[00:00:00] Speaker 04: We'll move on to the final case on calendar today, Omiti. [00:00:05] Speaker 04: So council, as you approach, Mr. Coleman, we're going to do hard caps. [00:00:11] Speaker 04: So you have 15. [00:00:13] Speaker 04: You're not going to steal his time, effectively. [00:00:16] Speaker 04: If you want to cede time to Mr. Sirbe, you certainly can do that. [00:00:19] Speaker 04: Mr. Sirbe, if you want to cede time to Mr. Coleman, that's fine. [00:00:23] Speaker 04: But you don't need to worry about Mr. Coleman gobbling up all your time. [00:00:28] Speaker 04: You'll have your time. [00:00:37] Speaker 01: Thank you, your honor. [00:00:38] Speaker 01: Ben Coleman for Appellant Julian Omidy. [00:00:41] Speaker 01: Our plan was that I was going to address materiality and recklessness, and then Mr. Sirbe was going to address the government's expert in forfeiture. [00:00:52] Speaker 01: And so if the court is okay with that, I'll jump right into materiality. [00:00:56] Speaker 01: And what I want to make clear from the beginning, and I'm going to focus on one particular argument, is that in our opening brief, we made two arguments. [00:01:05] Speaker 01: The first argument was that the evidence was insufficient. [00:01:09] Speaker 01: And then the second argument was that the government proceeded under an over-broad theory of materiality or fraud. [00:01:17] Speaker 01: And therefore, at least Mr. Omidy was entitled to a new trial. [00:01:21] Speaker 01: Those were two separate arguments. [00:01:22] Speaker 01: I want to focus on the second argument. [00:01:25] Speaker 01: And the reason why I want to make that clear is because the government in a recent Rule 28j letter has claimed that we have somehow waived what they're calling a Milheiser claim. [00:01:35] Speaker 01: And I think Milheiser is important to this case. [00:01:38] Speaker 01: But we made the exact same claim in our opening brief that Milheiser did. [00:01:42] Speaker 01: And it's at page 24 to 28 of our opening brief. [00:01:47] Speaker 01: What the government did in its response was that it collapsed everything into a sufficiency claim. [00:01:54] Speaker 01: And you can't fault us for the government's failures. [00:01:58] Speaker 01: And where I think the waivers occur here are really on the government side, because the government, I believe, has waived the harmless error argument, because they've never raised a harmless error argument as to our overbreath claim or our improper pathway to conviction claim. [00:02:17] Speaker 01: And also on the standard of review, I believe the government has waived any claim that we have not preserved our claim of over breath because the government's, the only fault that they have with respect to the preservation is that the rule 29 motion wasn't preserved. [00:02:36] Speaker 01: Even assuming they're right on that, and we disagree, that does not control our over-breadth claim, which is a claim for a new trial. [00:02:44] Speaker 01: And that claim was certainly adequately preserved. [00:02:47] Speaker 01: We filed a written motion asking the district court to prevent the government's witnesses from articulating this type of over-breadth theory. [00:02:57] Speaker 01: and this type of theory of materiality. [00:03:00] Speaker 01: In the jury instructions, we specifically objected that the instructions did not include an essential benefit of the bargain definition for materiality. [00:03:11] Speaker 01: And not only did we object, but we also requested that the court instruct on the essential benefit of the bargain. [00:03:18] Speaker 01: So this claim is reviewed de novo. [00:03:21] Speaker 01: this particular claim about overbreath. [00:03:24] Speaker 01: And the government has not claimed harmless error in their brief as to that claim, and therefore they've waived the harmless error argument. [00:03:33] Speaker 01: And that's why I think now, if I can get to Milheiser, why Milheiser is really important here. [00:03:38] Speaker 01: It was the exact same thing in Milheiser. [00:03:40] Speaker 01: The defense made the overbreath claim, and I think Milheiser shows that our claim is also correct in that regard, and then the government waived [00:03:51] Speaker 01: any type of harmless error argument and here what we have is a claim that by the government at trial it was repeated throughout the trial in the witness testimony and repeated in closing argument and this theory of fraud and materiality repeats itself over and over again in the government's answering brief is that any type of false statement [00:04:15] Speaker 01: would have led to the denial of the claim or would have led to further investigation. [00:04:21] Speaker 01: And that's just simply not an accurate statement of materiality after Milheiser. [00:04:26] Speaker 01: Milheiser makes clear that the false statement has to go to the essential benefit of the bargain. [00:04:32] Speaker 01: so that if the claim was otherwise covered, a jury could easily find under the essential benefit of the bargain standard that just because there was one false assertion in the claim packet, that does not mean that the government has shown materiality or fraud. [00:04:48] Speaker 04: Let me ask you this. [00:04:50] Speaker 04: What would satisfy your version of Milheiser? [00:04:54] Speaker 04: I'm not saying Dr. Amidi did this or didn't do this, but let's say that post-Milheiser, what is a viable healthcare fraud claim? [00:05:02] Speaker 01: Well, I think it would be that the claim was not medically necessary. [00:05:12] Speaker 01: Or the claim just wasn't performed. [00:05:15] Speaker 01: I mean, that certainly would be one, correct? [00:05:17] Speaker 01: Sure. [00:05:17] Speaker 01: So that would be number one, you're billing for something that you just didn't do. [00:05:21] Speaker 01: But in a case like this, where the services are provided, that the claim was not something that the insurer was obligated to compensate for, that would be materiality. [00:05:33] Speaker 01: And the problem we have here is that the government never introduced the governing plans that governed when something should have been covered or not covered. [00:05:43] Speaker 01: There was plenty of evidence in the record that, for example, in lap band surgeries that [00:05:49] Speaker 01: the people qualify for lap band surgery, even if you would put aside the sleep study report, that because of their body mass index and because of their other comorbidities, they would have qualified for the lap band surgery anyhow. [00:06:02] Speaker 01: So when you have that type of record and you... I guess I don't quite understand where you're going with this. [00:06:09] Speaker 02: Isn't the way we have to look at this the old basic standard that would it have a tendency to [00:06:18] Speaker 02: affect the outcome. [00:06:20] Speaker 02: If there are false reports, false testing that's being submitted to the carrier, [00:06:28] Speaker 02: That is going to have a tendency to have an impact on the decision. [00:06:31] Speaker 02: You don't have to prove to you that it, whether or not it would have been covered in a particular instance, it's the nature of the falsity. [00:06:39] Speaker 02: And the nature of the falsity here is a pretty significant falsity, false studies, which would have a tendency to affect the decision by the provider. [00:06:48] Speaker 02: So I don't, I guess I don't quite see where you're going with this. [00:06:53] Speaker 01: Well, I think that Milheiser has sort of cut down on that theory of materiality that you're on or just articulate. [00:07:00] Speaker 02: Well, isn't it objective or is it an objective test? [00:07:04] Speaker 01: It is an objective test. [00:07:06] Speaker 02: Okay. [00:07:06] Speaker 02: So we take a look at the falsity and we say, is this the sort of false statement that would likely have an impact on a decision being made by a provider? [00:07:19] Speaker 02: Isn't that how they analyze it? [00:07:20] Speaker 01: I really don't think so your honor after Milheiser and that's because I mean that was the same thing that happened in Milheiser is that the victims would say look we never in that case they were buying toner okay and the victim said look we never would have bought the toner had these [00:07:37] Speaker 01: misrepresentations not been made. [00:07:40] Speaker 01: I mean, that was their point. [00:07:41] Speaker 01: And this court said, no, that's just not good enough. [00:07:44] Speaker 01: The question for fraud is, did the victims get deprived of the essential benefit of the bargain? [00:07:51] Speaker 01: Simply saying, well, we wouldn't have entered into the transaction. [00:07:57] Speaker 01: That just no longer suffices under Ninth Circuit law. [00:08:00] Speaker 01: And other circuits are in agreement with that. [00:08:03] Speaker 01: It's the same, the DC circuit, the 11 circuit. [00:08:06] Speaker 01: I think at this point the majority of the circuits are in agreement with that. [00:08:09] Speaker 02: I guess where I'm having trouble is I'm hearing what you're saying to change what I think is an objective test into a subjective test. [00:08:19] Speaker 02: That's what you're doing here. [00:08:20] Speaker 02: Now maybe you're saying Milheiser's stands for that proposition, but I don't think that it does. [00:08:25] Speaker 01: No, and I think we're moving from a subjective to an objective, because under Your Honor's articulation of materiality, you're saying you're the victim. [00:08:35] Speaker 01: I wouldn't have done this. [00:08:36] Speaker 01: I wouldn't have engaged in this transaction. [00:08:38] Speaker 01: It's subjective. [00:08:39] Speaker 01: I personally, even though I got the essential benefit of the bargain, I myself subjectively would not have entered into this transaction. [00:08:46] Speaker 01: That is an incorrect subjective test after Milheiser. [00:08:50] Speaker 01: The question is, objectively, did you get the essential benefit of the bargain? [00:08:53] Speaker 02: So you're not focused on the nature of the falsity, whether or not the falsity is, the false statement is of the type that would be important to the provider. [00:09:06] Speaker 02: You're saying that's not the way to look at this. [00:09:08] Speaker 01: Well, I'm saying that would it be important to the essential benefit of the bargain? [00:09:13] Speaker 01: I think that is the clear, after Milheiser, that was the problem this court articulated with the materiality instruction and the materiality theory of the government was that it just said, you know, [00:09:25] Speaker 01: The government's theory was the victim said it was important to them and they wouldn't have engaged in the transaction if they had known about this falsity. [00:09:33] Speaker 01: And this court said, nope, that's just not good enough for fraud. [00:09:36] Speaker 01: It has to be, were they deprived of the essential benefit of the bargain? [00:09:40] Speaker 03: I thought the fraud here was with the insurance company. [00:09:43] Speaker 01: Correct. [00:09:44] Speaker 03: So when you talk about victim, you're talking about the patients? [00:09:46] Speaker 01: No, the insurance company. [00:09:47] Speaker 03: Talking about the insurance company. [00:09:49] Speaker 01: The question would be, did the insurance companies get deprived of the essential benefit of the bargain and that they were paying for procedures that they were not obligated to pay for under their plans? [00:10:00] Speaker 01: That is the test. [00:10:03] Speaker 03: Well, they were given false information, though, in many instances, right? [00:10:07] Speaker 01: Correct. [00:10:07] Speaker 01: Even assuming that is the case, the argument is that the false information did not necessarily mean that the people were not covered for the procedure. [00:10:17] Speaker 01: The false information was an extra, there were other bases for the coverage of the procedure. [00:10:23] Speaker 01: And in this case, we don't, the government didn't introduce the plans. [00:10:26] Speaker 01: Now, I'm saying put aside, the court may say, look, we think the evidence was sufficient to support the convictions, even under my articulation of, and Milheiser's articulation of materiality. [00:10:38] Speaker 01: What I'm arguing is that the theory that the government included in their prosecution, with their witness testimony and their arguments, it went too far. [00:10:50] Speaker 01: It said that it doesn't matter. [00:10:51] Speaker 01: Any false statement, the insurance companies either would not have paid the claim, even if the false statement... They're not saying any false statement. [00:10:58] Speaker 02: I don't think that's fair to the other side. [00:11:01] Speaker 02: They're saying this kind of false statement, false sleep studies, [00:11:06] Speaker 02: are so significant that it would be a basis to say, even if there's other reasons why somebody might qualify for coverage, they're saying that is such a material falsity. [00:11:21] Speaker 02: They're not saying any false statement because I don't think that's fair to the government's position. [00:11:26] Speaker 01: Well, Your Honor, I respectfully think they did articulate that and their witnesses said that. [00:11:30] Speaker 02: Well, but that's not our case. [00:11:31] Speaker 02: The case [00:11:33] Speaker 02: What I'm saying is you don't dispute what was submitted here were false sleep studies. [00:11:39] Speaker 01: Correct. [00:11:39] Speaker 01: Let's assume that there were false sleep studies. [00:11:41] Speaker 01: And their position was, and this is to get around the problem that they didn't introduce the plans and that the patients may have otherwise been covered. [00:11:50] Speaker 01: Put aside the sleep studies, given their body mass index, for example, and given their other comorbidities, they would have been eligible for the lap band surgery. [00:11:59] Speaker 01: Let's just use that example. [00:12:00] Speaker 01: To get around that problem, the government's position, their witnesses testified, and even in the closing argument was health insurance companies, their view is if there's any false information in the claims, we're entitled to deny the claim. [00:12:14] Speaker 02: So long as it's material. [00:12:16] Speaker 02: And what's material is a false [00:12:18] Speaker 02: Sleep study. [00:12:19] Speaker 01: But their position wasn't, it had to be material. [00:12:21] Speaker 01: Their position was, if the statement is false, either we can deny the claim, or their other theory was, we would have investigated further. [00:12:29] Speaker 01: That's their argument. [00:12:32] Speaker 01: With the time I have remaining, but what I saw, I just want to make clear just before I move on to recklessness is, number one, this issue on the over-breath of the theory, which only would get us a new trial, not judgments of acquittal, is reviewed de novo. [00:12:45] Speaker 01: And the government has not articulated a developed harmless error argument as to that claim. [00:12:51] Speaker 01: Now, with respect to recklessness, I think one of the problems with the court's precedent, and I really think it should be clarified, is that there are cases that go in different directions. [00:13:03] Speaker 01: And part of the problem is that we have different statutes that are involved. [00:13:08] Speaker 01: the plain language of the different statutes say different things, and then we have different jury instructions that are given in different cases, and it's kind of mixing apples and oranges. [00:13:18] Speaker 01: And really, the government, they're heavily relying on this case called Deering. [00:13:22] Speaker 01: And I want to explain kind of why Deering doesn't control this case, number one, and also number two, where Deering went off the road, sort of. [00:13:31] Speaker 01: Now, I think the clearest example for here, and let's start off with two of the statutes we're dealing with. [00:13:37] Speaker 01: We have the property fraud statutes, and I'm going to put them aside for a second. [00:13:41] Speaker 01: We're dealing with section 1035 and 1028A. [00:13:46] Speaker 01: Now, 1035 cannot be any clearer. [00:13:48] Speaker 01: The statute says, knowingly and willfully. [00:13:52] Speaker 01: That's the language in the statute. [00:13:55] Speaker 01: And there's just simply no way that a reckless indifference standard can, we've moved from a statute that specifically says knowingly and willfully and we're allowing it to be satisfied by reckless indifference. [00:14:07] Speaker 01: And that obviously has to be wrong. [00:14:09] Speaker 01: Those reckless indifference is not knowingly and it's certainly not willfully. [00:14:14] Speaker 01: And the same thing with 1028A, it says knowingly. [00:14:17] Speaker 01: Knowingly cannot be satisfied by recklessly. [00:14:20] Speaker 01: And where we went off the side of the road is that during [00:14:25] Speaker 01: did not involve the statutes that are involved here. [00:14:29] Speaker 01: Dearing involved section 1347. [00:14:31] Speaker 01: So this court does not have to overrule Dearing because it addressed a different statute. [00:14:37] Speaker 01: This case does not involve 1347. [00:14:38] Speaker 01: The instruction in Dearing was also different and I'll get to that. [00:14:43] Speaker 01: But where Dearing went off the road is that Dearing said that reckless indifference could satisfy knowingly and willfully and it cited a case called Tarala, which the court may be familiar with. [00:14:55] Speaker 01: But the problem is that Tirolo addressed securities fraud in Title 15, a provision in Title 15. [00:15:02] Speaker 01: The statute at issue in that case did not use the language knowingly and willfully. [00:15:06] Speaker 01: It just used the term willfully. [00:15:09] Speaker 01: That was it. [00:15:10] Speaker 01: And what this court said is, in the context of securities fraud, willfully does not require [00:15:19] Speaker 01: Brian versus the United States' willfulness. [00:15:21] Speaker 01: It doesn't require knowingly either. [00:15:23] Speaker 01: It just is a general wrongfully standard. [00:15:26] Speaker 01: And in that context, reckless indifference is okay. [00:15:31] Speaker 01: But the statutes that we're dealing with here, 1035, 1028A, they say knowingly and willfully, and the government has conceded in a case called the Joku, which came after Dearing, that 1035 [00:15:45] Speaker 01: requires Brian versus United States willfulness. [00:15:48] Speaker 01: There is just simply no way that a statute that requires Brian versus United States willfulness, and that's explicitly in the language that says knowingly and willfully, can be satisfied by reckless indifference. [00:16:00] Speaker 01: I mean, it counters. [00:16:02] Speaker 02: Can I jump ahead on this? [00:16:04] Speaker 02: Isn't it a bit of an academic point in this case when we're fighting about all this? [00:16:09] Speaker 02: I mean, the bottom line is there was considerable evidence [00:16:14] Speaker 02: of direct involvement by Omiti in micromanaging all of this activity. [00:16:20] Speaker 02: So we can have an academic discussion about reckless indifference and what would be the appropriate instruction. [00:16:27] Speaker 02: But at the end of the day, at most, wouldn't it be harmless error here? [00:16:33] Speaker 02: Because the evidence is overwhelming against Mr. Omiti. [00:16:36] Speaker 01: Well, we dispute that it was overwhelming. [00:16:39] Speaker 02: And, you know, before I get into why it wasn't overwhelming, I guess the first question is... Well, actually, and that's, I respect that, but am I correct that if, in fact, we conclude that there is considerable evidence of direct involvement by Omiti that all of this is somewhat academic? [00:16:55] Speaker 02: If we conclude that. [00:16:56] Speaker 01: Well, if the court finds that there was overwhelming evidence of a knowingly and willfully mens rea, then, I mean, under Needer, the court has said that you can engage in a harmless error analysis. [00:17:08] Speaker 01: Now, I think you have a problem under Needer when, if you agree with me on the materiality point, and you agree on the recklessness point, then you have sort of a doubly over-broad theory. [00:17:20] Speaker 01: You have two fundamental elements of the offense. [00:17:23] Speaker 01: that have been misinstructed and neither talks about a single element of the offense can be harmless error. [00:17:28] Speaker 01: But if you agree that there are two significant and critical elements of the offense that are tainted, I'm not sure that you could go there. [00:17:36] Speaker 01: And in addition, we also do have a constructive amendment claim for which harmless error doesn't apply. [00:17:41] Speaker 01: But I do want to get to Your Honor's question about wasn't the evidence of knowledge and intent overwhelming. [00:17:48] Speaker 01: And the bulk of that evidence, of the direct evidence, comes from their cooperating witnesses. [00:17:54] Speaker 01: And these cooperating witnesses have particular problems and this court has said in many cases that testimony from cooperating witnesses is not the type of overwhelming evidence that is going to supply for which we could ignore critical errors such as errors that go to the fundamental mens rea for the offense. [00:18:13] Speaker 01: Now, there may have been other circumstantial evidence that the government introduced to show that he knew, but that he was a micromanager and that he was reviewing charts. [00:18:25] Speaker 01: But there were doctors involved here who were reviewing the same charts. [00:18:30] Speaker 01: Those doctors were not prosecuted. [00:18:32] Speaker 01: Nobody said that they knew. [00:18:36] Speaker 01: They were reviewing the same charts that Mr. Omiti was reviewing. [00:18:41] Speaker 01: He had hired, you know, he had hired people to manage the sleep study program and he was relying on them. [00:18:47] Speaker 01: And so I don't think the evidence was overwhelming. [00:18:51] Speaker 01: The only, the strongest evidence came from their cooperating witnesses. [00:18:54] Speaker 01: And that's just simply not the type of evidence that would be considered overwhelming. [00:19:00] Speaker 02: Your position is cooperating witness testimony is, we have a whole collection of cooperating witnesses and because they're cooperating witnesses that isn't [00:19:08] Speaker 02: significant evidence, that would be a new proposition for me. [00:19:12] Speaker 02: We have a lot of cooperating witnesses in our cases. [00:19:14] Speaker 01: Well, I'm not saying that you can't rely on cooperating witnesses, but this court has said in cases like Bailey, it said it in Obagi, written by... Well, it certainly goes to the credibility. [00:19:24] Speaker 02: You have to analyze that. [00:19:25] Speaker 02: I'm not disputing that, but a lot of criminal cases are based on cooperating witnesses, and as far as I know, that's what we call evidence. [00:19:34] Speaker 01: I'm not saying it's not evidence, I'm saying it's not overwhelming evidence. [00:19:37] Speaker 01: Certainly a juror, and again, look, the court may have its own experience with cooperating witnesses and may view cooperating witnesses one way or the other. [00:19:44] Speaker 01: But that's not what harmless error analysis is for this court. [00:19:47] Speaker 01: It's could a jury sitting there, could a jury say, look, we're not going to believe these people. [00:19:51] Speaker 01: They've got all sorts of problems. [00:19:53] Speaker 01: They've lied over and over and over again. [00:19:56] Speaker 01: Not only are they getting sentencing benefits for custody, they're getting no custody time, but they're not having to pay any restitution. [00:20:03] Speaker 01: They're literally being paid. [00:20:04] Speaker 01: They don't have to pay money because they're not being saddled with restitution and these other things. [00:20:10] Speaker 01: Certainly, jurors could sit there and say, you know what, we're just not going to credit that. [00:20:13] Speaker 01: And they do often jurors reject cooperating witness testimony. [00:20:17] Speaker 01: So to say that a case is overwhelming when the large bulk of the direct evidence of his supposed knowledge and intent comes from the cooperating witnesses, we don't think that shows harmlessness beyond a reasonable doubt, which of course is the highest standard. [00:20:34] Speaker 01: I see I'm ticked down a few seconds. [00:20:37] Speaker 04: We'll have your rebuttal. [00:20:38] Speaker 04: Thank you. [00:20:38] Speaker 04: Thank you, Mr. Coleman. [00:20:46] Speaker 00: Good morning, and may it please the court, Edmund Searby for Mr. Omidy. [00:20:49] Speaker 00: I stand in today for Lawrence Robbins, whose briefs are before you. [00:20:54] Speaker 00: He became too sick to complete this appeal, and in fact, he passed away last week. [00:20:59] Speaker 04: Sorry to hear that. [00:21:03] Speaker 00: Your Honor, I'd like to begin where my colleague left off and make a couple points. [00:21:10] Speaker 00: One, [00:21:13] Speaker 00: As far as recklessness, I think the courts heard a lot and is going to hear a lot about whether dearing controls or other cases control. [00:21:24] Speaker 00: I would simply very quickly encourage the court to consider the Supreme Court's decisions in Borden and Global Tech and this court's Anbanck decision in Gracitas Ulibarri. [00:21:37] Speaker 00: All these decisions endorse the model penal codes hierarchy [00:21:43] Speaker 00: of mental states and I believe that is the solution to coherent law on whether recklessness can satisfy a more serious mental state. [00:21:56] Speaker 00: Going to the court's question about Mr. Klasky and whether the recklessness instruction should be deemed to be harmless in light of the evidence that [00:22:13] Speaker 00: In fact, Mr. Omidy directly directed this fraud through Mr. Klasky and to a lesser extent through Mr. Hong. [00:22:22] Speaker 00: I would encourage you in the brief to take note of the area where it points out that Mr. Klasky, while testifying that he was directed to falsify these scores in order to get lap band surgery approved. [00:22:37] Speaker 00: In fact, when you look at the scores, you see there's no rhyme or reason to them. [00:22:42] Speaker 00: Mr. Klasky is sometimes raising them when you don't need a sleep study score to get lap band surgery approved. [00:22:51] Speaker 00: And sometimes he's even lowering the scores. [00:22:54] Speaker 00: And I submit to the court that the government's solution to the problem of their own evidence that really didn't submit, it really didn't, wasn't consistent with their own theory was what is accurate information theory. [00:23:09] Speaker 00: And what's clear is during even the pendency of this case, but even before this case, there is controlling case law that first of all, all deception is not federal fraud. [00:23:22] Speaker 00: And there are controlling decisions to eliminate what's known variously in the circuits as right to control theory or accurate information theory. [00:23:33] Speaker 00: I urge the court to look, as my colleague pointed out, at the actual testimony of the insurers who testified in trial, as well as the government's own brief in this case at page 2, at page 20, page 30, and in other places. [00:23:51] Speaker 00: The government is clearly relying on accurate information theory. [00:23:56] Speaker 00: They are relying on the fact that any falsehood is material. [00:24:02] Speaker 00: And that's the testimony they offer. [00:24:04] Speaker 00: Did you require complete and accurate information on all claims? [00:24:08] Speaker 00: Oh, yes, we did. [00:24:10] Speaker 00: The problem with this theory is the court should think about how expansive it begins. [00:24:14] Speaker 00: In every case, you can ask somebody, do you require complete and accurate information? [00:24:22] Speaker 00: If I go out and buy a used car and I get exactly the car that I was represented by the salesperson to get, [00:24:31] Speaker 00: But I'm told later that the salesperson had a lapel pin for the Marine Corps, and in fact, they never served. [00:24:38] Speaker 00: And you asked me, was that material your decision? [00:24:41] Speaker 00: I'd say, oh yes, stolen valor. [00:24:43] Speaker 00: I never would have bought a car from somebody like that. [00:24:46] Speaker 00: But in fact, I got the benefit of the bargain. [00:24:49] Speaker 00: And the arc of the law has been to recognize that federal fraud needs to get cabined. [00:24:55] Speaker 00: And that's really what happened in Millheiser and before that in Brookhousen. [00:25:00] Speaker 00: And that's where the Supreme Court's headed in Seminelli. [00:25:03] Speaker 00: Well, let me just ask a question then. [00:25:05] Speaker 04: So if I go to the grocery store and I want to buy eggs, and I look at the box of eggs and it says USDA inspected, and I buy the eggs and we eat the eggs, it turns out that they were not USDA inspected. [00:25:20] Speaker 04: I would not buy eggs for my family that were not USDA inspected. [00:25:24] Speaker 04: You would say that's not fraud? [00:25:27] Speaker 00: I would say that's a close call, but that's going to the terms that we would believe are the benefit of the bargain. [00:25:36] Speaker 00: Basically, that product is what it's represented to be. [00:25:40] Speaker 04: But how is that different in this case where they're having the doctor play the role of the USDA and say, I'm certifying that this is correct. [00:25:47] Speaker 04: This is what happened. [00:25:48] Speaker 04: How is it different? [00:25:49] Speaker 04: I understand the issues with Milheiser. [00:25:51] Speaker 04: I'm not sure where we go with Milheiser. [00:25:53] Speaker 04: I'm just not sure this is the case. [00:25:54] Speaker 04: Explain to me why this case is not the crux of the bargain between the insurance companies and the doctors here. [00:26:01] Speaker 00: Because, as the government said, 85% of losses in lap band surgery, in many of these sleep studies, the sleep study was completely immaterial to whether the lap band surgery would be approved. [00:26:16] Speaker 00: And let me illustrate that by going to an issue in the case, and that was the admission of the expert, Mr. Patrone. [00:26:27] Speaker 00: And he put before the jury, and the reason I want to talk about it is it's an error in its own right that I believe was significant to the basic fairness of the trial, but also illustrates the issue that we're talking about of materiality and how wrong this was. [00:26:46] Speaker 00: And Patrone testified to the jury that basically there was $353.4 million in intended loss and $71.3 million in actual loss and that he could testify to the jury on a 95% confidence level. [00:27:13] Speaker 00: the district court should have kept this testimony out under its gatekeeper function, under 702, because Patrone took his assumptions of fraud and loss, not from doctors, not even from insurance experts, but from the prosecutors. [00:27:32] Speaker 00: And his primary assumption was that any change to a sleep study is fraud. [00:27:38] Speaker 00: And there [00:27:40] Speaker 00: A number of basic problems, but in my limited time I want to hit two of them. [00:27:44] Speaker 00: One is, in order to say that any change is fraud, they needed the baseline to say what it was changed from. [00:27:52] Speaker 00: The baseline here were the draft Zarabi reports, and they were offered for the truth of the matter asserted. [00:28:00] Speaker 00: The court erred in admitting these as business records. [00:28:04] Speaker 00: They were not authenticated by a person with knowledge. [00:28:07] Speaker 00: Michael Zerabi was not even at the trial. [00:28:10] Speaker 00: They were not reliable. [00:28:12] Speaker 00: Zerabi and I mean no disrespect, like Klasky, is a person with a serious mental illness. [00:28:18] Speaker 00: He admitted the data was so corrupt that he used his own imagination to make the numbers up. [00:28:25] Speaker 00: And he listed just these impossible results. [00:28:28] Speaker 00: He listed sleep apnea events where people weren't breathing for six, seven, eight minutes. [00:28:33] Speaker 00: They would have died. [00:28:35] Speaker 00: It was clinically impossible. [00:28:38] Speaker 00: But that's what the government is saying is the truth. [00:28:42] Speaker 00: So any deviation from that is false. [00:28:46] Speaker 00: The other assumption underlying Patrone's testimony that really gets us back to the materiality thing and illustrates how wrong this was, [00:28:54] Speaker 00: is any change is a loss. [00:28:58] Speaker 00: So a one-point change in a sleep study score under Patrone's methodology that he adopted from the government would be lost. [00:29:08] Speaker 00: And what is that? [00:29:09] Speaker 00: That is an accurate information theory. [00:29:12] Speaker 00: It's disconnected from the actual approval criteria. [00:29:16] Speaker 00: It's disconnected from the real issue here, which was the healthcare fraud had to be proven by proving that there wasn't medical necessity. [00:29:26] Speaker 00: But what do we say? [00:29:27] Speaker 00: See, when we get into his data, [00:29:29] Speaker 00: in his sample of 250 patients, he identified 47 that had an altered sleep study score and received lap band surgery. [00:29:40] Speaker 00: And he counted those all as loss and then magnified that over an 8,000 patient population to come up with this gigantic [00:29:51] Speaker 00: loss number that was so prejudicial and the jury heard, excuse me. [00:29:57] Speaker 00: The problem is when you get into those people that he counted as loss, you see that 26 of the 47 had a body mass index over 40, which the evidence in the record shows meant they automatically qualified for lap band surgery. [00:30:15] Speaker 00: The sleep study was completely immaterial. [00:30:18] Speaker 00: Another 17 had a body mass index of between 35 or 40, which means if they had another comorbidity, such as diabetes or hypertension, they also qualified for lap band surgery, irregardless of what their sleep study score. [00:30:37] Speaker 00: But Patrone never looked to see if they had another comorbidity. [00:30:41] Speaker 00: He just counted it as loss and fraud because there was any change to the sleep study report. [00:30:48] Speaker 00: No reasonable person would believe that in those instances, the change to the sleep study score was material. [00:30:56] Speaker 00: I see my time is winding down. [00:30:57] Speaker 00: I wanted to get to permeated with fraud. [00:31:01] Speaker 04: We're over time, so you've got about, I'll give you 30 seconds. [00:31:05] Speaker 00: Thank you, Your Honor. [00:31:06] Speaker 00: Just very quickly, permeated with fraud, we disagree with the government. [00:31:10] Speaker 00: Ninth Circuit's decision in Rutgerd clearly says that that theory should be limited to an all-Record search in the Fourth Amendment context, and I think Rutgerd's controlling... I was going to say there's a lot of other circuit authority that would disagree with you on forfeiture. [00:31:29] Speaker 04: I don't think Rutgerd squarely presents this, so are you saying that [00:31:35] Speaker 04: You're saying Rutger controls, like we are bound by Rutger. [00:31:37] Speaker 00: They say the concursory phrase is too loose and indefinite to constitute a finding by a proposter of the evidence absent specific supporting evidence. [00:31:46] Speaker 00: In any event, they didn't prove permeated with fraud here. [00:31:49] Speaker 00: The government acknowledged that there were substantial legitimate earnings from this business and look at what the district court did on restitution. [00:32:00] Speaker 00: The district court rejected Patrone's findings and in doing that noted that there were bariatric surgeons here who made independent decisions on medical necessity. [00:32:13] Speaker 00: And for that reason, you know, those transactions all would have been legitimate [00:32:21] Speaker 00: The government's argument to take everything is this absurd syllogism that basically the government acknowledges there was tons of legitimate business here. [00:32:33] Speaker 00: All patients entered the call centers, some patients received false sleep studies, therefore all payments were obtained from fraud. [00:32:41] Speaker 00: The last thing I'll say and I'll sit down is the government argues and compares this case to Warshack [00:32:49] Speaker 00: This case is distinguishable from Warshack on this grounds. [00:32:54] Speaker 00: In Warshack, the theory to take the alleged legitimate earnings was that the fraud predated it. [00:33:01] Speaker 00: The business began with one fraudulent product and they committed fraud on merchant banks to get the ability to charge cards. [00:33:10] Speaker 00: So the argument was that the later billings that were legitimate were the product of the earlier fraud. [00:33:18] Speaker 00: It's the opposite way in this case. [00:33:21] Speaker 00: They never prove this call center scheme and if you look at their own indictment, you'll see it contradicts what they're telling to this court. [00:33:30] Speaker 00: Basically, that the legitimate business began in 2008 or before, look at their indictment and the sleep study program began in 2010. [00:33:42] Speaker 00: So those, the legitimate earnings were not the product of the fraud. [00:33:48] Speaker 00: And permeated with fraud can't be magic words, as the government says, and then they just take everything. [00:33:53] Speaker 00: All right. [00:33:54] Speaker 00: Thank you, counsel. [00:33:56] Speaker 04: And Mr. Cromwell, you still have your five. [00:34:09] Speaker 05: Good morning, your honors. [00:34:11] Speaker 05: May it please the court, Saria Bahadou on behalf of the United States. [00:34:15] Speaker 05: So I'll start with materiality as well. [00:34:18] Speaker 05: The defendants did not argue what they have been arguing here today in their briefs. [00:34:24] Speaker 05: Their opening brief, the question presented was, may the government prove materiality without insurance plans? [00:34:32] Speaker 05: And in their reply brief, they asked for dismissal for, quote, want of sufficient proof. [00:34:39] Speaker 05: They argued a sufficiency claim. [00:34:41] Speaker 05: They challenged the government's evidence. [00:34:43] Speaker 05: They did not challenge [00:34:44] Speaker 05: the government's legal theory. [00:34:47] Speaker 05: In terms of just to go into the Milheiser question because that's where the court was going, Milheiser says specifically, when the misrepresentations are directed to the quality, adequacy or price of the goods themselves, the fraudulent intent is apparent because the victim was made to bargain without facts essential in deciding to enter the bargain. [00:35:10] Speaker 05: So in your egg example, [00:35:12] Speaker 05: If you were told something that went to the quality of those eggs, that was fraud. [00:35:17] Speaker 05: That's material to your decision, Judge Owens. [00:35:20] Speaker 05: That's exactly what happened here. [00:35:22] Speaker 05: The quality of these sleep studies, there was no quality of these sleep studies. [00:35:26] Speaker 05: They were fraudulent. [00:35:27] Speaker 05: They were not legitimate. [00:35:29] Speaker 05: And I think the best quote on this, if I may, is from one of the insurers themselves, and it's at ER 35, and Carl Reinhart said, [00:35:37] Speaker 05: If results are altered, the sleep study is worthless to me. [00:35:42] Speaker 05: And we would pay for it because I'm not getting what I ordered. [00:35:48] Speaker 05: I'm not getting a legitimate sleep study. [00:35:51] Speaker 05: So the insurer is specifically saying, I'm not getting what I ordered. [00:35:55] Speaker 05: I'm not getting those eggs that have a USDA approval on them. [00:35:58] Speaker 05: So this is simply not the case. [00:36:00] Speaker 05: where there were actually services that were rendered. [00:36:04] Speaker 05: And I actually think council inadvertently conceded a Milheiser point here. [00:36:09] Speaker 05: He said it would be appropriate under Milheiser, for example, if the claims were not medically necessary. [00:36:17] Speaker 05: The claims here were not medically necessary. [00:36:20] Speaker 05: There was not a doctor who was referring these patients for sleep studies. [00:36:24] Speaker 05: There was not a doctor who was actually interpreting these sleep studies. [00:36:29] Speaker 05: there wasn't a doctor doing these medical necessity determinations that insurers expect when they're paying for their services. [00:36:37] Speaker 05: Defense counsel also said that if the claims, I think, themselves were not performed, if the services were not performed, same answer. [00:36:44] Speaker 03: Were there any legitimate, just as, I know this goes to a different kind of a different point, but just as you're mentioning this, were there any legitimate studies? [00:36:52] Speaker 05: I don't believe so. [00:36:53] Speaker 05: And I don't even think that they can say that on this record. [00:36:56] Speaker 05: Because when they're going through these BMIs and they're talking about BMIs that were over 40 and these other comorbidities, that's all coming from the same bucket, the same bucket of fraud, the same bucket that the same patient reports that were all going through this call center, all the same records that were being developed by Get Then. [00:37:14] Speaker 05: And so that fraud was pervasive. [00:37:16] Speaker 05: So what they're doing now is trying to [00:37:19] Speaker 05: pick portions from patient files and say, well, that BMI was over 40, so the sleep study was immaterial. [00:37:26] Speaker 05: There's no way of knowing if that BMI was accurate. [00:37:29] Speaker 05: And actually, it's fraudulent, frankly, because coming to that decision, you're putting these patients through services that are not even medically necessary to make those appropriate determinations. [00:37:40] Speaker 05: And so I honestly think it's just counterfactual. [00:37:43] Speaker 05: And it would require the court to engage in a counterfactual [00:37:46] Speaker 05: that simply the jury was not engaging in. [00:37:48] Speaker 05: They were looking at the fraudulent lies that were in the sleep study reports. [00:37:54] Speaker 05: I mean, it's also not just sleep study reports. [00:37:56] Speaker 05: There's fraudulent prescription, and that's garden variety healthcare fraud. [00:38:00] Speaker 05: If you put a doctor's signature on a prescription and they didn't actually conduct an individualized, you know, assessment with a patient, [00:38:09] Speaker 05: and prescribe them a CPAP device, there's no medical necessity determination, there's no actual service that's being performed, it's just garden variety fraud. [00:38:17] Speaker 05: And I think if the court were to accept this new sort of Milheiser concept in this particular case, I'm not sure what fraud would be going forward. [00:38:28] Speaker 05: And here you have very core lies. [00:38:31] Speaker 05: And the government was very careful in closing argument. [00:38:34] Speaker 05: They specifically said the lies had to affect insurers' decisions. [00:38:39] Speaker 05: And then they went through line by line the specific lies that matter to insurers. [00:38:45] Speaker 05: So we respectfully believe that this claim is completely waived. [00:38:50] Speaker 05: It was all about sufficiency when we actually put pen to paper with the briefing. [00:38:54] Speaker 05: But now if this court engages in this Milheiser theory at all, [00:38:58] Speaker 05: We think that we prevail completely under Milheiser. [00:39:03] Speaker 05: Unless the court has more questions on Milheiser or on our theory of fraud, I can move to recklessness. [00:39:12] Speaker 05: Okay. [00:39:12] Speaker 05: In terms of recklessness, just to be clear, the instructions were not recklessness. [00:39:17] Speaker 05: It was reckless indifference. [00:39:19] Speaker 05: It's a big difference because when you have the word indifference in there, you have to know something exists to be indifferent to it. [00:39:26] Speaker 05: And this court has held many times over that this reckless indifference instruction is permissible. [00:39:32] Speaker 05: And the other side talks about dearing, but, and dearing may have involved a different statute, but I would just point this court to gay. [00:39:39] Speaker 05: Um, in the United States v. gay, the court said we have repeatedly upheld a reckless indifference standards in a male fraud case. [00:39:46] Speaker 04: Let me ask counsel, cause I was reading closings as I always do when I get the cases like this. [00:39:52] Speaker 04: I did not see. [00:39:54] Speaker 04: a heavy discussion of recklessness in closing. [00:39:57] Speaker 04: I think it might have been referenced in terms of referencing the jury instructions, but I didn't see it being argued. [00:40:04] Speaker 04: Am I correct in that? [00:40:05] Speaker 04: That was not the thrust of the closing? [00:40:07] Speaker 05: That's absolutely correct. [00:40:09] Speaker 05: There was, as in any closing, the government typically reviews the jury instructions with the jury and talks about, usually it's pretty verbatim from what the jury instructions say. [00:40:19] Speaker 05: The courts make sure that we do that, as the district judges know. [00:40:22] Speaker 05: And that's all that the reckless indifference, that's the only time it was featured, when the government was going over that language. [00:40:32] Speaker 05: And the court was exactly right. [00:40:33] Speaker 05: It is academic. [00:40:35] Speaker 05: The theory at trial was that the defendant not only knew, but he led and directed this fraud. [00:40:42] Speaker 05: And this idea that it was just based on a cooperator testimony or cooperators generally is also not based in the record whatsoever. [00:40:50] Speaker 05: First of all, if you look at that cooperator testimony, it was 11 trial days, so it's quite a number of volumes. [00:40:57] Speaker 05: But for the four days of the direct, it is a heavy document case. [00:41:01] Speaker 05: And you can tell that based on the number of exhibits. [00:41:04] Speaker 05: And if you read through that direct testimony, the prosecutor is guiding that cooperator through documents. [00:41:11] Speaker 05: It's not your typical cooperator eyewitness testimony where a lot of the defendant's cases were really just, you know, the case relied on that one [00:41:20] Speaker 05: particular witness. [00:41:21] Speaker 05: That's absolutely not this case whatsoever. [00:41:23] Speaker 05: And of course, there were 16, I think, get-thin former employees that testified. [00:41:29] Speaker 05: And many of them said that Julian Omidy was, quote, the big boss and, quote, everyone reported to him. [00:41:35] Speaker 05: That was from Petrkowski, not a cooperator. [00:41:38] Speaker 05: There was also Carrieto, not a cooperator. [00:41:41] Speaker 05: And he testified, Julian Omidy, quote, was in charge of all decisions as it related specifically to the sleep study. [00:41:49] Speaker 05: There's multiple witnesses over and over again, and the government absolutely in closing argued that Omiti set and reviewed Get-Thin policies and procedures. [00:41:57] Speaker 05: He was the one that asked the call center to sort patients by profitability. [00:42:02] Speaker 05: He was the one that said it's mandatory for patients to undergo two sleep studies. [00:42:07] Speaker 05: He was the one who directed the falsification of sleep study reports, and he was the one who mandated that the lies and the fake reports be sent to insurers. [00:42:15] Speaker 05: So we do think that it's entirely academic, and that was the government's closing to the jury. [00:42:24] Speaker 05: And I mean, in terms of recklessness, again, it's all academic, but we do think that the court's case has permitted exactly what the district judge did here. [00:42:32] Speaker 05: And just touching on, I think, the evidentiary issues that counsel talked about, this district judge lived with this case for quite some time. [00:42:42] Speaker 05: I think it was before Judge Gee probably for seven years. [00:42:45] Speaker 05: There was I think four years of pretrial litigation before it went to trial. [00:42:49] Speaker 05: And of course trial was about, you know, three months. [00:42:53] Speaker 05: But in terms of Mr. Petrone's testimony, Judge Gee had pretrial briefing on this issue. [00:42:59] Speaker 05: She ordered a written ruling on this issue. [00:43:03] Speaker 05: Even though she had decided that this testimony was permissible expert testimony, that it was irrelevant, she allowed the defense to fordeer this witness and that fordeer took up I think close to a morning where she allowed both defense to cross-examine this expert. [00:43:21] Speaker 05: And at that point she had determined that his testimony was admissible. [00:43:26] Speaker 05: She was careful. [00:43:28] Speaker 05: Her decision was well within the range of permissible decisions. [00:43:33] Speaker 05: that a district court can make when it comes to experts. [00:43:36] Speaker 05: And then in terms of what that expert relied upon, the Zerabi reports, again, those came in under the business records exception. [00:43:43] Speaker 05: And Judge Gee, again, was very careful in that regard. [00:43:46] Speaker 05: And in terms of on an abusive discretion standard, her decisions were well within the range of a permissible decision. [00:43:53] Speaker 05: And then just moving on to the forfeiture. [00:43:55] Speaker 05: Yeah, please. [00:43:56] Speaker 05: Sure. [00:43:56] Speaker 05: I think record, Judge Owens, [00:43:59] Speaker 05: in terms of record that there's other cases out of circuit that I think are more relevant to what was actually presented here. [00:44:08] Speaker 05: Record, if you actually look at the quote that defense hangs its hat on, which is that 100% fraud, and that's the only way you could possibly get a forfeiture in this context. [00:44:22] Speaker 05: If you go down into the record decision, it specifically says, [00:44:26] Speaker 05: you need to have specific supporting evidence. [00:44:29] Speaker 05: And so I don't think Rutgerd, which obviously involved a completely different statute, I think it was 1957, which involves specific tracing that's required, and this is a point that Judge Gee made in her order, that of course, you know, if you have a tracing statute, you're not going to be able to forfeit those indirect proceeds. [00:44:47] Speaker 05: So respectfully, we don't think Rutgerd is on point, and it would be helpful to clarify that [00:44:52] Speaker 05: that record is confined to that particular statute and to that narrow set of facts. [00:44:57] Speaker 05: And we think here, yet again, Judge Gee was careful. [00:45:00] Speaker 05: I think the calculation of the amount is reviewed for clear error. [00:45:03] Speaker 05: And the government only had to show facts by preponderance of the evidence. [00:45:08] Speaker 05: And we do think here that the fraud was pervasive, that we met that standard to show. [00:45:14] Speaker 05: Permeated by fraud doesn't mean 100% of the business has to be fraud. [00:45:17] Speaker 05: It just means it needs to be pervasive, that the central purpose has to be that fraudulent purpose. [00:45:23] Speaker 05: And we do think that the record establishes that. [00:45:25] Speaker 02: Your counterparts here suggest that, if I understood their argument, that there's some incons...the point is, point to the restitution award and the forfeiture award is, [00:45:36] Speaker 02: somehow inconsistent and demonstrating therefore that there's a problem. [00:45:41] Speaker 02: I don't necessarily agree with that, but I want, tell me why that shouldn't, the fact that there is a difference and that Judge Gee said that certain aspects of restitution were, she wasn't going to award because there were doctors that were reviewing the, kind of a second tier of review. [00:46:03] Speaker 02: And that didn't play into the forfeiture. [00:46:05] Speaker 02: Why should that not be a problem? [00:46:07] Speaker 05: Absolutely. [00:46:07] Speaker 05: So it's not a problem because there's different legal standards at play. [00:46:11] Speaker 05: Restitution is, the purpose of restitution is to make a victim whole. [00:46:16] Speaker 05: And it's also, so it really looks at actual losses and it's really going to, the perspective is looking at the victims. [00:46:24] Speaker 05: What did the victims suffer? [00:46:26] Speaker 05: And it's also governed by but for causation and proximate causation. [00:46:31] Speaker 05: And so when Judge Gee made that observation that she thought that down the line it was possible that there were these physicians who did an independent review, you know, in our position we don't think that there was evidence of that actually happening, but we respect Judge Gee's decision. [00:46:48] Speaker 05: You know, we didn't appeal that, but we don't agree with it. [00:46:51] Speaker 05: Even then, that was based on approximate cause standard. [00:46:54] Speaker 05: If you look at forfeiture, forfeiture is basically you're asking a completely different question. [00:46:59] Speaker 05: You're asking whether the proceeds [00:47:01] Speaker 05: were directly or indirectly obtained from the fraud. [00:47:05] Speaker 05: And so we're really looking at the money that's coming in to get thin and how that money is being used. [00:47:12] Speaker 05: And if you look at the government's forfeiture briefing, which is in volume three of the ER, it has a lot of charts that show exactly how the forfeiture is just looking at a different perspective. [00:47:23] Speaker 05: It's looking at how you have third party insurers and you have individual patients who are sending their money to get thin. [00:47:30] Speaker 05: and how they were going into these five bank accounts where they came to rest, and then how that money was then being pushed out to other get-thin entities to further their fraud. [00:47:40] Speaker 05: And so forfeiture doesn't have, it has but for causation, but it doesn't have proximate causation. [00:47:46] Speaker 05: So it makes sense why Judge Gee, I mean, she appropriately was looking at each, whatever concept it was, whether it was loss, intended loss at sentencing, which is a completely different standard, whether it was restitution, which is actual loss and subject to proximate causation standards, or forfeiture, which just has the but for causation, but is looking at the way the insurers were paying rather than what the insurers were losing. [00:48:10] Speaker 03: I think Judge Gee got it right. [00:48:24] Speaker 05: I don't think the record supports that. [00:48:26] Speaker 05: Judge Gee's conclusion was that she believed that there was, I think, a reference in the record to patient notes that made a reference to an independent evaluation being done by a physician. [00:48:39] Speaker 05: But other than that reference, we take the position that there's no evidence in the record that that was actually being done when the lap band surgeries were being performed down the road. [00:48:49] Speaker 03: So it's the government's view that from the get-go, everything was fraudulent? [00:48:53] Speaker 05: Yes, I mean when the money exchanged hands, which is what we look to fraud, I know we're mixing concepts here between fraud and forfeiture, but when the money exchanged hands, it exchanged hands because Gethin was submitting a claim or they were submitting a pre-approval request with fraudulent information and had the insurers known that, they would not have sent that money. [00:49:14] Speaker 05: So it was fraud from the beginning. [00:49:15] Speaker 05: The reason why for the claims they were just seeking [00:49:18] Speaker 05: money to get reimbursed for the pre-approval request, which is synonymous with the letters of medical necessity for lap band surgeries, that was just unlocking the right to bill. [00:49:28] Speaker 05: And again, when the money was exchanging hand, it was all based on fraudulent information. [00:49:32] Speaker 05: Those letters of medical necessity, for example, they attached a sleep study report that was falsified and that had a physician's signature on it, even though that physician did not interpret, did not order or did not interpret that sleep study for that patient. [00:49:46] Speaker 05: So it kind of all goes back to the fraud arguments I was making earlier, but we do think that it was fraud from the get go. [00:49:52] Speaker 05: And we don't think there's facts in the record that there were this, you know, multitude of physicians doing independent reviews down the road. [00:50:01] Speaker 05: Judge G made that call based on proximate causation. [00:50:04] Speaker 05: And I think this is more in the loss context, but she says many times over that she's being conservative by the time it got to sentencing, being conservative. [00:50:12] Speaker 05: And I think at one point she even said, [00:50:14] Speaker 05: I'm not questioning that there wasn't any liability as a result of what happened, but she was in a different world with different standards at the sentencing phase. [00:50:22] Speaker 04: So I have a hypothetical to ask. [00:50:24] Speaker 04: I just want to understand for your forfeiture theory. [00:50:26] Speaker 04: Imagine a scenario where someone goes to their doctor. [00:50:29] Speaker 04: The doctor says, look, you are obese. [00:50:32] Speaker 04: You're going to have to get lap band surgery. [00:50:35] Speaker 04: And so I'm going to refer you to USC medical. [00:50:38] Speaker 04: So I'm on the way driving home and I see the billboard for 1-800 get thin. [00:50:43] Speaker 04: And I say, hey, that looks pretty good. [00:50:44] Speaker 04: I don't like USC. [00:50:46] Speaker 04: I'm a UCLA guy. [00:50:48] Speaker 04: I'm going to go to 1-800-GET-THEN. [00:50:52] Speaker 04: In that situation where a doctor, and I'm not saying this happened in the case, but where a doctor has legitimately said, you need to get lap band surgery, and I see the billboard and I go that way, would those types of funds be forfeited when a doctor has said, you know, you legitimately need it? [00:51:10] Speaker 05: in this scheme and the way that it was run? [00:51:13] Speaker 04: Yes. [00:51:13] Speaker 05: Yes. [00:51:14] Speaker 04: And explain why. [00:51:15] Speaker 05: Because those are, say they are legitimate proceeds. [00:51:19] Speaker 05: I mean, you still have to deal with the fact that you have illegitimate proceeds that are all going to be gained by patients going through the same call center. [00:51:27] Speaker 05: And so just because you have legitimate and illegitimate proceeds together doesn't mean that there's no forfeiture. [00:51:34] Speaker 05: And I think if you look at Warshack and maybe Gladden, they basically say, [00:51:38] Speaker 05: If you have illegitimate proceeds that are effectively propping up the ability to earn legitimate proceeds, that's still forfeitable. [00:51:46] Speaker 05: And the forfeiture statute 981 is very clear on that because it's proceeds obtained directly or indirectly from the fraud activity. [00:51:55] Speaker 05: And I think your example is basically going to that indirectly portion. [00:52:01] Speaker 05: It didn't happen like that in terms of your hypothetical, but there were people who came in who weren't interested in lab ban, but who were diverted and referred to other services. [00:52:09] Speaker 05: And all of that would not have happened but for this call center or but for this fraudulent activity. [00:52:14] Speaker 05: Plus, there's evidence in the record that there was a directive to find something that get then could bill. [00:52:21] Speaker 05: And so it was part and parcel of the fraudulent activity. [00:52:26] Speaker 05: So unless the court has any more questions, [00:52:29] Speaker 02: Can I ask you about going back on the evidentiary rulings issues? [00:52:33] Speaker 02: And there's an interesting question about the admission as business records of these Zaribi reports. [00:52:41] Speaker 02: And I understand Judge Gee, that's the basis on which she admitted it, that they were 8036 records. [00:52:49] Speaker 02: And your counterparts say, well, you can't [00:52:56] Speaker 02: Effectively, if there's a collection of records that are not reliable and they're fraudulent or whatever, you can't use the business records model as the basis for, you know, they're legitimate business records of a fraudulent activity. [00:53:16] Speaker 02: What's your view on that? [00:53:17] Speaker 05: So, and I think Judge Gee answered this. [00:53:20] Speaker 05: If that were true, then you would never be able to get business records from a fraudulent business. [00:53:25] Speaker 05: I mean, many businesses are engaged in fraud. [00:53:27] Speaker 05: We charge a lot of them, and then we obtain the records. [00:53:29] Speaker 02: Well, then maybe you're not admitting them as a business record. [00:53:31] Speaker 02: Sure. [00:53:31] Speaker 02: You're admitting them on different bases. [00:53:33] Speaker 05: For other reasons. [00:53:33] Speaker 05: Yeah. [00:53:34] Speaker 05: Well, I should say too, Judge Gee's actual, her written ruling concluded that the Zarabi reports were admissible as party opponent admissions. [00:53:42] Speaker 05: When it got to trial, the focus was really on this business records exception, but there is actually a finding pre-trial about a party opponent admission. [00:53:51] Speaker 02: So she admitted them on both basis? [00:53:52] Speaker 05: Based on her pre-trial ruling. [00:53:53] Speaker 05: I think when it got to trial, the whole focus and I think it was well understood that these were coming in because if you actually look at the record, the discussion happens at, you know, volume sort of 41 and there's a little bit of going back and forth where the government says this was, we all thought that these were admissible at this point. [00:54:10] Speaker 05: and then they go back into the business record exception. [00:54:13] Speaker 05: But I will say it's the business record exception doesn't just necessarily exclude records just because there's falsities and inaccuracies in them. [00:54:23] Speaker 05: And we cite a couple of cases for that proposition in our brief. [00:54:27] Speaker 05: And that makes sense because what the court, the purpose of the business records exception is whether these are records that are, you know, used in regularly conducted businesses and if they're kept according to those practices. [00:54:40] Speaker 05: And there's a plethora of evidence in terms of an abusive discretion standard that Judge Gee had in front of her with respect to the Zarabi reports in terms of this, whether or not they were reliable. [00:54:52] Speaker 05: I mean, there was testimony that they were created at the same time as the studies themselves. [00:54:56] Speaker 05: There were other witnesses who had the same identical reports, which the government was able to identify with really unique [00:55:04] Speaker 05: hash values, and the report itself, the Zarabi reports were different than the falsified sleep studies in the respect that they actually had a hypnogram that was attached to it, which was very specific data. [00:55:17] Speaker 05: And we talk a little bit about that in our brief, but that was not something that was in the falsified report, but that lends more reliability to the actual reports, the Michael Zarabi reports. [00:55:27] Speaker 05: Getthin itself relied on these reports. [00:55:32] Speaker 05: even though they knew that no doctor was actually interpreting them. [00:55:35] Speaker 05: And I think based on all of that evidence, Judge Gee, in terms of the abuse of discretion standard, appropriately admitted them as a business record exception at trial. [00:55:46] Speaker 05: But that pre-trial ruling, I think she also gives a nod to the party opponent admissions rule. [00:55:53] Speaker 05: All right. [00:55:56] Speaker 04: Thank you very much, counsel. [00:55:57] Speaker 05: Thank you. [00:55:58] Speaker 05: We'd ask that the court affirm the jury's verdict and the Ditcher Court's sentence. [00:56:01] Speaker 05: Thank you. [00:56:09] Speaker 01: Your honor, would you mind if I saved a couple of minutes for Mr. Sir, because there were questions about forfeiture and the evidence. [00:56:16] Speaker 01: Let me, on the materiality and Milheiser, the first thing I want to do is, the government says we waived it, and they go, oh, look at the heading of their argument. [00:56:25] Speaker 01: Page 20, it's the heading of argument number one. [00:56:28] Speaker 01: dismissal, or at a minimum, a new trial is warranted on materiality grounds. [00:56:33] Speaker 01: Then A is the sufficiency claim, and then B is the new trial claim. [00:56:39] Speaker 01: We didn't waive it. [00:56:41] Speaker 01: Now, Your Honor, on whether this is a Milheiser case and the egg hypothetical. [00:56:46] Speaker 01: You are correct. [00:56:46] Speaker 01: If you want USDA eggs and you don't get the USDA eggs, you've been defrauded. [00:56:52] Speaker 01: But if your position is, I will take eggs that are either USDA approved or approved from UCLA, then I will buy the eggs. [00:57:02] Speaker 01: And I lie to you and I say that the eggs are approved by [00:57:09] Speaker 01: both, and it turns out that they're only approved by one, you still got what you wanted. [00:57:15] Speaker 01: You still got the benefit of your bargain. [00:57:17] Speaker 01: Now, you may have civil claims. [00:57:19] Speaker 01: You may be able to sue for some type of, you know, civil fraud or something like that. [00:57:25] Speaker 01: You may have other claims available. [00:57:27] Speaker 01: You just haven't been federally defrauded, criminally defrauded. [00:57:30] Speaker 01: Okay, that's the point of Milheiser. [00:57:32] Speaker 01: And I think that goes, Judge Sears-Bork, to some of your questions. [00:57:35] Speaker 01: There are differences between civil and criminal in this context. [00:57:38] Speaker 01: Now, on harmless error, this is where I think we – why Milheiser held that the government waived harmless error is exactly for what came up – happened here. [00:57:48] Speaker 01: The government just makes this broad claim that, you know, well, they were worthless, the sleeps – it was a false sleep study, whatever. [00:57:54] Speaker 01: We have multiple different counts, and the different counts are fraud for different things. [00:58:00] Speaker 01: So for example, their lap band surgery counts. [00:58:04] Speaker 01: There was significant evidence, and we've laid it out in the briefs, that these people that got them, the lap band surgeries, qualified regardless of the sleep study. [00:58:15] Speaker 01: The sleep study didn't matter because of their body mass index and their other comorbidities or just their body mass index alone. [00:58:23] Speaker 01: They qualify for the lap band surgery. [00:58:26] Speaker 01: This is a case there was evidence. [00:58:27] Speaker 01: The doctors, there were doctors that were signing off. [00:58:31] Speaker 01: These were surgeons who were not prosecuted. [00:58:33] Speaker 01: They were not giving people lap band surgeries that weren't medically necessary. [00:58:36] Speaker 01: They signed off on all these lap band surgeries. [00:58:39] Speaker 01: So if you want to do a harmless error analysis, you've got to go count by count. [00:58:44] Speaker 01: Let me give you another example. [00:58:45] Speaker 01: In our briefs, there was a CPAP. [00:58:48] Speaker 01: We addressed the one plan that they introduced. [00:58:50] Speaker 01: related to a CPAP that was given to a patient. [00:58:55] Speaker 01: And when we took their true numbers of the sleep study, and then we took the altered number of the sleep study, it didn't matter. [00:59:02] Speaker 01: The person had the sleep apnea that was required to get the CPAP machine. [00:59:08] Speaker 01: So there was no denial of the essential benefit of the bargain. [00:59:12] Speaker 01: So if you're going to do a harmless error analysis, [00:59:15] Speaker 01: which they haven't raised in their brief, they haven't done a developed one and they just get up and talk about generalities, you're going to have to go count by count by count to do that harmless error analysis. [00:59:26] Speaker 01: We don't know exactly what their specific harmless error analysis [00:59:31] Speaker 01: analysis position is as to each specific count. [00:59:34] Speaker 01: They've never alleged that. [00:59:35] Speaker 01: They just make this global harmless error argument and under a Milheiser approach you cannot do that just a global harmless error argument. [00:59:44] Speaker 01: I did want to save some time. [00:59:46] Speaker 04: Thank you, Mr. Coleman. [00:59:47] Speaker 04: I appreciate that. [00:59:57] Speaker 00: Your Honor, very briefly, a few points in rebuttal. [01:00:01] Speaker 00: I believe there was a statement made that a doctor never approved the sleep studies. [01:00:09] Speaker 00: I would call to the court's attention the government failed to preserve Dr. Zarabi's reports. [01:00:15] Speaker 00: It's a bit confusing because there are two Zarabis in this case. [01:00:18] Speaker 00: So there's Michael Zarabi who creates the draft reports. [01:00:22] Speaker 00: But his brother reviewed those to create a final report [01:00:27] Speaker 00: And the testimony, including from the government's witnesses, supported that there's an element of interpretation to scoring a sleep study, to reviewing the raw data. [01:00:38] Speaker 00: And the government failed to preserve that evidence. [01:00:41] Speaker 00: And it's troubling. [01:00:42] Speaker 00: And it becomes all the more troubling when they stand up and they say that this was fraud because no doctor ever approved it. [01:00:50] Speaker 00: We lost the best evidence of what was approved and what wasn't. [01:00:56] Speaker 00: If I understood the argument correctly, the government suggested that there wasn't evidence of bariatric surgeons making their own independent judgments of medical necessity. [01:01:09] Speaker 00: Judge Gee says directly right in there that there was such evidence, and there was. [01:01:14] Speaker 00: I mean, Charles Klasky was not performing stomach surgery. [01:01:18] Speaker 00: Independent doctors were. [01:01:22] Speaker 00: I think Judge Gee came to these realizations late. [01:01:25] Speaker 00: It was too late. [01:01:27] Speaker 00: The jury had returned its verdict. [01:01:28] Speaker 00: It was too late to stop the farce that was Patron's testimony. [01:01:34] Speaker 00: But these points apply not only in restitution, they apply in forfeiture. [01:01:38] Speaker 00: Forfeiture is not this free-reeling world where the government gets to take everything. [01:01:44] Speaker 00: So I would simply ask the court that so much depends on an independent judiciary that will hold the government to the limits of the law. [01:01:53] Speaker 00: The prosecution in this case jumped the limits in a very gross way with its expansive theories, and we ask this court to reverse. [01:02:05] Speaker 04: All right. [01:02:05] Speaker 04: Thank you very much. [01:02:06] Speaker 04: Thank you, counsel, for your briefing and argument in this case. [01:02:09] Speaker 04: It's much appreciated this matter is submitted, and we're done with the week. [01:02:12] Speaker 04: I want to thank Ms. [01:02:13] Speaker 04: Manning. [01:02:15] Speaker 04: Kwame, thank you for the tech help. [01:02:17] Speaker 04: We're done. [01:02:17] Speaker 04: Thank you.