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December 9, 2011

Another super-sized federal prison term for super-sized Medicare fraud

As reported in this Reuters piece, another record setting white-collar sentence was handed down in Florida today.  Here are the details:

A former Miami health care executive was sentenced to 35 years in prison for her role in a $205 million healthcare fraud scheme, authorities said on Friday.

Judith Negron, the owner of American Therapeutic Corp, a chain of mental health care centers shut down after a raid on its Miami headquarters in October 2010, was convicted in August on charges that she helped mastermind what prosecutors described in court documents as "one of the largest and most brazen healthcare fraud conspiracies" in U.S. history.

Her sentencing in federal court on Thursday by U.S. District Judge James Lawrence King followed the sentencing in September of her co-defendants and co-owners.  Lawrence Duran received a 50-year sentence and Marianella Valera received a 35-year sentence.

The prison sentences have been described by prosecutors as the harshest ever for defrauding Medicare, the federal insurance plan for the elderly and disabled....

Before Judge King's sentencing of the American Therapeutic trio, the highest Medicare fraud sentence was 30 years.  It was handed out in 2008 to a Miami physician, Ana Alvarez-Jacinto, convicted in an HIV-therapy scheme.

I certainly understand concerns with the costs and consequences of Medicare fraud, but I always worry that a prison sentence of multiple decades for a non-violent white-collar offense is going ultimately produce more (correction) costs than (crime-control) benefits. 

December 9, 2011 at 03:09 PM | Permalink


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I really don't get your position here. A large-scale fraud often devastates the lives of dozens, if not scores or hundreds of victims. Or, it deprives a crucial government program of hundreds of millions of dollars that could have been used to help deserving people. From a strictly economic view of harm, it has to be possible that the harm caused by a truly massive white-collar crime can be equal to if not greater than that involved in many violent crimes (especially something such as armed carjacking or robbery, where the perpetrator flashes a weapon and leaves with the property, without otherwise assaulting or injuring the victim).

Moreover, by their nature, such frauds are often committed by folks who are betraying the public trust in a serious way, undermining public faith in institutions, etc. And these are arguably people who earned or were given all the advantages society could provide, who more or less had it made, but broke the law anyway, out of sheer greed/glee/entitlement. This seems especially blameworthy.

And, finally, this seems to be the kind of prosecution that actually has the most realistic possibility of sending a message to the right people and acting as a deterrent.

Thus, I don't think it is crazy at all to contemplate long prison sentences for serious white-collar crimes.

Posted by: Anon | Dec 9, 2011 4:22:58 PM

Given that mental healthcare systems are already cut to the bone and the high costs which dervive from lack of proper mental health care, the fact that these defendants pocketed $205 million dollars of taxpayer money, says that a long sentence might be justified.

The cost to society of the fraud was at a minimum $205 million - not counting the costs which resulted when people who need services did not receive them because these crooks took the money. That cost comes directly out of tax payer dollars since it is a federallly and state funded program. A long sentence in this case is way more justified than a long sentence in say a drug case.

Posted by: virginia | Dec 9, 2011 5:10:29 PM

Because deterrence isn't the only goal of imprisonment, Doug. Seems to me that fraud this massive begs for incapacitation for the all the reasons anon outlined above.

Posted by: Daniel | Dec 9, 2011 5:12:42 PM

Do all of you really think 50 or 35 years are needed to achieve these ends and that, say, the 14 years given to Blago would not do the trick?

I am NOT asserting that white collar should be only measured in months rather than years. But does having them be decades long really benefit society? If you think you cannot be too tough, would you also support the death penalty for major white collar offends?

Posted by: Doug B. | Dec 9, 2011 5:56:37 PM

So much for the oft-assumed harmlessness of the "first time, non-violent" offender.

Posted by: Bill Otis | Dec 9, 2011 5:56:47 PM

Professor Berman: "But does having them be decades long really benefit society?"

me: if my calculation was correct, with the fraud amount being $205,000,000 the defendant received a sentence of one day per each approximately $16,035.98 taken. Put in perspective with other property crimes, that is actually a very lenient sentence.

If the sentence was 14 years, the sentence would one day for each $40,089.96 taken.

If deterrence works in any area it is in white color/financial crimes since they are the only crimes where there the gain to the criminal/loss to society can be measured. In this case, the loss is purely to society because they defrauded a government program which provides health care to the elderly and disabled. The costs are considerable because while there is a financial cost which every tax payer is ultimately a victim of when tax dollars are stolen, there are additional costs beyond the $205,000,000 in lost services by the needy. If a program for the disabled loses funds because of the greed of those defendants that imposes a social cost on innocent third parties in addition to the general cost thedefendant's greed caused.

In addition, unlike in a case like Madoff's swindle where the fraud costs may have been puffed some by the fraudulent showing of value which artificially increased the "loss" amount, there is no such loss here - accountants can measure the value under Medicare which provides fixed rates for most services and compare the amount billed with the amount of services provided. That number is pure loss - there are no questions about unclean hands or puffery in the amountof loss (like in many fiannacial frauds)

But I really think the point which shows why long sentences are justified is simple dollars and cents - while 35 years sounds liek a long sentnece, it is really only one day per $16,000 in fraud. IF a defendant went to court charged with stealing $16,000 worth of money or goods, they would get way more than a 1 day sentence - that should be the comparative measure of the sentence.

Posted by: virginia | Dec 9, 2011 6:29:15 PM

This case illustrates once again that “Contemporary policies concerning crime and punishment are the harshest in American history and of any Western country.” Michael Tonry, The Handbook of Crime And Punishment (Oxford Press 1998) paperback ed. at page 3). The case also illustrates that “American punishment is comparatively harsh, comparatively degrading, comparatively slow to show mercy.” James Q. Whitman, Harsh Justice (Oxford Press 2003) paperback ed. at page 19.

Posted by: Michael R. Levine | Dec 9, 2011 6:33:19 PM

Certainly there should be SOME correlation between a sentence for fraud or theft and the amount illegally taken, but there must be some limit. Negron took hundreds of millions because she had the access and ability to do so, and that doesn't necessarily reflect her moral blameworthiness relative to others convicted of lesser thefts or frauds. At some point this sentence became a punishment for being powerful and educated. It's just as senseless as the disproportionate sentences typically meted out to the poor and powerless.

Posted by: Matthew (2L) | Dec 9, 2011 6:52:30 PM

I am unable to see any flaw in virginia's reasoning. I would add only that fraud will undermine public support for this program. Medicare is going to be facing cutbacks, as virtually all federal spending will, and the size of the cutbacks (with which I agree out of necessity) should not be distorted by the public perception that Medicare is really Playday for thieves.

From what I saw in years of doing federal prosecutions, drug dealers more or less view imprisonment as a cost of doing business, but white collar types absolutely do not, meaning the deterrent effect of punitive sentencing has a multiplier effect in such cases.

Like Matthew2L, I do not believe a defendant should be more severely punished for being educated and powerful per se, but I do think that using one's power and knowledge for pure greed is an aggravating factor, cf. Blago.

Posted by: Bill Otis | Dec 9, 2011 8:48:41 PM

Virginia and Bill, your math shows the impact of large numbers but does not show how society is better served by 35 years or 14 years or 140 years or 350 years. What is an effective sentencing for Skilling ot Ebbers or others involved in crimes with even more loss using your math?

And, again, if you think being so tough is so important, why not the death penalty? Would not a death sentence have even more of a deterrent impact?

Posted by: Doug B. | Dec 9, 2011 11:03:05 PM

"...but I do think that using one's power and knowledge for pure greed is an aggravating factor..."

I agree. 'To whom much as been given much will be expected.'

"But does having them be decades long really benefit society?"

I'm not sure of your point here Doug. Are you challenging the purpose of any sentence that is decades long or just ones that apply to white collar crimes. I personally think that white collar crooks are violent offenders. This is one area where I agree 100% with the great Claus's point about self-dealt immunities. Most laws are made and enforced by white collar people and frankly the violent/non-violent distinction reeks of class bias. If anything, large scale white collar crimes are more morally blameworthy than armed violence.

Posted by: Daniel | Dec 10, 2011 12:45:38 AM

Doug --

"...if you think being so tough is so important, why not the death penalty?"

First because it would be illegal (remember I'm the guy who insists the law be obeyed until it is changed); and second because this would be only one of a large number of very serious crimes for which taking the defendant's life would be disproportionate.

"Would not a death sentence have even more of a deterrent impact?"

Sure it would, notwithstanding the frequent articles and comments here that the DP has no deterrent effect. We could also more effectively deter residential burglary and potsmoking with the DP.

The reason we don't is that deterrence is not the sole or even the dominant goal of criminal justice. The dominant goal is just punishment, and there is (rightly in my view) nothing close to a majority in this country for imposing the DP for stealing, no matter how large the theft. Indeed the DP for a theft crime would be such flagrant overkill that, for once, the term "barbaric" would fit.

Posted by: Bill Otis | Dec 10, 2011 7:10:04 AM

Fair points, Bill, but then how do you decide 35 or 14 or 100 years constitutes just punishment here. As the article suggests, this is a historically long term. Did all other shorter terms fail to achieve justice in all these other cases?

Posted by: Doug B. | Dec 10, 2011 8:54:02 AM

Doug --

"...how do you decide 35 or 14 or 100 years constitutes just punishment here."

A combination of mandatory guidelines and a great judge. But, to be honest, I think many people would retort: Who cares? When a defendant steals this much for this long, one could say he assumes the risk of arbitrariness, and constructively waives the right to complain about it.

"As the article suggests, this is a historically long term. Did all other shorter terms fail to achieve justice in all these other cases?"

The honest answer is I don't know.

Posted by: Bill Otis | Dec 10, 2011 11:32:44 AM

An additional sentencing consideration is the effect fraud has on other participants in a specific industry/business/profession.

A cheater profits at the expense of his honest competitors, who lose market share and, if marginally profitable in the first place, are oftentimes forced out of the market all together.

But most importantly, if the honest competitors see that the cheaters are getting away with it, they are tempted to cheat as well. Overtime a specific industry/business/profession could come to be inhabited primarily (if not completely) by cheaters.

There are specific victims of these types of frauds. But these frauds also systemically damage the specific industry/business/profession and the larger economy in ways that are very difficult to quantify. Yet the systemic damage has to be taken into account in the sentence imposed.

Posted by: Fred | Dec 10, 2011 12:36:43 PM

"Indeed the DP for a theft crime would be such flagrant overkill that, for once, the term "barbaric" would fit."

This is a common position but one that I think is inchoate. It confounds a behavioral analysis of the law with a moral analysis of the law. Punishment for crimes are subject to a proportionality test but I think this test is properly grounded in the degree of the crime and not its kind.

"Did all other shorter terms fail to achieve justice in all these other cases?"

That depends on whether one views 'justice' as an ahistorical reality or not. Insofar as we are dealing with the civil law justice is best defined in civil terms and what civilization considers to be just has changed and will change over time. I'd argue that the fact that white collar crooks are receiving 'historically long' sentences reflects the fact that what society consider to be just sentences for these types of crimes is changing.

OTOH if one believes that legal justice is grounded in ahistorical moral absolutes then your question Doug has force. I'd personally answer , "yes I think those shorter sentences did in fact fail to achieve justice."

Posted by: Daniel | Dec 10, 2011 1:36:22 PM

A good point, Doug. Al Capone received only 11 years.

My "modest proposal" to contain punishment cost while concurrently discouraging others who are thinking of similar conduct:
Do not use prison, but use environment control, e.g., Pt. Barrow, Alaska.

"I certainly understand concerns with the costs and consequences of Medicare fraud, but I always worry that a prison sentence of multiple decades for a non-violent white-collar offense is going ultimately produce more (correction) costs than (crime-control) benefits."

Posted by: Docile Jim Brady | Dec 10, 2011 1:51:36 PM

If this seems to be a reasonable sentence I believe we have been quite desensitized to extraordinary and harsh punishment. We do lead the world in incarceration of our citizens.

Posted by: beth | Dec 11, 2011 1:33:05 AM

Agree with Doug B. I don't see why such a long sentence is necessary to accomplish any of the goals of sentencing, and I doubt there is any empirical support for such necessity. Who is willing to commit fraud for a 15-year, but not a 30-year, sentence? Deterrence is, given the way our brains work, the same in both cases. Moreover, recidivism in the white collar context, particularly after a long sentence, is so low that incapacitation can't have much explanatory force. Retribution is likely the key factor. But why are people not satisfied that the awful loss of 15 years of life is not enough revenge and punishment? When is such a punitive theory just an unjustified pretext for a pathological and utterly useless desire for revenge--a desire divorced from any practical consideration (deterrence, incapacitation) existing merely to serve base psychological instincts?

Posted by: AnonymousOne | Dec 11, 2011 2:33:13 PM

For theft crimes, restitution should be sufficient justice. In addition to paying back the value of the stolen items, an additional percentage should be collected to pay for law enforcement and the courts. Community service can help pay back the cost to society. Locking people up is just costing society more, both because they aren't earning a living in prison and because it's difficult to get a job after a conviction.

Posted by: Hidden | Dec 11, 2011 3:52:39 PM

Beth, Michael Levine, and Anonymous1 are right on. We have become accustomed to outrageously long sentences. They are cruel and draconian. They demean the criminal justice system. Too long a sentence, just like too short a sentence, brings the criminal justice system into disrepute.

Posted by: David from Cal. | Dec 12, 2011 12:53:08 PM

bill: "I am unable to see any flaw in virginia's reasoning."

me: I think this is a first :)

Matthew: "At some point this sentence became a punishment for being powerful and educated"

me: no, its a punishment for fraud - its a punishment for being a dishonest crook. and ultimately, the fact that the dishonest crook is powerful and educated really should be an aggravating factor - and also, higher punishment should be counseled because an educated and powerful defendant is more likely to know legal ways to render ill gotten gain untouchable (and yes, there are legal ways white collar criminals can render their loot legally untouchable - drug kingpins also do so - and they aren't going to be made illegal because legitimate businesses and business people also utilize them to avoid taxes or to protect assets from civil lawsuits). If a defendant took $100 million dollars through a fraud and spent $10 million on luxury goods and hid $90 million in untouchable off shore trusts, a sentence has to be sufficient to deter. If the sentence was say 1 year, that would not be a meaningful sentence. I mean, if you start taking a poll would you go to prison for a year if you got $90 Million dollars when you got out, I'm sure that many people would do it. It might even become a reality televison show or something.

By contrast, if the sentence would put the crook in prison until they were extremely elderly, that would be deterrence. IF the defenadnt was 45 years old, and the sentence is 35 years, defendants are not going to think "If I pull this scam and get caught before I move to Rio, I'll still have millions in the bank" if they expect to be sent to prison until they are 80. That is a meaningful punishment.

Unfortunately, I do not know any other way to truly deter such scams - restitution as "hidden" claims is not going to work because any con artist who is smart enough to pull a multimillion dollar scam will be smart enough to place assets where creditors, the government, disgruntled spouses, disgruntled investors, theives, other con artists, etc. are not going to get to it. Anything short of a "draconian" sentence is essentialy laughable.

There are many crimes which are overpunished in this country - multimillion dollar corporate frauds are not one of them. In fact, anything short of a presumptive life sentence in those caes is probably underpunishing the crimes given that the defendant is likely to have secreted assets where the government can not reach it for restitution.

Posted by: virginia | Dec 12, 2011 5:11:27 PM

shed in this country - multimillion dollar corporate frauds are not one of them. In fact, anything short of a presumptive life sentence in those caes is probably underpunishing the crime

Posted by: ed hardy uk | May 30, 2012 6:00:23 AM

Greetings to all.
I just found this thread by accident. The defendant in question is my sister in law. Just to clarify some math.. the intended loss was 205 million because thats what they billed medicare. The actual loss is 87 millio over 10 years of operation. All the evidence showed that she had a minor roll in the fraud but was part of the conspiracy. As many of you know that it is virtually impossible to defend yourself from a DOJ prosecution. She was one of the only defendants to actually go to trial. Obviously the DOJ is still punishing her for this because they sent her to a "secure female facility" over 1200 miles away from her two very young sons. She is 42 years old so she basically recieved. A death sentance for a white collar non violent crime. The mastermind behind 911 will probably recueve the same fate. How is this fair?

Posted by: Jorge Estrada | Feb 4, 2013 9:49:33 PM

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