Medical Board Metes Out Discipline Based on a Police Report

If you’re a doctor or other licensed healthcare professional in California, remember. Your board or agency can discipline you for alleged conduct in a police report even if you’re never charged with or convicted of anything.

Just this week, the California Court of Appeal ruled that the medical board could discipline a doctor based on a police report even though his criminal case was dismissed.

Here’s what happened. The doctor was arrested for possessing cocaine. As part of his plea deal, he successfully completed a drug treatment program, and the case was dismissed. But the medical board learned of the arrest and filed its own case against him. At the hearing, the doctor argued the board’s case was based entirely on the arrest report, which was a problem because the Penal Code said you can’t do that.

The case pitted two statutes against each other. On one hand, the Penal Code says that when you complete a program like the one this doctor did, your arrest record can’t be used “in any way” to deny you a professional license or certificate. But the Business and Professions Code says that, “notwithstanding any other provision of law,” an agency that oversees the healing arts can do just that. It can rely on an arrest report to discipline you even if you successfully completed such a program.

It wasn’t the first time this question had come up, but remarkably, it was an issue of first impression in the law, meaning it was the first time a court of appeal had to decide it.

The court, though, had no trouble deciding that the second statute was a straightforward exception to the first one. The clincher was that the Penal Code was amended this year to make that interpretation explicit. So the doctor lost.

In these cases, you should begin to defend your professional license and livelihood at the same time you begin to defend against a criminal case or investigation. Which is immediately. We can help you do both.

New Year’s Resolutions

Speaking of compliance, here are two businesses that ended the year resolving charges they violated U.S. trade sanctions by dealing with blocked countries, people, or entities.

Both cases show how the government enforces its sanctions regime, and they illustrate how an ounce of prevention can beat a pound of cure. Both cases were brought by the Office of Foreign Assets Control, or OFAC, which is an agency within the Department of Treasury.

The first case concerns a dental-supply company that agreed to pay $1.2 million to settle charges that it violated the Iranian Transactions and Sanctions Regulations. The government alleged that, from the end of 2009 through the middle of 2012, the company exported 37 shipments of dental equipment to distributors in other countries knowing, or having reason to know, they would end up in Iran.

According to the government, it wasn’t an egregious case because the exports were likely eligible for a license if the company had only applied for one. But it didn’t, and that ended up costing it a lot more on the back end.

The second case concerns a luxury-goods company that agreed to pay $300,000-plus to settle charges that it violated the Foreign Narcotics Kingpin Sanctions Regulations. The government alleged that, from October 2010 to April 2011, the company exported four shipments of jewelry to a Hong Kong entity that was on OFAC’s list of blocked persons and interests. The blocked entity’s name and address squarely matched those of the ship-to party, but the company didn’t flag the transaction before shipping the goods.

According to the government, this wasn’t an egregious case either, but if you add up the settlement costs and legal fees, it sure does eat into the margin.

The Most Patriotic Thing

Here’s a gift for the holidays: James P. Gray relentlessly arguing against drug prohibition as he has for twenty-five years now. He calls it the best thing, the most patriotic thing, that he can do for his country.

If you don’t know Jim Gray, you should. He’s a former state judge from Orange County, California who used to be a Republican, now is a Libertarian, and ran for the Vice-Presidency of the United States in 2012. He’s also a national treasure. He served in the Peace Corps after college, the Navy JAG Corps after law school, and the U.S. Attorney’s Office after that. As a federal prosecutor, he handled some of the major drug cases of his day, and as a trial judge, he presided over the drug cases that flooded his courtroom. He saw the system from every perspective, and his experiences changed him.

Way before it was popular to say so, especially in Orange County, Judge Gray held a press conference to criticize the war on drugs. It was 1992, and he may have been the first sitting judge ever to do so. He risked his career and reputation in doing so, but he was right then as he is now. Most of the problems we associate with drugs, he says, are drug-prohibition problems, not drug-use problems.

“Drug prohibition is the biggest failed policy in the history of the United States, second only to slavery. And if you listen, regardless of what your interests are—I will tell you, regardless of what that is—be it education, healthcare, crime, terrorism, or the environment—I will show you to your satisfaction how it is made worse by our policy of drug prohibition.”

 

SEC Chair Offers Advice on Bitcoin and Its Ilk

This week, the chair of the U.S. Securities and Exchange Commission weighed in on crypto-currencies as well as ICOs or initial coin offerings. With the price of bitcoin nearing $20,000, it probably comes at the right time. You may have been wondering yourself: What are the rules for this stuff? Are they being followed? And what are the risks in these markets?

Here is a summary of his advice for both Main Street and Wall Street.

For Main Street

These are the folks at home who may be tempted to jump on the bandwagon.

  1. Understand that, for now, it’s the Wild West out there. The SEC hasn’t approved any crypto-currency-related funds or products for listing and trading, and no one has registered an ICO with the Commission. Don’t let anyone today tell you otherwise.
  2. Do your homework. If you choose to invest in these things, ask plenty of questions and demand clear answers. The Chair’s statement includes a list of sample questions to consider. Be especially careful if a pitch sounds too good to be true or you’re pressured to act quickly.
  3. Understand that these markets cross borders, so your money may travel overseas even without your knowledge. Once there, you may not ever be able to get it back.

For Wall Street

These are market professionals like brokers, dealers, lawyers, advisers, accountants, and exchanges.

  1. Although ICOs can be effective ways to raise money, you have to follow the securities laws if it constitutes an offering of securities. So ask yourself: Is this offering a security? Is it an investment contract? Is it, in other words, an investment of money in a pooled venture that expects to derive profit from the efforts of others? If you’re not clear on this then you need a lawyer because the Commission will look past the form of a transaction to its substance. So just calling it a currency doesn’t settle the question. We blogged recently about this fact-intensive inquiry here.
  2. If you handle transactions in crypto-currency, you should treat them as if cash were being handed from one party to the other. You should know your customer and mind anti-money-laundering laws whenever you allow payments in crypto-currencies, allow their purchase on margin, or otherwise use them to facilitate securities transactions.

New DOJ Policy on Foreign Business Bribery

On the eve of the fortieth anniversary of the Foreign Corrupt Practices Act, the Justice Department has unveiled a policy that strongly encourages businesses to self-report any violations to the government on their own.

Those that do can presume that the government won’t prosecute them criminally as long as they fix the problem timely and cooperate fully. That’s probably good for shareholders and boards of directors, among others, but less so for managers, executives, or foot soldiers who get thrown under the bus.

The new policy was announced last week at a conference on the FCPA. It’s been added to the official policy manual for federal prosecutors. It takes most parts of the government’s recent pilot program and makes them permanent.

What does it mean to self-report voluntarily, cooperate fully, and remediate timely? It means a company must report a violation promptly and before the government gets wind of it. Also, it must share everything it knows about anything and anyone involved. Then it must create a sound compliance program based on its size and resources. And it must return all the money or property that’s subject to restitution, forfeiture, or disgorgement.

The government may still prosecute if aggravating factors make the business more culpable. That may happen, for example, if executive management was involved, or the conduct was widespread, or the company made a lot of money from it, or it’s happened before.

But even then, if the business has voluntarily self-reported, fully cooperated, and timely remediated, the government will recommend a criminal fine that’s at least 50% lower than it otherwise might be (unless the business is a repeat offender). Also, if the business has created an effective compliance program, the government likely won’t require the appointment of an outside monitor.

Finally, if a business doesn’t self-report but later cooperates and remediates fully, the government will recommend a fine that’s at least 25% lower than it otherwise might be.

Reasonable Minds Can Differ

But they will usually find more to agree on.

Case in point: this short interview with the junior U.S. senator from Utah.

He’s considered one of the more conservative members of Congress, but he’s also part of a bipartisan group that’s pushing to reform our criminal justice system.

As a former federal prosecutor, he’s asked how he feels about the justice system and what’s changed for him over time.

He points to one case in particular that, presumably, he didn’t charge. The defendant was a man with two young children. He sold very small amounts of marijuana to an informant three times. He also owned a gun at the time, though he didn’t use it or brandish it during any of the sales. Based on those facts and the way he was charged, the man received a mandatory sentence of 55 years.

Even the sentencing judge openly criticized the sentence, but he wrote that his hands were tied under the law. He also said that it was a problem only Congress could fix.

The senator remembered those words when he got to Congress, and now he’s trying to do something about it.

Why is he doing this when he’s supposed to be a conservative Republican? That’s exactly why he’s doing it, he says.

DOJ Will Clear Out Weak Qui Tam Cases

In a surprise announcement, the U.S. Justice Department says it will start moving to dismiss weak whistleblower cases brought under the False Claims Act rather than let them run their course. The announcement was made at a recent conference by the Director of Commercial Litigation for the Fraud Section of the Department’s Civil Division. I wasn’t at the conference, but this gentleman was, and he sheds light on the new policy.

Up to this point, the government has let whistleblowers litigate cases on their own even when it didn’t think they were any good. As we’ve explained before, the government always gets a first look at these cases. If it likes what it sees, it will take over the case and throw its weight behind it. If it doesn’t, it will decline to intervene but allow the case to proceed if the whistleblower (and his or her lawyers) is willing to do the work. Often, the government’s decision not to intervene will prompt whistleblowers to dismiss the case themselves. But now, it seems, the government will sometimes make that decision for them.

Don’t Keep The Change, Doc

Meaning, don’t just pocket the difference when the government overpays you for healthcare goods or services.

Recently, a medical group agreed to pay $450,000 to settle allegations that it refused to return $175,000 in overpayments that it received from federal healthcare programs like Medicare and Medicaid. Here’s the government’s press release.

The overpayments at issue tend to happen in medical practices when two insurers share responsibility for a payment, and one pays too much.

But the thing is, you have to return the surplus, whether it’s big or small; you can’t keep it, and you can’t dawdle, either. If you do, you may incur significant liability under the False Claims Act, as we’ve explained before.

The rule is that you have sixty days to return the money once you know (or should know) about the overpayment. For more on the 60-day rule, see here.

In this case, the government alleged that the medical group failed to return the money despite repeated warnings, until it learned the Justice Department was investigating. Apparently, it didn’t know that one of its employees had filed a whistleblower lawsuit, which the government joined and took over. (For more on that process, see here.) The former employee will receive $90,000 of the settlement proceeds, or twenty percent.

This isn’t the first time the feds have moved to enforce the 60-day rule, and it sure won’t be the last. They’re just getting started.

They May Be Intelligent, But Are They Wise?

Speaking of fair shakes, here is a wise word of caution about the emerging, expanding use of computer programs to evaluate people in the justice system, whether at bail hearings, sentencings, or elsewhere.

The author is a former software engineer at Facebook who’s now studying law at Harvard. Her point isn’t that we shouldn’t use or consult these programs, but we should know what we’re getting into and proceed with caution. It’s troubling, for example, if we use programs that no one in the field fully understands—not judges, not lawyers, not probation—because the manufacturer won’t disclose a proprietary algorithm.

She says we turn to computers in part to control for our own biases, “[b]ut shifting the … responsibility to a computer doesn’t necessarily eliminate bias; it delegates and often compounds it.” That’s because these programs mimic the data we use to train them, so even the ones that accurately reflect our world will necessarily reflect our biases. Plus, they work on a feedback loop, so if they’re not constantly retrained, they lean in toward those biases and drift even further from reality and fairness. So they don’t just parrot our own biases; they amplify them. She saw this phenomenon time and again as a software engineer.

She agrees that algorithms can work for good. They’ve reportedly helped New Jersey reduce its pretrial jail population, for example.

But let’s proceed with caution, she says:

“Computers may be intelligent, but they are not wise. Everything they know, we taught them, and we taught them our biases. They are not going to un-learn them without transparency and corrective action by humans.”

Two Sides of the Same Coin

It’s not always easy to weigh the scales of justice.

Sometimes, like in the two stories from last week, the system treats people too harshly, and it ruins their lives.

Other times, though, someone’s unfairly blamed for not being harsh enough.

That’s the premise of this piece by a former chief criminal judge who was vilified for setting someone free without bail who then committed another crime.

But he made the best decision he could at the time. The guy was charged with failing to register as a sex offender. It’s a fairly common charge, and the guy was there for arraignment along with some thirty people.

It was a typical busy day in court, and the judge had to make a bunch of good decisions quickly. The prosecutor’s office called for a high bail amount that could have kept the guy in jail pending trial. But they always did that in these types of cases.

Under the law, the guy was presumed innocent in this case, and he was supposed to be released unless he was a flight risk or danger to the community. He didn’t seem to be a flight risk because he’d come to court on his own after being summonsed by mail. And he didn’t seem like a danger to the community, either. He wasn’t charged with a violent crime, and though he’d been convicted of forcible rape in 1993, that was over twenty years ago.

The judge heard from both sides and then followed the law, releasing him.

A week later, the guy was arrested on suspicion of rape and kidnapping. He ended up pleading guilty to lesser charges in that case in exchange for a seven-year sentence. But in the meantime, some hell broke loose.

The judge was called incompetent; he was called pro-rape; he was attacked on local talk radio and even the national news.

Here is how he dealt with it.

 

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