Opposition — Freedlander v. United States

'

j | 34, Supreme Court, U.S,

| WS. FILED

No. 80-161 acT $ 1980

In the Supreme Court of the United Strtes

OCTOBER TERM, 1979

DONALD FREEDLANDER, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WADE H. MCCREE, JR.

Solicitor General

PHILIP B. HEYMANN

Assistant Attorney General

DAVID B. SMITH

Attorney

Department of Justice

Washington, D.C. 20530

(202) 633-2217

In the Supreme Court of the United States

OCTOBER TERM, 1979

No. 80-161

DONALD FREEDLANDER, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

QUESTIONS PRESENTED

1. Whether petitioner’s indictment sufficiently charged

the receipt of “kickbacks” in violation of 42 U.S.C.

1396h(b)(1).

2. Whether 42 U.S.C. 1396h(b)(1) is unconstitutionally

vague.

II

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Papachristou v. City of Jacksonville, 405 U.S.

Reet Veen eves Covi cant veers seen cues 5

United States v. Hancock, 604 F.2d 999, cert.

Ey eee 2, 3, 4, 5

United States v. Petrillo, 382 U.S. 1......... 5

United States v. Porter, 591 F.2d 1048..... 2, 3, 4, 5

United States v. Powell, 423 U.S. 87 ........ 5

United States v. Zacher, 586 F.2d 912 ....... 3

Statutes:

Oe Ow SUITES ev. dnsdics ce acnvecadces = +

42 U.S.C. (Supp. II) 1896h(b)(1)(A) .......... 4

Mich. Stat. Ann. § 14.375(22) (1976) ......... 3

Mich. Stat. Ann. § 28.199 (1962) ............. 3

Mich. Stat. Ann. § 28.772 (1972) ............. 3

Miscellaneous:

Michigan Association of Osteopathic Physi-

cians and Surgeons, Code of Ethics, Section

ERPS ee «oy Pele Sey ceng ore wee pene mn 3

S. Rep. No. 92-1230, 92d Cong., 2d Sess.

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OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-20a) is

reported at 625 F.2d 111. The opinion of the district court

is reported at 468 F. Supp. 410.

JURISDICTION

The judgment of the court of appeals was entered on

June 16, 1980. The petition for a writ of certiorari was

filed on July 19, 1980. The jurisdiction of this Court is in-

voked under 28 U.S.C. 1254(1).

STATEMENT

Petitioner pleaded guilty in the United States District

Court for the Eastern District of Michigan to five counts of

an information charging receipt of kickbacks in connection

with furnishing services to individuals for which payments

are made by Medicaid funds, in violation of 42 U.S.C.

1396h(b)(1).! Petitioner was sentenced to serve 45 days

under a work-release program and to pay a fine of $10,000

on each count. Petitioner entered his guilty plea shortly

after the trial court issued an opinion and order denying

the defendants’ motion to dismiss the indictment. United

States v. Weingarden, 468 F. Supp. 410 (E.D. Mich.

1979). The court of appeals affirmed (Pet. App. la-20a).

The allegations of the information to which petitioner

and his co-defendants pleaded guilty are quoted verbatim

in the opinion of the court of appeals. The information

charged that during August and September of 1976

petitioner “did knowingly and wilfully solicit and receive

1Petitioner’s co-defendants, Richard Tapert, Harvey Golden, Gerald

Weingarden, and Robert Gash, also pleaded guilty to receiving

kickbacks (Pet. App. 4a). All five defendants were Detroit osteopathic

physicians (id. at la).

2

kickback payments from Titan Laboratories, Inc., and

M.A. Delaney, Inc. * * * principally to induce [him] to

send his laboratory work to Titan Laboratories, Inc.” and

that the laboratory work was paid for in part with

Medicaid funds (Pet. App. 8a).

ARGUMENT

1. Petitioner contends (Pet. 4-11) that the information is

legally insufficient because the facts it alleges do not con-

stitute a violation of the “kickback” provision of the pre-

1977 version of the Medicaid statute, 42 U.S.C.

1396h(b)(1).2 This claim is incorrect.

Petitioner relies principally on United States v. Porter,

591 F.2d 1048 (5th Cir. 1979), in support of his argument

that the term “kickback” does not refer to a payment made

to a party other than the party who initially transferred

the sum to the payor, and that, since the scheme alleged in

the information involved no payments from himself to the

laboratory but only referrals of specimens, the payments

by the laboratory to him were not illegal “kickbacks.” The

Porter decision held that “[{iJn ordinary parlance, a kick-

back is the secret return to an earlier possessor of part of

a sum received.” 591 F.2d at 1054 (emphasis in original).

While Porter supports petitioner and conflicts with the

decision below and with that of the Seventh Circuit in

United States v. Hancock, 604 F.2d 999, cert. denied, 444

*Prior to its amendment in 1977, 42 U.S.C. 1396h(b)(1) provided:

(b) Whoever furnishes items or services to an individual for

which payment is or may be made in whole or in part out of Fed-

eral funds under a State plan approved under this subchapter and

who solicits, offers, or receives any—

(1) kickback or bribe in connection with the furnishing of

. Such items or services or the making or receipt of such

payment * * *

shall be guilty of a misdemeanor * * *.

3

U.S. 991 (1979), the conflict does not warrant review by

this Court.

First, the Fifth Circuit’s narrow definition of “kickback”

is plainly incorrect. As the district court’s opinion demon-

strates (468 F. Supp. at 412-414), the term “kickback,” in

both legal and lay usage, commonly refers to the receipt of

money by a person (usually an agent) who has the ability

to influence the disbursement of funds belonging to other

persons or entities (often funds belonging to the agent’s

principal, but in this case Medicaid funds belonging to the

federal government). Far from being an essential feature

of the concept, prior ownership or possession of those

funds by the recipient of the kickback is rare. Indeed,

under the Porter definition of “kickback” it is difficult to

imagine who could violate 42 U.S.C. 13896h(b)(1). Only

3Petitioner asserts (Pet. 9-10) that the court of appeals’ reliance

upon Hancock was misplaced because the kickbacks in Hancock in-

volved “corrupt payments,” whereas here there were no allegations of

“corrupt payments.” But the conduct alleged here was in fact precisely

the same as that alleged in the Hancock indictment—the receipt of

kickbacks in return for referring Medicaid or Medicare patients’ blood

to a laboratory for diagnostic testing. In both cases, the payments

were “corrupt” because they involved the “selling of what our society

deems not to be legitimately for sale” (United States v. Zacher, 586

F.2d 912, 916 (2d Cir. 1978)), and a breach of the “duty imposed by

Congress on providers of services to use federal funds only for in-

tended purposes and only in the approved manner” (/bid.). It is worth

noting in this connection that, since 1973, Michigan law has provided

that “[a] person licensed to practice medicine * * * shall not receive a

fee or other remuneration from a clinical laboratory or an intermediary

for a clinical laboratory for submitting specimens from patients to a

clinical laboratory.” Mich. Stat. Ann. § 14.375(22) (1976). Violation of

this section is a misdemeanor. Mich. Stat. Ann. § 28.199 (1962),

§ 28.772 (1972). Likewise, Section 21 of the Code of Ethics of the

Michigan Association of Osteopathic Physicians and Surgeons provides

that “[a] physician shall not pay or receive compensation for referral of

patients.” The legislative history of former 42 U.S.C. 1396h(b)(1) re-

fers to “penalties for certain practices which have long been regarded

by professional organizations as unethical, as well as unlawful in some

jurisdictions* * *.” S. Rep. No. 92-1230, 92d Cong., 2d Sess. 208

(1972).

4

government officials would have prior possession of the

Medicaid funds; but since they are not providers of ser-

vices, they could not violate the statute. It should not be

assumed that Congress passed a statute defining a crime

that no one can commit.

Second, the statutory language in question was

amended in 1977 to leave no possible doubt that the kind of

payments petitioner received are prohibited kickbacks.

Thus, the conflict with Porter is of little continuing signifi-

eance.* The 1977 clarifying amendment to 42 U.S.C.

1396h(b)(1) punishes “[w]hoever solicits or receives any

remuneration (including any kickback, bribe, or rebate)

* * *in return for referring an individual to a person for

the furnishing * * * of any * * * service [reimbursable

under Medicaid]” (emphasis added). 42 U.S.C. (Supp. II)

1396h(b)(1)(A).5

2. Petitioner also suggests (Pet. 4, 7) that the pre-1977

version of 42 U.S.C. 1396h(b)(1) is unconstitutionally

vague. His whole argument on this point consists of a quo-

tation from Porter (591 F.2d at 1054):

If the meaning of the 1972 version of 42 U.S.C.

§ 1395nn(b) [the Medicare counterpart of 42 U.S.C.

1396h(b)(1)] was not clear and precise to the Congress

and to the United States Attorneys charged with en-

forcing the law, then we are hard put to say, with

that degree of confidence required in a criminal con-

viction, that these defendants were given clear

warning by that statute that their conduct was pro-

hibited by it, thus amounting to a criminal act.

4This Court denied certiorari in Hancock in which the petitioners

alleged the very same conflict. The issue is even less worthy of review

now.

5The legislative history of the 1977 amendment makes it clear that

Congress believed that it was merely clarifying, not altering, the

original law enacted in 1972. See Pet. App. 16a-17a.

5

This argument is specious. Both courts below correctly

rejected the “inference drawn in Porter that because 42

U.S.C. § 1895nn(b) was amended in 1977 due to a Con-

gressional desire for further clarification, the statute was

insufficiently clear before amendment so as not to give

adequate due process warning that the conduct at issue

was prohibited.” 468 F. Supp. at 414-415. As this Court

has observed, the “fact that Congress might, without diffi-

culty, have chosen ‘[c]learer and more precise language’

equally capable of achieving the end which it sought does

not mean that the statute which it in fact drafted is uncon-

stitutionally vague.” United States v. Powell, 423 U.S.

87, 94 (1975), quoting United States v. Petrillo, 332 U.S.

1, 7 (1947). Because “the term kickback has a commonly

understood meaning,” the statute gave petitioner “fair

notice that [his] conduct was forbidden.” United States v.

Hancock, supra, 604 F.2d at 1002. Compare Papachristou

v. City of Jacksonville, 405 U.S. 156, 162-163 (1972).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

WADE H. MCCREE, JR.

Solicitor General

PHILIP B. HEYMANN

Assistant Attorney General

DAVID B. SMITH

Attorney

OCTOBER 1980

tw U.S. GOVERNMENT PRINTING OFFICE: 1980 329398 90