United States District Court, E.D. Virginia, Norfolk Division
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For W. Wayne Perry, Jr., Defendant: Gray Bolling Broughton, John Staige Davis , V, LEAD ATTORNEYS, Brendan David O'Toole, Williams Mullen (Richmond), Richmond, VA.
For Angela Perry, Defendant: Andrew Michael Sacks, LEAD ATTORNEY, Sacks & Sacks, Norfolk, VA.
For Allison Hunter-Evans, Defendant: James Edward Short, LEAD ATTORNEY, James E Short PLC, Chesapeake, VA.
For USA, Plaintiff: Alan Mark Salsbury, LEAD ATTORNEY, United States Attorney's Office, Norfolk, VA; G. Wingate Grant, Melissa E O'Boyle, United States Attorney's Office, Richmond, VA.
OPINION and ORDER
Mark S. Davis, United States District Judge.
This criminal matter is before the Court on a motion filed by defendant W. Wayne Perry, Jr. (" Perry" or " Mr. Perry" ) seeking a bill of particulars as to Count Fourteen of the superseding indictment, ECF No. 64, and a motion filed by the United States of America (" Government" ) seeking to disqualify Perry's retained counsel based on the alleged need for counsel to testify as a fact witness at trial. ECF No. 80. Also pending before the Court is a motion filed by co-defendant Angela Perry, Mr. Perry's wife, seeking to join in the motion for a bill of particulars. ECF No. 91.
This Court previously issued an Order deferring ruling on Mr. Perry's motion seeking a bill of particulars and instructed the parties to confer in an effort to agree on additional disclosures that could be made by the Government to narrow the field of evidence to be admitted at trial without giving Defendant an improper preview of the Government's case. ECF No. 74. As the parties were unable to reach such an agreement, the Court held a hearing on both motions on May 30, 2014. For the reasons set forth in detail below: (1) Angela Perry's written motion for leave to join in Mr. Perry's motion seeking a bill of particulars is GRANTED;  (2) the joint motion seeking a bill of particulars is GRANTED; and (3) the Government's
motion to disqualify defense counsel is DENIED.
I. Factual and Procedural Background
A. Allegations in the Indictment
Mr. Perry and his wife Angela Perry (collectively with Mr. Perry, " Defendants" ) are charged with numerous health care fraud related offenses in an eighteen-count superseding indictment that was filed on February 5, 2014. ECF No. 61. As stated in the superseding indictment, Mr. Perry owned and operated Community Personal Care, Inc. (" CPC" ), a home health care business, between January of 2009 and January of 2013. Id. The superseding indictment charges that Defendants conspired to commit health care fraud, committed health care fraud, and made false statements relating to health care matters, among other things. Id. Although the majority of the counts in the superseding indictment set forth particular allegations outlining the charged offense conduct, Count Fourteen broadly alleges that Defendants participated in falsification or alternation of " office records" over a nearly four year period without identifying those office records that were allegedly falsified.
B. Mr. Perry's Asserted Facts
On November 29, 2012, federal agents investigating CPC executed a search warrant at CPC's office. During the search, Mr. Perry was informed by federal agents that the search was part of a Medicaid fraud investigation. Bond Hearing Tr. 23, ECF No. 79. Within several days of such search, Mr. Perry retained the Williams Mullen law firm to provide legal advice. Broughton Aff. ¶ 3, ECF No. 87. Williams Mullen immediately began an internal investigation into CPC's records, and, as characterized by Mr. Broughton of Williams Mullen, such investigation revealed documentary evidence that CPC employees, including but not limited to CPC staffing coordinators Vernice Spain and Sarina Freeman, were stealing from CPC and overbilling Medicaid. Id. ¶ 4.
In December of 2012, Perry's counsel contacted federal agents and prosecuting attorneys to both share defense counsel's discovery of illegal actions undertaken by CPC employees and to request that the Government investigate such matters. Id. ¶ ¶ 6-8. Defense counsel specifically requested that the Government perform surveillance of an upcoming meeting between Vernice Spain and another CPC employee that purportedly had an illegal purpose. Id. ¶ ¶ 7-8. After Perry's counsel informed him that the Government declined the defense's invitation to coordinate the investigation of CPC employees and further chose not to perform surveillance of the reported illegal meeting, " Mr. Perry sought advice [of counsel] as to whether he could terminate the employment of Vernice Spain and Sarina Freeman." Id. ¶ ¶ 8-9. After consulting with counsel, Perry/CPC terminated Vernice Spain and Sarina Freeman in December of 2012. Id. ¶ 10. However, Mr. Broughton advised Mr. Perry not to take any criminal or civil action against either of the terminated employees until it was clear how the federal government's investigation unfolded. Id. ¶ 11.
Many months later, on October 16, 2013, Mr. Broughton met with both the FBI agent and Assistant United States Attorney in charge of the CPC investigation/prosecution and again informed them that Vernice Spain and Sarina Freeman, and others, were responsible for false Medicaid billings and theft of both public and CPC funds. Id.
¶ 12. However, the Government made clear to Mr. Broughton that it believed that
Mr. Perry was the " mastermind" who had orchestrated the false Medicaid billings
and that both
Mr. Perry and Angela Perry would likely be named as co-defendants in a criminal case. Id. Less than a month later, on November 6, 2013, a criminal indictment was returned by the grand jury against Mr. Perry, Angela Perry, and one other individual who was charged with falsification of records to cover-up the Medicaid fraud charged in the superseding indictment. ECF No. 1.
After the return of the original indictment, Williams Mullen again reviewed CPC's records. Broughton Aff. ¶ 13. Such investigation revealed, as characterized by the defense, improper " bonus checks" issued in July of 2012 to Vernice Spain, Sarina Freemen, and Shavonne Freeman, that were separate and apart from their authorized CPC payroll direct deposits. Id. ¶ ¶ 13-14. According to Mr. Broughton, unlike the previously discovered Medicaid " kickback" scheme involving Vernice Spain and another employee, the unauthorized bonus checks issued in July of 2012 " did not appear to be tied to any false billings to Medicaid, only theft directly from CPC's account." Id. ¶ 14. After discussing this matter with Mr. Perry, " Williams Mullen, as counsel for CPC and its owner, Mr. Perry, advised Mr. Perry that CPC should file a criminal complaint against Ms. Spain, Sarina Freeman and Shavonne Freeman." Id. ¶ 15. Mr. Broughton advised Mr. Perry " that Shavonne Freeman should be named in the criminal complaint" because she " had clearly received an unauthorized 'bonus' check" in July of 2012. Id. In discussing the proposed criminal complaint with Mr. Perry, a complaint that would be filed with local non-federal law enforcement authorities, Mr. Broughton " did not advise Mr. Perry to inform or not inform the [City of Norfolk] detective of the ongoing federal criminal case." Id. ¶ 16.
In addition to the affidavit Mr. Broughton submitted to this Court in opposition to the Government's pending motion, Mr. Perry submitted his own affidavit confirming each of the above statements of fact. Perry Aff., ECF No. 86. Specifically, Mr. Perry states that he fired Vernice Spain and Sarina Freeman after consulting with counsel, that he did not take any civil or criminal action against these individuals between their December 2012 termination date and October of 2013 based on defense counsel's advice to wait and see how the federal investigation unfolded, that Perry " did not authorize" the bonus checks issued in July of 2012, and that the bonus checks " did not appear to be linked in any way to Medicaid" but instead " appeared to be stolen directly from CPC's account." Perry Aff. ¶ ¶ 8-10, 14. Mr. Perry further states in his sworn affidavit that Mr. Broughton communicated with both Perry and James Sears (" Mr. Sears" ), CPC's former Chief Financial Officer (" CFO" ), about the bonus checks and about filing a criminal complaint, that Mr. Sears and Perry made their report of embezzlement to local authorities at the direction of Mr. Broughton, and that defense counsel " did not advise [Mr. Perry] to inform or not to inform the magistrate or [local] law enforcement of the ongoing federal criminal case." Id. ¶ ¶ 18-22.
Further corroborating Mr. Perry's version of events, Mr. Sears also submitted a sworn affidavit to the Court outlining his communications with Perry's counsel and his involvement in filing the criminal complaint in April of 2014. Sears Aff., ECF No. 88. Specifically, Mr. Sears indicates that he provided CPC financial records to Perry's counsel at counsel's request, that
typically CPC " bonus" checks were only issued around the holidays, that Perry's counsel communicated with Mr. Sears via email about filing a criminal complaint with local authorities based on the alleged embezzlement by former CPC employees, and that Mr. Sears ultimately made such report of embezzlement as CFO of CPC on April 1, 2014 " at the direction of Gray Broughton." Id. ¶ ¶ 8-17.
C. Government's Asserted Facts
The Government has not advanced an affidavit offering any facts at this time, but does cite to testimony provided at Mr. Perry's bond revocation hearing conducted on May 5, 2014, by Magistrate Judge Lawrence R. Leonard. Bond Hearing Tr., ECF No. 79. The Government also has proffered evidence that it intends to introduce at trial to demonstrate that Mr. Perry was the " mastermind" behind the Medicaid fraud charged in the superseding indictment and that he is accusing former employees Vernice Spain, Sarina Freeman, and others, of illegal conduct to deflect blame from himself.
As will be discussed in greater detail below, the Government fails to advance any facts suggesting the existence of any inconsistencies between defense counsel's version of events leading up to the April 2014 complaint and Mr. Perry's own version of the same events. Moreover, the Government openly acknowledges that it does not dispute the accuracy of Mr. Broughton's statements in his affidavit, and does not accuse defense counsel of any misconduct. However, it appears that the Government seeks to question defense counsel at trial for two reasons: (1) the Government speculates that it can elicit inconsistencies between defense counsel's testimony and Perry's testimony; and (2) the Government seeks to demonstrate, through referencing trial evidence that will be before the jury at the time the Government questions defense counsel, that Mr. Perry did not admit his criminal conduct to his lawyers, thus undercutting Perry's ability to rely on an " advice of counsel" defense at trial.
II. Discussion - Motion for Bill of Particulars
As discussed on the record at the hearing on Perry's motion seeking a bill of particulars, " the purpose of a bill of particulars is to enable a defendant to obtain sufficient information on the nature of the
charge against him so that he may prepare for trial, minimize the danger of surprise at trial, and enable him to plead his acquittal or conviction in bar of another prosecution for the same offense." United States v. Schembari, 484 F.2d 931, 934-35 (4th Cir. 1973) (citing United States v. Dulin, 410 F.2d 363, 364 (4th Cir. 1969)). However, a bill of particulars is " not to be used to provide detailed disclosure of the government's evidence in advance of trial." United States v. Automated Medical Labs., Inc., 770 F.2d 399, 405 (4th Cir. 1985) (citing United States v. Anderson, 481 F.2d 685, 690 (4th Cir. 1973)). A bill of particulars does not amend or alter the indictment, but instead " merely amplifies the indictment by providing missing or additional information so that the defendant can effectively prepare for trial." United States v. Fletcher, 74 F.3d 49, 53 (4th Cir. 1996) (citing United States v. Howard, 590 F.2d 564, 567 (4th Cir. 1979)). In considering whether to grant a defendant's motion seeking a bill of particulars, it is appropriate for the district court to inquire into the information that has already been provided by the government during discovery. United States v. Society of Independent Gasoline Marketers of America, 624 F.2d 461, 466 (4th Cir. 1980).
Although a motion seeking a bill of particulars should not be used to require the government to preview its case, in cases involving vaguely asserted charges of fraud, perjury, or alteration of records, a bill of particulars may be necessary in order to provide a defendant a full and fair opportunity to prepare a defense. See United States v. Sampson, 448 F.Supp.2d 692, 696 (E.D. Va. 2006) (" In the case of fraud or perjury, it is critical that the government identify in the indictment the dates of the fraudulent conduct, the specific fraudulent documents, and the fraudulent statements within the documents." (citing United States v. Bortnovsky, 820 F.2d 572, 574 (2d Cir. 1987))); Bortnovsky, 820 F.2d at 574 (holding that the defendants were " hindered in preparing their defense" in light of " the district court's failure to compel the Government to reveal crucial information," associated with fraud charges, including the dates of several staged burglaries and " the identity of three fraudulent documents" ). A defendant is not fairly apprised of the necessary information merely because the government provided " mountains of documents to defense counsel who were left unguided as to which documents would be proven falsified" at trial. Bortnovsky, 820 F.2d at 575; see United States v. Modi, 197 F.Supp.2d 525, 530 (W.D. Va. 2002) (recognizing, " as argued by the defendants, that the volume of discovery in a complex case may itself impede rather than assist the defense in its understanding of the government's case," but nevertheless denying a motion for a bill of particulars in a criminal case involving a medical fraud conspiracy because the defendants conceded that the government provided " charts or summaries" identifying the " patients at issue, the dates of services, the suspect treatments, and the amounts paid for those allegedly improper services" ).
Here, Defendant Perry seeks a bill of particulars only as to Count Fourteen of the superseding indictment, which broadly alleges that, over a period of almost four years, Defendants, and other CPC employees acting under the direction of Defendants, " knowingly altered, falsified and made a false entry" in CPC's " office records . . . including DMAS-90s" with the intent to obstruct and influence the proper administration of the federal Medicaid program. Super. Indict. Count 14, ECF No. 61. It appears largely undisputed from the parties' briefs and oral argument
that, during discovery, the Government has in essence " opened its files" to Defendants. However, it also appears undisputed that the Government's " files" associated with this case include tens of thousands of documents.
The most glaring issue with the manner in which Count Fourteen is charged is the fact that it alleges alteration of unidentified " office records" over a nearly four year period of time. At the hearing on the instant motion, the Government explained to the Court that, in an effort to reduce the number of relevant documents, the Government specifically identified to Defendants 72 of the 504 patient files that were seized from CPC as the files on which the Government will rely during its case in chief at trial. Moreover, the Government indicated on the record that, with respect to Count Fourteen, the Government's evidence will not rely on unidentified types of " office records," but will instead be limited to the " DMAS-90" time sheets found within the 72 identified patient files.
When determining whether to grant a criminal defendant's motion for a bill of particulars, the government's disclosures during discovery are clearly relevant to the Court's exercise of its discretion to grant such a motion. Modi, 197 F.Supp.2d at 530. Here, the Government has both greatly reduced the number of relevant patient files and has limited the relevant evidence to a single type of allegedly false document: DMAS-90 time sheets. However, notwithstanding the Government's good-faith actions to reduce the pool of relevant documents, both parties represented at the hearing that there are likely " thousands" of DMAS-90 time sheets in the 72 patient files at issue, as these time sheets were filled out for each patient, sometimes on a weekly basis, and some of the patient files cover the entire period of almost four years set forth in Count Fourteen.
Based on this Court's questioning of counsel at the hearing on the motion for a bill of particulars, it is clear to the Court that Mr. Perry's motion has merit. The Government has acknowledged that the falsification/alteration charged in Count Fourteen took different forms, including adding or changing information on previously created DMAS-90 time sheets, or creating an entirely new falsified timesheet to replace a previously created DMAS-90. Such differing forms of alteration/ falsification will undoubtedly make it difficult for the defense to predict, in advance of trial, which of many thousands of documents the Government will seek to prove were altered or falsified. Adding to such difficulty, it appears that the DMAS-90s included in any given patient file may have been prepared by several different individuals that provided care to such patient, and differing preparers may have differing methods of completing (or altering) such forms. Moreover, the Government has acknowledged that even its witnesses will have difficulty identifying which DMAS-90s were falsified because many of such witnesses participated in the alteration or falsification of " hundreds and hundreds" of DMAS-90s covering a several year period.
Accordingly, without further particularization, Defendants will be left to sift through thousands of DMAS-90s contained in 72 patient files covering a nearly four-year period with limited, if any, ability to reasonably identify which documents the Government will attempt to prove false at trial. As noted at the hearing, to the extent the defense seeks to call a handwriting expert, or seeks to cross check the relevant time-sheets against other CPC records in an effort to defend the authenticity/accuracy of such documents, the
thousands of potentially falsified documents create a herculean task for the defense. The instant scenario therefore appears even more likely to result in " unfair surprise" at trial than the scenarios faced by the courts in Sampson and Bortnovsky. Moreover, the Government's admission that its own witnesses might have difficulty identifying the falsified/altered documents underscores the need for further particularization to the extent that the Government seeks to introduce altered or falsified documents at trial to prove the Defendants' guilt as to Count Fourteen. Accordingly, after considering the nature of the charge set forth in Count Fourteen, and the facts of this case, including disclosures made during discovery, the Court finds that the Government must provide more particularity than is currently provided through the identification of " thousands" of DMAS-90s that may, or may not, have been altered or falsified.
The Defendant's joint motion for a bill of particulars is therefore GRANTED, and the Government is ORDERED to identify to counsel for both remaining Defendants the falsified/forged/ altered DMAS-90s that the Government will, or may, rely on at trial as evidence of Defendants' guilt as to Count Fourteen of the superseding indictment. The Government should identify such DMAS-90s to counsel for both remaining defendants, no later than July 23, 2014. The timing of such disclosure should both allow the Government sufficient time to review the relevant DMAS-90s with its witnesses, and allow sufficient time for Defendants to hire any responsive experts (if necessary). To the extent that, after such date, the Government identifies one or more additional altered or falsified DMAS-90s which it will, or may, rely on at trial with respect to Count Fourteen, the Government should immediately notify defense counsel.
III. Discussion - Motion to Disqualify
The Government has filed a motion seeking to disqualify Mr. Perry's lawyers, including Mr. Broughton, Mr. Davis, and the entire Williams Mullen law firm. ECF No. 80. The Government asserts that Mr. Perry's April 2014 complaint to local authorities about embezzlement allegedly committed by former CPC employees was actually an effort to tamper with witnesses who will be called to testify against Perry at trial. Although Mr. Perry has not been formally charged with witness tampering, the Government contends that Perry's 2014 conduct is evidence of his " guilty knowledge" as to the fraud crimes that are charged in the superseding indictment.
The Government further argues that, because defense counsel provided Mr. Perry advice regarding the 2014 complaint, counsel " injected" themselves into the fact pattern of this case, are necessary and likely adverse witnesses to Mr. Perry, and that based on such facts, the entire Williams Mullen law firm should be disqualified.
Mr. Perry counters by arguing that defense counsel's testimony is not necessary at trial, that such testimony is not in dispute, and that it is subject to stipulation. Moreover, defense counsel represents that the defense strategy does not require defense counsel to testify on behalf of Mr. Perry at trial, and that even if defense counsel were called as a witness by the Government, any such testimony would only corroborate Mr. Perry, and thus it will not be " adverse" to Mr. Perry's interests.
A. Ethical Standard
The standard governing disqualification based on the potential that an attorney will be called on to testify as a fact witness at trial is grounded in counsel's ethical duties to the client, as well as counsel's ethical duties to the legal profession as a whole. The Local Rules of the United States District Court for the Eastern District of Virginia state that " the ethical standards relating to the practice of law in criminal cases in this Court shall be Section II of Part Six of the Rules of the Virginia Supreme Court as it may be amended or superseded from time to time." E.D. Va. Crim. R. 57.4(I). Such cross-reference to the Virginia Rules of Professional Conduct results in Rule 3.7, titled " Lawyer as Witness," being the guiding ethical standard for the analysis of the pending motion to disqualify counsel. Va. Rule Prof'l Conduct 3.7. Such Rule is commonly referred to as the " witness-advocate rule."
i. Analysis of Virginia Rule 3.7
In order to properly interpret the current version of Virginia's witness-advocate rule, Rule 3.7, one must first examine both the predecessor Virginia Model Code of Professional Responsibility, and Rule 3.7 of the ABA Model Rules of Professional Conduct on which the current Virginia Rule 3.7 was based. Prior to Virginia's adoption of Rule 3.7, which took effect on January 1, 2000, a Virginia lawyer's conduct was governed by the Virginia Code of Professional Responsibility. Relevant here are former Disciplinary Rules 5-101 and 5-102, which provide as follows:
DR 5-101. Refusing Employment When the Interests of the Lawyer May Impair His Independent Professional Judgment. -
(A) A lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client may be affected by his own financial, business, property, or personal interests, except with the consent of his client after full and adequate disclosure under the circumstances.
(B) A lawyer shall not accept employment in contemplated or pending litigation if he knows or it is obvious that he or a lawyer in his firm ought to be called as a witness, except that he may undertake the employment and he or a lawyer in his firm may testify:
(1) If the testimony will relate solely to an uncontested matter or to a matter of formality and there is no reason
to believe that substantial evidence will be offered in opposition to the testimony.
(2) If the testimony will relate solely to the nature and value of legal services rendered in the case by the lawyer or his firm to the client.
(3) As to any matter, if refusal would work a substantial hardship on the client because of the distinctive value of the lawyer or his firm as counsel in the particular case.
DR 5-102. Withdrawal as Counsel When the Lawyer Becomes a Witness. -
(A) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of his client, he shall withdraw from the conduct of the trial and his firm, if any, shall not continue representation in the trial, except that he may continue the representation and he or a lawyer in his firm may testify in the circumstances enumerated in DR 5-101(B)(1) through (3).
(B) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm may be called as a witness other than on behalf of his client, he may continue the representation until it is ...