White Collar Roundup - November 2013

85 Years for Fraud The U.S. Court of Appeals for the Second Circuit upheld an 85-year prison sentence in United States v. Stitsky over the defendants' claim it constituted "cruel and unusual punishment." The defendants had been convicted of fraud for their role in the scheme, in which 352 victims lost more than $23 million. During the approximately three-year scheme, the defendants allegedly misrepresented their firm's history and assets and failed to mention prior criminal history. (Notably, one defendant was in prison for a prior fraud conviction when he hatched this scheme and was on supervised release when he engaged in it.) After their hefty sentences were imposed, the defendants appealed, claiming the length violated the Eighth Amendment's ban on "cruel and unusual punishment." The Second Circuit disagreed, noting, "While the district court's sentence is severe, the facts it identified in support of its within-guidelines sentence adequately bear the weight assigned to them." Attorneys Can't Just Blow the Whistle Attorneys cannot breach their ethical duties and become False Claims Act (FCA) relators, according to the Second Circuit in Fair Laboratory Practices Assocs. v. Quest Diagnostics Inc. In that case, Mark Bibi, former general counsel of Quest's wholly owned subsidiary, Unilab Corp., along with two former executives created Fair Laboratory Practices Associates (FLPA) to bring an FCA claim against Quest and Unilab. Bibi had been Unilab's only in-house lawyer from 1993 to 2000, during the time of the alleged false claims. The defendants moved to dismiss the FCA complaint, alleging Bibi had breached his ethical duties by bringing the suit. The district court agreed and dismissed the complaint. FLPA appealed. The Second Circuit held that the FCA does not pre-empt state ethics rules and that Bibi had violated N.Y. Rule 1.9(c) by disclosing protected client confidences. Millions Paid for Violating the False Claims Act The U.S. Department of Justice (DOJ) announced a settlement with Boston Scientific Corp. to settle pending FCA litigation. According to the DOJ press release, Boston Scientific agreed to pay $30 million to settle allegations that between 2002 and 2005 its subsidiaries "knowingly sold defective heart devices to health care facilities that in turn implanted the devices into Medicare patients." One of Boston Scientific's subsidiaries pleaded guilty in February 2010 to criminal charges of "misleading the [Food and Drug...