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Fifth Circuit Clarifies “Proximity” as a Factor in Imputing “Willfulness” — A Potential Breakthrough for Defense in Federal Health Care Fraud Prosecutions

By: Jim Turner, Attorney, Gregor Wynne Arney, PLLC

United States v. Nora, Case No. 18-3178, 2012 WL 716628 (5th Cir. 02/24/2021)

Home health care operations are often small businesses with an administrative office out of which a range of medical providers are dispatched. Casting a wide net, the government has in the past based prosecutions on a staff member’s “proximity” to the wrongdoing to impute knowledge.

The testimony may go like this: “everybody knew,” or the government may assert as it did in Nora, “it is difficult to believe that [Nora] was oblivious to what was happening … or his role in it.”

The Fifth Circuit rejected that argument, saying it “just isn’t enough.” The Court explained that “proximity” is probative to the extent it directly exposed the defendant office staff member to dishonest or fraudulent behavior. Otherwise, it is not enough.

Nora’s counsel argued that though he understood, for instance, referral payments were being made for new patients, there was no evidence he knew the payments constituted unlawful kickbacks.
Showing he had received compliance training and otherwise been briefed on compliance was not
enough.

The Court held that the government must instead prove the defendant actually understood the way the system was run was unlawful. This was enough to help Jonathan Nora.

The facts are telling.

On October 6, 2009, Lisa Crinel, the owner of Abide Home Health Care Services, hired Jonathan Nora as a full-time data entry clerk, paying him $13 per hour. Nora was 22 years old. He had a high school diploma and a few college credits.

Three years later, Nora became Abide’s office manager, earning a salary of $60,000. At his trial, the government did not offer any evidence that Nora was compensated beyond his salary. Nora continued as Abide’s office manager until 2014 when government agents executed a search of Abide’s offices.

The 2014 search ultimately resulted in the return of an indictment charging Nora and others with federal offenses.

The government charged Nora, et al., with the following violations of federal law: conspiracy to commit health care fraud, a violation of 18 U.S.C. § 1349; conspiracy to pay or receive illegal kickbacks, a violation of 18 U.S.C. § 371 and 42 U.S.C. § 2320a – 7b(b)(2); and aiding and abetting in the commission of health care fraud, a violation of 18 U.S.C. § § 1347 and 2.

To convict a defendant of health care fraud, the government must prove that the defendant “knowingly and willfully defrauded any healthcare benefit system.” To convict a defendant under the anti-kickback statute, the government must prove that the defendant “knowingly and willfully offered or paid any remuneration (including any kickback, bribe, or rebate) to induce someone to refer an individual to a health care provider for which payment may be made under a federal health care program.”

The government indicted 23 individuals employed by or associated with Abide Home Care Services including Lisa Crinel, Abide’s owner and the principal orchestrator of the scheme to defraud. Crinel pleaded guilty and agreed to testify for the government. Nora, together with Dr. Shelton Barnes, Dr. Michael Jones, Dr. Henry Evans, Dr. Gregory Molden and Paula Jones proceeded to trial before a jury. The doctors were employed by Abide as “house doctors” – they referred patients to Abide for home health care services. Paula Jones, Dr. Jones’ wife, was one of Abide’s billers.

The government’s case against the several defendants was based on the execution of their duties with Abide. At trial and on appeal Nora contended that the government failed to offer any evidence that he knowingly and willfully engaged in a scheme to defraud or knowingly or willfully participated in a conspiracy to pay or receive kickbacks.

A panel of the Fifth Circuit Court of Appeals agreed and reversed Nora’s convictions.

The gravamen of Nora’s argument was that the government failed to offer any evidence tending to demonstrate that his conduct was willful. In the criminal context, “a willful act is one undertaken with a bad purpose.” Thus, to establish a “willful” violation of a statute, the government must prove that the defendant acted with knowledge that his conduct was unlawful.

The court of appeals noted that the government offered detailed evidence of Nora’s role at Abide and his work responsibilities; however, this evidence did not prove that Nora understood that Abide’s various practices and schemes were fraudulent or unlawful.

Consequently, the evidence offered against Nora was insufficient to show that he acted with bad purpose in carrying out his responsibilities as an employee of Abide. Because the evidence offered by the government at trial was insufficient to show that Nora acted with knowledge that his conduct was unlawful, the court of appeals reversed Nora’s convictions.

The Nora decision, if incorporated in concise and well-drafted proposed jury instructions, should give those caught up in broad prosecutions of “everyone in the office,” a greater chance of prevailing by holding the government to its statutory burden of proof.

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