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Possible Changes to Asset Forfeiture In Health Care Fraud Cases

by Laura A. Perkovic

Asset forfeiture can seem like a harsh form of justice and an added layer of punishment on top of a criminal sentence. It is exactly that. Forfeiture laws are in place to take away the fruits of criminal enterprises: homes, cars, investments, and cash derived from criminal business activity, to ensure (as SCOTUS puts it) that crime does not pay.

In a criminal conspiracy, defendants must with limited exception, forfeit the full amount of conspiracy-wide ill-gotten gains. The court can order the forfeiture of specific assets paid for with funds traceable to the commission of the underlying crimes. If assets are unavailable, the court can order a money judgment, and therein lies the danger to those on the low rungs of the conspiracy ladder. Courts have imposed joint and several liabilities among co-conspirators for all conspiracy profits, regardless of who received or enjoyed them. Joint and several liabilities means that each conspirator is independently liable for the full extent of the forfeiture judgment, up to and until the judgment is satisfied. Effectively, that means that those who are solvent will pay, regardless of their role in the criminal enterprise.

Currently pending before the U.S. Supreme Court is a case captioned Honeycutt v. United States of America, where the Court will address whether a forfeiture statute can impose joint and several liabilities upon co-conspirators, or whether forfeiture should be limited to a defendant’s actual proceeds. Though Honeycutt concerns the forfeiture statute applicable to violations of the Controlled Substances Act, the Court’s decision will affect health care providers such as pharmacists; physicians; mid-levels such as nurse practitioners and physician assistants; practice managers; and others.

Honeycutt will have immediate application to those health care providers facing charges under the Controlled Substances Act, such as an unlawful distribution of controlled substances and misbranding. These cases involve allegations of prescribing without legitimate medical purpose; “pill mills;” and pharmacies tangled up in pill mill cases for filling purportedly illegal prescriptions.

Other health care crimes involve conspiracies to defraud the United States, fraudulent billing, kickbacks, money laundering and more. The government can seek forfeiture in these types of criminal cases a well, though under a different statute than that undergoing analysis in Honeycutt. However, given the similarity of the statutes, there is every reason to believe the outcome in Honeycutt, whether favorable to the defense or not, will apply likewise to forfeitures stemming from these other types of health care crimes.

Oral argument in Honeycutt is set for March 29, 2017. The outcome could alleviate at least some of the danger of health care providers “losing it all” in criminal forfeiture actions.