U.S. v. Rogan

• Decision Date: 20 February 2008
• Docket Number: No. 06-4144.,06-4144.
• Citation: 517 F.3d 449
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Peter G. ROGAN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

517 F.3d 449

UNITED STATES of America, Plaintiff-Appellee, v. Peter G. ROGAN, Defendant-Appellant.

No. 06-4144.

United States Court of Appeals, Seventh Circuit.

Argued September 21, 2007.

Decided February 20, 2008.

Thomas M. Bondy (argued), Dept. of Justice, Civil Div., Appellate Sec., Washington, DC, for Plaintiff-Appellee.

Patrick E. Deady (argued), Hogan Marren, Chicago, IL, for Defendant-Appellant.

Before EASTERBROOK, Chief Judge, and KANNE and ROVNER, Circuit Judges.

EASTERBROOK, Chief Judge.

For more than a decade before Edgewater Medical Center closed in December 2001, Peter Rogan was a principal manager and financial beneficiary—both directly and through his family's interest in Braddock L.P., Edgewater's management company. Toward the end of Edgewater's existence, Braddock (renamed `Bainbridge Management, L.P.), Roger Ehmen (Edgewater's vice president of development and marketing), and four physicians (Ravi Barnabas, Andrew Cubria, Sheshiqiri Rao, and Kumar Kaliana) were indicted for fraud and other crimes related to bills that Edgewater had presented to the Medicare and Medicaid programs. All six defendants pleaded guilty. Bainbridge was fined and ordered to pay restitution; the other defendants received sentences ranging from 52 to 151 months' imprisonment.

Rogan was not indicted. Instead the United States filed this civil action against him under the False Claims Act, 31 U.S.C. §§ 3729-33. The theory of the caseds that Rogan conspired with the six indicted persons to defraud the United States by concealing the fact that many patients came to Edgewater only because of referrals that violated the Stark Amendment to the Medicare Act, 42 U.S.C. § 1395nn, and the Anti-Kickback Act, 42 U.S.C. 1320a-7b. Edgewater paid the four physicians for patients rather than medical services. The complaint added that, apart from the fact that the Stark Amendment forbids federal reimbursement for services that stem from compensated referrals, many of the bills were padded: they listed services that were unnecessary or had not been performed. The district court held a bench trial, found that Rogan knew about these shenanigans (and may have orchestrated them), and ordered him to pay a total of $64 million and change. 459 F.Supp.2d 692 (N.D.Ill.2006). The district court's comprehensive opinion describes the scheme's details.

In this court Rogan does not deny that illegal referrals occurred, that kickbacks were paid, that the bills sent to the United States omitted this information, and that he knew what was going on. Instead he argues that the omissions were not material. By this he does not mean the usual definition, under which a "statement is material if it has `a natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed.'" Neder v. United States, 527 U.S. 1, 16, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (quoting from Kungys v. United States, 485 U.S. 759, 770, 108 S.Ct. 1537, 99 L.Ed.2d 839 (1988)). The omissions were material by that standard, because the Stark Amendment forbids payment of any claim that arises from medical services rendered to a patient who had been referred improperly. See United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997). Rogan agrees that this is so but argues, nonetheless, that a federal employee in a position to take a decision had to testify that the government was sure to enforce the statute.

That's not a component of materiality. A statement or omission is "capable of influencing" a decision even if those who make the decision are negligent and fail to appreciate the statement's significance. Suppose someone who applies for a loan represents that he has a net worth of $2 million, when his actual net worth is $2 million. A loan officer might fail to see the minus sign (had one been included), but the lie would be material anyway, because net worth strongly influences lending decisions. So, too, information that a hospital has purchased patients by paying kickbacks has a good probability of affecting the decision. The question is not remotely whether Edgewater was sure to be caught—though it would have been, had it disclosed the truth on all 1,812 reimbursement requests—but whether the omission could have influenced the agency's decision. That's an objective standard, here controlled by the Stark Amendment. Testimony from a claims-processing officer along the lines of "I follow the law" is not required.

Another way to see this is to recognize that laws against fraud protect the gullible and the careless—perhaps especially the gullible and the careless—and could not' serve that function if proof of materiality depended on establishing that the recipient of the statement would have protected his own interests. See United States v. Rosby, 454 F.3d 670 (7th Cir.2006). The United States is entitled to guard the public fisc against schemes designed to take advantage of overworked, harried, or inattentive disbursing officers; the False Claims Act does this by insisting that persons who send bills to the Treasury tell the truth. As Justice Holmes put it, "[mien must turn square corners when they deal with the Government." Rock Island, Arkansas & Louisiana R.R. v. United States, 254 U.S. 141, 143, 41 S.Ct. 55, 65 L.Ed. 188 (1920).

Rogan asserts that the United States did not rely on the omissions. Reliante is an element of a civil action under the False Claims Act but is easy to show: the truth would have revealed that reimbursement is illegal. Rogan's assertion that some disbursing officer had to testify that the United States does not pay illegal claims is just a repackaged version of the materiality argument and fails for reasons already given.

Nor does Rogan get any mileage from the argument that Edgewater's records do not "rule out" the possibility that the four physicians provided some medical services. Ruling things out is not the standard in a civil suit (or even in a criminal prosecution). The district judge gave careful attention to the codes on the records and concluded that the physicians used codes to identify referred patients. Rogan could hardly expect the admitting form to read "patient acquired by kickback" as opposed to some seemingly innocuous notation that those in the know (such as Ehmen) would take as the cue to pay the agreed price to the referring physician. That the codes included words such as "attending," which could mean that the physician rendered medical services, does not compel the district judge to find that services were rendered. Rogan does not try to show that any of the detailed factual findings on this score is clearly erroneous. (His argument that the district judge had to address each of the 1,812 claim forms is a formula for paralysis. Statistical analysis should suffice. At all...