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    Locke Lord QuickStudy: Fifth Circuit Reluctantly Holds that Government May Collect Both Restitution and Forfeiture When it is Victim

    Locke Lord Publications

    White Collar

    When recovering the loss amount due to commission of a crime, the criminal justice system has two main tools: forfeiture and restitution.  Forfeiture gives the government the authority to seize a defendant’s assets that were acquired as a result of criminal activity.  Restitution, on the other hand, requires a defendant to pay back its victims for the damage the defendant caused.  While it would seem natural to seize a criminal’s ill-gotten gains through forfeiture and then return them to the victims as part of the restitution, the Fifth Circuit’s recent decision in United States v. Sanjar held that when the government is the victim it may, essentially, collect twice — by both seizing assets through forfeiture and requiring a defendant to separately pay restitution.1

    The Fifth Circuit’s Sanjar opinion came on the heels of what was already a marked year for forfeiture law.  In June, the Supreme Court decided Honeycutt v. United States, holding that co-conspirators charged with certain drug crimes are only required to forfeit assets up to the amount that the defendant received from the crime.2  Thus, Honeycutt specifically rejected the government’s position that a forfeiture order could be applied to co-conspirators for joint and several liability of the full amount of the conspiracy.  Then, in July, the Department of Justice (“DOJ”) revoked a previous Obama-era prohibition on federal adoptions of assets seized by state and local law enforcement aimed at curbing abuses in asset forfeiture.3  After renewed bi-partisan criticism of asset forfeiture abuses, however, the DOJ appointed an Asset Forfeiture Accountability Director in October.4  Criminal justice attorneys have since awaited an opinion like Sanjar to see if the 2017 changes to forfeiture law would equally apply to restitution.  Sanjar forks the roads between forfeiture and restitution, increasing the protections afforded to criminal defendants for the former while undercutting them for the latter.

    Defendant Dr. Mansour Sanjar (“Sanjar”) and five others were convicted on a mix of substantive and conspiracy counts of healthcare fraud, 18 U.S.C. §§ 371, 1347, and Anti-Kickback Statute violations, 42 U.S.C. § 1320a-7b, for their partial hospitalization program (“PHP”).5  Throughout trial, the government demonstrated that the defendants’ community mental-health center PHP was a “Mickey Mouse facility” that both treated patients when treatment was unnecessary and billed time spent watching movies or listening to music as intensive medical treatment.6  Although several of the defendants and the government raised an array of issues on appeal, the Fifth Circuit’s three rulings related to the trial court’s forfeiture and restitution orders are particularly significant.7

    First, defendants appealed the amount of their restitution order.8  Even if they defrauded the government, defendants contended that they were entitled to a credit for the value of the medical services that they did provide.9 The Fifth Circuit disagreed.10  Defendants, according to the Court, only presented expert testimony showing that the PHP’s patients qualified for its medical services based on an analysis of the patients’ records.11 The government, however, presented ample evidence that the records themselves were falsified and, therefore, not reliable.12  As such, defendants had not demonstrated that any of the medical services were necessary in the first place, much less that they warranted a restitution credit.13

    The government also appealed the amount of the trial court’s restitution order on different grounds.14  Because the government would be the nominal recipient of both the restitution amount and the forfeited proceeds, the trial court offset the defendants’ restitution order by the amount of the forfeiture order.15  This, the government insisted, was impermissible.16  After reviewing the case law of other circuit courts facing the issue, the Fifth Circuit ruled in the government’s favor, explaining, “both restitution and criminal forfeiture are mandatory features of criminal sentencing that a district court does not have authority to offset.”17  Still, the Court expressed concern regarding its ruling by stating, “We have difficulty seeing why amounts the Department of Justice collects through forfeiture should not be transferred to the victim agency.  And that appears to be DOJ policy . . . .  But Congress left it to the executive branch to decide whether to follow through on that sensible policy.”18

    Finally, Defendant Adam Main (“Main”) challenged the forfeiture judgment against him.19  The trial court issued a judgment of over $4 million dollars reflecting the gross proceeds the conspiracy generated during Main’s employment at the PHP.20  Main, however, only received $120,000 from the conspiracy.21  Thus, Main argued, the forfeiture judgment against him should be limited to that amount.22  The Fifth Circuit vacated and remanded the forfeiture order against Main and held that the healthcare fraud forfeiture statute does not provide for joint and several co-conspirator liability, similar to the drug forfeiture statute in Honeycutt.23

    Notably, the Fifth Circuit also stated that the applicable restitution statute expressly authorizes joint and several liability, unlike the forfeiture statute.24  While the Court reserved ruling on joint and several liability under the restitution statute, this caveat implies that the Court is inclined to rule that co-defendants in a healthcare fraud conspiracy may be held jointly and severally liable for restitution orders in an amount for the harm the entire conspiracy caused, regardless of each individual defendant’s culpability.

    The Fifth Circuit drew several clear lines with the Sanjar opinion.  First, criminal defendants convicted of a healthcare fraud conspiracy are now assured that they will only forfeit the proceeds that they individually obtained and not the entire amount of the conspiracy.  When it comes to restitution, however, defendants may be jointly and severally liable for the entire conspiracy.  Finally, when the government is the victim of a healthcare fraud conspiracy, the district court does not have the discretion to offset assets seized by forfeiture against the restitution order.  With such high stakes, healthcare practitioners are best served by implementing compliance programs, conducting internal investigations, and staying current on rapidly evolving healthcare laws.

     

    1 876 F.3d 725, 750-­51 (5th Cir. 2017).  
    2 — U.S. —, 137 S.Ct. 1626, 1635 (2017).
    3 U.S. Dep’t of Justice, Attorney General Sessions Issues Policy and Guidelines on Federal Adoptions of Assets Seized by State or Local Law Enforcement (July 19, 2017).  See also U.S. Dep’t of Justice, Attorney General Prohibits Federal Agency Adoptions of Assets Seized by State and Local Law Enforcement Agencies Except Where Needed to Protect Public Safety (Jan. 16, 2015).
    4 U.S. Dep’t of Justice, Attorney General Sessions Announces Director of Asset Forfeiture Accountability (Oct. 17, 2017).
    Sanjar, 876 F.3d at 735. Id. at 733–34.
    6 Id. at 747.
    7 Id. at 747-48.
    8 Id. at 748.
    9 Id.
    10 Id.
    11 Id.
    12 Id.
    13 Id. at 750.
    14 See id.
    15 Id.
    16 Id. at 751.
    17 Id. (citations omitted).
    18 Id. at 748.
    19 Id.
    20 Id.
    21 Id.
    22 Id. at 749-50.
    23 Id. at 749 n.15.
    24 Id. at 749 n.15.

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