Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 1 of 9 Pageid#: 933

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1 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 1 of 9 Pageid#: 933 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA ABINGDON DIVISION UNITED STATES OF AMERICA : : Case No. 1:12-cr v. : : EDDIE WAYNE LOUTHIAN, SR. : SALTVILLE RESCUE SQUAD, INC. : MONICA JANE HICKS : GOVERNMENT S MEMORANDUM IN SUPPORT OF PRELIMINARY ORDER OF FORFEITURE The United States of America ( Government ), through counsel, submits this Memorandum to both summarize the evidence presented at trial which relates to asset forfeiture and preview the additional evidence and argument it intends to offer in the forfeiture hearing set for November 19, I. INTRODUCTION Between December 1, 2005, and October 1, 2011 ( Relevant Time Period ), then- President and Business Manager of the Saltville Rescue Squad ( Squad ) Eddie Wayne Louthian, Sr. ( Louthian ), committed health care fraud and other related crimes and a jury on September 20, 2012, convicted him of seven counts. Monica Jane Hicks ( Hicks ), who served as the Squad s HIPAA Officer during part of the Relevant Time Period, waived trial and pled guilty to conspiracy to commit health care fraud. The issue before the Court is what, if any, assets should be forfeited as fruits of the crimes. At trial, the Government showed the proceeds of the health care fraud were paid directly to the Squad by electronic funds transfers. The Government also showed these payments totaled over $900,000. In the forfeiture hearing, the Government will show that in same timeframe, the Squad purchased expensive new real estate, vehicles and equipment, and its primary bank USAO#2008R00577 Page 1 of 9

2 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 2 of 9 Pageid#: 934 account swelled to over $300,000. Simple accounting and common sense indicate the Squad could not have acquired these new major assets but for its receipt of the fraud proceeds. With respect to each specific asset of which the Government seeks forfeiture, at the time the Squad purchased the asset, the Squad had received fraud proceeds (reduced by prior major asset purchases) in excess of the purchase price. While the Squad was acquitted of criminal wrongdoing, such does not entitle it to retain a $900,000 windfall by virtue of its President and Business Manager s and HIPAA Officer s fraud. II. FACTS In summary, at trial, members of the Squad (past and present) testified that during the Relevant Time Period, at the direction of Louthian and/or Hicks, they routinely wrote and/or attested to call sheets which misrepresented that dialysis patients N.H., B.M. and J.R. could not walk and/or omitted the known fact these patients could walk. 1 Misleading call sheets from various dates in the Relevant Time Period were admitted into evidence as examples. See, e.g., Government s Trial Exhibit Nos , 88-90, 96, 98, , In addition, Hicks testified that at Louthian s behest, she forged signatures on certificates of medical necessity to make it appear as if a doctor had timely issued them. See, e.g., Government s Trial Exhibit No. 112 (collective exhibit including forged certificates). Hicks testified all this was done to secure payment of claims for transporting three dialysis patients, B.M., N.H. and J.R., to and from treatments. Personnel involved in processing claims testified Louthian initiated the submission of the false and/or misleading call sheets and forged certificates, and Anthem Blue Cross Blue Shield ( Anthem ) and the Government ( Medicare ) relied on them in evaluating and paying claims. See, e.g., Government s Trial Exhibit Nos (notes showing Anthem relied on call 1 Transcripts of the relevant testimony have been requested and are being prepared. USAO#2008R00577 Page 2 of 9

3 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 3 of 9 Pageid#: 935 sheets). Special Agent Robert Slease of the Office of the Inspector General, Department of Health & Human Services, testified that during the Relevant Time Period, Louthian s salary doubled. Special Agent Nicholas Worsham of the Internal Revenue Service added that within the same timeframe, the Squad and Louthian purchased expensive new real estate. Prior to the trial, Hicks pled guilty to conspiracy to commit health care fraud. ECF No At the conclusion of the trial, the jury found Louthian guilty of health care fraud, conspiracy to commit health care fraud, and other crimes. ECF No The Squad was acquitted. ECF No A. Evidence Presented at Trial Shows the Squad Received over $900,000 in Proceeds. With respect to the sums the Squad received, Anthem Senior Investigator Melinda Matzell testified that during the Relevant Time Period, Anthem paid the Squad $135, for transporting patients N.H., B.M. and J.R. ECF No. 207 at 148:25-154:11 (referencing Government s Exhibit Nos ). 2 Likewise, HHS Special Agent Slease testified that during the same period, Medicare paid the Squad $772, for transporting the three patients. Special Agent Slease added that the amounts Medicare paid the Squad for transporting these three patients represented 43% of all Medicare s payments to the Squad. See Government s Trial Exhibit Nos. 99, 131. Based on the above, all told, the Squad received $907, for transporting the three patients. Documentary evidence showed payments to the Squad were effected by electronic funds transfers to an account at the Bank of Marion. ECF No. 207 at 23:4-24:3 (referencing Government s Trial Exhibit No. 2). In the forfeiture hearing, the Government anticipates Special Agent Slease will briefly review how he calculated the amounts Medicare paid the Squad as well as the documentary evidence which shows these sums were electronically transferred into the Squad s account. 2 The transcript of proceedings the day Matzell testified has been completed and so is cited herein. USAO#2008R00577 Page 3 of 9

4 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 4 of 9 Pageid#: 936 B. Trial Evidence Shows the Squad used Fraud Proceeds to Acquire Real Estate. At trial, IRS Special Agent Worsham testified the Squad purchased a tract of land in Smyth County, Virginia, by a series of checks for an aggregate of $176, drawn on one of its accounts at the Bank of Marion, and Louthian simultaneously purchased a neighboring tract. See, e.g., Government s Trial Exhibit No. 109 (memorializing the Squad s purchase). In the forfeiture hearing, Special Agent Worsham will review these transactions. C. Evidence Will Establish the Squad Purchased Major Vehicles and Equipment. In the forfeiture hearing, the Government will introduce business records of Northwestern Emergency Vehicles which show the Squad purchased several vehicles from Northwestern during the Relevant Time Period, each at a price in excess of $100,000, including a $100,000 Mercedes van and three different ambulances each priced above $135,000. The Government will also introduce business records of Stryker Sales Corporation showing the Squad purchased expensive new equipment, including six power cots at a total cost of over $77,000, all by checks drawn on the Squad s account at the Bank of Marion. D. Additional Evidence Will Illuminate the Squad s Stockpiles of Cash. In the forfeiture hearing, the Government anticipates IRS Special Agent Worsham will testify that the Government on February 2, 2012, seized the Squad s primary account at the Bank of Marion, with $330, remaining in the account. Special Agent Worsham will compare the Squad s assets (including cash) as of the seizure in February against its assets in 2005 (i.e., before the fraud) to illustrate just how markedly the Squad has prospered as a result of the fraud. E. The Squad Used Fraud Proceeds to Purchase the Major Assets Referenced Above. Charts showing the amount of money the Squad received for transporting N.H., B.M. and J.R. in each year of the Relevant Time Period, combined with records reflecting the Squad s USAO#2008R00577 Page 4 of 9

5 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 5 of 9 Pageid#: 937 major asset purchases within the same timeframe, will demonstrate that with respect to each asset of which the Government seeks forfeiture, at the time the Squad purchased the asset, the Squad s fraud receipts (reduced by prior major asset purchases) exceeded the purchase price. A look back at the Squad s pre-fraud assets and finances reinforces the conclusion that the Squad purchased its expensive new real estate, vehicles and equipment with fraud proceeds. III. LAW AND ARGUMENT The Government bears the burden of proof, by a preponderance of evidence, that a specific amount of money is forfeitable as the total proceeds of a crime and/or that specific property has a nexus to the crime. See, e.g., United States v. Tanner, 61 F.3d 231, (4th Cir. 1995), cert. denied, 116 S.Ct. 925 (l996) (21 U.S.C. 853 imposes a preponderance of the evidence standard). As previously argued to the Court, the proceeds of the crime are always forfeitable in a criminal case, and it is not necessary to show that the money ever legally belonged to the defendant, or that the defendant ever personally received the proceeds of the offense. United States v. Grossman, 501 F.3d 846, 849 (7th Cir. 2007) (the proceeds of the crime, or property traceable thereto, is always subject to forfeiture in a criminal case, even if it held in the name of a third party; the rule that criminal forfeiture orders cannot reach the property of third parties is not violated because under the relation back doctrine, the transfer of the proceeds to a third party is void); United States v. Huber, 243 F. Supp. 2d 996, (D.N.D. 2003) (forfeiture verdict properly included proceeds that defendant did not receive personally because he directed them to a third party), aff d, 404 F.3d 1047 (8th Cir. 2005); United States v. George, 2010 WL , *1 (E.D. Va. Apr. 26, 2010) (property obtained directly or indirectly includes property defendant obtained herself as well as property obtained by third parties acting in concert with her). USAO#2008R00577 Page 5 of 9

6 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 6 of 9 Pageid#: 938 In support of its burden, the Government may rely upon hearsay to the same extent as in any other aspect of sentencing. See, e.g., United States v. Ivanchukov, 405 F. Supp. 2d 708, 709 n.1 (E.D. Va. 2005). Once the Government has met its burden, forfeiture is mandatory. United States v. Monsanto, 491 U.S. 600, 607 (1989) ( Congress could not have chosen stronger words to express its intent that forfeiture be mandatory in cases where the statute applied.... ). Although the Government bears the burden of proving the extent of the proceeds of crime and tracing those proceeds into specific assets, such burden can be met by circumstantial evidence. This approach is routinely accepted by courts, and the Government need only tie assets to the criminal course of conduct, not specific acts. See, e.g., United States v. Adams, 2009 WL (W.D. Va. June 24, 2009) ( It is well established that the Government need not trace funds to a particular illegal act, but only to the criminal course of conduct. ); United States v. Parcels of Land, 903 F.2d 36, 42 (1st Cir. 1990) (accepting circumstantial evidence and rejecting requirement that the Government must link seized properties with particular drug transactions). In determining whether the Government has met its burden, the court or the jury must look to the totality of the circumstances. See United States v. $30,670 in U.S. Funds, 403 F.3d 448, 467 (7th Cir. 2005) (court must look to the totality of the circumstances). As noted by the court in United States v. Hailey, F.Supp.2d, 2012 WL (D. Md. Aug. 23, 2012): The government must trace the funds to the criminal course of conduct, but it need not trace them to a particular illegal act, to satisfy its burden. The Court may consider the timing of the defendants' acquisition of the property relative to his commission of the offense, his lack of other legitimate sources of income, and any steps taken to conceal his connection to the asset. Id. at *2, citing Adams, supra. Thus, there is no standard approach that should be applied in all cases, and cases have applied this principle in differing circumstances. See., e.g., United States USAO#2008R00577 Page 6 of 9

7 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 7 of 9 Pageid#: 939 v. Alaniz, 148 F.3d 929, 934 (8th Cir. 1998) (where agents seized $2,000 in currency from a ski jacket found in a closet in a safe house used by drug conspirators, and the money was folded in a manner consistent with drug trafficking, there was sufficient evidence to support the jury s finding that the money was drug proceeds); United States v. Certain Real Property Located on Hanson Brook, 770 F. Supp. 722, 725 (D. Me. 1991) (history of drug trafficking and use of large quantities of cash to purchase real property sufficient under section 981 to support reasonable belief that money laundering violations had occurred). As detailed above, the Government will demonstrate the total proceeds generated by the offense which were directed to the Squad. The Government is seeking a monetary judgment in the total amount of proceeds traceable to the commission of the conspiracy to commit health care fraud and substantive health care fraud offenses. See, e.g., United States v. Poulin, 690 F. Supp. 2d 415, 425 (E.D. Va. 2010) (concluding that use of term property in 18 U.S.C. 982(a)(7) pertaining to health care fraud permits entry of a money judgment for the amount of proceeds defendant obtained; any other reading would eviscerate the statute); United States v. Boesen, 473 F.Supp.2d 932, (S.D. Iowa 2007) (defendant ordered to forfeit gross proceeds traceable to the health care fraud scheme). The Government will also demonstrate the tie between the receipt of criminal proceeds and the acquisition of assets. Therefore, these assets should be ordered forfeited to the United States, subject to third-party interests, including the interests of the Squad. Specifically, the Government is requesting a preliminary order of forfeiture to include the following: A. A money judgment in the amount of $907, B. The following specific assets: (1) Funds seized on February 2, 2012, from Bank of Marion, Acct. No (2) 2012 GMC (Unit 404) USAO#2008R00577 Page 7 of 9

8 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 8 of 9 Pageid#: 940 (3) 2012 Sprinter Van (Unit 401) (4) 2008 Ford Ambulance Type III (5) Ford Ambulance (Unit 406) (6) Ford Ambulance (7) Stryker Cots (8) Northwestern Vehicle Unit #402 (9) acres on Buckeye Hollow Road, Smyth County, Virginia, Tax Map No. 41-A-109B (10) 5.00 acres on Buckeye Hollow Road, Smyth County, Virginia, Tax Map No. 41-A-109 IV. CONCLUSION The assets traceable to the health care fraud by the Squad s President and Business Manager, Louthian, and HIPAA Officer, Hicks, should be forfeited. The Government will submit an appropriate order following the ruling by the Court. Dated: November 18, 2012 Respectfully submitted, TIMOTHY J. HEAPHY United States Attorney s/ Albert Mayer New York Bar No Sharon Burnham Virginia Bar No Janine Myatt Virginia Bar No Randy Ramseyer Virginia Bar No United States Attorney s Office Western District of Virginia 180 West Main Street Abingdon, Virginia (276) (276) (fax) USAVAW.ECFAbingdon@usdoj.gov USAO#2008R00577 Page 8 of 9

9 Case 1:12-cr JPJ-PMS Document 215 Filed 11/18/12 Page 9 of 9 Pageid#: 941 CERTIFICATE OF SERVICE I hereby certify that on November 18, 2012, I electronically filed the foregoing Government s Memorandum in Support of Preliminary Order of Forfeiture with the Clerk of the Court using the CM/ECF system, which will send notice of such filing to, and constitute service of such filing on, all registered CM/ECF users who are counsel of record in this case. s/ Albert P. Mayer New York Bar No Special Assistant United States Attorney United States Attorney s Office Western District of Virginia 180 West Main Street Abingdon, Virginia (276) (276) (fax) USAVAW.ECFAbingdon@usdoj.gov USAO#2008R00577 Page 9 of 9