United States v. Gross, Case No. 8:18-CR-00014-JLS

• Decision Date: 27 March 2019
• Docket Number: Case No. 8:18-CR-00014-JLS
• Citation: 370 F.Supp.3d 1139
• Parties: UNITED STATES of America, Plaintiff, v. Jeffrey David GROSS, Defendant.
• Court: U.S. District Court — Central District of California

370 F.Supp.3d 1139

UNITED STATES of America, Plaintiff,

v.Jeffrey David GROSS, Defendant.

Case No. 8:18-CR-00014-JLS

United States District Court, C.D. California.

Signed March 27, 2019

Ashwin Janakiram, SAUSA - Office of the US Attorney General Crimes Section, Los Angeles, CA, Joseph Timothy McNally, Scott D. Tenley, AUSA - Office of US Attorney, Santa Ana, CA, for Plaintiff

Hamilton E. Arendsen, Arendsen Cane Molnar LLP, San Diego, CA, Mark Mermelstein, Mona Samir Amer, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, for Defendant

ORDER DENYING DEFENDANT'S MOTION TO DISMISS COUNTS 2-8 AND 10-14 OF THE INDICTMENT (DOC. 31)

ORDER DENYING REQUEST TO CROSS-EXAMINE AGENT HABBEN

ORDER DENYING DEFENDANT'S MOTION TO DISMISS INDICTMENT (DOC. 61)

The Hon. Josephine L. Staton, United States District Judge

This matter is before the Court on two defense motions. The first moves to dismiss twelve of fourteen counts of the Indictment based on a statute of limitations issue (Doc. 31, "MTD Certain Counts"). The second moves to dismiss all counts of the indictment, arguing that essential elements are lacking (Doc. 61, "MTD All Counts"). The Court denied the first at the hearing on March 22, 2019 and noted a formal order would follow. The Court took the second under submission. For the reasons stated in this Order, both motions are DENIED.

I. Background

Defendant Jeffrey David Gross is a neurosurgeon who was indicted as part of the Drobot/Pacific Hospital kickback conspiracy/fraud scheme. (See generally Doc. 1, Indictment.) Defendant is alleged to have received kickbacks in exchange for referrals of patients needing spinal surgeries and other (usually invasive) procedures. (Indictment ¶ 24(a)-(k).)¹ The Indictment alleges Defendant is associated with kickbacks totaling $ 622,936. (¶ 26.) The payments were allegedly disguised as payments pursuant to bogus contracts entered into for the purposes of disguising and concealing the kickback payments. (¶ 24(h).) The charges against Defendant involve kickbacks related to surgeries billed to personal injury attorneys rather than insurers, as Defendant performed surgeries contingent on a recovery through personal injury cases. (¶ 24(a)-(c); see also MTD All Counts at 1.)

Based on these allegations, Defendant is charged with conspiracy, mail and wire fraud involving deprivation of honest services, and use of an interstate facility in aid of an unlawful activity. The fraud scheme is alleged to have operated from 1997 to October 2013. (¶ 1.) The overt acts in furtherance of the conspiracy that involved Defendant range from February 1, 2008 through May 30, 2013. (Indictment at 10-11 & 29.) The Indictment was returned by the Grand Jury and filed on January 23, 2018. (Id. )

The Indictment was sealed the same day it was returned and filed. (Doc. 7.) In sealing the Indictment, the Magistrate Judge relied on the Government's Ex Parte Application to Seal ("Application"). (Doc. 6.) The Application was supported by the prosecutor's Declaration, which stated:

The defendant has not been taken into custody on the charge contained in the indictment to be presented to the grand jury on January 23, 2018. The likelihood of apprehending the defendant might be jeopardized if the indictment in this case were made publicly available before the defendant is taken into custody on the indictment.

(Doc. 6, Janakiram Decl. ¶ 2.) The same day the Government filed the Indictment, it also filed its Notice of Request for Detention, claiming that no condition or combination of conditions would reasonably assure Defendant's appearance and safety of the public. (Doc. 4.) The Indictment remained sealed until May 18, 2018, when the Magistrate Judge unsealed it at the request of the Government. (Docs. 11-12.)

II. Motion to Dismiss Certain Counts

Defendant moves to dismiss Counts 2 through 8 and 10 through 14 as untimely. The Government contends the statute of limitations was tolled from the time the Indictment was filed under seal and the time the seal was lifted, that is, from January 23, 2018 to May 18, 2018 ("the seal period").

A. Statute of Limitations and Sealed Indictments

The limitations period as to all counts is five years. 18 U.S.C. § 3282(a). "Generally speaking, the return of an indictment tolls the statute of limitations with respect to the charges contained in the indictment." United States v. Pacheco , 912 F.2d 297, 305 (9th Cir. 1990) (citations omitted). However, sealed indictments toll the limitations period from the date of the return of the indictment only if that indictment was sealed for "legitimate prosecutorial objectives." United States v. Bracy , 67 F.3d 1421, 1426 (9th Cir. 1995). Otherwise, the tolling period begins with the indictment's unsealing.

In this case, if the Indictment was sealed and maintained under seal for legitimate prosecutorial objectives, then no count is barred by the statute of limitations. However, if the Indictment was not sealed or was not maintained under seal for any legitimate prosecutorial objective, then only Count 1 (conspiracy) and Count 9 (wire fraud involving deprivation of honest services) are timely.

B. Issues Presented by Motion to Dismiss Certain Counts

The Government contends that legitimate prosecutorial objectives in this case tolled the statute of limitations during the seal period. Specifically, the Government describes an ongoing criminal investigation and the ongoing involvement of cooperating witnesses, including covert activity by those witnesses. These reasons were not proffered by the Government when it sought the Magistrate Judge's Order to seal the Indictment. (See Doc. 6.) Nevertheless, the Government contends it need only demonstrate a legitimate prosecutorial objective after the fact, that is, once a defendant challenges the timeliness of charges brought in a case where the limitations period expired while the indictment was under seal. (Opp. at 20-21.)

1. After-the-Fact Consideration

As explained below, the Court agrees that the question of whether a sealed indictment tolls the limitations period is determined by a consideration of the record after a defendant challenges the sealing, which is necessarily after the seal is lifted.

The practice of sealing of indictments when they are returned by the Grand Jury and filed with the Court for the purpose of facilitating the arrest and arraignment of the charged defendant is routine and authorized by the Federal Rules of Criminal Procedure:

(4) Sealed Indictment. The magistrate judge to whom an indictment is returned may direct that the indictment be kept secret until the defendant is in custody or has been released pending trial. The clerk must then seal the indictment, and no person may disclose the indictment's existence except as necessary to issue or execute a warrant or summons.

Fed. R. Crim. P. 6(e)(4). Rule 6(e)(4) does not require that the Magistrate Judge develop a contemporaneous record justifying the sealing. See United States v. Srulowitz , 819 F.2d 37, 41 (2d Cir. 1987) (reversing the district court's dismissal of an indictment based on the absence of a contemporaneous record, and instead holding that the Government need only justify the sealing when challenged by a defendant after the unsealing of the indictment); accord United States v. Sharpe , 995 F.2d 49, 52 (5th Cir. 1993) (relying on Srulowitz ). Indeed, three circuits have characterized the sealing of an indictment under Rule 6(e)(4) as a "ministerial act." Srulowitz , 819 F.2d at 41 ("[S]ealing in the first instance is but a ministerial act, and it is wholly within the discretion of the Magistrate whether to require the prosecutor to justify a request to seal."); United States v.Sharpe , 995 F.2d at 52 (same); United States v. Lakin , 875 F.2d 168, 171 (8th Cir. 1989) (same). The Magistrate Judge's determination to seal the indictment under this provision is given great deference. See, e.g., United States v. Wright , 343 F.3d 849, 856 (6th Cir. 2003) ; United States v. Ramey , 791 F.2d 317, 321 (4th Cir. 1986) ; United States v. Edwards , 777 F.2d 644, 649 (11th Cir. 1985) ; United States v. Southland Corp. , 760 F.2d 1366, 1380 (2d Cir. 1985) ; United States v. Liersch , No. 04CR2521, 2006 WL 6469421, at *2 (S.D. Cal. June 26, 2006) ; contra United States v. Benavides , No. CR 06-62-M-DWM, 2009 WL 10679152, at *7 (D. Mont. Dec. 15, 2009) (giving no deference to the decision of the Magistrate Judge where the under seal application was granted pursuant to the regular practice in the district).

Here, pursuant to Rule 6(e)(4), the Magistrate Judge sealed the indictment without the development of the record at the time of sealing. Therefore, the Court agrees that the basis for maintaining the indictment under seal must be justified by the Government only when challenged by the Defendant after the unsealing of the indictment. Accordingly, the Court focuses on the current record to determine whether maintaining the Indictment under seal served legitimate prosecutorial objectives.

2. Legitimate Prosecutorial Objectives

The Government has the burden of establishing the sealing of an indictment serves legitimate prosecutorial objectives. See, e.g., Srulowitz , 819 F.2d at 41 (explaining that "the government, if challenged, must demonstrate legitimate prosecutorial purposes for the secrecy of the indictment"). Here, the Government proffers two legitimate prosecutorial objectives that were served by the sealing of the Indictment.

First, the Government claims there was an ongoing criminal investigation, almost a "second phase" of the investigation, in which many unindicted co-conspirators may have been lulled into a false sense of security. The Government's Opposition at 14-19 and the FBI agent's declaration² describe the ongoing investigation, activities, and actual and anticipated results. (See also Doc. 54, Habben Decl. ¶¶ 6-9.) Second, the Government presents evidence that there was ongoing covert investigatory activity by cooperating witnesses. (See...