United States v. Khalil

1

UNITED STATES OF AMERICA, Plaintiff, v. SHERIF KHALIL et al., Defendants.

No. 22-cr-20200

United States District Court, E.D. Michigan, Southern Division

June 25, 2024

OPINION & ORDER (1) DENYING DEFENDANTS' MOTIONS TO DISMISS COUNT ONE (DKT. 78) AND COUNT TWO (DKT 79) AND (2) GRANTING NANCY HARRIS'S MOTION TO ADOPT SHERIF KHALIL'S MOTION TO DISMISS COUNT TWO AND MOTION FOR BILL OF PARTICULARS (DKT. 81)

MARK A. GOLDSMITH UNITED STATES DISTRICT JUDGE.

Before the Court are Defendants' motions to dismiss Count One (Dkt. 78) and Count Two (Dkt. 79) of the amended indictment (Dkt. 18), as well as Nancy Harris's motion to adopt Sherif Khalil's motion to dismiss Count Two and motion for a bill of particulars.^[1]For the reasons that follow, the Court (i) denies Defendants' motions to dismiss Count One and Count Two and (ii) grants Harris's motion to adopt Khalil's motion to dismiss Count Two and motion for bill of particulars.^[2]

I. BACKGROUND

In April 2022, a grand jury indicted Defendants Sherif Khalil Ali Saad, Kurt Schroeder, Nagi Abdelsyed, and Nancy Harris on four counts of healthcare related offenses. See Am Indictment. Count One charges Khalil, Saad, Schroeder, and Abdelsyed under 18 U.S.C. § 371 with a conspiracy to defraud the United States and to pay and receive health care kickbacks in violation of the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b. Am. Indictment ¶¶ 30-46. Count Two charges Khalil, Saad, Schroeder, and Harris with a conspiracy to commit health care fraud and wire fraud in violation of 18 U.S.C. § 1349. Id. ¶¶ 47-65. Counts Three and Four, which are not presently at issue, charge Schroeder with aggravated identity theft in violation of 18 U.S.C. §§ 1028A and 2. Id. ¶¶ 66-68.^[3]Abdelsyed has pleaded guilty to Count One. See Plea Agreement (Dkt. 101).

The amended indictment alleges the following central facts. Abdelsyed owned Spectra Clinical Labs, Inc., a participating provider with Medicare, from at least January 2016 to April 2021. Am. Indictment ¶¶ 18, 21. Khalil operated Spectra as its chief executive officer and president from at least January 2016 through March 2020. Id. ¶ 21. In addition, Khalil jointly owned and controlled two Michigan companies, Spectra Acquisition Corporation (SAC) and Top Tier Consultants L.L.C. Id. ¶¶ 19, 20. Saad and Schroeder were recruiters paid by SAC and Top Tier to obtain urine samples and physician orders for urine drug testing by Spectra, which was to be billed to Medicare. Id. ¶¶ 22, 24. Harris was the owner of Charlotte Pain Management Clinic (CPMC) and “provided [Schroeder] with [] access to CPMC for the purpose of allowing [him] to obtain urine samples and physician orders for urine drug testing.” Id. ¶ 26.

With respect to Count One, the amended indictment alleges a conspiracy in which Defendants-through SAC and Top Tier-paid recruiters Saad and Schroeder to ensure that Medicare beneficiaries' urine samples were referred to Spectra by physicians for urine drug testing, which was to be billed by Spectra to Medicare. Id. ¶¶ 30-46. According to the Government, these payments constituted illegal renumeration, including kickbacks and bribes, in violation of the AKS. Id. ¶ 31. Relevant paragraphs from the amended indictment include the following:

• From in or around January 2016, and continuing through in or around April 2021, the exact dates being unknown to the Grand Jury, in Wayne and Oakland Counties, in the Eastern District of Michigan, and elsewhere, Defendants SHERIF KHALIL, ALI SAAD, KURT SCHROEDER, and NAGI ABDELSAYED did willfully, that is, with the intent to further the objects of the conspiracy, and knowingly combine, conspire, confederate and agree with each other, as well as with Co-Conspirator 1, and others known and unknown to the Grand Jury to commit certain offenses against the United States, that is:

a. to defraud the United States by impairing, impeding, obstructing, and defeating through deceitful and dishonest means, the lawful government functions of the United States Department of Health and Human Services in its administration and oversight of Medicare, in violation of Title 18, United States Code, Section 371;

b. to offer and pay remuneration, including kickbacks and bribes, directly and indirectly, overtly and covertly, in cash and in kind to any person to induce such person: (i) to refer an individual to a person for the furnishing and arranging for the furnishing of any item and service for which payment may be made in whole and in part under a Federal health care program, that is, Medicare; and (ii) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, that is, Medicare, in violation Title 42, United States Code, Section 1320a-7b(b)(2)(A) and (B); and

c. to willfully solicit or receive remuneration, including kickbacks and bribes, directly and indirectly, overtly and covertly, in cash and in kind: (i) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for a which payment may be made in whole or in part under a Federal health care program, that is, Medicare, in violation Title 42, United States Code, Section 1320a-7b(1)(1)(A) and (B). Id.

• It was a purpose of the conspiracy for Defendants . . . to unlawfully enrich themselves by: (1) offering, paying, soliciting, and/or receiving kickbacks and bribes to ensure that Medicare beneficiaries' urine samples were referred by physicians to Spectra for urine drug testing; (2) submitting or causing the submission of claims to Medicare for urine drug testing of urine samples referred to Spectra as a result of the payment of kickbacks and bribes; and, (3) diverting proceeds of the fraud for the personal use and benefit of the [Defendants and their co-conspirators. Id. ¶ 32.

• The manner and means by which the [D]efendants and their co-conspirators sought to accomplish the purpose of the conspiracy included, among others, the following: Defendants . . . devised and participated in a scheme to pay and/or receive illegal kickbacks and bribes in exchange for referring urine samples and physician orders for urine drug testing to Spectra for the purpose of billing Medicare. Id. ¶ 33.

With respect to Count Two, the amended indictment alleges a conspiracy in which Defendants submitted false and fraudulent claims to Medicare via interstate wire for (i) claims based on kickbacks and bribes, and (ii) claims that were medically unnecessary and/or not eligible for Medicare reimbursement. Id. ¶ 49. Relevant paragraphs from the amended indictment include the following:

• From at least January 2016, and continuing through in or around the March 2020, the exact dates being unknown to the Grand Jury, in Wayne and Oakland Counties, in the Eastern District of Michigan, and elsewhere, Defendants Sherif Khalil, Ali Saad, Kurt Schroeder, And Nancy Harris did willfully and knowingly combine, conspire, confederate, and agree with each other, and others known and unknown to the Grand Jury, to commit certain offenses against the United States, namely . . . to knowingly and willfully execute a scheme and artifice to defraud a health care benefit program affecting commerce, as defined in Title 18, United States Code, Section 24(b), that is, Medicare, and to obtain, by means of materially false and fraudulent pretenses, representations, and promises, money and property owned by, and under the custody and control of, said health care benefit program, in connection with the delivery of and payment for health care benefits, items, and services, in violation of Title 18, United States Code, Section 1347. Id. ¶ 48.

• It was a purpose of the conspiracy for Defendants . . . and their coconspirators, to unlawfully enrich themselves by, among other things: (a) submitting or causing the submission of false and fraudulent claims to Medicare via interstate wire for claims based on kickbacks and bribes; (b) submitting or causing the submission of false and fraudulent claims to Medicare via interstate wire for services that were (i) medically unnecessary and/or (ii) not eligible for Medicare reimbursement; (c) concealing the submission of false and fraudulent claims via interstate wire to Medicare and the receipt and transfer of the proceeds from the fraud; and (d) diverting proceeds of the fraud for the personal use and benefit of the [D]efendants and their co-conspirators. Id. ¶ 49.

According to the amended indictment, recruiters were specifically trained to obtain physician orders for “comprehensive” urine drug testing, which has the highest Medicare reimbursement rate. Id. ¶¶ 16, 55. In 2018, Khalil and Saad retained a private compliance company, which informed them that orders for comprehensive urine drug testing should be rare, and that Spectra was required to collect documentation from physicians to support each comprehensive urine drug testing claim submitted to Medicare. Id. ¶ 56. In 2019, over 70% of claims for urine drug testing submitted by Spectra to Medicare were for comprehensive urine drug testing. Id. ¶ 57. Spectra did not collect supporting documentation for all claims. Id. ¶ 58. Recruiters were paid as a percentage of Spectra's reimbursements from Medicare and other insurers. Id. ¶ 64.

The amended indictment also alleges that Harris and Schroeder obtained a physician stamp that Schroeder used to stamp orders for comprehensive urine drug testing, without the permission of the physician. Id. ¶¶ 60-63. This allegation forms the basis for Counts Three and Four.

II. ANALYSIS

The Court addresses Defendants' motions to dismiss Count One and Count Two in turn, finding that both motions...