Head of Georgia Medical Equipment Provider Indicted for Medicare Fraud; Atlanta Inmate Indicted for Selling "Cooperation" Information to Defendants

Samuel Curtis, III, a Texas resident, has been charged with four counts of health care fraud and aggravated identity theft in the U.S. District Court for the Southern District of Georgia for allegedly attempting to steal more than $500,000 from Medicare, according to an article in the Florida Times-Union. Curtis is alleged to have operated Perferred Prosthetics and Orthotics, a medical equipment supply company doing business in Georgia and Texas, and to have allegedly stolen information from Medicare physicians and recipients and used the information to submit false claims to Medicare. The indictment alleges that Curtis and others routinely billed Medicare for ankle, knee and back braces and other medical devices that either were never provided to patients, were not medically necessary or had not been prescribed by a doctor. Curtis' associate, Cecil Risher, of Brunswick, Georgia, was arrested earlier in the investigation.

In other Georgia news, according to 7th Space, Sandeo Dyson, a former inmate of the Atlanta City Detention Center, has found himself indicted once again in the U.S. District Court for the Northern District of Georgia for allegedly obtaining information about crimes being committed in Georgia and North Carolina from other inmates and then selling the information to criminal defendants in cases in the Northern District for five to ten thousand dollars apiece, earning an approximately $50,000 from the scheme. The defendants would offer the information provided by Dyson to have their sentences reduced for cooperation. Dyson allegedly instructed the defendants to lie to authorities by concealing the fact that they had no real personal knowledge of the proffered information, and had  purchased the information from Dyson. Dyson is charged with one count of conspiracy to obstruct justice and to make false statements, three counts of obstruction of justice, and two counts of false statements.


Sentencing Considerations for Corporations and Organizations

            We received an excellent reader question regarding what factors do Federal courts consider in imposing punishment on corporations or organizations in criminal proceedings. Corporations of course, don’t “go to jail.” The Government does collect its $200 however, since the organization sentencing provisions of the United States Sentencing Guidelines are primarily fine-driven. And while there is a massive body of law concerning factors which must be considered in imposing sentence on individuals, caselaw relating to considerations in imposing punishment on corporations is relatively sparse.

However, areas which courts consider in sentencing corporations or organizations, and conversely areas which corporate criminal counsel may emphasize in order to attempt to mitigate the consequences to their corporate clients, may be discerned from the Guidelines themselves. In many cases, such as relating to acceptance of responsibility and role in the offense, these considerations closely parallel those for individual defendant. The questions facing a corporation at sentencing will boil down to how much will the corporation be made to pay in the form of fines and restitution, and what conditions will be imposed on the corporation.

The relevant portion of the Guidelines is Chapter Eight. Imposing a sentence on a corporation or organization in a Federal criminal case involves a complex determination by the sentencing court. In brief, the court must:

1. Determine whether any restitution, remedial orders or community service should be ordered;

2. Determine the amount of the fine, including determining the corporation’s or organization’s “culpability score”;

3. Determine whether any departures or probation is appropriate.

The Introductory Commentary to Chapter Eight states that it is designed “designed so that the sanctions imposed upon organizations and their agents, taken together, will provide just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct.” U.S.S.G., Ch. 8, Pt. A, Introductory Commentary. The sentencing provisions of Chapter Eight are intended to reflect the general principles that:

First, the court must, whenever practicable, order the organization to remedy any harm caused by the offense. The resources expended to remedy the harm should not be viewed as punishment, but rather as a means of making victims whole for the harm caused.

Second, if the organization operated primarily for a criminal purpose or primarily by criminal means, the fine should be set sufficiently high to divest the organization of all its assets.

Third, the fine range for any other organization should be based on the seriousness of the offense and the culpability of the organization. The seriousness of the offense generally will be reflected by the greatest of the pecuniary gain, the pecuniary loss, or the amount in a guideline offense level fine table. Culpability generally will be determined by six factors that the sentencing court must consider. The four factors that increase the ultimate punishment of an organization are: (i) the involvement in or tolerance of criminal activity; (ii) the prior history of the organization; (iii) the violation of an order; and (iv) the obstruction of justice. The two factors that mitigate the ultimate punishment of an organization are: (i) the existence of an effective compliance and ethics program; and (ii) self-reporting, cooperation, or acceptance of responsibility.

Fourth, probation is an appropriate sentence for an organizational defendant when needed to ensure that another sanction will be fully implemented, or to ensure that steps will be taken within the organization to reduce the likelihood of future criminal conduct.

U.S.S.G., Ch. 8, Pt. A, Introductory Commentary. The provisions are designed to offer “incentives” to corporations or other organizations to police and eliminate criminal conduct through compliance and ethics programs. U.S.S.G., Ch. 8, Pt. A, Introductory Commentary.

The Introductory Commentary to Part B of Chapter Eight states:

As a general principle, the court should require that the organization take all appropriate steps to provide compensation to victims and otherwise remedy the harm caused or threatened by the offense. A restitution order or an order of probation requiring restitution can be used to compensate identifiable victims of the offense. A remedial order or an order of probation requiring community service can be used to reduce or eliminate the harm threatened, or to repair the harm caused by the offense, when that harm or threatened harm would otherwise not be remedied.

U.S.S.G., Ch. 8, Pt. B. Guideline Section 8B1.1 requires a court to enter a restitution order for the full amount of a victim’s loss if such an order is authorized. Section 8B1.3 authorizes a court to order community service as a condition of probation “where such community service is reasonably designed to repair the harm caused by the offense.” U.S.S.G. § 8B1.3. The commentary on Section 8B1.3 notes that the community service should be “related to the purposes of sentencing.” U.S.S.G. § 8B1.3, Cmt.

            Guidelines Section 8B2.1 describes an “effective compliance and ethics program.” It states that, in order to have an effective compliance and ethics program, a corporation or organization must:

1. Exercise due diligence to prevent and detect criminal conduct and establish standards and procedures to prevent and

detect criminal conduct;

2. “[P]romote an organizational culture that encourages ethical conduct and a commitment to compliance with the law”;

3. Ensure that the corporation’s or organization’s governing authority is knowledgeable about the compliance and ethics program and that specific individuals have day-to-day responsibility for the program; and

4. Take reasonable steps to ensure that the compliance and ethics program is followed, enforced and evaluated.

            A critical provision is Guidelines Section 8C2.5, which governs determination of a corporation’s “culpability score.” That section provides for a base score of 5 points with increases or decreases to the level for:

1. Condoning, tolerating or “willful ignorance” of criminal activity by corporate governing authorities or high-level personnel;

2. Any prior history of misconduct;

3. Any violation of orders or obstruction of justice; and/or

4. Self-reporting, cooperation and acceptance of responsibility.

With regard to a decrease in culpability level for cooperation, the Application Notes state that:

[C]ooperation must be both timely and thorough. To be timely, the cooperation must begin essentially at the same time as the organization is officially notified of a criminal investigation. To be thorough, the cooperation should include the disclosure of all pertinent information known by the organization. A prime test of whether the organization has disclosed all pertinent information is whether the information is sufficient for law enforcement personnel to identify the nature and extent of the offense and the individual(s) responsible for the criminal conduct.

U.S.S.G. § 8C2.5, Note 12.

            Another vital provision is Guideline Section 8C2.8—the corporate equivalent of Code Section 3553(a) which courts must consider in sentencing individuals. Section 8C2.8 provides:

(a) In determining the amount of the fine within the applicable guideline range, the court should consider:

(1) the need for the sentence to reflect the seriousness of the offense, promote respect for the law, provide just punishment, afford adequate deterrence, and protect the public from further crimes of the organization;

(2) the organization’s role in the offense;

(3) any collateral consequences of conviction, including civil obligations arising from the organization’s conduct;

(4) any nonpecuniary loss caused or threatened by the offense;

(5) whether the offense involved a vulnerable victim;

(6) any prior criminal record of an individual within high-level personnel of the organization or high-level personnel of a unit of the organization who participated in, condoned, or was willfully ignorant of the criminal conduct;

(7) any prior civil or criminal misconduct by the organization other than that counted under §8C2.5(c);

(8) any culpability score under §8C2.5 (Culpability Score) higher than 10 or lower than 0;

(9) partial but incomplete satisfaction of the conditions for one or more of the mitigating or aggravating factors set forth in §8C2.5 (Culpability Score);

(10) any factor listed in 18 U.S.C. § 3572(a); and

(11) whether the organization failed to have, at the time of the instant offense, an effective compliance and ethics program within the meaning of §8B2.1 (Effective Compliance and Ethics Program).

(b) In addition, the court may consider the relative importance of any factor used to determine the range, including the pecuniary loss caused by the offense, the pecuniary gain from the offense, any specific offense characteristic used to determine the offense level, and any aggravating or mitigating factor used to determine the culpability score.

U.S.S.G. § 8C2.8. The Application Notes to Section 8C2.8 further state, in relevant part, “[i]f punitive collateral sanctions have been or will be imposed on the organization, this may provide a basis for a lower fine within the guideline fine range.” U.S.S.G. § 8C2.8, Note 2.

            Finally, Part C of Chapter Eight provides for departures from a sentence/fine if a court finds “that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described.” U.S.S.G., Ch. 8, Pt. C, Introductory Commentary. The relevant potential grounds for upward or downward departures are:

1. Substantial assistance to authorities under Section 8C4.1;

2. Risk of death or bodily injury under Section 8C4.2;

3. Threat to the environment under Section 8C4.4;

4. Threat to a market under Section 8C4.5;

5. Public entity (ground for downward departure) under Section 8C4.7;

6. If members or beneficiaries of the corporation or organization are also victims (ground for downward departure) under Section 8C4.8;

7. Whether the remedial costs exceed the gain from the offense under Section 8C4.9; and

8. Mandatory programs to detect and prevent violations of the law under Section 8C4.10.

            From this maze of Guidelines, the following potential points can be derived for corporate criminal counsel to potentially argue in favor of a low or lesser punishment or fine, departure or for mitigation generally:

  1. Any compliance and ethics programs instituted or proposed by the corporation either before or following the alleged conduct;
  2. Any actions the corporation has taken to remedy any harm from the alleged conduct, including:
    1. Restitution to any victims;
    2. Institution or proposal of a compliance and ethics program;
    3. Any other efforts the corporation has made to detect or prevent criminal activity, or to detect or prevent any recurrence of the alleged conduct;
  3. The corporation’s service to the community before or following the alleged conduct;
  4. Whether the corporation reported the alleged conduct to law enforcement;
  5. Whether the corporation cooperated and/or rendered substantial assistance to the Government, and the degree of such cooperation and/or assistance;
  6. Whether the alleged conduct constituted a distinct, isolated instance, as opposed to demonstrating that the corporation had an alleged criminal purpose;
  7. The relative position of the individuals involved in, or having knowledge of, the alleged conduct—i.e. whether governing or high level officers or lower level personnel;
  8. Whether the corporation has any history of similar conducts;
  9. The seriousness of the alleged conduct, including whether it resulted in any physical harm, threat to any market, third party, etc.;
  10. The corporation’s role in the alleged conduct, including whether the corporation or its officers, members or employees were also victims of the alleged conduct;
  11. The lack of likelihood of recurrence of the alleged conduct;
  12. The corporation’s efforts to investigate the alleged conduct and actions against culpable individuals;
  13. Whether the alleged conduct resulted in collateral consequences to the corporation, including costs from investigation, civil lawsuits relating to the alleged conduct, etc.; and
  14. Whether the gains from the alleged conduct were outweighed by the costs incurred by the corporation in responding to and remedying the alleged conduct.

These points may also furnish useful guidelines or tips for corporate officers or members and counsel in attempting to devise appropriate responses in the event of notice of alleged wrongdoing and/or a criminal investigation.

SEC Announces New Tools to Secure Cooperation in Investigations and Enforcement Proceedings


The Securities and Exchange Commission announced this week a new initiative to encourage private individuals and corporations to cooperate in SEC investigations and enforcement. The SEC will revise its Enforcement Division's enforcement manual to add a new section entitled "Fostering Cooperation." The section will allow SEC investigators to use the following "tools":

Cooperation Agreements — Formal written agreements in which the Enforcement Division agrees to recommend to the Commission that a cooperator receive credit for cooperating in investigations or related enforcement actions if the cooperator provides substantial assistance such as full and truthful information and testimony.

Deferred Prosecution Agreements — Formal written agreements in which the Commission agrees to forego an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and to comply with express prohibitions and undertakings during a period of deferred prosecution.

Non-prosecution Agreements — Formal written agreements, entered into under limited and appropriate circumstances, in which the Commission agrees not to pursue an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and comply with express undertakings.

The proposed changes also streamline the process for requesting immunity from the Justice Department for witnesses assisting in SEC investigations and enforcement actions. They futhermore set forth considerations for evaluating cooperation by individuals, including:

The assistance provided by the cooperating individual.
The importance of the underlying matter in which the individual cooperated.
The societal interest in ensuring the individual is held accountable for his or her misconduct.
The appropriateness of cooperation credit based upon the risk profile of the cooperating individual.
As the announcement recognizes, the "tools" are tools which the Department of Justice has long employed to secure cooperation and obtain information. Professor Ellen S. Podgor of Stetson University College of Law and the White Collar Crime Prof Blog has listed concerns regarding the SEC's new cooperation criteria.