Attorneys Should Never be Involved in Fraud With Clients
The Crime Fraud Exception to the Attorney Client Privilege
posted on June 25, 2021 by Barry Zalma
In United States of America v. Aron Chervin, Et Al, No. 10 CR 918 (S.D.N.Y. 09/21/2011) an indictment involving multiple health insurance fraud perpetrators attempted to keep from their criminal trial wiretap conversations that seem to establish the crime.
By motion dated June 1, 2011, Defendant Michael Lamond (“Lamond”) moved to suppress nineteen telephone conversations between himself and Defendant Aron Chervin intercepted by the Federal Bureau of Investigation (“FBI”) pursuant to court-authorized wiretaps. Defendant argued that the communications are protected by the attorney-client privilege because Aron Chervin was a client.
The Defendants were charged with creating wholesale and retail shell corporations to perpetuate the fraudulent sale of Durable Medical Equipment (“DME”) to obtain inflated reimbursement from no-fault insurance providers, and financing their scheme through the sale of fraudulent receivables of the clinics to investors who benefitted from the inflated reimbursement generated by the fraud even though New York State prohibits medical professionals from sharing fees for medical services with non-medical professionals.
The sophisticated schemes also utilized the services of lawyers to represent patients, to facilitate payments, and to prevent the insurance companies from detecting the possibility of fraud.
The indictment also alleged that the scheme involved billing for invoices generated by the medical professional corporations and submitted to no-fault insurers through the Law Office of Akiva Ofshtein, P.C., which employed Defendant Lamond and Defendant Vadim Chervin. Defendant Lamond was allegedly an attorney licensed to practice in New York State and an expert in the submission of no-fault insurance claims. The indictment alleged that Lamond’s services were used to draft contracts with financiers and to prevent “unwanted scrutiny” from insurers. Furthermore, the indictment alleged that Lamond allowed use of his attorney’s escrow account to receive monies from financiers purchasing the inflated receivables. This arrangement allowed members of the conspiracy to shield the fact that the insurance payments were received by certain members of the conspiracy rather than the relevant medical corporation.
The privilege, however, is not an unbridled license which protects all communications between attorney and client. One of these exceptions to the privilege is commonly referred to as the crime-fraud exception. Under this exception, the privilege ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing. Nor can the privileged communications between an attorney and client be carried on with the purpose of furthering or enabling a crime or fraud.
It is well-settled that the party asserting the attorney-client privilege bears the burden of establishing that all the elements of the privilege are present.
The attorney may be innocent, and still the guilty client must let the truth come out. Therefore, Lamond’s knowledge of whether a fraudulent scheme was afoot is not relevant to the application of the crime-fraud exception to Lamond’s interactions with Aron Chervin.
The intercepted calls demonstrate that Aron Chervin used the services of Lamond and the Law Office of Akiva Ofshtein, P.C., to (1) submit fraudulent bills and collect money from no-fault insurers, (2) draft contracts with doctors and investors in furtherance of the fraudulent scheme, and (3) launder monies garnered through the fraudulent scheme.
After reviewing all of the telephone taps the District Court concluded that the allegation of Lamond that the conversations he is seeking to suppress took place in his capacity as legal counsel to Mr. Chervin and involved consultations regarding financing, no-fault insurance collections and arbitration matters and that the conversations do show, however, that the Government has probable cause to believe that Aron Chervin intentionally and knowingly utilized the services of Michael Lamond to further Chervin’s illegal scheme to obtain funds by submitting fraudulent medical bills, traveling in interstate commerce, to no-fault insurance carriers.
The District Court concluded that there was probable cause to believe that Aron Chervin was knowingly involved in a complex mail or wire fraud scheme to defraud no-fault insurance providers and that the crime-fraud exception to the attorney-client privilege applies to this set of facts. Therefore, the District Court denied the motion to suppress.
Adapted from Zalma on Insurance Claims Part 108 -Second Edition
Available as a Kindle book or Available as a paperback
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4