No one convicted in the Forest Park medical fraud trial did anything wrong. And even if they did, the government didn’t prove it. And even if there was proof, the judge shouldn’t have allowed it.
Also, the law is really confusing, and the jury, clearly, was confused.
That’s more or less the gist of new arguments made by six defendants, including four doctors, who were found guilty last spring for their roles in what federal authorities called a vast bribery and insurance-billing scheme at Forest Park Medical Center, a now-bankrupt surgical hospital in North Dallas.
In separate pleadings filed in U.S. District Court in Dallas last week, the six are seeking judgments of acquittal or, in the alternative, new trials.
The U.S. attorney’s office has yet to respond to the defense motions, and no hearings have been scheduled.
At trial, the jury considered 17 criminal counts, most involving different groups of defendants, and variations in outcomes are reflected in their new petitions. Nonetheless, there’s significant overlap among the defendants’ claims of fatal errors committed by prosecutors and by U.S. District Judge Jack Zouhary, who presided over the trial. Among other things, the defense motions claim:
— Prosecutors made improper comments and unsubstantiated claims in their opening statements and closing arguments. They repeatedly told the jury that insurance fraud affects us all – it raises health care costs and limits consumers’ options. Such statements cast jurors as victims of the defendant’s actions – as part of the greater “us” – rather than as impartial triers of fact. The observation that “we all pay” for fraud was not only highly prejudicial, it was also unsupported by the evidence.
— Judge Zouhary’s instructions to the jury – on what all agree was an exceptionally complex body of law – were sometimes inadequate, ambiguous, contradictory or wrong.
— The judge erred by limiting testimony that some doctors on trial had consulted with business lawyers and were assured that their financial arrangements with Forest Park were legal. The restrictions Zouhary imposed on the scope of this testimony hindered the doctors in presenting an advice-of-counsel defense.
— The judge’s reading in court of a pretrial proffer by one defendant – essentially, an admission of guilt – prejudiced the jury against other defendants.
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Forest Park, a physician-owned hospital that opened in 2009, made a fast fortune. It did so, according to federal investigators, by bribing surgeons and others to steer well-insured patients to the hospital. It then billed the patients’ insurance carriers at much higher rates than what large, established hospitals would have charged. In its first four years, authorities say, the hospital paid out about $40 million in bribes and collected more than $200 million through “tainted and unlawful” insurance claims.
From the moment the government announced indictments in the Forest Park case, in late 2016, the criminal prosecution caught the attention of health care providers, lawyers and regulators around the country. Many think other hospitals and doctors could face legal scrutiny for similarly questionable conduct. Forest Park, after all, didn’t invent bribery or greed.
Originally, 21 people associated with Forest Park were indicted. They included two doctors who helped found the hospital, seven other physicians, and the two health care executives who ran the place.
By the time the case went to trial in February of this year, 10 defendants had pleaded guilty and agreed to cooperate with the government.
Nine defendants proceed to trial before a jury of three men and nine women at the federal building in downtown Dallas. The trial took seven weeks. On April 9, the jury returned its verdicts.
One defendant, a weight-loss surgeon, was acquitted. The jury hung on another defendant, a Forest Park manager who has since pleaded guilty to one conspiracy count. The seven who were convicted included three surgeons, a pain-management doctor, one of Forest Park’s two top administrators and an occupational nurse.
Six of those seven are now seeking judgments of acquittal or new trials. The online index of the district court clerk’s office shows no such motion from the seventh, Iris Forrest, the nurse. Her defense lawyer, Ezekiel Tyson of Dallas, did not return a telephone call regarding the status of her case.
The six requesting a do-over are:
— Mac Burt, who ran Forest Park with his business partner, Alan Beauchamp. Beauchamp was among the original defendants who pleaded guilty and testified for the prosecution.
It was his proffer, read to the jury by Judge Zouhary, that his fellow defendants are now citing as a ground for acquittal.
In June 2016, five months before his indictment, Burt, accompanied by legal counsel, voluntarily met with federal agents. According to notes taken by one of the agents, Burt admitted that “he realized from the very beginning” that Forest Park was paying surgeons for patient referrals. A $600,000 Forest Park check Beauchamp had requested “was for doctor kickbacks.”
Zouhary read to the jury a one-paragraph summary of the agent’s notes, which included Burt’s incriminating admissions.
“You may consider this evidence as to defendant Burt,” the judge said.
Some of the latest defense motions assert that by refusing a defense request to add the word “only” – “You may consider this evidence as to defendant Burt only” – the judge’s statement was incriminating toward Burt’s fellow defendants, presumably the unidentified recipients of “doctor kickbacks.” Burt did not testify at trial, so those co-defendants were denied the right to confront their accuser.
— Dr. Michael Rimlawi and Dr. Douglas Won, spine surgeons who founded the Minimally Invasive Spine Institute.
Won and Rimlawi, according to their pleadings, were among those who sought legal advice before entering into their financial arrangements with Forest Park. The lawyers told them the agreements, which described their monthly payments as “marketing money,” were permissible if properly carried out. Both now say the judge unfairly restricted testimony about these conversations with lawyers.
— Dr. Shawn Henry, a spine surgeon. Unlike others, Henry didn’t get monthly “marketing payments.” Instead, he was hired as a $30,000-a-month consultant to a small real estate company owned by two of Forest Park’s founding physicians. In all, he received $840,000, money the prosecution contended was a thinly disguised bribe for steering surgeries to Forest Park. Government witnesses testified that Henry’s $30,000 a month came from Forest Park, not from the real estate company for which he was ostensibly a consultant. And in the 28 months when he was collecting the checks, there was no indication that he’d ever spent two seconds consulting with anyone about anything.
But, he argues in his motion for acquittal, what prosecutors contended and what they proved were two different things. Sure, he was a lousy real estate consultant. But that doesn’t make him a criminal.
“The crucial issue at trial … was the purpose of the payments,” the motion says. It adds that the government “offered no direct evidence – by way of document or testimony – to show that Dr. Henry knew” his consulting fees had anything to do with how many surgeries he performed at Forest Park. Prosecutors couldn’t even show that Henry knew the money was coming from Forest Park.
“The government’s evidence against Henry was thin and circumstantial,” the motion says.
— Jackson Jacob, a business associate of Beauchamp’s who ran a company called Adelaide Business Solutions. The government characterized Adelaide as a shell company whose only purpose was to hide Forest Park’s bribes to doctors.
Each month, according to testimony, Forest Park would deliver a lump-sum check, usually around $1 million, to Adelaide. Beauchamp would give Jacob a list of doctors (or marketing companies associated with doctors) and the amount each was to be paid. Jacob would deposit the big Forest Park check and write smaller Adelaide checks for delivery to the doctors.
For this service, which required Jacob to A) have a checking account and B) know how to write his name, he got a cut of the payments – a total of $526,000 over four years, according to prosecutors.
Jacob, not unlike Henry, claims the government failed to prove that he knew there was anything questionable about his arrangement with Forest Park. Beauchamp told him the payments to the doctors were for marketing or, in some cases, services rendered; and that the hospital’s lawyers had signed off on them. Jacob, his pleading says, “operated under a reasonable and bona fide belief” that Beauchamp was telling the truth.
He also argues that he was particularly harmed by Judge Zouhary’s reading of Burt’s confessional proffer, since the judge’s statement quoted Burt as saying Adelaide was the conduit for Forest Park’s “doctor kickbacks.”
— Mike Shah, a pain management physician. Shah’s pleading largely echoes the others, but with a curious addition: It notes that his medical practice differed markedly from those of the surgeons on trial.
Shah mostly administered pain-relieving injections to workers’ comp patients. That’s a lot less lucrative – for the doctor and the hospital – than cutting open spines and stomachs. Shah notes that the government accused him of pocketing far less in kickbacks – just $67,850 – than the millions the other doctors were accused of pocketing.
Shah, the pleading says, was merely a “tangential” figure in the government’s investigation of Forest Park.
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The defendants’ pleadings offer similar analyses of the statutes upon which the government built its case.
To paraphrase, it’s a body of law about as clear as mud.
The government developed a novel prosecutorial theory, one that relied in part on a 55-year-old law enacted to target mobsters. Other statutes cited in the Forest Park indictment are complicated, confusing, vague or densely written. And they’re not always consistent with one another.
For Forest Park jurors, finding a way through the syllabic labyrinth and properly applying the laws’ bewildering provisions and standards presents formidable challenges. Even experienced lawyers can find it daunting.
The work of the jurors was made more difficult still, the defendants say, by the prosecutors’ repeated mischaracterizations of evidence and by the judge’s inadequate, sometimes perplexing jury instructions. The result, they say, is a set of guilty verdicts that aren’t sustainable, or even rational.
“The jury’s verdict is best explained as a product of confusion,” says Won’s pleading.
From the beginning, lawyers for the Forest Park defendants, like many of their colleagues in the white-collar defense bar, had concerns about the government’s unprecedented decision to indict doctors and other health care professionals under an anti-racketeering statute from the Kennedy era: The International Travel and Tourism Act of 1961, commonly called the Travel Act.
The law makes it a federal offense to travel interstate or internationally, or to use the mail or “any facility in interstate or foreign commerce,” for the purpose of committing or distributing the proceeds of unlawful activities.
In effect, it makes the act of traveling (or using the mail or engaging in interstate commerce) in the furtherance of certain crimes an indictable federal offense separate from the underlying state or federal crime. (That’s an oversimplified explanation of what one legal expert calls “without doubt … one of the most confusing crimes conceptually to understand.”)
Then there’s a federal anti-kickback statute that prohibits the exchange of remuneration – broadly defined as anything of value – for the referral of patients for medical services. But it only applies to services payable under a federal insurance program, like Medicare or Medicaid (though even the definition of what constitutes a “federal program” under the statute is hazy). Rimlawi’s petition calls the anti-kickback law “unworkably complex and hard to understand.”
And it rarely applied to the Forest Park investigation, since the hospital cared for very few federally insured patients, which meant authorities could pursue very few potential violations under the anti-kickback statute.
Won, for example, treated 517 patients at Forest Park, and all of them were privately insured. Of Rimlawi’s 594 Forest Park patients, 590 were privately insured. Henry was responsible for 705 surgeries at Forest Park, and only eight of them were covered by federal insurance programs.
Forest Park didn’t want Medicare or Medicaid patients. Reimbursement rates are lower and regulatory scrutiny is higher than is typical with private insurers. The hospital deliberately sought out a clientele with deep, dependable private health care benefits.
Government authorities, believing that fraud was rampant at Forest Park, sought to greatly expand their enforcement reach beyond the handful of federal-insurance cases they could pursue under the anti-kickback statue. That’s where the Travel Act came in.
By invoking it, the government could investigate suspected bribes and kickbacks involving referrals of privately insured patients. The underlying offense they used to apply the act was a state criminal statute, the Texas commercial bribery law.
That, too, posed problems.
In the 45 years since its enactment, the Texas commercial bribery law – a general business statute – had never been used to charge a doctor, in state or federal court, with improperly referring patients. Moreover, the law is at odds with a more recent, more specific state statute, the 1999 Texas Solicitation of Patients Act. That law incorporates federally accepted “safe harbor provisions” that shield doctors from prosecution under the anti-kickback law. Those provisions are not part of the Texas commercial bribery law.
Perhaps “clear as mud” was too kind.
The Forest Park case is believed to be the first successful medical fraud prosecution in the United States based on the Travel Act – though “successful” is open to interpretation, given what seem to be inconsistencies, even contradictions, in the jury’s verdicts on the seven Travel Act counts it considered.
Burt, the Forest Park executive, was found guilty on most, but not all, of the Travel Act counts – essentially, guilty of bribing doctors. But the doctors he was accused of bribing were acquitted on most, but not all, of those same counts.
That’s not possible as a matter of law, Burt argues. His petition for acquittal says that under the commercial bribery law, an offense occurs if one offers a benefit the acceptance of which is an offense under the statute. In other words, if the jurors found that a doctor didn’t break the law by taking bribes, Burt couldn’t have broken the law by paying the doctor bribes.
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Five of the six defendants seeking to have their convictions set aside have retained new legal counsel since the trial. Only Burt is represented in the current pleadings by the same legal team that defended him at trial, Ed Tomko and Jason Ross of Dykema Gossett.
Rimlawi’s new lawyers are David Gerger of Gerger Khalil & Hennessy of Houston, and of counsel Stephen F. Malouf and Jonathan Nockels of Malouf & Nockels of Dallas.
Won’s are Jay Nanavati, Bryan Skarlatos and Sharon McCarthy of Kostelanetz & Fink of New York City, and Kevin Ross and Daniel Geyser, separate practitioners in Dallas.
Henry’s new lawyer is Franklyn Mickelsen of Broden & Mickelsen of Dallas.
Jacob’s is Sara A. Johnson of New Orleans.
Shah’s are Abbe David Lowell and Christopher Man of Winston & Strawn in Washington, D.C., and Dion Robbins of Winston & Strawn in Dallas. Lowell, a luminary of the Beltway bar, served as chief minority counsel during the U.S. House’s 1998 impeachment proceedings against President Bill Clinton.
In all, the Forest Park case has been fruitful for Winston & Strawn.
Dr. Nick Nicholson, the one surgeon acquitted by the jury, was represented by Thomas Melsheimer, managing partner of the firm’s Dallas office, assisted by partner Scott Thomas and associate Grant Schmidt – with total billings said to have exceeded $4 million.
And celebrated Dallas trial lawyer Mark Werbner, who joined Winston & Strawn in April, represented Dr. Wade Barker, one of the founders of Forest Park Medical Center. Barker, a bariatric surgeon, was an original defendant who signed a plea agreement and testified for the government.