United States v. Weingarden, Crim. No. 78-80689.
| Decision Date | 05 April 1979 |
| Docket Number | Crim. No. 78-80689. |
| Citation | 468 F. Supp. 410 |
| Parties | UNITED STATES of America, Plaintiff, v. Gerald WEINGARDEN, D.O., Donald Freedlander, D.O., Robert Gash, D.O., Harvey Golden, D.O., Richard Tapert, D.O., Henry Ellis, Sanford Hoskow, Charles Shermetaro, Maureen Hoskow, a/k/a Maureen A. Delaney, J.K.F., Inc., a Michigan Corporation, Media Technology, Inc., a Michigan Corporation, and Bernard Lampear, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Peter M. Rosen, Ross Parker, Detroit, Mich., for plaintiff.
Neil H. Fink, Detroit, Mich., Warren J. Perlove, Robert S. Harrison, Southfield, Mich., Gerald D. Saunders, Detroit, Mich., Fred L. Harris, Southfield, Mich., Philip A. Gillis, Gillis, Louisell & Berg, Detroit, Mich., Terence V. Page, Clark, Hardy, Lewis, Fine & Asher, Birmingham, Mich., Michael H. Golob, Detroit, Mich., Albert J. Krieger, Miami, Fla., for defendants.
Defendants were indicted by a United States Grand Jury upon a 37-count indictment, combined with a 42-count information, charging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., on September 21, 1978. Count 1 of the indictment charges conspiracy to acquire an interest in an enterprise and to participate in the affairs of an enterprise through a pattern of racketeering activities, in violation of 18 U.S.C. § 1962(d). Count 2 of the indictment charges a substantive violation of the provisions of 18 U.S.C. § 1962(b) (). Count 3 of the indictment alleges substantive violations of 18 U.S.C. § 1962(c) (). Counts 4 through 37 of the indictment each allege substantive violations of 18 U.S.C. § 1341 (mail fraud). Some or all of the substantive violations set forth in Counts 4 through 37 are relied upon by the government as predicate acts of racketeering necessary to charge and convict under 18 U.S.C. § 1962. On March 16, 1979, the court denied the motion of one defendant to dismiss the indictment, which incorporated by reference other defendants' motions to dismiss. On March 21, 1979, the United States Court of Appeals for the Fifth Circuit issued its decision in United States v. Porter, 591 F.2d 1048 (5th Cir. 1979) (Coleman, J.). Relying on this case, counsel for defendants orally moved for a rehearing of the motions to dismiss. For the reasons stated below the court declines to follow Porter, and the motion for rehearing will be denied.
Defendants in the instant case were charged in the information counts with having violated 42 U.S.C. § 1396h(b)(1), which at the relevant time provided:
Relying on Porter, defendants argued orally that "kickback" cannot refer to a payment made to a party other than the party which initially transferred the sum to the payor; and that since the alleged scheme involved no payments by doctors to the laboratories but only referral of specimens, the payments by the labs to the doctors were not illegal "kickbacks." Hence, defendants argue, the indictment and information charge no crime.
In Porter, eight doctors and one laboratory operator were charged with violating 42 U.S.C. § 1395nn(b)(1), in connection with a scheme of payments for supplying medicare services. In a typical transaction a physician would determine that tests for the presence of various diseases should be performed on blood samples taken from the patient. Two types of labs offered testing services — the manual type, with a number of machines each designed to do one test, and the automated type, with one machine capable of simultaneously performing an entire battery of tests. The manual labs charged significantly higher rates for the same service; for a particular blood test an automated lab would receive a medicare reimbursement of $35, while the comparable figure for a manual lab was $214. The doctors sent their blood samples to the manual lab operated by Porter, who paid the doctors up to $35 for each sample sent. Under the "AdServ" system employed by defendants, the doctors would be paid a "handling fee" (which the government contended was a bribe, kickback, or rebate) by a third party, AdServ, for submitting blood specimens from medicare beneficiaries and would accept lab work for non-medicare patients at a reduced price or at cost. "Under this arrangement, therefore," as the court noted, "the doctors profited and non-Medicare patients were subsidized by the Medicare Program." 591 F.2d at 1051. Porter holds that payments by a laboratory which received medicare fees and shared the fees with doctors who had referred their specimens to the lab, had not made "kickback" payments proscribed by 42 U.S.C. § 1395nn(b), which shares its language and legislative history with § 1396h(b)(1). The court stated that "kickback" ordinarily means "the secret return to an earlier possessor of part of a sum received" (591 F.2d at 1054; emphasis in original). Hence the court concluded that "once the labs lawfully received a lawful fee . . . there was no outstanding restriction on what the lab could do with the money once it received it." 591 F.2d at 1054. The court apparently reasoned that once the laboratory received the funds from medicare, payments by the lab to others would be "corrupt" only if paid to a governmental official or agent. Porter relies on dicta in United States v. Zacher, 586 F.2d 912 (2d Cir. 1978), for the proposition that a kickback (like a bribe, as Zacher makes clear) "involves a corrupt payment or receipt of payment in violation of the duty imposed by Congress on providers of services to use federal funds only for intended purposes and only in the approved manner." 586 F.2d at 916, quoted in 591 F.2d at 1054.
The weight of the cases, however, indicates that the term "kickback" in both legal and lay usage may refer not only to "a return of a part of a sum received . ." (Webster's Seventh New Collegiate Dictionary, 1969 ed.), see also Boehm v. United States, 123 F.2d 791, 813 (8th Cir. 1941) (), but also to the forwarding of a sum to a third party for services performed for the payor of the kickback by the third party payee (though the payee may not originally have given payor any payment). In fact, Webster's Third New International Dictionary of the English Language Unabridged (1971 ed.) defines "kickback," in part, as:
2: REFUND: as (a): a percentage payment exacted as a condition for granting assistance by one in a position to open up or control a source of income or gain (appointees paid a — to the ward boss out of each paycheck).
Thus where a vending company installed its cigarette machines in restaurants in a chain of which appellant was president, upon clandestine payments by the vending company to the appellant, such payments were permissibly labelled by a government witness as "kickbacks." United States v. Engle, 458 F.2d 1017, 1020 (8th Cir. 1972).
The Supreme Court, in United States v. Brewster, 408 U.S. 501, 522 n. 16, 92 S.Ct. 2531, 2542, 33 L.Ed.2d 507 (1972), has referred to the facts of United States v. Bramblett, 348 U.S. 503, 75 S.Ct. 504, 99 L.Ed. 594 (1955), as "a Congressman's misuse of office funds via a `kick-back' scheme." In Bramblett, defendant was indicted and convicted of violating 18 U.S.C. § 1001, by representing to the Disbursing Office of the House of Representatives that one Margaret M. Swanson was a clerk in defendant's Congressional office, and entitled to receive compensation, when she was not. (The facts are set out in the lower court's opinion, 120 F.Supp. 857, 858 (D.D.C. 1954).) In Powell v. McCormack, 395 U.S. 486, 525, 89 S.Ct. 1944, 1966, 23 L.Ed.2d 491 (1969), the Court noted that "The House of Commons had expelled Robert Walpole for receiving kickbacks for contracts relating to `foraging the Troops,' . . . and committed him to the Tower." For similar references to kickbacks as misuse of government status to obtain payments through awarding of contracts (violations of the Kickback Act of 1934, subsequently amended), see, e. g., United States v. Acme Process Equipment Co., 385 U.S. 138, 87 S.Ct. 350, 17 L.Ed.2d 249 (1966); United States v. Carbone, 327 U.S. 633, 66 S.Ct. 734, 90 L.Ed. 904 (1946).
The Sixth Circuit has often used the term "kickback" in this fashion. In United States v. Thompson, 366 F.2d 167 (6th Cir. 1966), defendants were members of a county council who solicited a particular architectural firm for the construction of a hospital under the Hill-Burton Act, 42 U.S.C. § 291 et seq., and who requested a 1% kickback payment from the firm. In United States v. Foster, 566 F.2d 1045, 1050 (6th Cir. 1977), the court labels "kickbacks" those payments made by borrowers of bank loans to the defendants who were bank officers authorized to make loans on behalf of the bank; a portion of the loan proceeds was paid to defendants. See also In re Grand Jury Proceedings, Detroit, Michigan, August, 1977, 570 F.2d 562, 563 (6th Cir. 1978) ().
Indeed the Fifth Circuit as well has used the term in this way or referred to such usage. In United States v....
To continue reading
Request your trial
-
U.S. v. Tapert, s. 79-5222-79-5224
...to dismiss the indictments. Thereafter, in a published opinion, she denied their motions for a rehearing. United States v. Weingarden, 468 F.Supp. 410 (E.D.Mich.1979). In this opinion Judge Kennedy held that the pre-1977 version 42 U.S.C. § 1396h(b)(1) prohibited the conduct charged in the ......
-
HOMEOWNERS ASS'N, ETC. v. Costle, C 78-0030-L(B).
... ... No. C 78-0030-L(B) ... United States District Court, W. D. Kentucky, Louisville Division ... ...