A press release of  the DOJ reports that a "federal jury in Anchorage, Alaska, has found former Alaska State Representative Victor H. Kohring guilty of conspiracy, bribery and attempted extortion." The press release states that "[f]ollowing an eight-day jury trial, Kohring, … was convicted … for corruptly soliciting and receiving financial benefits from a company in exchange for performing official acts in the Alaska State Legislature on the company’s behalf. Unlike two executives from VECO, who plead guilty (see here), Kohring decided to go to trial.  Typically, taking the risk of trial has had severe consequences when it comes to the sentencing phase. Whether this holds true in this circumstance remains to be seen.

(esp)

A DOJ Press Release reports that following a seven day trial in Miami, Florida, "[t]he owner and operator of a Florida durable medical equipment company and an assisted living facility has been convicted by a federal jury."  She was convicted of "conspiracy to defraud the U.S. government, to submit false claims to Medicare, and to receive kickbacks; conspiracy to commit health care fraud; and three counts of receiving kickbacks in exchange for referring patients to a co-conspirator pharmacy."  Sentencing is set for November 9th.

The case involved “compounded” aerosols. The press release notes that "[c]ompounding is the process of a pharmacist making medication as opposed to a pharmaceutical manufacturer."  The press release states that:

"In 2006, the Medicare program paid for over $155 million worth of aerosol medications in Miami-Dade County alone. These drugs amassed the single most common item billed to Medicare Part B and accounted for over 32 percent of all claims filed with the Durable Medical Equipment Regional Carrier (DMERC) in Miami-Dade County. From 2005 to 2006, claims for aerosol medications rose approximately 115 percent. According to Medicare data, Miami-Dade County alone accounted for more paid DME claims than every state in the country except California, Texas, New York, Michigan, and Ohio.

"Centers for Medicare and Medicaid Services recently announced that it will no longer pay for compounded aerosol, as it has concluded that such drugs are medically unnecessary."

(esp)

CBC is reporting that Lord Conrad Black has been convicted of three counts of mail fraud and one count of obstruction of justice, and not guilty on other counts of mail/wire fraud, RICO, and tax fraud.  He was not convicted on the largest transaction, the Can-West non-compete, and found guilty on a charge related to another non-compete.  The other three defendants, Peter Atkinson, Jack Boultbee, and Mark Kipnis, were also found guilty on some fraud counts and acquitted of others. Further updates on the verdict later. (ph)

The attorney for former Dynegy executive Jamie Olis won a civil fraud claim against the company for failing to pay the legal fees in defending Olis in a criminal prosecution arising from his work at the company.  Although Olis was convicted and has now served four years in prison, the issue at the trial concerned whether Dynegy’s by-laws required it to advance attorney’s fees for an officer subject to judicial proceedings for conduct undertaken in the course of employment.  Although it is a standard by-law provision to advance such fees, at least during an investigation and trial, the government pressured Dynegy into denying fees to Olis’ counsel.  A jury in Houston found Dynegy liable for $450,000 in fees and recommended $2 million in punitive damages for Olis’ lawyer, Terry Yates.  A Reuters story (here) discusses the verdict.

The theory here is interesting because attorney’s fees claims are usually brought as a contract law action, or as an equitable proceeding under the law of the state of incorporation.  Dynegy is a Delaware corporation, so that state’s liberal indemnification laws would have required payment of at least a portion of Olis’ attorney’s fees.  But, such an action could not have been the basis for punitive damages, which are limited to tort cases.  Rather than a claim by Olis for reimbursement, Yates brought a fraud action in his own right, apparently claiming that the denial of fees after he undertook the representation defrauded him of the payment because of his obligation to defend Olis regardless of whether he was paid by the company.  A novel theory, and one that may result in a punitive damage award, although courts tend not to give what a jury recommends.  I have not seen this theory used to recover attorney’s fees under a corporate by-law, and Dynegy could pursue an appeal challenging what appears to be a new application of civil fraud.

Tom Kirkendall of the Houston’s Clear Thinkers blog has an interesting post (here) discussing the government’s policy of pressuring organizations to deny attorney’s fees for their officers and employees, including the KPMG tax shelter case in New York.  The most recent iteration of the government’s policy on charging corporations — the McNulty Memo — no longer mentions payment of legal fees for employees as a sign of a lack of cooperation, but whether there is a real change in attitude on this front remains to be seen.  (ph)