In the Courts

In 2009, Dr. Melgen came under investigation by the Centers for Medicare and Medicaid Services (CMS) for allegedly overbilling the government though a prohibited practice known as “multi-dosing.” Id. at 1. Medicare policy requires that each patient receiving Lucentis, a drug used to treat macular degeneration, be treated using a separate vial. Dr. Melgen used leftover solution from individual vials to treat multiple patients, then charged Medicare for the cost of a separate vial for each patient. CMS suspected that Melgen overbilled Medicare for $8.9 million using this practice in 2007 and 2008 alone. Id.

After CMS notified Dr. Melgen that it may seek reimbursement for the overbilling, Senator Menendez instructed his staff to contact Melgen about “a Medicare problem we need to help him with.” Id. As the investigation escalated, Menendez became personally involved, meeting with Melgen's lobbyist to construct a strategy and then attempting to use his influence in Washington to clear Melgen of the charges.

Over the course of three years, Senator Menendez met with officials from CMS and the Department of Health and Human Services (HHS), ostensibly to discuss general policy regarding multi-dosing. In reality, according to prosecutors, the purpose of these meetings was to advocate on behalf of Dr. Melgen with government regulators. While Melgen was under formal proceedings by CMS, Menendez met with the Acting Principal Deputy Administrator and Director of CMS to persuade him to “not punish [Melgen] retroactively” for multi-dosing. Id. at 2. CMS continued investigating Dr. Melgen, but agency employees wrote that “[w]e have a bit of a situation with Senator Menendez, who is advocating on behalf of a physician friend of his in Florida.” Id.

In 2012, Senator Menendez met with the Acting Administrator of CMS under the guise of discussing her nomination to become the agency's permanent Administrator. However, “there is no evidence suggesting that her nomination was actually discussed” at the meeting. Id. at 2. Instead, Senator Menendez continued to press CMS on its multi-dosing policy without mentioning Dr. Melgen by name. Id. After failing to resolve the issue with CMS officials, Senator Menendez arranged for a meeting with then-Senate Majority Leader Harry Reid and DHS Secretary Kathleen Sebelius. At the meeting, Menendez “advocated on behalf of Dr. Melgen's position in the Medicare billing dispute, focusing on his specific case and asserting unfair treatment.” Id. Sebelius informed Menendez that “she had no power to influence the matter.” Senator Reid later told the FBI that Dr. Melgen's “individual situation was clearly the purpose of the meeting.”

Menendez also intervened on Dr. Melgen's behalf with State Department and Customs officials in relation to a contract dispute with the Government of the Dominican Republic. Id. at 3. Senator Menendez and his staff pressed senior State Department officials to “resolve this matter” in Melgen's favor “and threatened to call a hearing if there was no solution.” Id.

Over the same time period, Melgen gave Menendez hundreds of thousands of dollars in campaign contributions and other gifts. Id. at 4. The indictment also charged Menendez with failing to disclose any of these reportable gifts in his annual financial disclosure to the Secretary of the United Senate, in violation of the Ethics in Government Act.

In April 2015, a federal grand jury indicted Senator Menendez on 22 counts of fraud, bribery, conspiracy, and violation of the Ethics in Government Act. Id. Menendez moved to dismiss the indictment, claiming that his conduct was protected under the Speech or Debate Clause of the United States Constitution, which shields lawmakers and staff from prosecution for “legislative activity.” The district court denied the motion, holding that Menendez “failed to prove that the Indictment references any legislative acts covered by the Speech or Debate Clause.” Id.

On appeal, Menendez argued that the district court's definition of “legislative acts” was too narrow. Menendez proposed that conduct by an elected official should qualify for Constitutional protection if it “appears legislative.” Id. at 7. Because his meetings “addressed questions of policy” and did not mention Dr. Melgen by name, Menendez argued, they were covered by the Speech or Debate Clause.

The Third Circuit rejected these arguments, finding that Menendez was “essentially lobbying on behalf of a particular party,” which placed his activities “outside the constitutional safe harbor.” Id. at 9. The court specifically held that when assessing an “ambiguously legislative” act, such as Menendez's meetings with executive branch officials, a court must “consider the content, purpose, and motive of the act to assess its legislative or non-legislative character.” Id. at 7. (The court also rejected the Government's argument that any “efforts by members of Congress to influence the Executive Branch” fall outside Speech or Debate Clause protection).

The court clarified that “efforts by legislators to 'cajole' and 'exhort' Executive Branch officials with respect to the administration of a federal statute are not protected. They include efforts to intervene in decisions pending before the Executive Branch that would mainly affect one particular party.” Id. at 9. Under that standard, the court found that the “evidence is plentiful that to most of those involved the focal point of the meetings with Executive Branch officials was Dr. Melgen.”

As Menendez's appeal specifically concerned the Speech or Debate Clause, the court did not discuss the Supreme Court's recent decision in McDonnell v. United States, 136 S. Ct. 2355 (2016), which raised the bar for convicting public officials for these types of quasi-official acts. The impact of the McDonnell ruling will be determined by the trial judge. Menendez's attorney indicated that the Senator intends to seek en banc review of this decision by the Third Circuit and, if necessary, the Supreme Court.

In the Courts and Business Crimes Hotline were written by Micah Stein, an associate at Mayer Brown in Washington, DC.