370 F. Supp. 3d 1139
C.D. Cal.2019Background
- Defendant Jeffrey D. Gross, a neurosurgeon, was indicted in a kickback/referrals scheme (1997–Oct.2013) alleging $622,936 in disguised payments for patient referrals and bogus contracts.
- Charges: conspiracy; mail and wire fraud (honest-services theory); use of an interstate facility in aid of unlawful activity (Travel Act). Overt acts involving Gross dated Feb. 1, 2008–May 30, 2013.
- Indictment returned and filed (sealed) Jan. 23, 2018; government sought detention the same day. Indictment unsealed May 18, 2018.
- Gross moved to dismiss Counts 2–8 and 10–14 as time-barred (statute of limitations); and separately moved to dismiss all counts for failure to allege essential elements.
- Court considered whether a sealed indictment tolls the limitations period only if sealing served legitimate prosecutorial objectives, and whether the indictment adequately alleged elements of honest-services fraud and the Travel Act offense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sealed indictment tolled statute of limitations for seal period | Seal was justified by legitimate prosecutorial objectives (ongoing investigation, cooperating witnesses, covert activity) so tolling applies | Seal lacked contemporaneous justification; government’s public statements undermined secrecy; tolling should not apply | Seal period tolls limitations because government proved legitimate prosecutorial objectives post-unsealing; Counts 2–8,10–14 not time-barred |
| Whether indictment sufficiently alleges honest-services fraud (fiduciary duty) | Allegations show physician–patient fiduciary relationship; omissions (kickbacks) breach duty | Gross: omissions were non-medical and do not implicate fiduciary breach | Fiduciary duty sufficiently alleged; physician–patient relationship fits Milovanovic definition |
| Whether omissions were material and required intent/harm | Government: failure to disclose substantial illegal payments was material; Skilling/Williams allow intangible-harms theory without proof of actual tangible harm or intent to harm | Gross: omissions immaterial; prosecution must show intent to harm or actual harm (relying on Jain) | Omissions are material; no need to allege intent to harm or tangible harm under Ninth Circuit precedent (Williams, Skilling) |
| Whether mailings and Travel Act allegations properly plead use of mails and bribery/unlawful activity | Mailings (billing to attorneys) furthered scheme; California statutes prohibiting referral fees qualify as bribery for Travel Act; specific intent alleged | Gross: mailings not in furtherance; kickbacks are not "bribes"; §650 is general intent | Mailings alleged were in furtherance of scheme; kickbacks fall within generic definition of "bribery" for Travel Act; §650/§750 support Travel Act predicate |
Key Cases Cited
- United States v. Pacheco, 912 F.2d 297 (9th Cir.) (return of indictment generally tolls limitations)
- United States v. Bracy, 67 F.3d 1421 (9th Cir.) (sealed indictments toll limitations only if sealed for legitimate prosecutorial objectives)
- United States v. Srulowitz, 819 F.2d 37 (2d Cir.) (no contemporaneous record required at sealing; government must justify sealing if challenged)
- United States v. Milovanovic, 678 F.3d 713 (9th Cir.) (fiduciary-duty element and materiality standard in honest-services fraud)
- Skilling v. United States, 561 U.S. 358 (U.S.) (§1346 limited to bribes and kickbacks)
- United States v. Williams, 441 F.3d 716 (9th Cir.) (intangible-rights theory applies to private-sector honest-services fraud)
- Perrin v. United States, 444 U.S. 37 (U.S.) (Travel Act "bribery" includes payments to private individuals to influence actions)
- United States v. Piccolo, 835 F.2d 517 (3d Cir.) (kickback schemes can qualify as bribery under the Travel Act)
- United States v. Seregos, 655 F.2d 33 (2d Cir.) (affirming Travel Act application to kickbacks)
- United States v. Bernhardt, 840 F.2d 1441 (9th Cir.) (indictment requirements: elements and adequate detail)
- United States v. Jackson, 72 F.3d 1370 (9th Cir.) (indictment that tracks statutory language is generally sufficient)
- United States v. Buckley, 689 F.2d 893 (9th Cir.) (focus is on whether indictment informs defendant and court of charges, not on proof)