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Tag: 2023 News

Prosecutors Say Pharmaceutical Makers Are Victims of $1B Fraud

Four former executives and two former employees of Outcome Health, a Chicago-based health technology start-up company founded in 2006, were charged in 2019 for their alleged roles in a fraud scheme that targeted the company’s clients – many of whom were pharmaceutical companies – lenders and investors, and involved approximately $1 billion in fraudulently obtained funds.

The executives were in Chicago’s Dirksen Federal Courthouse on Monday to face trial.

Rishi Shah of Chicago, co-founder and CEO of Outcome Health, and Shradha Agarwal, of Chicago, president of Outcome Health were charged along with Brad Purdy of San Francisco, chief operating officer and chief financial officer, and Ashik Desai, of Philadelphia, executive vice president of business operations and, more recently, chief growth officer of Outcome.

Outcome, formerly called ContextMedia, was one of Chicago’s high-flying startups, pulling in $500 million during its first round of funding in May 2017 and attracting high-profile investors like Goldman Sachs and Google’s parent company, Alphabet. The company was valued at $5.5 billion at the time.

The company installs TVs and tablets in physicians’ offices and sells targeted ads to pharmaceutical companies. Outcome’s troubles started in 2017 when The Wall Street Journal reported that the company inflated data to pharmaceutical companies to boost ad sales. Things continued to unravel when the company was sued by investors who wanted to get their nearly $500 million investment back, claiming the company provided investors with fraudulent data and financial reports.

Its business is to run advertisements for different medications on TV screens and tablets in doctor’s offices, in exchange for a fee from the pharma companies whose products are being advertised.

It’s been a successful enough operation that in 2017 the company was valued at $5.5 billion, $3.6 billion of which was personally claimed by the then-31-year-old Shah.

The same year, Outcome received a $500 million investment from Goldman Sachs, Google affiliate CapitalG and the Pritzker Group, a venture capital firm run by the same wealthy family that Democratic Illinois Governor J. B. Pritzker belongs to.

According to the allegations, the former executives and employees perpetrated a fraudulent scheme by selling clients advertising inventory the company did not have and then under-delivering on its advertising campaigns.

Despite these under-deliveries, the company allegedly still invoiced its clients as if it had delivered in full.

To conceal the under-deliveries, the former executives and employees allegedly falsified affidavits and proofs of performance to make it appear the company was delivering advertising content to the number of screens in its clients’ contracts, and also inflated patient engagement metrics regarding how frequently patients engaged with Outcome’s tablets.

Furthermore, Desai allegedly altered a number of studies presented to clients to make it appear that the campaigns were more effective than they actually were.

Outcome not only overcharged clients, it also overstated its revenue for 2015 and 2016, according to the charges.

“The deception alleged to have been committed by the defendants tricked clients into paying for advertising it failed to deliver and served to falsely inflate the value of Outcome Health,” Assistant U.S. Attorney Brian Hayes, chief of the Criminal Division for the Northern District of Illinois, said in a statement.

According to a report by CourtHouse News, federal prosecutors repeated those accusations in their opening arguments on Monday, following a full week of jury selection.

This trial is about ambition, greed and fraud… it’s about lies to get money, and what it took to hide those lies,” Justice Department attorney Kyle Hankey told the jury. “They sold advertising inventory that they didn’t have to their clients. They billed their clients for advertising they didn’t deliver.”

The prosecutor painted Shah and Agarwal as greedy tech entrepreneurs whose ambitions outstripped their ability to deliver on Outcome’s promised services. He alleged that the pair had lied “from the outset,” overstating how many offices in which their company could feasibly place advertisements.

“They oversold advertising inventory to their client… It told its clients that it had more offices than it really had,” Hankey said.

Hankey concluded his opening arguments by claiming that the trio of defendants regularly fired employees who caught on to Outcome’s alleged fraud scheme, including one accountant who was only with the company for two weeks before being shown the door. That accountant is scheduled to testify during the trial.

In the trio’s own opening arguments, Shah’s attorney John Hueston, of the California law firm Hueston Hennigan, did not contest that some fraud occurred at Outcome. Instead, he laid blame for the fraud on the 29-year-old Desai.

Unlike Shah, Agarwal and Purdy, Desai pleaded guilty to the two wire fraud charges he faced in December 2019.

Prosecutors painted Desai, who is scheduled to testify as a government witness, as a younger protégé of Shah who followed along with Outcome’s alleged fraud scheme at his mentor’s instruction. Hueston, conversely, accused Desai of carrying out the fraud scheme without the defendants’ knowledge.

The trial is expected to last several weeks before attorneys return for their closing arguments.

California and 19 States File as Amicus Against OSHA Rights Challenge

Allstates Refractory Contractors, LLC filed suit against the Secretary of Labor and the Occupational Safety and Health Administration, asking the Court to declare OSHA’s statutory power to promulgate permanent “safety standards” unconstitutional, and to issue a permanent injunction preventing OSHA from enforcing those standards.

The parties filed dueling Motions for Summary Judgment, which is appropriate only where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Federal Civil Rule 56(a).

In ruling on the motions, Federal District Judge Jack Zouhary wrote that Congress passed the Occupational Safety and Health Act in 1970, declaring the Act’s “purpose and policy” was “to assure so far as possible every working man and woman in the Nation safe and healthful working conditions. Under the Act, Congress gave the Secretary of Labor the power “to set mandatory occupational safety and health standards and vested the Secretary with “broad authority . . . to promulgate different kinds of standards” for health and safety in the workplace.

Allstates is a general contractor that provides furnace services to various glass, metal, and petrochemical facilities. The company has four full-time employees, but also hires “up to 100” part-time employees, depending on the job.

OSHA cited the company for standards violations, including a “serious violation after a catwalk brace fell and injured a worker below.” Allstates did not contest the citation or seek judicial review. Instead, it settled the violation for $5,967 in December 2019.

Allstates’ argument in support of an injunction is straightforward – it claims Congress violated the Constitution by delegating to OSHA the authority to write permanent safety standards. Article I of the Constitution states that “[a]ll legislative Powers herein granted shall be vested in a Congress of the United States.” This principle, known as the “nondelegation doctrine,” prevents Congress from “transfer[ing] to another branch powers which are strictly and exclusively legislative.”

In National Maritime Safety Association v. OSHA, plaintiff claimed that Congress did not provide an intelligible principal to guide OSHA’s promulgation of health and safety standards. 649 F. 743 (D.C. Cir. 2011). The D.C. Circuit flatly rejected the argument:

Thus, Judge Judge Zouhary concluded his opinion by saying that with “no binding or persuasive authority supporting its argument, Plaintiff falls short of demonstrating actual success on the merits. OSHA’s discretion is sufficiently limited. Plaintiff’s Motion is denied; Defendants’ Motion is granted.”

Allstates appealed the dismissal of their case to the United States Court of Appeals for the Sixth Circuit. In doing so, this employer has attracted the attention of the California Attorney General, who just announced that he has joined a coalition of 19 attorneys general in filing an amicus brief arguing against the employer.

His announcement characterizes the employers case as “a cynical attempt to drastically undermine the U.S. Occupational Safety and Health Administration’s (OSHA) ability to establish and enforce federal workplace safety protections.” And an “attempt to unwind more than half a century of legal precedent.”

In addition to the 19 states attorney’s general, the docket for the case in United States Court of Appeals for the Sixth Circuit shows 28 additional entities who have been granted the privilege to file briefs in the case as amicus. Notable amicus includes the American College of Occupational and Environmental Medicine (ACOEM), the Sierra Club, National Safety Council, Buckeye Institute, National Federation of Independent Business, National Association of Home Builders, Pacific Legal Foundation among a growing list of many others.

National Association of Home Builders and the National Federation of Independent Business filed an amicus brief “to help explain the importance of applying a strong nondelegation doctrine.”

They go on to argue that the “nondelegation doctrine has seemingly evolved to a point where it is a virtual dead letter, as then-Professor Kagan wrote. Elena Kagan, Presidential Administration, 114 Harvard L. Rev. 2245, 2364 (2001) (“It is …. a commonplace that the nondelegation doctrine is no doctrine at all”). But serious application of the nondelegation doctrine is necessary to safeguard multiple aspects of the Framers’ constitutional design.”

Court Rejects “Offset” to Injured Firefighter’s Disability Retirement

Nicholas Casson was a firefighter for the City of Santa Ana for 27 years. He took a service retirement in 2012 and immediately began receiving pension payments through California Public Employees Retirement System (CalPERS) of approximately $7,200 per month.

He immediately started a second career with the Orange County Fire Authority (OCFA) where he was eligible for a pension under respondent Orange County Employees Retirement System (OCERS). Importantly, he did not elect reciprocity between the two pensions, which would have allowed him to import his years of service under CalPERS to the OCERS pension. He started as a first-year firefighter for purposes of the OCERS pension and immediately began collecting pension payments from CalPERS.

Five years into the new job, he suffered an on-the-job injury that permanently disabled him. He applied for and received a disability pension from OCERS, which, normally, would have paid out 50 percent of his salary for the remainder of his life.

However, because he was receiving a CalPERS retirement, OCERS imposed a “disability offset” pursuant to Government Code section 31838.5, which is the statute at the center of this appeal. This resulted in a monthly benefit reduction from $4,222.81 to $1,123.87.

After exhausting his administrative remedies, Casson filed a petition for a writ of mandate in the trial court. The court denied the petition, finding that the plain language of section 31838.5 required a disability offset. Casson appealed. The Court of Appeal reversed in the published case of Casson v. Orange County Employees Retirement System – G060950 (January 2023).

This appeal arises from a claim for a service-connected disability retirement (i.e., retirement arising from an on-the-job injury) under a pension governed by the County Employees Retirement Law of 1937, Government Code section 31450 et seq. (CERL).

The parties have presented a single issue on appeal: Does the term “disability allowance” in section 31838.5 include payments under a prior service pension in the absence of reciprocity? This is a pure statutory interpretation issue.

The opinion first answered the question “what is reciprocity?” At the time of retiring from a qualifying job, the employee may elect to defer pension benefits and leave his or her contributions on deposit with the pension plan. (§ 31700.) If, within the applicable timeframes, the employee is employed in another government position with a qualifying pension plan, the employee may elect to link the two pensions in a system of reciprocity. (§ 31831.) The effect of that election is the employee does not receive pension benefits under the first plan until he or he or she retires from the second plan. The advantage to the employee is that he or she enters the second pension plan with the same amount of service credit as the first plan.

Reciprocity is not automatic. An employee must affirmatively elect reciprocity. (§ 31831.) In this case Casson did not.

Government Code section 31838.5 places certain limits on the amount of disability pay a person may receive if he or she has been the beneficiary of multiple CERL retirement plans. OCERS’ argument, which the trial court adopted, is relatively straightforward: section 31838.5, on its face, does not limit its application to reciprocal pensions. Indeed, the word reciprocal is nowhere mentioned in the statute.

Casson takes the view that section 31838.5 only applies to reciprocal pensions.

The court of appeal agreed with Casson and said “Casson did not elect reciprocity. He chose to treat the two pensions as separate. He forwent valuable benefits to do so. The compelling logic of treating the two pensions as one for disability purposes, therefore, simply does not apply. On the contrary, it would be fundamentally unfair to Casson to limit his disability allowance to the equivalent of a single pension when he did not elect the benefits of treating the two pensions as one.”

CMS Rule to Collect $4.7B in Penalties to “Hold Insurers Accountable”

The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), finalized the policies for the Medicare Advantage Risk Adjustment Data Validation program.

The announcement comes on the heels of a report from the Office of Inspector General (OIG) which found that Cigna-HealthSpring of Tennessee’s risk adjustment program payments led to almost $760,000 in overpayments in 2016 and 2017.

This will be the CMS’s primary audit and oversight tool of Medicare Advantage program payments. Under this program, CMS hopes to identify improper risk adjustment payments made to Medicare Advantage Organizations (MAOs) in instances where medical diagnoses submitted for payment were not supported in the beneficiary’s medical record.

CMS’ payments to Medicare Advantage Organizations are adjusted based on the health status of enrollees, as determined through medical diagnoses reported by MAOs.

Studies and audits done separately by CMS and the HHS Office of Inspector General have shown that Medicare Advantage enrollees’ medical records do not always support the diagnoses reported by MAOs, which leads to billions of dollars in overpayments to plans and increased costs to the Medicare program as well as taxpayers.

Despite this, no risk adjustment overpayments have been collected from MAOs since Payment Year 2007. This new rule aims to fix the flaws that have plagued the Medicare Advantage risk adjustment data validation program and that led to overpayment.

The RADV final rule reflects CMS’s consideration of extensive public comments and robust stakeholder engagement after the release of the 2018 Notice of Proposed Rulemaking. The finalized policies will also allow CMS to continue to focus its audits on those MAOs identified as being at the highest risk for improper payments.

The RADV final rule can be accessed at the Federal Register at

“Protecting Medicare is one of my highest responsibilities as Secretary, and this commonsense rule is a critical accountability measure that strengthens the Medicare Advantage program. CMS has a responsibility to recover overpayments across all of its programs, and improper payments made to Medicare Advantage plans are no exception,” said the HHS Secretary. “For years, federal watchdogs and outside experts have identified the Medicare Advantage program as one of the top management and performance challenges facing HHS, and today we are taking long overdue steps to conduct audits and recoup funds. These steps will make Medicare and the Medicare Advantage program stronger.”

However, there will be some pushback about this new rule. The Associated Press reports that insurers have been gearing up for a fight against the long-awaited final rule, with company leaders raising concerns about the accuracy of the audits. The move will raise insurance rates, warned Matt Eyles, the president of America’s Health Insurance Plans, the lobbying arm for health insurance companies.

“Our view remains unchanged: This rule is unlawful and fatally flawed, and it should have been withdrawn instead of finalized,” Eyles said.

The Biden administration estimated Monday that it could collect as much as $4.7 billion from insurance companies with these newer and tougher penalties for submitting improper charges on the taxpayers’ tab for Medicare Advantage care.

Safeway Stores Still Litigating Same Wage Hour Claims – for 21 Years!

The current Wheeler v Safeway Stores case has a lengthy history involving the settlement of two related wage and hour lawsuits following years of litigation, which began in 2001 and includes two prior appeals.

Safeway has managed the operations of a distribution center in Tracy California. Prior to 2003, the distribution center was operated by a third party, Summit Logistics, Inc, for Safeway’s benefit. The plaintiffs in this and related cases are truck drivers who worked out of that distribution center, delivering goods to Safeway stores in Northern California and Nevada.

The terms of the drivers’ employment were governed by successive collective bargaining agreements, which provided for meal periods and rest breaks and specified the manner in which wages were calculated.

Safeway provided its drivers with a “driver trip summary – report of earnings” (ROE) and an “earnings statement” with each paycheck. Safeway instructed the drivers to compare their earning statement and ROE with their trip sheets to ensure that they were paid the correct amount, and to speak with the transportation manager or a payroll clerk if they believed their pay was incorrect.

In two related cases, the plaintiffs in Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 and the plaintiff in Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, brought suit against their former/current employer (Summit/Safeway), alleging violations of statutory and regulatory laws related to meal and rest periods and itemized wage statements. In Cicairos the court of appeal reversed the trial court’s grant of summary judgment in favor of Summit. In May 2013, the court of appeal reversed the trial court’s order denying plaintiff’s motion for class certification in Bluford.

In December 2014, the parties agreed to settle all of the claims alleged in both Cicairos and Bluford. In February 2015, the parties executed a written settlement agreement memorializing the terms of the settlement.

Beginning on June 14, 2015, Safeway implemented certain changes to its rest break practices and wage statements.

Nonetheless, in January 2016, Wheeler and others filed this current wage and hour class action complaint against Safeway, alleging violations of statutory and regulatory laws related to rest periods and itemized wage statements as well as a derivative claim under the unfair competition law. The allegations supporting these claims were similar to the allegations supporting the claims alleged in Cicairos and Bluford.

In this action, the rest period claim is limited to Safeway’s conduct from March 10, 2015, to June 13, 2015–the three-month period from the preliminary approval of the Cicairos/Bluford settlement to the day before Safeway implemented changes to its rest break practices. The wage statement claim is limited to Safeway’s conduct after the preliminary approval of the settlement- – March 10, 2015, to the present. According to plaintiffs, Safeway’s wage statements continued to be inadequate after the settlement was approved. Specifically, plaintiffs allege that the wage statements were deficient because they failed to indicate the rate of pay associated with each task performed.

In December 2018, the trial court granted plaintiffs’ motion for class certification, which, as relevant here, included certification of a subclass of “all current and former Safeway drivers not provided accurate itemized wage statements from March 10, 2015 to the present.”

In October 2020, the trial court granted summary adjudication in favor of Safeway on plaintiffs’ rest period claim. The court explained that, in December 2018, the Federal Motor Carrier Safety Administration determined that California’s meal and rest break rules were preempted under federal law and could not be applied to truck drivers.

In mid-April 2021, in anticipation of trial in early May 2021, Safeway filed two motions in limine. Motion in Limine No. 1 sought to prevent plaintiffs from presenting any evidence or argument regarding wage statements issued to members of the Cicairos/Bluford settlement class on or before October 8, 2015 – the date the judgment incorporating the settlement agreement became final.

Motion in Limine No. 2 sought to prevent plaintiffs from presenting any evidence or argument regarding wage statements issued on or after June 14, 2015. In support of this motion, Safeway argued that such evidence was irrelevant because the wage statements issued during this time period did not violate Labor Code section 226 as a matter of law, and that, in any event, plaintiffs could not establish injury as a matter of law.

Rulings on these motions rulings effectively limited relief on the wage statement claim to current class members who were not members of the Cicairos/Bluford settlement class and were employed by Safeway during the three-month period from March 10, 2015, to June 14, 2015.

Following the trial court’s in limine rulings, the parties agreed to settle the remaining claims. Thereafter, the matter was dismissed pursuant to stipulation. Judgment was entered in December 2021.

Plaintiffs timely appealed challenging the in limine rulings. The court of appeal concluded that the trial court erred and therefore reversed in the unpublished case of Wheeler v Safeway Stores -C095601 (January 2023).

Safeway argued, and the trial court apparently agreed, that section 226, subdivision (a) does not require an employer to explain the basis for how each piece-rate was determined. Rather, it only requires that wage statements include the applicable piece-rate and the number of piece-rate units earned. The court of appeal disagreed with this construction of the statute.

It concluded “that when, as here, an employee is subject to a piece-rate compensation system, the employer must provide the employee a wage statement that clearly explains how their compensation was calculated, including the applicable piece-rate formula for each specific task performed and any other information necessary to calculate the employee’s compensation for that task. Without such information, the core purpose of section 226 – to assist an employee in determining whether he or she has been properly compensated – would not be served.”

WCRI Reports – 7% of Workers with COVID-19 Develop Long COVID

A new study from the Workers Compensation Research Institute (WCRI) found that 7 percent of workers with COVID-19 claims received treatment for long COVID after the acute period of the infection. While long COVID prevalence was the highest among workers who were hospitalized during an acute stage of disease, even some workers with limited medical care early after the infection developed long COVID symptoms.

“While most patients infected with COVID-19 recover quickly, some patients do not return to their usual state of health and experience a wide variety of recurring or new symptoms and complications months after the initial infection period,” said John Ruser, CEO and president of WCRI.

The study, Long COVID in the Workers’ Compensation System Early in the Pandemic, examined the prevalence of long COVID among COVID-19 workers’ compensation claims with infections that occurred in the first months of the pandemic. The study addresses the following questions:

– – How often do workers with COVID-19 receive medical care beyond a short quarantine and/or recovery period?
– – What is the prevalence of long COVID symptoms among workers with COVID-19?
– – What are the industry and worker characteristics associated with long COVID?
– – How do rates of long COVID vary across states?

The analysis includes COVID-19 cases reported with a date of infection between March 1, 2020, and September 30, 2020. For each claim, it collected information on indemnity benefits and payments for medical care that occurred through March 31, 2021.

Bogdan Savych authored this study.

Dept of Corrections Immune From Prisoner-Nurse Based FEHA Claims

Jennifer Bitner and Evelina Herrera were employed as licensed vocational nurses by defendant and respondent California Department of Corrections and Rehabilitation (CDCR).

They filed a class action suit against CDCR alleging that (1) while assigned to duties that included one-on-one suicide monitoring, they were subjected to acts of sexual harassment by prison inmates and, (2) CDCR failed to prevent or remedy the situation in violation of the California Fair Employment and Housing Act (FEHA), Government Code section 12940 et seq.

The trial court granted summary judgment in favor of CDCR on the ground that it was entitled to statutory immunity under Government Code section 844.6, which generally provides that “a public entity is not liable for . . . [a]n injury proximately caused by any prisoner.” (§ 844.6, subd. (a).)

The Court of Appeal affirmed the dismissal in the published case of Bitner v Dept of Corrections – E078038 (January 2023).

Plaintiffs appeal, arguing that, as a matter of first impression, the court should interpret section 844.6 to include an exception for claims brought pursuant to FEHA. Plaintiffs also argue that, even if claims under FEHA are not exempt from the immunity granted in section 844.6, the evidence presented on summary judgment did not establish that their injuries were proximately caused’ by prisoners. The Court of Appeal disagreed with both of these arguments.

To the extent plaintiffs argue that section 844.6 is ambiguous because FEHA contains express statutory provision imposing liability on public entities, any ambiguity is easily resolved in light of well-established cannons of construction.

When the language of a statute is clear, courts need go no further. In this case the opinion concluded that “the plain meaning of the statute’s words is clear and unambiguous.

When faced with conflicting statutes providing for governmental immunity and liability, the statute providing immunity will prevail in the absence of any clear indication of a contrary legislative intent.

To the extent there is any doubt on this point, the California Supreme Court’s decision in Caldwell v. Montoya (1995) 10 Cal.4th 972 (Caldwell) is dispositive. In Caldwell, our Supreme Court considered and rejected the argument that FEHA claims should be exempt from the statutory immunity set forth in section 820.2, which provides public employees immunity for discretionary acts.

Plaintiffs attempt to factually distinguish Caldwell by arguing that the case addresses immunity of public employees under a different statute. However, a similar argument was considered and rejected in Towery v. State of California (2017) 14 Cal.App.5th 226, 231-232

Santa Ana Man Convicted for $152M Tainted Prescription Drug Sales

A federal jury convicted 58 year old David Jess Miller, who lived in Santa Ana, and his company, Minnesota Independent Cooperative (“MIC”), of a wide array of charges relating to the unlicensed and fraudulent distribution of prescription drugs. The verdicts were handed down after a two-week trial before the Hon. Charles R. Breyer, Senior U.S. District Judge.The trial was the result of indictments filed in two separate districts – the Northern District of California and the Southern District of Ohio.

The convictions included charges handed down in a second superseding indictment by a grand jury in the Northern District of California on February 11, 2016, and by a separate indictment handed down on May 6, 2015, in the Southern District of Ohio. Both indictments involved additional defendants and charges that were not presented at the trial.

The evidence at trial established that Miller, was at the center of a vast racketeering enterprise responsible for the fraudulent distribution of hundreds of millions of dollars’ worth of diverted prescription drugs, including instances in which Miller and his co-conspirators distributed tampered medication that posed a health risk to consumers. The scheme targeted brand-name prescription drugs designed to treat HIV, hepatitis C, mental disorders, and various other serious conditions.

Miller and MIC lied to their customers about the nature and sources of the prescription drugs being sold, falsely claiming that the drugs had been maintained in the safe, federally and state-regulated supply chain.

The evidence at trial established that Miller and his company agreed with many others, including Mihran Stepanyan, 37, and Artur Stepanyan, 45, to conduct the affairs of their wide-ranging and long-lasting criminal enterprise.

The evidence established that the enterprise, operating primarily out of Southern California and Minnesota, was responsible for distributing diverted prescription drugs to unsuspecting pharmacies throughout the county.

In finding Miller guilty, the jury concluded that he played a role in promoting the racketeering conspiracy. For example, as the owner and operator of MIC between 2007 and 2015, Miller bought approximately $157 million of diverted prescription drugs from codefendants Mihran Stepanyan and Artur Stepanayan. Miller and MIC also knew that the Stepanyans were not licensed to sell prescription drugs and that the Stepanyans procured their drugs from street suppliers. Miller and MIC nevertheless purchased the diverted drugs from the Stepanyans and lied to their customers about the sources and nature of those drugs.

Further, the jury concluded Miller engaged in a money laundering conspiracy. The evidence established that Miller and others laundered hundreds of millions of dollars between approximately 2007 and 2015 to promote their criminal activities and to conceal the nature of their scheme.

For example, to hide the fact Miller was paying the Stepanyans for the illegally sourced drugs they were distributing, Miller made payments to the Stepanyans’ company GC National Wholesale through companies in Puerto Rico he controlled. As to another supplier, Miller authorized payments to accounts held in the names of various front companies at banks in multiple countries. In this way, Miller and his co-conspirators sought to obscure the illicit sources of MIC drugs and to conceal the true identities of the suppliers.

In sum, at the conclusion of the trial, Miller was convicted of one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit mail, wire, and bank fraud, in violation of 18 U.S.C. § 1349; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); ten counts of mail fraud, in violation of 18 U.S.C. § 1341; and one count of conspiracy to engage in the unlicensed wholesale distribution of drugs and making false statement to the FDA, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(2)(A), and 18 U.S.C. § 371.

Miller remains out of custody pending sentencing. Miller faces a maximum statutory term of life in prison; however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The Stepanyans and 38 other defendants have pleaded guilty to their respective roles in the conspiracies.

“The illegal conduct of David Miller was reprehensible,” said FBI Special Agent In Charge Robert Tripp. “He and his co-conspirators undermined safeguards designed to protect the public, reintroduced diverted prescription drugs into the supply chain, and compromised patient safety for personal gain.”

The prosecution is the result of an investigation by the FBI, the IRS, the FDA, and USPIS. The United States Attorney’s Office notes the extraordinary contributions and commitment of IRS-CI Special Agent Bryan Wong in this case.

Federal Judge Enjoins Controversial California COVID Misinformation Law

Senior United States district judge of the United States District Court for the Eastern District of California, William B. Shubb, granted a request for a preliminary injunction, made by a group of California physicians, against enforcement of AB 2098 – a controversial law that placed the severe restrictions on physicians against providing “misinformation” about COVID-19 to their patients.

It was signed into law on September 30, 2022, and codified at Cal. Bus. & Prof. Code § 2270 and was effective January 1, 2023. This law empowers the Medical Board of California and the Osteopathic Medical Board of California to discipline physicians who “disseminate” information about Covid-19 that departs from the “contemporary scientific consensus.”

The statute provides that “[i]t shall constitute unprofessional conduct for a physician and surgeon to disseminate misinformation or disinformation related to COVID-19, including false or misleading information regarding the nature and risks of the virus, its prevention and treatment; and the development, safety, and effectiveness of COVID-19 vaccines.”

Plaintiffs are five physicians, licensed to treat patients in the state of California. Last November they filed a lawsuit in the Federal District Court in the Eastern District of California alleging that AB 2098 violates their First Amendment rights to free speech and expression, their patients’ First Amendment rights to receive information from them, and their Fourteenth Amendment rights to due process of law.

Section 1 of AB 2098 lays out the ostensible justification for the bill including that the spread of misinformation and disinformation about Covid-19 vaccines has weakened public confidence4 and placed lives at serious risk; and that “major news outlets” have reported that health care professionals are “some of the most dangerous propagators of inaccurate information regarding the COVID-19 vaccines.”

Section 2 deems it “unprofessional conduct for a physician and surgeon to disseminate misinformation or disinformation related to COVID-19, including false or misleading information regarding the nature and risks of the virus, its prevention and treatment; and the development, safety, and effectiveness of COVID-19 vaccines”

“Misinformation”is defined as “false information that is contradicted by contemporary scientific consensus contrary to the standard of care. ” However Judge Shubb pointed out that the “Act neither defines nor provides guidance for determining the meaning of ‘contemporary scientific consensus.’ “

AB 2098’s sponsor, the California Medical Association, argued that this law is needed because of physicians who “call into question public health efforts such as masking and vaccinations.”

In his Order Granting a Preliminary Injunction Judge Shubb pointed out that the Supreme Court of the United States has stated that “the Constitution protects the right to receive information and ideas,” which “is an inherent corollary of the rights of free speech and press that are explicitly guaranteed by the Constitution.”

Having determined that plaintiffs have standing to bring this action, the court considered whether they have demonstrated a likelihood of success on the merits, a requirement for issuing a preliminary injunction.

Plaintiffs contend that the law’s definition of “misinformation” is unconstitutionally vague under the Due Process Clause of the Fourteenth Amendment. A statute is unconstitutionally vague when it either “fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.”

The operative question under the fair notice theory is whether a reasonable person would know what is prohibited by the law. Vague statutes are particularly objectionable when they “involve sensitive areas of First Amendment freedoms” because “they operate to inhibit the exercise of those freedoms.”

Judge Shubb pointed out that the “Defendants provide no evidence that “scientific consensus” has any established technical meaning; the expert declarations they offer are notably silent on the topic.”

In Forbes v. Napolitano, 236 F.3d 1009, 1010 (9th Cir. 2000), amended, 260 F.3d 1159 (9th Cir. 2001) the Ninth Circuit considered a vagueness challenge to a law prohibiting medical “experimentation” or “investigation” involving fetal tissue from abortions unless necessary to perform a “routine” pathological examination.

In that case the terms “investigation” and “routine” were problematic because multiple common definitions could apply in the medical community, which “[lacked] any official standards to help” define the terms. Id. at 1012. The Ninth Circuit reasoned that because the contested terms lacked sufficiently clear, commonly understood definitions in the medical community, and the statute failed to provide narrowing definitions, the statute was unconstitutionally vague. The lack of definitional clarity failed both to give doctors fair notice of what conduct was prohibited, and to give courts and law enforcement sufficient standards by which to narrow the terms’ meanings.

Judge Shubb then wrote that like the contested terms in Forbes, “contemporary scientific consensus” lacks an established meaning within the medical community, and defendants do not propose one. At oral argument, defense counsel declined to explain what specific conduct the law may prohibit, arguing that application of the law is highly fact-specific.

He went on to say that Courts have based their understanding of scientific consensus on a wide range of sources, including U.S. professional organizations, international professional organizations, state and federal courts, U.S. scientific studies, international scientific studies, various federal agencies, and the state of California.

And because the term “scientific consensus” is so ill-defined, physician plaintiffs are unable to determine if their intended conduct contradicts the scientific consensus, and accordingly “what is prohibited by the law.”

Because plaintiffs have “established a likelihood of success on the grounds of their Fourteenth Amendment vagueness challenges,” the court did not address the merits of their First Amendment arguments.

Agile Occupational Medicine and Pinnacle HealthCare Announce Merger

Agile Occupational Medicine announced that it had completed its merger with Pinnacle HealthCare. The combined practices provide 14 clinics throughout California and Yuma, Arizona, creating the fourth-largest occupational medical group in California.

Pinnacle Healthcare was founded in 1999 with the goal of providing high-quality medical care for non life-threatening situations, as well as occupational medicine options and urgent care.

According to its website “Hundreds of employers in Salinas, CA, Monterey, San Benito, Santa Cruz, and Merced counties choose Pinnacle Healthcare to be their sole provider in treating and managing employee and workplace health needs.”

Agile currently has fourteen clinics that it says is strategically located to achieve its goal of serving a majority of employers throughout California.

Agile focuses on forming partnerships with local businesses to ensure that the medical needs of local employees are addressed. From DOT physicals and drug screenings to workplace injury treatment, Agile offers a wide range of occupational health programs that help employers maintain a healthy and safe workforce while providing cost-effective health care for companies and employees.

After this merger, the two combined companies say they will be the “fourth-largest occupational medical group in California.”

The Agile Founder and CEO said “Agile and Pinnacle share a common vision of delivering the highest quality care and support to injured workers and employers. Coming together under a single company will allow us to partner in that effort and provide better services to a larger audience throughout California and southwest Arizona. Our teams have worked together on strategic initiatives in the past, and through those processes, have developed a shared vision for improving medical care in the workers’ compensation market to support employment-related health services better.”

“Joining Agile is a big win for Pinnacle. We have built a quality clinic group over the past 20 years, and Agile brings the funding and enterprise platforms that allow us to expand significantly going forward,” said Ernesto Alvero, PA, former CEO of Pinnacle who will serve as the Senior Vice President of Clinic Operations for Agile. “We see this as two great companies coming together to form greater value than the sum of the parts. It’s a real win for both organizations and our customers.”