mesereau law group law offices of sharon …...julian garcia were mentioned, but jonathan pena’s...

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DEFENDANTS’ MOTION TO DISMISS SUPERSEDING INDICTMENT ON THE BASIS OF VINDICTIVE PROSECUTION AND THE APPEARANCE OF VINDICTIVENESS

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MESEREAU LAW GROUP Thomas A. Mesereau, Jr., CSBN: 91182 10100 Santa Monica Blvd., Suite 300, Los Angeles, CA 90067 Tel: (310) 651-9960│Fax: (310) 772-2295 Email: [email protected] LAW OFFICES OF SHARON APPELBAUM Sharon Appelbaum, Esq., CSBN: 296121 401 Wilshire Blvd., 12th Floor, Santa Monica, CA 90401 Tel: (310) 853-0829│Fax: (213) 402-2434 Email: [email protected] Attorneys for Ronald Grusd, and California Imaging Network, and Willows Consulting

UNITED STATED DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA, ) CASE NO. 15CR2821-BAS Plaintiff, )

) DEFENDANTS’ MOTION vs. ) TO DISMISS THE SUPERSEDING

) INDICTMENT FOR VINDICTIVE ) PROSECUTION AND THE RONALD GRUSD, et al…, ) APPEARANCE OF Defendants. ) VINDICTIVENESS )

) DATE: August 9, 2017 _________________________________________ ) TIME: 2:00pm TO THE HONORABLE JUDGE CYNTHIA BASHANT, TO LAURA E. DUFFY, UNITED STATES ATTORNEY FOR THE SOUTHERN DISTRICT OF CALIFORNIA, AND HER REPRESENTATIVES, AND COUNSEL FOR CO-DEFENDANTS:

Please take notice that on August 9, 2017, in the courtroom of the Honorable Judge Cynthia

Bashant or as soon thereafter as may be heard, the defendants DR. RONALD GRUSD,

CALIFORNIA IMAGING NETWORK MEDICAL GROUP, AND WILLOWS CONSULTING

COMPANY, by and through counsel, Thomas A. Mesereau, Jr. and Sharon Appelbaum, Esq., will

move the Court to dismiss the instant case for vindictive prosecution or alternatively, the appearance of

vindictiveness and request a hearing on these issues. This motion is based on the memorandum of

points and authorities and attached exhibits.

Case 3:15-cr-02821-BAS Document 188 Filed 07/31/17 PageID.891 of 35

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Dated: July 31, 2017 Respectfully submitted, Santa Monica, CA /s/ Sharon Appelbaum /s/ Sharon Appelbaum, Esq. LAW OFFICES OF SHARON APPELBAUM 401 Wilshire Blvd., 12th Floor

Santa Monica, CA 90401 Tel: (310) 853-0829│Fax: (213) 402-2434 Email: [email protected] Thomas A. Mesereau, Jr. MESEREAU LAW GROUP 10100 Santa Monica Blvd., Suite 300 Los Angeles, CA 90067 Tel: (310) 651-9960│Fax: (310) 772-2295 Email: [email protected]

Attorneys for Ronald Grusd, and California Imaging Network, and Willows Consulting


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TABLE OF CONTENTS

I. Introduction …………………………………………………………………………… 5 A. Charges and Theories in the Original Indictment ………………………………. 5 B. Related Indictments ……………………………………………………………. 5 C. Continuances, Plea Bargaining, and the Advice of Counsel Defense …………… 6 D. Charges and Theories in the Superseding Indictment …………………………... 8

II. The Government Violated the Defendants Due Process Rights by Obtaining a Superseding

Indictment as a Direct Response to Defendants’ Efforts to Prepare a Defense and Be Prepared for the Charges Against ………………………………………………….. 9 A. Standard – Burden Shifting, if no presumption ………………………………… 10 B. Initial Burden on the Defense Pretrial:

Exercising Constitutional and Statutory Rights ………………………………… 11 i. The Superseding Indictment’s New Charges, Counts, Theories, Victims, and

Monetary Allegations in a Complex Case Filed 3 Months before Trial is a Clear Lack of Notice Violating Due Process Rights …………………………...11

ii. Exercising Procedural Rights ……………………………………………11 a. The Superseding Indictment is the Government’s Response to the

Defendants’ Exercise of their Need for a Continuance …………….. 12 b. The Superseding Indictment is the Government’s Response to the

Defendants’ Exercise of their Right to Prepare a Defense and Present Witnesses for Proper and Adequate Representation at Trial ……....... 13

c. The Superseding Indictment is the Government’s Response to the Defendants’ Disagreement of the Terms of the Plea Offer ………… 14

d. The Superseding Indictment is the Government’s Response to the Defendants’ Exercise of Their Right to a Jury Trial and to Confront Accusers ………………………………………………....………… 14

C. Burden Shifts to the Prosecution to Defend Against Allegations of Vindictive Prosecution ……………………………………………………………………. 15

III. Presumption of Vindictiveness Attaches when Additional Charges Are Based on Same Conduct that Was the Subject of Original Indictment – Factual Nucleus of Both Indictments the Same ………………………………………………………………………………. 15 A. Mistake is Not a Valid Justification for Increasing the Charges …………………17

IV. Conclusion …………………………………………………………………………… 18

V. Declaration of Counsel ………………………………………………………………. 19

VI. Exhibits………………………………………………………………………………. 21


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TABLE OF AUTHORITIES

Cases Bisno v. United States, 299 F.2d 711 (9th Cir. 1961) ……………………………………… 13 Blackledge v. Perry, 417 U.S. 21 (1974) …………..………………………………………..10 Bordenkircher v. Haves, 434 U.S. 357 (1978) ……………………………………………... 11, 12 North Carolina v. Pearce, 395 U.S. 711 (1969) ……………………………………………..10 United States v. Burt, 619 F.2d 831 (9th Cir. 1980) ………………………………………..11 United States v DeMarco, 550 F.2d 1224 (9th Cir. 1977) …………………………………. 10, 16 United States v. Garza-Juarez, 992 F. 2d 896 (9th Cir. 1993) ………………………………..15 United States v. Goodwin, 457 U.S. 368 (1982) …………………………………………….12 United States v. Griffin, 617 F.2d 1342 (9th Cir. 1980) …………………………………….10 United States v. Ruesga-Martinez, 534 F.2d 1367 (9th Cir. 1976) …………………………...10, 11, 15, 17 United States v. Spiesz, 689 F.2d 1326 (9th Cir. 1982) ……..……………………………….10, 15 Williamson v. United States, 207 U.S. 425 (1908) …………………………………………..13 United States Constitution Fifth Amendment, Due Process Clause ………………………………………………… 13 Sixth Amendment, Due Process Clause ………………………………………………… 11, 14 Statutes Federal 18 U.S.C. § 1347 ………………………………………………………………………… 9 18 U.S.C. § 1952(a)(1) …………………………………………………………………… 9 18 U.S.C. § 1952(a)(2) …………………………………………………………………… 9 18 U.S.C. § 3161 ………………………………………………………………………… 9, 12 State California Business and Professions Code § 650 ………………………………………… 9 California Insurance Code § 750 ………………………………………………………… 9 9th Circuit Criminal Jury Instructions Advice of Counsel ………………………………………………………………………. 13


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I. INTRODUCTION

A. Charges and Theories in the Original Indictment

The Original Indictment in this case was filed on November 6, 2015, and contained 8 counts based

on violations of state law brought into the federal sphere through the Travel Act. [Dkt. 1].

A close reading of the Original Indictment illustrates that the Government asked the Grand Jury to

charge a conspiracy that defendants had engaged in violations of state law that defrauded alleged patient

victims by way of “Honest Services” Mail Fraud because of alleged kickbacks influencing the doctor’s

referrals. This count was made federal by way of the Travel Act in the way it was charged. The amount

of alleged monetary fraud was in excess of $1 million dollars for submission of claims for ancillary

medical procedures. Original Indictment ¶23(n).

The Original Indictment only charged 1 count of substantive Honest Services Mail Fraud dealing

with one alleged patient victim from March 10, 2015, in Count 2. Original Indictment ¶¶25-28.

Counts 3-8 in the Original Indictment alleged violations of the Travel Act, alleging violations of

California Labor Code sections 139.3, 139.32, and 3215, California Business and Professions Code

section 650 and California Insurance Code section 750, citing acts that occurred on the dates of

November 7, 2014, November 25, 2014, December 17, 2014, March 2, 2015, and April 2, 2015.

Original Indictment ¶¶29-30.

None of these counts alleged that the defendants had engaged in a fraudulent scheme to obtain

money or property that violated federal laws directly - the classic basis by which the Government

usually charges mail and wire fraud.

B. Related Indictments

Importantly, on December 2, 2015 and December 3, 2015, a state court Grand Jury was convened

and defendant GRUSD and 3 co-defendants were indicted in 54 counts in San Diego County Case No.

SCD255519. Many of the key witnesses for the federal case including Dr. Steven Rigler, Special Agent


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Jeff Horner, and Department of Insurance Investigator Israel Garcia testified at that proceeding.

During that proceeding Additionally, at that proceeding the names of Fermin Iglesias, Carlos Arguello,

Julian Garcia were mentioned, but Jonathan Pena’s name was not.

In November 2015, Julian Garcia was indicted on 14 counts by the United States Attorney’s Office

for the Southern District of California by a federal Grand Jury. See Dkt 15-CR-2820-BAS. Based on the

docket numbers, it appears it was filed just before the Original Indictment on the instant case. None of

the Defendants in the instant case were named or mentioned in that Indictment.

In January 2016, Fermin Iglesias and Carlos Arguello were indicted on 3 counts by the United

States Attorney’s Office for the Southern District of California by a federal Grand Jury. See Dkt 16-

CR0131-BAS. Julian Garcia is named in that indictment as a co-conspirator. Interestingly enough, the

language in that Indictment is striking similar to the language in the current Indictment, indicating that

information was available and known to the federal Government at least 15 months ago.

In June 2016, Jonathan Pena and others were indicted on 14 counts by the United States Attorney’s

Office for the Southern District of California by a federal Grand Jury. See Dkt 16-CR-1409-H.

C. Continuances, Plea Bargaining, and the Advice of Counsel Defense

On October 11, 2016, a motion to substitute Thomas A. Mesereau, Jr. and Sharon Appelbaum as

counsel for defendants, DR. RONALD GRUSD, CALIFORNIA IMAGING NETWORK

MEDICAL GROUP, and WILLOWS CONSULTING COMPANY was granted. [Dkt 150]. A joint

Motion to Continue Trial Date in the instant case was granted on November 18, 2016. [Dkt. 153].

In January 2017, defense counsel asked the Government whether there would be any pre-trial offer

in the instant case. In return, the Government invited the defense to a reverse proffer meeting wherein

they would explain the evidence against the Defendants and possible terms and conditions of any plea

offer. See Exhibit A.


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On February 13, 2017, a meeting was held at the United States Attorney’s Office for the Southern

District of California. A possible plea was discussed but without any direct discussion of the exact

charges to plead to, sentence to be imposed, and monetary amount to be paid for restitution.

On March 2, 2017, defendants filed a Motion to Continue Trial Date predicated on the fact that it

had taken some time to receive the discovery because of protective order issues. [Dkt 166].

On March 10, 2017, defense counsel revealed a document to the Government that defense counsel

had reviewed in examining the efficacy of an advice of counsel defense in hopes it might be of use in

mitigating the offer. See Exhibit A.

On March 15, 2017, Assistant United States Attorney Fred Sheppard sent an email to the defense

indicating that the documentation submitted by defense would not serve to mitigate the plea offer and

that the offer would expire on March 31, 2017.

AUSA Sheppard also stated that the United States would not agree to any continuance beyond

August 1, 2017. See Exhibit A.

On March 28, 2017, the Government sent formal federal and state plea offer documents via email

to the defense which showed the charges that the defendants would ultimately have to plea to, possible

sentences, but failed to include the actual or even estimated amount of restitution to be paid in the

federal and state cases following a plea. The expiration date of March 31, 2017 remained. See Exhibit B.

There was a phone conversation with a federal prosecutor to ascertain the amount of restitution

that would have to be paid, but the prosecutor indicated she could not speak for the state prosecutors.

That was unexpected since the federal authorities were handling negotiations for the state and

federal authorities. The defense attempted to contact the state prosecutors, but were unable to reach

them before the offer expired. See Exhibit C.

The Government filed a motion in opposition to the Defendants’ motion to continue the trial date

on April 3, 2017, [Dkt. 171], and the Defendants filed a Reply, [Dkt. 172], on April 4, 2017.


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On April 7, 2017, the Court vacated the trial date of June 6, 2017, and granted a continuance to

October 10, 2017, due to the copious amounts of discovery produced by the Government and with the

understanding that defense counsel would be engaged in trial in Santa Barbara between August 9, 2017

and the following 4-6 week period.

In May 2017, the Government turned over more discovery, approximately 256 megabytes, of

material to the defense.

On July 5, 2017, the Government turned over more discovery, approximately 28 megabytes of

materials to the defense.

D. CHARGES AND THEORIES IN THE SUPERSEDING INDICTMENT

On July 12, 2017, the Government filed a Superseding Indictment containing 45 counts. This

Superseding Indictment comes (a) twenty (20) months after the Original Indictment had been obtained,

(b) less than 4 weeks before defense counsel was scheduled to start a trial in another jurisdiction of

which the Government was aware, and (c) less than 3 months before trial in this case was scheduled to

begin.

Significantly, the Superseding Indictment brings forth completely new theories. The conspiracy

count removes all use of the Travel Act to bring in the alleged violations of state law.

The Superseding Indictment alleges there was a conspiracy to commit Honest Services Mail Fraud,

but under a different theory and now alleges that there were conspiracies to commit Honest Services

Wire Fraud; and conspiracies to commit the classic theory of Mail Fraud, Wire Fraud, and Health Care

Fraud. Superseding Indictment ¶¶ 19a-19e.

It also increases the monetary amount of the alleged fraud to $20.3 million dollars. Superseding

Indictment ¶¶ 21r.


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Now, the Superseding Indictment charges the defendants with 14 new counts of substantive

Honest Services Mail Fraud, subsuming the one from the Original Indictment and adding 12 new

alleged patient victims.

It adds a theory of violation of direct Health Care Fraud violations under section 18 U.S.C. § 1347

and charges this as both a new theory of conspiracy and as 14 substantive violations. It discusses dates

and allegations relating to the 13 alleged patient victims mentioned under the newly added substantive

Honest Services Mail Fraud charges.

The Travel Act counts now exist under a different code sections 18 U.S.C. §1952(a)(1) and 18

U.S.C. §1952(a)(2) and no longer includes violations of California Business and Professions Code §650

and California Insurance Code section §750.

Three (3) counts of money laundering have now been added in the Superseding Indictment

including 2 checks made to Line of Sight, allegedly run by a co-conspirator, and 1 monetary transfer

from a company owned by a defendant to a separate defendant.

Lastly, the Superseding Indictment specifies the forfeiture it seeks which is defendant GRUSD’s

family home.

II. THE GOVERNMENT VIOLATED THE DEFENDANTS’ DUE PROCESS RIGHTS BY OBTAINING A SUPERSEDING INDICTMENT IN RESPONSE TO DEFENDANTS’ EFFORTS TO (a) PREPARE A DEFENSE, (b) GAIN A CONTINUANCE, (c) DISAGREE WITH A PLEA BARGAIN AND (d) TO BE PREPARED FOR THE CHARGES AGAINST THEM AT TRIAL

Defendants, DR. RONALD GRUSD, CALIFORNIA IMAGING NETWORK MEDICAL

GROUP, AND WILLOWS CONSULTING COMPANY, by and through counsel, Thomas A.

Mesereau, Jr. and Sharon Appelbaum, move to dismiss the Superseding Indictment on the basis of

Vindictive Prosecution.


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A. Standard – if no Presumption in Place, Burden Shifting

The Ninth Circuit explained in United States v. Spiesz, 689 F.2d 1326 (1982), that a claim for

vindictive prosecution arises:

when the government increases the severity of alleged charges in response to the exercise of constitutional or statutory rights. Blackledge v. Perry, 417 U.S. 21 (1974); North Carolina v. Pearce, 395 U.S. 711 (1969); United States v. Burt, 619 F.2d 831 (9th Cir. 1980); United States v. Griffin, 617 F.2d 1342 (9th Cir. 1980), cert. denied 449 U.S. 863; United States v. DeMarco, 550 F.2d 1224 (9th Cir. 1977), cert. denied 434 U.S. 827. It is generally held that vindictive prosecution is present where a defendant is reindicted or retried after the exercise of a procedural right. United States v. Burt, supra at 836. A dismissal will lie not only for actual vindictiveness, but also for the appearance of vindictiveness. United States v. Ruesga-Martinez, 534 F.2d 1367 (9th Cir. 1976); United States v. Burt, supra; United States v. Griffin, supra.

United States v. Spiesz, 689 F.2d at 1328.

In Blackledge v. Perry, 417 U.S. 21 (1974), even though there was absolutely no evidence of

vindictiveness in the record, the Court held that it was constitutionally impermissible for the

prosecution to bring the more serious charge against Perry after he had exercised his statutory right to

appeal. Similarly, the Supreme Court had found previously in North Carolina v. Pearce, 395 U.S. 711

(1969), that due process requires that the reasons for imposing harsher sentences upon retrial must

affirmatively appear so that an accused may be free, when taking an appeal, of any apprehension of

subsequent retaliatory or vindictive sentencing because of his successful appeal.

In the instant case, the Government filed a Superseding Indictment alleging more than 5 times the

original number of counts, more violations of law, different theories, different actors, different victims,

and vastly different monetary amounts on July 12, 2017. This Superseding Indictment was sought after

a failed plea bargain attempt, after learning of the advice of counsel defense the defendants’ planned to

use at trial, and after the defendants won their motion for a continuance past the date of August 1,

2017. The Indictment was filed 3 months before trial by the Government knowing at that time that

defense counsel would be engaged in trial for part of those 3 months.














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B. Initial Burden of Proof for Vindictive Prosecution: Exercising Constitutional and Statutory Rights

In pretrial situations, it is the “defendant who alleges vindictiveness [who] has the burden of making

the initial showing of an ‘appearance of vindictiveness.’” United States v. Spiesz, 689 F.2d at 1328 (internal

citations omitted).

It is generally held that vindictive prosecution is present where a defendant is reindicted or retried

after the exercise of a procedural right. United States v. Burt, at 836. In United States v. Ruesga-Martinez, 534

F.2d 1367, 1370 (9th Cir. 1976), the Court found that a dismissal for vindictive prosecution is allowable

even where actual vindictiveness does not exist, but that the appearance of vindictiveness does.

i. The Superseding Indictment’s New Charges, Counts, Theories, Victims, and Monetary Allegations in a Complex Case Filed 3 Months before Trial is a Clear Lack of Notice Violating Due Process Rights

A criminal defendant has the right to notice of the charges against him. The right to notice is

grounded in the Constitution which states “the accused shall enjoy the right… to be informed of the

nature and cause of the accusation.” United States Constitution, Amend VI.

The Superseding Information filed on July 12, 2017, containing forty-five (45) counts filed twenty

(20) months after the Original Indictment in a case declared complex and three (3) months before trial

on the eight (8) count Indictment is prejudicial to the Defendants as they were not on notice of any of

the additional charges, theories, victims, and allegations of wrongdoing.

When the Government filed the Indictment, defense counsel was scheduled to begin a trial in a

different jurisdiction on August 9, 2017 and be engaged in that trial for 4-6 weeks. That would have left

only weeks to prepare for the new charges, theories, victims, and allegations of wrongdoing.

The appearance of vindictiveness is palpable.

ii. Exercising Procedural Rights

The Supreme Court has long recognized that due process principles bar a prosecutor from seeking

to “punish a person because he has done plainly what the law allows.” Bordenkircher v. Haves, 434 U.S.


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357, 363 (1978). Indeed, the Bordenkircher Court held that such a vindictive, retaliatory action “is a due

process violation of the most basic sort,” and “for an agent of the [government] to pursue a course of

action whose objective is to penalize a person’s reliance on [her] legal rights is patently

unconstitutional.” Id. (internal citations omitted).

The Supreme Court has stated that the mere possibility of vindictive governmental action toward a

criminal defendant to be such a serious taint upon a prosecution that it requires district courts “in

certain cases in which action detrimental to the defendant has been taken after exercise of a legal right...

to presume an improper vindictive motive” whenever there is at least “a reasonable likelihood” that the

government’s conduct was in retaliation “for exercising a protected statutory or constitutional right.”

United States v. Goodwin, 457 U.S. 368, 372-73 (1982) (internal citations omitted).

The Defendants in this case have exercised their right to a jury trial, to confront their accusers, to

present a defense and witnesses in their defense.

a. The Superseding Indictment is the Government’s Response to the Defendants Exercise of their Need for a Continuance

A defendant’s right to a speedy trial is defined by the United States Constitution and 18 U.S.C.

§3161. The Defendants also have the opportunity to request a continuance if the ends of justice so

require for them to have an adequate, proper, and effective defense at trial.

This case was declared, previous to current counsel entering the case, a complex case for the

purposes of 18 U.S.C. §3161(h)(7)(B)(ii). When current counsel came onto the case, the Original

Indictment had been on file for 11 months. A joint continuance was granted to give new counsel time

to prepare and a trial date set for June 6, 2017.

Counsel received the discovery in early January 2017, after litigation about the protective order, and

by the end of February 17, 2017, it was clear to defense counsel that due to the copious amounts of

discovery and defense counsels’ trial schedule, a further continuance was needed and so the Defendants

filed a Motion to Continue in early March 2017.




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The AUSAs made it known they would not consent to a continuance beyond August 1, 2017. See

Exhibit A. However, in April 2017, the Court heard the arguments and granted a continuance until

October 10, 2017, to prepare for the 8 counts in the Original Indictment.

Then on July 12, 2017, a 45 count Superseding Indictment was filed by the Government. This

Indictment contains new prosecutorial theories and additional counts – many which could have been

charged by the Government back in November 2015.

b. The Superseding Indictment is the Government’s Response to the Defendants’ Exercise of Their Right to Prepare a Defense and Present Witnesses for Proper and Adequate Representation at Trial

Under the United States Constitution, the accused has a procedural due process right to present a

defense and to present witnesses in his defense. United States Constitution, Amend. V. Defense

counsel has been forthright and made representations to the Government, verbally, in writing, and in

court of its intent to present an Advice of Counsel defense, well in advance of when it is required by

law to do so. Counsel had even sent paperwork to the Government to show in good faith that they had

begun this process which is not an easy one.

As the comment to Criminal Jury Instruction 5.9 states, “A defendant who reasonably relies on the

advice of counsel may ‘not be convicted of a crime which involves willful and unlawful intent.’

Williamson v. United States, 207 U.S. 425, 453 (1908). Advice of counsel is not a separate and distinct

defense but rather is a circumstance indicating good faith which the trier of fact is entitled to consider

on the issue of intent. Bisno v. United States, 299 F.2d 711, 719 (9th Cir. 1961).” Criminal Jury Instruction

5.9 (9th Cir.).

Knowing that defense counsel might be preparing this defense to the 8 counts charged in the

Original Indictment, going back into the Grand Jury chamber to present evidence on additional

theories, victims, conspiracies, co-conspirators, that defense had not prepared for and would not be

prepared for by trial seems to be a way to circumvent the trial preparation of the defendants.


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c. The Superseding Indictment is the Government’s Response to the Defendants’ Disagreement of the Terms of the Plea Offer

Even if the Court finds that the Government at some point in time stated that they may re-indict

the case if the offer was rejected, and the defense does not concede that this was ever communicated,

the Defendants in this case did not knowingly, intelligently or voluntarily reject the Government’s offer.

See Bordenkircher v. Haynes, 434 U.S. 357 (1978).

In Bordenkircher, the Supreme Court stated that in “the ‘give-and-take’ of plea bargaining, there is no

such element of punishment or retaliation so long as the accused is free to accept or reject the

prosecution’s offer.” Id. At 363. The case at bar holds a key distinction.

Here, an amorphous plea offer was first made to the Defendants. Exact charges that the

Defendants would plead to in both the federal and state cases were not explained to the defense until

the end of March 2017 and the issue of how much restitution the Defendants would have to pay at

both the federal and state levels were not ever reached. Then the offer expired.

This is not a situation such as the Supreme Court had envisioned wherein the Government and the

Defendants had equal bargaining power and the Defendants had the power to accept or reject the offer.

The Defendants were never made aware of the exact amount of restitution that would be a

consequence of such a plea and then the offer expired without ever being accepted or rejected by the

Defendants. It expired because the Government said it did.

This was an inherently unequal bargaining position since the parameters of the plea were never

properly and fully laid out by the Government this re-entry into the Grand Jury appears to be

retaliatory for the exercise of the known right for a continuance and to have a jury trial.

d. The Superseding Indictment is the Government’s Response to the Defendants’ Exercise of their Right to a Jury Trial and to Confront Accusers

Under the United States Constitution, the accused has a procedural due process right to a jury trial

and to confront his accusers. United States Constitution, Amend. VI. A jury trial and the right to


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confront his accusers can be waived by the defendant if a plea agreement is entered between the

Government and the defendant. Unless and until that right is waived, and it can only be waived by the

defendant himself, the defendant holds that right.

The Defendants in this case have made it clear that they are exercising that procedural right.

C. Burden Shifts to The Prosecution to Defend Against Allegation of Vindictive Prosecution

Once the defense makes a prima facie showing of actual vindictiveness after the exercise of a

procedural right or a showing of the appearance of vindictiveness:

The burden then shifts to the prosecution to prove that the increase in the severity of the charge did not result from any vindictive motive. It is said that these cases establish a prophylactic rule designed not only to relieve the defendant who has asserted his right from bearing the burden of “uping the ante”, but also to prevent chilling the exercise of such rights by other defendants who must make their choice under similar circumstances in the future. United States v. DeMarco, supra, at 1227.

United States v. Spiesz, 689 F.2d at 1328 (internal citations omitted). See also United States v. Ruesga-

Martinez, 534 F.2d at 1369 (finding that Pearce and Blackledge “establish, beyond doubt, that when the

prosecution has occasion to reindict the accused because the accused has exercised some procedural

right, the prosecution bears a heavy burden of proving that any increase in the severity of the alleged

charges was not motivated by a vindictive motive.”)

III. PRESUMPTION OF VINDICTIVENESS ATTACHES WHEN ADDITIONAL

CHARGES ARE BASED ON SAME CONDUCT THAT WAS THE SUBJECT OF THE ORIGINAL INDICTMENT – FACTUAL NUCLEUS OF BOTH INDICTMENTS THE SAME

In United States v. Garza-Juarez, 992 F.2d 896, 907 (9th Cir. 1993), the Court found that a

presumption of vindictiveness attaches when the “additional charges are based on the same conduct

that was the subject of the first indictment, when the same sovereign was involved, and most

importantly, when the decision to file increased charges directly followed the assertion of a procedural

right.”


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In United States vs. DeMarco, 550 F.2d 1224, 1226 (9th Cir. 1977), one of the points the court relied on

when it dismissed the Indictment for prosecutorial vindictiveness was that the “factual nucleus of both

Indictments was the same”.

The Original Indictment the allegations hinged on the Travel Act since only violations of California

state law were at issue. Importantly, the Travel Act is no longer referenced in Count One or the

substantive Honest Services Mail Fraud counts and thus, has changed the Government’s entire theory.

However, the majority of the counts utilize the same dates, time periods, locations and actors.

Under that prior theory, in the Original Indictment, the patients who were allegedly defrauded of

honest services by their physicians because of the alleged kickbacks were the “victims”. By adding the

Federal Health Care Fraud and substantive Wire Fraud and Mail Fraud allegations to the conspiracy,

the insurance companies become alleged victims using the same evidence that the Government had at

the time of the Original Indictment, although in a way that the defense had not prepared for trial.

The information about the insurance companies involved was known to the Government because

the corresponding state Indictment listed those entities and ancillary services at issue back in December

2015 and the AUSAa in the instant case were involved in the Indictment on the state case.

Knowing all of this at the time, the Government did not choose to file any allegations that directly

implicated federal law without the state statutes and Travel Act involvement. The new Indictment

seems to be a smarter Indictment involving charges that could have been brought back in November

2015 since none of the dates of the alleged conduct extend beyond September 2015.

For example, Count 2, Honest Services Mail Fraud in the Original Indictment is now Count 8 in

the Superseding Indictment and is accompanied by mentioning 13 other alleged patient victims.

Superseding Indictment ¶¶ 23–26. Since Count 8 and the date of March 10, 2015 exists in the middle of

the time period of the other allegations, these counts could have been allegations, this could have been

alleged at the time of the Original Indictment in November 2015.


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The new allegations of federal Health Care Fraud allegations track the exact language of the new

Honest Services Mail Fraud charges in the Superseding Indictment. Counts 3–16 are mirrored in

Counts 23–36. Superseding Indictment ¶¶ 23–26; ¶¶27-30.

The Travel Act counts in the Superseding Indictment no longer rely on some of the California state

laws apparently to allow the Government to present less evidence and prove fewer violations.

Superseding Indictment ¶¶ 35-42.

Another example is that the Superseding Indictment states now that twenty (20) million dollars are

the monetary amount of the fraud without any basis for that claim. One can only assume it involves

alleged losses to the alleged insurer-victims, but as all parties know those claims were never paid and

those allegations may only be attempted at best. Springing such a monetary change from the one

million previously stated in the Original Indictment is an extreme change shortly before trial. This

information must have been known to the Government in 2015 because it dealt with the same

insurance companies that the state Government did, the reason for such a delay and the change shortly

before trial gives the appearance of vindictiveness at the very least.

The two Money Laundering Counts dealing with checks from WILLOWS CONSULTING to Line

of Sight for Professional Services literally track the language of the Travel Act Counts 3-8 in the

Original Indictment. These additional allegations are just an attempt to pile on because as Line of Sight

was a defendant in the Original Indictment, these allegations could have been presented to a Grand

Jury back in November 2015. Yet, it was sprung on the defendants 3 months before trial with lack of

notice.

A. Mistake is Not a Valid Justification for Increasing the Charges

If a prosecutor has charged a case incorrectly or missed charges because of an oversight or

inexperience, the Ninth Circuit has not found that this a valid justification for increasing the charges.

United States v. Ruesga-Martinez, 543 F. 2d 1367, 1730 (9th Cir. 1976) (finding no merit to the


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Government’s argument that even though the facts were known prior to the first Indictment since it

was handled by an inexperienced prosecutor at the time the Superseding Indictment should be

allowed). Especially since in this case, the same prosecutors were involved in the state case and all the

other related Indictments mentioned above in I.B. Knowing that, and that the information in the

instant Indictment was known previous to the Original Indictment, there can be no mistake or

oversight used as a reason here.

Furthermore, the added forfeiture allegation of Defendant Grusd’s family home is an extreme

change where tracing of funds needs to be scrutinized for the sufficiency of this allegation and certainly

appears as if the Government is punishing Defendant Grusd for the exercise of his rights since no new

discovery has been turned over justifying this sudden addition.

IV. CONCLUSION

Wherefore, the Defendants respectfully ask the Court to dismiss the Superseding Indictment for

vindictive prosecution and/ or the appearance of vindictive prosecution. The defendants have made a

showing by prima facie evidence that the exercise of their constitutional and statutory rights triggered

the Government to create this harsher 45 count Superseding Indictment 20 months after the Original

Indictment was filed and shortly before trial on the 8 count indictment was to begin. This is a direct

violation of the due process rights of the Defendants.

Alternatively, the court should strike all allegations in the Superseding Indictment that are

allegations and counts that could have been brought much earlier than a few months before trial

because they were known to the prosecution in 2015.

DATED: July 31, 2017 Respectfully submitted, Santa Monica, CA /s/ Sharon Appelbaum /s/ Sharon Appelbaum, Esq. LAW OFFICES OF SHARON APPELBAUM

MESEREAU LAW GROUP Thomas A. Mesereau, Jr.


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V. DECLARATION OF COUNSEL, SHARON APPELBAUM I, Sharon Appelbaum, state:

1. That the Original Indictment in this case was filed on November 6, 2015.

2. That a Superseding Indictment in this case was filed on July 12, 2017.

3. That a state indictment, San Diego case SCD255519, named DR. GRUSD as a defendant, among others included in the Original Indictment here, in 54 counts and was filed after a Grand Jury proceeding which took place on December 2 and 3, 2015.

4. That many of the key witnesses for the federal Government in this case testified at the state Grand Jury proceeding and were named in that proceeding. That AUSA Fred Sheppard was present for at least some of the testimony at the state Grand Jury proceeding since he conducted the questioning of Dr. Steven Rigler.

5. That in November 2015, Julian Garcia was the defendant named in a federal Indictment prosecuted by at least one of the same federal prosecutors as in the instant case.

6. That in January 2016, Fermin Iglesias and Carlos Arguello were the named defendants in a federal Indictment prosecuted by at least one of the same federal prosecutors as in the instant case. That much of the language in that Indictment can be seen in the Superseding Indictment.

7. That in June 2016, Jonathan Pena and others were the named defendants prosecuted by at least one of the same federal prosecutors as in the instant case.

8. That in October 2016, Thomas A. Mesereau, Jr. and Sharon Appelbaum substituted into the case as counsel for Defendants Grusd, California Imaging Network, and Willows Consulting Company.

9. That defense counsel received from the Government a discovery of approximately a half a terabyte of data in January 2016.

10. That counsel believes that it was in January 2017, that the Government was asked whether there would be any pre-trial offer in the instant case. In return, the Government invited the defense to a meeting at their office.

11. That on February 13, 2017, a meeting was held at the United States Attorney’s Office for the Southern District of California. A possible plea was discussed but without any direct discussion of the exact charges to plead to, sentence to be imposed, and monetary amount to be paid for restitution.

12. That on March 2, 2017, defendants filed a Motion to Continue Trial Date predicated on the fact that it had taken some time to receive the discovery because of protective order issues.


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13. That on March 10, 2017, defense counsel revealed a document to the Government that defense counsel had reviewed in examining the efficacy of an advice of counsel defense in hopes it might mitigate the offer.

14. That on March 15, 2017, Assistant United States Attorney Fred Sheppard sent an email to the defense indicating that the plea offer extended to the defense would expire on March 31, 2017. AUSA Sheppard also indicated that the United States would not agree to any continuance beyond August 1, 2017.

15. That on March 28, 2017, the Government sent formal federal and state plea offer documents via email to the defense which showed the charges that the defendants would ultimately have to plea to, possible sentences, but failed to include the actual or even estimated amount of restitution to be paid in the federal and state cases following a plea. The expiration date of March 31, 2017 remained.

16. That on or about March 31, 2017, there was a phone conversation between counsel and a federal prosecutor to ascertain the amount of restitution that would have to be paid, but the prosecutor indicated she could not speak for the state prosecutors.

17. That it had been represented to defense counsel that the federal authorities were handling negotiations for the state and federal authorities. Defense counsel then attempted to contact the state prosecutors, but were unable to reach them before the offer expired.

18. The Government filed a motion in opposition to the Defendants’ motion to continue the trial date on April 3, 2017, and the Defendants filed a Reply, on April 4, 2017.

19. That on April 7, 2017, the Court vacated the trial date of June 6, 2017, and granted a continuance to October 10, 2017.

20. That in late May 2017, the Government turned over an additional 256 megabytes of data to the defense and an additional 28 megabytes of data on July 5, 2017, shortly filed by the Superseding Indictment.

21. That the Superseding Indictment contained 45 counts against defendants, additional conspiracy theories, new theories of alleged violations, new charges and allegations of statutes broken, and new co-conspirators.

22. That the defense has been preparing and examining an advice of counsel defense against the Original 8 count Indictment. That the advice of counsel defense needs to be re-examined and reviewed because of the new allegations and Superseding Indictment.

23. That counsel contacted counsel for Gonzalo Paredes and they are not opposed to this motion.

24. That a dismissal of the Superseding Indictment is necessary in light of the violation of the defendants’ due process rights.

DATED: July 31, 2017 LAW OFFICES OF SHARON APPELBAUM /s/ Sharon Appelbaum /s/

Sharon Appelbaum, Esq


mesereau law group law offices of sharon …...julian garcia were mentioned, but jonathan pena’s...

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