The Modern Public Square

This week brought us another unanimous U.S. Supreme Court case that’s arguably more important because it concerned the First Amendment.

The issue was a North Carolina law that made it a felony for registered sex offenders to use any social-networking site that lets minors join. So to be clear, that’s any social-media site, period, that lets minors join. That meant Facebook, LinkedIn, Twitter, or pretty much any other social-media site. The law was even broad enough to include websites like Amazon, WebMD, and the Washington Post. So you almost couldn’t use the Internet.

The defendant was one of more than 1,000 people who’ve been prosecuted under the law. In 2002, when he was 21 years old, he had sex with a 13-year-old girl, and he was charged with it. He pleaded guilty to it and registered as a sex offender. Then the law passed in 2008.

In 2010, he happened to get a traffic ticket dismissed in court, whereupon he logged on to Facebook and posted this to his timeline: “Man God is Good! How about I got so much favor they dismissed the ticket before court even started? No fine, no court cost, no nothing spent … Praise be to GOD, WOW! Thanks JESUS!”

He was indicted for that.

He moved to dismiss on the ground that the law violated the First Amendment, but the trial court denied it. He was convicted at trial and given a suspended prison sentence.

The court of appeals agreed with him, finding that the law violated the First Amendment.

But the state supreme court reversed, finding the law “constitutional in all respects.”

The high court, however, unanimously reversed. After all, the law plainly applied to websites like Facebook, LinkedIn, and Twitter and likely others as well. Facebook itself had 1.79 billion active users—or three times the population of North America.

The Court called these sites “integral to the fabric of our modern society and culture.” They had become our main sources for sharing current events, participating in the public square, and exploring human thought and knowledge. To foreclose access to them was to foreclose the legitimate exercise of First-Amendment rights.

Yes, a state could pass specific, narrowly-tailored laws that regulate the type of conduct that portends crime, like contacting a minor or using a website to gather information about one.

But it couldn’t just cut people off from the public square.

White-Collar to Blue-Collar in One Day

Last week, the U.S. Supreme Court issued two notable decisions on the same day.

One was a civil white-collar case, the other a criminal drug-trafficking case, and in both cases, the Court reversed the lower-court ruling on appeal.

In the civil case, the Court imposed a five-year statute of limitations on SEC cases that seek to disgorge profits. That’s the same period that applies in cases to enforce a fine, penalty, or forfeiture. Although disgorgement of profits is traditionally a form of restitution that’s measured by a defendant’s wrongful gain, the Court ruled that it’s a penalty in SEC cases for a couple reasons. First, the agency uses it to deter and punish defendants as much as to compensate victims. Sometimes, the money goes to Uncle Sam, and sometimes, the only victim is the public at large. Second, the agency often disgorges more than defendants have gained, leaving them worse off than before they broke the law. That may be the point, but that makes it a penalty.

In a footnote, the Court even seemed to call into question whether courts could order disgorgement at all. That’s something they’ve been doing since the 1970s, so it’s a big deal. For more in-depth analysis of this decision, see here.

In the criminal case, the Court reined in the government’s forfeiture power. Forfeiture allows the government to seize money or property that’s derived from a crime. But the law limits this to what someone actually and personally receives or obtains. That means you can’t be responsible for amounts obtained by someone else. So the hypothetical college student who gets $500 per month to drop off a few packages isn’t on the hook for the whole multimillion-dollar drug enterprise.

Here, two brothers worked in a hardware store together. One of them owned the store, and the other was a salaried employee. The two were charged with selling large amounts of a product they knew or had reason to know was being used to make meth. In three years, the store grossed about $400,000 from selling the stuff and netted $270,000.

The government wanted the $270,000 in profits. The owner agreed to forfeit $200,000 of it when he pleaded guilty, but the employee went to trial. He was acquitted of three counts, convicted of eleven, and sentenced to sixty months in prison. Then the government went after him for the remaining $70,000.

Although the government agreed that the employee had no ownership interest in the store and didn’t personally benefit from the illicit sales, it argued that, in a conspiracy, everyone is responsible for the full proceeds of the conspiracy. And it won that argument on appeal.

But the Supreme Court rejected that and reversed.

 

Judge Not, Lest We Be Judged

If you’re still not sold on the power of redemption, I may not be able to sway you.

But consider this guy. He committed a carjacking at 16 and spent eight years in prison for it. Today, at 35, he has a wife, two bouncy sons, and now, a law degree from Yale. He just graduated last month. I guess it’s good we didn’t throw away the key.

His story reminded me of three quotes I saw recently. They each spoke to why we should treat people humanely in our justice system. I saw them in the email signature of a defense lawyer in Texas, and while he and I have never met, I think they say something positive about him, too. If you need a lawyer in his neck of the woods, look him up.

I especially liked how the quotes were attributed to three very different people. An itinerant lawyer and activist. An influential computer scientist. An acclaimed writer and novelist.

Three different walks of life, but they seemed to agree on some things.

  1. Freedom is not worth having if it doesn’t include the freedom to make mistakes.”
  2. “Good judgment comes from experience, and experience comes from bad judgment.”
  3. “Sometimes you make choices in life and sometimes the choices make you.”

Great quotes, all. You live and breathe long enough, you know them to be true.

A Model Penal Code for the 21st Century

Charging decisions, which we wrote about last week, matter for many reasons. They drive plea bargains, and they affect sentencing. You file a felony, for example, so that the guy will plead to a misdemeanor without giving you much trouble. It happens all the time.

Bad charging decisions, though, don’t just cause wrongful convictions or unjust sentences.

They cause other consequences that continue to torment you after you’ve served your sentence. Your actual sentence may include your jail or prison time, the fines you must pay, or the terms of probation you must follow. You did the crime so you should do the time and pay the fine, right? Okay, but then even after you do, you still may not be able to cast a vote, land a job, rent a home, hold a license, or get a loan. These are the so-called collateral consequences of a conviction.

But the future may be brighter.

Last week, the American Law Institute approved major changes to the Model Penal Code to address these consequences. The ALI is the leading scholarly body that aims to clarify, modernize, and otherwise improve American law. The Model Penal Code is its seminal work in the area of criminal law. It doesn’t have the force of law by itself, but it’s influential. Most states have used it in passing their own laws, and courts cite to it often.

The new provisions would require you to prove, by clear and convincing evidence, that a collateral consequence of your conviction imposes a heavy burden on your ability to rejoin society and that public safety doesn’t need you to suffer it.

If you do that then a court could relieve you from that burden. A court could even issue a certificate of rehabilitation that shields employers, landlords, or others who give you a second chance from civil liability.

Already, state legislatures have been proposing and passing laws to give people a fair shake to prove themselves before dismissing them based on the past.

Hopefully, that momentum keeps building. We should consider what it means to have a record, anyway, when most people either have one, know someone close to them who does, or would have one but for the grace of God. And we should consider how we judge people altogether in a world in which our every action can leave a permanent trace.

The twenty-first century may demand it.

The New DOJ Policy on Charging Decisions

Two weeks ago, the new U.S. Attorney General announced a new policy for charging and sentencing in criminal cases. Although the policy targets drug cases in particular, it applies to all federal prosecutions.

You can break it down into three parts.

First, prosecutors should file the “most serious, readily-provable” charges in each case. The most serious charges are those that carry the stiffest sentence, including any mandatory-minimum sentence. To deviate from this policy, prosecutors must get approval from a supervisor, document their reasons for it, and be able to point to “unusual facts.”

Second, in most cases, prosecutors should seek a standard sentence under federal sentencing guidelines. If they want to deviate from the guideline sentence, they must get supervisory approval and document their reasons in the file.

Third, prosecutors should discard inconsistent policies of the prior administration. Under prior policy, prosecutors still charged the most serious offense that was consistent with a defendant’s conduct and likely to yield a solid conviction. But they were also encouraged to evaluate cases individually to decide which charges to file, and they were told to seek sentences that were fair and proportional under all the circumstances.

In particular, prosecutors now must ignore two prior policies that tried to reduce harsh sentences in low-level, nonviolent drug cases. Under one policy, they were not to charge a specific drug quantity if it triggered a mandatory-minimum sentence, and they were to avoid charging prior drug convictions that doubled the minimum sentence or put someone in prison for life. We wrote about this before here. Under the other policy, they could not threaten to charge such priors just to force you to plead guilty. I guess that’s fair game now.

The new policy has sparked criticism across the spectrum. Lawmakers from both parties have railed against it. One former U.S. Attorney decried its “stunning lack of faith” in line prosecutors. A coalition of state and local prosecutors has published an open letter against it. And the National Association of Criminal Defense Lawyers had this reaction:

“This Attorney General has taken away the discretion of professional prosecutors to determine what sentence serves justice in any given case. Instead, prosecutors are now required in every case mindlessly to seek the maximum possible penalty…. This policy will lock up non-violent offenders with little or no criminal history, waste untold millions of dollars, devastate families and whole communities, and yet not make us any safer.”

When Medicare Says You Can’t Sit With Us

Earlier this year, the U.S. Department of Health and Human Services issued new regulations on its power to exclude healthcare providers and suppliers from participation in a federal healthcare program. The agency excludes some 3,500 people or entities per year. You’ll want to avoid being one of them.

Here are some important takeaways.

The agency is empowered to cast a wider net. It may exclude not just the providers and suppliers who submit claims or receive payments but any person or entity that furnishes items or services for which others request or receive payment.

You can be excluded if you’re convicted of interfering with an audit. The agency doesn’t define the term “audit” for this purpose. Before, you had to have obstructed a criminal investigation, not just an audit or the like. The new rule also makes changes to the factors that extend or reduce the presumptive three-year exclusion under this provision.

You can be excluded for not providing information to support a claim even if you didn’t furnish the items or services in question. You can be excluded if you referred the items or services to others to furnish or certified that they were needed.

The agency has ten years to exclude you for false claims or illegal kickbacks. This timeframe follows the outer ten-year statute of limitations for violations of the False Claims Act. Before, there was theoretically no limit on how far back the agency could look to exclude you under these provisions.

The rule makes several changes to the aggravating and mitigating factors that extend or reduce the length of exclusions. Most of these changes affect the dollar-loss thresholds. For example, it’s now aggravating if the government’s loss amounts to $50,000 or more, when it used to be $15,000. And it’s mitigating if the loss is less than $5,000 when it used to be $1,500. Or, for excessive or unnecessary billing, it’s aggravating if the loss is $15,000 or more when that threshold used to be $1,500. Also, in most cases, it’s no longer mitigating if you provide access to care that’s otherwise not available in your area. Instead, the agency will consider that in deciding whether to exclude you rather than for how long.

You may be eligible for early reinstatement. You can request it if you were excluded because your professional license was revoked, suspended, or surrendered in a disciplinary investigation. There’s a presumption against it for the first three years that you’re excluded or for the length of your suspension or revocation, whichever is longer. There’s no such presumption if you’re still licensed in a different state or by a different licensing authority or if you were able to get a new license after full disclosure. But you’re not eligible at all if you lost your license because of patient abuse or neglect.

CMS Puts Out New Physician Self-Referral Disclosure Protocol

If you’re a healthcare provider or supplier, take note.

Starting June 1, 2017, there is a new process for self-reporting actual or potential violations of the Stark Law to the Centers for Medicare & Medicaid Services.

Remember, Stark says that doctors can’t refer certain, designated health services that are payable by Medicare or Medicaid to entities in which they have a financial interest. The same goes if an immediate family member is the one with the financial interest. The entity that receives the referral can’t bill for those services, either. But exceptions apply.

Why in the world would you self-report? Well, if there is discretion to keep you in the program, your cooperation will go a long way. You’ll pay less in penalties. You’ll reduce or eliminate your liability for not reporting and returning the overpayments sooner. And you’ll probably put the matter behind you more quickly than if the government gets wind of it.

Now, there’s a new way to do it. Up to this point, you would submit your self-disclosure to CMS by letter. From June 1, you must submit a packet of forms and enclosures that you certify. You should submit all information necessary for the agency to analyze the actual or potential violation. You may also submit a cover letter with additional, relevant information.

You’re well-advised not to do any of this without appropriate counsel.

The new protocol doesn’t apply to non-Stark-related disclosures of potential fraud, waste, or abuse involving a federal healthcare program.

So if you wish to disclose actual or potential violations of other laws like the Anti-Kickback Statute, you should use a separate process for it.

After you talk to your lawyer.

 

When It Sounds Too Good To Be True

Last week, it was the SEC; this week, it’s the FTC or Federal Trade Commission. That’s the agency that, among other things, enforces federal laws against unfair or deceptive business acts or practices, including false advertising.

So what happened?

The FTC settled a lawsuit against a chiropractor who sold a “breakthrough” weight-loss system for $1,895 a pop. He also licensed and franchised the system to other chiropractors and professionals to sell.

Although the defendant didn’t admit or deny the allegations, he agreed to stop making the following claims about his system:

  1. That you could lose twenty to forty pounds, or more, in forty days.
  2. That you could do that safely and without cutting calories or exercising.
  3. That you could burn between 2,000 and 7,000 calories per day.
  4. That you could treat diabetes, psoriasis, and other conditions.

I’m no doctor, but as far as I know, it’s not possible to lose that much weight or burn that many calories without starving yourself or exercising like you’re on meth. According to the complaint, the people who bought the system were told—only after the fact—to eat about 500 calories per day. To put that in perspective, the bowl of cereal you had this morning was at least 200 calories. Good luck getting through the rest of the day.

The defendant also agreed to pay $2 million in refunds; to pay $30 million more if he violates the settlement agreement; to stop presenting friends, relatives, or business partners as satisfied customers who endorsed his system; and to stop using a non-disparagement clause in his contract that punished people for criticizing the system.

Buyer, beware: All that glitters ain’t gold, and there’s no substitute for good nutrition, exercise, and sleep.

SEC Lights Up Another Cannabis Company

In what may be a sign of maturity for the industry, the Securities and Exchange Commission has sued another marijuana-related business for violating federal securities laws.

Last month, the SEC charged a California-based company and two former executives with a classic pump-and-dump scheme. First, the Commission says, the defendants touted phony revenue to drive up the price of the company’s stock. Then they unloaded their own shares for millions of dollars. According to the complaint, much of the revenue came from a series of sham transactions with a shell company that the executives controlled. So the SEC charged them with fraud as well as offering and selling unregistered securities.

The company and one of the executives have settled the case without admitting or denying liability. The executive agreed to pay more than $12 million, among other penalties.

Meanwhile, the company has turned over a new leaf, so to speak, overhauling its management, business model, and board of directors.

The SEC will continue to scrutinize the market, however, which highlights something cannabis companies should already know: get your ducks in a row, and run your business the right way.

Puff and pass if you want, but don’t pump and dump.

Back to Basics, Again.

Speaking of the U.S. Supreme Court, we shouldn’t have to rely on the country’s highest court to decide some questions correctly. But we do.

This week, the Court issued a friendly reminder about the presumption of innocence.

If you’re convicted of a crime, but your conviction is overturned on appeal, and there won’t be a retrial, the government has to return any money that you paid toward fines, fees, or restitution because you’re presumed innocent again. You’re presumed innocent until you’re proven guilty beyond a reasonable doubt in a fair trial where the verdict holds up. Until then, the government can’t make you prove your innocence to get your money back.

Here’s what happened. In two separate cases, a man and woman were convicted at trial, and they were ordered to pay fines, fees, and restitution as a result. Then both had their convictions reversed on appeal. One was retried but acquitted. The other wasn’t retried because the state dropped the case.

With the charges dismissed, the defendants asked for their money back, but they lost in the state courts because a new state law required them to sue for their money and prove their innocence by clear and convincing evidence.

But that can’t be right, and it wasn’t. Without a conviction, the state had no right to their money, and under the Due Process Clause of the U.S. Constitution, it couldn’t shift the burden of proof to them to prove their innocence.

Good for them that the court of last resort got it right.

But that court hears fewer than two percent of all potential cases each year. And it wouldn’t have heard these cases, either, if it weren’t for a pro bono clinic at the UCLA School of Law.

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