August 14, 2014 Articles

U.S. v. Houser: Bellwether for Civil FCA Theories in Criminal Prosecutions?

Future cases will test the extent to which theories of liability that have been accepted in civil FCA cases may also form the basis of criminal prosecutions.

By Jerry Friedberg and Amanda Touchton

In United States v. Houser, 2014 WL 2767200 (June 19, 2014), the Eleventh Circuit upheld the defendant’s conviction and 20-year sentence for Medicare fraud and tax evasion. The case is noteworthy for the federal government’s willingness to devote its resources to prosecuting persons who operate nursing homes that force the residents to live in grossly substandard conditions. The case is equally noteworthy for the severity with which the district court was willing to punish the owner, who received a sentence similar to that imposed on high-level drug dealers. The egregious facts of Houser undoubtedly explain both the prosecution and the sentence. Looking beyond these two issues, however, the ruling suggests a potentially far-reaching development: the incorporation of expansive theories of liability derived from civil False Claims Act (FCA) cases into the criminal context.

Courts have interpreted the civil FCA broadly, consistent with its remedial purposes. Two theories of civil liability under the FCA have no direct parallel in common law: (a) worthless services, and (b) implied false certification. A worthless-services claim “asserts that the knowing request of federal reimbursement for a procedure with no medical value violates the Act.” United States ex rel. Mikes v. Straus, 274 F.3d 687, 702 (2d Cir. 2001); United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1053 (9th Cir. 2001) (worthless-services theory based on “seeking and receiving payment for medically worthless tests”). An implied false certification occurs when an entity has previously undertaken to expressly comply with a law, rule, or regulation, and that obligation is implicated by submitting a claim for payment, even though a certification of compliance is not required as part of the process of submitting the claim. Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). Prosecutors in some jurisdictions are starting to apply these theories of liability to criminal cases, even though criminal statutes are traditionally interpreted narrowly and implicate due-process concerns not present in traditional FCA civil actions.

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