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Reckless Disregard Upheld as Standard in Criminal Conviction

by Linda G. Rodrigue

The United States Court of Appeals for the Ninth Circuit recently upheld the health care fraud conviction of a mental health clinic owner in Idaho, ruling that proof of intent to defraud can be made by showing reckless indifference to the truth or falsity of statements in health care cases. The Ninth Circuit Court of Appeals case is entitled United States v. Dearing, No. 06-30606 (9th Cir. 9/25/07). The reckless indifference standard, which has long been a standard for civil liability in cases brought under the Federal Civil False Claims Act, 31 U.S.C. §3729, et seq., was cited as being sufficient to uphold a criminal conviction under 18 U.S.C. §1347, a federal criminal health care fraud statute.

In the Dearing case, a co-owner of a mental health clinic was convicted of 32 counts of aiding and abetting health care fraud on evidence that he was the owner, he was aware that fraud was occurring in the business, he was interviewed by a representative of the Oregon Medicaid program and claimed that billing irregularities had been fixed, and he profited from the fraud. In upholding his conviction, the Ninth Circuit referred to cases in which it had allowed reckless indifference to the truth or falsity of statements to be sufficient to establish the element of intent to defraud in mail fraud and wire fraud cases, citing to United States v. Munoz, 233 F.3d 1117 (9th Cir. 2000), and United States v. Ely, 142 F.3d 1113 (9th Cir. 1997), respectively. The Court also cited to United States v. Tarallo, 380 F.3d 1174 (9th Cir. 2004), which permitted a standard of reckless indifference in securities fraud cases.

Similarly, the United States Court of Appeals for the Sixth Circuit has upheld a recklessness standard when the defendant owned the company, had the ability to hire and fire, frequently visited the location where fraud occurred, was present on at least one occasion where fraud had taken place, and covered up evidence of the fraudulent conduct afterward. See United States v. Davis, 490 F.3d 541 (6th Cir. 2007).

The Ninth Circuit Court of Appeals has been considered a less conservative circuit that other federal circuits in the United States. Nevertheless, this circuit has apparently not had any difficulty accepting a reckless disregard standard as one to show proof of intent to defraud under the federal criminal health care statutes.

Full post as published by Louisiana Law Blog on November 09, 2007 (boomark / email).