Source: http://wakeforestlawreview.com/tag/fraud/
Timestamp: 2019-04-21 10:07:42+00:00

Document:
Today, in the civil case of United States ex rel. Michaels v. Agape Senior Community, Inc., the Fourth Circuit published an opinion affirming the district court’s decision on the Attorney General’s unreviewable veto power under 31 U.S.C. § 3730, and dismissing the appeal of an evidentiary issue. In affirming the lower court’s ruling, the Court found the U.S. District Court for the District of South Carolina properly interpreted the relevant statute and persuasive case law on the issue of the Government’s right to veto a settlement for qui tam action cases in which they elected not to take part. In dismissing the appeal of the district court’s decision to disallow statistical sampling as hard evidence, the Court strictly construed 28 U.S.C. § 1292(b) and declined to review the present issue for it did not concern a pure question of law.
This action arose from the allegations of Brianna Michaels and Amy Whitesides regarding the dealings of their former employer, defendant Agape Senior Community, Inc. and twenty-three affiliated elder care facilities throughout South Carolina (collectively, “Agape”). The two former employees alleged that Agape had fraudulently billed Medicare and other health care programs run by the Federal Government for thousands of patients who were ineligible or did not actually receive the charged services.
Michaels and Whitesides proceeded with this matter under the False Claims Act (FCA), which authorizes private individuals (referred to as “relators”) to pursue legal actions on behalf of the United States in order to receive civil remedies for fraud committed against the Government, called a “qui tam action”. See 31 U.S.C. §§ 3729-3733. This type of suit permits the Government to intervene within specified time periods, or decline to intervene and instead allow the relators to conduct the action. Id. at § 3730(b)(4)(A)-(B). In this case, the Government declined to intervene, but did alert the relators of a provision in § 3730(b) which provides the Attorney General ultimate, non-reviewable authority to object to proposed settlements and dismissals, a provision at the center of this appeal.
Discovery efforts revealed that Agape had filed over 50,000 claims for federal health care programs for a relevant time period in which they had also admitted 10,000 patients. Based on the unreasonable cost of reviewing all such documents and materials pertaining to these claims and individuals, estimated at over $36 million, the relators sought instead to use a statistical sampling of the evidence to prove their case of fraudulent federal health care billing. However, the District Court ruled this to be an improper evidentiary method (referred to as “the statistical sampling ruling”).
The parties then negotiated and reached a proposed settlement agreement, but the Attorney General objected to the settlement amount, pursuant to § 3730(b)(1), based on the Government’s own statistical sampling assessment and estimated damages. Agape sought to enforce the settlement over such objection, but the District court refused and found instead that the Attorney General possessed absolute veto power over such decisions under § 3730(b)(1). In this ruling, the court did note the peculiarity of the Government involving itself in a case in which it chose not to be a party, and by way of a method in which the court had found improper, but still upheld this veto power (referred to as “the unreviewable veto ruling”).
On appeal, the Fourth Circuit addressed the district court’s two rulings, the statistical sampling ruling and the unreviewable veto ruling. Namely, these matters raised two issues: (1) the extent of the Attorney General’s power under § 3730(b)(1) to veto an FCA qui tam action settlement in which the Government chose not to intervene; and (2) the authority of the Court of Appeals to review the district court’s decision regarding the evidentiary use of statistical sampling in this case. The Court’s review of these matters was de novo. The appeal of these issues occurred before the actual trial to better serve judicial efficiency, based on the court’s opinion that both involved important and controlling questions whose result could lead to the ultimate termination and judgment of litigation. As such, the Fourth Circuit granted appeal and heard these issues pursuant to 28 U.S.C. § 1292(b).
In reviewing the district court’s interpretation of Section 3730(b)(1), the Court began by assessing two different interpretations of this very statute put forth by different circuit courts. First, the Ninth Circuit’s decision in United States ex rel. Killingsworth v. Northrop, 25 F.3d 715 (9th Cir. 1994) held that the Attorney General’s consent-for-dismissal provision for FCA qui tam suits is not absolute, but instead can be limited and subject to a reasonableness review if the government chooses not to intervene. Conversely, the Fifth and Sixth Circuits both determined that the Attorney General has absolute veto power over such settlements, regardless of the Government’s choice to intervene, and therefore relators may not seek voluntary dismissals without the consent of the Attorney General. See Searcy v. Philips Electronics North America Corp., 117 F.3d 154 (5th Cir. 1997); United States v. Health Possibilities, P.S.C., 207 F.3d 335 (6th Cir. 2000).
The Fourth Circuit chose to adopt the interpretation of the Fifth and Sixth Circuits, holding that the Attorney General does indeed have absolute, unreviewable power to consent or object to voluntary settlements in FCA qui tam suits. It reached this conclusion based on the plain language of the statute and the determination that the consent-for-dismissal provision is unambiguous. Additionally, the court found that the statute’s legislative history reveals a clear Congressional intent to grant such unreviewable authority to the Attorney General, and that Congress did in fact act purposefully by choosing not to articulate limitations on this authority. Moreover, the court reasoned that this interpretation is wholly consistent with the FCA, a statutory scheme that still construes the United States Government as the real party of interest, regardless of their choice to intervene.
In examining the district court’s statistical sampling ruling, the Circuit relied on other Fourth Circuit precedent concerning interlocutory review to determine that this issue was not eligible for this specific type of appeal. Namely, the court observed that such review is to be used sparingly under strictly construed requirements, and must involve a controlling question of law. See Myles v. Laffitte, 881 F.2d 125, 127 (4th Cir. 1989). Moreover, the court emphasized that review under Section 1292(b) is not proper when the question turns on genuine issues of fact where the district court applies settled law to the facts and evidence of a particular case. Based on such standards, the Court found that the district court’s ruling to disallow statistical sampling did not concern a question of law regarding its admissibility in general, but instead solely concerned its admissibility with respect to the particular facts and evidence in this case. Thus, the issue did not raise a pure question of law subject to interlocutory review.
Accordingly, the Fourth Circuit affirmed the district court’s unreviewable veto ruling, and dismissed the relators’ appeal of the statistical sampling ruling.
Today, in an unpublished opinion in U.S. v. Daren Gadsden, the 4th Circuit affirmed the convictions and sentence of the district court for the District of Maryland and remanded with instructions to reduce the restitution amount.
Daren Karem Gadsden (“Gadsden”) was a landlord in the Housing Authority of Baltimore City’s (“HABC”) Section 8 program. In 2010, Gadsden, with the help of three others, established bank accounts in fake business names, fraudulently created a consulting agreement between one of these fake businesses and the HABC with a forged signature of HABC’s CFO, and ultimately transferred $1.3 million of unauthorized funds into the accounts. A jury convicted Gadsden of one count of conspiracy to commit bank fraud, eight counts of bank fraud, two counts of aggravated identity theft, and two counts of evidence tampering. Gadsden was sentenced to 286 months imprisonment.
After the jury verdict, Gadsden moved for a judgment of acquittal under Rule 29 arguing that the evidence offered at trial did not support the conviction. Gadsden argued that the government did not satisfy it’s burden for the bank fraud charges, and as a consequence, did not satisfy the elements of the conspiracy or aggravated identity theft charges. The 4th Circuit reviewed the district court’s denial of the Rule 29 motion de novo.
On appeal, Gadsden argued that the government failed to satisfy its burden under § 1344(2). At trial, the government argued that Gadsden orchestrated an integrated scheme to obtain funds from HABC’s bank account and the fraudulently opened business accounts. Therefore, Gadsden argued, the government had to prove that Gadsden violated § 1344 as to both banks. While the Court refused to opine as to whether this standard was appropriate under the facts, the Court held that a reasonable jury could find that Gadsden placed both banks at a risk of loss that the banks did not knowingly accept. As a result, the district court did not err in denying Gadsden Rule 29 motion.
As a result of finding that the evidence was sufficient to affirm the bank fraud charges, the Court affirmed the conspiracy charge and the aggravated identity theft charge as well.
The district court originally ordered Gadsden to pay $1.3 million in restitution to the bank that opened the fraudulent accounts. The Court found that because the bank was able to mitigate its losses to $1.1 million, Gadsden’s restitution should be reduced to that amount.
The 4th Circuit affirmed Gadsden’s convictions and sentence, and remanded the restitution judgment with instructions to reduce the amount to $1.1 million.
Today, in an unpublished per curiam opinion, United States v. Hartsoe, the Fourth Circuit affirmed the decision of the U.S. District Court for the District of South Carolina convicting Jerry Elmo Hartsoe of mail fraud and making false statements.
In the District Court, the jury convicted Hartsoe of eight counts of mail fraud and one count of making false statements.
On appeal, Hartsoe argued that the Fourth Circuit should vacate the District Court’s decision. Hartsoe alleged that the District Court improperly allowed into evidence statements Hartsoe made before law enforcement read Hartsoe his Miranda Rights.
Here, however, the Fourth Circuit determined that Hartsoe’s presence was voluntary. When Hartsoe first arrived to the scene, law enforcement asked Hartsoe to leave. Hartsoe’s testimony indicated he was not intimidated, but was aggressive and demanding at the scene. Later, law enforcement told Hartsoe that he was not under arrest and was free to leave. As a result, the Fourth Circuit found it unlikely that a reasonable person in Hartsoe’s position would have believed himself to be in custody. Thus, no Miranda warnings were required and Hartsoe’s statements were properly admitted into evidence.
The Fourth Circuit Affirmed Hartsoe’s convictions, finding the District Court did not err in allowing Hartsoe’s statements into evidence.
Today, in Douglas C. Dunlap v. Texas Guaranteed, the Fourth Circuit reaffirmed that a plaintiff has the burden of establishing that fraud by a defendant could not have been discovered through a reasonable investigation, providing an exception to the standard statute of limitations. Under Va. Code Ann. § 8.01-243(A), a two year statute of limitations begins to run from the date that a fraud is discovered by the plaintiff or when it could have been discovered “by the exercise of due diligence.” Unless a plaintiff can establish that the fraudulent conduct could not have been discovered within the previous two years, any lawsuit on this grounds is barred.
What does the “exercise of due diligence” mean?
The standard of “due diligence” is such “prudence, activity, or assiduity” as a “reasonable and prudent man” would exercise under the “relative facts of the special case.” In Dunlap, the court affirmed the district court’s dismissal of the case on the grounds that it was barred by the statute of limitations. The plaintiff did not present sufficient evidence that the exercise of due diligence would not have revealed the fraud. Thus, Dunlap demonstrates that in order to overcome the statute of limitations through the undiscovered fraud exception, the burden is on a plaintiff to demonstrate that he did not have a reasonable opportunity to discover the underlying conduct.
Today, in United States v. Graves, the 4th Circuit affirmed the conviction of John Robert Graves, a former F.B.I. employee who—along with his wife—ran a sophisticated investment scheme that he used to defraud mostly elderly investors. Mr. Graves raised three issues on appeal. First, he claimed that his conviction for making false statements was contrary to law because some of the questions posed during his interrogation, and some of his answers, were ambiguous. Second, he disputed his convictions under the Investment Advisers Act because he claimed that during the relevant period he was working as a broker-dealer and not an investment adviser. Finally, Mr. Graves disputed the finding of fact that his scheme involved “sophisticated means,” and thus argued that he should not have been subject to a sentence enhancement. The Fourth Circuit affirmed each of these convictions.
First, Mr. Graves argued on appeal that the government had not established that he made one or more “materially false, fictitious, or fraudulent statement[s] or representation[s]” in violation of 18 U.S.C. §1001(a). To support this argument, Mr. Graves pointed to isolated evidence from his interrogation. For instance, when a government agent asked him—“And that’s where the $150,000 went, came from to go to [victim]?.” Mr. Graves responded: “I guess.” Mr. Graves claimed that this question was ambiguous as was his answer, and thus he had not made an affirmatively false statement. The Fourth Circuit observed that this was the “slightest snippet” from a larger conversation that Mr. Graves surreptitiously recorded and then played to the jury during his trial. The recording included other unambiguously false statements by Mr. Graves, and thus the jury had a reasonable basis to conclude that he had made false statements in violation of §1001(a).
Second, Mr. Graves argued that his conviction under the Investment Advisers Act, 15 U.S.C. § 80b-6, was improper because he was employed as a broker-dealer and not an investment adviser during the relevant time period. As a professional matter, Mr. Graves was registered as an investment adviser, and the court observed that he provided “investment advice for a fee to his victims to prompt them to invest in his and his wife’s companies.” Even if the statutory understanding of the term “investment adviser” differed from what was required to be registered in this profession, the court noted that Mr. Graves stipulated at trial that between 2006 and 2010 he “was an Investment Adviser” as that term is intended under 15 U.S.C. § 80b-6. Thus, as a matter of law Mr. Graves acted as an investment adviser under § 80b-6.
Today, in United States v. Jayad Zainab Ester Conteh, the Fourth Circuit affirmed by unpublished per curiam opinion the District Court of Maryland’s denial of a motion to suppress, holding there was probable cause to justify the issuance of a search warrant. The Fourth Circuit reviewed the District Court’s factual findings for clear error and its legal conclusions de novo.
Defendant Argues the Sworn Application Supporting her Arrest Warrant Was Insufficient to Establish Probable Cause.
On appeal the defendant raised three issues: (1) the sworn application supporting her arrest warrant was insufficient to establish probable cause; (2) the officer executing the warrant did not act in reasonable good faith reliance on the state commissioner’s determination of probable cause; and (3) the District Court abused its discretion in qualifying a witness as an expert in Sierra Leoneon Creole.
Defendant was Convicted of Conspiracy to Commit Bank Fraud, Aggravated Identity Theft, and Exceeding Authorized Access to a Computer Thereby Obtaining Information Contained in a Financial Record of a Financial Institution.
Conteh, a teller for the bank, accessed accounts with information personally identifying the account holders in a way that suggested her access was unauthorized. Several bank accounts were compromised when information for the accounts was changed and checks were ordered without authorization. Further, the owner of a vehicle observed attempting to retrieve checks ordered without authorization from one of the compromised accounts relied on a bank insider to provide him information.
Probable Cause to Justify an Arrest Means a Police Officer is Aware of Facts and Circumstances That Are Sufficient to Warrant a Prudent Person in Believing That the Suspect Has committed an Offense, Under the Circumstances Shown.
Determined by the totality of the circumstances, probable cause is a fluid concept that turns on the assessment of probabilities. United States v. Dickey-Bey, 393 F.3d 449, 453–54. In reviewing the state commissioner’s probable cause determination, the court may only ask whether the commissioner had a substantial basis for concluding there was probable cause. Under this standard, the court grants much deference to the commissioner’s assessment of the facts presented to him. United States v. Blackwood, 913 F.2d 139, 142 (4th Cir. 1990).
Taking the facts of this case as a whole, the commissioner had a substantial basis to conclude that the supporting application established probable cause.
Alternatively, the Fourth Circuit Rejects the Defendant’s Claim That the Officer Did Not Rely on the Warrant in Good Faith.
Under the good faith exception, created by the Supreme Court of the United States in United States v. Leon, evidence obtained from an invalid warrant will not be suppressed if the officer’s reliance on the warrant was objectively reasonable. United States v. Perez, 393 F.3d 457, 461 (4th Cir. 2004).
Leon identifies four ways in which an officer’s reliance on a warrant would not qualify as good faith reliance. Conteh argued one of these exceptions, noting that an officer’s reliance on a warrant would not qualify as good faith if the warrant was so facially deficient that no reasonable officer could presume its validity.
However, the Court rejected, as unsupported by the record, Conteh’s assertion that probable cause is lacking because the application contains a “significant misstatement” that she was the individual who changed the information.
Reviewing for Abuse of Discretion, the Fourth Circuit Affirmed the District Court’s Decision to Qualify an Expert Witness.
In ensuring that evidence is reliable under Fed. R. Evid. 702, a district court “must decide whether the expert has ‘sufficient specialized knowledge to assist the jurors in deciding the particular issues in the case.’” Belk, Inc. v. Meyer Corp., U.S., 679 F.3d 146, 162 (4th Cir. 2012). In making this decision, the court should “consider the proposed expert’s full range of experience and training.” United States v. Pansier, 576 F.3d 726, 737 (7th Cir. 2009). Federal Rule of Evidence 702 “does not require any particular imprimatur.” United States v. Gutierrez, 757 F.3d 785, 788 (8th Cir. 2014).
Despite the facts that the witness does not hold degrees in Sierra Leoneon Creole, works as a teacher in another field, and had not acted as a translator for any government agency prior to his involvement in the case at bar, the Court concluded that the witness was properly qualified as an expert in Sierra Leoneon Creole based on his education and experience with the language. The witness testified regarding messages in Sierra Leoneon Creole obtained from the cellular phone seized from Conteh incident to her arrest.

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