U.S. v. Shaw
| Citation | 106 F.Supp.2d 103 |
| Decision Date | 19 June 2000 |
| Docket Number | No. Crim.A. 99-10044-RE.,Crim.A. 99-10044-RE. |
| Parties | UNITED STATES of America, Plaintiff, v. K. Glenn SHAW, Eileen B. Aird, and Louise Verde, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Nancy Silverman, Martha Purcell Rogers, Ober Kaler, Washington, DC, for Eileen B. Aird.
Douglas Farquhar, Hyman, Phelps & McNamara, Washington, DC, Maria R. Durant, David M. Osburne, William H. Kettlewell, Dwyer & Collora, Boston, MA, for Glenn K. Shaw.
Sollers J. Sedwick, III, Michael E. Meece, King & Spalding, Washington, DC, for Louise Verde.
Susan G. Winkler, Diane C. Freniere, Susan C. Hanson-Philbrick, U.S. Atty's Office, Boston, MA, for U.S.
Pending for disposition at this time are the following motions:
(1) Defendant K. Glenn Shaw's Motion to Dismiss Count 18 of Superseding Indictment for Failure to State a Crime (Docket Nos. 39, filed September 15, 1999, and 101, filed February 11, 2000) with Supporting Memoranda (Docket Nos. 41, filed September 15, 1999, and 102, filed February 11, 2000) and Appendix (Docket No. 103, filed February 11, 2000). The Government has filed a Response (Docket No. 128, filed March 15, 2000). Defendant K. Glenn Shaw filed a Reply (Docket No. 133, filed April 4, 2000). The Government filed a Surreply (Docket No. 161, filed June 5, 2000);
(2) Defendant K. Glenn Shaw's Motion to Dismiss on Statute of Limitations Grounds (Docket Nos. 43, filed September 15, 1999, and 104, filed February 11, 2000) with Memorandum in Support (Docket No. 105, filed February 11, 2000). The Government has filed an Opposition (Docket No. 112, filed February 25, 2000).
The procedural background is relevant to the pending motions that are the subject of this Opinion.
On February 10, 1999, in a one-count indictment, a grand jury charged Dr. K. Glenn Shaw (Shaw) with a conspiracy to commit an offense against the United States in violation of 18 U.S.C. § 371. The grand jury charged, specifically, that Shaw conspired to violate the anti-kickback statute, to wit, "to induce external clinics to order and to arrange for ordering laboratory blood testing services including Non-Routine Tests for their dialysis patients from Lifechem, which services were paid for primarily by Medicare Trust Funds." Docket No. 1, ¶ 14.
Shaw entered a plea of not guilty on February 23, 1999 before Magistrate Judge Cohen.
On September 15, 1999, Shaw moved to dismiss the indictment for failure to state a crime and on statute-of-limitation grounds. See Docket Nos. 39 and 43.
On September 22, 1999, the grand jury returned a multi-count superseding indictment as to defendants Eileen B. Aird (Aird) and Louise Verde (Verde) and Shaw. Count One alleges that Aird and Verde conspired to defraud the government, a violation of 18 U.S.C. § 371. Count One states, specifically, that the purpose of the conspiracy was, among other things,
to evade and frustrate efforts by Medicare to pay only for the reasonable and medically necessary blood testing of Medicare Program beneficiaries as ordered by physicians in the normal ordinary course of the treatment of their dialysis patients; and thereby to fraudulently obtain unlawful reimbursement from the Medicare Program for thousands of medically unnecessary, and therefore not lawfully reimbursable, laboratory tests performed by LIFECHEM on blood drawn from dialysis patients.
Docket No. 46, ¶ 31. Counts Two through Seventeen allege that, in conspiring to defraud the United States, as stated in paragraph one of the superseding indictment, Aird and Verde also violated 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 2 (aiding and abetting). See id. at ¶¶ 39-68.
Count Eighteen of the superseding indictment re-alleges a violation of 18 U.S.C. § 371, stating that defendant Shaw
knowingly, willfully, and intentionally combined, conspired, confederated and agreed to commit an offense against the United States and its agency the Health Care Financing Administration, namely, to knowingly, willfully and intentionally offer and pay remuneration, directly and indirectly, overtly and covertly, in cash and in kind, to wit: by rebates and special pricing on dialysis related products, by lavish entertainment and hunting trips, by consultant fees, by grants, and by writing off debt for laboratory services for indigent and HMO patients, all such remuneration being made to induce the external dialysis facilities to order and arrange for the ordering from LIFECHEM of any service and item paid for, in whole or in part, by the Medicare Program, specifically clinical laboratory blood testing conducted for dialysis patients in the external facilities, all in violation of Title 42, United States Code, Section 1320a-7b(b)(2)(B).
Shaw entered a plea of not-guilty before Magistrate Judge Cohen on Count Eighteen of the superseding indictment on October 15, 1999. On the same day, both Aird and Verde entered pleas of not-guilty on Counts One through Seventeen.
On February 11, 2000, Shaw moved to dismiss Count Eighteen of the superseding indictment (the only count against him) for failure to state a crime. On the same day, Shaw also moved to dismiss Count Eighteen on statute-of-limitation grounds.
On February 22, 2000, the Government dismissed Counts Two through Nine of the superseding indictment against Aird and Verde.
On February 25, 2000, the Government filed its response to Shaw's motion to dismiss Count Eighteen of the indictment on statute-of-limitation grounds. See Docket No. 112.
On March 15, 2000, the Government filed its response to Shaw's motion to dismiss Count Eighteen of the indictment for failure to state a crime. See Docket No. 128. On April 4, 2000, Defendant K. Glenn Shaw filed a Reply. See Docket No. 133. On June 5, 2000, the Government filed a Surreply. See Docket No. 161.
On April 25, Magistrate Judge Cohen issued his final Status Report ordering the case returned to "the district judge to whom this case is assigned for further proceedings." Docket No. 150.
On May 25, 2000, all of the parties appeared before me for an initial pre-trial conference. At that conference, the defendants filed a list of the pending motions that remain to be resolved by the court. See Docket 160. Among them are Shaw's two motions to dismiss that are the subject of this Opinion.
The following recitation of relevant facts is from the superseding indictment (see Docket No. 46) unless otherwise stated.
National Medical Care (NMC), a health care company, provided through its various subsidiaries, an array of products and services to patients diagnosed with end-state renal disease ("ESRD"). From in or about 1989 through in or about December 3, 1993, Dr. K. Glenn Shaw was President of NMC Medical Products, Inc. (MPD), a wholly owned subsidiary of National Medical Care, Inc. (NMC), that manufactured, sold, and distributed products used in kidney dialysis, a primary treatment of ESRD. MPD sold these dialysis related products both to the NMC-owned clinics, called Bio-Medical Applications (BMAs) and and to dialysis facilities not owned by NMC.
NMC also had another division, called the LifeChem division (LifeChem), that provided clinical laboratory blood testing services both to the BMAs and to dialysis clinics not owned by NMC. LifeChem also specialized in performing laboratory blood tests for ESRD patients.
From August 1990 through January 1993, Eileen Aird was the General Manager of LifeChem. From January 1993 until October 1996, Aird was the president of LifeChem.
Louise Verde was the Product Manager for LifeChem from 1987 until late 1993. From late 1993 until October 1997, Verde was Senior Product Manager in Marketing at LifeChem.
On October 1, 1996, Fresneius Medical Care A.G., a German corporation, purchased NMC, and the entity formerly known as NMC continued doing business in North America under the name Fresneius Medical Care — North America.
Shaw retired from NMC's employ in 1993.
In 1965, Congress enacted Title XVIII of the Social Security Act ("The Medicare Program") authorizing the federal government to pay for the cost of certain medical services, including clinical laboratory blood testing services, for persons aged 65 and older. By amendment in 1972, Congress extended the coverage of the Medicare Program to include paying, under most conditions, for the cost of certain medical services for persons suffering from ESRD, regardless of the person's age.
The Department of Health and Human Services (HHS) administers the Medicare Program through the Health Care Financing Administration (HCFA). In discharging its duties, HCFA makes contracts with private insurance companies ("carriers") to receive, review, and pay lawful claims for reimbursement for the provision of clinical laboratory services to Medicare Program beneficiaries.
HCFA mandates that all ESRD patients undergo, in addition to dialysis, monthly blood testing in order to monitor the efficiency of the dialysis treatment. These tests are performed by clinical laboratories, like LifeChem, and classified by Medicare as "routine tests." The Medicare Program reimburses dialysis clinics directly for dialysis treatments and for routine tests through a monthly fixed payment per patient, per treatment. Because LifeChem was an approved provider under the Social Security Act, LifeChem was authorized to submit directly to the carriers under contract with HCFA lawful claims for reimbursement for these routine tests as well as other tests that were ordered by physicians and that were reasonable and medically necessary in the diagnosis and treatment of Medicare treatment beneficiaries.
For ESRD patients who received dialysis treatments at a dialysis unit or center, Medicare paid for the dialysis that the patient needed for the entire month through a monthly, capitated payment with money from the...
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