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United States v. Assad

United States District Court, E.D. Tennessee, Greeneville

August 21, 2019




         This matter is before the Court on defendants' Larry Everett Smith (“Smith”), Tanith Enterprises, LLC d/b/a Medvest Management Services (“Tanith”), and ULD Wholesale Group, LLC (“ULD”), (collectively the “Smith Defendants”), Joint Motion to Dismiss, [Doc. 126], the United States' Response, [Doc. 145], and the defendants' Joint Reply, [Doc. 154].

         Defendants Andrew Assad (“Assad”), Peter Bolos (“Bolos”), Michael Palso (“Palso”), Synergy Pharmacy Services, Inc. (“Synergy”), and Precision Pharmacy Management LLC (“Precision”), (collectively the “Synergy Defendants”), have filed for leave to join and adopt the Joint Motion to Dismiss. [Docs. 127, 155].

         In addition, the Court will consider, defendants' Germaine Pharmacy Inc. (“Germaine”), and ERX Consultants, LLC (“ERX”), Motion to Dismiss, [Doc. 130]. The matters are now ripe for review.

         I. Background

         The following synopsis summarizes the relevant allegations in the indictment that the government eventually must prove beyond a reasonable doubt.

         Defendants are either pharmacists, pharmacies, wholesalers, or managers who operated pharmacies. The indictment alleges that beginning around June 2015 and continuing through in or around April 2018, defendants knowingly and willfully engaged in a scheme to fraudulently bill Medicare, Medicaid, TRICARE, FECA, FEHBP, and private insurance carriers for in exchange for kickbacks and bribes. [Doc. 1 at ¶¶ 32, 33]. According to the indictment, defendants executed the conspiracy by scheming with a telemedicine company[1] to deceive doctors to prescribe certain medications that the defendant pharmacies found to be the most profitable. [Id. at ¶¶ 32, 34-38]. The telemedicine company orchestrated the fraud by allegedly selling these prescriptions with profitable drugs to defendant pharmacies. [Id. at ¶¶ 34-38]. Afterwards, in submitting a claim of reimbursement to the patients' insurance companies through pharmacy benefit managers (“PBM”), the defendant pharmacies allegedly misrepresented their purchase price of the medications, suggesting it was close to the average whole price (“AWP”), when in reality, the purchase price was much lower. [Id. at ¶¶ 39-44]. Defendants profited from the misrepresentation and split the profit with the telemedicine company. [Id. at ¶¶ 45-66].

         On October 9, 2018, defendants were charged by way of indictment with thirty-two separate counts: one count of conspiracy to commit health care fraud in violation of 18 U.S.C. § 1349, twenty-nine counts of mail fraud in violation of 18 U.S.C. § 1341, and two counts of misbranding drugs in interstate commerce with intent to defraud and mislead in violation of 21 U.S.C. §§ 331(a), 353(b)(1), and 333(a)(2). [Id.]. Defendants now move to dismiss the indictment for failure to state an offense. [Docs. 126, 130].

         II. Analysis

         Pursuant to Rule 12 of the Federal Rule of Criminal Procedure, a “party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial on the merits.” Fed. R. Crim. P. 12(b)(1). Rule 12(b)(3) specifies the motions which must be made before trial. Fed. R. Crim. P. 12(b)(3). Among these, a defendant may bring a motion to dismiss for “a defect in the indictment or information including . . . (v) failure to state an offense.” Fed. R. Crim. P. 12(b)(3)(B)(v).

         Rule 7(c)(1) of the Federal Rules of Criminal Procedure requires that an indictment "be a plain, concise, and definite written statement of the essential facts constituting the offense charged." The United States Supreme Court has held that "an indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense." Hamling v. United States, 418 U.S. 87, 117 (1974) (citations omitted). See United States v. Anderson, 605 F.3d 404, 411 (6th Cir. 2010). "It is generally sufficient that an indictment set forth the offense in the words of the statute itself, as long as [they] . . . fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offence intended to be punished." Hamling, 418 U.S. at 117-18 (citations and internal quotations omitted). In other words, where the indictment “clearly track[s] the language of the statute, ” it sufficiently “contain[s] the elements of the offense.” Anderson, 605 F.3d at 411. Where the charging language includes “the relevant time period and the specific event that triggered the charge, ” the defendant will “accordingly be able to adequately plead an acquittal or conviction in bar of any future prosecutions arising from the same offense.” Id.

         A Rule 12(b)(3)(B)(v) motion is appropriate only "when it raises questions of law rather than fact." United States v. Ali, 557 F.3d 715, 719 (6th Cir. 2009) (approving defendant making a Rule 12 motion that "raise[d] a purely legal question about whether the indictment stated an offense"); see also, e.g., Universal Milk Bottle Serv. v. United States, 188 F.2d 959, 962, 64 Ohio Law Abs. 186 (6th Cir. 1951) (holding a motion "claiming that [the indictment's] allegations are false and untrue" improper because "issues of fact" must "be tried by a jury"); United States v. Levin, 973 F.2d 463, 467 (6th Cir. 1992) (holding a Rule 12 motion inappropriate if it requires the court to "invade the province of the ultimate finder of fact"). “[A] court cannot consider a factual challenge to an indictment purporting to show a defect consisting solely of insufficient evidence to prove a particular charge.” United States v. Hann, 574 F.Supp.2d 827, 830 (M.D. Tenn. 2008) (citation omitted). Accordingly, an indictment that is valid on its face may not be dismissed on the ground that it is based on inadequate or insufficient evidence. United States v. Williams, 504 U.S. 36, 54 (1992).

         In this context, the Court must review the indictment's factual allegations as true and construe those allegations in a practical sense with all of the necessary implications. United States v. Reed, 77 F.3d 139, 140 n. 1 (6th Cir. 1996) (en banc). Defendants' burden in this context is, correspondingly, “a heavy” one. United States v. Lamoureux, 711 F.2d 745, 747 (6th Cir. 1983).

         Defendants argue the indictment “is fatally flawed because it fails to allege facts that state a criminal offense.” [Doc. 126 at 7]. Specifically, defendants assert that the indictment does not allege defendants' participation in a scheme to defraud, or an intent to defraud. Conversely, the government contends that the indictment fully tracks the relevant statutes, includes the relevant time periods, and each charge is substantiated by specific allegations that fairly inform defendants of the charges against which they must defend. [Doc. 145 at 3].

         A. Breach of PBM Provider Agreements Amounts to a Civil Breach of Contract

         When “the indictment charges a conspiracy: [i]t is well settled that [in] an indictment for conspiring to commit an offense-in which the conspiracy is the gist of the crime-it is not necessary to allege with technical precision all the elements essential to the commission of the offense which is the object of the conspiracy." United States v. Ogbazion 2017 WL 1315813, at *22-23 (S.D. Ohio Apr. 10, 2017) (quoting United States v. Superior Growers Supply, Inc., 982 F.2d 173, 176 (6th Cir. 1992)). See United States v. Reynolds, 762 F.2d 489, 494 (6th Cir. 1985). "To establish conspiracy to commit [health care] fraud under 18 U.S.C. § 1349, the government must demonstrate that 'two or more persons conspired, or agreed, to commit the crime of [health care fraud] and that the defendant knowingly and voluntarily joined the conspiracy.'" Ogbazion, 2017 WL 1315813, at *23 (quoting United States v. Harrison, 663 Fed. App'x. 460, 464 (6th Cir. 2016)). Further, the crime of health care fraud requires a scheme or artifice to defraud a health care benefit program in connection with the delivery of or payment for health care benefits, items, or services, the defendants knowingly and willfully executed or attempted to execute this scheme or artifice to defraud, and defendants acted with intent to defraud. 18 U.S.C. § 1347.

         Based on this authority, the offense of conspiracy to commit health care fraud charged in Count One of the indictment does not need to "'allege with technical precision all the elements essential to . . . the object of the conspiracy [(i.e., [health care] fraud)]." Ogbazion, 2017 WL 1315813, at *25-6 (quoting Superior Growers, 982 F.2d at 176). “Rather, the charge ...

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