A federal magistrate judge in the Southern District of Florida has sharply criticized the Department of Justice’s (DOJ) handling of evidence in a case that the Department, itself, has called “the largest single criminal health care fraud case ever brought against individuals.” United States v. Esformes, 1:16-cr-20549-RNS. Philip Esformes is currently charged in a Third Superseding Indictment with various healthcare conspiracy and fraud offenses that allegedly defrauded Medicare and Medicaid of $1 billion. Although the magistrate judge’s August 10, 2018 Report and Recommendation recommended denial of the Defendant’s Motions to Disqualify the Prosecution Team, and to Dismiss the Indictment, she also recommended that key evidence items be suppressed.
Philip Esformes was originally arrested at his home on July 22, 2016. On the same day, federal agents executed a search warrant at one of the assisted living facilities named in the indictment, and seized 70 boxes of documents, as well as various electronic devices and storage media. The application for the warrant did not mention that the facility to be searched included an attorney’s office, and the magistrate judge who approved the warrant was not informed of that fact. Instead of assigning a taint attorney to the search, the government assigned an agent to identify and segregate potentially privileged documents – but did not give him sufficient background or information to perform the task properly. As a result, only a few documents were placed in the “Taint” box, while a significant number of privileged documents were placed, along with thousands of other seized documents in the other 69 boxes – where they were examined and reviewed by the government’s attorneys. Furthermore, Esformes alleged, the government used some of those documents in both a reverse proffer with a non-party and interviews of a non-party witness.
Esformes further argued that the prosecution team violated his Joint Defense Agreement (“JDA”) with two brothers, Guillermo “Willie” Delgado and Gabriel (“Gabby”) Delgado, who were cooperating with the government. Based on the alleged misconduct, Esformes moved in April 2017 to disqualify the prosecution team and to dismiss the most recent indictment against him as remedies for these alleged privilege violations.
Over nine days in October, November, and December 2017, the magistrate judge heard testimony from eighteen witnesses, including government attorneys, FBI and other federal agents, state investigators, and defense attorneys. Her 117-page opinion describes in exhaustive detail the testimony and her findings based on the testimony of these witnesses.
The magistrate judge found that “the government’s disregard for the attorney client and work product privileges ha[d] not been limited to a single instance or event,” and that the government’s attempt to obfuscate the evidentiary record during the hearing had been “deplorable.” Finding that Esformes had “sufficiently met his burden of showing misconduct on the part of the government, albeit not to the level of extraordinary misconduct found in other cases,” and had also met his burden of showing prejudice “to some extent,” the court, nonetheless, concluded that “the extreme remedies of dismissal and disqualification are inappropriate in this case.” Instead, the magistrate judge recommended “the less drastic remedy of suppression” of specified items of evidence.
Attorneys have until August 24, 2018 to file objections to the Report and Recommendations.