9th Circuit hears Las Vegas doctor-lawyer fraud appeal

SAN FRANCISCO – Attorneys and prosecutors involved in the ongoing case related to allegations of corruption involving Las Vegas doctors and lawyers argued before an appeals panel Tuesday over the relevance of granting immunity to a key witness.

The 9th U.S. Circuit Court of Appeals held the hearing to determine whether a federal judge acted appropriately last year when he ordered the government to provide spine surgeon Mark Kabins immunity to testify during the trial against personal injury attorney Noel Gage.

Federal prosecutors said it is “unprecedented” for a judge to order the government to grant immunity to the target of an investigation. Gage’s attorneys claim that Gage was not given a fair trial because Kabins would have contradicted government witnesses had he been allowed to testify.

“This is not a bad faith case,” Chief Judge Alex Kozinski told prosecutors. “This is a case where you offered your witness a benefit and denied the defense witness the same benefit.”

Gage was indicted on charges related to a conspiracy to cheat patients out of personal injury settlements. The government claims medical consultant Howard Awand, who was also indicted, was the mastermind behind the scheme.

Prosecutors say Gage, Awand and Kabins were major players in a network of doctors and lawyers who worked together to inflate medical costs and boost legal settlements, then collect kickbacks from lucrative judgments.

After hearing about the federal investigation, Dr. John Thalgott and Dr. Benjamin Venger came forward and offered to assist the government. Both were granted immunity and neither was indicted.

U.S. District Judge Justin Quackenbush dropped the charges against Awand and Gage after Gage’s trial ended in a hung jury and the government refused to grant Kabins immunity. The government promptly appealed Quackenbush’s ruling, further delaying the case against Gage.

“It is not a pleasant experience when one is falsely accused of a crime,” Gage said Tuesday. “I feel comfortable, the judges were receptive.”

The bulk of the discussion Tuesday was whether Kabins’ testimony would have contradicted that of Thalgott, a government witness and one-time partner of Kabins.

The government’s investigation centered on the care received by Melodie Simon, a woman who underwent routine back surgery in 2000, suffered complications that prosecutors said were ignored and ended up a paraplegic.

Thalgott and Kabins performed the surgery and Gage represented Simon when she sued for medical malpractice. Rather than suing Thalgott and Kabins for damages prosecutors estimated would have been in the neighborhood of $14 million, Gage pursued anesthesiologist Dan Burkhead. Simon received a $2 million judgment.

Thalgott told jurors that he and Kabins held a secret meeting with Gage to protect themselves from a medical malpractice suit and hatch a plan to blame Burkhead for Simon’s injuries. Thalgott suggested that Kabins could have been vulnerable to a medical malpractice lawsuit because he waited about 11 hours to perform emergency surgery after learning of Simon’s complications.

Attorney Pamela Johnston, who represents Gage, told appellate judges that if Kabins had been allowed to testify, he would have denied he was at fault.

“He would say, ‘I didn’t delay, I did not cause the injuries to Melodie Simon,’” Johnston said. “The jury could not convict Noel Gage if they believed Kabins.”

Kozinski scoffed at Johnston’s argument.

“Trust me, doctors never think they screwed up,” Kozinski said.

The panel questioned why the government didn’t simply indict Kabins rather than argue about use immunity and ultimately have the case thrown out.

“If you really wanted to preserve prosecuting Kabins, you go ahead and indict him,” said Judge Barry Silverman. “You could have indicted him rather than name him as a target.”

Assistant U.S. Attorney Steve Myhre said the investigation into Kabins was continuing. The doctor was indicted in March, a development that does not change the matter before the appeals court.

Myhre said offering immunity to Kabins would have created a “severe impediment” to the government’s case. U.S. Attorney Gregory Brower said it would have compromised the government’s ability to later indict him.

“As long as someone is the target of an investigation, no court has ever upheld a district court order requiring the government to immunize a target of its investigation,” Brower said after Tuesday’s hearing.

Use immunity allows a witness to testify, but forbids the government from using any of the testimony to prosecute the individual. Prosecutors can only use the information if they confirm it through other sources, but by doing that they are more susceptible to defense challenges.

Myhre told the panel that court-ordered use immunity only occurs when the potential witness is not a target of the investigation. At least one judge suggested otherwise.

Judge Stephen Ray Reinhardt said the government was “clearly wrong” in its belief that a judge cannot make an exception for immunity for a targeted subject.

Brower said if the panel upholds Quackenbush’s ruling, his office plans to request a hearing before the full appeals court. He said he is willing to take the case to the Nevada Supreme Court if necessary. Brower also presumed the defense would do the same.

“This is a long way from being tried again,” he said.


Contact reporter Adrienne Packer at apacker@reviewjournal.com or 702-387-2904.


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