Week Forty-Four

Week of October 30, 2017 through November 3, 2017

US v. Melina Ali (Motz 11/3/2017): The Fourth Circuit held that a defendant can be held in contempt when she fails to take any steps to comply with a court order to produce documents, even when the documents are not under her possession. The court affirmed the district court’s decision finding the defendant in contempt. Full Opinion

US v. Beth Palin (Motz 10/30/2017): The Fourth Circuit held that a district court can weigh materiality in assessing defendants’ guilt for health care fraud even if the district court does not explicitly mention it. The court further held that even if a district court fails to consider materiality in its assessment of the defendants’ guilt, it commits harmless error if the record conclusively establishes that health care fraud occurred. Further, the court held that Universal Health did not change the standard for materiality, but even if it did, the defendants’ misrepresentations in this case were material. The court affirmed the district court’s opinion and order denying the defendants’ motions. Full Opinion


Highlight Case

US v. Beth Palin, No. 16-4522

Decided: October 30, 2017

The Fourth Circuit held that a district court can weigh materiality in assessing defendants’ guilt for health care fraud even if the district court does not explicitly mention it. The court further held that even if a district court fails to consider materiality in its assessment of the defendants’ guilt, it commits harmless error if the record conclusively establishes that health care fraud occurred. Further, the court held that Universal Health did not change the standard for materiality, but even if it did, the defendants’ misrepresentations in this case were material. The court affirmed the district court’s opinion and order denying the defendants’ motions.

Defendant Beth Palin (“Palin”) owned an addiction medicine clinic and a laboratory that processed urine drug tests ordered by the addiction medicine clinic. Defendant Joseph Webb (“Webb”), Palin’s husband, assisted Palin in the operation of both facilities. The laboratory performed two types of urine tests: a basic, inexpensive test and a sophisticated, more expensive test. Insured patients received both types of tests. The lab billed insurers for the expensive test. The district court found that the defendants knowingly defrauded health care benefit programs. The court did not expressly mention materiality in its analysis. The defendants moved for judgments of acquittal or, in the alternative, for a new trial. They contended that Universal Health Services, Inc. v. United States ex rel. Escobar, — U.S. —, 136 S. Ct. 1989 (2016) changed the materiality standard applicable to health care fraud, and under the new standard, their asserted misrepresentations were not material. The district court denied the motions, explaining that the misrepresentations were material, even assuming the standard outlined in Universal Health applied. This appeal followed.

First, the court noted that health care fraud requires misrepresentation or concealment of a material fact. The court reasoned that, although the district court did not expressly mention materiality, its findings suggested that it viewed materiality as an issue. Specifically, the court noted that the district court found the defendants performed unnecessary tests, hid that fact from employers, and sought payment even though the rules prohibited submission of claims for medically unnecessary tests. The court further concluded that even if the district court failed to consider materiality when finding the defendants guilty, the error was harmless because no rational fact finder could conclude otherwise. Next, the court examined the impact of Universal Health on the materiality standard. The court explained that it did not believe the Supreme Court intended to overrule materiality standards. However, the court did not need to resolve that question because it concluded the misrepresentations were material under the proposed Universal Health materiality standard.

Accordingly, the Fourth Circuit affirmed the district court’s opinion and order denying the defendants’ motions.

Full Opinion

Jacob D. Taylor

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