United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 11-3123
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United States of America, *
*
Movant - Appellee, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Whispering Oaks Residential Care *
Facility, LLC; Whispering Oaks RCF * [PUBLISHED]
Management Co., Inc., *
*
Respondents - Appellants. *
*
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Submitted: December 12, 2011
Filed: March 12, 2012
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Before WOLLMAN, MELLOY, and COLLOTON, Circuit Judges.
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PER CURIAM.
In May 2011, the United States Attorney's Office for the Eastern District of
Missouri issued two subpoenas duces tecum to Whispering Oaks Residential Care
Facility, LLC and Whispering Oaks RCF Management Company as part of a health
care fraud investigation. The two companies, a health care facility and a related
management company, are both represented by Naren Chaganti. The subpoenas were
issued with identical document requests to each company, and they were served on
Chaganti on May 25, 2011.1
After receiving the subpoenas, Chaganti obtained multiple extensions of time
from the Government, but ultimately refused to produce the requested documents. The
Government filed a motion to compel production, and Whispering Oaks filed motions
to quash the subpoenas and to recuse or transfer. The district court2 set a hearing for
the motion on July 20. The day before the hearing, the court continued the
proceedings at the request of Chaganti, who claimed to be out of the country for a
family emergency. When the court ordered Whispering Oaks to show cause why the
hearing should not be set for August 12, Chaganti again requested an even longer
continuance, but failed to provide any details about the nature of his emergency, his
need to be out of the country for an extended period of time, or any firm time line for
his return. The court finally set a hearing date for September 2, and advised
Whispering Oaks that no further extension would be granted. The court also noted that
it would consider written filings if counsel did not appear at the hearing.
Chaganti again tried to postpone the hearing the day before it was scheduled to
occur by submitting a motion to the court via email, despite a prior warning from the
court that no motions would be accepted through email. Because the court found that
Whispering Oaks was engaged in an unwarranted pattern of delay and noncompliance,
the hearing proceeded as scheduled on September 2. No representative of Whispering
Oaks appeared. At the hearing the district court found that the Government had
demonstrated its entitlement to production of the subpoenaed documents, though the
1
A third subpoena was also issued to Dr. Surenda Chaganti, who is Naren
Chaganti's brother and was believed to have provided health care services at
Whispering Oaks. This third subpoena was not included in the Government's motion
to compel production.
2
The Honorable Audrey G. Fleissig, United States District Judge for the Eastern
District of Missouri.
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court found the scope of the requests to be overly broad because the requested
documents were not limited to a specific time period. The Government agreed to
modify these requests and limited its request to documents dated from January 1, 2007
to the present. On September 7, 2011, the district court entered an order granting the
Government's motion to compel and denying Whispering Oaks' motions to quash and
to recuse or transfer.
Whispering Oaks appeals the district court's rulings, arguing that the
enforcement of these subpoenas violates its Fourth Amendment right to be free from
unreasonable searches.3 We review a district court's decision to enforce an
administrative subpoena for abuse of discretion. Fresenius Med. Care v. United
States, 526 F.3d 372, 375 (8th Cir. 2008). An administrative subpoena, unlike a
warrant, does not need to be supported by probable cause and is analyzed under the
Fourth Amendment's general reasonableness standard. Doe v. United States, 253 F.3d
256, 264–65 (6th Cir. 2001); United States v. Bailey (In re Subpoena Duces Tecum),
228 F.3d 341, 347–50 (4th Cir. 2000). "The showing of reasonable cause required to
support an application for enforcement of a subpoena duces tecum 'is satisfied . . . by
the court's determination that the investigation is authorized by Congress, is for a
purpose Congress can order, and the documents sought are relevant to the inquiry.'"
Donovan v. Shaw, 668 F.2d 985, 989 (8th Cir. 1982) (quoting Oklahoma Press Publ'g
Co. v. Walling, 327 U.S. 186, 209 (1946)).
3
Whispering Oaks also seeks a reversal of the district court's denial of its motion
to recuse or transfer; however its argument on this matter is confined in its brief to
only a footnote promising to unearth corruption in the St. Louis court system.
Whispering Oaks offers no facts or legal authority in support of its broad accusation
nor any argument that would call into question the impartiality of the district judge.
We need not consider such a cursory argument. See Watson v. O'Neill, 365 F.3d 609,
615 (8th Cir. 2004) (declining to consider conclusory allegation that consisted of one
sentence in appellant brief).
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It is well established that a "subpoena is properly enforced if (1) issued pursuant
to lawful authority, (2) for a lawful purpose, (3) requesting information relevant to the
lawful purpose, and (4) the information sought is not unreasonable." Fresenius, 526
F.3d at 375. If an agency has satisfied these requirements for an administrative
subpoena, the burden shifts to the respondent to show that judicial enforcement
"would amount to an abuse of the court's process." EEOC v. Peat, Marwick, Mitchell
& Co., 775 F.2d 928, 931 (8th Cir. 1985).
The subpoenas in this case were issued pursuant to lawful authority. 18 U.S.C.
§ 3486 grants the Attorney General or his designee the authority to issue
administrative subpoenas in any investigation relating to a federal health care offense.
18 U.S.C. § 3486(a); see Fresenius, 526 F.3d at 375; Doe, 253 F.3d at 265; Bailey 228
F.3d at 350. Whispering Oaks does not argue that the subpoenas fail to comply with
§ 3486. Whispering Oaks does argue, however, that the Government has no authority
to investigate fraudulent claims if Medicaid has not made any payment on those
claims. This argument is based upon a misunderstanding of the law. It is illegal to
knowingly submit a false health care claim, regardless of whether or not a payment
has been made. See, e.g., 18 U.S.C. § 1035 (criminalizing knowingly making false
statements involving a health care benefit program); 18 U.S.C. § 1347 (criminalizing
the execution of or attempt to execute a federal health care fraud scheme). The
existence or absence of any payment on Whispering Oaks' Medicaid claims has no
bearing on the Government's legal authority to investigate those claims under § 3486.
The second requirement for the enforcement of a subpoena is that it be for a
lawful purpose. The Government asserts that the subpoenas were issued for the lawful
purpose of investigating Whispering Oaks' billing practices for possible health care
fraud. The respondent bears a heavy burden to disprove the existence of a valid
purpose for an administrative subpoena. United States v. LaSalle Nat'l Bank, 437 U.S.
298, 316 (1978). Whispering Oaks alleges that the subpoenas were instead issued as
part of a conspiracy between state and federal agencies to harass Chaganti because of
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unspecified political or racial animus. There is no evidence in the record that supports
this tenuous allegation.
Whispering Oaks contends that it could have provided evidence that the
Government's investigation is motivated by this elaborate and impermissible purpose
if the district court had compelled discovery of the sources of information that first
prompted the Government's suspicion of illegal activity. Whispering Oaks argues that
the district court erred in not granting a hearing and requiring the Government to
present evidence of a "reasonable suspicion" that the law had been violated.4
Whispering Oaks cites no legal authority for requiring the Government to justify its
administrative subpoenas by revealing the identity of any informants, the information
those informants may have provided, or any other facts revealing the motives behind
a lawful investigation. The Government, with its subpoena power, "does not depend
on a case or controversy for power to get evidence but can investigate merely on
suspicion that the law is being violated, or even just because it wants assurance that
it is not." United States v. Morton Salt Co., 338 U.S. 632, 642–43 (1950); see also
United States v. R. Enterpreses, Inc., 498 U.S. 292, 295 (1991) ("[T]he Government
cannot be required to justify the issuance of a grand jury subpoena by presenting
evidence sufficient to establish probable cause because the very purpose of requesting
the information is to ascertain whether probable cause exists."); Peat, 775 F.2d at 930
(stating that the EEOC need only "show that its investigation is for a legitimate
purpose authorized by Congress and that the documents subpoenaed are relevant to
4
Whispering Oaks asserts that a hearing was necessary to assess the
reasonableness of the subpoenas. However, all of Whispering Oaks' arguments were
considered at the September 2 hearing, as presented in its motion to quash and other
filings. Chaganti was unable to show cause why he or another representative for
Whispering Oaks could not attend that hearing and present the arguments in person.
Whispering Oaks makes no showing of how the district court might have abused its
discretion in conducting the hearing as scheduled. Whispering Oaks' absence from that
hearing was unjustified, and its argument that a separate hearing was necessary is
without merit.
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its inquiry," and that it need not show it had reason to believe the respondent had
violated federal law).
The third requirement for an administrative subpoena to be enforced is that the
information sought must be "reasonably relevant" to the agency's investigation.
Morton Salt, 338 U.S. at 652. Courts have noted that "the language of § 3486
indicates that the question of an administrative subpoena's relevance is not a question
of evidentiary relevance." Doe, 253 F.3d at 266; see also United States v. Arthur
Young & Co., 465 U.S. 805, 814 (1984) (stating that the statutory authority for the
investigatory power of the IRS allows it "to obtain items of even potential relevance
to an ongoing investigation, without reference to its admissibility. . . . [T]he Service
therefore should not be required to establish that the documents it seeks are actually
relevant in any technical, evidentiary sense."). The standard for determining the
relevance of a subpoena's requests is not particularly burdensome, and indeed, a
subpoena "should be enforced when the evidence sought by the subpoena is not
plainly incompetent or irrelevant to any lawful purpose of the agency in the discharge
of its duties." Doe, 253 F.3d at 266 (original alterations and quotation marks omitted).
The Government's subpoena requests seek documents relating to goods and
services provided at Whispering Oaks, expenditures for those goods and services,
personnel records and job descriptions, bank statements and tax returns for the care
facility and management company as well as documents that describe the relationship
between the two, and any communications either company had with state agencies
about governing health care regulations. Whispering Oaks tries to diminish the
relevance of the requested documents by portraying them as requests for grocery bills
and plumbers' payments, or attempts to connect jewelry purchases to trash pickup.
Whispering Oaks' characterization does not accurately reflect the requests, nor does
it credibly question the relevance of requested documents to a criminal investigation.
The district court did not err in finding the requests to be relevant to a criminal fraud
investigation.
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The last requirement for enforcement of an administrative subpoena is that the
information sought must not be unreasonable. Whispering Oaks argues that some of
the requests are overly broad, but its reasoning focuses mostly on conclusory
statements about the relevance of the requests to a lawful investigation. As mentioned
above, Whispering Oaks has not demonstrated any error in the court's conclusion.
Whispering Oaks is no longer in business, and it therefore cannot argue that
enforcement of the subpoenas will interfere with care at the facility. Whispering Oaks
offers no other reason why the enforcement of the subpoenas would be overly
burdensome. The district court did not err in finding that the subpoenas were not
unreasonable.
Because the Government has satisfied the requirements for judicial enforcement
of the subpoenas, Whispering Oaks bears the burden of showing enforcement would
be an abuse of process. The court's process is abused when a subpoena is "issued for
an improper purpose, such as to harass the [respondent] or to put pressure on him to
settle a collateral dispute, or for any other purpose reflecting on the good faith of the
particular investigation." United States v. Powell, 379 U.S. 48, 58 (1964). Whispering
Oaks' broad allegations about the Government trying to harass or discriminate against
Chaganti must meet a "heavy burden" in establishing bad faith, see LaSalle, 437 U.S.
at 316; Doe, 253 F.3d at 272, yet it can point to no credible evidence on the record that
demonstrates the subpoenas were actually motivated by an improper purpose.
Whispering Oaks has not met its burden of showing that enforcement of the
subpoenas will be an abuse of the court's process.
Accordingly, we affirm the decision of the district court.
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