U.S. v. Sriram

• Decision Date: 12 February 2001
• Docket Number: No. 00 C 4988.,00 C 4988.
• Citation: 147 F.Supp.2d 914
• Parties: UNITED STATES of America, Plaintiff, v. Krishnaswami SRIRAM, M.D., Defendant.
• Court: U.S. District Court — Northern District of Illinois

147 F.Supp.2d 914

UNITED STATES of America, Plaintiff, v. Krishnaswami SRIRAM, M.D., Defendant.

No. 00 C 4988.

United States District Court, N.D. Illinois, Eastern Division.

February 12, 2001.

AUSA, United States Atttorney's Office, Chicago, IL, for Plaintiff.

Mark S. Hersh, United States Attorney's Office, Chicago, IL, Theodore Thomas Poulos, Terence H. Campbell, Cotsirilos, Stephenson, Tighe & Streicker, Chicago, IL, Steven Alan Miller, John William Moynihan, Sachnoff & Weaver, Ltd. Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

SCHENKIER, United States Magistrate Judge.

On August 15, 2000, the Government filed this action alleging that the defendant, Krishnaswami Sriram ("Dr.Sriram"), fraudulently obtained at least $1,224,154.25 in Medicare payments. The Government asserted claims for civil penalties and treble damages under the False Claims Act, 31 U.S.C. § 3729 (Counts II and III), as well as damage claims under common law theories of mispayment by mistake of fact (Count IV), unjust enrichment (Count V), and fraud (Count VI). In addition, the complaint asserted a claim for injunctive relief under 18 U.S.C. § 1345, asking that the Court enjoin the alleged fraudulent activity by Dr. Sriram and freeze "assets that are the product of, or profit on the product of, his fraud" (Compl.¶ 47) (Count I).

With the complaint, the Government filed an ex parte motion for temporary restraining order, preliminary injunction and other equitable relief. On August 16, 2000, the district judge issued a temporary restraining order barring Dr. Sriram from engaging in future fraudulent activity, and requiring him to maintain and not to dispose of certain documents and records. That order also froze various assets of Dr. Sriram, including four bank accounts and three pieces of real estate which had a collective value in excess of $4 million. By its terms, the initial temporary restraining order was due to expire on August 30, 2000.

At the time of the entry of the temporary restraining order, the district judge also referred the matter to this Court for a hearing on the Government's motion for preliminary injunction. Thereafter, as a result of a limited consent signed by all parties, the matter was reassigned to this Court pursuant to 28 U.S.C. § 636(c) and Local Rule 73.1 for final ruling on any requested extensions of the temporary restraining order and on the motion for preliminary injunction (doc. ## 7-9); since that time, the parties have generally consented to the jurisdiction of this Court for all purposes (doc. ## 33-35). By agreement of the parties, the temporary restraining order, with some modification, was extended five times: on August 23, 2000 (doc. # 10), September 13, 2000 (doc. # 11), October 12, 2000 (doc. # 12), November 30, 2000 (doc. # 15), and January 19, 2001 (doc. # 32). The temporary restraining order currently in effect is due to expire on February 14, 2001.

During the several months that the restraining order has been in effect, several events of significance to this case have occurred. First, pursuant to agreement between the parties, the specific bank accounts and property subject to the restraining order have been narrowed to three: (1) a certificate of deposit with a value of some $3.3 million, held in Account Number 7000017538 ("Account 7538") at the Lake Forest Bank & Trust; (2) real estate and improvements located at 611 Hunter Lane in Lake Forest, Illinois; and (3) real estate and improvements located at 715 East Falcon Drive in Arlington Heights, Illinois. Other accounts originally frozen have been released for Dr. Sriram's use; in addition, there have been some withdrawals of money from Account 7538 for use by Dr. Sriram in paying legal fees and other expenses. Second, criminal charges have been filed against Dr. Sriram. On November 2, 2000, the Government filed a criminal complaint against Dr. Sriram and, on November 30, 2000, a grand jury returned an indictment against Dr. Sriram for ten violations of the mail fraud statute, 18 U.S.C. § 1341, and ten violations of the health care fraud statute, 18 U.S.C. § 1347. The indictment also asserts a claim under 18 U.S.C. § 982 for criminal forfeiture of certain assets, including Account 7538 and the two items of real estate and improvements that remain frozen under the current restraining order.¹ Third, on December 15, 2000, the Government filed an amended complaint in this case which asserts the same causes of action as in the original complaint, but increases the claim of a loss to the Government from Dr. Sriram's alleged fraud from $1.2 million to an amount no less than $1,651,527.05 (Am.Compl.¶ 52).

Presently pending before the Court are two motions. The Government has moved for a preliminary injunction (doc. # 1-2), seeking to continue (1) the prohibition against submitting false claims; (2) the requirement to preserve and not to dispose of certain documents and records; and (3) the freeze on Account 7538 and the Lake Forest and Arlington Heights real estate and improvements. The Government argues that under 28 U.S.C. § 1345, it is entitled to a preliminary injunction freezing assets sufficient to guarantee, as far as possible, that the Government will be able to collect on the civil judgment it believes it will obtain. The Government further argues that it is likely to prove at trial that Dr. Sriram fraudulently obtained at least $1.6 million in Medicare payments, and that under the False Claims Act, 31 U.S.C. § 3729, the Government will be entitled to an automatic tripling of that amount plus an additional sum of at least $5 million in civil penalties.

For his part, Dr. Sriram, disputes that the Government is likely to prove that any fraud occurred, or that the amount of the alleged fraud is $1.6 million. Moreover Dr. Sriram argues that under Section 1345 only the amount shown to be traceable to the alleged fraud may be frozen, and that Section 1345 does not authorize the Court to freeze assets to secure a trebled damage award or penalties that may be imposed. Thus, Dr. Sriram has moved to release assets that exceed any amount that the Government might demonstrate it is likely to show was fraudulently obtained; in the alternative, if the assets currently under the restraining order remain frozen, Dr. Sriram requests the release of sufficient funds to cover monthly living expenses and payments for defense costs.

On January 16-18, 2001 the Court conducted an evidentiary hearing on the Government's motion for preliminary injunction. At that hearing, the Government called nine witnesses: Kathy Barbour, an FBI agent; Katherine Huber, an IRS agent; Drs. Anshu Gupta, John Haebich, and Ameeruddin Syed, all of whom practiced medicine for Home Doctors, an entity established by Dr. Sriram; Peter Theiler, an investigator with Wisconsin Physicians Services ("WPS"), an entity involved in providing Medicare reimbursement to doctors; Dr. Stephen Boren, who reviews claims for WPS; Lisa Suarez, who was employed by Dr. Sriram at various times in 1998 and 1999; Dr. Sriram's wife, Raji Sriram, whom the Government allege was involved in submitting billing claims for services allegedly provided to Medicare recipients; and Dr. Sriram himself. However, through the assertion of the spousal testimony privilege and her own Fifth Amendment privilege against self-incrimination, Ms. Sriram supplied no substantive testimony concerning either the billing practices of Dr. Sriram or their sources of income.² In addition, the Government called Dr. Sriram, who declined to answer any substantive questions based on his assertion of the Fifth Amendment. Dr. Sriram called no witnesses to testify in his behalf at the hearing.

The Court has received legal memoranda from the parties on the Government's motion for preliminary injunction, and on the defendant's assertion that Section 1345 does not allow the freezing of assets based on treble damages and possible penalties under 31 U.S.C. § 3729. On January 18, 2000, the Court also heard oral argument from the attorneys.

Based on the Court's review of the evidentiary record and the applicable legal authorities, the Court finds that the Government has established an entitlement to a preliminary injunction under 18 U.S.C. § 1345 prohibiting Dr. Sriram from submitting false Medicare claims, requiring him to preserve and not to discard certain documents and records, and freezing certain of his assets. However, the Court further finds under Section 1345, the amount of assets that can be frozen is limited to the amount that the Government has established it is likely to prove were traceable to the alleged criminal Medicare fraud — $1,651,527.05. The Court finds that Section 1345 does not empower courts to increase the amounts frozen to secure the collectibility of treble damages or penalties.

The Court sets forth below the findings of fact and conclusions of law that constitute the grounds for granting the Government's request for preliminary injunction. To the extent that any finding of fact constitutes a conclusion of law, the Court hereby adopts it as such, and to the extent that any conclusion of law constitutes a finding of fact, the Court adopts it as such. See Miller v. Fenton, 474 U.S. 104, 113-14, 106 S.Ct. 445, 88 L.Ed.2d 405 (1985).

I.

A. The Parties.

1. Plaintiff, the United States, is suing on behalf of the Department of Health and Human Services ("HHS"), which administers the Medicare program.

2. Dr. Sriram is a domiciliary of the State of Illinois and resides at 611 Hunter Lane, Lake Forest, Illinois. Dr. Sriram is licensed to practice medicine, and at all times relevant to this action, Dr. Sriram has provided physician services to Medicare beneficiaries.

B. Operation of the Medicare Program.

3. Medicare is a program administered by HHS that provides health insurance for persons aged 65 and older, certain younger people with disabilities, and people with end-stage renal disease. Medicare has...