11th Circuit Hears $36 Million Health Care Fraud Appeal

MIAMI, Fla. (CN) – A former home-care agency owner serving time in federal prison took to the 11th Circuit Tuesday to appeal his conviction on charges that he spearheaded a multimillion-dollar scheme to submit false claims to Medicare.

Khaled Elbeblawy is claiming on appeal that his conviction should be tossed out because prosecutors improperly showed the jury damning statements he made in connection with a plea deal that was ultimately aborted.

Currently serving a 20-year sentence, Elbeblawy was arrested in what the Justice Department in 2015 billed as “the largest national Medicare fraud takedown in history,” an operation that resulted in 73 arrests across several separate Florida criminal cases.

Elbeblawy was accused of paying kickbacks for patient referrals, and falsely billing for home health services that were medically unnecessary, and in some instances were never even provided.

Prior to his arrest, Elbeblawy had been cooperating with federal prosecutors for more than two years in hopes of a reduced penalty. He made a tentative plea deal and cooperated with law enforcement to secretly record conversations with doctors whom he had allegedly showered with kickbacks.

But he had a change of heart and backed away from the agreement to plead guilty.

Elbeblawy hired new counsel and went to trial in 2016, at which point the  incriminating statements he made while cooperating with federal prosecutors were introduced as evidence.

Elbeblawy’s signed admission and his interactions with the government’s legal team in connection with the plea deal were featured prominently by  prosecutors. The admission was cited as the central piece of evidence during closing arguments.

There’s a federal court regulation, Rule 410, which could have prevented the use of that material at trial. In general, Rule 410 prohibits prosecutors from using a  defendant’s statements during plea negotiations as evidence if the defendant ends up pleading not guilty.

However, Elbeblawy’s plea deal included a waiver of his Rule 410 protections. Such waivers are controversial, but to the chagrin of many defense attorneys nationwide, their use was held up as valid in the 1995 U.S. Supreme Court case United States v. Mezzanatto.

At the heart of Elbeblawy’s appeal is his argument that he did not knowingly, voluntarily agree to the waiver. His appellate brief states that high courts have found that a Rule 410 waiver may be deemed void in such circumstances.

According to the brief, Elbeblawy’s past attorney’s testimony “establishes, at most, that he might have read the waiver language to Elbeblawy, but that he certainly did not explain it.”

Elbeblawy adds that there were no criminal charges posted against him when the plea deal was signed, and that the legitimacy of the deal was never reviewed by the court. Notably, a guilty plea was never entered in the case.

“The aggressive and risky strategy employed by the government at trial in this case …  is unprecedented and impermissible,” Elbeblawy’s attorney Richard Klugh claims.

Klugh told Courthouse News in a phone interview that prosecutors’ exploitation of his client’s statements from the plea-deal-phase “was alarming and concerning.”

“I’ve never seen this before in an Eleventh Circuit [case],” he said.

The government’s appellate team for its part disputes Elbeblawy’s narrative that he was induced to unwittingly sign off on the waiver of his entitlement to Rule 410 protections.

According to the government’s brief, Elbeblawy’s past attorney testified that he “literally read” the plea agreement to Elbeblawy in the attorney’s office.

What’s more, the evidence was so abundant in the criminal case that it wouldn’t have mattered whether the signed admission was presented at trial, the government argues.

According to Justice Department attorney Alexander Robbins, all those secret recordings  that Elbeblawy helped prosecutors make are not covered under Rule 410. The recordings were, on their own, more than enough to illustrate to the jury that Elbeblawy was guilty, Robbins argues.

One conversation with a doctor, which Elbeblawy recorded in cooperation with prosecutors, has Elbeblawy making reference to past kickback deals with the physician, according to the government’s brief.

“I remember what I used to do with you before. Let me know what you have in mind. Any number you tell me for a patient,” Elbeblawy allegedly said while talking to the doctor.

A bevy of other issues are under consideration by the 11th Circuit panel, including whether a jury instruction in the trial was inappropriately worded, and whether the district court made erroneous findings when calculating Elbeblawy’s sentencing guideline range.

Opposing counsel are in agreement on one issue: that the $36 million forfeiture and restitution order against Elbeblawy needs to be remanded and retooled.

Prosecutors are conceding that the district court incorrectly held Elbeblawy jointly and severally liable for the gross proceeds received by Willsand Home Health, an agency that he helped run alongside an alleged co-conspirator before establishing his own operation.

“Elbeblawy should not have been held jointly and severally liable for the gross proceeds of Willsand during the time he was a mere employee at the company with no legal or de facto ownership interest in its proceeds — although he is still liable for the benefits he personally received from those proceeds,” Robbins notes.

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