United States v. Fata (In re Korff)
| Decision Date | 31 August 2016 |
| Docket Number | Criminal Case No. 13-cr-20600,Case No. 16-cv-12984 |
| Parties | In re Petition of Tracy Korff, et al., In the matter of: UNITED STATES OF AMERICA, Plaintiff, v. FARID FATA, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
OPINION AND ORDER GRANTING THE UNITED STATES' MOTION TO DISMISS THE PETITION (ECF NO. 4) AND DISMISSING THE PETITION (ECF NO. 1)
On May 27, 2016, Petitioner Tracy Korff, Personal Representative of the Estate of John Korff, filed this action individually and on behalf of 43 individuals involved in civil litigation in the Oakland County Circuit Court, State of Michigan, against Farid Fata and several other allegedly associated tortfeasors. The Petition is filed pursuant to 18 U.S.C. § 3771(d)(3), the Crimes Victims' Rights Statute ("the CVRA"), and seeks to avoid potential claims for reimbursement by Medicare and other health providers in relation to Petitioners' state court settlements against Fata and several other tortfeasors. On July 1, 2016, the government filed a response and motion to dismiss the Petition. (ECF No. 4.) The Petitioners filed a response to the motion to dismiss (ECF No. 6) and the government filed a reply (ECF No. 9). On August 11, 2016, the Court permitted Petitioners to file a supplemental brief. (ECF No. 12.) The Court held a hearing on Friday, August 19, 2016 and heard extensive argument from both the Petitioners and the government. For the reasons that follow, the Court GRANTS the government's motion to dismiss, DENIES the Petitioners' request for relief and DISMISSES the Petition.
This Petition is filed on behalf of 43 individuals currently involved in civil litigation in the Oakland County Circuit Court against Farid Fata, Crittenton Hospital Medical Center, McLaren Health Corporation and Trinity Health-Michigan, among other defendants, in which the Petitioners assert claims of medical malpractice arising out of Fata's admitted malfeasance in treating patients, conduct that is the subject of a criminal health care fraud proceeding against Fata in a separate action in this Court. United States v. Farid Fata, Case No. 13-cr-20600 ("the Fata criminal proceeding"). In this Fata criminal proceeding, the Court accepted Fata's pleas of guilty without benefit of a Rule 11 plea agreement and sentenced him to 45 years in prison.1 The Court, after holding three days of post-sentencing public hearings on the restitution issue, established an initial plan of restitution that provides for notice to all patient victims and establishes a process for the filing of claims by those victims. (Fata criminal proceeding, ECF No. 186, Order Establishing Restitution Plan and Review of Claims for Restitution) ("the Restitution Order"). The Restitution Order defines certain categories of Fata's former patients' non-reimbursed, out-of-pocket medical expenses that will be compensable under the restitution plan with appropriate documentation.
Petitioners contend that their recently-completed $8 million settlement in their state court civil actions may subject them to federal statutory obligations to reimburse Medicare from those settlement awards for certain payments made by Medicare on their behalf (hereinafter the "medical expense or health care liens"). Petitioners acknowledge that this Court's Restitution Order allowingrestitution only for non-reimbursed expenses "clearly prohibits Petitioner [Korff] from seeking restitution for monies that she is required to pay to satisfy the liens of Medicare, Medicaid or Blue Cross Blue Shield in the civil case." (Petition 3.) Petitioners assert that precluding restitution for these amounts victimizes the Petitioners and violates their rights as crime victims under the CVRA to receive full restitution and to be treated with respect and dignity.
Petitioners now ask this Court to "remedy" this alleged inequity by either: (1) ordering that Medicare (and/or other health care benefit programs) "waive off" Petitioners' medical expense liens that they may be statutorily obligated to pay from their settlement award in their state civil cases against Fata and other tortfeasors; or alternatively (2) modifying this Court's Restitution Order to remove the word "non-reimbursed," and/or deeming any payments that Petitioners are required to make from their settlement award to satisfy any medical expense liens in their underlying state civil actions as qualifying "out-of-pocket expenses" under the Court's Restitution Order.
The government opposes the Petition and moves to dismiss, arguing that: (1) Petitioners are asking this Court to relieve them of their reimbursement obligations under the Medicare laws but have failed to exhaust their administrative remedies under the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b), (the "MSP") and thus this Court lacks subject matter jurisdiction over Petitioners' claims; and (2) assuming Petitioners do have standing in this Court, the relief requested by Petitioners that would require this Court to recharacterize their medical expense reimbursement payments as qualifying out-of-pocket expenses under the Court's Restitution Order (a) would violate the mandate of the Mandatory Victim Restitution Act, 18 U.S.C. § 3663A ("the MVRA") that victims receive compensation only for actual and direct monetary loss and (b) would award the Petitioners a windfall recovery at the expense of the hundreds of Fata victims who have not filed andsettled individual civil actions and thus would not similarly be entitled to recover amounts from the restitution fund for "expenses" that they themselves did not pay.
In the Fata criminal proceeding, Fata, without benefit of a plea agreement, pleaded guilty to 13 counts of health care fraud, one count of conspiracy to pay and receive kickbacks, and two counts of money laundering. As part of a sentencing stipulation, Fata admitted that he had administered unnecessary medical treatments and testing, including dangerous chemotherapy and other chemical infusions, to at least 553 patients. On July 10, 2015, Fata was sentenced to 45 years' imprisonment.2 A Judgment was issued and the determination of restitution to the victims of Fata's crimes under the MVRA was deferred to a later date. United States of America v. Farid Fata, No. 13-cr-20600 (E.D. Mich. July 14, 2015) (ECF No. 158, Judgment p. 6.) Fata stipulated to a Preliminary Order of Forfeiture that was entered by the Court on July 9, 2015, pursuant to which Fata agreed to forfeit his rights to certain property and further agreed to a money judgment of $17,601,233.00, "representing the amount of gross proceeds obtained as a result of [his] health care fraud violations as alleged in the Fourth Superseding Indictment." (E.D. Mich. No. 13-cr-20600, ECF No. 154, Preliminary Order of Forfeiture.) Presently, the restitution fund stands at approximately $12 million after liquidation and a 10% payment to a whistleblower.
Typically, forfeited funds are deposited directly in the Treasury of United States, absent special agreement from the Asset Forfeiture and Money Laundering Section ("AFMLS") of the Criminal Division of the Department of Justice. The Department of Justice may, however, in itsdiscretion, transfer "forfeited assets to restitution where the defendant does not have sufficient resources to pay restitution outside of the forfeited assets." Catharine M. Goodwin, Federal Criminal Restitution, § 12:13 (2014 Edition). Working extensively with AFMLS, the government obtained the authorization to create a restitution plan in the Fata criminal proceeding that seeks to apply the full amount of the forfeited funds to restitution for individual victims of Fata's crimes. The government estimates that after liquidation and payment to a qui tam relator, approximately $12 million will be available for restitution.
Under the Restitution Order entered by this Court on April 11, 2016, three different categories of restitution will be available to Fata patient-victims: (1) all non-reimbursed, out-of-pocket medical expenses paid by any former patient for medical services provided by Fata or at his direction; (2) all non-reimbursed, out-of-pocket medical expenses for remedial measures that were incurred as a result of any inappropriate or unnecessary treatments ordered or provided by Fata; and (3) all non-reimbursed, out-of-pocket expenses for psychological and psychiatric mental health treatment and prescription mental health medications. Each of the three categories of expenses that will be available to the patient victims requires differing levels of supporting documentation but, in each case, restitution is available only for non-reimbursed, out-of-pocket expenses. If any portion of a patient-victim's medical expenses have been paid by another payer, such amounts are not available for recoupment by the patient-victim under the restitution plan.
It is undisputed that some portion of Petitioners' medical expenses were paid on their behalf by certain medical lien holders, and the Petitioners represent that they will be statutorily obligated to reimburse those medical lien holders out of their settlement awards. Petitioners concede that such reimbursements, which they will be required to make from the money that they receive from thevarious tortfeasors in their state court suits, are not non-reimbursed, out of pocket expenses that may be recouped under the Restitution Order. Petitioners, however, believe they are entitled to recover those reimbursement payments again from the restitution fund in the criminal proceedings and seek a ruling from this Court that would enable them to do so. For the reasons that follow, the Court denies the relief Petitioners request and dismisses the Petition.
The government does not cite any particular statute or court rule under which it moves to dismiss, but its claim that Petitioners failed to exhaust...
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