Ninth Circuit Affirms Honest-Services Conviction in Healthcare Bribery Scheme

On September 30, 2024, the Ninth Circuit Court of Appeals affirmed a conviction for honest-services mail fraud in USA v. Solakyan. Solakyan was charged as a primary participant in one of the largest workers’ compensation bribery schemes ever uncovered in San Diego County. As owner and operator of multiple medical imaging companies, Solakyan routed patients from complicit care providers to his own companies for unnecessary medical imaging, ultimately resulting in $263 million in fraudulent compensation claims. As part of the conspiracy, Solakyan compensated physicians and medical schedulers through cross-referrals and direct cash payments.

Solakyan raised a number of issues on appeal. Solakyan’s appeal and the Court’s resulting opinion provide insight into how the federal mail fraud statute, 18 USC § 1341, is applied to physicians and medical care providers in “honest-services” fraud cases.

Schemes to defraud under USC § 1341 need not cause economic harm to victims but can also be predicated upon depriving individuals or government actors of “intangible rights, such as the right to have public officials perform their duties honestly.” Honest services fraud applies to actors in both the public and private sectors.

In Solakyan, the Court affirmed that honest services fraud does not require the government to prove actual or intended tangible harm.

The Court also confirmed that honest services fraud may be based on a doctor-patient relationship. Historically, honest services fraud required a finding that the accused party owe some fiduciary duty to victims, or “a comparable duty of loyalty, trust, or confidence.”