604 F.2d 999 (7th Cir. 1979), 77-1276, United States v. Hancock

Docket Nº:77-1276, 79-1161.
Citation:604 F.2d 999
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. William HANCOCK and Paul A. Palombi, Defendants-Appellants.
Case Date:July 09, 1979
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 999

604 F.2d 999 (7th Cir. 1979)

UNITED STATES of America, Plaintiff-Appellee,


William HANCOCK and Paul A. Palombi, Defendants-Appellants.

Nos. 77-1276, 79-1161.

United States Court of Appeals, Seventh Circuit

July 9, 1979

Argued June 18, 1979.

Rehearing and Rehearing En Banc Denied Aug. 24, 1979.

Page 1000

Howard S. Siegrist, Southfield, Mich., for defendants-appellants.

Richard L. Kieser, South Bend, Ind., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, and CUMMINGS and TONE, Circuit Judges.


These two appeals arise from a series of indictments filed against several chiropractors for soliciting and receiving kickbacks in Medicare and Medicaid cases, 42 U.S.C. §§ 1395nn(b)(1) (Medicare) and 1396h(b)(1) (Medicaid) (1972) (amended 1977). 1 In separate proceedings, each defendant entered a plea of nolo contendere to one count of his indictment and was adjudged guilty as charged. These appeals have been consolidated because both of these defendants have raised challenges to the sufficiency of the indictments and the constitutionality of the statutes. 2 We hold that the indictments sufficiently allege the crime of receiving a kickback under the statutes and that the kickback statutes are not unconstitutionally vague.

Page 1001


Both defendants contend that their conduct did not constitute a crime. By pleading Nolo contendere, however, the defendants have admitted the allegations in the indictments and waived all nonjurisdictional defects in the proceedings, including all defects in the indictments, other than sufficiency. United States v. Michigan Carton Co., 552 F.2d 198 (7th Cir. 1977). Therefore, the issue raised by this contention is whether the indictments sufficiently allege the crime of receiving a kickback under § 1396h(b)(1).

Briefly, the indictments allege the following conduct by the defendants. Defendants Hancock and Palombi are doctors of chiropractic licensed to practice in Michigan and Indiana, respectively. Between 1973 and 1975, the defendants used the services of a certain medical laboratory, Chem-Tech Laboratory of Fort Wayne, Indiana. The defendants obtained blood and tissue specimens from their patients and sent the specimens to Chem-Tech for testing. Along with the specimens, the defendants filled out and submitted test request forms, including billing information on the patient containing Medicare or Medicaid recipient numbers where applicable. Chem-Tech then billed the patient, his insurer, or, pertinent to this case, the state agency handling Medicare and Medicaid funds. Finally, the indictments allege that the defendants "did solicit and receive kickbacks from Chem-Tech . . . for referring Medicare and Medicaid recipients' blood and tissue specimens to Chem-Tech . . . ." The defendants claim the payments received from Chem-Tech were legitimate "handling fees" for the actual services of obtaining, packaging, and sending the samples, and then interpreting the results of the tests. The indictment labelled the payments "kickbacks" in violation of § 1396h(b)(1).

The defendants rely on two recent cases construing the terms "kickback" and "bribe" in §§ 1395nn(b)(1) and 1396h(b)(1). In United States v. Zacher, 586 F.2d 912 (2d Cir. 1978), the court held that payments charged by a nursing home operator above the amount reimbursed by Medicaid could not be characterized as bribes under § 1396h(b)(1). The court reasoned that the terms bribe and kickback have settled legal definitions which "involve a corrupt payment or receipt of payment in violation of the duty imposed by Congress on providers of services to use federal funds only for intended purposes and only in the approved manner." 586 F.2d at 916. The court found no corruption or breach of duty in Zacher's receipt of the payments...

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