Government appeals medical fraud case dismissal

A series of crucial arguments lost by the federal government ultimately led to the June collapse of its medical fraud case against personal injury attorney Noel Gage and his alleged right-hand man, Howard Awand.

Now the U.S. Attorney's office is relying on the 9th U.S. Circuit Court of Appeals to resuscitate the case that authorities once said would net a collection of high-profile doctors and lawyers.

In a lengthy appeals brief filed with the 9th Circuit on today, the government claims that U.S. District Judge Justin Quackenbush erred when he dismissed the cases against Gage and Awand. The gist of the government's complaint surrounds Las Vegas surgeon Mark Kabins and the handling of patient Melodie Simon.

Defense attorneys representing Gage and Awand claim Kabins' testimony would have benefited their clients because his statements would have contradicted testimony offered by two surgeons who were granted immunity by the federal government.

Quackenbush agreed that if the government offered immunity to surgeons whose testimony suited its theory, it should grant the same offer to a witness who might contradict the government.

Quackenbush dismissed the case after the government refused, unsuccessfully arguing that Kabins is a target of the investigation.

"The government's refusal to grant immunity to a defense witness does not violate due process when the witness is a target of the same investigation that gave rise to the prosecution of the defendant," the government wrote in its appeals brief.

Gage and Awand were indicted on charges of money laundering, conspiracy, mail and wire fraud designed to deprive clients of their rights to honest services by their attorney.

The government claims the two belonged to a network of doctors and attorneys who enriched themselves by rigging medical malpractice lawsuits and sharing kickbacks generated by artificially inflated settlements.

Awand, who the government calls the "ringleader," referred seriously injured patients to the same group of personal injury attorneys and surgeons. The physicians and lawyers also referred cases to each other, according to the government.

"In return for the client referrals, the lawyers paid kickbacks to Awand in the form of unethical fee-splits and promised Awand that they would not bring medical malpractice suits against the doctors," the government's brief states.

A three-week trial that ended in March focused on the treatment of Simon, who underwent routine back surgery and emerged from the hospital a paraplegic.

Kabins and Dr. John Thalgott were Simon's surgeons; Gage was hired to represent Simon after the tragic chain of events following her surgery.

The government claims that Gage had a viable medical malpractice lawsuit against Thalgott and Kabins, who was notified of internal bleeding that was causing the paralysis but waited about 11 hours before he performed emergency surgery. Gage abandoned the plan to sue the surgeons after he was approached by Awand and joined the alleged conspiracy.

Awand offered Gage a case that ultimately netted an $18 million settlement and, according to the indictment, Gage changed directions on the Simon case. Instead of pursuing lawsuits against the surgeons, Gage went after the anesthesiologist. Instead of securing a settlement between $8 million and $10 million, Simon received $2 million.

Thalgott, who approached the government and was offered immunity before he was named a subject or target of the investigation, testified that he, Awand and Gage held a secret meeting to discuss suing the anesthesiologist rather than the surgeons.

The defense argued that had Kabins testified, he would have said that Gage never promised not to sue Thalgott and himself. He would have testified that he was not responsible for Simon's injuries.

During its unsuccessful argument against offering immunity to Kabins, prosecutors told Quackenbush the defense could have called the surgeon as a witness. The defense called no witnesses during the trial.

"The court reached that conclusion (to dismiss the case) despite the fact that (1) the jury in the first trial had Kabins' sworn disposition testimony on the identical subject matter, and (2) Gage declined to put on a defense medical expert who was prepared to testify that Kabins' medical treatment did not cause Simon's injuries," the government brief states.

The government said Kabins gave prosecutors a proffer statement, which means he explained his role in the Simon case with the understanding his statements could not be used during a trial. The government contends his testimony would not have contradicted that of Thalgott and the judge wrongly dismissed the cases.

"This court cannot uphold the district court's dismissal without contravening its own precedent and coming into conflict with other circuits that have addressed this issue," the government brief states. "Both precedent and compelling policy reasons require reversal."

Contact reporter Adrienne Packer at apacker or 702-384-8710.