United States v. Speqtrum, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v. Civil Action No. 10-2111 (JEB)
SPEQTRUM, INC., d/b/a Speqtrum Health
Care Services,
Defendant.
MEMORANDUM OPINION AND ORDER
The Government brought this action against Speqtrum, Inc., claiming that Defendant, a
home-health-care provider, had knowingly submitted fraudulent claims to the District of
Columbia’s Medicaid Program for services it had not rendered or was not authorized to render.
The Government sought a temporary restraining order and a preliminary injunction under 18
U.S.C. § 1345 to enjoin the disposition of Speqtrum’s assets. On Feb. 7, 2011, Judge Henry
Kennedy, to whom this case was previously assigned, issued an Order granting the
Government’s request for a preliminary injunction and ordering that the D.C. Health Care
Finance Department (DCHCFD) not transfer $1.8 million of the $4.5 million in payments
withheld or recouped from Speqtrum without leave of court.
Defendant has now filed a Motion for the release of attorney fees and costs of almost
$100,000, which request has been opposed by the Government. Because the Court finds, at least
at present, that Defendant is not entitled to such fees from either the frozen $1.8 million or the
remainder currently in the possession of the DCHCFD, the Court will deny the Motion without
prejudice to be renewed, if appropriate, at a later date.
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I. Analysis
In seeking the release of monies to pay for attorney fees, Defendant has two potential
sources: the frozen $1.8 million or the $2.7 million still retained by the DCHCFD. The Court
will address each in turn, ultimately finding that neither is currently available to Defendant.
A. Frozen Assets
It is not disputed here that the “purpose of freezing assets in this case is to preserve the
status quo and prevent those assets from being dissipated or diverted during the pendency of the
case.” United States v. Jamie, 2011 WL 145196, at *1 (S.D.W.Va. 2011). “The award of
attorneys’ fees in such cases is firmly entrusted to the discretion of the district court.” Id. (citing
Commodities Futures Trading Comm’n v. Am. Metals Exh. Corp., 991 F.2d 71, 79 (3d Cir.
1993)). In exercising such discretion, the Court must “balance the government's justification for
restraining property with the defendant's legal interest in a full and fair hearing on the merits.”
Id. (internal quotation marks and citation omitted).
On the one hand, “the Government does not violate the Sixth Amendment if it seizes ...
[ill-gotten gains] and refuses to permit the defendant to use them to pay for his defense.” Caplin
& Drysdale, Chartered v. United States, 491 U.S. 617, 626 (1989); see also United States v.
American Therapeutic Corp., 797 F. Supp. 2d 1289, 1293-94 (S.D. Fla. 2011) (denying release
of attorney fees in health-care case brought under § 1345 and noting lack of Sixth Amendment
right to counsel for civil litigants); S.E.C. v. Quinn, 997 F.2d 287, 289 (7th Cir. 1993) (“Just as a
bank robber cannot use the loot to wage the best defense money can buy, so a swindler in
securities markets cannot use the victims' assets to hire counsel who will help him retain the
gleanings of crime.”) (internal citation and citation omitted).
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On the other, the Court has the authority to release frozen funds “in the interest of
fundamental fairness if wrongdoing is not yet proven and the restrained property is a defendant's
only means of securing counsel.” Jamie, 2011 WL 145196, at *1 (citations omitted); United
States v. Payment Processing Ctr., LLC, 439 F. Supp. 2d 435, 440-41 (E.D. Pa. 2006) (although
Sixth Amendment does not entitle defendant to release of frozen assets, that rationale “does not
merit denying a defendant in a § 1345 action a reasonable claim for fees from restrained property
upon the appropriate showing before the § 1345 complaint has been resolved on the merits”)
(footnote omitted).
In making the decision, the Court should assess a defendant’s financial ability to fund a
defense. See Payment Processing, 439 F. Supp. 2d at 440 (defendant's ability to fund a defense
an important factor in determining whether equity favors releasing assets). In Jamie, for
example, the Court determined that the defendant had “no other substantial assets to satisfy [its]
attorney’s submitted fees.” Id. at *2. “Requiring defendants to prove an inability to afford
counsel before lifting a property restraint is also consistent with the established burden-shifting
rules in the context of other asset restraints.” Payment Processing, 439 F. Supp. 2d at 441. Here,
however, Defendant has submitted no financial records or otherwise demonstrated an inability to
pay its counsel. Absent such, even if the Court were inclined to release funds, it would have no
basis to do so.
B. Assets Held by DCHCFD
Defendant, alternatively, seeks to access the $2.7 million not frozen by the Court. These
funds are still the subject of administrative hearings that have been stayed pending resolution of
the current suit. See Reply, Exh. 2 (Order of Office of Administrative Hearings). In fact, it is
Defendant who has opposed lifting the stay and who has the power to have it lifted. Id. This
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Court is not empowered to release those funds until a final decision has been made at the
administrative level. If, for example, the Office of Administrative Hearings determines
Defendant is entitled to some or all of the sums contested, then this whole issue would become
moot, as Defendant would have sufficient resources to pay its counsel. Conversely, were
Defendant to lose at the OAH stage, it might have a stronger argument regarding its need to
access the frozen funds. In addition, once those administrative proceedings have been
completed, then Defendant may challenge them to the extent it believes that there was error.
See, e.g., NB v. District of Columbia, 800 F. Supp. 2d 51 (D.D.C. 2011) (suit challenging
DCHCFD’s denial of Medicaid benefits); cf. also Heckler v. Ringer, 466 U.S. 602, 606 (1984)
(“Pursuant to her rulemaking authority, the Secretary has provided that a ‘final decision’ is
rendered on a Medicare claim only after the individual claimant has pressed his claim through all
designated levels of administrative review.”) (internal citation and footnote omitted). Defendant,
therefore, must decide whether it wishes to have the stay lifted and its entitlement to the funds
determined. Until that is accomplished, however, the Court cannot render any assistance.
Defendant cites United States v. Sriram, 147 F. Supp. 2d 914 (N.D. Ill. 2001), as an
example of a district court releasing monies outside of the frozen assets. See Reply at 2. Yet,
Sriram did not deal with sums that were held by a regulatory body or were the subject of
administrative proceedings; on the contrary, the funds released were those in the defendant’s
personal bank account. See 147 F. Supp. 2d at 916, 949. It thus provides no support for
Defendant’s argument.
II. Conclusion
The Court, therefore, ORDERS that Defendant’s Motion is DENIED WITHOUT
PREJUDICE.
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IT IS SO ORDERED.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: Feb. 16, 2012
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