In the Courts

On appeal to the Fourth Circuit, the government sought review of three evidentiary rulings by the district court. First, the court excluded uncharged conduct, accepting Bajoghli's arguments that the conduct amounted to other “bad-character” evidence under Rule 404(b) and that the government had not satisfied its attendant notice obligation. The court also held that the uncharged conduct was more prejudicial than probative under Rule 403. Second, the district court ruled that evidence of Bajoghli's post-scheme conduct ' he allegedly had stopped performing medically unnecessary procedures and began erasing scheduling data for his medical assistants after learning of the criminal investigation into his activities ' was inadmissible. The court found that this post-scheme conduct constituted “other bad acts” and that the government had again failed to meet its notice obligations under Rule 404(b)(2); and, in the alternative, the evidence was barred by Rule 403. Third, the government sought review of the district court's ruling that the government could only introduce evidence that Bajoghli received more than he paid for the slide analyses, not the specific details of the arrangement.

In an opinion issued on May 11, the government prevailed on all fronts.

Addressing the issues in turn, the Fourth Circuit first explained that uncharged conduct furthering the scheme did not constitute extrinsic “bad-character” evidence under Rule 404(b); rather, the uncharged conduct was intrinsic evidence of the existence and scope of the scheme to defraud. In order to prove a scheme to defraud, the government must establish the boundaries of that scheme and, while the indictment cited 53 specific fraudulent transactions, it also alleged that each transaction was part of a broader scheme to defraud. Accordingly, the uncharged conduct was admissible because it was probative of the boundaries of the fraud scheme.

Next, the Fourth Circuit found that evidence that Bajoghli stopped billing providers for fraudulent operations after learning that he was under criminal investigation went to his knowledge and intent to defraud the benefits providers. This reversed the district court's ruling that the post-scheme conduct was inadmissible under Rules 404(b) and 403. In rejecting the district court's Rule 403 analysis, the Fourth Circuit noted that evidentiary law strongly favors the admissibility of evidence that is probative of an element of the charged offense, and the lower court had failed to identify any reason why introduction of Bajoghli's post-scheme conduct unfairly prejudiced him.

Finally, the Fourth Circuit permitted the government to introduce detailed evidence of Bajoghli's fee arrangement with outside contractors, finding that evidence of the defendant's financial gain was especially probative in establishing the defendant's intent to defraud. Here, the Fourth Circuit noted that the “substantial disparity” between the amounts Bajoghli received and paid underscored Bajoghli's motivation for engaging in fraud. The Fourth Circuit also noted that the twin needs for “evidentiary richness and narrative integrity” counseled in favor of permitting the government to introduce these details.

In the Courts and Business Crimes Hotline were written by Mayer Brown LLP summer associate Jonathan S. Klein.

Fourth Circuit Confirms Prosecutorial Latitude in Proving Fraud Schemes

In a recent decision, the U.S. Court of Appeals for the Fourth Circuit confirmed the wide discretion federal prosecutors have to introduce evidence of a criminal defendant's scheme to defraud. United States v. Bajoghli , No. 14'4798, 2015 BL 136412 (4th Cir. May 11, 2015).

In United States v. Bajoghli, Dr. Amir Bajoghli, a Board-certified dermatologist with offices in Washington, DC, and Virginia, was indicted under 18 U.S.C. ' 1347 for executing a “scheme or artifice to defraud” public and private health-care entities. Specifically, the 53-count indictment against Bajoghli alleged three fraud schemes: First, that he routinely provided fake skin cancer diagnoses to patients, performed medically unnecessary procedures to treat the non-existent cancers, and then billed for the procedures. Second, that Bajoghli billed procedures performed by unlicensed medical assistants as if he had performed them, resulting in a higher reimbursement rate. Third, that he was reimbursed for pathology slide analyses at a rate of $100-$130 per slide, despite paying an outside contractor $15 per slide to conduct the analyses.

On appeal to the Fourth Circuit, the government sought review of three evidentiary rulings by the district court. First, the court excluded uncharged conduct, accepting Bajoghli's arguments that the conduct amounted to other “bad-character” evidence under Rule 404(b) and that the government had not satisfied its attendant notice obligation. The court also held that the uncharged conduct was more prejudicial than probative under Rule 403. Second, the district court ruled that evidence of Bajoghli's post-scheme conduct ' he allegedly had stopped performing medically unnecessary procedures and began erasing scheduling data for his medical assistants after learning of the criminal investigation into his activities ' was inadmissible. The court found that this post-scheme conduct constituted “other bad acts” and that the government had again failed to meet its notice obligations under Rule 404(b)(2); and, in the alternative, the evidence was barred by Rule 403. Third, the government sought review of the district court's ruling that the government could only introduce evidence that Bajoghli received more than he paid for the slide analyses, not the specific details of the arrangement.

In an opinion issued on May 11, the government prevailed on all fronts.

Addressing the issues in turn, the Fourth Circuit first explained that uncharged conduct furthering the scheme did not constitute extrinsic “bad-character” evidence under Rule 404(b); rather, the uncharged conduct was intrinsic evidence of the existence and scope of the scheme to defraud. In order to prove a scheme to defraud, the government must establish the boundaries of that scheme and, while the indictment cited 53 specific fraudulent transactions, it also alleged that each transaction was part of a broader scheme to defraud. Accordingly, the uncharged conduct was admissible because it was probative of the boundaries of the fraud scheme.

Next, the Fourth Circuit found that evidence that Bajoghli stopped billing providers for fraudulent operations after learning that he was under criminal investigation went to his knowledge and intent to defraud the benefits providers. This reversed the district court's ruling that the post-scheme conduct was inadmissible under Rules 404(b) and 403. In rejecting the district court's Rule 403 analysis, the Fourth Circuit noted that evidentiary law strongly favors the admissibility of evidence that is probative of an element of the charged offense, and the lower court had failed to identify any reason why introduction of Bajoghli's post-scheme conduct unfairly prejudiced him.

Finally, the Fourth Circuit permitted the government to introduce detailed evidence of Bajoghli's fee arrangement with outside contractors, finding that evidence of the defendant's financial gain was especially probative in establishing the defendant's intent to defraud. Here, the Fourth Circuit noted that the “substantial disparity” between the amounts Bajoghli received and paid underscored Bajoghli's motivation for engaging in fraud. The Fourth Circuit also noted that the twin needs for “evidentiary richness and narrative integrity” counseled in favor of permitting the government to introduce these details.

In the Courts and Business Crimes Hotline were written by Mayer Brown LLP summer associate Jonathan S. Klein.