Monday, March 31, 2008

Should Fraudulent Billing By Attorneys Be Mail Fraud

The Wall Street Jrl (here) reports on an attorney from a major U.S. law firm pleading to a one count Information to the crime of mail fraud, 18 U.S.C. s 1341 for engaging "in a fraudulent scheme to charge the Firm and its clients hundreds of thousands of dollars for personal and non-existent business expenses."  Although the Wall Street Journal mentions the name of the firm, the Information they link to does not (see here). Some interesting observations here:

  • The government seems to always mention the innocent affiliations, and clearly this is justified in RICO cases where they need to identify the innocent enterprises. So why in this Information do they call it - "a major United States law firm (the 'Firm')" and omit the law firm's name?  Are they giving special treatment to a law firm as opposed to another form of business when the firm or business name is lumped into the Information or Indictment, even though the firm or business has no criminal culpability and may have been the source of notifying the authorities of wrong-doing?  Mind you, I am not criticizing the removal of the name here as this is a good move by the U.S. Attorney.  My question is - why isn't this done more often?
  • But where was the "The Firm" in this scenario?  The Information filed by the US Attorney's Office says that this "fraudulent scheme" was "[f]rom in or about 1993 through in or about 2005." Why was this not discovered sooner?  Was there no oversight? Did the "the firm" have a corporate compliance program?
  • Should mischaracterizing billing or even fraudulent billing by an attorney constitute mail fraud? This issue came up in the case of United States v. D'Amato, 39 F.3d 1249 (2d Cir. 1994), although that case was different as noted by the Second Circuit in vacating the conviction.  The court stated, "[t]he mail fraud statute does not criminalize the charging of an allegedly excessive fee, where, as here, a corporate agent with at least apparent authority to do so agreed to the fee, received no personal benefit from the fee, and was not deceived by the payee." But then note in United States v.Myerson, 18 F.3d 153 (2d Cir. 1994) the court allowed a conviction to stand were the "fraud was based on ..... submitting a legal fee that overbilled his clients by millions of dollars and by his fraudulent claims that personal charges were legitimate business expenses." (Myerson was not, however, convicted of defrauding the law firm)
  • Clearly overbilling and fraudulent billing by an attorney is unethical conduct and clearly it should be something subject to disciplinary action.  But should the federal government be needing to intervene with criminal actions under the mail fraud statute?

(esp)

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