By Anthony Biraglia

In the criminal case of United States v. Bajoghli, the Fourth Circuit found that the trial court abused its discretion in granting a defendant’s pre-trial motions in connection with an indictment for healthcare fraud under 18 U.S.C. § 1347. The Court concluded that the pre-trial evidentiary rulings unreasonably restricted the government’s ability to carry its burden of proof by preventing the introduction of evidence concerning the defendant’s post-scheme conduct, limiting testimony not specifically related to the fifty-three transactions that comprise the charges, and excluding evidence of the defendant’s financial gain. In a published opinion released on May 11, 2015, the Fourth Circuit reversed the trial court and remanded the case for further proceedings.

Dr. Bajoghli Indicted for Healthcare Fraud Scheme and the Trial Court Ruled in His Favor on His Three Pre-Trail Motions

On August 12, 2014, a grand jury returned a sixty-count indictment against Dr. Amir Bajoghli (“Bajoghli”), a dermatologist operating offices in Virginia and Washington, D.C., that included fifty-three counts related to an alleged healthcare fraud scheme. According to the government, Bajoghli violated 18 U.S.C. § 1347 by “knowingly and willfully . . . execut[ing] a scheme or artifice to defraud” consisting of four types of conduct: (1) misdiagnosing patients with skin cancer and performing medically unnecessary surgery, (2) directed non-physician medical personnel to perform wound closures while billing as though he had done the closures himself, (3) billing as though he had performed services himself that were in fact performed by non-physicians, and (4) billing for skin pathology slide analysis performed by outside contractors for significantly lower than the claimed amount.

Bajoghli filed three pre-trial motions related to the exclusion or limitation of certain evidence, all of which were granted by the trial court. The first motion (“September 23 motion”) struck language in the indictment concerning fees Bajoghli received for fraudulently reporting that he had done work himself that he had in fact outsourced, thus limiting the evidence that could be introduced on that allegation. The second motion (“October 13 motion”) prevented the government from introducing evidence about Bajoghli’s alleged post-scheme activities. The third motion (“October 20 motion”) suppressed any evidence that was not specifically related to the fifty-three allegedly fraudulent transactions referred to in the indictment. The trial court ruled on the second and third motions one day prior to the scheduled trial date. The government sought review of these evidentiary rulings via an interlocutory appeal.

Abuse of Discretion

The Fourth Circuit determined that the trial court abused its discretion in granting Bajoghli’s pre-trial motions because the exclusions and limitations contemplated in the motions would not allow the government to present evidence required to prove both the “scheme” element and the intent element of 18 U.S.C. § 1347(a). Although the trial court has the discretion to manage evidence in a trial, that discretion must be tempered by the need to allow the government “sufficient latitude to carry its burden of proof” in complex healthcare fraud cases where criminal intent is an issue.

Granting the Pre-Trail Motions Was Too Restrictive

With regard to the September 30 motion, the Court focused on the fact that intent was a hotly contested issue in the case. Evidence of alleged financial gain can be “particularly probative” in establishing a defendant’s intent to defraud, and to exclude such evidence would not allow the government to present sufficiently detailed evidence about an element of the offense. Thus, the trial court’s decision to exclude evidence of Bajoghli’s alleged financial gain constituted an abuse of discretion.

The court also found that the trial court abused its discretion in granting the October 13 motion. While Bajoghli argued that evidence of his conduct after the alleged scheme ended was subject to suppression under Federal Rules of Evidence (“FRE”) 404(b) as extrinsic to charged acts, the court reasoned that evidence of his post-scheme conduct was relevant to proving intent, an element of the crime, and thus avoided the requirements of FRE 404(b). The court also rejected the argument that evidence of post-scheme conduct was unfairly prejudicial to the defendant under FRE 403.

Finally, the Fourth Circuit overturned the trial court’s ruling on the October 20 motion. Suppressing any evidence not directly related to the fifty-three charges would effectively prevent the government from proving that the various fraudulent transactions it alleged were part of a “scheme” to defraud, as is required by 18 U.S.C. 1347(a). The court, citing precedent, reasoned that evidence relevant to the overall scheme should not be excluded, even if it is not directly relevant to the specific fraudulent transaction with which the defendant is charged. If the government were so limited, it would have to bring hundreds of charges in large healthcare fraud cases in order to prove the “scheme” element.

Reversed and Remanded

Because the Fourth Circuit concluded that granting the pre-trial motions was too restrictive, it reversed the trial court and remanded the case for further proceedings.