Entering into a deal with a conman may not be the best way to kick off the New Year. White collar defense attorney and long-time friend of ByrdAdatto Sarah Wirskye joins us to share a client dumpster fire story about the criminal ripple effects of making a deal with a conman.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
Transcript
[Intro] Welcome to the legal one, two threes with ByrdAdatto legal issues, simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
[Brad] Welcome back to another episode of legal one, two threes with ByrdAdatto. I’m your host, Brad Adatto with my cohost Michael Byrd.
[Michael] Thanks Brad. As a business and healthcare law firm, we meet a lot of interesting people and learn their amazing stories. Today, we get to spend time with our friend and my next door neighbor, Sarah Wirskye. In fact, we shot a lot of videos for our Access+ portal and BAntering with Byrd Adatto series remotely during the pandemic. I would not be surprised if Sarah or someone from her family has inadvertently photo bombed or video bombed one of our videos because her front driveway is right outside my home office window.
[Brad] Nice video bombing, good job there. Well, before we bring Sarah in, you and I are both huge sports fans, but I know you spent a lot of time reading articles on baseball and in particular, the Texas Rangers, but beside the Rangers, I’m sure you’ve kept up with that other baseball team here in Texas- the Houston Astros.
[Michael] Well, yeah. Growing up in Texas and Dallas in particular, they were referred to as “the last rows for the disastrous”. Of course, I don’t say that out loud anymore since they have a world series and the Rangers don’t have anything.
[Brad] Yup. Well, you know, I brought that up because as an outside observer of baseball, if I remember correctly, the Astros had a huge scandal on sign stealing. What happened?
[Michael] Well, believe it or not, actually, it makes total sense. This news story broke at the beginning of 2020, because of course it did in 2020. And so for those that don’t remember, the Astros were found by major league baseball to have illegally used a camera system to steal signs during the 2017 regular season and post-season during, which they won the world series, as well as part of the 2018 season. So basically the Astros used a video camera in center field to film the opposing catcher’s signs to the pitchers and the Astros players or team staffers would watch the live camera feed behind the dugout and then signal it to the batters. They would know what pitch is coming. So Brad, what does this have to do with today’s episode?
[Brad] Okay, great. Fair question. Well, in preparing for our guest, it reminded me that in life there are signs and we don’t always see them, or we just ignore them. With the Astros, it appeared that no one in the organization stopped to determine the outcome of stealing these signs. They failed to see the bigger picture and someone should have said, you know, or send the signal; pun intended, to cut it out. Much like if you’re driving, you actually missed the stop sign. This can cause a chain reaction of hitting another car or getting a ticket.
[Michael] Okay. Well, before our audience stops listening, which would be a bad sign, again, Brad dad joke, inserted. What does this all have to do with our guest today, Sarah?
[Brad] I’m glad you asked. Two reasons. First, our guest often has to practice an area of law, which her clients either missed or deliberately ignored the signs to stop or step on the brake. Failure to do so cause the government, like the MLB and the Astros example, to open investigations and apply penalties on her clients. This ripple effects of failure to see the signs and cause some of the major dumpster fires. Secondly, her daughter Catherine and your daughters Ava and Ellex posted actual signs in the windows while we were all quarantined during the initial outbreak of the pandemic.
[Michael] That was actually one of the sweeter moments of a very crazy unprecedented time in our lives. So we were all learning the discipline of working in schooling from home. And as you might imagine with preteen and teenage girls boredom sets in. My daughter, Ava, and Sarah’s daughter, Catherine, their windows face each other. And we could hear while we were working downstairs, all this laughter upstairs and we’re like, what in the world is going on? And, they had developed their own communication system by posting a note and taping it on the window that would just, you know, ask basic questions like “What are you doing?” or “how are you doing?” And then, Catherine would post one back and this went on for a few days.
[Brad] So cool.
[Michael] So, a little formal introduction to Sarah, besides her being my neighbor and us having some fun pandemic stories to share. Sarah has been a practicing attorney for over 20 years defending clients and white collar criminal and civil fraud disputes with the government. Sarah received her law degree from Southern Methodist University with honors. She has an MBA from the University of Texas at Dallas. She has a Bachelor of Business Administration from SMU and her business background as a former practicing CPA with the big six accounting firm and her MBA makes her uniquely suited to defend clients in financial fraud matters. On a personal note, Sarah is married to her husband Bill and has two children; the after mentioned famous note sharer Catherine and her son Will. Sarah, welcome.
[Sarah] Thank you. Thank you very much for having me here today.
[Brad] Sarah, we’re excited to have you here. And our theme for this season on Legal 123s with ByrdAdatto is dumpster fires. And for those who are not familiar with the term dumpster fires, it basically means a complete mismanagement of a situation or an occurrence, which results in disaster. Like many of our prior guests, you too have a confession, you’re a lawyer but also a CPA. So please explain to our audience how a CPA becomes a white collar defense attorney.
[Sarah] Sure. So I actually practiced accounting for a few years with a big six firm and then went in-house while I got my MBA. And I practiced long enough to know I didn’t want to practice as a CPA long-term, but it really is a great background to have in these white collar criminal and civil fraud cases because a lot of these cases have to do with following the money. And you’re often looking at financial records, tax records, those kinds of things. So it’s a great background to have with that in that particular area.
[Michael] Well, that’s amazing. I mean, I know on the non-criminal side for us, we are constantly having conversations about following the money and making sure deals are set up compliantly. So I can only imagine when you’re in a defensive situation that it’s even that much more important to really understand the financials and be able to dig beneath the surface.
[Sarah] It is. And it’s often an area you can poke holes in the government’s case. They may think they’ve got a $20 million case and it’s only $10 million. It’s all relative, but it is an area where sometimes you can poke some holes in the government. So it’s a good background.
[Michael] Cool. Well, as Brad mentioned we’re discussing dumpster fire stories that you know do not always have happy endings. In fact, I think the very essence of it being a dumpster fires is that they don’t have a happy ending, because we had stories that have a redemption at the end and these don’t. But there are pearls of wisdom that we all as attorneys can gain from these events. Based on your background of dealing with so many criminal and civil investigations and prosecutions of your clients. Tell us a dumpster fire story that you can share with our audience.
[Sarah] Sure. So I recently tried a health care fraud case that has several issues that came up, things that occurred historically in the factual background, long before there was a government investigation- that is the perfect dumpster fire story. But like I said, these are the types of issues that I’ve seen over and over in the white collar criminal practice area, which is basically criminal fraud cases brought by the government or even some of the civil whistleblower key terms civil fraud cases. Again, the government is the party on the other side, but this case is unique because it had so many of these issues. Whereas in a lot of cases you may have one or two of these issues.
So this particular case, it started out like so many of these cases do where my client trusted a salesman or in this case, frankly, a con man. And you know, there’s a spectrum there. A lot of the times you’ve got someone who’s really just enthusiastic about some structure and they may believe it. Whereas sometimes you’ve got someone on the other extreme that I would call a con man. I don’t know that they believe it or not, but they’re very good at convincing multiple people, and in this case including my client, that the structure was legitimate and had been blessed that everything is good.
You need to get into this structure and you often see that trait with entrepreneurs where they’re dreamers and we’ll worry about the details later. The problem is when you’re dealing with a highly regulated area, especially health care, you can’t worry about the details later, which I’m sure you see when you guys have clients come in as well.
[Michael] Yeah. And I was gonna say, something you said struck me because we experienced it on our end not doing the defense side. You mentioned that they have in there, you know, air quotes, enthusiasm and selling the deals that they’ve got these deals blessed. And I hear people say, oh there’s a legal opinion on this and they’ll cite it to some firm or sometimes we hear that ByrdAdatto wrote a legal opinion on this and it makes us cringe. Cause we don’t know what they’re talking about. Or even these documents were prepared by so-and-so health care firm. Was that something in this case or something you thematically see?
[Sarah] Interestingly, that was exactly one of the next issues I was going to discuss, which is in this case, the architect of the structure told not just my client but dozens of other individuals, that there were legal opinions. And related to that, that the contracts had been drafted and blessed by legal counsel. And this government investigation lasted over eight years. The legal opinions never surfaced. So I highly doubt they existed. But my client didn’t hire his own counsel and that’s the next issue that is often problematic. So he was relying on what this individual said about the legal opinions, and even if they do exist, if you don’t have your own counsel you don’t know what was represented to someone else’s counsel, where they followed. There are a lot of obstacles if you don’t have your own legal counsel with respect to any opinions.
And related to that, like I mentioned the contracts, there was a contract that my client and other folks entered into. Now, some of these were reviewed by counsel. My client did not have counsel and so his contract was not reviewed by counsel. One of the things that we heard over and over in trial from the government regarding the contract was even if a contract’s okay on its face, if it’s not followed, it really doesn’t matter. And this is an issue that I have seen not only in this case, but so many of my cases, and that was an issue here.
And related to that, one of the issues we had with these contracts, where the government took the position that they weren’t followed, that things under the contract weren’t done. And regardless, people were paid a lot of money in the government’s eyes, unrealistic amount of money for the work that was done, or even should have been done. And therefore, it was really a kickback.
[Brad] So we may get a little bit into this part in the analysis, but when you’re sitting there visiting with your clients on this, did they never have a moment where that look, you know lack of better term, their Spidey sense kicked in where they’re like, wow, this is really weird that I’m getting paid all this money for doing just very little work.
[Sarah] Well that’s funny you say that because my legal term for it is, does the contract pass the smell test? That’s really what it gets down to. And we’ll talk about this a little more in the analysis, like you said, but if you’re getting paid ridiculous amount of money for little to no work, it looks suspect. And following up on that is even something that doesn’t sound like a lot of money to professionals, may be a lot of money to the jury. You know what you’re being paid under contract, maybe more money than some of these jurors make all year, and so that’s always a challenge in these cases. A couple of other issues that came up in terms of being problematic is sloppiness and emails and text messages. And we had that in this case, particularly my client’s situation, according to the government. But you see this over and over, that people are just sloppy in these types of communications. And we can’t underestimate the weight that these types of evidence has in front of the jury.
And then finally, I know this is an issue that you guys see, but there are a lot of misconceptions out there about whether private pay funds in the health care area, whether they’re subject to regulations, subject to government scrutiny. There’s a lot of misinformation out there. And so in this case, there was less scrutiny from a factual standpoint over various aspects because they were dealing largely with private pay funds. What people don’t realize is there are a lot of statutes out there where the government can reach private pay funds. And just because a person is not dealing largely with government pay isnot going to make you immune from prosecution.
[Brad] Yeah. And I have a question on some just additional facts. When you were talking about your client, how many other people were brought into this scheme? Was it a lot or was it just your client?
[Sarah] This was a huge case. Twenty-one individuals were indicted. Which is a big indictment and there were others that weren’t indicted. So, and then of those twenty-one individuals, about half pled guilty and then nine of them ended up going to trial.
[Brad] So the concept of safety in numbers is not work. Oh, you know, everyone’s doing it.
[Sarah] Well, and those didn’t work across the board, but to some extent, those were part of the defenses were this seemed legitimate to my client and it’s not just my client. It’s all these other individuals too, that they trusted, you know, they trusted the architect.
[Michael] So a little context, as Brad will tell you, I’m like Mr. Context. I’ve got it tattooed on my back.
[Brad] He does.
[Michael] For the audience, in dealing with these fraud cases what we’re talking about is a business arrangement that kind of the underpinning is that there are patient referrals happening. Kind of describe, broadly what was the arrangement, what was the alleged problem.
[Sarah] Sure, the gist of the arrangement was that a hospital was paying for advertising expenses for the most part and some consulting fees for other healthcare providers, mostly physicians, but some other providers as well. And the government took the position that those were bribes and kickbacks basically. And that was what the case boiled down to. And these are issues that I’ve seen over and over in other cases as well, there may be variations for what the payments are being made for, whether it’s consulting or medical directorship or a variety of services, it’s a similar structure and prosecution strategy.
[Brad] And one kind of follow-up question, which I guess since Michael loves context so much and I’m surprised he didn’t ask this question, but for our audience, when we introduced you we talked about you being a white collar defense attorney. Maybe you could explain to them what does that mean?
[Sarah] So a white collar criminal defense attorney defends individuals and entities in criminal disputes with the government and white collar crimes or financial crimes with fraud allegations. And so on the other side of the case, you have the government almost always the federal government, the state does some work. And so those cases can include healthcare fraud, which is the largest area of my practice, but tax fraud, customs, insider trading type allegations, but you’re dealing with false representations or alleged false representations or fraudulent conduct is the underlying conduct in those cases.
[Michael] Awesome. So this sounds like a true dumpster fire. I love to explore what happens next. How you defend these kinds of accusations, how we deal with patient referrals as a means of currency in these arrangements. And so we’ll take a little break right now and discuss these questions and more with Sarah on the other side.
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[Brad] Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, with my cohost Michael Byrd, and we still have our guest and friend Sarah Wirskye with us who just told us a story about her clients who were misled by failing to see the signs and just either ignoring them or in general, following the con man who as she explained was the architect of the entire model. And it obviously had these ripple effects on her client.
And so there’s a lot to unpack if you’re new to the health care field altogether, or just trying to understand what happened. And I think Sarah says, you kind of define it earlier that you know what happens when someone brings you in, what are some of the first steps that you take when you brought into a case like this?
[Sarah] So when you get brought into a case, the government’s already begun their investigation. And so the first thing you need to do is get up to speed and figure out what happened, what’s going on. And a lot of that involves in these cases, reviewing documents, emails are a huge part of that, and then interviewing witnesses as well. So you can figure out what the facts are and make an informed decision on how to proceed in terms of representation.
[Michael] Wow. And so, you know, as you mentioned in this particular case, there was a ton of defendants. And when you have a case where multiple people are indicted like this, do you work with co-defendants on the case?
[Sarah] Yes. We had a great group of co-counsel in this case. And so you do work with them, in often under what’s called a joint defense arrangement, but you always also have to be careful as well when you’re sharing some information, but you know, you’re not going to be sharing everything generally. But you do work with them and even in trial, which what you want is a generally a cohesive defense because if people start pointing fingers at each other, oftentimes, everyone gets convicted. So you’re walking kind of a tight rope. You have to distinguish your client, but at the same time not say they’re really really bad, so it can get tricky.
[Brad] Makes sense. And so obviously we talked about the health care piece of this, but what other issues do you typically see in these types of cases?
[Sarah] So, you know, these issues often translate into other types of cases as well. But a lot of the times you will have conflicting documentation. And I touched on this a little bit, you know, the force of the emails and the texts and things. I mean, you’ll see issues where there’s just really exculpatory, I guess, language and those kinds of documents. And so those are some of the issues that you have to deal with over and over.
In this case it was clear. My client was acquitted on, he was charged when he went to the trial, he was charged with more counts than anybody else remaining at trial, he was charged with sixteen counts. I had two of them dismissed through an agreement with the prosecutor. He was acquitted on ten of them, but the counts that he was convicted on, the four counts he was convicted on, all had to do with a particular individual with whom there were really incriminating emails. So I can’t emphasize enough the force of that type of evidence. And so those are some of the issues you have to deal with.
[Michael] It strikes me in a season of dumpster fires that you’re almost the dumpster fire specialist, because by the time it gets to you they’re in the dumpster fire and you’re trying to do everything you can to rescue them. And it’s crazy that how you define victory in those situations because you’re dealing with sixteen counts and multiple defendants. You know, I guess it takes a special mindset to kind of operate with that kind of pressure in all of your cases.
[Sarah] It is. I mean, oftentimes you’ve got varying facts going in, and in this case of the nine defendants who went to trial there was one who was acquitted. And interestingly, he had no problematic emails which I thought was interesting. There was a lady on whom there was a hung jury, but everybody else was convicted on some or all of the accounts that they were charged with.
And so going back to your issue where my client was acquitted of the majority of the counts in the more serious counts, such as the money laundering and the travel act and so forth. The jury had a hard time from the verdict. I didn’t have a chance to talk with them, but had a hard time with the emails. The government flashed those up on the screen every chance they got, even when there was a client or a witness who had nothing to do with that document. They try to put them up on the screen as big as could be to remind the jurors of these problematic documents.
[Brad] Yeah. And I think something you said early on when the fact pattern as you were describing, they were doing very little work and getting paid a lot of money. And often we talk about that with our clients on the front end, about the form and substance of a transaction. Is what are you doing perform this and does the form match that? And then of course, there’s always that terrible word that some of our clients hate for us to say over and over again, but is it at fair market value, and is it taken account for volume of valuable referrals between the potential provider and the end recipient of it. And so those are very important factors.
And what I love about this story is it shows that when you ignore those signs that are out there, that unfortunately the government is out there. The government does find these trails of information. And eventually it leads to, as you said, an eight year investigation and they have plenty of time to find witnesses, plenty of time to pull documents. Michael has described this the best; by the time you show up the dumpster fires roaring and now your job is to try to help either put it out if possible, or pull your client out as best you can.
[Michael] Yeah. I mean, it’s hard to find redeeming storylines when it’s a dumpster fire like this. I know for us, the wisdom we gain and the way it helps us is when we’re advising our clients and we’re trying to tell them the risk and we can point them to something that says, look, we’re not making this up. This is very real and this is what it looks like. Even the story of the one person who was acquitted, who didn’t have problematic emails. I’m sure they didn’t feel like they won one at the end. I’m sure there was immense relief because they weren’t going to jail, but I just know the amount of money and toll on their life that they took over the course of this investigation and trial. I’m sure it was unbelievable.
[Sarah] Absolutely. I mean, years of his life and the stress and all that, and this case really was the perfect dumpster fire case because we have so many of these issues. Oftentimes you have some, but I can make arguments. Like they did hire a counsel on the front end, there were attempts to do what was under the contract. The follow-up to that, which I’m sure you advise your clients.,not only was there work done under the contract, but did you document it and is the documentation robust. There may not be a lot of bad emails and texts.
I’ve got a case right now where I’m making that argument. You shouldn’t indict my client because you have a zero smoking gun email. And so, you know, like I said, this case that’s such a combination of these dumpster VAR factors. Whereas a lot of the times you don’t have all of these, so you can make the opposite argument, the flip side to convince the government and not indict your client. And hopefully you have some of those backs going forward.
[Brad] Well, Sarah, we are so grateful to have you on Legal 123s with ByrdAdatto. And for those who want to learn more about Sarah and her practice, please look down the episode notes where you can find her contact information. And again, thank you so much for joining us today.
[Sarah] Thank you so much for having me. I enjoyed it.
[Michael] Thanks Sarah.
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