United States v. Hagen

UNITED STATES OF AMERICA, Plaintiff, v. LEAH HAGEN (1), MICHAEL HAGEN (2), Defendants.

CRIMINAL NO. 3:19-CR-0146-B

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

April 21, 2020

MEMORANDUM OPINION AND ORDER

Before the Court are Defendant Leah Hagen's and Defendant Michael Hagen's Motion to Dismiss the Indictment and Superseding Indictment and Brief in Support (Doc. 52) and Motion for Bill of Particulars (Doc. 63). For the following reasons, the Court DENIES the Hagens' motions.

I.BACKGROUND

On March 27, 2019, Leah and Michael Hagen were indicted on one count of conspiring to defraud the United States and to pay and receive health care kickbacks under the Anti-Kickback Statute. See Doc. 1, Indictment, 5 (alleging violations of 18 U.S.C. § 371 and 42 U.S.C. §§ 1320a-7b(b)(1)-(2) (the "Anti-Kickback Statute")). On September 12, 2019, the Government filed a superseding indictment that included an additional count against the Hagens for conspiring to commit money laundering in violation of 18 U.S.C. § 1956(h). Doc. 50, Superseding Indictment, 11.

Generally, the superseding indictment alleges that from around March 2016 to January 2019, the Hagens knowingly conspired to pay illegal kickbacks and bribes to Herb Kimble's international call-center businesses in exchange for completed, signed prescriptions for durable medical equipment ("DME") and other Medicare-required documents (collectively referred to in the superseding indictment as "doctors' orders"). Id. ¶¶ 20-31. The Hagens purportedly operated this scheme through two DME companies: Metro DME Supply and Ortho Pain Solutions. Id. at 1.

The superseding indictment alleges the following scheme. The Hagens enrolled Metro DME Supply as a Medicare provider. Id. ¶ 22. In doing so, they promised to comply with all the Medicare rules and regulations, including compliance with the Anti-Kickback Statute. Id. Then, through Metro DME Supply, the Hagens paid illegal kickbacks and bribes—totaling around $6.6 million—to Herb Kimble in exchange for the completed doctors' orders. Id. ¶ 23. Metro DME Supply purportedly provided services to Medicare beneficiaries from Dallas County, Texas; and Metro DME Supply would bill Medicare for these services. Id. ¶ 24.

Around August 2017, as the result of an audit, Centers for Medicare and Medicaid Services (CMS) suspended Medicare payments to Metro DME Supply. Id. ¶ 25. CMS notified Leah Hagen of this suspension. Id. In September 2017, "Metro DME Supply voluntarily terminated its operations and its certification with original fee-for-service Medicare." Id. ¶ 26.

However, purportedly in the same month that Metro DME Supply terminated its operations, the Hagens began paying illegal kickbacks and bribes through their other DME company, Ortho Pain Solutions, to Kimble's companies in exchange for doctors' orders. Id. ¶ 27. These payments allegedly totaled to approximately $8.2 million. Id.

The superseding indictment alleges that the doctors' orders that the Hagens received from their agreement with Kimble's companies were "generated often in the absence of any preexisting doctor-patient relationship or physical examination, and frequently based solely on a short telephonicconversation." Id. ¶ 28. Yet, the Hagens would "submit[] claims to fee-for-service Medicare and Medicare Advantage plan sponsors for reimbursement based on" these orders. Id.

The superseding indictment further alleges that the Hagens, with Kimble's and others' help, attempted to conceal their scheme from Medicare and state regulators by creating "sham contracts, invoices, and other documentation that disguised the payments as for marketing and business process outsourcing[.]" Id. ¶ 29. And the superseding indictment describes a number of overt acts that the Hagens purportedly committed, with Kimble and others, and in furtherance of the conspiracy. Id. ¶ 31. First, on April 4, 2016, Leah Hagen, on behalf of Metro DME Supply, signed a Business Process Outsourcing and Call Center Services Agreement and a Marketing Services Agreement with Kimble's companies. Id. ¶¶ 31(b), (c). Thereafter, on April 7, 2016, Leah Hagen emailed Kimble, Michael Hagen, and others, stating: "We are ready to get this marketing campaign rolling. . . . We approved the sample telemed RX that were sent over. We agree to do lumbar and wrist—Medicare for now." Id. ¶ 31(d). Next, on August 5, 2016, Leah Hagen emailed Kimble and others, "expressing her concern that the number of doctors' orders was not on target." Id. ¶ 31(e). Then, on September 20, 2017, Leah Hagen emailed representatives of one of Kimble's companies, Kimble, and Michael Hagen to provide signed agreements for marketing and business process outsourcing services, this time on behalf of Ortho Pain Solutions. Id. ¶ 31(f). Last, the superseding indictment alleges that on January 26, 2019, the Hagens discussed with Kimble that they had "paid him approximately $280 per DME product in exchange for completed doctors' orders." Id. ¶ 31(a).

Overall, Count One alleges that the Hagens submitted "approximately $17 million in claims to original fee-for-service Medicare for DME, the vast majority of which were the product of illegal kickbacks and bribes," and based on doctors' orders that the Hagens received from Kimble inexchange for illegal kickbacks and bribes. Id. ¶ 30.

Count Two of the superseding indictment alleges that the Hagens knowingly and willfully conspired with others, including Kimble, to knowingly transfer money and funds from "a place in the United States to a place outside of the United States with the intent to promote" the conspiracy alleged in Count One. Id. ¶¶ 32-33.

Pending before the Court are the Hagens' motion to dismiss the superseding indictment and motion for a bill of particulars. Doc. 52, Defs.' Mot. to Dismiss; Doc. 63, Defs.' Mot. Bill of Particulars. All briefing has been received on these motions, and as such, they are ripe for review.

II.LEGAL STANDARD

A. Sufficiency of an Indictment

Federal Rule of Criminal Procedure 7(c)(1) provides that an indictment "must be a plain, concise, and definite written statement of the essential facts constituting the offense charged . . . ." "The purpose of an indictment is 'to allege each essential element of the offense charged so as to enable the accused to prepare his defense and to allow the accused to invoke the double jeopardy clause in any subsequent proceeding.'" United States v. Lawrence, 727 F.3d 386, 397 (5th Cir. 2013) (quoting United States v. Morrow, 177 F.3d 272, 296 (5th Cir. 1999)). "Thus, an indictment is sufficient if it 'contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend.'" Id. (quoting United States v. Fuller, 974 F.2d 1474, 1480 (5th Cir. 1992)). "It is not necessary for an indictment to go further and to allege in detail the factual proof that will be relied upon to support the charges." United States v. USPlabs, LLC, 338 F. Supp. 3d 547, 557 (N.D. Tex. 2018) (quoting United States v. Crippen, 579 F.2d 340, 342 (5th Cir. 1978))."Generally, an indictment [that] follows the language of the statute under which it is brought is sufficient to give a defendant notice of the crime of which he is charged." Id. (alterations in United States v. USPlabs) (quoting United States v. Thomas, 348 F.3d 78, 82 (5th Cir. 2003)).

"[A] motion to dismiss an indictment for failure to state an offense is a challenge to the sufficiency of the indictment[.]" United States v. Kay, 359 F.3d 738, 742 (5th Cir. 2004). "When the court decides such a motion, it is required to 'take the allegations of the indictment as true and to determine whether an offense has been stated.'" United States v. Daniels, 316 F. Supp. 3d 949, 953 (N.D. Tex. 2018) (quoting Kay, 359 F.3d at 742). "The propriety of granting a motion to dismiss an indictment . . . by pretrial motion is by-and-large contingent upon whether the infirmity in the prosecution is essentially one of law or involves determinations of fact[.]" Id. (quoting United States v. Fontenot, 665 F.3d 640, 644 (5th Cir. 2011)). "A court must deny a motion to dismiss if the motion relies on disputed facts." USPlabs, 338 F. Supp. 3d at 557 (citing, inter alia, United States v. Covington,_395 U.S. 57, 60 (1969)).

B. Bill of Particulars

Under Federal Rule of Criminal Procedure 7(f), a defendant "may move for a bill of particulars before or within 14 days after arraignment or at a later time if the court permits." Fed. R. Crim. P. 7(f). The district court has discretion over whether to grant the request. United States v. Shults, 2018 WL 5023779, at *1 (N.D. Tex. Sept. 18, 2018). "The purposes of a bill of particulars are to provide the defendant with sufficient notice of the charges against him so that he can prepare an adequate defense, to minimize surprise to the defendant at trial, and to enable the defendant to plead double jeopardy in the event of a subsequent prosecution." United States v. Faulkner, 2011WL 2880919, at *1 (N.D. Tex. July 15, 2011) (citing, inter alia, United States v. Carlock, 806 F.2d 535,550 (5th Cir. 1986)). "A bill of particulars cannot be used, however, to 'obtain a detailed disclosure of the government's evidence prior to trial[.]'" Id. (quoting United States v. Kilrain, 566 F.2d 979, 985 (5th Cir. 1978)); see also United States v. Davis, 582 F.2d 947 951 (5th Cir. 1978) ("[I]t is well established that generalized discovery is not a permissible goal of a bill of particulars."). Instead, the Court "must balance the needs of the defendant against the [G]overnment's right not to disclose its witnesses, evidence or legal theories." Shults, 2018 WL 5023779, at *1 (quoting United States v. Campbell, 710 F. Supp. 641, 642 (N.D. Tex. 1989)).

"In determining whether a bill of particulars is necessary, the court examines 'whether the indictment sets forth the elements of the offense charged and sufficiently apprises the defendant of the charges against...