On February 14 of this year, Bermuda filed a lawsuit in the Federal District Court for Massachusetts, seeking damages and legal costs from the Lahey medical organization of Burlington, MA. Bermuda claims that Lahey, aided by Dr. Ewart Brown, former prime minister of Bermuda, cost the country millions of dollars by engaging in a “pattern of racketeering activity.”
Bermuda v. Lahey is likely to prove complex. It seeks to apply the federal Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970 to a civil dispute. Congress aimed RICO at “organized crime.” RICO helped reduce the New England Mob from subverters of mainstream business through violence and threats to exploiters of some peep shows and massage parlors. However, little known to most people, RICO also includes a section authorizing civil lawsuits.
When a “pattern of racketeering activity” by an “interstate enterprise” has been proven in court, triple damages plus legal costs can be awarded in a civil RICO lawsuit. As an early example, civil RICO was used successfully against anti-abortion activists who harassed and trashed a Philadelphia clinic during 1984, resulting in awards of about $45,000 for damages and $90,000 for legal costs.
Bermuda’s claims: According to the recent lawsuit, Lahey “accept[ed] fees for medically unnecessary…services…using those fees to pay Brown increasing bribes…to promote its interests in Bermuda.” [Bermuda v. Lahey complaint, paragraph 121] The “actions have caused [Bermuda] to…increase the rate at which it pays for certain health benefits, and to pay for overseas services in the United States….” [Bermuda v. Lahey, paragraph 132]
That is the essence of Bermuda’s arguments that it is owed damages under the RICO Act, in 18 USC 96.1962(a). Bermuda has also made claims under RICO Sections 1962(b), 1962(c) and 1962(d), using similar arguments. Its complaint says that fraud continued over more than ten years, that fraud cost Bermuda millions of dollars and that “bribes” and “kickbacks” were key elements in the “racketeering activity.”
“Lahey and Brown concocted a scheme built upon bribery and greed and carried out with complete disregard for Brown’s position of public trust or for the physiological and psychological impact on patients–who were subjected to excessive, medically unnecessary and frankly dangerous scans so that Brown and Lahey could obtain greater reimbursements….” [Bermuda v. Lahey, paragraph 3]
“Between 2006 and 2016, Bermudian public healthcare insurers paid Lahey over $40 million for services…To induce patient referrals for diagnostic scanning at the Brown clinics, Brown…offered and paid kickbacks, which he dubbed and disguised as ‘commissions.’…” [Bermuda v. Lahey, paragraph 92]
Dr. Brown is a bystander to Bermuda v. Lahey, not a defendant. If damages and legal costs were awarded under the lawsuit as filed, Lahey would have to pay. However, Dr. Brown’s activities would be key elements in showing a “pattern of racketeering activity” by an “interstate enterprise.”
A key issue for Bermuda will be proving that Lahey knew services in which it participated were “medically unnecessary.” If they were medically necessary or if Lahey did not know otherwise, then Lahey would not likely be seen as a party to fraud. According to the complaint in the lawsuit, patients were often referred to the Brown clinics in Bermuda, who would perform scans and send images to Lahey in the U.S. for interpretation. In such a sequence, Lahey acted as a third-party provider.
Conflicts: According to Bermuda’s complaint, “By 2001, Brown…was…serving as Bermuda’s minster of transport. At this time, [Lahey] entered into the first of many consulting agreements…whereby Lahey agreed to pay Brown and [his company Bermuda Healthcare Services] substantial sums of money in exchange [for] their promotion of Lahey’s interests on the island. [Bermuda v. Lahey, paragraph 28]
The complaint continues, saying “agreements called for Lahey’s payment of ‘consulting fees’ to Brown…in exchange, Brown…would ‘promote healthcare opportunities (for Lahey) in Bermuda and elsewhere in the West Indies.’…Brown’s use and exploitation of his role as a government minister to promote Lahey’s interests in Bermuda [was] a clear conflict of interest….” [Bermuda v. Lahey, paragraph 31]
According to the complaint, what looks to have been a problem developed into a threat: “Increasing the rate of Lahey’s payments was important to Brown because he was reliant on the payments to fund his clinics, which had to operate at capacity each month for him to stay…solvent.” [Bermuda v. Lahey, paragraph 38]
Bermuda’s complaint says Lahey had helped Brown make arrangements to buy a CT scanner for his clinics and later buy an MRI scanner–very costly and risky moves for an individual physician. In addition to paying off debt for equipment, he was also paying Lahey directly for interpreting scans, rather than their trying to bill Bermuda’s national health program, and he tended to fall behind on payments.
Bermuda’s complaint continues by saying that “Brown routinely used his role as premier…to ensure that Lahey got the access for which it paid him…on February 5, 2007, [the chief operating officer at Lahey] mailed Brown to thank him ‘for offering Lahey the opportunity to meet with your minister of health…to participate in the development of a future urgent care center’…Brown responded, ‘You didn’t know you were in the in-crowd? (Smile)’.” [Bermuda v. Lahey, paragraph 50]
As of 2007, an outside survey found that Bermuda did not require a government certificate of need to operate CT and MRI scanners. Its national health-care program did not require preauthorizations for scans. In Massachusetts, certificates of need for scanners began in 1976, and most health-care insurance plans required preauthorizations for scans in the 1980s. In its complaint, Bermuda notes that Dr. Ewart Brown successfully opposed a preauthorization requirement proposed in 2013. [Bermuda v. Lahey, paragraph 99]
Prospects: Clearly set out in Bermuda’s complaint initiating the recent lawsuit are issues that might have been obvious to Lahey executives: conflicts of interest between Dr. Brown’s efforts in Bermuda for Lahey and Dr. Brown’s duties in government, plus financial pressures created by Dr. Brown’s debt payments for medical equipment and Dr. Brown’s payments for medical services provided by Lahey.
Bermuda’s complaint has benefited from unexplained disclosures, such as messages cited between Dr. Brown and an executive at Lahey. However, Bermuda probably has more to learn about Lahey’s activities. Unless the case is dismissed on preliminary motions, it will enter discovery, providing Bermuda with opportunities to obtain information.
Bermuda’s complaint says that “no one was better positioned than Lahey, which read all scans conducted at the Brown clinics, to detect medically unnecessary scans.” [Bermuda v. Lahey, paragraph 81] However, Lahey did not necessarily know what medical indications had prompted scans, since it was reportedly Dr. Brown’s clinics that performed them. Whether scans were or were not “medically necessary” and how much Lahey knew about that are issues likely to develop at a trial.
Bermuda has accused Lahey of paying Dr. Brown for favors and accused Dr. Brown of paying other physicians to refer patients to his clinics. It will surely try to obtain documents and testimony strengthening those claims. If successful in the efforts, Bermuda might be able to prove at a federal trial what it now alleges–that the cooperation between Lahey and Dr. Brown comprised a “fraudulent enterprise,” subject to sanctions under the RICO Act. [Bermuda v. Lahey, paragraph 70]
– Craig Bolon, Brookline, MA, April 15, 2017
Complaint, Bermuda v. Lahey, case 1:17-cv-10242, U.S. District Court for Massachusetts, February 14, 2017
Priyanka Dayal McCluskey, Lahey fights back against Bermuda bribery allegations, Boston Globe, April 14, 2017
Unattributed, Brown braced for chance of arrest, Royal Gazette (Bermuda), February 24, 2017
Shelley Murphy and Priyanka Dayal McCluskey, Former Bermuda premier defends his ties to Lahey, Boston Globe, February 22, 2017
Shelley Murphy and Danny McDonald, Bermuda’s ex-premier calls claims Lahey bribed him a litany of lies, Boston Globe, February 16, 2017
Sam Strangeways, Lawsuit slams Brown and Lahey, Royal Gazette (Bermuda), February 16, 2017
Janelle Lawrence, Bermuda files lawsuit accusing a U.S. hospital group of costly, unnecessary medical-imaging tests, Bloomberg News, February 15, 2017
Mark Arsenault, Former Bermuda leader with ties to Lahey was educated in US, Boston Globe, February 15, 2017
Jo Anne Pool, Northeast Women’s Center v. McMonagle: a message to poltical activists, Akron Law Review 23(2):251-267, 2015
John J. Hamill, Brian H. Rowe, Kaija K. Hupila and Emily Burke Buckley, A guide to civil RICO litigation, Jenner & Block, 2014
Bermuda Hospitals Board: Estate Master Plan review, Johns Hopkins, 2007