F.2d 20, 30 (1st Cir. 1989) (“The issue of sole versus primary reason for payments is

irrelevant since any amount of inducement is illegal.”) (emphasis in original); United States v.

McClatchey, 217 F.3d 823 (10th Cir. 2000) (adopting one-purpose test set forth in Greber);

see also United States v. Kats, 871 F.2d 105 (9th Cir. 1989). 

As the Seventh Circuit stated in finding “handling fees” paid to doctors by a laboratory

testing company to be disguised bribes for referrals, 

In the context of Congress' regulation of the expenditure of enormous

sums of federal funds under the Medicare and Medicaid programs, making

payments in return for Medicare referrals is corrupt. The potential for increased

costs to the Medicare-Medicaid system and misapplication of federal funds is

plain where payments for the exercise of such judgments are added to the

legitimate costs of the transaction.

United States v. Hancock, 604 F.2d 999,1001-02 (7th Cir. 1979), cert. denied. 444 U.S. 991

(1979). The Seventh Circuit held in Hancock that payments to physicians in return for the

physicians’ promise to send patients to a particular facility qualified as kickbacks. Hancock,

604 F.2d at 1002 (“the defendants were able to open up or control the payment of federal

funds to Chem-Tech by sending Medicare or Medicaid patients tissue specimens to ChemTech . . . .”).

Giving a person the opportunity to earn money may constitute an inducement under the

Anti-kickback statute. “The gravamen of Medicare Fraud is inducement. Giving a person an

opportunity to earn money may well be an inducement to that person to channel potential

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Medicare payments towards a particular recipient.” Bay State Ambulance, 874 F.2d at 29 (1st

Cir. 1989).

The Seventh Circuit broadly interprets the term “refer” as used in the Anti-kickback

statute, and has held that it is not limited to the physician who formally authorizes a particular

service. United States v. Polin, 194 F.3d 863, 866-67 (7th Cir. 1999) (“refer” and

“recommend” as used in the Anti-kickback statute may apply to physicians or others who

refer, recommend, turn over, select or give business to a particular recipient). 

HHS has promulgated regulations specifying those payment practices that will not be

subject to criminal prosecution or provide a basis for administrative exclusion. Known as the

“Safe Harbor” regulations, 42 C.F.R. § 1001.952, the Safe Harbors list various circumstances

under which a financial relationship between a provider and a referral source would not give

rise to liability under the Anti-kickback statute. 

Payments to a physician under a personal service agreement must meet all of the

following requirements in order to qualify for the Safe Harbor during the time period in

question, 42 C.F.R. § 1001.952(d) (1991):

(1) The agency agreement is set out in writing and signed by the parties.

(2) The agency agreement specifies the services to be provided by the agent.

(3) If the agency agreement is intended to provide for the services of the agent on a

periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the

agreement, the agreement specifies exactly the schedule of such intervals, their precise

length, and the exact charge for such intervals.

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The regulations were amended in November 1999, primarily to add the seventh 1

requirement set forth below: 

(1) The agency agreement is set out in writing and signed by the parties.

(2) The agency agreement covers all of the services the agent provides to the principal for

the term of the agreement and specifies the services to be provided by the agent.

(3) If the agency agreement is intended to provide for the services of the agent on a

periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the

agreement, the agreement specifies exactly the schedule of such intervals, their precise

length, and the exact charge for such intervals.

(4) The term of the agreement is for not less than one year.

(5) The aggregate compensation paid to the agent over the term of the agreement is set in

advance, is consistent with fair market value in arms-length transactions and is not

determined in a manner that takes into account the volume or value of any referrals or

business otherwise generated between the parties for which payment may be made in

whole or in part under Medicare or a State health care program.

(6) The services performed under the agreement do not involve the counselling or

promotion of a business arrangement or other activity that violates any State or Federal

law.

(7) The aggregate services contracted for do not exceed those which are reasonably

necessary to accomplish the commercially reasonable business purpose of the services. 

42 C.F.R. § 1001.952(d) (2000).

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(4) The term of the agreement is for not less than one year.

(5) The aggregate compensation paid to the agent over the term of the agreement is set

in advance, is consistent with fair market value in arms-length transactions and is not

determined in a manner that takes into account the volume or value of any referrals or

business otherwise generated between the parties for which payment may be made in

whole or in part under Medicare or a State health care program.

(6) The services performed under the agreement do not involve the counselling or

promotion of a business arrangement or other activity that violates any State or Federal

law.

42 C.F.R. § 1001.952(d) (1991); see Nursing Home Consultants, Inc. v. Quantum Health 1

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Servs. Inc., 926 F. Supp. 835, 844 (E.D. Ark. 1996) (defendant must fully comply with Safe

Harbor provisions); United States v. Neufeld, 908 F. Supp. 491, 497-98 (S.D. Ohio 1995)

(defendant must fully comply with a safe harbor provision to avoid prosecution).

The finder of fact may infer that payments were intended to be kickbacks based on

testimony that the recipient of the payments “was grossly overpaid . . . for any legitimate

professional services he may have rendered.” United States v. Norton, 2000 WL 33281703 *4

(W.D. Va. Nov. 14, 2000).

As discussed below, the transactions that Rogan engaged in with Drs. Barnabas, Rao

and Cubria violated the Anti-kickback statute and did not qualify for a Safe Harbor. Rogan

entered into these transactions with the physicians to induce their referrals of patients to

Edgewater. 

First, beginning in 1993 and continuing through 1998, Rogan arranged for Edgewater

to enter into a series of teaching and physician recruiting contracts with Barnabas. (USPFF. ¶¶

34-56). Rogan’s purpose in causing the hospital to enter these contracts was to induce

Barnabas to refer his substantial body of patients to Edgewater. (USPFF. ¶ 56). Barnabas was

paid $60,000 per year through these contracts, and was not expected to (nor did he) perform

all the obligations spelled out in the contracts. (USPFF. ¶¶ 40, 44, 48, 50, 56). The contracts

thus exceeded fair market value and required few (if any) services, thus failing to satisfy the

Safe Harbor requirements. The purpose of all of the contracts was to induce Barnabas’s

referral of patients to Edgewater, and hence Rogan’s conduct violated the Anti-kickback

Statute as well. 

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Second, in 1997, Rogan caused Edgewater to make a series of payments to and

ultimately enter into a contract with Dr. Rao, ostensibly to manage the hospital’s anesthesia

services, and later its detox program. (USPFF. ¶¶ 61-62, 85-87). Rogan’s purpose in causing

the hospital to make these payments and execute these contracts was to induce Rao to refer a

substantial number of patients to Edgewater. (USPFF. ¶ 74, 85-87). The anesthesia

arrangement also provided Dr. Barnabas an opportunity to bill the Medicare and Medicaid

programs because Rao’s referrals were admitted to Edgewater through Barnabas, who could

then bill for services provided to these patients. (USPFF. ¶ 63). The contracts did not satisfy

the Safe Harbor given that the compensation amounts were set in a manner related to the

expected value of referrals. The purpose of both contracts was to induce referrals to

Edgewater from Rao, and hence the arrangement violated the Anti-kickback Statute. 

Third, as with Drs. Rao and Barnabas, Rogan entered into various kickback

arrangements with Dr. Cubria, beginning prior to 1995 and continuing on forward into 2000.

Beginning with Rogan’s forgiveness of Cubria’s debt for his office build-out, time and time

again, Rogan acceded to Cubria’s demands in order to keep Cubria’s patients at Edgewater.

Rogan increased Cubria’s EKG reading contract payment to $6,000, a sum far exceeding fair

market value, in order to induce referrals, and continued the payments through 2000. (USPFF.

¶¶ 103-107). Rogan approved payments to Cubria in 1995 ostensibly for teaching without any

contract to support the payments, and Cubria testified that he did not teach at Edgewater.

USPFF. ¶¶ 99-100). In light of the circumstances surrounding Rogan and Cubria’s

relationship, the only logical inference to be drawn is that the payments were yet another

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vehicle to funnel money to Cubria in return for referrals.

The list of benefits that Rogan provided to Cubria goes on and on - further evidence of

Rogan’s willingness to pay for business. In 1996, Rogan loaned Cubria $84,000 and awarded

him two services contracts to help Cubria hire a physician for Cubria’s own private practice,

thereby saving Cubria the expense of a salary and giving him the ability to bill for the second

cardiologist’s services. (USPFF. ¶¶ 113-115). In 1997, Rogan loaned Cubria $150,000 of

Edgewater’s money due to Cubria’s personal financial problems. (USPFF. ¶ 120). When

Cubria explained that he would have difficulty paying back even half of what he owed the

hospital at that point, Rogan agreed to pay Cubria another $80,000, without so much as even a

written contract for the payments. (USPFF. ¶ 121). The ostensible purpose of the $80,000

payment was for Cubria’s work on a feasibility study of advertising that Cubria himself had

requested that Edgewater provide for his private practice. (Id). The sham nature of the

arrangement is further buttressed by the fact that Roger Ehmen and one of his subordinates did

most of the work on the study, with Cubria not doing anything remotely approaching $80,000

worth of work. (USPFF. ¶¶ 123-124). 

Not surprisingly, Rogan agreed to fund the requested advertising for Cubria’s practice.

(USPFF. ¶ 126). When advised that it would not be appropriate to pay for advertising to

benefit Cubria unless Edgewater purchased Cubria’s practice, Rogan paid Cubria another

$60,000 for an option to purchase Cubria’s practice. (USPFF. ¶ 125). When negotiations fell

apart, Rogan still went ahead with the advertising for Cubria, paying for commercials starring

Cubria and featuring his office number, with only a small mention of Edgewater itself in the

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commercials. (USPFF. ¶ 127). The ads drew patients into Cubria’s practice – patients who

Cubria then referred to Edgewater for treatment. (USPFF. ¶ 129). 

In1998, Rogan approved giving Cubria a cardiac rehabilitation directorship contract

for $48,000 per year. (USPFF. ¶ 132). The amount exceeded fair market value for the

services described in the contract, and far exceeded fair market value for the services that

Cubria actually provided. (USPFF. ¶¶ 133-134). The purpose of the contract was to keep

Cubria happy at Edgewater. (Id.). In 1999, Rogan gave Cubria another contract, this time

with Braddock. (USPFF. ¶ 137). Cubria received payment in advance for some of the work,

which he never fully performed. (USPFF. ¶¶ 138-140). Some of the “work” he did perform

involved pressuring other physicians to whom Rogan had given contracts to keep their patients

at Edgewater – hardly a legitimate task. (Id.). In sum, Rogan ensured a steady flow of money

to Dr. Cubria in order to ensure a correspondingly steady flow of patient referrals. The final

transaction between the two men occurred in February 2001, after news of the investigation

had broken. After urging Cubria to destroy his computer to avoid incriminating himself or

Rogan, Rogan gave $9,800 in cash to Cubria. (USPFF. ¶ 142). Rather than giving the money

directly to Cubria, Rogan arranged for another physician, Dr. Lopez, to physically hand the

money to Cubria. (Id). 

3. Rogan Violated the Stark Statute

Enacted as amendments to the Social Security Act, the Stark Statute, codified at 42

U.S.C. § 1395nn, prohibits a hospital (or other entity providing designated healthcare items or

services) from submitting Medicare claims for payment based on patient referrals from

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physicians having a prohibited “financial relationship” (as defined in the statute) with the

hospital. 

The Stark Statute establishes the bright-line rule that the United States will not pay for

claims submitted by a hospital for items or services referred by a physician with whom the

hospital has a prohibited financial relationship. The statute provides, in pertinent part:

(a) Prohibition of certain referrals

(1) In general

Except as provided in subsection (b) of this section, if a

physician (or an immediate family member of such physician)

has a financial relationship with an entity specified in paragraph

(2), then --

(A) the physician may not make a referral to the entity

for the furnishing of designated health services for which

payment otherwise may be made under this subchapter,

and

(B) the entity may not present or cause to be presented a

claim under this subchapter or bill to any individual,

third party payor, or other entity for designated health

services furnished pursuant to a referral prohibited under

subparagraph (A).

42 U.S.C. § 1395nn (emphasis added).

In the Stark Statute, “referral” is defined as “the request or establishment of a plan of

care by a physician which includes the provision of designated health services.” 42 U.S.C.

§ 1395nn(h)(5)(A). The accompanying regulations interpreting the statute broadly define

“referral” as, among other things, “a request by a physician that includes the provision of any

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designated health service for which payment may be made under Medicare, the establishment

of a plan of care by a physician that includes the provision of such a designated health service,

or the certifying or recertifying of the need for such a designated health service . . . .” 42 C.F.R

§ 411.351. A referring physician is defined in the same regulation as “a physician who

makes a referral as defined in this section or who directs another person or entity to make a

referral or who controls referrals made to another person or entity.” Id. 

On CMS Form UB-92s, hospitals are required to designate the patient’s attending

physician and the physician that performed the principal procedure (the “operating”

physician). See Medicare Hospital Manual, 460, FL 82-83. A UB-92 is the hospital’s claim

for Medicare reimbursement for a service it provided that was requested by a given patient’s

attending or operating physician, was included in the plan of care established by the patient’s

attending or operating physician, or certified as necessary by the patient’s attending or

operating physician. Hence, a physician designated as an attending or operating physician on

a hospital’s UB-92 form qualifies as a “referring” physician under the Stark Statute. 

The Stark Statute broadly defines prohibited financial relationships to include any

“compensation” paid directly or indirectly by a hospital to a referring physician. The statute’s

exceptions then identify specific transactions that will not trigger its referral and billing

prohibitions. In order to avoid the referral and billing prohibitions in the statute, a hospital’s

financial relationship with a physician must meet the requirements of one of these enumerated

exceptions. 

In order for compensation paid to a referring physician serving as a hospital consultant

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 Regulations published in 2001 (after the time period relevant to this case) created an

2

additional potential exception for certain physician services arrangements. See 42 C.F.R.

411.357(1). 

-39-

or director to fall within an exception to the statute, the contract must (1) be in writing and

signed by the parties; (2) be for a term of at least a year; (3) specify the services covered, cover

all the services to be provided by the physician, with the aggregate of such services reasonable

and necessary for the legitimate business purposes of the hospital; and (4) set the payment for

contract services in advance, consistent with fair market value for services actually rendered,

not taking into account the volume or value of the referrals or other business generated

between the parties. 42 U.S.C. § 1395nn(e)(3). 

2

Compensation paid to a physician (directly or indirectly) under a medical directorship

or other contractual arrangement that exceeds fair market value, for which no actual services

are required, or which takes into account the volume or value of the referrals or other business

generated between the parties, triggers the referral and payment prohibitions of Stark II with

respect to designated health services referred by that physician.

Rogan’s dealings with Drs. Barnabas and Cubria failed to satisfy any of the exceptions

set forth in the Stark statute. The teaching contract with Dr. Barnabas that extended into 1995

did not accurately describe the recruiting services that Barnabas ostensibly was doing,

provided for payments for teaching services that were never performed, and the compensation

amount was tied to referrals. Dr. Barnabas’s recruiting contracts similarly failed to meet the

fair market value requirement and provided for compensation tied to referrals. 

Rogan’s various financial relationships with Cubria similarly failed to satisfy the

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exceptions set forth in the Stark statute. All of Cubria’s professional services contracts with

Edgewater exceeded fair market value and the amounts were always set in order to maintain

his referrals to Edgewater. The teaching payments in 1995 were not made pursuant to any

contract with Cubria, and were for services not performed. The $80,000 payment to Cubria in

1997 similarly lacked the benefit of any written contract and the payment far exceeded fair

market value for the services provided. Finally, the loans and advertising provided to Cubria

did not fit within any exception in the Stark statute.

If a relationship between a physician and a hospital does not meet one of the

exceptions in the statute, the hospital is prohibited from billing for “designated health

services” (which includes inpatient and outpatient hospital services) referred by that physician.

If a hospital submits prohibited claims and collects payment, the regulations implementing 42

U.S.C. § 1395nn expressly require that the hospital refund all collected amounts on a timely

basis. 42 C.F.R. § 411.353 (emphasis added). Thus, because Edgewater’s relationships with

Drs. Barnabas and Cubria failed to satisfy the exceptions in the Stark statute, Edgewater was

prohibited from billing for inpatient services for patients treated by the two physicians and

should have refunded the payments it received. 

C. Rogan Caused the Submission of Knowingly False Claims

1. Rogan Caused Edgewater to Submit the Cost Reports and UB-92s

A defendant “causes” the submission of a false claim when he instructs others to

submit false claims or delegates that responsibility to others. United States v. Mackby, 261

F.3d 821, 827–29 (9th Cir. 2001) (physical therapy provider who instructed office personnel

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to submit claims was liable under FCA) United States v. Krizek, 111 F.3d 934, 942 (D.C. Cir.

1997) (physician who delegated billing responsibility to wife and office staff was liable under

the FCA). Establishing procedures that cause others to present false claims can also give rise

to FCA liability. United States v. Teeven, 862 F.Supp 1200, 1223 (D. Del. 1992). The

causation element of the FCA can be satisfied by “anyone who knowingly assists in causing

the government to pay claims grounded in fraud.” United States ex rel. Riley v. St. Luke’s

Episcopal Hosp., 355 F.3d 370, 378 (5th Cir. 2004). 

Rogan was responsible for the submission of Medicare and Medicaid claims by

Edgewater both legally and practically. First, Rogan was the majority owner of and worked

for Braddock (later renamed Bainbridge), which entered into a series of management contracts

with Edgewater, providing that Braddock would act as the exclusive manager of the day-today operations of the hospital, which included the submission of claims to Medicare and

Medicaid for services rendered to patients, and would supervise and manage all billings,

collections and cost reporting. (USPFF. ¶¶ 11-21). Second, Rogan was the CEO of

Edgewater through 1997 and supervised the CEO after that, and both of the individuals

responsible for submitting claims, Nancy Bryson and Henry Zeisel, reported directly to Rogan.

(USPFF. ¶¶ 7, 144, 146, 157). In addition, as Zeisel testified, the Medicare program

corresponded directly with Rogan concerning cost report issues. (USPFF. ¶ 146). Finally, a

defendant who engages in conduct that violates a condition of payment, knowing that claims

will subsequently be submitted seeking payment from the federal government despite the

disqualifying conduct, has certainly caused the false claim to be submitted. In sum, Rogan

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was in charge of Edgewater and had direct oversight of false claims submitted in this case. 

2. Rogan Knew the Claims Were False

For purposes of the FCA, “knowledge” that the statement or document was false or

fraudulent means that the defendant:

1. had actual knowledge that the claim was false;

2. acted in deliberate ignorance of the truth or falsity of the claim; or

3. acted in reckless disregard of the truth or falsity of the claim. 

No specific intent to defraud is required. 31 U.S.C. § 3729(b); United States ex rel Lamers v.

City of Green Bay, 168 F.3d 1013, 1018 (7th Cir. 1999). 

Rogan was fully aware that the hospital’s contracts and financial relationships with

Cubria, Barnabas, and Rao were devised to induce these physicians’ referrals. He testified to

his knowledge of the Stark and Anti-kickback statutes. (USPFF. ¶ 150). As the CEO and

later head of the management company that operated Edgewater, Rogan was also fully aware

of the fact that the hospital was routinely submitting claims to the Medicare and Medicaid

programs for services on behalf of patients referred and/or treated by Cubria and Barnabas.

(USPFF. ¶ 158). Rogan directly supervised the individuals responsible for signing the

hospital’s Medicare and Medicaid cost reports and overseeing the submission of UB-92 forms.

He never once informed these individuals that some of the services contained in the reports

were procured through the payment of illegal kickbacks or in violation of the Stark Statute.

(USPFF. ¶¶ 152, 158). 

Even if Rogan’s denials of knowledge were credible, which they certainly were not, he

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would stand as a shining example of deliberate ignorance and reckless disregard under the

FCA. As CEO of the hospital, Rogan signed contract after contract requiring physicians that

he knew had busy practices to work hundreds and hundreds of hours for Edgewater,

sometimes under multiple contracts. He received complaints that Dr. Cubria, for example,

was not performing his directorship duties, yet he did nothing to stop the payments to Dr.

Cubria. (USPFF. ¶ 133). He admitted personally negotiating payments to Cubria without the

benefit of any contract, an automatic violation of the Stark statute. He never bothered to have

anyone at Edgewater send Cubria a loan repayment schedule, despite arranging for the

hospital to loan Cubria over a quarter of a million dollars. Rogan claimed to have received

some type of legal advice that the hospital should buy Cubria’s practice before paying for

advertising for him, yet Rogan approved payments for such advertising knowing that

Edgewater had not purchased Cubria’s practice. (USPFF. ¶ 126). Rogan admitted being told

by Dr. Rao in August 1998 that Dr. Rao had been using Edgewater’s money to pay for patient

referrals to Edgewater, yet Rogan never bothered to disclose this information to the hospitals’s

attorneys. (USPFF. ¶ 81). See United States ex rel. Asch v. Teller, Levitt, and Silvertrust,

P.C., 2004 WL 1093784 *3 (N.D. Ill. May 7, 2004) (“No person having specialized

knowledge of such matters such as a CPA was consulted, no attorney oversaw the work of the

non-attorney employees who were involved in the actual receipt of account payments, or gave

the employees any guidance on how they should handle such payments. Such conduct

certainly constitutes deliberate indifference and reckless disregard as a matter of law.”). 

In sum, regardless of which prong of the FCA’s knowledge requirement is applied,

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Rogan knowingly caused Edgewater to submit approximately $18,000,000 in false claims, and

is liable under the FCA for these actions. 

D. Rogan Conspired with Others to Cause the Submission of False Claims

Section 3729(a)(3) of the FCA prohibits “conspir[ing] to defraud the government by

getting a false or fraudulent claim allowed or paid.” 31 U.S.C. § 3729(a)(3). General civil

conspiracy principles apply to FCA claims under 31 U.S.C § 3729(a)(3), meaning that to

prevail on this count, the government need only show a single illegal plan, a shared general

conspiratorial objective, and an overt act committed in furtherance of the conspiracy that

damaged the United States. See generally United States v. Murphy, 937 F.2d 1032, 1039 (6th

Cir. 1991).

The evidence at trial showed that Rogan conspired with Ehmen and Drs. Barnabas,

Cubria and Rao to engage in a kickback scheme designed to benefit Edgewater, Rogan and the

physicians themselves through payments to the physicians and patient referrals to Edgewater.

Rogan committed numerous overt acts in furtherance of this conspiracy, including negotiating

the kickbacks himself, signing contracts that obligated Edgewater funds to pay the kickbacks,

and ensuring that claims for patients referred by the physicians involved were submitted to the

Medicare and Medicaid programs. This Court has already found that the United States has

proved, by a preponderance of the evidence, that a conspiracy existed of which Mr. Rogan was

a part. While this ruling was for evidentiary purposes only, it was a necessary and critical step

towards an ultimate finding of liability in this case. 

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 False claims submitted after September 29, 1999 incur a penalty of between $5,500 and 3

$11,000 per claim. See 28 C.F.R. § 85. 

-45-

III. DAMAGES AND PENALTIES

The FCA provides for treble damages and a civil penalty of $5,000 to $10,000 for each

false claim submitted. See 31 U.S.C. § 3729(a). The court assesses the penalties and applies 3

the treble damages multiplier. See United States ex rel. Chandler v. Cook County, 538 U.S.

119, 123 S. Ct. 1239, 1247 (2003) (“[U]nder the FCA, if [the jury] finds liability, its

instruction is to return a verdict for actual damages, for which the court alone then determines

any multiplier, just as the court alone sets any separate penalty.”). The imposition of penalties

is mandatory. See United States v. Hughes, 585 F.2d 284, 286 (7th Cir. 1978). 

Under the FCA, the United States is entitled to recover all damages incurred “because

of” the false claims at issue in this case. The term “because of” simply means those damages

that were caused by or would not have occurred but for the false claims and false statements.

United States v. First Nat’l Bank of Cicero, 957 F.2d 1362, 1374 (7th Cir. 1992). The

measure of damages the United States is entitled to recover under the FCA is the amount of

money the government paid out by reason of the false claims over and above what it would

have paid out if the claims had not been false or fraudulent. Marcus, 317 U.S. at 543-545;

Neifert-White, 390 U.S. at 232. 

In the instant case, the United States would have paid Edgewater nothing for hospital

claims related to patients referred to Edgewater by physicians with a prohibited financial

relationship with the hospital. See 42 U.S.C. § 1395nn. Barnabas and Cubria both had

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prohibited financial relationships with Edgewater. Hence, the United States’ damages are the

value of claims Edgewater submitted on behalf of patients referred to the hospital by Barnabas

and Cubria – i.e. the claims for which either Barnabas or Cubria served as either the attending

or operating physician. 

In addition to the damages figure discussed above, Rogan is liable for a civil penalty

for each false claim submitted to the United States. See 31 U.S.C. § 3729(a); United States v.

Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726, 727 (7th Cir. 2006). Pursuant to the Debt

Collection Improvement Act, Pub. L. 104-134, penalties for false claims submitted as of

September 29, 1999 are $5,500 to $11,000. See 64 Fed. Reg. 47099, 47103 (1999).

Though the imposition of penalties is mandatory, see 31 U.S.C. § 3729 (specifying that

any person who engages in one of seven enumerated categories of conduct “is liable to the

United States Government for a civil penalty of not less than $5,000 and not more than

$10,000, . . .” (emphasis added)), the Court determines the penalty figure. See Chandler, 123

S. Ct. at 1247.

Rogan is liable and subject to a civil penalty for the presentation of 1,822 claims for

payment. (USPFF ¶ 215, 218, 233). 522 of those claims were UB-92s submitted to the

Medicare program for patients with whom Dr. Barnabas was identified as either the attending

or operating physician. (USPFF ¶ 207). 1,290 of those claims were UB-92s submitted to the

Medicare program for patients with whom Dr. Cubria was identified as either the attending or

operating physician. (USPFF ¶ 214). Five of the claims were Medicare cost reports submitted

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between 1995-2000, (USPFF ¶ 215), and the final five claims subject to penalties were cost

reports submitted to the Medicaid program. (USPFF ¶ 233). Of the 1,290 claims submitted

for Dr. Cubria’s patients, 316 fell after the September 29, 1999 increase in the penalty

spectrum pursuant to the Federal Debt Collection Act. (USPFF ¶ 217). One Medicare cost

report and one Medicaid cost report were also submitted after September 29,1999. (USPFF.

¶¶ 217, 233). 

The Court should impose the maximum penalty for each of the false claims that Rogan

caused to be presented to the United States – $10,000 for those claims submitted before

September 29, 1999, and $11,000 for those claims submitted after that date. The maximum

penalty is appropriate in this case as a consequence of the seriousness of the conduct for which

Rogan is liable. The evidence at trial showed that Rogan was the critical participant and

instigator in a wide-ranging scheme over many years to defraud the Medicare and Medicaid

programs. Rogan’s illegal activity resulted in criminal indictments, guilty pleas,

incarcerations, and a millions upon millions of dollars in losses to the Medicare and Medicaid

trust funds, all of which resulted in Rogan’s own personal financial gain. Moreover, the

evidence showed that Rogan went to great lengths to cover up his involvement in the illegal

activity, including destroying documents and asking his close associates to destroy their

computers and their contracts. (USPFF. ¶¶ 159-181). Rogan is guilty of the exact sort of

“serious misconduct,” Hays v. Hoffman, 325 F.3d 982, 994 (8th Cir. 2003), for which the

maximum penalty amount is appropriate. The evidence also showed that Rogan caused false

claims to be submitted with actual knowledge of their falsity – this is not a case where liability

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stems from a mental state of reckless disregard or deliberate ignorance.

Of the 1,822 false claims, all but 318 were presented before the September 29, 1999

increase in the penalty spectrum. (USPFF. ¶¶ 216, 233). Consequently, those 1,504 claims

should subject Rogan to a penalty of $10,000 each, in the total amount of $15,040,000. The

final 318 claims that were submitted on or after September 29, 1999 should be subject to a

penalty of $11,000 each, for a total of $3,498,000. The final penalty figure for the false claims

comes out to $18,538,000.

In the instant case, Rogan caused Edgewater to submit $14,630,120 million in false

claims to the Medicare program and $4,469,115 in false claims to the Medicaid program.

(USPFF. ¶¶ 218, 234). The federal share of the funds fraudulently obtained from the

Medicaid program is $2,234,557.50, or 50% of the total. (USPFF. ¶ 234). The United States

has been damaged in the amount of $16,864,677.50 through Rogan’s misconduct; when

trebled, as required by law, the government’s damages total $50,594,032.50. When the

penalties are added to the government’s damages , the total comes to $69,132,032.50. The

United States is entitled to a judgment against Rogan in this amount pursuant to the FCA. 

IV. COMMON LAW CLAIMS

The United States also asserts claims for common law fraud, unjust enrichment, and

payment under mistake of fact in its complaint. Each of these alternative theories of recovery

involve the rights of the federal government under a nationwide program, and hence are

governed by federal common law. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726

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(1979). 

The elements of common law fraud are: “(1) a false statement of material fact,

(2) knowledge or belief of the falsity by the party making it, (3) intention to induce the other

party to act, (4) action by the other party in reliance of the truth of the statements, and (5)

damage to the other party resulting from such reliance.” Indemnified Capital Investments, SA.

v. R.J. O'Brien & Assocs., Inc., 12 F.3d 1406, 1412 (7th Cir. 1993) (citation omitted). In the

instant case, Rogan knowingly caused Edgewater to falsely certify compliance with applicable

statutes and regulations, in order to induce the United States to pay false claims. The United

States paid claims it would not have paid had it been informed of the true facts underlying

Edgewater’s relationships with certain physicians, and hence was damaged by Rogan’s

misconduct. Rogan is liable to the United States in the amount of its damages under

traditional principles of common-law fraud, which total $16,864,677.50 in the instant case. 

Under the equitable theory of unjust enrichment, “a person is unjustly enriched if the

retention of [a] benefit would be unjust.” Restatement of Restitution, § 1 (1937); see also

Taylor Woodrow Blitman Constr. Corp. v. Southfield Gardens Co., 534 F. Supp. 340, 347 (D.

Mass. 1982) (noting that, under the federal common law, “[t]he doctrine of unjust enrichment

is equitable in nature and correspondingly broad”). The elements of a federal common law

claim of unjust enrichment have been summarized as follows: “the plaintiff must show that:

(1) he had a reasonable expectation of payment, (2) the defendant should reasonably have

expected to pay, or (3) society's reasonable expectations of person and property would be

defeated by nonpayment.” Provident Life & Accident Ins. Co. v. Waller, 906 F.2d 985, 993-

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94 (4th Cir. 1990) (citation omitted) (emphasis added). In this case, Rogan received

substantial pecuniary benefits from his affiliation with Edgewater, from his salary and bonuses

as CEO to the profits his entities made through their management contracts with the hospital.

Given the egregious abuses that took place at Edgewater under Rogan’s watch, at a minimum,

the United States (a victim of the misconduct) is entitled to recover from Rogan the substantial

benefits that accrued to him from his stewardship of the institution. These benefits total at

least $10,000,000, given Rogan’s capture of at least $9,500,000 of Braddock’s management

fees from 1995-2000, in addition to the salaries, bonuses, and fringe benefits he received as

CEO of Edgewater. 

Under the common law, the United States has a right to recover funds lost through the

erroneous acts of its agents – i.e. payments made under a mistake of fact. Thus, if agents of

the federal government, acting on behalf of the United States, paid claims submitted by

Edgewater as a result of Rogan's actions “under an erroneous belief which was material to the

decision to pay, [the Government] is entitled to recover the payments.” United States v.

Mead, 426 F.2d 118, 124 (9th Cir. 1970) (citations omitted). Here, the express and implied

certifications of compliance with the Anti-kickback and Stark Statutes contained in

Edgewater’s cost reports and UB-92 forms were material to the United States’ decision to pay

Edgewater, and as these certifications were false, the United States erroneously paid

Edgewater and is entitled to recover the amounts improperly provided to the hospital, which

total $16,864,677.50 in the instant case. 

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VI. CONCLUSION

For the foregoing reasons, the United States is entitled to judgment against Rogan

under the FCA and the common law for the payments it made to Edgewater on behalf of

patients treated by Drs. Barnabas and Cubria.

Respectfully submitted, 

PETER D. KEISLER

ASSISTANT ATTORNEY GENERAL

CIVIL DIVISION

PATRICK J. FITZGERALD

UNITED STATES ATTORNEY

s/Linda A. Wawzenski

by: LINDA A. WAWZENSKI

 Assistant United States Attorney

 (312) 353-1994

Laurie A. Oberembt

John K. Neal

Michael J. Friedman

Attorneys, Civil Division

U.S. Department of Justice

Post Office Box 261

Washington, D.C. 20044

Dated: May 17, 2006 Counsel for the United States

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CERTIFICATE OF SERVICE

The undersigned Assistant United States Attorney hereby certifies that in accordance

with FED. R. CIV. P. 5, LR5.5, and the General Order on Electronic Case Filing (ECF), the

following documents:

NOTICE OF MOTION

were served pursuant to the district court’s ECF system as to ECF filers, if any, and were sent

by first-class mail on May 17, 2006, to the following non-ECF filers:

Neil E. Holmen

Winston & Strawn

35 West Wacker Dr.

Chicago, Illinois 60601

Joseph Spiegler

Winston & Strawn

35 West Wacker Dr.

Chicago, Illinois 60601

/s Linda A. Wawzenski

LINDA A. WAWZENSKI

Assistant United States Attorney

219 South Dearborn Street

Chicago, Illinois

(312) 353-1994

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