Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 1 of 12 PageID #: 419
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`§
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`§ CIVIL ACTION NO. 6:15-CV-948
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`TARIQ MAHMOOD
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is the United States’ Motion for Summary Judgment (ECF 6). The case
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`was transferred to the undersigned with the consent of the parties pursuant to 28 U.S.C. § 636.
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`For the reasons set forth below, the Court GRANTS in part the motion for summary judgment.
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`BACKGROUND
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`The United States of America (“the Government”) filed this action on October 29, 2015
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`seeking relief against Defendant Tariq Mahmood (“Defendant”) pursuant to the False Claims Act
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`(“FCA”), 31 U.S.C. § 3729(a)(1)(A), (B) and (C). Defendant was a licensed physician who
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`owned multiple hospitals in Texas. The Government alleges that Defendant submitted, or caused
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`to be submitted, false and fraudulent claims to Medicare and Medicaid that resulted in a
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`reimbursement of $578,240.41 paid by Medicare and Medicaid to accounts controlled by
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`Defendant. The Government alleges that Defendant caused his hospital employees to manipulate
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`billing codes to fraudulently increase insurance reimbursements.
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`1
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`UNITED STATES OF AMERICA
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`v.
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 2 of 12 PageID #: 420
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`On April 11, 2013, a federal grand jury returned an Indictment against Defendant on 1
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`count of Conspiracy to Commit Health Care Fraud, in violation of 18 U.S.C. § 1349, and 1 count
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`of Health Care Fraud, in violation of 18 U.S.C. §§ 1347 and 2. The grand jury returned a First
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`Superseding Indictment on December 18, 2013, on 1 count of Conspiracy to Commit Health
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`Care Fraud, in violation of 18 U.S.C. § 1349, 7 counts of Health Care Fraud, in violation of 18
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`U.S.C. §§ 1347 and 2, and 7 counts of Aggravated Identity Theft, in violation of 18 U.S.C. §§
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`1028A and 2. The case proceeded to a jury trial on July 21, 2014. At trial, the Government
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`identified 85 claims for reimbursement where Defendant directed an employee to secretly access
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`the coding after another employee had entered the codes, and to resequence the diagnosis codes
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`to increase the reimbursement amount. On the substantive health care fraud counts in the First
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`Superseding Indictment, the Government identified 7 specific patients for whom Defendant
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`fraudulently directed the resequencing of diagnosis codes on Medicare claim forms. On July 24,
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`2014, the jury returned a verdict finding Defendant guilty on all 15 counts of the First
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`Superseding Indictment.
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`The Court sentenced Defendant on April 14, 2015 to a total term of imprisonment of 135
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`months, consisting of 63 months of imprisonment on Counts 1 through 8, and 24 months on each
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`of Counts 9 through 15 of the First Superseding Indictment. The Court ordered Counts 9
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`through 11 to run consecutive to Counts 1 through 8 and Counts 12 through 15 to run
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`concurrently to Counts 1 through 8, for a total of 135 months. The Court additionally calculated
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`the total loss caused by Defendant’s fraud to be $599,128.02—the aggregate amount that Center
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`for Medicare and Medicaid Services, Texas Department of Health & Human Services and BCBS
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`reimbursed Defendant’s hospitals—and ordered restitution to be paid in the amount of
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`$599,128.02.
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`2
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 3 of 12 PageID #: 421
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`After the Court denied Defendant’s motion for a new trial, Defendant appealed his
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`conviction and sentence. On appeal, Defendant challenged the sufficiency of the evidence on his
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`health care fraud and aggravated identity theft convictions, the trial court’s failure to conduct an
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`evidentiary hearing on his motion for a new trial, and the calculation of the sentence and
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`restitution order. In an opinion filed on April 14, 2016, the Fifth Circuit Court of Appeals
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`affirmed Defendant’s convictions and the new trial ruling. The appellate court vacated
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`Defendant’s sentence and the restitution order and remanded the case for resentencing. U.S. v.
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`Mahmood, 820 F.3d 177 (5th Cir. 2016). The appellate court held that Defendant “carried his
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`burden at sentencing to show that his hospitals rendered legitimate services to patients and that
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`Medicare would have paid substantial sums for those services had he not fraudulently billed
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`them.” Id. at 194. As a result, the “district court’s refusal, without explanation, to credit
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`Mahmood for the $430,639 that Medicare would have reimbursed his hospitals but for his fraud
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`was a legally unacceptable method of calculating the loss.” Id. This procedural error affected
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`the applicable sentencing guideline range, requiring resentencing. For the same reasons, the
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`restitution amount was determined based on an erroneous calculation of the victims’ actual loss,
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`requiring reconsideration on remand.
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`Following remand, the Court conducted a resentencing hearing on September 14, 2016.
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`In a judgment entered on September 15, 2016, the Court sentenced Defendant to 135 months of
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`imprisonment, consisting of 63 months on Counts 1 through 8 of the First Superseding
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`Indictment and 24 months on Counts 9 through 15 of the First Superseding Indictment. Counts
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`9, 10 and 11 of the First Superseding Indictment were ordered to run consecutively to the 63-
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`month term of imprisonment, for a total term of 135 months. In addition, the Court ordered the
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`payment of restitution in the amount of $145,358.23.
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`3
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 4 of 12 PageID #: 422
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`Prior to the decision of the appellate court, the Government filed the motion for summary
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`judgment that is currently before the Court. In its motion, the Government seeks an award of
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`$2,091,480.82 against Defendant, plus costs and interest. The Government asserts that
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`Defendant is estopped from denying FCA liability as a result of his conviction. The award
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`requested by the Government includes $1,156,480.82 in compensatory damages and $935,000.00
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`in civil penalties. The Government calculated the compensatory damages amount by trebling the
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`“amount of the claims paid by government payors as a result of Mahmood’s fraud” and then
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`subtracting the amount of restitution ordered by the Court.1 The requested civil penalty of
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`$935,000.00 represents $11,000 for each of 85 claims that were wrongfully submitted to
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`Medicare and Medicaid.
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`In response, Defendant filed a Combined Rule 56(d) Motion for Continuance; Alternative
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`Motion to Stay Proceedings Pending Outcome of Criminal Appeal; and Response to the
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`Government’s Motion for Summary Judgment (ECF 7). In the response, filed prior to the
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`resolution of Defendant’s appeal, Defendant asserts the Court should stay this case pending
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`resolution of his appeal in the interest of judicial economy. He also argues that he is not estopped
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`from denying liability as to all 85 fraudulent claims forming the basis of the restitution award
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`because estoppel only applies to claims for the 7 patients identified in the health care fraud
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`counts. Defendant seeks a Rule 56(d) continuance to obtain medical records pertinent to the
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`other 78 patients and have them reviewed by the coding expert that reviewed the medical records
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`of the 7 patients forming the basis for the substantive counts of conviction. Defendant concedes
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`that, unless his convictions are reversed on appeal or in a post-conviction § 2255 motion, he is
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`liable under the FCA for the claims made with respect to the 7 patients identified in the
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`substantive counts of the First Superseding Indictment. As a result of the restitution order and
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`1 See The United States’ Motion for Summary Judgment, ECF 6, at *11–12.
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`4
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 5 of 12 PageID #: 423
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`criminal forfeiture provisions, Defendant argues that the Government has been more than made
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`whole in this matter.
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`After the appellate court issued its April 14, 2016 opinion, the Government filed a Notice
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`of Additional Authority Supporting Summary Judgment (ECF 21). The Government asserts that
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`the holding that the Court must credit Defendant for the $430,639 that Medicare would have
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`reimbursed his hospitals but for his fraud when calculating the amount of restitution due does not
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`affect the amount of damages and civil penalties in this FCA case. The Government submits that
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`its calculation of $1,156,480.82 in damages already includes a credit for restitution.
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`Defendant responds that the Government’s actual damages are only $143,608—the
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`amount of overpayment. If the amount is trebled, the compensatory damages are $430,924.
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`With regard to civil penalties, the possible range is $467,500 to $935,000, representing a penalty
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`of not less than $5,500 and not more than $11,000 for each false claim. Defendant argues that
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`the restitution amount of $143,608 should be deducted from the final amount due.
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`SUMMARY JUDGMENT STANDARD
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`The Court may only grant a motion for summary judgment when there is no genuine
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`dispute of material fact and the moving party is entitled to summary judgment as a matter of law.
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`FED. R. CIV. P. 56(a). A genuine dispute as to a material fact exists “if the evidence is such that a
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`reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,
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`Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A “material fact” is one that
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`might affect the outcome of the suit under governing law. Id. The party seeking summary
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`judgment always bears the initial responsibility of informing the district court of the basis for its
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`motion and identifying those portions of the pleadings, depositions, answers to interrogatories,
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`and admissions on file, together with the affidavits, if any, which it believes demonstrate the
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`5
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 6 of 12 PageID #: 424
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`absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106
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`S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
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`The moving party, however, “need not negate the elements of the nonmovant’s case.”
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`Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The movant’s burden is
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`only to point out the absence of evidence supporting the nonmoving party’s case. Stults v.
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`Conoco, Inc., 76 F.3d 651, 655 (5th Cir. 1996). Once the moving party makes a properly
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`supported motion for summary judgment, the nonmoving party must look beyond the pleadings
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`and designate specific facts in the record showing that there is a genuine issue for trial. Id. All
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`facts and inferences are viewed “in the light most favorable to the nonmoving party.” McFaul v.
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`Valenzuela, 684 F.3d 564, 571 (5th Cir. 2012). “Summary judgment may not be thwarted by
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`conclusional allegations, unsupported assertions, or presentation of only a scintilla of evidence.”
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`Id.
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`I.
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`False Claims Act Liability
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`ANALYSIS
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`In his Response to the United States’ Notice of Additional Authority Supplementing
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`Summary Judgment, Defendant focuses on the calculation of damages and not liability pursuant
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`to the FCA. The doctrine of collateral estoppel precludes the relitigation of an issue decided on
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`the merits in an earlier proceeding. U.S. v. Thomas, 709 F.2d 968, 972 (5th Cir. 1983).
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`“Because of the existence of a higher standard of proof and greater procedural protection in a
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`criminal prosecution, a conviction is conclusive as to an issue arising against the criminal
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`defendant in a subsequent civil action.” Id. (citing In the Matter of Raiford, 695 F.2d 521 (11th
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`Cir. 1983). An estoppel in favor of the Government arises in a subsequent civil proceeding
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`where the questions at issue were directly determined in a prior criminal prosecution and
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`6
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 7 of 12 PageID #: 425
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`conviction. Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568–69, 71 S.Ct. 408,
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`413–14 (1951).
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`Defendant’s earlier argument that he is only estopped from challenging liability on the
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`claims for the 7 patients identified in the substantive counts of the First Superseding Indictment
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`lacks merit. Defendant’s pleadings admit that the loss in his criminal case results from the 85
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`fraudulent claims. All 85 claims at issue were considered in the criminal action. As noted by the
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`appellate court, the Government identified 85 claims at trial that were fraudulently resequenced
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`at Defendant’s direction.2 The Government’s witness testified concerning the amount billed on
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`those claims and the amount that Medicare would have reimbursed if those claims were
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`submitted without Defendant’s fraud.3 “[T]he judgment in the prior proceeding precludes the
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`relitigation of issues actually litigated and necessary to the outcome of the first action.”
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`Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326 n. 5, 99 S.Ct. 645, 649 n. 5 (1979). The
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`factual conduct and violation of law alleged here was distinctly put in issue and directly
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`determined against Defendant in the criminal case. As a result, he is collaterally estopped on the
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`issue of liability in this FCA action.
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`II.
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`Damages
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`Once liability is established, the FCA provides for the recovery of “3 times the amount of
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`damages which the Government sustains because of the act of that person.” 31 U.S.C. § 3729(a).
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`Defendant asserts that the actual damages amount in this case is the amount of the overpayment.
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`The Government’s evidence at trial established that Medicare would have reimbursed
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`Defendant’s hospitals all but $143,608.4 As a result, Defendant submits that the trebled damages
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`amount is $430,824. The Government, on the other hand, argues that an offset for the fair
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`2 See U.S. v. Mahmood, 820 F.3d at 183.
`3 Id. at 194.
`4 Id. at 184, 196.
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`7
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 8 of 12 PageID #: 426
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`market value of the services rendered should not be applied until after the Court trebles the full
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`amount that Medicare and Medicaid paid. The Government seeks to treble the full amount paid
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`to Medicare and Medicaid ($574,247.67 and $3,992.74, respectively) and then subtract a
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`restitution credit of $578,240.41, for a total amount of $1,156,480.82. Notably, the amount of
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`restitution at resentencing was reduced to $145,358.23.5 Following resentencing, the
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`Government’s calculation would now result in an increased damages award of $1,589,363.
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`The Government’s position is not supported by the statute or case law. The statute
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`provides that the amount to be trebled is the “damages which the Government sustains.” 31
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`U.S.C. § 3729(a). The evidence at trial established that Defendant’s hospitals provided
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`legitimate services to the patients at issue. The fraud took place in the manipulation of the
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`coding process after services were provided to fraudulently increase the amount of
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`reimbursement. Medicare, however, received value from those services provided to its
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`beneficiaries. U.S. v. Mahmood, 820 F.3d at 195 (citing U.S. v. Jones, 664 F.3d 966, 984 (5th
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`Cir. 2011). As a result, the calculation of the Government’s loss in this case requires
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`consideration of the fair market value of the services rendered. Id.
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`Courts look to the actual damages or total loss in determining the amount of damages to
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`treble pursuant to § 3729(a). See U.S. v. Bornstein, 423 U.S. 303, 96 S.Ct. 523, 532 (1976); U.S.
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`v. Peters, 927 F.Supp. 363, 368 (D. Neb. Jun. 3, 1996); U.S. v. Szilvagyi, 398 F.Supp.2d 842,
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`849–50 (E.D. Mich. Oct. 25, 2005) (trebling the total loss suffered by Medicare). The Supreme
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`Court in Bornstein stated that the computation is based on the actual damages. Id. The Court
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`further explained that “[t]he Government’s actual damages are equal to the difference between
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`the market value of the [product or services] and the market value [they] would have had”
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`5 The total restitution amount constitutes $751.70 to Blue Cross Blue Shield, $998.19 to Medicaid and $143,608.34
`to Medicare.
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`8
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 9 of 12 PageID #: 427
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`without the fraudulent conduct. Id. In Peters, the Court determined that the “measure of actual
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`damages is determined by the amount paid due to the false claim minus the amount paid had the
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`claim been truthful.” U.S. v. Peters, 927 F.Supp. at 368. In U.S. v. Boutte, a case relied upon by
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`the Government, the Court similarly used the amount of actual loss for FCA treble damages.
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`U.S. v. Boutte, 907 F.Supp. 239, 242 (E.D. Tex. Oct. 25, 1995). By contrast, courts should look
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`to the full amount paid only if the government would not have paid any amount but for the fraud.
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`See U.S. v. Anghaie, 633 Fed.Appx. 514 (11th Cir. 2015).
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`Here, the amount of actual loss to Medicare is $143,608.34. As determined at
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`resentencing, the actual loss to Medicaid is $998.19. Trebling the amount of actual damages, as
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`required by 31 U.S.C. § 3729(a), results in a damages award of $433,819.59.
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`III. Civil Penalties
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`In addition to treble damages, the statute provides that Defendant “is liable to the United
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`States Government for a civil penalty of not less than $5,000 and nor more than $10,000, as
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`adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 . . .” 31 U.S.C. §
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`3729(a). The parties do not dispute that an adjustment for inflation increases the civil penalty
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`range to $5,500 to $11,000. See 28 C.F.R. § 85.3(a)(9). As addressed above, there are 85 false
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`claims in this case. Defendant does not dispute that the applicable civil penalty range in this case
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`is $467,500 to $935,000, which is calculated by multiplying the applicable civil penalty range by
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`85.6
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`The Government argues that the maximum penalty of $11,000 per false claim should be
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`awarded, for a total penalty of $935,000. The Government submits that Defendant did not
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`cooperate with the Government, resulting in an investigation of Defendant’s multiple hospitals
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`6 See Defendant’s Response to the United States’ Notice of Additional Authority Supplementing Summary
`Judgment, ECF 22, at *4.
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`9
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 10 of 12 PageID #: 428
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`across the State of Texas and reviewing records from 2005 to 2013. The Government asserts
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`that significant time and resources were spent in the investigation and prosecution of Defendant.
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`Further, the Government argues that Defendant’s criminal adjudication signifies the necessity of
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`a civil penalty at the high end of the applicable range. The Government points to a recent case in
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`this District in which the Court elected a mid-range penalty of $8,250 per false claim where there
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`was not an attendant criminal conviction, and asserts that the penalty should be higher here since
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`there is a criminal conviction for the same conduct. See United States of America ex. rel.
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`Harman v. Trinity Industries, Inc., et al., Civil Action No. 2:12-CV-89 (E.D. Tex. Jun. 9, 2015).
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`Neither Defendant’s response nor his sur-reply brief to the motion for summary judgment
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`addresses the amount of the civil penalty to be awarded per false claim. He does not respond to
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`the Government’s argument concerning the time and resources expended on this matter or the
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`relevance of his criminal conviction to the amount of the penalty. In his Response to the United
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`States’ Notice of Additional Authority Supplementing Summary Judgment, Defendant
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`acknowledges that the range of penalty is $5,500 to $11,000 per each of the 85 false claims and
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`Defendant includes a footnote requesting a hearing to present mitigating evidence.7
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`“The fact . . . that Congress provided for treble damages and an automatic civil monetary
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`penalty per false claim shows that Congress believed that making a false claim to the
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`government is a serious offense.” U.S. v. Mackby, 339 F.3d 1013, 1018 (9th Cir. 2003). The
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`range of statutory penalty available to the Court evidences the congressional intent to give courts
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`discretion in fashioning an appropriate penalty. See U.S. v. Peters, 927 F.Supp at 369. With a
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`monetary fine, the “touchstone is value of the fine in relation to the offense.” Austin v. U.S., 509
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`U.S. 602, 113 S.Ct. 2801, 2815 (1993) (Scalia, J., concurring).
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`7 See Response to the United States’ Notice of Additional Authority Supplementing Summary
`Judgment, ECF 22, at *4.
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`10
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 11 of 12 PageID #: 429
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`The appellate court decision in Defendant’s criminal case fully describes the scheme
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`enacted by Defendant to manipulate the Medicare-billing procedures at his hospitals. See U.S. v.
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`Mahmood, 820 F.3d at 182–84. Without any review of patient medical records, Defendant
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`directed his employees to resequence billing codes in the billing system to increase Medicare
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`reimbursement amounts. When employees became unwilling to cooperate with Defendant’s
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`requests, Defendant moved on to other employees whom he directed to secretly access the billing
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`system to resequence the codes entered by other coders. Id. Defendant’s conduct resulted in a
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`criminal prosecution and judgment for a lengthy term of imprisonment, evidencing the
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`seriousness of the conduct. There is no evidence to suggest that there are any mitigating
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`circumstances Defendant could show that would make a civil penalty at the high end of the
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`statutory range inappropriate. As a result, the civil penalty in this case is assessed at $11,000 per
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`false claim, for a total of $935,000.
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`CONCLUSION
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`There are no genuine issues of material fact in this case. The United States is entitled to
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`judgment as a matter of law. The motion for summary judgment should be granted in part such
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`that the Government is entitled to recover damages in the amount of $433,819.59 and a civil
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`penalty of $935,000.00, for a total of $1,368,819.59. Defendant has not shown authority for his
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`request that the amount of restitution be deducted from the final amount due. It is therefore
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`ORDERED that the United States’ Motion for Summary Judgment (ECF 6) is
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`GRANTED IN PART. In accordance with 31 U.S.C. § 3729(a), the Government is awarded
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`damages in the amount of $433,819.59 against Defendant Tariq Mahmood. In addition,
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`Defendant Tariq Mahmood is ordered to pay a civil penalty in the amount of $935,000.00.
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`11
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`Case 6:15-cv-00948-KNM Document 26 Filed 09/26/16 Page 12 of 12 PageID #: 430
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`Within 10 business days, the Government shall submit a proposed Final Judgment
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`consistent with this Memorandum Opinion and Order.
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`12
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`So ORDERED and SIGNED this 26th day of September, 2016.