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Richmond Marketing Company Owner Sentenced for Health Care Kickback Scheme
Lorie Monroe, 51, of Richmond, Virginia, was sentenced yesterday to 37 months in prison, followed by 3 years of supervised release, for conspiracy to receive health care kickbacks, in violation of Title 18, United States Code, Section 371. In addition, Monroe was ordered to pay $545,410.00 in restitution to the Virginia Department of Medical Assistance Services.
The sentence was imposed by United States District Judge Henry E. Hudson. On January 24, 2012, Monroe waived indictment and pled guilty to a one-count information alleging conspiracy to receive health care kickbacks.
The underlying criminal statute that Monroe has been accused of conspiring to commit is 42 U.S.C. § 1320a-7b(b)(1)(A). The statute makes it illegal for a person to solicit or receive kickbacks and other remunerations in return for referring an individual to a person for furnishing or arranging services under a Federal health care program.
According to court documents, Monroe was the owner and operator of Creed Xtreme Marketing Concepts, a.k.a Creed Extreme Marketing (“Creed”), a company located in Glen Allen, Virginia. Sometime prior to December 2008, Monroe and “Individual A” agreed that Creed would serve as a marketing company for “Company 1.” It is not clear who initiated the alleged agreement, but Monroe’s plea indicates that she did not solicit kickbacks but was merely the recipient.
Individual A is the CEO of Company 1. Company 1 was an IIH provider located in the Eastern District of Virginia, which was under contract with Medicaid to provide Intensive In-Home Therapy (IIH) services. IIH services are designed to assist those youth and adolescents who are at risk of being removed from their homes, or are being returned to their homes after removal, because of a significant mental health, behavioral, or emotional issues. Allegedly, Monroe and Individual A verbally agreed that Monroe would receive approximately half of the Medicaid payments for each child Monroe referred to Company 1 for IIH services.
On or about December 2008, Monroe allegedly hired two employees to canvass low income areas, specifically Section 8 housing and subsidized housing projects, in the greater Richmond and Petersburg, Virginia, areas, to find children who were Medicaid beneficiaries to refer to Company 1. Court documents further allege that Company 1 contacted the individuals recruited by Creed, then enrolled many of these Medicaid-eligible children in its IIH program and billed Medicaid for IIH services rendered. Between December 2008 and January 2010, Company 1 allegedly paid Monroe a total of $545,410.00 in kickbacks for recruiting beneficiaries for IIH services.
The court documents do not identify Individual A or Company 1 by name. There may be several reasons for this, but most likely, the government is still building their case against the two and has not issued an indictment as of yet. Monroe’s plea agreement further supports this theory, as part of the plea discusses Monroe’s continued cooperation in the form of potential grand jury testimony, participation in government debriefings, producing documents related to criminal activity, and the inclusion of the possibility of a 5K1.1 and Rule 35(b) downward departure during sentencing.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Scientist Accused of Economic Espionage
Tze Chao pleaded guilty in federal court in San Francisco on March 1, 2012, to conspiracy to commit economic espionage. Chao, 77 of Newark, Delaware, was indicted by a federal grand jury on February 7, 2012. He was charged with one count of conspiracy to commit economic espionage, in violation of 18 U.S.C. § 1831(a)(5).
Economic espionage falls under the ambit of the protection of trade secrets by the United States government. The statute that Chao has pleaded guilty to makes it a federal crime to knowingly transmit trade secrets to benefit a foreign government or instrumentality. In other words, an individual can be criminally prosecuted under this federal statute if they breach a private employment agreement by providing trade secrets to a foreign government or agent, which is what Chao has been accused of. The punishments are also severe, including fines up to $500,000 or imprisonment up to 15 years, or both.
In pleading guilty, Chao, who was employed by DuPont from 1966 to 2002, stated that he provided trade secrets concerning DuPont’s proprietary titanium dioxide (TiO2) manufacturing process to companies he knew were controlled by the government of the People’s Republic of China (PRC). Beginning in 2003, the year after Chao left DuPont, he began consulting for the Pangang Group, a PRC government controlled company that produces TiO2.
As an employee of DuPont, Chao had signed an agreement to protect the trade secrets of DuPont before and after his employment, which is typical for scientists in the industry. Based on Chao’s statements in the plea agreement, he discusses the benefit of the new technology and how it was more beneficial for the environment. One would think that if the new TiO2 manufacturing process was more efficient and favorable to the environment, sharing such information might actually be useful. Therefore, Chao may have never intended to benefit the PRC and harm the U.S. Specifically, he may have not realized the criminal implications by engaging in such behavior. This is also evidenced by the fact that Chao, an employee of DuPont for over 35 years, never communicated trade secrets to a foreign government.
Chao’s plea comes in connection with the superseding indictment returned three weeks ago charging Walter Liew, Christina Liew, Robert Maegerle, and USA Performance Technology Inc., among others, for their efforts to sell DuPont trade secrets to companies controlled by the PRC government. Those companies – the Pangang Group and three subsidiaries – also were named as defendants in the indictment and charged with conspiracy to commit economic espionage and attempted economic espionage.
Chao has already pleaded guilty, but it will be interesting to follow the others that were indicted in the case. The motive, or intent, in providing trade secrets will be a significant issue if the case goes to trial. If the individuals can prove that they did not intend to conspire to benefit a foreign government, a favorable outcome might be possible.
In addition to criminal prosecution, Chao and the other former employees of DuPont have opened themselves up to civil suits for breach of contract with DuPont.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Former Executive at Gourmet Foods Company Sentenced to 30 Months in Prison for Embezzling Over $1 million from Her Employer
In the Central District of California, a woman was sentenced on February 13, 2012 for embezzling more than $1 million from her employer, a Santa Barbara-based gourmet food company. Lisa Sackie, 48, was sentenced by United States District Judge George H. Wu, who also ordered the defendant to pay $1.1 million in restitution to Future Food Brands, the parent company of Santa Barbara Bay Foods.
Sackie pleaded guilty to two counts of mail fraud in August of 2011, admitting that she wrote company checks to herself and to pay for personal expenses. Sackie pleaded to an information, and subsequently waived her right to a grand jury indictment. Sackie’s decision to plead to an information and waive her right to an indictment likely benefited her in sentencing because she admitted guilt early in the process and saved government resources. In fact, according to her sentencing memorandum and the sentencing guidelines, Sackie was facing a sentencing range of 33 to 41 months. Accordingly, Sackie was sentenced to 33 months in prison, the very bottom of her recommended sentencing range. Although her attorneys’ request for a variance of 33 months of probation was denied, Sackie benefited from cooperating, as reflected in the judge’s determination to sentence her at the bottom of the applicable range.
According to the plea agreement the government agreed to bring no additional charges against the defendant based upon her scheme to defraud her employer. Thus, instead of facing a multitude of fraud counts, Sackie only faced the maximum penalty of two fraud counts. Had Sackie not agreed to a plea agreement early on, the government would have likely convened a grand jury and charged her with a multitude of fraud counts dating as far back as 2004, which is when the government alleges Sackie’s scheme to defraud had begun. Depending on the full extent of the circumstances a defendant faces, it may be prudent to plea early, much like Sackie, and not put the government to its constitutional burden of proving a case.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
