Defendants’ Joint Motion to Strike — United States v. Chocron (Dkt. 160, S.D. Fla.)

Summary

The defendants' joint motion to strike non-fraudulent allegations in Counts 1 and 2, with a request for oral argument, in United States v. Diego Sanudo Sanchez Chocron, et al., Case No. 24-CR-20155, in the U.S. District Court for the Southern District of Florida, entered January 28, 2025 as Document 160. The defendants argue that paragraphs of the indictment describe regulatory violations rather than fraud, including alleged violations of the Shell Lab Rule by billing Medicare for tests performed by third-party laboratories and the use of COVID-19 tests not authorized under the FDA's Emergency Use Authorization program. They cite Takhalov and Ciminelli and ask that those paragraphs be stricken.

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Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 1 of 7




                          UNITED STATES DISTRICT COURT
                          SOUTHERN DISTRICT OF FLORIDA

                        CASE NO. 24-CR-20155-RUIZ/TORRES(s)

  UNITED STATES OF AMERICA

  vs.

  DIEGO SANUDO SANCHEZ CHOCRON.
  _________________________________________/

                          Defendants’ Joint Motion to Strike
                     Non-Fraudulent Allegations in Counts 1 and 2
                           (and Request for Oral Argument)

           Described as the “Colt 45” and “true love” of federal prosecutors, the mail and

  wire fraud statutes (18 U.S.C. §§ 1341 and 1343) are no stranger to the federal courts.

  Jed S. Rakoff, The Federal Mail Fraud Statute, 18 Duquesne L. Rev. 771, 771 (1980).

  In 2023 alone, prosecutors filed more than 1,300 wire fraud charges—the highest

  number since 1986. Hunter Taylor, Transactional Records Access Clearinghouse,

  Wire Fraud Charges and Convictions Projected to Reach Record Levels in FY 2023

  (July 21, 2023), https://trac.syr.edu/reports/723/. Lately, however, prosecutors have

  gone too far and are now attempting to use the fraud statutes to convert basic breach

  of contract cases into federal fraud Indictments. Both the Supreme Court and the

  Eleventh Circuit continue to reverse fraud convictions that cross the line, but

  prosecutors remain undeterred. This Indictment is a good example of a prosecution

  that has ignored binding precedent about what is required to indict someone for

  fraud.

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 2 of 7




        Counts 1 and 2 of the Indictment, as we previously noted, are a maze of

  allegations. Many of the paragraphs in Count 1, however, allege only mere

  misrepresentations or regulatory offenses – neither of which is sufficient to charge

  fraud. Therefore, these supposed misdeeds, which fall short of fraud, should be

  stricken from Count 1.

        The Eleventh Circuit in United States v. Takhalov, 827 F.3d 1307 (11th Cir.

  2016), made it clear that fraud under federal law requires more than a mere

  misrepresentation; it requires actual harm or loss to the victim. The court held that

  "[a] schemer who tricks someone to enter into a transaction has not ‘schemed to

  defraud’ so long as he does not intend to harm the person he intends to trick." Id. at

  1313. Importantly: “this is so even if the transaction would not have occurred but for

  the trick.” Id. The court further explained, "If a defendant lies, but the lie does not

  affect the value of the bargain, then he has not committed a crime under the federal

  fraud statutes." Id. at 1314.

        In Takhalov, women were hired to lure male patrons to a bar, but the women

  concealed the fact that they were employed by the bar. Id. at 1310-1311. The

  implication that the women might have future romantic interest in the men certainly

  “relates to” the drinks that the men purchased, in the sense that it substantially

  motivated the purchases. See id. at 1314. And those same men would have considered

  it “important” that purchasing drinks would not help them woo the women; indeed,

  the purchases may not have occurred “but[ ]for the lie.” Id. at 1313. Yet the Eleventh

  Circuit held this is not criminal fraud.

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 3 of 7




        Just last Term, the Supreme Court in Ciminelli rebuked the courts of appeals

  and district courts for “interpret[ing] the mail and wire fraud statutes to protect

  intangible interests unconnected to traditional property rights.” Ciminelli v. United

  States, 598 U.S. 306 (2023). 1 The Court reversed the wire fraud convictions of a

  defendant who had secured a $750 million state project through a bid-rigging scheme.

  That the scheme denied the State the right to control to whom it made disbursements

  by sapping it of potentially valuable economic information about the bidders was

  irrelevant to the issue of whether or not a federal crime had been committed. “The

  right-to-control theory,” said this Court, “cannot be squared with the text of the

  federal fraud statutes, which are limited in scope to the protection of property rights.”

  Id. at 314 (internal quotation marks omitted). This informational deprivation was

  just another expansive theory of the kind that the Court has “consistently rejected”

  as “stray[ing] from traditional concepts of property.” Id; United States v. Guertin, 67

  F.4th 445, 451 (D.C. Cir. 2023) (explaining that, “when [an] employer receives the

  benefit of its bargain, [an] employee’s lie merely deprives the employer of honesty as

  such, which cannot serve as the predicate for a wire fraud conviction”). To hold

  otherwise, as the Supreme Court recently cautioned, would make “a federal crime of

  an almost limitless variety of deceptive actions traditionally left to state contract and

  tort law.” Ciminelli, 598 U.S. at 310.



  1      And this Term, the Court has again taken up a fraud case involving
  misrepresentations, which did not result in loss – Kousisis v. Untied States, 23-909,
  presenting the question of whether deception to induce a commercial exchange can
  constitute mail or wire fraud, even if inflicting economic harm on the alleged victim
  was not the object of the scheme.

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 4 of 7




         Applying this principle, a misrepresentation alone is insufficient to constitute

  fraud unless it materially affects the victim’s decision-making and results in harm or

  loss. Regulatory violations or breaches of procedural rules may constitute

  wrongdoing, but unless they cause a tangible financial loss or deprive the victim of

  money or property, they cannot support a fraud conviction under the standard

  articulated in Takhalov and a string of recent Supreme Court cases including

  Ciminelli.

  Counts 1 & 2, Paragraph 7: The Shell Lab Rule

     Counts 1 and 2 allege that the defendants violated the Shell Lab Rule by billing

  Medicare for tests that were performed by third-party laboratories beyond the

  permissible 30% threshold. See ¶ 7 of Counts 1 & 2. While this may constitute a

  regulatory violation, it does not amount to fraud because:

     •   The Indictment does not allege that Medicare paid for services that were not
         performed or received.
     •   Medicare was billed for diagnostic testing that the patients actually received,
         and there is no indication of financial harm or loss to Medicare or the patients.
     •   The Shell Lab Rule is a procedural limitation, and its violation does not
         inherently affect the value of the services provided or the legitimacy of the
         transaction.

     In Takhalov, the court explained that even if a victim enters into a transaction

  based on a misrepresentation, there is no fraud unless the victim suffers harm. Id. at

  1313. Here, the government fails to allege any harm resulting from the alleged Shell

  Lab Rule violation, making this allegation insufficient to support fraud. This

  paragraph should therefore be stricken.

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 5 of 7




  Counts 1 & 2, Paragraphs 5-6, 8-10: Kickbacks

     The Indictment alleges that the defendants paid and received kickbacks to induce

  referrals for testing services. See ¶¶ 5-6, 8-10 of Counts 1 & 2. However, these

  allegations fail to establish fraud because:

     •   The government does not allege that the kickbacks resulted in Medicare or
         HRSA paying for unnecessary or substandard testing.
     •   Medicare and HRSA reimbursed for tests that were actually performed, and
         there is no suggestion that the tests were invalid, inaccurate, or deficient.
     •   The payment of kickbacks, while prohibited under the Anti-Kickback Statute,
         does not, by itself, cause harm or loss unless it leads to financial detriment to
         Medicare or HRSA.

     Paying and receiving kickbacks is a separate crime and is actually charged in the

  Indictment. However, it does not constitute fraud. As Takhalov held, a lie that does

  not harm is not fraud. Id. at 1312. The Indictment fails to articulate any causal

  connection between the kickbacks and a tangible loss to Medicare or HRSA.

     And the Eleventh Circuit has made clear in United States v. Medina, 485 F.3d

  1291, 1298 (11th Cir. 2007), that simply proving a kickback did not even meet the

  misrepresentation prong of fraud, let alone the loss:

     We hold that based on the facts of this case, representatives of Ocean and United
     paying kickbacks alone is not sufficient to establish health care fraud. While we
     acknowledge that paying kickbacks like those at issue in this case is a violation of
     42 U.S.C. § 1320a–7b(b)(2)(A), we cannot hold that this conduct alone is sufficient
     to establish health care fraud without someone making a knowing false or
     fraudulent representation to Medicare. See United States v. Porter, 591 F.2d 1048,
     1055–56 (5th Cir.1979) (conspiracy to commit health care fraud was weakened
     where alleged kickbacks did not involve materially false statements or any
     money/property loss to Medicare).

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 6 of 7




     These kickback paragraphs should be stricken.

  Counts 1 & 2, Paragraph 12: Emergency Use Authorization

     The Indictment alleges that the defendants used COVID-19 tests that were not

  authorized under the FDA’s Emergency Use Authorization (EUA) program. See ¶ 7

  of Counts 12. These allegations also fail to meet the Takhalov standard for fraud

  because:

     •   The government does not allege that the tests were ineffective, inaccurate, or
         otherwise worthless.
     •   Medicare and HRSA reimbursed for tests that were actually performed, and
         the Indictment does not describe how the use of non-EUA-authorized tests
         caused harm to these programs.
     •   The EUA requirements are regulatory standards, and their violation, without
         evidence of financial harm, does not constitute fraud.



                                         * * *

  The four remaining defendants all join this motion.

Case 1:24-cr-20155-RAR Document 160 Entered on FLSD Docket 01/28/2025 Page 7 of 7




        Fraud requires both a misrepresentation and harm or loss to the victim. The

  paragraphs above that do not allege a loss must be stricken.

                                        Respectfully submitted,

                                        MARKUS/MOSS PLLC
                                        40 N.W. Third Street
                                        Penthouse One
                                        Miami, Florida 33128
                                        Tel: (305) 379-6667
                                        markuslaw.com

                                  By:   /s/ David Oscar Markus
                                        David Oscar Markus
                                        Florida Bar Number 119318
                                        dmarkus@markuslaw.com

                                        /s/ Lauren Field Krasnoff
                                        Lauren Field Krasnoff
                                        Florida Bar Number 0086951
                                        lkrasnoff@markuslaw.com

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