United States v. Luis

• Decision Date: 21 June 2013
• Docket Number: Case No. 12–23588–CIV.
• Citation: 966 F.Supp.2d 1321
• Parties: UNITED STATES of America, Plaintiff, v. Sila LUIS, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

966 F.Supp.2d 1321

UNITED STATES of America, Plaintiff,

v.Sila LUIS, et al., Defendants.

Case No. 12–23588–CIV.

United States District Court, S.D. Florida.

June 21, 2013.

Susan Torres, U.S. Attorney's Office, Miami, FL, for Plaintiff.

Howard Milton Srebnick, Black Srebnick Kornspan & Stumpf, Scott Alan Srebnick, Miami, FL, for Defendants.

ORDER

PAUL C. HUCK, District Judge.

THIS MATTER is before the Court upon the United States of America (the “Government['s]”) Emergency Ex Parte Motion for Temporary Restraining Order and Preliminary Injunction under 18 U.S.C. § 1345 [D.E. # 4] and Defendant, Sila Luis (“Luis['s]”) Motion to Modify the Restraining Order to Release Assets for the Defense of the Related Criminal Case [D.E. # 46]. For the reasons discussed below, the Motion for Preliminary Injunction is granted and Luis's Motion to Modify the Restraining Order is denied.

A. Background

a. Statutory Basis for Injunctive Relief Under 18 U.S.C. § 1345

Section 1345 allows courts to grant injunctive relief to prevent certain types of fraud and to prevent alienation of property associated with the fraud. 18 U.S.C. § 1345. Thus, a court may enter an injunction under § 1345 preventing mail fraud, wire fraud, banking laws, or the commission of a federal health care offense.¹Id. Section 1345 also allows a court to enter an injunction when an individual alienates or disposes of any property obtained as a result of such violations, to prevent any person from withdrawing, transferring, removing, dissipating, or disposing of any such property or property of equivalent value.²Id. The “equivalent value” language means that when some of the assets that were obtained as a result of fraud cannot be located, a person's substitute, untainted assets may be restrained instead. See United States v. DBB, Inc., 180 F.3d 1277, 1281 (11th Cir.1999).

b. The Burden of Proof and Elements for Injunctive Relief Under § 1345

As to the elements for injunctive relief, a reasonable reading of § 1345 indicatesthat the Government bears the burden to establish that: (1) a Federal health care offense has been committed; (2) the total amount of proceeds obtained from the criminal activity; and (3) that there has been dissipation of assets received as a result of the criminal activity. See United States v. Brown, 988 F.2d 658, 663 (6th Cir.1993) (finding § 1345 requires the Government demonstrate that a predicate offense has been committed and the extent of the fraud); see also§ 1345 (requiring dissipation of assets for a court to award injunctive relief).

Regarding the applicable burden of proof, there is considerable disagreement in the case law. Several courts have applied the preponderance of the evidence standard to claims for injunctive relief under § 1345. See Brown, 988 F.2d 658, 663 (6th Cir.1993); United States v. Williams, 476 F.Supp.2d 1368, 1374 (M.D.Fla.2007) (applying the preponderance of the evidence standard); United States v. Sriram, 147 F.Supp.2d 914, 938 (N.D.Ill.2001) (same); United States v. Barnes, 912 F.Supp. 1187, 1198 (N.D.Iowa 1996) (same); United States v. Quadro Corp., 916 F.Supp. 613, 617 (E.D.Tex.1996) (same); see also United States v. Legro, 284 Fed.Appx. 143, 145 (5th Cir.2008) (recognizing disagreement about whether probable cause or preponderance of the evidence standard applies to state a claim for injunctive relief under § 1345 and declining to resolve the issue). Other courts have concluded that a showing of only probable cause is required. See United States v. Livdahl, 356 F.Supp.2d 1289, 1294 (S.D.Fla.2005); United States v. Fang, 937 F.Supp. 1186, 1197 (D.Md.1996); United States v. Davis, No. 88–1705–CIV–ARONOVITZ, 1988 WL 168562, at *1 (S.D.Fla.1988). This Court agrees with those courts that found probable cause is the correct burden of proof

c. Evidence of Federal Health Care Offenses and Dissipation of Assets

Pursuant to § 1345, the Court previously entered a temporary restraining order (“TRO”) restraining all of Luis's assets. The Government seeks to convert the TRO into a preliminary injunction, and the Court held a hearing on that matter on February 6, 2013. As a basis for the requested injunctive relief, the Government points to the parallel criminal prosecution, where Luis is charged with violations of 18 U.S.C. § 1349 (conspiracy to commit health care fraud) and 18 U.S.C. § 371 (conspiracy to defraud the United States and to commit offenses against the United States). Luis is also charged with violation of 42 U.S.C. § 1320a–7b(b)(2)(B) (paying health care kickbacks) and a forfeiture count under 18 U.S.C. § 982. Luis was indicted by a grand jury on these charges. According to the indictment, the offenses resulted in $45 million of improper Medicare benefits being paid. The parties agree that Luis has much less than $45 million in personal assets.

At the hearing, the Court accepted three declarations of Federal Bureau of Investigation Special Agent Clint Warren (“Special Agent Warren”) as direct testimony. Special Agent Warren investigated Luis's businesses, LTC Professional Consultants, Inc. (“LTC”) and Professional Home Care Solutions, Inc. (“Professional”) for Federal health care fraud. During the investigation, Special Agent Warren received information from nine cooperating witnesses (“CWs”) who worked as nurses and patient recruiters for LTC, Professional, or both.

The CWs said that LTC and Professional defrauded Medicare during the period of January 2006 to June 2012. Before the fraudulent scheme was put into place, Luis signed Medicare enrollment agreements in 2003, 2004, and 2005, whereby she agreed to abide by Medicare laws and regulations, including the Anti-kickback statute. According to the information provided to Special Agent Warren, LTC and Professional paid nurses to recruit patients. The nurses, in turn, gave the patients a portion of the kickbacks in the form of direct payments. The CWs also told Special Agent Warren that LTC and Professional fraudulently billed Medicare for services that were not medically necessary or were not actually provided. One CWs estimated that at least 90% of all Professional and LTC patients were receiving kickbacks. Eight of these CWs specifically identified patients who received kickbacks. The total paid by Medicare for claims submitted on behalf of these patients who were identified was $ 4,356,553.85. During the period of this fraud, however, LTC and Professional collected a total of approximately $45 million from Medicare billings.

Special Agent Warren's declarations also provided information about assets being dissipated. Luis and the other defendants transferred monies from LTC and Professional to themselves directly and by the use of shell corporations that were owned by Luis's family members. There was also evidence that Luis used the funds to purchase luxury items, real estate, automobiles, and to travel. According to the declarations, Luis also received approximately $4,490,000 of the funds directly. In addition, although the investigation uncovered the fact that Medicare paid LTC and Professional $45 million dollars, only a fraction of the funds were located.

B. Discussion

a. The Indictment and Declarations of Special Agent Warren Establish Probable Cause to Satisfy the Elements of § 1345

Initially, the indictment and declarations establish probable cause to satisfy the elements for injunctive relief under § 1345. That is, there is probable cause to believe that: (1) Federal health care offenses have been committed; (2) $45 million was obtained illegally as a result of those offenses; and (3) that there has been dissipation of those monies. An indictment is sufficient to establish probable cause that offenses have been committed and the amount of the proceeds from those offenses. See United States v. Bissell, 866 F.2d 1343, 1349 (11th Cir.1989). Here, the Grand Jury indicted Luis for committing Federal health care offenses and found that LTC and Professional improperly obtained $45 million from those offenses.

Furthermore, in other situations where probable cause is required, the finding of probable cause may properly rest upon the affidavit of a law enforcement officer. See Illinois v. Gates, 462 U.S. 213, 226, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983) (explaining that issuance of a search warrant may be based upon an affidavit of a law enforcement officer when based upon a proper information source). Section 1345 requires there be dissipation of the proceeds. As discussed above, in his investigation, Special Agent Warren discovered that Luis used the funds to purchase luxury items, real estate, automobiles, and for travel. In addition, the investigation uncovered the fact that Medicare paid LTC and Professional $45 million dollars, but only a fraction of the assets could be located. The declaration, which is based upon information discovered in the criminal investigation, establishes probable cause to believe that there has been dissipation of assets.

Thus, the initial requirement to obtain a preliminary injunction, restraining up to $45 million of Luis's assets, has been met.³

b. Luis's Right to a Hearing and Right to Challenge the Factual Basis of the Probable Cause Finding

The parties disagree about whether Luis was entitled to a hearing and, if so, the scope of the hearing and whether she has the right to challenge the probable cause determination. The Government's position is that Luis has no right to challenge the factual basis of the probable cause finding, which is based solely upon the indictment and declarations of Special Agent Warren. Luis, on the other hand, argues that she is entitled to a full adversarial hearing where she should be allowed to cross-examine the CWs. In this case, Luis was permitted a hearing, where she was allowed to cross-examine Special Agent Warren but was not permitted to cross-examine the CWs.

As an initial matter, § 1345 does not require a hearing by its language. However, the Fifth Amendment provides...