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Health Care Fraud, Bank/Mortgage Fraud and Securities Fraud Practitioner should be aware of 18 USC § 1345, a law that allows the federal government to create federal health care crimes, bank-mortgage crimes, securities crimes and other offences. Otherwise known as the federal fraud injunction statute, it also authorizes a court to freeze the assets of individuals or entities who have obtained assets as a past or ongoing result. Federal bank violations, health care violations, securities violations, or other covered federal offenses. This statutory authority to prevent such conduct and to freeze a defendant’s assets is a powerful tool in the federal government’s arsenal to combat fraud. Section 1345 has not been widely used by the federal government in the past in connection with fraudulent prosecution of health and hospital care, bank-mortgage and securities cases, however, it has tremendous impact when actions are filed by the government. Maybe on the outcome of such cases. Health and hospital care fraud attorneys, bank and mortgage fraud attorneys, and securities fraud law firms should recognize that when a defendant’s assets are frozen, a defendant’s ability to maintain a defense may be fundamentally impaired. White-collar criminal defense attorneys should advise their health and hospital care, bank-mortgage and securities clients that parallel civil injunction proceedings by federal prosecutors may be brought simultaneously with a criminal indictment involving a covered offense. is included.
Section 1345 authorizes the US Attorney General to initiate a civil action in a federal court to order any person to:
• Violates or is about to violate 18 USC §§ 287, 1001, 1341-1351, and 371 (includes conspiracy to defraud the United States or any of its agencies)
• contravenes or is about to contravene banking laws, or
• has committed or is about to commit a federal health care offense.
Section 1345 further states that the US Attorney General may issue an injunction (without binding) to prevent a person from alienating, taking back, transferring, removing, destroying or disposing of property obtained as a result of a banking law violation, securities law violation, or can get a restraining order. or a federal healthcare offense or property that is traceable to such violation. The court shall proceed forthwith to hear and determine any such action, and may enter such restraining order or injunction, or take such other action, as may be deemed fit to the United States or any person or persons Necessary to protect against sustained and substantial injury. The class of persons for whose protection action is taken. Generally, a proceeding under section 1345 is governed by the Federal Rules of Civil Procedure, except when an indictment against the defendant has been returned, in which case the discovery of such matter is governed by the Federal Rules of Criminal Procedure. .
Government successfully invokes Section 1345 in federal healthcare fraud case United States v. Bissig, et al., Civil Action No. 1:00-cv-335-JDT-WTL (SDIn.). The case was initiated as a qui tam by a relator, FDSI, a private company engaged in the detection and prosecution of false and improper billing practices involving Medicaid. FDSI was hired by the State of Indiana and provided access to Indiana’s Medicaid billing database. Following an investigation of co-defendant Home Farms, FDSI filed a qui tam action in February, 2000 pursuant to the Civil False Claims Act, 31 USC §§ 3729, et seq. The government soon became involved in the FDSI’s investigation of Home Farm and Ms. Bissig, and in January, 2001, the United States issued an order to prevent ongoing criminal fraud under 18 USC § 1345 and to freeze Home Farm and Peggy and Phillip’s assets. Filed an action for. Bisig. In 2002, the indictment against Ms. Bissig and Home Farm was dropped. In March, 2003, Ms. Bissig and/or Home Farm were criminally charged with four counts of violation of 18 USC § 1347, plus one count of unlawful payment of kickbacks in violation of 42 USC § 1320a-7b An encroachment charge was filed in b)(2)(a), and one count of mail fraud in violation of 18 USC § 1341. The superseding indictment also emphasized a criminal forfeiture charge that Ms. Bissig and some of Home Farm’s property were subject to forfeiture to the United States. Pursuant to 18 USC § 982(a)(7). In accordance with her guilty plea agreement, Ms Bissig agreed to forfeit various pieces of real and personal property that she had personally acquired during her scheme, as well as the Home Farm property. The United States seized approximately $265,000 in prohibitory actions and recovered approximately $916,000 in assets seized in criminal actions. The court held that the relator could participate in the proceeds of the recovered property because the relator’s rights in the forfeiture proceedings were governed by 31 USC § 3730(c)(5), which provides that a relator maintains an “equal right” in a keeps. Alternative proceedings as in qui tam proceedings.
An important issue when section 1345 is invoked is the scope of property that can be frozen. Under § 1345(a)(2), in order to freeze the assets or proceeds of a fraudulent federal healthcare offense, bank offense, or securities offense, there must be a “detectable violation.” United States v. DBB, Inc.180 F. 3d 1277, 1280-1281 (11th Cir. 1999); United States vs. Brown988 F.2d 658, 664 (6th Cir. 1993); United States vs. Feng, 937 f. supply. 1186, 1194 (D.Md. 1996) (any property to be frozen must be in some way traceable to the alleged illegal activity); United States v. Quadro Corp., 916 F.Supp. 613, 619 (EDTex. 1996) (the court may freeze only those assets that the government has proved related to the alleged scheme). Even though the government may seek treble damages against a defendant according to the Civil False Claims Act, the amount of treble damages and civil monetary penalties do not determine the amount of property that can be frozen. Again, only those proceeds which are traceable to a criminal offense can be frozen under the statute. United States v. Shriram147 F.Supp.2d 914 (NDIl. 2001).
Most courts have found that granting injunctive relief under the statute does not require the court to conduct a traditional balancing analysis under Rule 65 of the Federal Rules of Civil Procedure. Identification. No proof of irreparable harm, inadequacy of other remedies, or balance of interest is required, because the mere fact that the statute was passed means that the violation would inevitably cause harm to the public and was prevented when necessary. should go. Identification. The government only needs to prove by a preponderance of the evidence standard that an offense has been committed. Identification. However, other courts have balanced the traditional injunctive relief factors when faced with an action under Section 1345. United States v. Hoffman, 560 F.Supp.2d 772 (D.Minn. 2008). Those factors are (1) the risk of irreparable harm to the agitator in the absence of relief, (2) the balance between that harm and the harm that the relief would cause to other litigants, (3) the likelihood of the agitator’s eventual success on the merits and ( 4) The public interest, and Movent bears the burden of proof relating to each factor. Identification., USA vs Williams, 476 F.Supp2d 1368 (MDFl. 2007). Neither factor is determinative, and the primary question is whether the balance of equity is in favor of the movant such that the ends of justice require the court to intervene to maintain the status quo until the merits are determined. If the risk of irreparable harm to the movant is slight compared to the potential injury to the other party, the movant bears a particularly heavy burden of showing a likelihood of success on the merits. Identification.
In Hoffman In the case, the government presented evidence of the following facts in court:
• Beginning in June 2006, the Hoffman defendants formed entities to purchase apartment buildings, convert them into condominiums, and sell the individual condominiums for large profits.
• To finance the venture, the Hoffman defendants and others fraudulently obtained mortgages from financial institutions and mortgage lenders in the names of third parties, and Hoffman hired third parties to cooperate with mortgage brokers in applying for the mortgages. Directed to buyers.
• Inflation of buyers’ income and bank account balances in subject loan applications, failure to list other properties being purchased at or near the time the current property is purchased, failure to disclose other mortgages or liens, and false characterizations including several material contains false statements. Source of down payment provided at closing.
• The Hoffman defendants used this method from January to August 2007 to purchase more than 50 properties.
• Typically, the Hoffmans inherited or placed tenants in condominium units, received their rental payments, and then paid the rents to third-party buyers to apply as mortgage payments. Hoffman and others routinely shift portions of such rental payments, often causing third-party buyers to become delinquent on mortgage payments.
• The United States believes that the amount traceable to Defendants’ fraudulent activities is approximately $5.5 million.
While the court recognized that the appointment of a receiver was an extraordinary measure, the court determined that it was appropriate at the time. Hoffman The court found that there was a complex financial structure involving straw buyers and a potentially legitimate business coexisting with fraudulent schemes and that a neutral party was necessary to administer the properties because of the potential for rent reduction and foreclosure .
Like other injunctions, the defendant subject to an injunction under section 1345 is subject to contempt proceedings in the event of a breach of such injunction. United States v. Smith502 F.Supp.2d 852 (D.Minn. 2007) (Defendant found guilty of criminal contempt for withdrawing money from a bank account that was frozen under 18 USC § 1345 and placed under a receivership Was placed).
If the defendant prevails in an action filed by the government under section 1345, the defendant may be entitled to attorney fees and costs under the Equal Access to Justice Act (EAJA). United States v. Cacho-Bonilla, 206 F.Supp.2d 204 (DPR 2002). The EAJA allows a court to award costs, fees, and other expenses to a prevailing private party in litigation against the United States unless the court finds that the government’s position was “substantially reasonable”. 28 USC § 2412(d)(1)(a). To be eligible for a fee award under the EAJA, the defendant must (1) establish that it is the prevailing party; (2) that the position of the Government was not sufficiently justified; and (3) that no special circumstances render an award unjust; And the fee application should be submitted to the court within 30 days of the final decision, supported by itemized statement. cacho-bonilla, prefix,
Healthcare fraud attorneys, bank and mortgage fraud law firms, and securities fraud attorneys must be aware of the government’s authority under the anti-fraud statutes. the ability of the federal government to bring civil action to order the commission or impending commission of federal health care fraud offenses, bank fraud offenses, securities fraud offenses, and other offenses under Chapter 63 of Title 18 of the United States Code, and to a To freeze a defendant’s assets can dramatically change the course of a case. While Section 1345 has been used occasionally by the federal government in the past, there is increasing recognition by federal prosecutors that prosecutions involving health care, bank-mortgage, and securities crimes can be more effective when adjudicated under Section 1345. provoked by action. Government. Health and hospital care attorneys, bank and mortgage attorneys, and securities law firms should recognize that when a defendant’s assets are frozen, a defendant’s ability to maintain a defense may be greatly impaired.
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