Not All Quids Are Created Equal

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DOJ’s proposed dismissal of the criminal bribery indictment of New York Mayor Eric Adams, in return for his agreement to help with the Trump administration’s immigration crackdown, has drawn criticism from various quarters. Many of those have been on the right, including not only the conservative AUSAs who resigned in protest, but also commentators from the Wall Street Journal, the National Review, and others who usually back Trump’s positions—particularly on immigration.

But others, in defense of the decision, have analogized the arrangement to a typical DOJ cooperation deal with a criminal defendant. The typical rhetorical question: doesn’t DOJ agree to drop charges against defendants all the time in return for their help with prosecutions or other law enforcement proceedings?

The answer: Yes, but there is a fundamental difference here. Which explains why Adams, his counsel Alex Spiro, and Acting Deputy Attorney General Emil Bove have so strenuously denied that there was any such quid-pro-quo deal.

There are several situations in which federal prosecutors may cut a deal with a criminal target or defendant in return for cooperation. The most common is under a "cooperation plea agreement," otherwise known as a "5K" deal. The defendant agrees to plead guilty, to provide information to the government about others involved in the crime or about separate crimes, and to testify about those crimes and other persons in trial or before a grand jury, if necessary.

In return, the government agrees that it will tell the sentencing judge about the defendant's cooperation and, if the cooperation has been truthful and valuable, recommend that the judge reduce the defendant's sentence accordingly. The formal method for this recommendation is via a motion for a sentencing reduction under Section 5K1.1 of the Federal Sentencing Guidelines; hence the term "5K." The judge does not have to agree to lower the sentence, but usually will, because otherwise it would be hard to persuade future defendants to accept such deals.

In some cases, in return for cooperation, the government may agree not to charge the cooperator at all. This may involve a Deferred Prosecution Agreement or a Non-Prosecution Agreement, or in some cases granting the cooperator immunity from prosecution, as long as his or her testimony is truthful.

And in other cases, law enforcement agencies may actually put suspects on its payroll, having them work as confidential informants to provide information on ongoing crimes, in return for money, or perhaps informal promises not to pursue charges against them.

But there is a major difference between those situations and the deal that DOJ apparently cut with Adams. Ordinary, legitimate cooperators offer to act in their individual capacities--providing information or testimony--in return for the benefit of avoiding or reducing criminal liability.

Adams is a public official, who was elected to act on behalf of the people of New York, and use his powers only for their benefit. The agreement he apparently made here was to take actions in his official capacity--using his power as Mayor to influence city immigration policy, such as by opening the Rikers jail to ICE--in return for personal benefits (i.e., having the charges dropped). And the deal was also structured so that if he did not use his official power in that way, the charges could be re-filed.

Agreeing to act on your own behalf in return for a benefit to you is generally legal. Agreeing to use your official powers in return for a personal benefit is not. Ordinarily, DOJ does not enter into such deals--it prosecutes them. Indeed, that is what Adams was originally charged with.

Think of it another way: If someone were to offer Mayor Adams $10,000 in return for his taking some official action to help the payer—say, by granting a building permit—few would claim that was allowed. The illegality would lie in Adams using his position of public trust for private benefit. Why would it be any different if the benefit to Adams is his freedom rather than cash?

The issue is not that DOJ is trading off one federal law enforcement interest for another. It is that Adams, with DOJ’s help, is trading his office for a free pass.

As Ye Sow

Not what I expected

For a long time, when I heard the phrase “hoist by his own petard,” I pictured some sort of medieval knight with a long lance, which somehow reached backward, hooking onto the seat of his pants and lifting him in the air with the force of his own jousting. I know I’m not the only one who imagined this.

But no—a petard is a type of small bomb. In the metaphor, the fool blows himself up.

I feel even more confident that many of those who celebrate President Trump’s incipient war on DEI were also very much against President Biden’s COVID-vaccine policies. How ironic it would be if their successful attacks on the latter helped Trump’s opponents defeat the former.

The FCA Gambit

Trump’s executive order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” aims to use the threat of Department of Justice enforcement of the False Claims Act (FCA) to pressure federal contractors and grant recipients to abandon DEI programs. In essence, the order requires contractors to certify that their DEI policies do not violate federal anti-discrimination laws, particularly Title VII of the Civil Rights Act. If it turns out that they do, their certifications could be deemed “false,” and they could be exposed to ruinous FCA penalties. In addition, the law encourages whistleblowers in such companies to report violations, in return for a potential share of any DOJ recovery.

But it is not clear that President Trump has the authority to issue such an executive order. And it is a series of challenges to Biden’s vaccine mandates, as well as his minimum wage policy, that show why.

Red States Attack Executive Authority Over Contractors

In 1949, Congress enacted the Federal Property and Administrative Services Act (FPASA) to create the modern system of federal government procurement. For decades afterwards, presidents issued executive orders directing that federal contractors comply with certain requirements, sometimes seemingly aimed at advancing policies rather afield of ordinary contract management concerns. And for decades, the courts allowed it.

But in the wake of the COVID pandemic, Biden issued Executive Order 14042, requiring contractors to have their employees vaccinated. Opponents of vaccine mandates—including a number of red state governments—filed challenges, asserting that the order exceeded the President’s authority under FPASA.

Several courts agreed. Reviewing the history of FPASA and executive orders regarding contracting, the Sixth Circuit concluded that the statute was meant to help in “making the government’s entry into contracts less duplicative and inefficient”—that is, that it was focused on “government efficiency, not contractor efficiency.” Then it gave that requirement teeth, holding that Biden’s order did not meet the standard because it was directed to the conduct of contractors, rather than that of the government. Thus, it held the order invalid.

In separate cases brought by other states, the Fifth and Eleventh Circuits went further. Both held that Biden’s vaccine order ran afoul of the “major questions doctrine,” which requires that policy changes of “vast economic and political significance” required specific Congressional authorization. That is, both courts determined that an executive order on government contracting could not be used to accomplish a broader policy goal that was not clearly aimed at efficiency at all.

More recently, several other red states challenged a separate executive order issued by President Biden, which imposed a $15 minimum wage on contractors. While the Tenth Circuit rejected the challenge, the Ninth Circuit held that the minimum wage order, like the vaccine orders, exceeded the president’s FPASA authority.

The Hoist

Under those precedents, Trump’s anti-DEI order could suffer the same fate. Although another executive order dating from 1965 (which Trump rescinded) had long barred discrimination and required that contractors adopt certain affirmative action policies, the Sixth and Eleventh Circuit in the vaccine cases went out of their way to cast doubt on the notion that such anti-discrimination requirements related to “economy and efficiency” and were authorized by FPASA. In the process, they cited a comment in a 1979 Supreme Court decision pointing out that “nowhere in [FPASA] is there a specific reference to employment discrimination.”

As those courts held, it is arguable that anti-discrimination rules—and at least Trump’s battle against wokeness—are about something other than economy and efficiency. Meanwhile, the federal courts have increasingly moved to restrict the executive branch’s authority to set policy through rules binding on private actors—witness the Supreme Court’s disavowal of Chevron deference and adoption of the major questions doctrine. The same logic used to rein in executive rulemaking under Obama and Biden could well be harnessed to limit Trump’s ambitious vision for the presidency.

Of course, the jousting match doesn’t necessarily end there. Were pro-DEI plaintiffs to successfully challenge Trump’s order on these grounds and further entrench the precedent, it could prevent a future Democratic president from re-instituting rules aimed at promoting minority-owned contractors.

The moral for those who now inhabit the White House and those who hope to regain it: be careful where you put that petard.

Neither Fish Nor Fowl

This might explain it.

The platypus, it is said, looks “like God made it from spare parts”: duck bill, beaver tail, webbed feet, and poisonous spurs. When lawsuits try to mix kickback allegations with fraud claims, they often prove just as odd and unwieldy. And sometimes the judicial decisions they inspire do as well.  

The First Circuit’s recent decision in Humana v. Biogen, Case No. 24-1012 (Jan. 17, 2025), is just such a chimera. A health insurer sued a drug maker under RICO, claiming that the drug maker paid kickbacks to get patients to buys its drugs, then passed the costs onto the insurer without disclosing the kickbacks, and that this amounted to federal mail and wire fraud. The court rejected that theory, finding that the insurer had not described a false representation for purposes of the fraud statutes.

But while the court may well have reached the right conclusion, it took a strange route to get there, applying False Claims Act analysis and precedent to the mail and wire fraud statutes. It's almost as awkward as a mammal that lays eggs.

The Humana decision

Humana is a health insurer, Biogen a pharma company that makes multiple sclerosis drugs. Biogen sells its drugs to wholesalers, who sell them to pharmacies, who sell them to patients. Under Medicare Part D, patients pay a copay or deductible, and an insurer (such as Humana) pays for the rest of the drug cost.

Humana claimed that Biogen orchestrated a scheme in which Biogen provided the drugs free to uninsured patients, then “funneled” them into Humana Medicare plans, and then indirectly covered their co-pays through donations to certain non-profits. According to Humana, this violated the federal Anti-Kickback Statute and Medicare regulations. Humana ultimately paid for the resulting drug orders.

Humana sued Biogen under RICO, alleging that Biogen had engaged in a pattern of federal mail and wire fraud violations. Mail and wire fraud violations require, among other things, the making of false representations of material facts. A civil complaint alleging a RICO claim based on fraud must describe the false representations in detail, including explaining what the defendant said and why it was false.

Per Humana’s complaint, under Medicare regulations, “downstream” entities (like Biogen, the wholesalers, or the pharmacies) that contract to sell goods to Medicare Part D insurers (like Humana) must comply with federal laws and regulations and certify that certain claims data the suppliers provide is “true, accurate, and complete.” According to Humana, Biogen caused the pharmacies to submit claims for payment for the drugs along with a false “implied certification” that they were not tainted by kickbacks or other illegal conduct.

The First Circuit rejected this theory, and found that Humana had not adequately alleged misrepresentations for purposes of the mail/wire fraud statutes and RICO. The court observed that the Supreme Court had recognized the “implied certification” theory as a basis for a claim under the False Claims Act in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016).

But the First Circuit distinguished Escobar in two ways. In Escobar, the defendant had submitted a claim for payment directly to the payer (i.e., Medicare).  Also, in Escobar, the defendant had made certain specific representations to Medicare about the services provided, without disclosing other information that rendered those statements misleading “half-truths.” By contrast, Biogen had not submitted any claims directly to Humana, and there was no allegation of “half-truths,” but rather a pure omission. The First Circuit found that this was insufficient for a RICO claim.

My take

I think the First Circuit may have missed the mark in its analysis, if not its conclusion. First, the FCA and the mail/wire fraud statutes are different laws. Escobar and the “implied certification” theory arise from the FCA and decisions interpreting it, not from mail and wire fraud jurisprudence. Whether or not a complaint has properly alleged an implied certification theory or any other basis for FCA liability is not the issue. Instead, the question is whether the defendant has caused the mail or interstate wires to be used in a scheme to deprive someone else of property through false representations.

In many circuits, pure omissions can support charges of mail or wire fraud in some circumstances, such as where a specific law creates a duty to disclose the relevant information. It is not clear whether Humana alleged that the Medicare regulations specifically required Biogen or others to disclose the alleged scheme to Humana. But the First Circuit does not seem to have analyzed that issue, as it focused on the Escobar/FCA test instead.

Second, a RICO claim can be based on mail or wire fraud even where the false representations were not made directly to the plaintiff. In Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (2008), the Supreme Court held that a company could bring a RICO claim against a competitor that made false representations to county officials in order to beat the plaintiff in an auction. Thus, the First Circuit’s emphasis on direct communications between the plaintiff and defendant, while perhaps relevant to an FCA analysis, are not necessarily appropriate in a fraud-based RICO case.

Takeaway

It’s tricky to plead a RICO claim. It’s even trickier to plead one based on mail or wire fraud, where the fraud involves failure to disclose violations of a different law to someone other than the plaintiff. It may well be possible, but neither Humana’s complaint nor the First Circuit’s decision light the way.

*Like many, I had assumed that the plural of platypus is "platypi" or "platypae." Apparently, it is actually "platypuses" (or possibly "platypodes"), because the word derives from Greek, not Latin. This may be the most useful information in this post.