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United States v. Zuschlag

United States District Court, D. Maine

June 4, 2018



          D. Brock Hornby United States District Judge

         This is a criminal prosecution centered on health care fraud charges[1] in connection with the MaineCare program.[2] The two individual defendants, Kristen and Robert Zuschlag, husband and wife, owned companies (Freeport Transit (FTI) and C3 Transport) that provided medical transportation services for MaineCare members. The federal prosecution started with a two-count indictment against Kristen Zuschlag on November 15, 2016 (ECF No. 1). Since then, there have been four superseding indictments. The Fourth Superseding Indictment filed on November 28, 2017 (ECF No. 113), contains fifteen counts and two forfeiture allegations. The defendants have moved to dismiss the first four Counts, namely, false statement relating to a health care benefit program (Count One, Kristen Zuschlag); obstruction of a federal audit (Count Two, Kristen Zuschlag); conspiracy to commit health care fraud (Count Three, both defendants); and health care fraud (Count Four, both defendants). They seek dismissal of all four Counts on account of prosecutorial delay;[3] and counts Three and Four on account of “duplicity” because, they say, each of those Counts charges three single and distinct crimes as a single offense, and two of the three are barred by the statute of limitations. None of the parties has requested oral argument. I Deny the motion to dismiss so far as it is based on prosecutorial delay. I do need further explanation, however, of the relationship and significance of the most recent addition of an additional object for the conspiracy, a change in the date the conspiracy began, and additional manner and means- particularly, allegedly false testimony by both defendants at a state administrative hearing in March of 2010, conduct that would otherwise be barred from criminal prosecution by the statute of limitations. The Clerk's Office shall schedule oral argument on that remaining issue.

         Prosecutorial Delay

         The defendants recognize that to secure a Fifth Amendment due process dismissal of an indictment for prosecutorial delay when the statute of limitations has not expired, they must show that “the delay (1) caused substantial prejudice to the accused's rights to a fair trial, and (2) was an intentional maneuver by the government to gain a tactical advantage over the accused.” Defs.' Mot. 11 (ECF No. 137) (citing United States v. Lovasco, 431 U.S. 783, 790 (1977); United States v. Marion, 404 U.S. 307, 324 (1971); and United States v. DeCologero, 530 F.3d 36, 78 (1st Cir. 2008)). The defendants devote most of their argument to the substantial prejudice element and conclude: “In this case, the Defense has established actual prejudice. The government should now be called to explain the delay between the completion of the investigation and the bringing of criminal charges.” Defs.' Mot. 20.

         Unfortunately for the defendants, the burden on both elements rests with them, United States v. Irizarry-Colon, 848 F.3d 61, 70 (1st Cir. 2017), as they recognize in their brief. Defs.' Mot. 11. In this case they have advanced no showing of an intentional government maneuver to gain a tactical advantage. They do cite an earlier 2015 decision where the First Circuit stated in dictum that “there may be instances when prosecutorial delay will be sufficiently egregious to support a due process violation even absent tactical purpose.” United States v. Ramos-Gonzalez, 775 F.3d 483, 491 (1st Cir. 2015) (citing Lovasco, 431 U.S. at 795 n.17). They then cite Fourth, Seventh, and Ninth Circuit cases that, they say, allow dismissal for “negligence or reckless disregard for the circumstances as the prosecutor knew them to be” without showing an improper tactical purpose. Defs.' Mot. 19-20. But the 2015 First Circuit decision did not involve an egregious delay, and the court did not define the term.[4] Instead, in its later 2017 decision, Irizarry-Colon, the First Circuit dropped any reference to that possibility and reverted to its usual language that a defendant must prove tactical delay by the government to justify dismissal. 848 F.3d at 70. I apply the Irizarry-Colon analysis and conclude that in the absence of any assertion that the government's conduct here was an intentional maneuver to gain a tactical advantage, the motion to dismiss for prosecutorial delay must fail.

         That should dispose of this part of the motion. But in the event that the First Circuit decides that in some cases defendants need not show that the government engaged in an intentional maneuver to gain a tactical advantage, I assess the defendants' substantial prejudice assertions as well. I certainly understand the defendants' frustration over the delay here. In 2010 they won a contested recoupment hearing where the State had attempted to recover $283, 000 against them for improper billing from 2004 to 2009. MaineCare officials were upset with the ruling, calling it “difficult to accept, ” Defs.' Ex. 2 (ECF No. 137-2), and in 2012 an auditor, Michael Bishop, referred the matter to the Maine Attorney General for criminal prosecution. But in May 2013 the Maine Attorney General's Office declined to prosecute (“no chance that we could pursue any criminal case in this matter, ” Reply Ex. 5 (ECF 148-5)). Bishop then referred the matter to federal authorities later in 2013, where the matter languished because of backlogs in the U.S. Attorney's office. After consenting to two extensions of the statute of limitations[5] in the hope that federal prosecution would be declined, the defendants refused further extensions and on November 15, 2016, the first indictment (against Kristen Zuschlag) was filed.

         But despite the frustrations of this chronology for the defendants, they have not established substantial prejudice resulting from the delay, as I now describe.

         Counts One and Two

         On Counts One and Two, the defendants acknowledge that Kristen Zuschlag (the only defendant on those two counts) “is at least partially able to defend the allegation that Mrs. Zuschlag provided false documents, with the use of expert testimony.” Defs.' Mot. 11. But they say that “the unavailability of common carrier shipping records, due to the passage of time, severely hampers Mrs. Zuschlag's ability to defend the factual claim that she provided false documents to [MaineCare's Program Integrity Unit].” Id. at 11-12. This seems to be an argument that because the Indictment filed on November 15, 2016, asserts that she provided false documents on November 15, 2011, an earlier shipping date would be a defense to that charge and, moreover, that an earlier shipping date would provide a complete statute of limitations defense.[6]

         The defendants acknowledge that Bishop says that he received the allegedly false documents on November 16, 2011, id. at 2, 8, and that there is a date stamp for that date, id. at 9; Defs.' Reply 4 (ECF No. 148). Presumably the defendants would like common carrier records to show that the allegedly false documents were actually shipped November 14 or earlier. But, they say, common carriers do not have records going back that far. Defs.' Mot. 9 & n.3; Decl. of Kristen Zuschlag ¶ 13, Defs.' Ex. 6 (ECF No. 137-6) (“After I was initially indicted, on November 15, 2016, I attempted to obtain records from UPS and Federal Express that would show the dates of documents having been shipped to Michael Bishop of the MaineCare Program Integrity Unit . . . I was advised that such records were no longer available.”).

         The government asserts that “[o]n November 15, 2011, the auditor [Bishop] spoke with Kristen Zuschlag who informed the auditor that she had mailed the requested documents, ” Gov't Resp. 7 (ECF No. 144), and it provides an auditor's log in support of the assertion. Gov't Ex. 7 (ECF No. 145-6). The defendants have not directly responded to this assertion in their reply memorandum. Of course, Bishop's statement as the government reports it does not state that Kristen Zuschlag told Bishop when she had shipped the documents in question. But nowhere do the defendants assert that Kristen Zuschlag or anyone else will testify that she actually shipped them earlier than November 15. The defendants say only that “there is no objective evidence of when the documents were shipped, which is the critical fact that Mrs. Zuschlag is missing due to the government's delay.” Defs.' Reply 4 (emphasis in original). That is not enough to support substantial prejudice on these two Counts. On this record I have no basis to conclude that common carrier records, if they existed, would show an earlier shipping date. The person most likely to know the actual shipping date is the defendant Kristen Zuschlag. She can still assert her statute of limitations defense on these two Counts at trial.[7]

         Counts Three and Four

         Counts Three and Four are the conspiracy and health care fraud charges against both defendants over allegedly fraudulent billing for MaineCare members whom the defendants' companies transported. The Fourth Superseding Indictment ¶ 7 charges a conspiracy going back to July 2009. The defendants argue that the passage of time makes it difficult to identify the riders in question and the riders' medical needs at that time (the period from 2009 through 2013). Defs.' Mot. 13, 16. They argue that they no longer have enough of their own relevant records and that MaineCare regulations required them to keep their records only for three years. Decl. of Robert Zuschlag ¶¶ 8-11, Defs.' Ex. 5 (ECF No. 137-5); Decl. of Kristen Zuschlag ¶¶ 10-12, 14, Defs.' Ex. 6. But the government points to their MaineCare provider agreements that required them to keep their records for at least five years and, beyond then, until the end of an audit, if later. Gov't Resp. 15; Gov't Ex. 1 (ECF No.145). The government asserts that audits were initiated in 2011 and 2013 that did not end, but led instead to the criminal investigation that resulted in this criminal prosecution. Gov't Resp. 15. In their Reply, the defendants have not responded to this assertion, and they recognize in their motion that an audit occurred in 2011. Defs.' Mot. 12. If, in the face of recordkeeping obligations, the defendants failed to keep relevant records, [8] I do not attribute any resulting prejudice to the prosecution's delay, since the government could reasonably assume that the defendants would comply with their recordkeeping obligations.[9] Cf. United States v. Carruth, 699 F.2d 1017, 1019 (9th Cir. 1983) (“To allow [the defendant's] prejudice claim here would be to hold that those under criminal investigation have a right to destroy documents and then to argue that they are prejudiced because the documents are unavailable to support their defense. This we refuse to do.”).

         The defendants also argue that because of the passage of time, other comparable companies no longer have records that could support the defendants' practices as generally acceptable, Defs.' Mot. 14-15. As the government points out, however, those companies also stated that they did not engage in the same activity as the defendants' companies, and therefore their records would not be helpful to the defendants. Gov't Resp. 13; see also Defs.' Mot. 14-15 (same). The defendants attempt to thwart this argument by saying that such statements by other companies were made “presumably out of fear that they would become the target of a PIU investigation.” Defs.' Mot. 14. This “presumably” comment is only speculation that does not support a finding of substantial prejudice.

         The defendants also assert, without support, that they cannot admit into evidence information from a Regional Transportation Program (RTP) computer database concerning the referral of ambulatory riders to wheelchair companies like their company and that they need the underlying documents, which are no longer available. Defs.' Mot. 13-14. The government disagrees. Gov't Resp. 13. It cites Fed.R.Evid. 902(13)-(14), and the summary evidence rule (Rule 1006), and states that it intends to introduce some of the data itself. The defendants' mere assertion that they cannot get information from the RTP database into evidence does not-without explanation why that is so-establish substantial prejudice.

         Finally, the defendants argue that a favorable witness who, they say, approved their billing practices for MaineCare, has died. Defs.' Mot. 15. But they attach the Hearing Officer's Report of the 2010 hearing that stated that even in 2010 this witness could not recall making that representation. Defs.' Ex. 1 at 5, 7, 8 (ECF No. 137-1).[10] The government has attached a partial transcript of the hearing where the defendants' then-lawyer said the same thing about the witness. Tr. at 38:7, Gov't Ex. 2 (ECF No. 145-1). The defendants have given no indication that her testimony would have changed had she lived.[11]

         In short, the defendants' assertions, both singly and collectively, fail ...

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