Employer Used As Means to Commit Crime not a Victim under Restitution Act, Fourth Circuit Court Rules
The Mandatory Victims Restitution Act of 1996 (“MVRA”) provides that a victim of a federal crime may be entitled to an order of restitution for certain losses suffered as a direct result of the commission of the crime for which the defendant was convicted. A question that courts sometimes face is whether a company can be considered a “victim” under the MVRA if an employee uses that company as an instrument to defraud the federal government.
Looking at this issue, the U.S. Court of Appeals for the Fourth Circuit on April 4, 2014, declined to allow a company’s bankruptcy estate to receive restitution for a large debt caused by an owner/employee’s fraud because that company was used as an instrument for that fraud. In re Bankruptcy Estate of AGS, Inc., No. 12-cr-113 (4th Cir., April 4, 2014).
Dr. Allen G. Saoud was convicted after a June 2013 jury trial of five counts of health care fraud. Dr. Saoud, who is a dermatologist, in 2005 was excluded from participating in Medicare and Medicaid for 10 years. He then plotted to maintain ownership and control of his dermatology practice, AGS, Inc. in violation of the exclusion. He founded a new dermatology practice and transferred all of his patients to this new practice. After selling his new practice to Dr. Fred Scott for $1.8 million, Dr. Saoud then sold AGS, which had lost its value, for $1 million to nurse practitioner Georgia Daniel. Despite these sales, he continued to control and profit from both entities, partly by collecting Medicare and Medicaid reimbursement funds.
After Dr. Saoud was convicted, the estate of AGS, Inc., which had filed for bankruptcy, sought a $1 million restitution award to cover bankruptcy creditor claims that stemmed partly from the underlying fraud. The district court declined. The Estate of AGS, Inc. then filed a writ of mandamus with the Fourth Circuit.
The Fourth Circuit also refused to award restitution to the Estate. The Court held that Dr. Saoud used AGS, Inc. as an instrument in his scheme to illegally obtained Medicare and Medicaid funds, and as such, the Court declined to “also hold that AGS was one of the scheme’s victims.”
AGS, Inc. should be a source of concern to companies that have sustained losses as a result of employee fraud. If an employee, director, officer or owner uses a company to defraud the government and that company incurs tax or other debt liability as a result of that fraud, that company may not be able to receive restitution under the MVRA. Jackson Lewis attorneys are available to advise companies on the scope of the Mandatory Victims Restitution Act and their rights in collecting amounts lost to criminal acts.
President Obama recently released a Strategy to Reduce Methane Emissions (Strategy) that sets forth a multi-pronged plan for reducing methane emissions both domestically and globally. Domestically, the plan is to focus on four sources of methane—the oil and gas sector, coal mines, agriculture and landfills—and to pursue a mix of regulatory actions with respect to those sources. Energy companies now have the opportunity to help influence exactly what those actions will be.
For the oil and gas sector, the Strategy indicates that the federal government will focus primarily on encouraging voluntary efforts to reduce methane emissions—such as bolstering the existing Natural Gas STAR Program and promoting new technologies. But the Strategy also identifies two areas of potential mandatory requirements. First, later this year, the Bureau of Land Management (BLM) will issue a draft rule on minimizing venting and flaring on public lands. Regulated parties will have the opportunity to submit comments after the proposed rule is released. Second, the Strategy confirms that the Environmental Protection Agency (EPA) will decide this fall whether to propose any mandatory methane control requirements on oil and gas production companies. Consistent with that announcement, on April 15, 2014, EPA released five technical whitepapers discussing methane emissions from the oil and gas production process. The agency is soliciting comments on those whitepapers—they are due by June 16, 2014.
For coal mines, the Strategy indicates that BLM will soon be seeking public input on developing a program to capture and sell methane from coal mines on public lands. The Strategy further indicates that EPA will continue promoting voluntary methane capture efforts.
For landfills, the Strategy calls for public input on whether EPA should update its regulations for existing solid waste landfills, indicates that EPA will be proposing new regulations for future landfills, and indicates that EPA will continue to support the development of voluntary landfill gas-to-energy projects.
For agriculture, the Strategy does not suggest any new regulatory requirements. Instead, it indicates that EPA and the Department of Energy will work to promote voluntary methane control efforts and that those agencies will place special emphasis on promoting biogas—starting with the release of a “Biogas Roadmap” in June 2014.
In addition to these sector-specific approaches, the Strategy emphasizes the need for improved methane measurement and modeling techniques, both domestically and globally. All of the topics covered by the Strategy are ones about which regulated parties may want to submit comments—to EPA, BLM and/or the Office of Management and Budget.