Petition — RICHARD E. E. TAPERT v. UNITED STATES (No. 80-682)

80-682

zm Sapreme Court, U.S.

zz FILED

OCT 17 1980

.. CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM 1980

——-~ ¢—_—

United States Court of Appeals

For the Sixth Circuit No. 79-5222

-—— e——_

RICHARD E. TAPERT, D.O.,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

—e——_

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

ee

MICHAEL H. GOLOB

Attorney for Petitioner

1930 Buhl Building

Detroit, Michigan 48226

(313) 964-5070

Interstate Brief & Record Co., Wurlitzer Bldg., 1509 Broadway, Detroit, Mi 48226

962-8745 962-8746

7y

QUESTION PRESENTED FOR REVIEW

Whether 42 United States Code 1396h prior to its

amendment in 1977 proscribed payments received by

physicians in return for referring their laboratory work

to a specific laboratory where all payments received by

the laboratory from the Government under the

Medicaid Program were properly billed for and

obtained?

7%

iii

TABLE OF CONTENTS >

Page

Question Presented for Review ...............05. i

I. 50 oo bp is v6 b tive ada'g ec ceanls de iv

ea ck edna Sakae ps enelemaers 2

Nes wae abies X 0.5/0 6 VE bes an eabs 2

CLA 2 as yh. c's'y isd 48 biale 0 6'uwie nb ork 2

PN 502 sus Vereessuseveyeseseyy 2

EE aS aes vi b's vce eetaesaceeeevee 4

Reason for Allowance of Writ ...............0.06. 6

Argument

The Court of Appeals erroneously decided

an important question of Federal law in

construing 42 United States Code 1396h in

conflict with a decision of the United States

Court of Appeals for the Fifth Circuit which

now requires this Honorable Court to

resolve the conflict which has arisen in the

Circuit Courts of Appeal on this important

question of Federal statutory construction .. 6

ra Elia ioe 8

Appendi, “A” — Judgment and Commitment of

the United States District Court ............... la

Appendix ‘“B’ — Opinion of the United States

Court of Appeals for the Sixth Circuit .......... 3a

PRECEDING PAGE WAS BLANK

iv

Page

Appendix “C’’ — Order of the United States Court

of Appeals for the Sixth Circuit Denying Petition

for Rehearing En Banc and Rehearing .......... 27a

Appendix “D” — 42 United States Code 1396h . 28a

TABLE OF AUTHORITIES

Cases:

United States v. Porter, 591 F2d 1048 (5th Cir.

see RL CER ERE ER er ey 3,6,7

United States v. Weingarden, 468 F. Supp. 410

Cees ME STOR: Seba nbd boas pew eC eee huRs 3

Stautes:

42 United States Code 1396h ............... 2,5,6

42 United States Code 1396h(1) (1972) ........ 3,5

No. ——

IN THE

Supreme Court of the United States

OCTOBER TERM 1980

United States Court of Appeals

For the Sixth Circuit No. 79-5222

—_e——_

RICHARD E. TAPERT, D.O.,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

——_e——_

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

The Petitioner, Richard E. Tapert, D.O., by his

attorney, Michael H. Golob, respectfully prays that a

- Writ of Certiorari issue to review the Judgment

heretofore entered against him by the United States

Court of Appeals for the Sixth Circuit on June 16, 1980

and the Order Denying the Petition for Rehearing En

Banc and Rehearing entered on August 19, 1980.

OPINIONS BELOW

The Judgment and Commitment of the United States

District Court for the Eastern District of Michigan,

Southern Division, is unreported, but is set forth in

Appendix A herein.

The Opinion of the United States Court of Appeals

for the Sixth Circuit is reported at 625 F2d 111 (6th Cir.

1980), and is set forth as Appendix B herein.

The Order of the United States Court of Appeals for

the Sixth Circuit denying the Petition for Rehearing En

Banc and Rehearing is unreported, but is set forth in

Appendix C herein.

JURISDICTION

The Judgment of the United States Court of Appeals

for the Sixth Circuit was entered on June 16, 1980;

Petition for Rehearing En Banc and Rehearing was

timely filed and was denied on August 19, 1980. The

jurisdiction of the Court is invoked under Title 28,

United States Code 1254(1).

STATUTE INVOLVED

42 United States Code 1396h.

SUMMARY OF THE CASE

Petitioner, Richard E. Tapert, D.O., a licensed

physician, was indicted on September 21, 1978 along

with four (4) other physicians and seven (7) other

defendants. On February 2, 1979, a follow-up

3

Information was filed charging Doctor Tapert with

violations of 42 United States Code 1396h(b)(1) (1972),

for the receipt of kickback payments in return for

sending his laboratory work to Titan Laboratory.

On March 16, 1979, the United States District Court

Judge denied the Movion to Dismiss all of the charges.

On March 21, 1979, the United States Court of Appeals

for the Fifth Circuit issued its Opinion in United States

v. Porter, 591 F2d 1048 (5th. Cir. 1979) which directly

pertained to the instant cause. The defendants orally

moved the Court for rehearing which prompted the

Trial Court to issue a written opinion denying the

defendants’ Motion for Rehearing which has been

published as United States v. Weingarden, 468 F. Supp.

410 (E.D. Mich. 1979).

On April 10, 1979, Doctor Tapert entered a plea of

guilty to the Counts of the Amended follow-up

Information pertaining to him. A timely motion in

arrest of Judgment was filed and denied by the Trial

Court.

On June 8, 1979, the Judgment and Commitment of

the Trial Court, reproduced as Appendix A herein,

entered a total fine of $25,000.00 and provided that

Doctor Tapert should serve twenty (20) days under a

work release program.

A timely Notice of Appeal was filed with the Sixth

Circuit and the Sixth Circuit issued an opinion

affirming the conviction on June 16, 1980, said opinion

being reproduced in Appendix B herein. Pursuant to a

timely Motion for Rehearing and Rehearing En Banc,

the Sixth Circuit denied said petitions on August 19,

1980, with said Order Denying Rehearing En Banc and

Rehearing being reproduced in Appendix C herein.

STATEMENT OF THE CASE

The Amended follow-up Information against Doctor

Tapert alleged that he had received monetary payments

from a medical laboratory in exchange for referring his

laboratory work to the laboratory. The Amended

follow-up Information further provided that the claims

filed by the laboratory were in accordance with

Medicaid statutes and regulations and therefore, the

moneys received by the laboratory were those to which

the laboratory was lawfully entitled. In its entirety, the

Amended follow-up Information against Doctor Tapert

is being reproduced herein as follows:

“ ‘Counts Twenty-Seven Through Thirty-Five

“‘On or about the dates listed below, in the

Eastern District of Michigan, Richard Tapert,

D.O., having obtained services from Titan

Laboratories, Inc., for which payment was to be

made in part of the federal funds under a state

plan approved under Title XIX of the Social

Security Act, did knowingly and wilfully [sic]

solicit and receive kickback payments from Titan

Laboratories, Inc., and Associates Physicians

Services Co., as detailed below in connection

with the furnishing of the aforesaid services,

each payment being a separate count of this

indictment.

‘To wit, Richard Tapert, D.O., received

monetary payments from an entity related to

Titan Laboratories, Inc., namely Associated

Physicians Services Company, in exchange for

referring his laboratory work to Titan

5

Laboratories, Inc. The claims filed by Titan

Laboratories, Inc., were in accordance with

Medicaid statutes and regulations and the

monies received by Titan Labvoratories, Inc., was

entitled. That is, when Titan Laboratories, was

asked for payment for specific blood work was

in accordance with Medicaid statutes and

regulations.

Approximate Date Amount of Source of

“ ‘Count of Payment Money Payment

27 June 24, 1975 $200 Associated Physicians Services, Co.

28 August 12, 1975 $200 Associated Physicians Services, Co.

2 September 19, 1975 $500 Associated Physicians Services, Co.

w» October 17, 1975 $200 Associated Physicians Services, Co.

31 December 10, 1975 $200 Associated Physicians Services, Co.

32 February 17, 1976 $400 Associated Physicians Services, Co.

33 May 26, 1976 $400 Associated Physicians Services, Co.

M“ June 30, 1976 $200 Associated Physicians Services, Co.

35 July 26, 1976 $400 Associated Physicians Services, Co.

“ “All in violation of Title 42, U.S.C., Section

1396h(b)(1).’

(Amended Follow Up Information, pages 4-5;

App. 419)’

On April 10, 1979, Doctor Tapert pled guilty to five

counts of the Amended follow-up Information.

Following the Trial Court’s denial of his timely Motion

for Arrest of Judgment, Doctor Tapert filed a timely

Claim of Appeal in the United States Court of Appeals

for the Sixth Circuit on the issue as to whether the

Amended follow-up Information charged an offense

pursuant to 42 United States Code 1396h. Contrary to

the decision of the United States Court of Appeals for

the Fifth Circuit in United States v. Porter, 591 F.2d 1048

6

(5th Cir. 1979), the Sixth Circuit rejected Doctor Tapert’s

argument that the Amended follow-up Information did

not charge an offense.

The Sixth Circuit further specifically declined to

follow the decision of the Fifth Circuit in the Porter

matter, thus expressly creating a conflict among the

various Courts of Appeal. In other words, both the

Sixth Circuit and the Government would concede that if

the law of the Fifth Circuit in Porter were applied in the

Sixth Circuit, Doctor Tapert would be guilty of no

federal criminal offense.

REASON FOR ALLOWANCE OF THE WRIT

ARGUMENT

I.

THE COURT OF APPEALS ERRONEOUSLY DECIDED AN

IMPORTANT QUESTION OF FEDERAL LAW IN CON-

STRUING 42 UNITED STATES CODE 1396h IN CONFLICT

WITH A DECISION OF THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT WHICH NOW RE-

QUIRES THIS HONORABLE COURT TO RESOLVE THE

CONFLICT WHICH HAS ARISEN IN THE CIRCUIT

COURTS OF APPEAL ON THIS IMPORTANT QUESTION

OF FEDERAL STATUTORY CONSTRUCTION

Tae Court of Appeals for the Sixth Circuit, in

construing 42 United States Code 1396h, has rendered a

decision in conflict with a decision of the United States

Court of Appeals for the Fifth Circuit on an important

matter of Federal statutory construction.

In essence, the United States Court of Appeals for the

Fifth Circuit in United States v. Porter, supra, has

narrowly construed the term “bribe or kickback” which

is a necessary element under 42 United States Code

.

7

1396h. In Porter, supra, the Fifth Circuit reasoned that

because the statute was materially amended in 1977

because of difficulty in application, it would not be

constitutionally permissible to safely apply the prior

statute, at issue in the present case, to conduct

occurring prior to the amendment of the statute.

“... If the meaning of the 1972 version of 42

U.S.C. § 1395nn(b) was not clear and precise to

the Congress and to United States Attorneys

charged with enforcing the law, then we are

hard put to say, with that degree of confidence

required in a criminal conviction, that these

defendants were given clear warning by that

_ statute that their conduct was prohibited by it,

thus amounting to a criminal act.”” United States

v. Porter, supra, at 1054.

In its Opinion, the Sixth Circuit expressly rejected the

Porter decision, thus creating a conflict among the

Circuits on an important matter of Federal statutory

construction. The Sixth Circuit has opted for a much

broader definition of the terms of our “bribe, kickback

or rebate” found in the statute, in opposition to all

existing Federal law which mandates narrow

constructions of penal statutes.

Given this conflict in the Circuits on this important

issue of Federal statutory construction, it is respectfully

urged that this most Honorable Court grant this

Petition for a Writ of Certiorari to resolve this important

question. The issue of whether a physician has

committed a criminal act by referring blood analysis

work to a specific laboratory sliould not depend upon

whether the physician lives in the midwest as

contrasted to the southeastern portion of the United

States.

7y

CONCLUSION

For the foregoing reasons, Petitioner, Richard E.

Tapert, D.O., respectfully urges that this Petition for

Writ of Certiorari be granted to resolve the conflict

which has arisen among the Circuits.

Respectfully submitted,

MICHAEL H. GOLOB (P-23118)

Attorney for Petitioner

1930 Buhl Building

Detroit, Michigan 48226

(313) 964-5070

Dated: October 6, 1980

Judgment and Commitment Order la

APPENDIX “A”

JUDGMENT AND COMMITMENT ORDER

(United States District Court

Eastern District of Michigan)

United States of America vs.

DEFENDANT: RICHARD TAPERT, D.O. Docket No.

79-8009 1-04

In the presence of the attorney for the government the

defendant appeared in person on this date: 6-08-79

COUNSEL: XX WITH COUNSEL Michael Golob

PLEA: XX GUILTY, and the court being satisfied that

there is a factual basis for the plea,

FINDING & JUDGMENT: Defendant has been convicted

as charged of the offense(s) of Counts 27 thru 31,

Medicaid Kickbacks, in violation of Title 42, Section

1396 (h) (b) (1), U. S. Code.

The court asked whether defendant had anything to say

why judgment should not be pronounced. Because no

sufficient cause to the contrary was shown, or appeared

to the court, the court adjudged the defendant guilty as

charged and convicted and ordered that: The defendant

is hereby committed to the custody of the Attorney

General or his authorized representative fe.

imprisonment for a period of twenty (20) days under a

work release program.

SENTENCE OR PROBATION ORDER: IT IS ORDERED

that defendant pay a FINE in the amount of five

thousand dollars ($5,000.00) on each of 5 Counts for a

total of twenty-five thousand dollars ($25,000.00)

2a Judgment and Commitment Order

SPECIAL CONDITIONS OF PROBATION, IT IS

ORDERED that Counts 32, 33, 34 & 35 of the

Information be DISMISSED.

IT IS FURTHER ORDERED that defendant’s bond be

continued pending appeal.

ADDITIONAL CONDITIONS OF PROBATION, In

addition to the special conditions of probation imposed

above, it is hereby ordered that the general conditions

of probation set out on the reverse side of this

judgment be imposed. The Court may change the

conditions of probation, reduce or extend the period of

probation, and at any time during the probation period

or within a maximum probation period of five years

permitted: by law, may issue a warrant and revoke

probation for a violation occurring during the probation

period. |

COMMITMENT RECOMMENDATION: The court

orders commitment to the custody of the Attorney

General and recommends,

Is! Cornelia G. Kennedy

Date 6/11/79

Opinion 3a

APPENDIX “B”

OPINION

Nos. 79-5222-24, 79-5269-70

(United States Court of Appeals

For the Sixth Circuit)

Decided and Filed June 16, 1980

United States of America, Plaintiff-Appellee, v.

Richard Tapert, Harvey Golden, Gerald Weingarden,

Donald Freedlander and Robert Gash, Defendants-

Appellants.

Appeal from the United States District Court for the

Eastern District of Michigan.

Before: Weick and Jones, Circuit Judges, and Phillips,

Senior Circuit Judge.

Phillips, Senior Circuit Judge, delivered the opinion

of the Court, in which Wei:k, Circuit Judge, joined.

Jones, (pp. 18-20) filed a separate concurring opinion.

Phillips, Senior Circuit Judge. These are consolidated

appeals by five Detroit osteopathic physicians who

were convicted of receiving kickbacks for sending urine

and blood samples of their patients to Titan

Laboratories (Titan) for analysis. All five of the

physicians were enrolled in the Medicare and Medicaid

programs and the charges for the laboratory analysis

were paid to Titan out of Medicare and Medicaid funds.

The district court held that the payments violated the

original version of 42 U.S.C. § 1936h(b),’ which was in

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

for which payment is or may be made in whole or in part

out of Federal funds under a State plan approved under this

(cont'd. on following page)

4a Opinion

effect during the years involved in this case. In 1977

Congress amended the statute so as to remove any

possible doubt that conduct such as that involved in the

present case violates the Act.?

(cont'd. from preceding page)

title [42 USCS §§ 1396-1396d, 1396f-1396i] 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, or

(2) rebate of any fee or charge for referring any such

individual to another person for the furnishing of

such items or services

shall be guilty of a misdemeanor and upon conviction

thereof shall be fined not more than $10,000 or imprisoned

for not more than one year, or both.

2 The amended § 1396h(b)(1) is as follows:

(6X1) Whoever solicits or receives any remuneration

(including any kickback, bribe, or rebate) directly or

indirectly, overtly or covertly, in cash or in kind —

(A) in return for referring an individual to a

person for the furnishing or arranging for the

furnishing of any item or service for which payment

may be made in whole or in part under this

subchapter, or

(B) in return for purchasing, leasing, ordering, or

arranging for or recommending purchasing, leasing,

or ordering any good, facility, service, or itern for

which payment may be made in whole or in part

under this subchapter.

shall be guilty of a felony and upon conviction thereof, shall

be fined not more than $25,000 or imprisoned for not more

than five years, or both.

(2) Whoever offers or pays any remuneration (including

any kickback, bribe, or rebate) directly or indirectly, overtly

or covertly, in cash or in kind to any person to induce such

person —

(A) to refer an individual to a person for the

furnishing or arranging for the furnishing of any item

or service for which payment may be made in whole

or in part under this subchapter, or

(B) to purchase, lease, order, or arrange for or

recommend purchasing, leasing, or ordering any

good, facility, service, or item for which payment may

be made in whole or in part under this subchapter,

shall be guilty of a felony and upon conviction thereof, shall

be fined not more than $25,000 or imprisoned for not more

than five years, or both. (cont’d. on following page)

S|

Opinion 5a

The principal issues on this appeal are whether the.

information under which appellants were convicted

charges a violation of the pre-1977 version of 42 U.S.C.

§ 1396h(b)(1) (mote one), and whether the statute is

unconstitutional for vagueness. Then Chief District

Judge Cormelia Kennedy, now a judge of this court,

ruled that the payments to the doctors were kickbacks,

that the information charges a violation of the statute

and that the statute is not invalid for vagueness. We

affirm.

I

Apparently Titan initiated the arrangement for the

kickbacks, by having its representative contact one of

the physicians.’ In return for payments from Titan or

one of its affiliates, the physician agreed to send his

patients’ specimens to Titan and to encourage his

colleagues to do the same. Other physicians entered

into similar agreements, which Titan described as

“consulting’’ arrangements. This pattern of activity

began in April 1974 and continued until January 1978.

(cont'd. from preceding page)

(3) Paragraphs (1) and (2) shall not apply to —

(A) a discount or other reduction in price obtained

by a provider of services or other entity under this

subchapter if the reduction in price is properly

disclosed and appropriately reflected in the costs

claimed or charges made by the provider or entity

under this subchapter; and

(B) any amount paid by an employer to an

employee (who has a bona fide employment

relationship with such employer) for employment in

the provision of covered items or services.

¥ See United States v. Shermetaro, — F.2d — (No. 79-5148, 6th

Cir, 1980), in which this court affirmed the conviction of one of the

parties to this scheme under 18 U.S.C. § 371 for conspiracy to

defraud the United States by obstructing the collection of income

taxes from Titan Laboratories.

6a Opinion

Beginning in 1976, the physicians began depositing

their Titan checks in an escrow fund for the purpose of

acquiring an interest in Titan. The fund was

administered by J.K.F. Inc., a corporation set up by the

physicians to hold the Titan stock they proposed to

buy. When the escrow fund reached $60,000, the

physicians contributed an additional $15,000 and J.K.F.

Inc. acquired a 40 percent interest in Titan.

On September 21, 1978, a federal grand jury returned

a 37 count indictment against appellants, five other

individuals and three Michigan corporations. On

February 2, 1979, the Government filed a 42 count

follow-up information charging appellants with

soliciting and receiving Medicare and Medicaid

kickbacks from Titan and associated entities. The

information thereafter was amended. The version under

which appellants were convicted is referrec to in the

record as the Amended Follow-Up Information.

Judge Kennedy denied the motions of appellants 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 of 42 U.S.C. § 1396h(b)(1)

prohibited the conduct charged in the information, and

that the challenged statute was sufficiently clear to give

to appellants adequate notice that their alleged conduct

was illegal.

Thereafter, under a plea bargaining agreement, each

of the appellants entered a plea of guilty to certain

counts of the information applicable to him. The

Government approved dismissal of the indictment.

Opinion 7a

II

Prior to their guilty pleas, the appellants gave notice

that they intended to appeal the ruling of the district

court on the applicability of § 1396h(b)(1). To preserve

the issue for appeal they moved for arrest of judgment

- under Fed. R. Crim. P. 34 on the ground that the

statute did not apply to their conduct and the district

court, therefore, had no jurisdiction to accept their

guilty pleas. This is the procedure approved by this

court in United States v. Heller, 579 F.2d 990, 992-93, and

n. 1 (6th Cir. 1978). See also North Carolina v. Alford, 400

U.S. 25, 37-38 (1970): United States v. Cox, 464 F.2d 927,

941 (6th Cir. 1972). The Government concedes that the

alleged defects raised by appellants are jurisdictional

and not waived by their guilty pleas. Consequently the

legal issue is properly before this court.

Il

Dr. Gerald Weingarden entered a plea of guilty to

Counts three through seven of the amended follow-up

information, which are as follows:

On or about the dates listed below, in the

Eastern District of Michigan, Gerald

Weingarden, D.O., having obtained services

from Titan Laboratories, Inc., for which payment

was to be made in part out of federal funds

under a state plan approved under Title XIX of

the Social Security Act, did knowingly and

willfully solicit and receive kickback payments

from Titan Laboratories, Inc., Spartan

Laboratories, Inc., and M.A. Delaney, Inc., as

detailed below in connection with the furnishing

of the aforesaid services, each payment being a

separate count of this indictment.

8a

Opinion

To wit, the Government contends Gerald

Weingarden, received monetary payments

labelled “consulting fees” from an entity related

to Titan Laboratories, Inc., namely Spartan

Laboratories, Inc., principally to induce the

defendant to send his laboratory work to Titan.

In addition, it was agreed that the defendant

would perform the following services: (1) to form

and assist in the formation of J.K.F., Inc., as

described in indictment Number 78-80689, and

(2) to encourage other doctors to send their

laboratory work to Titan, as described in

Indictment Number 78-80689.

Gerald Weingarden visited Titan Laboratories,

Inc., from time to time, in connection with the

performance of the above-described services.

The claims filed by Titan Laboratories, Inc.,

were in accordance with the Medicaid statutes

and regulations, and the monies received by

Titan Laboratories, Inc., were those to which

Titan Laboratories, Inc., was entitled. That is,

when Titan Laboratories, Inc., was asking for

payment for specific blood work, that blood

work had been done, and that the billing for that

blood work was in accordance with medicaid

statutes and regulations.

Approximate Date Amount of Source of

Count of Payment Money Payment

3 October 27, 1976 $1,000 Spartan Laboratories, Inc.

4 November 22, 1976 $1,000 Spartan Laboratories, Inc.

5 December 28, 1976 $1,000 Spartan Laboratories, Inc.

6 March 1, 1977 $1,000 Spartan Laboratories, Inc.

7

March 1, 1977 $1,000 Spartan Laboratories, Inc.

7?

Opinion 9a

All in violation of Title 42, U.S.C., Section

1396h(b)(1).

At his Rule 11 sentencing hearing, Dr. Weingarden

admitted that he had committed the acts charged in the

information.

Dr. Harvey Golden entered a plea of guilty to counts

11 through 15 of the Information, which charged as

follows:

On or about the dates listed below, in the

Eastern District of Michigan, Harvey Golden,

D.O., having obtained services from Titan

Laboratories, Inc., for which payment was to be

made in part out of federal funds under a state

plan approved under Title XIX of the Social

Security Act, did knowingly and willfully solicit

and receive kickback payments from Titan

Laboratories, Inc., and Media Technology, Inc.,

as detailed below in connection with the

furnishing of the aforesaid services, each

payment being a separate count of this

indictment.

To wit, Harvey O. Golden D.O., received

monetary payments from Titan Laboratories,

Inc., in exchange for referring his laboratory

work to Titan Laboratories, Inc. The claims filed

by Titan Laboratories, Inc., were in accordance

with the Medicaid statutes and regulations, and

the monies received by Titan Laboratories, Inc.,

were those to which Titan Laboratories, Inc.,

were entitled. That is, when Titan Laboratories,

Inc., was asking for payment for specific blood

work, the blood work had been done, and that

10a

Opinion

the billing for that blood work was in accordance

with Medicaid statutes and regulations.

Approximate Date Amount of Source of

Count of Payment Money Payment

11 May 27, 1974 $850 Titan Laboratories, Inc.

12 August 8, 1974 $900 Media Technology, Inc.

13 September 3, 1974 $1,500 Titan Laboratories, Inc.

14 October 24, 1974 $1,000 Titan Laboratories, Inc.

15 December 6, 1974 $1,500 Titan Laboratories, Inc.

All in violation of Title 42, U.S.C., Section

1396h(b)(1).

At his Rule 11 sentencing hearing, Dr. Golden

testified as follows:

The Court: Knowing those things, how do

you wish to plead at this time to Counts 11, 12,

13, 14, 15?

Defendant Golden: Guilty, your Honor.

The Court: Will you tell me in your own

words what it is that you did do that causes you

to plead guilty?

Defendant Golden: Part of my motives I

stated, perhaps an equal amount of my motives

were for the inducement of monetary gain.

The Court: In other words, to receive

payment from Titan for sending work to Titan?

Defendant Golden: Yes.

The Court: And some of that work at least

was Medicare and Medicaid work?

Defendant Golden: Yes, your Honor.

The Court: Would that be true for all of the

periods involved here, May 27, 1974, through

December 6, 1974?

Defendant Golden: Yes, your Honor.

Opinion lla

Dr. Donald Freedlander entered a plea of guilty to

counts 17 through 21 of the Information, which charged

as follows: ;

On or about the dates listed below, in the

Eastern District of Michigan, Donald

Freedlander, D.O., having obtained services

from Titan Laboratories, Inc., for which payment

was to be made in part out of federal funds

under a state plan approved under Title XIX of

the Social Security Act, did knowingly and

wilfully [sic] solicit and receive kickback

payments from Titan Laboratories, Inc., and

M.A. Delaney, Inc., as detailed below in

connection with the furnishing of the aforesaid

services, each payment being a separate count of

this indictment.

To wit, the Government contends Donald

Freedlander, D.O., received monetary payments

from an entity related to Titan Laboratories, Inc.,

namely M.A. Delaney, Inc., principally to induce

Donald Freedlander, D.O., to send his laboratory

work to Titan Laboratories, Inc. In addition, it

was agreed that Donald Freedlander would

perform the following services:

(1) to form and assist in the formation of J.K.F.,

Inc., as described in Indictment Number

78-80689, and (2) to encourage other doctors to

send their laboratory work to Titan Laboratories,

Inc., as described in Indictment Number

78-80689.

The claims filed by Titan Laboratories, Inc., were

in accordance with the Medicaid statutes and

12a Opinion

regulations, and the monies receivea by Titan

Laboratories, Inc., were those to which Titan

Laboratories, Inc., were entitled.

That is, when Titan Laboratories, Inc., was

asking for payment for specific blood work, that

blood work had been done, and that the billing

for that blood work was in accordance with

Medicaid statutes and regulations.

Approximate Date Amount of Source of

Count of Payment Payment

M.A. Delaney, Inc.

M.A. Delaney, Inc.

M.A. Delaney, Inc.

M.A. Delaney, Inc.

M.A. Delaney, Inc.

17 August 23, 1976

18 August 23, 1976

19 September 7, 1976

2 —- September 10, 1976

21 September 15, 1976

eeege F

All in violation of Title 42, U.S.C., Section

1396h(b)(1).

At his Rule 11 sentencing hearing, Dr. Freedlander

testified as follows:

The Court: Will you tell me what it was that

you did on or about the dates mentioned that

causes you to plead guilty? What did you do on

or about August 23rd, 1976, with regard to these

checks apparently from M.A. Delaney, Inc.?

Defendant Freedlander: These checks were

received by me, yes, your Honor, they were

received by me.

The Court: You received the checks described

in Counts 17, 18, 19, 20, 21?

Defendant Freedlander: Yes, I did, your

Honor.

The Court: From M.A. Delaney?

7.

Opinion 13a

Defendant Freedlander: Yes, I did.

The Court: And did you have some

relationship at least with Titan Laboratories as

stated in the information?

Defendant Freedlander: Yes, I did, your

Honor.

The Court: And did that include some kind

of business involving Medicare and Medicaid?

Defendant Freedlander: Right.

The Court: In other words, this was business

with Titan Laboratories that included some

business relating to Medicare and Medicaid

samples?

Defendant Freedlander: Yes, your Honor.

The Court: Did you receive these payments

for sending work to Titan Laboratories?

Defendant Freedlander: Yes, I did, your

Honor.

The Court: Did you perform any services for

these companies, M.A. Delaney and Titan Lab?

Defendant Freedlander: Yes, I did, your

Honor, I helped with the formation and was of

assistance to the J.K.F. Corporation.

* ¢ *

The Court: You have said something about,

among other things, and that was kind of

confusing to me, except for setting up J.K.F.

Corporation, did you provide any other services

to Titan Laboratories?

Defendant Freedlander: Yes, among other

things, I encouraged other physicians to send

their work to the laboratory.

The Court: In other words, there may not be

a factual basis for this plea other than the

*%

14a

Opinion

statement that you in fact performed services

besides sending business to Titan Lab?

Mr. Fink: I think under the general intent

statute, I don’t think there has to be a dominant

purpose, your Honor. He has indicated that that

was one vf the things he received consideration

for.

The Court: As long as it is clear, and I am

not so sure it is clear from the statement, was

one of the reasons that you received these

payments from Titan Lab, or from M.A.

Delaney, Inc., because you were sending your

lab business to Titan Laboratories, was that one

of the reasons?

Defendant Freedlander: In the total, yes, it

was. It was part of it. It was one of the reasons.

** *

The Court: In view of the fact it uses the

word wilfully [sic] and that there were other

considerations, I think we should at least really

know what he does wish to plead guilty. I have

a little problem with the factual basis under his

statement. Maybe I can ask him this question.

Was the referral of business to Titan

Laboratories a substantial or significant reason?

Dr. Freedlander: They were among the

reasons, you know, a combination as to the rest

of it, why, I received the compensation, yes,

your Honor.

The Court: I am still trying to find out if it

was significant at all or was it just minor?

Defendant Freedlander: Well, when I say

significant, your Honor, there are several

components involved. Is this more strongly that

Opinion 15a

this one or that one, as the case may be, as ! say,

I did give my blood work to the laboratory, I did

help assist them, I did help in getting other

doctors referred to them, and with the

combination of everything I don’t know where

to put the weight on each one as to

compensation, but all were done by me, that is

true, and I did receive the compensation.

Mr. Fink: Your Honor, the 1952 cases that

you are familiar with, the Interstate travel in aid

of racketeering cases, which are specific intent

crimes, which I don’t think this is, do not

require the dominant purpose to be the travel, it

can be a co-equal purpose.

The Court: Is he going to say it was co-equal

with the other things?

Defendant Freedlander: With the other

things, yes.

*, *

The Court: As long as we get something that

was co-equal with other services of recruiting

doctors and helping to form this other

corporation, the three of them would be

co-equal?

Defendant Freedlander: Yes, your Honor.

The Court: I think that that is sufficient for

that.

**. ©

The Court: I think I should ascertain that.

Did you, in fact, submit blood samples to Titan

Laboratories?

Defendant Freedlander: That I did, your

Honor.

l6a

Opinion

The Court: And they were from Medicare

and Medicaid patients?

Defendant Freedlander: Yes, they were.

Mr. Rosen: That's sufficient.

The Court: I think I asked that but maybe

not so directly.

Mr. Rosen: I have nothing further.

The Court: And that was during the time

period of these checks that were received from .

M.A. Delaney?

Defendant Freedlander: Yes, they were, your

Honor.

The Court: And the payments from M.A.

Delaney were for the three purposes: One

because you sent your lab work to Titan; two,

because they indicated tests; and, three, you

were supplying other doctors to send their work

to J.F.K. and/or others?

Defendant Freedlander: Yes, your Honor.

The Court: And you did what you did

knowingly?

Defendant Freedlander: Yes, I did, your

Honor.

The Court: Having discussed these matters

this afternoon, do you still wish to plead guilty

to Counts 17, 18, 19, 20 and 21?

Defendant Freedlander: Yes, I do.

Dr. Richard Tapert entered a plea of guilty to counts

27 through 31 of the Information, which charged as

follows:

On or about the dates listed below, in the

Eastern District of Michigan, Richard Tapert,

D.O., having obtained services from Titan

Laboratories, Inc., for which payment was to be

made in part out of federal funds under a state

plan approved under Title XIX of the Social

Security Act, did knowingly and wilfully [sic]

solicit and receive kickback payments from Titan

Laboratories, Inc., and Associated Physicians

Opinion 17a

Services Co., as detailed below in connection

with the furnishing of the aforesaid services,

each payment being a separate count of this

indictment.

To wit, Richard Tapert, D.O., received

monetary payments from an entity related to

Titan Laboratories, Inc., namely Associated

Physicians Services Company, in exchange for

referring his laboratory work to Titan

Laboratories, Inc. The claims filed by Titan

Laboratories, Inc., were in accordance with the

Medicaid statutes and regulations and the

monies received by Titan Laboratories, Inc.,

were those to which Titan Laboratories, Inc.,

was entitled. That is, when Titan Laboratories,

was asking for payment for specific blood work

was in accordance with Medicaid statutes and

regulations.

Approximate Date Amount of Source of

Count of Payment Money Payment

27 June 24, 1975 $200 Associated Physicians

Services, Co.

28 August 12, 1975 $200 Associated Physicians

: Services, Co

29 September 9, 1975 $500 Associated Physicians

Services, Co.

»” October 17, 1975 $200 Associated Physicians

Services, Co.

31 December 10, 1975 $200 Associated Physicians

Services, Co.

All in violation of Title 42, U.S.C., Section

1396h(b)(1).

At his Rule 11 sentencing hearing, Dr. Tapert testified

as follows:

The Court: How do you plead to counts 27

through 31?

18a

Opinion

The Defendant: I plead guilty.

The Court: Will you tell me what it was that

you did do that causes you to plead guilty to

those counts?

The Defendant: I accepted monetary

payments from Associated Physicians Service

Company in exchange for referring my

laboratory work to Titan Laboratory.

The Court: And did you do that knowingly?

The Defendant: Yes, I did.

The Court: Are there any other questions the

Government would like me to ask?

Mr. Rosen: Maybe your Honor could inquire

as to the taking of blood samples from

Medicare-Medicaid patients.

The Court: Yes, during this period of time

that these payments were made, was some of the

work that you were referring to Titan Laboratory

or Associated Physicians Medicare and Medicaid

work?

The Defendant: Yes.

The Court: For Medicare and Medicaid

patients?

The Defendant: That is correct.

The Court: And would that be true during

the period of each of these payments?

The Defendant: Yes.

The Court: Any other questions, Mr. Rosen?

Mr. Rosen: No, your Honor.

The Court: Have you had plenty of time to

discuss this matter with your attorney?

The Defendant: Yes, I have.

The Court: And he has explained to you

what it is the Government has to prove to prove

you guilty?

Opinion 19a

The Defendant: Yes.

The Court: And you understand also that this

is a final disposition insofar as this Court is

concerned, that this plea of guilty, if the Court

accepts it, it will not set aside the plea of guilty

should an appeal be unsuccessful on the legal

issues, do you understand?

The Defendant: I understand.

The Court: Having discussed these matters

this afternoon, do you still wish to plead guilty

to these counts?

The Defendant: Yes, I do.

Dr. Robert Gash entered a plea of guilty to count 36

of the Information, which charged as follows:

On or about the dates listed below, in the

Eastern District of Michigan, Robert Gash, D.O.,

having obtained’ services from Titan

Laboratories, Inc., for which payment was to be

made in part out of federal funds under a state

plan approved under Title XIX of the Social

Security Act, did knowingly and wilfully [sic ]

solicit and receive kickback payments from Titan

Laboratories, Inc., and Associated Physicians

Services, Co., as detailed below in connection

with the furnishing of the aforesaid services,

each payment being a separate count of this

indictment.

To wit, Robert Gash, D.O., received monetary

payments from an entity related to Titan

Laboratories, Inc., namely Associated Physicians

Services Company, in exchange for referring his

laboratory work to Titan Laboratories, Inc. The

claims filed by Titan were in accordance with the

20a Opinion

Medicaid statutes and regulations and the

monies received by Titan Laboratories, Inc., was

entitled. That is, when Titan Laboratories, Inc.,

was asking for payment for specific blood work

was in accordance with Medicaid statutes and

regulations.

Approximate Date . Amount of Source of

Count of Payment Money Payment

3% August 11, 1975 $200 Associated Physicians

Services, Co.

All in violation of Title 42, U.S.C., Section

1396h(b)(1).

In his Rule II sentencing hearing, Dr. Gash testified

as follows:

The Court: Will you tell me what you did on

or about August 11, 1975 that causes you to

plead guilty?

Defendant Gash: On or about August 11,

1975, I received a check for $200.00 from

Associated Physicians Services, Inc., for

submission of lab work to Titan Laboratories.

The Court: To Titan Laboratories?

Defendant Gash: Yes.

The Court: And was some of that lab work

at least lab work under both Medicare and

Medicaid?

Defendant Gash: I would have to assume so.

I really don’t know that, your Honor.

The Court: But ordinarily there would be

some within the work that you would submit

within a month?

Defendant Gash: I would say so, yes.

The Court: Does the Government have some

evidence that some of this was?

Opinion 21a

Mr. Rosen: Yes, it does, your Honor.

The Court: Are there any other questions you

would like to ask?

Mr. Rosen: No, your Honor.

The Court: Having discussed this matter this

afternoon, do you still wish to plead quilty to

Count 36?

Defendant Gash: Yes, your Honor.

IV

In asserting that the statute was not sufficiently broad

prior to the 1977 amendment to make their activities a

criminal offense, and that the statute under which they

were convicted is invalid for vagueness, appellants rely

strongly upon the fact that Congress found it necessary

to enact the 1977 amendment.

An amendment to an existing statute is not an

acknowledgment by Congress that the original statute is

invalid. It is a common and customary legislative

procedure to enact amendments strengthening and

clarifying existing laws.

The report of the House Committee on Ways and

Means contains the following statement on the purpose

of the 1977 amendment:

Your committee bill would modify the penalty

provisions in existing law which relate to those

persons providing services under medicare and

medicaid.

Existing law provides specific penalties under

the medicare and medicaid programs for certain

practices that long have been regarded by

professional organizations as unethical, which

Opinion

are unlawful in some jurisdictions, and which

contribute significantly to cost of the programs.

Such practices as the submission of false claims,

or the soliciting, offering, or acceptance of

kickbacks or bribes, including rebates or [sic] a

portion of fees or charges for patient referrals, are

misdemeanors under present law...

Recent hearing and reports, however, indicate

that such penalties have not proved adequate

deterrents against illegal practices by some

individuals who provide services under

medicare and medicaid. In addition, these

misdemeanor penalties appear inconsistent with

existing Federal criminal code sanctions which

make similar actions punishable as felonies.

Also, it has been brought to the attention of the

committee by the U.S. Attorney’s offices which

have utilized these Social Security Act sanctions

in the prosecution of medicare and medicaid

fraud cases that the existing language of these

penalty statutes is unclear and needs

clarification.

Your committee’s bill would strengthen the

penalty provisions in existing law which relate to

persons providing services under medicare and

medicaid...

In addition, the bill would clarify and

restructure those provisions in existing law which

define the types of financial arrangemer'‘s and

conduct to be classified as illegal under medicare

and medicaid. (Emphasis added.) H.R. Rep. No.

95-393 (II), 95th Cong., 1st Sess. reprinted in

(1977) U.S. Code Cong. & Ad. News 3039, 3055.

Opinion 23a

We agree with the definition of “kickbacks” adopted

and applied by the Seventh Circuit in United States v.

Hancock, 604 F.2d 699 (7th Cir. 1978). We follow that

decision in affirming the decision of the district court

that appellants have entered pleas of guilty under an

Information charging them with violations of a valid

statute which made their conduct a criminal offense.

The record demonstrates to our satisfaction that the

payments which the appellants admitted receiving were

“kickbacks” within the meaning of the statute.

We choose to follow the Seventh Circuit in Hancock,

rather that United States v. Porter, 591 F.2d 1048 (5th

Cir. 1979). The reasons for this conclusion are stated

well by Judge Kennedy in her published opinion. 468

F.Supp. at 412-15.

Appellants contend that they did not “furnish” the

services in connection with which they received

payments, and that the Information does not charge an

offense. These and all other contentions made by

appellants have been considered and found to be

without merit.

The convictions are affirmed.

Jones, Circuit Judge, concurring. I agree that the term

“kickback” should be defined to include “a percentage

payment for granting assistance by one in a position to

open up or control a source of income.” United States v.

Hancock, 604 F.2d 999, 1002 (7th Cir. 1978). The United

States has an important interest in securing the honest

administration of federally funded programs. United

States v. Thompson, 366 F.2d 167 (6th Cir.), cert. denied,

385 U.S. 973 (1966). I write separately to discuss a

substantial issue of first impression concerning the

construction of 42 U.S.C. § 1396h(b)(1) (1972): Is a

24a Opinion

physician, who provides services to medicaid patients

and who receives illegal kickbacks from laboratories for

the referral of those patients, for which referrals federal

funds do not reimburse the doctor or the laboratory, a

person who “furnishes items or services to an individual

for which payment is or may be made in whole or part

out of Federal funds .. . and who... . receives any (1)

kickback . . . . in connection with the furnishing of such

items or services . . .?” I concur with the majority’s

affirmative answer.

The language of the amended informations and the

guilty pleas, as thoroughly reported in the majority

opinion, define the facts of the case.1 The defendants

were charged with and pleaded guilty to receiving

payments in various forms from a laboratory for patient

referrals. The informations allege that the defendants

“obtained services” from a laboratory, for which

services medicaid would pay in part, and that the

defendants received kickbacks in connection with these

services. Consequently, the relevant services for which

federal funds were paid are the tests performed by the

laboratory. The record also establishes that the

' According to my construction of § 1396h(b)(1), the amended

informations do state an offense. In his zeal to uphold the guilty

pleas, the Assistant United States Attorney argued seriously that this

Court should consider the amended informations to have been

informally amended by oral argument and by his response to the

defendants’ motion to dismiss the informations. Further, he

contended that the district court had implicitly granted leave for this

informal second amendment. The Government's position is not

supported in the record and is an attempt to play ‘fast and loose”

with the established rules of criminal procedure and principles of

due process. Such overly zealous advocacy should be tempered. In

other respects, the Assistant United States Attorney prepared a fine

brief.

Opinion 25a

defendants were reimbursed by medicaid for their

treatment of the same patients referred to the

laboratories.

The facts raise two questions of statutory

interpretation: 1) did the physicians “furnish” the

laboratory services; and 2) were the kickbacks paid “in

connection with” the laboratory services rather than just

the patient referrals? Defendants argue that they did not

“furnish” the laboratory services, since the laboratory

actually performed the tests. They point out that their

services were reimbursed separately from the laboratory

tests. Second, they argue that the kickbacks were paid

“in connection with” the patient referrals rather than

any service for which medicaid funds were paid. They

declare that the kickbacks did not affect their treatment

of patients or the laboratory’s performance of tests.

It is fair to say that physicians in Michigan in

1976-1977 furnished the laboratory services to their

patients. The physicians took the specimens and sent

them to a laboratory. A laboratory could act only on

orders from the physicians. Mich. Comp. Laws Ann.

§§ 325.81(b), 325.89(b), repealed by Mich. Comp. Laws

Ann. § 333.20501 et seg. (1978); cf. 42 C.F.R.

§ 405.1316(e) (Medicare regulations). The laboratory

could report the test results only to the physicians,

unless they instructed otherwise. Mich. Adm. Code R.

325.2353(2) (Rule 53); cf. 42 C.F.R. § 405.1316(g)

(Medicare regulations). The physicians bore the

responsibility of interpreting the test data. In short, the

physicians did everything but actually perform the

clinical tests. Under these circumstances, by

interpreting the word “furnish” according to its

common usage to mean “supply or provide,’’ I would

hold that the physicians did “furnish” the laboratory

services.

|

26a Opinion

The physicians received the kickbacks “in connection

with” the laboratory services. The statute is satisfied if

there is a logical relationship between the kickbacks

and the services for which federal funds were paid. In

our case, the kickbacks were an agreed part of the

performance of the laboratory services. The relationship

between the physicians and the laboratory was formed

around the payment of the kickbacks. The physicians

chose to refer patients to a specific laboratory because

of the negotiated kickback payments. The phrase “in

connection with” has a sufficient broad meaning in

common parlance to conclude that the kickbacks were

received “in connection with’ the laboratory services.

The legislative history bolsters my interpretation of

§ 1396h(b)(1) as enacted in 1972. Congress intended to

prohibit in the administration of the Medicaid program

any practices which were unethical or were proscribed

by state law. H.R. Rep. No. 92-231, 92d Cong., 2d

Sess., reprinted in [1972] U.S. Code Cong. & Ad. News

4989, 5007, 5093, 5308. The physicians’ receipt of

kickbacks for patient referrals to the laboratory is

forbidden by both Section 21 of the Code of Ethics of

the Michigan Association of Osteopathic Physicians and

Surgeons and by state statute, Mich. Comp. Laws Ann.

§ 445.162. Similarly, a laboratory is prohibited from

soliciting business by paying kickbacks. Mich. Comp.

Laws Ann. § 333.20525(c) (1978). Since the language of

the statute permits, § 1396h(b)(1) should be interpreted

to effectuate congressional intent. Barrett v. United

States, 423 U.S. 212 (1976); United States v. Tarter, 522

F.2d 520 (6th Cir. 1975). The ordinary meaning of the

statutory language and the 1972 legislative history

compel the conclusion that the physicians’ receipt of

kickbacks under the circumstances in this case is a

violation of § 1396h(b)(1).

Opinion; Order Denying Rehearing 27a

Finally, because the ordinary meaning of the plain

language of § 1396h(b)(1) would have notified the

defendants that their conduct was unlawful, the statute

is not unconstitutionally vague. United States v.

Hancock, 604 F.2d at 1002.

Accordingly, I concur with the opinion and judgment

of the majority.

APPENDIX “C”

ORDER DENYING PETITION FOR REHEARING

EN BANC AND REHEARING

No. 79-5223

(United States Court of Appeals for the Sixth Circuit)

(Filed and Entered August 19, 1980)

(United States of America, Plaintiff-Appellee, v.

HARVEY GOLDEN, D.O., Defendant-Appellant.)

Before WEICK and JONES, Circuit Judges, and

PHILLIPS, Senior Circuit Judge.

The court having not favored rehearing en banc in

this case, the petition for rehearing has been referred to

the hearing panel for disposition.

Upon consideration, it is ORDERED that the petition

for rehearing be and hereby is denied.

Entered by order of the court.

/s/ John P. Hehman

CLERK

28a 42 USC 1396h

APPENDIX “D”

42 UNITED STATES CODE 1396h

Ҥ 1396h. Offenses and penalties

“(b) Whoever furnishes items or services to an

individual for which payment is or may be made in

whole or in part out of Federal 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 and upon conviction

thereof shall be fined not more than $10,000 or

imprisoned for not more than one year, or both.”