A Misleading DOJ Press Release

I was surprised to read the headline of a recent DOJ press release: “Former Acclarent, Inc. Executives Convicted of Crimes Related to the Sale of Medical Devices.” I was surprised because I thought I’d read that the case had been a big win for the defense.

So I read the press release.

The first paragraph said that the former CEO and a former VP of Acclarent “were convicted by a federal jury in connection with distributing adulterated and misbranded medical devices.”

The second paragraph named the two defendants and noted that they “were convicted by a jury following a six week trial of 10 counts of introducing adulterated and misbranded medical devices into interstate commerce.”

Wow, ten counts? That sounds like a big win for DOJ.

The third paragraph described the counts of conviction in a fair amount of detail:

The jury concluded that Facteau and Fabian caused the unlawful distribution of a medical device known as the Relieva Stratus Microflow Spacer (“Stratus”) for uses not cleared or approved by the U.S. Food and Drug Administration.  Despite the fact that the company had told the FDA that the Stratus was a medical device intended to maintain an opening to a patient’s sinus, Facteau and Fabian launched the product intending it to be used as a steroid delivery device.  The FDA, however, had specifically refused Acclarent’s request to clear the Stratus for marketing as a drug delivery device without further submissions to support that use.

It sure sounds like these two are some bad dudes, right?

The fourth paragraph of the press release described the “evidence at trial” that apparently led to the convictions.

The evidence at trial demonstrated that Facteau and Fabian sought to quickly develop and market products, including the Stratus as a drug delivery device, to create a projected revenue stream that would make Acclarent an attractive business for either an initial public offering or acquisition.

There must have been an overwhelming amount of “evidence at trial” to lead to these very serious convictions. I’m already pondering a possible blog post about this type of health care fraud. Hmmm…CEO of a company…serious convictions…must be facing a lengthy prison sentence given the loss calculation.

Then I read the FIFTH paragraph:

The jury acquitted Facteau and Fabian on 14 felony counts of fraud.  The 10 counts of conviction were misdemeanor counts related to the same conduct.

Wait. What?

After four full paragraphs explaining that these two executives had been “convicted” of “10 counts” and describing the serious charges and “evidence at trial,” DOJ finally says that the two executives were convicted of minor misdemeanors and face a year in jail.

Wow.

DOJ is a government agency. It’s not a private firm selling its success stories. It’s not hustling for clients.

So why is it using PR strategies to try to “sell” a big loss in a huge health care fraud trial as a win? DOJ did the same thing to Don Blankenship. It put out a press release about how he was convicted of a “federal conspiracy charge” that doesn’t even use the word “misdemeanor” in it.

I’ve always thought that DOJ’s press releases should report DOJ losses as well as wins. Why shouldn’t the public be made equally aware when DOJ loses a case as when it wins?

And given that DOJ (particularly SDNY) loves to put out press releases of indictments–before any evidence has ever been tested in court before a neutral fact-finder–shouldn’t it put out a press release when that indictment wasn’t proven at trial?

Take a look at the press release for the indictments of these two Acclarent executives. It describes very serious potential misconduct.

DOJ press releases about indictments come in high in Google’s search results. So whenever someone searches for those executives’ names, he will find those press releases. The least DOJ could do when it doesn’t obtain in a conviction is put out a press release fully clearing the person’s name.

Maybe the exoneration will show up second in the search results.

 

 

 

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Another Big Win in the White Collar World (This Time in the EDVA, of All Places)

After I wrote my last post, I was reminded about another big win that I should have mentioned before. Greg Poe, Preston Burton and Rachel Li Wai Suen won a complete acquittal for former high-ranking army officer Edwin Livingston. Here’s a short summary of the win:

A federal court on Wednesday exonerated four former high-ranking Army officers accused of orchestrating a large-scale bribery scheme involving under-the-table payments to Pentagon acquisition officials in an attempt to secure lucrative Defense Department contracts for their Virginia-based government contracting firm.

Edwin Livingston III, 67; Ronald Tipa, 68; Thomas Taylor, 66; and Ross DeBlois Sr., 55, were all found not guilty on a total of 32 counts of bribery and fraud, according to a ruling by the U.S. District Court for the Eastern District of Virginia.

Federal prosecutors alleged the four men, all retired colonels in the Army National Guard, used their government contracting company, Military Personnel Services Corporation, or MPCS, to bribe Defense Department officials to steer Pentagon acquisition and services contracts to the Falls Church, Virginia-based firm.

For those of you practice in the white-collar world, one fact here should stand out. They won a complete acquittal in the EASTERN DISTRICT OF VIRGINIA. That’s probably the toughest court to face these kinds of charges. The jury pool is stacked with current and former military folks, defense contractors and other Northern Virginia residents who don’t take kindly to bribery.

The judges there are uniformly tough on defendants, too. It’s not an easy place to try a criminal case, never mind win one.

The other three defendants also had great counsel. These kinds of wins are a huge team effort, so a quick shout-out to the whole group:

Mark MacDougall, Karen Williams, and Connor Mullin (Akin Gump); Bob Trout, Gloria Solomon, and Chris Hatfield (Trout Cacheris); and Barry Pollack and Addy Schmitt (Miller Chevalier).

That’s a rock star-level joint defense group.

Congrats to everyone!

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Celebrating Summer with Recent Wins in the White-Collar World

In the past few months, there have been several big wins for white-collar defendants.  Because we’re in desperate need for some good news as of late, here are highlights of those victories.

As I’ve pointed out before, DOJ doesn’t publicize its losses, so it’s sometimes hard to learn about these wins for the defense bar. Feel free to send your wins my way, and I’m happy to talk about them here.

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Posted in Acquittal After Jury Trial, Dismissal of charges in indictment, Health care fraud | Leave a comment

I’m All About the Glory (Please Nominate Me!)

Blawg100WebBadgeLast year, I won the coveted (among geeky law bloggers) ABA Blawg 100 award. I’ll be honest: I put in a lot of time on this blog and that little award meant a lot. I even got a great little badge to put on the blog.

Yes, I should get out more.

I’m hoping to make it two years in a row. If you like this blog, would you consider nominating it again? You just need to click here and then enter the URL of Grand Jury Target (www.grandjurytarget.com).

If you are at the nomination site with extra time on your hands, here are a few other law blogs that I particularly like and are absolutely worthy of the award.

Suits by Suits – a great blog about lawsuits involving corporate executives

Sidebars – an extremely substantive blog written by a former prosecutor, with a bit of a pro-government bent (a nice counterpoint to my blog’s pro-defense bent)

White Collar Crime Prof Blog – written by several folks, it keeps current with developments but also lets the authors express their opinions

Thanks for reading everyone!

Sara

 

 

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When Will the Government Ask for Pretrial Detention for a White Collar Defendant?

Young corrupted businessman behind the prison barsIt is very rare for a defendant in a white collar criminal case to be detained pretrial.

The two primary factors under the Bail Reform Act are whether the defendant (1) is a danger to another person or to the community, or (2) is a risk of flight. 18 U.S.C. § 3142(e)(1) (detention permitted where no set of conditions “will reasonably assure the appearance of the person as required and the safety of any other person and the community”).

Usually, a white collar defendant isn’t much of a safety risk because the crimes are not violent ones. It’s more common that he may flee, but even that is a tough standard to meet when the defendant has a family or strong community ties in the jurisdiction.

A recent healthcare fraud case in the Southern District of Florida is helpful example of the type of extreme case in which the government may ask for pretrial detention.

In United States v. Esformes, the government indicted Philip Esformes in an alleged $1 billion Medicare fraud scheme. According to the government, Mr. Esformes

masterminded and executed sophisticated health care fraud and money laundering conspiracies through a network of skilled nursing facilities and assisting living facilities that he owned or operated.

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Ninth Circuit Stands Strong on Computer Fraud and Abuse Act (Sort Of)

Computer security conceptThe Computer Fraud and Abuse Act has been used by prosecutors to charge individuals who “exceed authorized access” (or act “without authorization”) on a computer–sometimes their employers’ computers, sometimes a stranger’s computer that they are hacking. The problem is that Congress didn’t bother to defined “authorized access.”

If you are a CFAA rookie, I’ve written about the basics of the CFAA before. Plus, I wrote about its use in an…interesting case involving fetishes and a police officer.

Over a single week in July, the Ninth Circuit weighed in with two decisions about the definition of “authorized access.” The opinions are both good and bad.

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The Best Sentence in the McDonnell Decision

The Winner Is... card with bokeh backgroundLike most defense attorneys, I welcomed the Supreme Court’s decision in the McDonnell case.   The Court vacated former Governor McDonnell’s convictions for Hobbs Act extortion and honest services fraud and remanded the case to the Fourth Circuit for further findings.

I’m not going to rehash the substance of the decision in detail, since others have done so quite ably—from SCOTUSblog  to Sidebars  to White Collar Crime Prof Blog.

Instead, I’m going to talk about my favorite sentence in the opinion. Here it is:

[T]he Government’s legal interpretation is not confined to cases involving extravagant gifts or large sums of money, and we cannot construe a criminal statute on the assumption that the Government will “use it responsibly.” United States v. Stevens, 559 U. S. 460, 480 (2010).

Love it.

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Posted in Appeal, Public Corruption, Reversal | 1 Comment

The Hard Numbers on White-Collar Criminal Sentences

Marketing segmentation

Calling all data geeks:

The United States Sentencing Commission just issued its “Overview of Federal Criminal Cases, Fiscal Year 2015.”

It’s a fairly short summary of the longer “2015 Sourcebook of Federal Sentencing Statistics,” which is also worth checking out.

A few interesting tidbits about white-collar cases are included in the Overview.

First, fraud cases make up 10.5% of all cases, the third largest portion of total federal criminal convictions (after drug and immigration offenses). There were 7420 fraud cases, which is a decrease of 2.5% from 2014.

Second, the losses varied greatly among these cases, ranging from $0 (134 cases) to more than $7 billion. There was, according to the report, “an average loss amount of $2,909,541 and a median loss amount of $213,831.”

Third, the “average sentence imposed in fraud cases in fiscal year 2015 was 27 months.”

Fourth, the Sentencing Commission gathered some statistics on sentences imposed on organizations. There were 181 such cases, a little lower than previous years for which the Commission gathered statistics.

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Fifth Circuit Slaps Down District Court’s Loss Calculation in Contracting Fraud Case

The government knows—and exploits the fact—that loss amount is the driver of white collar sentences. In criminal contracting fraud cases, the government has taken the position that the relevant loss is the entire amount of the contract that was wrongfully obtained, even if the defendant fully performed under the contract and the government received everything it was promised under the contract.

This is an absurd position. Consider a typical breach of contract case. Party A sues Party B for breach of contract. During discovery, it becomes clear that Party A received everything it had bargained for under the contract. So what are the damages? Zero. Defendant wins.

A criminal case is, of course, not a civil breach of contract case. (The Civil Division has taken this same position in civil False Claims Act cases, too.) But that shouldn’t mean we leave common sense at the door when it comes to loss.

At least one court of appeals has pushed back on the government’s theory of loss in criminal cases. I wrote about the Third Circuit’s 2015 decision here.

Now, a second court of appeals has joined the Third Circuit in its skepticism about this calculation of loss. In a recent case out of the Fifth Circuit, United States v. Harris, the court of appeals reversed the defendant’s sentence in a government contracting fraud case because the lower court didn’t offset the contract values by the fair market value of the work performed by the defendant.

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Thinking About Consequences and the Yates Memo

Falling dominoes caught in motionDepartment of Justice officials have recently made several speeches trying to explain the Yates Memo. For example, On May 10, Deputy Attorney General Sally Yates gave remarks at the New York City Bar Association’s white-collar crime conference. On May 14, Assistant Attorney General Leslie Caldwell spoke to the American Bar Association’s 25th Annual National Institute on Health Care Fraud. And on June 9, Acting Associate Attorney General Bill Baer gave remarks on the civil False Claims Act.

They seemed to want to quell concerns by the defense bar that the Yates Memo, and DOJ’s new pronouncements about corporate cooperation, would lead to much more extensive (and expensive) internal investigations of wrongdoing by companies.

Let me say, first, that I appreciate the efforts of all of these officials to explain what changes the Yates Memo is meant to bring about. But (and there’s always a “but”) I’m still not convinced that there will not be unintended consequences of the new policy.

In her speech, Ms. Yates said that “the policy was certainly designed to change practices, both within the department and outside the department.” She also explained that “just as the policy does not seem to have brought about the end of Western civilization from the companies perspective it’s not business as usual at DOJ either.”

There are two parts of what she said that are worth considering–the scope of investigations following the Yates Memo, and the real consequences of not cooperating with DOJ about the scope of an investigation.

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