Over the last several years, our firm has been involved in one of the most significant overcriminalization cases in the country, United States v. Clay, which is now pending before the Eleventh Circuit Court of Appeals. No. 8:11-cr-00115-JSM-MAP (M.D. Fla. 2013) (appeal pending, 11th Cir., No. 14-12373, Argument Oct. 2, 2015).
Clay involves a so-called whistleblower who sought employment with a managed healthcare company, WellCare Health Plans. WellCare provided behavioral and medical healthcare services to Medicaid recipients in Florida and elsewhere. The company included health maintenance organizations (HMOs) that managed care for recipients under contracts with Florida Medicaid.
WellCare did not know that the whistleblower had come to the company seeking to “hit the lottery” by finding potential regulatory issues. The whistleblower hired a politically savvy plaintiff’s lawyer and eventually recorded over 650 hours of conversations with other employees.
It turned out that a contract interpretation question had arisen between the company and Florida Medicaid regulators. By statute, the WellCare HMOs were required to return to the state Medicaid premium dollars for behavioral healthcare in the event they did not expend at least 80% of the total premiums for the provision of behavioral healthcare. Needless to say, these healthcare expenditure calculations can be quite complex and involve complicated medical economic concepts. Incredibly, Florida regulators decided not to engage in formal rulemaking to specify how the calculation should be done. Instead, the regulators decided to negotiate contract provisions with the healthcare industry for over a decade on how to perform the calculation.
The whistleblower found a lower-level employee who had doubts about WellCare’s methodology for the calculation. The whistleblower, under the guidance of his lawyer, was able to get the lower-level employee to speculate in tape recorded conversations about how the company might be violating the AHCA contracts. However, the lower-level employee had not read the AHCA contracts and had no involvement in the negotiations between the company and the regulators on how to implement the calculation. The crux of the contract interpretation issue related to whether the WellCare HMOs could use legitimate payments to a related company, which actually provided the healthcare services, for the calculation. Notably, using these related-party expenses for the calculation was standard in the industry, and had been approved by both outside and in-house counsel.
Based on the tape recordings, which included sheer speculation from the lower-level employee, the FBI and other government agencies initiated a search of the WellCare headquarters. Over 200 agents turned the company upside down without any notice. Suddenly, as a public company, WellCare faced the potential devastating loss of government contracts and other damage to its business due to the raid.
Despite the fact that this case revolved around a contract dispute, federal prosecutors turned it into a massive healthcare fraud case and brought criminal charges against the company’s top executives. Even though there were no fake patients, services, or diagnoses, which are all present in healthcare fraud cases, federal prosecutors filed criminal charges against the executives. The federal government based its prosecution on differences in contract interpretation between the regulators and the company.
The case went to trial for over four months, and although the executives were acquitted or the jury hung on most of the charges, they were convicted of submitting false information to the regulators for one year. The federal prosecutors sought sentences close to twenty years in jail. The case is now on appeal.
One of the critical issues before the appellate court is whether an individual can be convicted of a crime while having an objectively reasonable interpretation of a contract or other legal document. This legal defense was developed in a critically important case, United States v. Whiteside, 285 F.3d 1345 (11th Cir. 2002), which places limits on federal prosecutors who want to criminalize civil legal disputes. Whiteside represents one of the most important overcriminalization decisions. In Clay, the court is being asked to reaffirm the Whiteside holding and ensure that individuals are not convicted of a crime when they have a reasonable disagreement with government regulators concerning the interpretation of legal documents.
The Clay case has engendered significant commentary in the legal community concerning overcriminalization and the limits that need to be placed on federal prosecutors. I have organized below the relevant legal documents concerning Clay, articles by commentators, as well as presentations by legal experts concerning this issue. I hope you will find this to be a good resource for combating overcriminalization and addressing this very important public policy issue.
Here is a quick list of all the overcriminalization posts:
United States v. Clay: Court Should Reverse Defendants’ Convictions Based on Well-Reasoned Decision in United States v.Whiteside
United States v. Clay: When Executives Receive Jail Time for Ordinary Business Decisions
Court Holds Defendant’s Interpretation of Ambiguous Regulation Need Not Be ‘Most Reasonable’ Interpretation
Criminalizing Reasonable Interpretations of Regulatory Schemes: United States v. Clay – Podcast
John Lauro Leads a Panel Addressing the Problem of Overcriminalization in the Federal Judicial System
Overcriminalization: It Can Be Complex or Simple, But It Is Always Wrong
NACDL’s Overcriminalization Panel
Courthouse Steps Teleforum Preview: Regulatory Crimes: United States v. Clay – Oral Argument
Eleventh Circuit Has Opportunity in “U.S. v. Clay” to Reshape Prosecutors’ & Courts’ Approach on Criminal Intent
United States v. Clay – Oral Argument
Being an Executive is Not a Crime
Prosecutors Run Amok?
The WellCare Case Provides an Example of Overcriminalization in Action
United States v. Clay: A Case Study in Overcriminalization and Unchecked Prosecutorial Discretion