How physicians can combat criminal fraud investigations

At a time when doctors face increased pressure from competition, reduced fee schedules, and greater scrutiny from insurance companies, a recent holding from the United States Supreme Court may provide creative arguments to stop-or at least slow-the continued trampling of physicians' rights in tandem civil-criminal fraud investigations.

These dual investigations are increasing significantly, so it is critical for physicians to use all potential tools in their arsenals, including constitutional challenges to statements made in civil proceedings and use later in a criminal proceeding.

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Often, physicians investigated for fraud by special investigative units (SIUs) will make incriminating statements elicited in the context of a civil or administrative proceeding, and less formally in pre-litigation cooperative efforts to resolve the investigation.

Such civil statements-often made innocently-are provided in the absence of Fifth Amendment and other protections afforded in criminal investigations. These statements, once the civil matter is resolved by the SIUs, are then often provided to state office of insurance fraud prosecutors (OIFPs) examining criminal fraud allegations against the same physician.

The OIFP uses these statements in subsequent criminal proceedings, which can result in prison, disbarment, and other significant legal and financial costs.

This practice effectively circumvents all protections traditionally afforded to criminal targets and/or defendants whereby they are not compelled to make any statement that could be used against them and are, moreover, provided constitutional protections under the Fifth Amendment, specifically to protect against incriminating statements.

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When SIUs collect and then transfer incriminating physician statements in this manner, they morph-improperly, we would argue-into an appendage of the state, which is designated as the only authority to properly prosecute crimes.

Fighting back

The holding and application of the recent United States Supreme Court decision in Ohio v. Clark, however, may provide a new type of argument to combat the SIU-OIFP two-headed investigative monster.

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How can a physician use the Clark decision in the context of fraud investigations? The Clark court analyzed out-of-court statements under the "primary purpose" test, which essentially looks at the formality of the interrogation and poses the question as to whether the out-of-court statements were for “testimonial” purposes (and therefore subject to certain Constitutional questions) or other, less formal use.

The “primary purpose” test thus raises arguments for physicians subject to dual SIU-OIFP civil-criminal investigations. In the typical situation, an insurance company's SIU, acting akin to a State actor, first will civilly investigate a physician suspected of engaging in misconduct, typically in the form of medical insurance fraud such over-billing, unnecessary procedures, sham procedures and kickback schemes.

After the SIU's investigation of the physician has advanced, or more likely is resolved through payment by the physician, it will typically make a referral, whether required under state statutes or voluntarily, to the state's OIFP for investigation and possible criminal prosecution.

In light of the Clark decision, however, physicians can legitimately argue that the statements provided to SIUs in civil investigations are "testimonial" and cannot be introduced later in an OIFP's criminal case.

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Unfortunately, the time to utilize such Clark arguments is when a physician is already facing criminal prosecution and when part of the evidence consists of statements the physician made earlier to an SIU. At such time, an application to the Court relying upon Clark is warranted.

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The lesson is to always be forewarned when SIUs seek statements in an investigation. Those statements can, be used against you in a criminal proceeding. When and if they are, you should pursue all available arguments challenging the collection and use of those statements as improper under the Constitution.

Michael S. Weinstein is a former U.S. Department of Justice trial attorney and federal prosecutor, and now serves as the chairman of the white-collar practice group at Cole Schotz P.C., handling white-collar defense matters and internal corporate investigations.

Jason R. Finkelstein is an associate in the litigation department at Cole Schotz, focusing primarily on complex commercial disputes, white-collar defense and employment matters. Both authors practice out of Cole Schotz's New Jersey and New York offices.