United States of America v. Gupta et al
Filing
7
OPINION entered by Judge Sue E. Myerscough on 08/30/2011. SEE WRITTEN OPINION. Motion to Reconsider 6 is ALLOWED. At 4:00 PM on the 30th of August, 2011, this Court issues a Temporary Restraining Order ENJOINING and PROHIBITING Defendants Gupta, Th e Nutrition Clinic, Virta-Gupta, their agents, employees, attorneys, and all persons acting in concert and participation with them, including all banking and other financial institutions at which they do business, business partners, and all other cor porations over which the Defendants Gupta, The Nutrition Clinic, or Virta-Gupta exercise control or have an ownership interest. A preliminary injunction hearing is set for September 1, 2011 at 10:00 AM in Courtroom 1, U.S. Courthouse, Springfield, IL 62701. (DM, ilcd)
E-FILED
Tuesday, 30 August, 2011 04:12:19 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
UNITED STATES OF AMERICA,
)
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Plaintiff,
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v.
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GAUTAM GUPTA, JAANA MONIKA )
VIRTA-GUPTA, and GAUTAM
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GUPTA, M.D., LLC, d/b/a THE
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NUTRITION CLINIC, and
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RAKEESH WAHI,
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Defendants.
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11-3329
OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This matter comes before the Court on Plaintiff United States of
America’s Motion to Reconsider Temporary Restraining Order. See d/e 6
(Motion). For the reasons stated below, the Court will not reconsider its
finding that the Government is required to satisfy the four-factor test
typically used in cases of injunctive relief. However, because the Motion
recites proof sufficient to obtain a TRO, the Motion is ALLOWED.
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RELEVANT FACTS
On August 24, 2011, Plaintiff United States of America (the
Government), filed a Motion for Temporary Restraining Order and
Preliminary Injunction (Motion) under 18 U.S.C. § 1345 . See d/e 3.
The Government attached a 14-page affidavit from Michael Kuba, an
Illinois State Police Officer, stating that his investigation of Dr. Gupta
shows that Dr. Gupta violated 18 U.S.C. § 1347 by obtaining $2.3
million in fraudulently obtained health care payments. See d/e 3-1 at 8-9
(Aff. In Support of Injunctive Relief). Officer Kuba’s affidavit detailed
how from June 2001 to January 2010, Dr. Gupta and persons acting on
his behalf systematically inflated bills they submitted for Medicaid
reimbursement. The Complaint for Injunctive Relief filed against Dr.
Gupta similarly alleged a $2.3 million dollar Medicaid fraud. See d/e 1.
By comparison, the Government’s Motion for Entry of Temporary
Restraining Order and Preliminary Injunction alleged fraud in excess of
$20 million. See d/e 2. The $20 million figure is consistent with the
amount alleged in a criminal indictment pending against Dr. Gupta
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wherein Dr. Gupta defrauded Blue Cross and Blue Shiled of Illinois. See
United States v. Gupta, et al., 11-30043 (C.D.Ill. (July 13, 2011)).
However, this Court does not consider amounts pertaining to the Blue
Cross and Blue Shield of Illinois fraud since the amount alleged in the
instant civil case is limited to the $2.3 million in Medicaid fraud.
The $2.3 in fraudulent Medicaid bills were sent to the Illinois
Department of Health and Family Services’ (HFS) offices in Springfield,
Illinois for processing and payment. HFS administers the Medicaid
program for the State of Illinois and received Medicaid funds pursuant to
42 U.S.C. § 1396, et seq.
Although the fraudulent scheme is over, Dr. Gupta is allegedly
dissipating assets traceable to his fraud insofar as he is selling and
transferring property he purchased with proceeds of the fraud. See d/e 31 at 10-14 (Aff. In Support of Injunctive Relief). Therefore, the
Government moved to enjoin Dr. Gupta, and those acting on his behalf,
from dissipating assets traceable to the scheme to defraud. Additionally,
the Government alleges that while Dr. Gupta has sold The Nutrition
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Clinic, The Nutrition Clinic has at least $300,000 in outstanding
accounts receivable. Id. at 13-14.
The Nutrition Clinic The Government filed a brief in support of its
Motion. See Memorandum in Support of Temporary Restraining Order,
Preliminary Injunction and Other Equitable Relief (d/e 4). The brief and
the related pleadings allege that Dr. Gupta has fled this country to avoid
prosecution. Prior to fleeing, Dr. Gupta provided his wife, Defendant
Jaana Monika Virta-Gupta, with a “power of attorney” designed to
liquidate and/or transfer assets in Dr. Gupta’s name and in the name of
his corporations within the United States. See, i.e., d/e 3-1 at 12-13
(Aff. In Support of Injunctive Relief).
This Court denied the Government’s motion initially because the
Government did not satisfy the four-factor test required for injunctive
relief. See Text Order dated August 24, 2011 (citing United States v.
Hoffman, 560 F.Supp.2d 772 (D.Minn. 2008)(applying four-factor test
in context of 18 U.S.C. § 1345) and United States v. Williams, 476
F.Supp.2d 1368 (M.D.Fla. 2007)(same). However, the Court gave the
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Government leave to refile. See Text Order dated August 24, 2011.
On August 25, 2011, the Government moved for reconsideration
by filing the instant Motion. As before, the Government contends that it
need not satisfy the traditional four-factor test. Nonetheless, because the
Government alternatively provides evidence to satisfy the four-factor test
to support issuance of a TRO, this Court will enjoin Dr. Gupta, and
those acting on his behalf, from dissipating assets traceable to the scheme
to defraud. The injunction shall not apply to erstwhile Defendant
Rakeesh Wahi, a medical doctor who worked with Dr. Gupta and
allegedly participated in the fraud. The reason for this limitation is that
the Government voluntarily dismissed Dr. Wahi from this case on August
26, 2011. See d/e 5 (Notice of Voluntary Dismissal).
JURISDICTION & VENUE
Because the Government is the plaintiff and a federal question is
posed by the § 1345 issue, this Court has subject matter jurisdiction. See
28 U.S.C. §§ 1345, 1331. Personal jurisdiction and venue requirements
are satisfied because relevant acts—the processing of Defendants’
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fraudulent bills at HFS’ Springfield, Illinois office—occurred in this
judicial district. See World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297 (1980) (personal jurisdiction exists where a defendant
“purposefully avail[ed] [himself or herself] of the privilege of conducting
activities” in the forum state); see 28 U.S.C. §1391(b) (venue in nondiversity cases is proper in a judicial district where any defendant resides,
if all defendants reside in the same State).
STANDARD FOR INJUNCTIVE RELIEF
To obtain a TRO, a movant must show that: (1) it is reasonably
likely to succeed on the merits; (2) no adequate remedy at law exists; (3)
it will suffer irreparable harm which, absent injunctive relief, outweighs
the irreparable harm the respondent will suffer if the injunction is
granted; and (4) the injunction will not harm the public interest. See
Joelner v. Vill. of Washington Park, Illinois, 378 F.3d 613, 619 (7th Cir.
2004)(stating requisite elements for a TRO); Goodman v. Illinois Dep’t
of Fin. and Prof’l Regulation, 430 F.3d 432, 437 (7th Cir. 2005) (internal
citations omitted)(stating that a movant bears the burden of proof).
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Section 1345 is appropriately used to enjoin a defendant from dissipating
assets traceable to health care fraud. Id. at § 1345(a)(2)(B)(i). “To
succeed on a claim to enjoin fraud under section 1345, the plaintiff must
demonstrate the balance of the four equitable factors—success on the
merits, irreparable injury, the balance of the hardships on the parties, and
the public interest—weigh in favor of injunctive relief, but also must
establish that fraud has been committed and demonstrate the extent of
such fraud.” Williams, 476 F.Supp.2d at 1374 (citing United States v.
Brown, 988 F.2d 658, 663 (6th Cir. 1993).
Ex parte relief, such as the Government seeks here, is permissible
only if the Government satisfies Federal Rule of Civil Procedure
65(b)(1)(A) or (B). Rule 65(b)(1)(A) provides for ex parte relief when
specific facts in an affidavit show that “immediate and irreparable injury,
loss, or damage will result to the movant before the adverse party can be
heard in opposition”. Since the affidavit of Officer Kuba states that
assets traceable to the Defendants’ $2.3 million fraud are presently being
dissipated, ex parte relief is permissible under Rule 65(b)(1)(A). See d/e
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3-1 at 10-12 (Aff. In Support of Injunctive Relief).
ANALYSIS
The instant Motion states that Congress’ purpose in enacting 18
U.S.C. § 1345 was “‘to allow the Attorney General to put a speedy end to
a fraud by seeking an injunction in federal district court” as soon as the
requisite evidence is secured.’” United States v. American Heart
Research Foundation, Inc., 996 F.2d 7, 11 (1st Cir. 1993) (emphasis in
original)(quoting S. Rep. 225, 98th Cong., 2d Sess. 402 (1984), reprinted
in U.S. Code Cong. & Admin. News 3182, 3549). The Government
argues that the legislative history and plain language of § 1345 shows
that courts may dispense with the traditional four-part test for injunctive
relief. See Motion at 3. Moreover, the Government cites several cases
where courts imposed injunctions without applying the traditional fourfactor test in order to prevent ongoing harm to the public. See Motion at
3-6 (citing, inter alia, United States v. Odessa Union Warehouse Co-Op,
883 F.2d 172, 175-76 (9th Cir. 1987), Heart Research Foundation, Inc.,
996 F.2d at 11).
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The authority cited by the Government—none of which is a
Seventh Circuit case pertaining to § 1345 injunctions—is distinguishable
from or inapposite to the case at bar. Unlike the Odessa Union
Warehouse Co-Op decision—a Food, Drug and Cosmetic Act case cited
by the Government, public health will not be threatened unless an
injunction is issued without satisfying the four-factor test. Furthermore,
in contrast to Heart Research Foundation, Inc. and cases similar to it,
this case does not an involve an ongoing fraud requiring a speedy end.
See Heart Research Foundation, Inc., 996 F.2d at 11; see also, United
States v. Cappetto, 502 F.2d 1351, 1358-59 (7th Cir. 1974)(enjoining
ongoing gambling violations where the United States sued under 18
U.S.C. § 1964). In fact, the Government states that Dr. Gupta last
submitted a fraudulent bill on February 1, 2010. See d/e 3-1 at 6 (Aff. In
Support of Injunctive Relief). By July 15, 2011, he fled the country to
avoid prosecution. Id. at 12.
Even if there were an ongoing fraud, the availability of injunctive
relief under § 1345 does not mean that the traditional four-factor test
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need not be satisfied. The Hoffman opinion is instructive on this matter.
See Hoffman, 560 F.Supp.2d 772. In Hoffman, the defendants were
engaging in a large-scale mail, wire, and bank fraud. The defendants
purchased apartment buildings, converted the properties into
condominiums, helped third-party buyers obtain fraudulent loans, and
sold condominiums to the third-party buyers without disclosing the
third-party buyers’ liabilities and false statements. The defendants then
placed renters into the condominiums, but diverted rent payments to
themselves. Consequently, the third-party buyers became delinquent on
their mortgages, condominiums were foreclosed upon, and $5.5 million
in losses accrued. Id. at 775. Based on these facts, the United States
obtained a temporary restraining order and then a preliminary injunction
under § 1345. Additionally, the court granted the United States’ request
to have a receiver appointed. The receiver, as a neutral party, could
administer any of the defendants’ legitimate business interests, protect
innocent third-parties’ interests, and avoid furthering the defendants’
scheme to defraud. Id. at 777-78.
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Applying the traditional four-factor test, the court in Hoffman
found that injunctive relief was warranted. Id. at 777. The likelihood of
success on the merits was established using a preponderance of the
evidence standard. To meet that burden the United States merely had to
show that the defendants devised a fraudulent scheme for the purchasing
and selling of property. The United States satisfied the irreparable harm
factor by showing that the defendants’ scheme jeopardized the financial
stability of renters, purchasers, sellers, escrow agents, and banking
institutions. Id. at 776. The balancing of harms factor also weighed in
the United States’ favor. Among other things, the court found that
because of extant vacancies and the fact that renters were occupying
many of the defendants’ properties, it was necessary to end the
defendants’ scheme and force the defendants to maintain financial assets
for the protection of innocent third parties. Id. at 776-78. Finally, the
court found that there was a substantial public interest in “protecting
innocent parties from predatory and fraudulent schemes.” Id. at 777.
Here, the Government supports its Motion with a 14-page affidavit
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from Michael Kuba, an Illinois State Police Officer who avers that his
investigation of Dr. Gupta shows that Dr. Gupta violated 18 U.S.C. §
1347 by obtaining $2.3 million in fraudulently obtained health care
payments. See d/e 3-1 at 8-9 (Aff. In Support of Injunctive Relief).
Officer Kuba’s affidavit states that from June 2001 to January 2010, Dr.
Gupta and persons acting on his behalf systematically inflated bills they
submitted for Medicaid reimbursement. Although the fraudulent
scheme is over, Dr. Gupta is now dissipating assets traceable to his fraud
insofar as he is selling and transferring property he purchased with
proceeds of the fraud. See d/e 3-1 at 10-14 (Aff. In Support of Injunctive
Relief). Moreover, Defendant The Nutrition Clinic—a participant in the
fraudulent scheme—has yet to collect approximately $300,000 in
accounts receivable which may ultimately be subject to the Government’s
recovery. The Court finds that this evidence is sufficient to prove that a
fraud has been committed, the extent of the fraud is established, and the
Government is likely to succeed on the merits of a fraud claim. See
Williams, 476 F.Supp.2d at 1374; Hoffman, 560 F.Supp.2d at 777.
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Irreparable harm is also apparent. Dr. Gupta used fraudulently
obtained medical payments to purchase real estate, stakes in companies,
etc. By selling these assets or transferring them from his direct control,
Dr. Gupta is dissipating assets traceable to his fraud and interfering with
the Government’s ability to recover financially. Every dissipated dollar is
one less dollar that can be applied to restitution. Therefore, the
irreparable harm factor supports issuance of an injunction. Hoffman,
560 F.Supp.2d at 776.
Similarly, a balancing of harms supports injunctive relief. Any
difficulty Dr. Gupta may experience while his assets are frozen is eclipsed
by the potential lack of recovery that may befall the Government if assets
are not kept intact. Id. at 776-78.
Finally, as in Hoffman, there is a substantial public interest in
“protecting innocent parties from predatory and fraudulent schemes.” Id.
at 777. Accordingly, application of the traditional four-factor test shows
that a preliminary injunction should be issued under § 1345. See
Hoffman, 560 F.Supp.2d at 778; see also, Williams, 476 F.Supp.2d at
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1374.
CONCLUSION
For the reasons stated above, Plaintiff United States of America’s
Motion to Reconsider Temporary Restraining Order (d/e 6) is
ALLOWED.
WHEREUPON THE COURT, having considered the matter and
being duly advised in the premises finds that a Temporary Restraining
Order is warranted pursuant to 18 U.S.C. § 1345. The Court finds that
Plaintiff United States of America has shown probable cause to believe
that Defendants Gautum Gupta (“Gupta”), Gautum Gupta, M.D., LLC,
d/b/a The Nutrition Clinic (“The Nutrition Clinic”), Jaana Monika VirtaGupta (“Virta-Gupta”) committed a Federal health care offense in
violation of 18 U.S.C. § 1347. The Court further finds that a continuing
and substantial injury to Plaintiff United States of America, the Medicaid
program, and the public, absent a temporary restraining order issued
without notice, is likely to occur and is defined as follows: the continued
disposition and alienation of funds or assets obtained as a result of the
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$2.3 federal health care offense or of equivalent value to $2.3 million
resulting from the commission of a federal health care fraud offense. The
irreparable harm necessary is established in light of the statutory basis for
the issuance of a temporary restraining order under the showing made by
Plaintiff United States of America. See 18 U.S.C. § 1345.
THEREFORE, at 4:00 p.m. on the 30th day of August, 2011, this
Court issues a Temporary Restraining Order ENJOINING and
PROHIBITING Defendants Gupta, The Nutrition Clinic, Virta-Gupta,
their agents, employees, attorneys, and all persons acting in concert and
participation with them, including all banking and other financial
institutions at which they do business, business partners, and all other
corporations over which the Defendants Gupta, The Nutrition Clinic, or
Virta-Gupta exercise control or have an ownership interest, are enjoined
in these regards:
(1) The preceding individuals and entities are prohibited from
alienating, withdrawing, transferring, removing, dissipating, or otherwise
disposing of, in any manner, any moneys or sums presently deposited, or
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held on behalf of Defendants Gupta, The Nutrition Clinic, Virta-Gupta
by any financial institution, trust fund, or other financial agency, public
or private, that are proceeds from the $2.3 million in fraudulent claims
made by Defendants Gupta, The Nutrition Clinic, Virta-Gupta, or any
moneys of an equivalent value to those taken through false, fictitious, or
fraudulent claims;
(2) The preceding individuals and entities are prohibited from
alienating, withdrawing, transferring, removing, dissipating, or otherwise
disposing of, in any manner, assets, real or personal, whose value is up to
$2.3 million;
(3) Additionally, the preceding individuals and entities are
prohibited from interfering with, transferring or disposing of any assets
up to $2.3 million in value owned by Gupta, The Nutrition Clinic,
Gautam Gupta, LLC, and all other companies, businesses accounts and
assets in any way related to Gupta. Accordingly, Defendants Gupta, The
Nutrition Clinic, Virta-Gupta, their agents, employees, attorneys, and all
persons acting in concert and participation with them, including all
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banking and other financial institutions at which they do business,
business partners, and all other corporations over which Defendants
Gupta, The Nutrition Clinic, or Virta-Gupta exercise control or have an
ownership interest must:
(A) Preserve all business, financial and accounting records,
including bank records, which detail Defendants Gupta’s, The
Nutrition Clinic’s, or Virta-Gupta’s business operations and
disposition of any payment which directly or indirectly arose
from the payment of money to the aforementioned
Defendants on behalf of any healthcare benefit program;
(B) To preserve all medical records, including patient records,
which relate to Defendants Gupta’s, The Nutrition Clinic’s, or
Virta-Gupta’s business operation and/or to services for which
claims were submitted to the federal healthcare benefit
programs;
(C) To provide to Plaintiff United States of America the
following:
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(i) a list of all post office boxes or other locations at
which mail addressed to Defendant Gupta, The
Nutrition Clinic, or Virta-Gupta is received;
(ii) a list of all financial institutions, including but not
limited to banks and brokerage houses, at which are or
have been maintained in the past four years savings,
checking, or any other kind of account or other safe
deposit box into which money has been deposited in
Defendant Gupta’s, The Nutrition Clinic’s, or VirtaGupta’s names or in the names of their agents,
employees, officers, persons acting in concert with them,
or any business names under which they operate,
together with the number or other designation of
each such account or box;
(iii) a list of all financial institutions, including but not
limited to, banks and brokerage houses, at which are
maintained, or have been in the past four years, savings,
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checking, or any other kind of account or other safe
deposit box into which monies received in response to
any of the activities described in Plaintiff United States
of America’s Complaint have been deposited, together
with the number of such box or other designation of
each such account or box; and
(iv) the names, addresses, and telephone numbers of any
individuals who have received remuneration of any kind
for assisting in record-keeping, bookkeeping, accounting,
brokering, or financial, investment, or tax advice or
consultation for Defendant Gupta, The Nutrition
Clinic, or Virta-Gupta in the past four years.
(4) To provide an accounting of the assets in which Defendants
Defendant Gupta, The Nutrition Clinic, or Virta-Gupta hold a legal or
equitable interest, within ten calendar days, and to provide on a monthly
basis, commencing forthwith, suitable reports detailing their financial
condition; and
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(5) To complete within ten (ten) calendar days of receipt a
Financial Disclosure Statement form provided to Defendants Gupta, The
Nutrition Clinic, and Virta-Gupta by Plaintiff United States of America.
(6) The duration of this Temporary Restraining Order shall not
exceed 14 days of the time and date of its entry.
(7) A preliminary injunction hearing is set for September 1, 2011,
at 10:00 a.m. in Courtroom 1, U.S. Courthouse, Springfield, Illinois,
62701.
IT IS SO ORDERED.
ENTERED: August 30, 2011
FOR THE COURT:
s/ Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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