Sunday, March 11, 2007

U.S. v. Srivastava (U.S.D.C.)(Approved for Publication)

Signed March 6, 2007--Memorandum Opinion and Order by Judge Roger W. Titus. (Approved for publication.)

Defendant is a cardiologist practicing medicine through a Subchapter S Corporation who became the subject of a health care fraud investigation. In the course of the investigation, SA Marrero of HHS-OIG submitted a single affidavit in support of applications for three search warrants, which were ultimately approved. Two of the warrants applied to Defendant's medical offices, and the third authorized a search of Defendant's residence. Each warrant contained identical substantive language that authorized the seizure of a list of enumerated "records including, but not limited to, financial business, patient and other records related to" the Defendant's "business . . . which may constitute evidence . . .." SA Marrero then forwarded copies of seized documents between Defendant and the Bank of India to the U.S. Attorney's office, which documents were then forwarded to IRS and ultimately led to a formal investigation regarding possible tax fraud committed by the Defendant. Defendant then filed a Motion to Suppress based on its conclusion that the evidence in question had been obtained in violation of the Fourth Amendment, which motion was granted August 4, 2006.

The Government raised six main arguments in its Motion for Reconsideration: (1) The Court incorrectly interpreted the warrant; (2) the documents were not seized unlawfully; (3) more documents are related to Srivastava's business than the Court concluded because Srivasatava operates a Subchapter S corporation; (4) the evidence obtained in the IRS investigation was lawful; (5) the evidence should not have been suppressed under the independent source and the inevitable discovery doctrines; and (6) specifically, the Bank of India faxes should not have been suppressed.

The Court addressed all these arguments in the August 2006 opinion but repackaged some of its analysis with respect to the first and third arguments.

First, the Government suggested that the modifying clauses "related to the business" and "may constitute evidence of violations" should not be viewed as limits on the types of documents that could be seized. The Court, however, found these clauses must be read to limit the scope of the warrant in order to save it from what would otherwise be unconstitutional overbreadth. The Court determined that suppression was appropriate because of two additional and important factors. First, the quantity of the materials seized was significant. Many of the documents seized were not related to the investigation as the Government later returned many of them to the Defendant, although not until tax investigators had had an opportunity to review the contents. Further, SA Marrero specifically testified that he did not advise his agents on any limits regarding what they could collect and resulted in the seizure of many documents not authorized by the warrant, such as an invitation to a cultural event and a CVS "Extra Care" card. Thus, the Court's suppression order was rooted in the actions of the seizing agents who grossly exceeded the scope of the warrants and not simply the interpretation of the text of the warrants and accompanying affidavit.

Second, the Government argues that the type of corporation, Subchapter S, operated by Defendant is significant with respect to the volumes of documents collected by the agents, including the Bank of India documents, since he declared his income from the corporation on his individual tax return. The Court reasoned that, regardless of the type of business operated by Defendant, the agents should not have seized personal financial records and tax returns, and they should not have seized business records unless they tended to show violations of 18 USC §1347. These were the two simple and basic restrictions contained in the warrant but disregarded by Marrero. It was clear from Marrero's testimony that it was not as if the agents became confused during the search as to whether the documents were business or personal -- they went on a wholesale fishing expedition and seized all documents and many other personal affects without regard as to whether the documents or items were business records or demonstrative of health care fraud. Further, the Government argued that "some of the documents demonstrating defendant's income from a lucrative occupation and the disposition of that income may constitute health evidence of fraud (sic)." While it is true that evidence of extreme wealth or extravagant spending is admissible under the Federal Rules of Evidence, such evidence cannot be said to be evidence of health care fraud in this case. Unlike a typical drug dealer who has no legitimate source of income that would support an affluent lifestyle, Defendant was engaged in a legitimate and lucrative profession. As such, the Court rejected the so-called "proceeds of the crime" argument. The rationale that the financial records and tax returns seized were related to the Section 1347 investigation is also negated by the fact that the Government returned approximately 80% of the seized documents to the Defendant.

The full opinion is available in PDF.

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