Smart Phone Police Searches Now Require a Warrant, Unless Consent is Given

Government searches of every smart phone now require a warrant. Any other ruling in Riley v. California, would have voided the United States Constitution, Fourth Amendment’s proscriptions against governmental rummaging through the personal effects of its citizens. In Riley v. California, the Supreme Court ruled that state and federal investigators’ smart phone searches incident to lawful arrests require a warrant issued upon probable cause. The court held so, comparing the search of smart phones to that of a storage unit or entire house, based upon the extent of personal privacy data contained in smart phones.

The first stated limitation of the Riley decision is clear. “Our holding, of course, is not that the information on a cell phone is immune from search; it is instead that a warrant is generally required before such a search, even when a cell phone is seized incident to arrest. Our cases have historically recognized that the warrant requirement is ‘an important working part of our machinery of government….The critical point is that, unlike the search incident to arrest exception, the exigent circumstances exception requires a court to examine whether an emergency justified a warrantless search in each particular case.'” So, if there is a need and judicial allowance, the a warrantless search will be accepted and the evidence admissible.

The sufficiency of state or federal government probable cause proclamations in warrants, prompting judicial permission to search, has been extensively discussed in every jurisdiction in the country. The level of evidence necessary to secure a warrant is fact specific to the investigation and lower than beyond a reasonable doubt. With regard to smart phone searches, probable cause must relate to specific criminal activity of the immediate investigation and not general criminal activity for which search of the smart phone will or could produce evidence of a crime.

The ruling’s second significant limitation is that it does not discuss consensual searches of smart phones. This brings us to the future step of police investigative techniques in light of Riley. Police will now make every effort to secure consent before searching smart phones, thereby voiding both the need for a warrant and the importance of the Riley decision. These will be permissive searches, similar to consent search of automobiles on the highway during an otherwise legal car stop, that police will secure from the smart phone owner or possessor of the phone. Threat of a search based upon a warrant to coerce, connive, or simply scare a target into allowing a search of the smart phone is the step the police will now use to avoid the warrant requirement.

The Pennsylvania Supreme Court discussed consent searches in Commonwealth vs. Strickler and Commonwealth v. Freeman. There, the Court concluded that the issue of whether a minor encounter or constitutional seizure takes place centers upon whether an individual objectively believe that he is free to end the encounter and refuse a request to answer questions or conduct a search. In these cases the court made a critical determination that when an individual is subject to a valid detention ( a legal basis exists to conduct any police investigation), and the police continue to engage that person in conversation, the Citizen, having been in an official detention, is less likely to understand that he has the right to refuse to answer questions or a search. The court here must first determine is there reasonable suspicion of criminal activity to initially detain the person from whom consent is being sought.

Furthermore, while acknowledging the importance of the various factors, the court stressed that “conferral of the free-to-go advice” is itself, not a reason to forgo a totality assessment and therefore does not constitute a controlling factor in assessing whether the person would actually credit a police indication that he was free to leave. The suppression court must focus on whether there was a clear and expressed end point of the prior detention, the character of the police presence and conduct in the encounter under review, the geographic and temporal environment elements associated with the encounter, and the presence or absence of express advice that the citizen subject was free to decline the request for consent to search.

Each level of more intrusive questioning by any police officer must be based upon objective, articulable, reasonable suspicion of criminal behavior under federal and state constitutions for the officers’ subjective suspicions to be validated. Claims of heightened suspicion lead to an environment in which a defendant will be subjected to non-consensual search of both car and/or smart phone without probable cause.

Police Departments will commence training and expand investigative psychiatric and psychological tricks to secure consent searches of any smart phone. Regardless of how many police officers are present, on what road, at what time of day or night, and for what purpose, how consent is secured needs to be litigated. Custodial interrogation circumstances should be investigated to properly imply and defeat consent searches. Exploring the time period within which consents are secured under what circumstances the consent techniques will prove fruitful.

Please call me to discuss how and why your smart phone was searched and if you gave consent, why and what coercive measures were employed to secure your consent.

Medicare Fraud — Total Loss Guideline Calculations

One of my recent blogs discussed a new federal court ruling addressing a federal sentencing guideline comment that increases offense level calculations based upon total versus net loss to the government. This decision has enormous implications in the health care fraud field.

Many of my clients are the second and third tier employees of a variety of health care providers. Whether pharmaceutical, small medical practice, hospital, or large medical practice, my clients are typically not the organizers or orchestrators of the fraud scheme into which they are either hired or become a component. Rather, after hire, they eventually become accomplices and/or co-conspirators to the fraud when they engage in the entity’s fraudulent business practices.

For honest employees, unaware of the fraud scheme into which they are hired, they assist in their employer’s fraud simply by performing their particular job task; thus, each person truly becomes part of the larger fraud scheme to which all are then jointly and/or severally liable for the full amount of loss to the federal government.

Translated into medical office terms, the receptionist that knows the doctor or nurse can not and is not seeing 80 patients a day, but nonetheless completes the office visitor slips indicating such, is responsible for every illegal dollar paid to that doctor or nurse for those 80 patients a day for as long as the fraud was perpetrated. The same applies to the singular nurse who complies with the office manager’s request to submit medical billing charges under regulations that are either incorrect or inapplicable to the treatment provided.

Some medical offices have 10-20 off-site nurses providing home health care services. Here, billing is centrally performed. While each nurse is unaware of the other’s fraud, they could become responsible for the total fraud (the government loss) of the entire company, perpetrated by office administrators and other nurses.

The total loss calculation of federal funds received by “otherwise ineligible” beneficiaries (any person or entity not allowed to receive the federal money) is intended to act as a deterrent to criminal conduct. Prosecutors use this potential calculation as a fulcrum to compel lower level employees into cooperating and educating the investigators of the internal mechanics of the fraud scheme. Obviously if an entity is accused of millions of dollars in fraud, for which every employee is a minor player compared to the orchestrators, wholly unaware of the extent of the gross fraud perpetrated, and who do not receive any benefit of the fraud (salary but not commission based upon gross billings and payments), cooperation to avoid financial ruin becomes a primary consideration.

However, prior to cooperation, counsel’s role is to insure you, the new client, is in-fact a target based upon compelling evidence. Rushing in to proffer or cooperate, just to avoid the possibility of a gross loss claim without conducting any due diligence, is a huge mistake. As well, significant plea negotiation must occur to limit the gross loss claim per lower level defendant. Sometimes, prosecutors allow a cooperating co-conspirator to reduce the total value of the loss to which they are pleading if it is clear that the employee was not involved in orchestrating the fraud scheme. Trying to limit total loss claim to only those billings of the professional client is a prime goal. Also eliminating any criminal forfeiture should be sought.

Nonetheless, proffering is tantamount to pleading guilty. Proffering includes admission to criminal conduct along with acceptance of responsibility for your specific role in scheme. Here is where counsel must work to limit the fraud claim against a client so as to limit the total loss guideline level calculation.

Admitting to knowingly participating in fraud of a federal insurance program may result in preclusion letters from Medicare, Medicaid, and any other federal insurance programs. One’s inability to participate in a federal insurance program necessarily trickles down to insurance companies dropping you as a professional participant in their network because they find out why you do not have a Medicare or Medicare billing number. Also their contracts inquire into the presence of any preclusion letters.

At this juncture, being under any government criminal investigation also creates professional license consequences. Either upon license renewal, or after conviction, there are mandatory disclosure requirements to any state licensing board. Whether your are the subject of a criminal investigation, or convicted of any felony offense, your license will also now be implicated.

Please call me to discuss 1) any inquiry to you by any state or federal investigatory body or 2) your license reporting issues as a result of criminal investigation or conviction.

Total Value of Loss Calculation in Federal Sentencing

The federal sentencing guidelines are a complex set of congressional mandates and instructions identifying for federal judges all factors to be considered when sentencing a federally convicted felon to prison. The federal government is one of the largest contractors and employers in the country, engaging in a substantial amount of business that affects all aspects of the economy. Section 2B1.1, note 3(F)(ii) addresses sentencing guideline calculations associated with fraudulent receipt of government benefits; allegations of fraud and conspiracy related to receipt of any government contract or benefit from those contracts or programs.

The recent case of U.S. v Nagel, 212014 U.S. District Lexis 63033 (M.d.Pa. May 2014), addresses Section 2B1.1, note 3(F)(ii), which resulted in a 24 level increase to the base sentencing guideline calculation for Mr. Nagle. The court applied this note in sentencing Nagle after he was convicted of participating in a fraud scheme to secure federal transportation contracts.

Defendant Nagle was the president of the corporation that masked itself as a disadvantaged business enterprise (“DBE”). Nagle assisted in submitting bids for numerous highway construction projects sponsored by PennDOT and SEPTA but funded by the federal government. With Nagle’s assistance, his company received 336 general and/or subcontracts valued in excess of $119 million. Nagle was accused and eventually found guilty of conspiring to engage in a mail fraud scheme to misrepresent his entity’s disadvantaged business qualifications in order to receive federal highway construction contracts that his company was “otherwise ineligible” to receive.

The presentence investigation report (the “PRS”) valued the entire fraud scheme in excess of $135.8 million. Because Nagle join the conspiracy after its initiation, the loss value attributed to him was $53.9 million. Sentencing guidelines provision 2B1.1(b) increased Nagle’s offense level calculation 24 levels.

Nagle objected to the PSR’s value of loss calculation being determined by the gross value of the contracts awarded and not deducting for the actual value of goods and services provided. This argument was based upon U.S. v White, 2012 WL 4513489 (SDNY Oct 2, 2012), and its interpretation of U.S.S.G. §2B1.1(1)(h). There the court allowed for such a deduction, which resulted in a 14 level, not 24, increase in sentencing exposure.

The Nagle Court reviewed both sentencing provisions and rejected White. The court held that the government bears the burden of proving the loss with specific and reliable evidence. The Sentencing Guideline note at issue defines actual loss as the reasonably foreseeable pecuniary harm that resulted from the offense. The United States Sentencing Commission drafted comment note 3(A)(iii) to U.S.S.G. §2B1.1 , allowing courts to use “gain resulted from the offense” as an alternate measure of loss.

The Nagle court held that the government loss attributed to Nagle’s fraud shall equal the total dollar amount of money the otherwise ineligible defendant receives regardless of benefit or goods provided. The note reads “in a case involving government benefits (grants, loans, entitlement program payments), the loss shall be considered to be not less than the value of the benefits obtained by the unintended recipient. U.S.S.G. § section 2B 1.1 cmt.n.3(F)(ii).

Courts have defined unintended recipient someone who is not socially or economically disadvantaged (otherwise eligible) for whom the set-aside government program is designed to benefit. In White, the defendant certified that he was a service-disabled veteran when he was not. In Nagle, he certified that his company was a disadvantaged business enterprise when it was not.

This case makes clear that Congress, the U.S.S.G., and the courts take a dim view of defendants that “fraudulently certify they are a disadvantage business enterprise” when they are not.   Proper and appropriate construction work (both the services and material provided) become irrelevant in the sentencing scheme. The U.S.S.G. comments and notes address this specific type of fraud scheme in the context of the standard “calculation of loss” issue.

These cases are brought against these defendants (corporate officers and companies) who divert federal funds from their intended use — to help disadvantaged business enterprises secure their congressional mandated percentage of federal contract dollars. To discourage such fraud, the courts are instructed to value of the total loss equal to the face value of the contract fraudulently obtained. This practice lets these corporate entities know that no matter what, their will be no profit available for stealing this contract money from otherwise eligible competitors. Your corporation will lose all of the expenses it incurred in building the road because it will have to disgorge the entire contract value.

Another PHMP Trap –Be Careful

Pennsylvania’s Professional Health Monitoring Program (“PHMP”)  is replete with trap doors and fake doorways that effectively extend the probationary period beyond three years.  In reviewing a client’s agreement to extend his PHMP probation for violating the terms thereof, I came across standard paragraph 5.g.  This paragraph is a catchall phrase that can and will extend a professional’s PHMP probation for an unknown amount of time.

My last blog discussed the different time calculations between a professional’s voluntary enrollment in and the Board’s formal acknowledgement of a PHMP agreement. In that case, the professional provisionally enrolled in December, his PHMP case worker intentionally did not provide to him the formal consent agreement until March, and the licensing board did not accept the consent agreement as of June.  This seven month delay effectively extended for a least seven months the finish line of his PHMP three year probation agreement.

Once a person violates their PHMP agreement, the probationary time period begins anew.  Typically, however, the clock will stop on the day of the violation (a missed drug test or a positive drug test), only to restart upon the entry of a new consent agreement.

As with every PHMP agreement, paragraph 5(g) is the clause of concern to me.  This paragraph in every PHMP agreement, consent agreements, and reinstatement consent agreements reads;

“after successful completion of the minimum period of probation, Respondent may petition the board, upon a form provided by the PHMP  reinstate respondent’s authorization to practice the profession to unrestricted, non-probationary status. The respondent is required to remain in compliance with all terms and conditions of this agreement and until the board issues the order terminating the respondent’s probationary status.”

This paragraph means that even though the PHMP monitored probation is three years, there is no automatic reinstatement of the participant’s license. Rather, the applicant must file a formal petition for reinstatement, on a form provided by PHMP and only then will the board schedule a hearing and rule on the reinstatement application.  These are two significant condition precedents to reinstatement to an unrestricted, non-probationary status license.

First the PHMP caseworker must provide and complete the appropriate form. The PHMP caseworker, with whom a participant has struggled for three years, will not necessarily execute the form in an appropriate and timely manner upon completion of the three-year time period. While a participant may feel they have done everything they are required, a PHMP case worker can and will cause a delay (for any number of months) in getting your the PHMP completion form or letter.  There will be nothing the PHM P participant can do because they require the form provided by their PHMP case worker before reinstatement may be sought.

Secondly, an application to a licensing board will necessarily generate a response from that board’s prosecutor.  Necessary due process hearing delays for prosecutor’s responses will follow.  As well, the matter may not be placed on the board’s agenda at the next board hearing.  Similar to the initial delay producing the PHMP consent agreement and a board executing that consent agreement, delays will be present before the board will address an application for unrestricted, non-probationary status.

Significantly, the respondent is required to remain in compliance with all terms and conditions of the PHMP agreement until the board issued its order terminating probationary status. This effectively means 3 to 6 additional months of more drug testing, workplace monitoring, and all other aspects of the PHMP consent agreement. These are huge issues.

Call me to discuss your PHMP case, application, and other issues.

Another Federal Sentencing Provision –Identity Theft

This blog will focus on U.S.S.G. Section 2B1.1(b)(2)(C) as a specific sentencing provision of the United States Sentencing Guidelines. In this age serious identity theft crimes (the Target Store), this one provision can substantially increase a federal sentencing guideline recommendation.

A recent case discussing this provision is U.S. v Ballard,, 551 Fed. Appx. 33 (3rd Cir. May 2014). In this matter Ballard is accused of federal identity theft crimes after a legal search of her personal storage unit revealed numerous Apple iPods, cellular phones, and Apple laptop computer, all possessing numerous other people’s privacy data. Ballard was federally charged with, and convicted of, possessing other persons’ ID cards, Social Security documents, drivers licenses health insurance cards, school IDs and library cards. Ballard was found guilty of utilizing all of the information to obtain credit cards and other bank related documents in other people’s name with her picture and address. Identify theft and mail fraud charges were also included.

At sentencing, an FBI officer testified that Ballard possessed 1312 individuals’ information for which Ballard purchased items on behalf of at least 600 of those people. The total monetary loss was $111,000.

The government moved for an 8 level enhancement under section 2B 1.11.1(b)(1(E) for the monetary loss and a 6 level increase under 2B1.1(b)(2)(C) because Ballard’s crime involved 250 or more victims. Accordingly, the guideline sentence on one count of mail fraud required a 37-46 month sentence consecutive to the mandatory minimum 24 month sentence for identity theft.

The sentencing issue was what evidence was permissible to establish proof of both financial loss and the identity of a victim to establish over 250 victims. The court found that merely an FBI officer’s testimony that a defendant possessed the names and corroborating identifiers (dates of birth, social security numbers, government issued cards) not of the defendant is sufficient evidence to trigger the sentencing enhancement. Simply possessing another persons’ identifying financial data, whether or not that person suffered financial loss, will be the basis for aggravating a sentence under section 2B1.1(b)(2)(C) and 18 U.S.C Section 1028(d)(7).

This is a huge problem for any person accused of identity theft. Regardless of whether an individual’s credit card was used, social security number was used, or date of birth copied, mere possession of another person’s personal information and data will be sufficient for activation of this sentencing provision.

Please call me to discuss your case.

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