Since Insurance Fraud is a Felony Charging Misdemeanors Wasteful

Following a preliminary hearing, Sanjoy Banerjee, a physician, was charged with two counts of presenting a false or fraudulent health care claim to an insurer, a form of insurance fraud and three counts of perjury. The superior court denied Banerjee’s motion to dismiss the information as unsupported by reasonable or probable cause and he sought a writ of prohibition to eliminate the charges. In Sanjoy Banerjee v. The Superior Court Of Riverside County, The People, Real Party in Interest, E076291, California Court of Appeals, Fourth District, Second Division (October 5, 2021) the Court of Appeals prohibited the perjury counts and allowed the insurance fraud charges to go forward.

INTRODUCTION

Banerjee petitioned for a writ of prohibition, directing the superior court to vacate its order denying his Penal Code section 995 motion and to issue an order setting aside the information. The People claim the evidence supports a strong suspicion that Banerjee committed two counts of insurance fraud and three counts of perjury.

Between 2014 and 2016, Banerjee billed a workers’ compensation insurer for services he rendered to patients through his professional corporation and through two other legal entities he owned and controlled. The insurance fraud charges are based on Banerjee’s 2014-2016 billings to the insurer through the two other entities. The perjury charges are based on three instances in which Banerjee signed doctor’s reports, certifying under penalty of perjury that he had not violated “section 139.3.”

BACKGROUND

Banerjee is charged with violating Penal Code section 550, subdivision (a)(6), a form of insurance fraud. The statute makes it a crime to “[k]nowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit.” The elements of the crime are (1) the knowing presentation of a false claim for payment of a health care benefit, (2) with the intent to defraud the recipient. Insurance fraud is a specific intent crime; the defendant must specifically intend to defraud a person with a false or fraudulent claim. The crime is complete upon the presentation of the claim, regardless of whether anyone is defrauded by or anything of value is taken or received in consideration for the claim.

A physician who refers to or seeks consultation from an organization in which the physician has a financial interest must disclose this interest to the patient in writing at the time of the referral.

Banerjee’s Formation of Three Service Provider Entities

Banerjee is a licensed physician, specializing in pain management.  He formed his professional corporation, Sanjoy Banerjee, M.D., Inc., in 2005, and in 2010, he began operating the corporation under the fictitious name, PPCC. Kensington and Rochester were formed in 2014. The articles of organization for Kensington and Rochester state that they were to be managed by their members and identify Banerjee as their sole member. Statements of information for Kensington and Rochester, filed in 2014, identify Kensington’s type of business as a “clinical diagnostic and reference laboratory” and Rochester’s as an “ambulatory surgical center.”

BHHC’s Investigation of Banerjee

Gordon Oard, an investigator for BHHC, was the only witness who testified at the preliminary hearing. Oard was tasked with investigating “suspicious” claims and service providers for BHHC, and he began investigating Banerjee in 2017. Oard discovered that Banerjee had been billing BHHC through three legal entities, namely, PPCC, Kensington, and Rochester, which Banerjee owned and operated from the Wildomar location.

The insurance fraud charges in counts 1 and 2 are based on Banerjee’s aggregate billings to BHHC, through Kensington and Rochester, between 2014 and 2016. The prosecutor argued that these billings were false and fraudulent because Banerjee violated section 139.3(a) by referring the patients to Kensington and to Rochester-entities in which he had a financial interest-without informing BHHC that he had a financial interest in Kensington and Rochester. In sum, defense counsel argued that Banerjee did not violate section 139.3(a) and was therefore not guilty of insurance fraud or perjury.

DISCUSSION

It is a settled principle of statutory construction that, where exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed.

A physician’s disclosure to a patient that the physician has a financial interest in an organization to which the physician refers the patient or seeks a consultation makes perfect sense as a means of informing the patient that the physician has a conflict of interest with the organization, regardless of whether the services for which the patient is referred make the referral unlawful under section 139.3(a).

The government violates a person’s Fifth Amendment right to due process of law “by taking away someone’s life, liberty, or property under a criminal law so vague that it fails to give ordinary people fair notice of the conduct it punishes, or so standardless that it invites arbitrary enforcement.” (Johnson v. U.S. (2015) 576 U.S. 591, 595.)

Section 139.31(e) provides: “The prohibition of section 139.3 shall not apply to any services for a specific patient that is performed within, or goods that are supplied by, a physician’s office….” Banerjee claims that section 139.31(e) is unconstitutionally vague because it does not specify what “ ‘within… a physician’s office’ ” means, and because other parts of section 139.31 do not provide guidance.

Our interpretation of the physician’s office exception of section 139.31(e) means that the exception applied to Banerjee’s referrals of patients to Kensington and Rochester (§ 139.3(a)), and that Banerjee did not violate section 139.3(a) by referring patients for services specified in section 139.3(a) to Kensington and Rochester. Thus, Banerjee’s acts of signing three doctor’s reports, under penalty of perjury, certifying to BHHC that he had complied with “section 139.3” was not false (§ 118).

Insurance Fraud

The People’s theory for the insurance fraud charges is that Banerjee presented false and fraudulent billings to BHHC for services described in Labor Code section 139.3(a), after he referred the patients to Kensington and Rochester for the services, in violation of Labor Code section 139.3(a). Penal Code section 550, subdivision (a)(6), a form of insurance fraud, is committed when the defendant knowingly makes or causes to be made any false or fraudulent claim for a health care benefit. Insurance fraud is a specific intent crime; the defendant must specifically intend to defraud a person with a false or fraudulent claim. The evidence adduced at the preliminary hearing shows that the superior court had probable cause to believe that Banerjee was guilty of the insurance fraud charges.

The evidence showed that, between 2014 and 2016, Banerjee presented false and fraudulent claims for health care benefits to BHHC through Kensington and Rochester, with the specific intent to defraud BHHC. Banerjee’s billings through Kensington and Rochester were for substantially higher amounts than Banerjee had previously billed BHHC for the same or similar services that he provided solely through PPCC, and that BHHC had been billed by the group practice with whom Banerjee had formerly practiced. Banerjee did not inform BHHC that he owned and operated Kensington and Rochester; and in one instance, Banerjee double billed BHHC for two epidural injections provided to the same patient on the same day, through PPCC and Rochester. The Rochester billing for the two epidural injections was approximately $9,000 higher than the total billing for the patient through PPCC.

The record also supports a strong suspicion that Kensington and Rochester were sham entities, and that Banerjee formed Kensington and Rochester with the specific intent to defraud BHHC through his Kensington and Rochester billings.

The Kensington and Rochester billings gave the appearance that the entities were not part of Banerjee’s medical practice but were stand alone, diagnostic testing and surgical centers, operating independently of any physician’s office. But when BHHC’s investigator, Oard, visited Banerjee’s Wildomar location, he discovered that Banerjee was operating Kensington from “a small closet-type room,” and that Banerjee was operating Rochester from a “converted treatment room.” The evidence supported a strong suspicion that Banerjee had no business reason for forming Kensington and Rochester, other than to use them to present highly inflated billings for his diagnostic and surgical services to BHHC. The information cannot be set aside as to the insurance fraud charges because the evidence demonstrates that there is some rational ground for assuming the possibility that those offenses have been committed and the defendant is guilty of them.

DISPOSITION

Further proceedings may continue, and the court’s previous order staying further proceedings on the information was lifted and the matter may go to trial on the two insurance fraud charge.

ZALMA OPINION

The crime of insurance fraud is a simple, direct, crime to prove. If a fraudulent bill is sent to an insurance company the crime may be proved. Since the evidence showed that by using the two additional entities Banerjee was able to bill $9,000 more than if he billed it directly can cause a jury to conclude he issued the bills with the intent to defraud the insurer. The Court of Appeal, by eliminating the perjury charges made the case simple, clean and direct instead of complicating the trial with difficult to prove and less than clear statutes. Banerjee succeeded partially, and in so doing, made it easier for the state to convict him of insurance fraud.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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