The two former managers likely will not face further prosecution for fraud and do not have to pay $2.3-million in restitution.
By GRAHAM BRINK, Times Staff Writer
© St. Petersburg Times, published March 26, 2002
TAMPA -- Two former HCA -- The Healthcare Co. executives accused of cheating government health insurance programs won't be going to prison after all.
The 11th U.S. Circuit Court of Appeals overturned the convictions of Jay Jarrell and Robert Whiteside, saying government prosecutors had failed to prove that fraud had taken place.
Federal prosecutors could petition the appeals court to reconsider the decision. Barring that, the two mid-level HCA managers are likely freed from further criminal prosecution in the case. They also do not have to pay the $2.3-million in combined restitution ordered during their sentencings.
The decision could be the final chapter in a criminal case that sent reverberations through HCA, the nation's largest hospital chain company, and the health care industry.
"This was a complete and fitting vindication of Jay Jarrell, Bob Whiteside and HCA," said Whiteside's appellate attorney, Walter Dellinger, who was the acting U.S. solicitor general in 1996 and 1997. "I believed from the earliest time I looked at this case that the way HCA approached the accounting issues was right."
Federal prosecutor and acting spokesman Jay Trezevant said his office was aware of the decision and was reviewing it. He had no further comment.
The government's investigation began after John Schilling, an HCA reimbursement manager in Fort Myers, came forward as a whistle-blower. He said he thought he could prove there was fraud at HCA-operated Fawcett Memorial Hospital in Port Charlotte. Nashville, Tenn.-based HCA was formerly known as Columbia/HCA Healthcare Corp.
Using Schilling as an informer, federal investigators obtained search warrants in July 1997 for raids on dozens of HCA locations throughout Florida, as well as in other states. Included were the offices of Jarrell, Whiteside, Michael T. Neeb and Carl Lynn Dick.
Jarrell, the most senior executive of the group, had been chief financial officer of Basic American Medical, a hospital company acquired by HCA in 1992. After the buyout, Jarrell quickly advanced up the HCA ladder and was chief executive of the company's Southwest Florida division at the time of his initial indictment in July 1997.
Whiteside was director of reimbursement for HCA's Southwest Florida division from 1992 until his promotion to HCA's headquarters in 1994.
The charges centered on convoluted accounting practices and whether the men filed false statements with the government. The prosecutors argued that the men exploited and covered up a Medicare auditor's mistake that allowed them to falsely claim reimbursement. The men argued that the accounting did not violate any regulations and that they did not file false statements.
After an eight-week trial, including three days of deliberations, the jury found Jarrell and Whiteside guilty on six counts of cheating the government out of more than $3-million. Neeb was acquitted of all charges, and the jury failed to reach a verdict on Dick, who was charged with a single count of conspiracy.
Jarrell and Whiteside were sentenced to 33 months and 24 months in prison, respectively. U.S. District Judge Susan Bucklew, however, allowed the men to remain free pending the outcome of the appeal. At the time, Bucklew said the government's case was "not completely persuasive" and noted that even the government's experts testified about the complexity of the Medicare reimbursement process.
In the decision filed late Friday, the appellate court agreed with Jarrell and Whiteside's lawyers who argued that competing interpretations of the applicable law were reasonable and justified. "Reasonable people could differ," the court said.
"This ruling should give the government pause before they charge someone with a crime when the regulations they are relying on are ambiguous," said Peter George, Whiteside's trial attorney. "Now, Jarrell and Whiteside have to work to get their reputations back and move on with their lives."
Jarrell and Whiteside no longer work for HCA, and their lawyers said they have had difficulty finding work. HCA spokesman Jeff Prescott said company officials plan to sit down with the two men to talk about their futures with HCA.
"We want to do the right thing," he said.
The appellate decision will not affect the plea agreement HCA made last year to pay a $65-million fine for Medicare fraud in Florida and $30-million more for similar charges in Texas. The company was accused of taking kickbacks, filing false cost reports with Medicare and conspiring with others to defraud the government.
In 2000, the company also paid $745-million to resolve three civil issues with the Justice Department. Two more civil issues remain to be worked out, Prescott said.
The appellate decision raised questions about how successful the government would have been in pursuing criminal charges against HCA if the company hadn't agreed to pay $95-million in fines to avoid criminal trials.
"Things would be reviewed differently today," Prescott said. "But given our position and the potential consequences, settling the case was the best business decision to make at that time."