The WellCare Case Provides an Example of Overcriminalization in Action

Overcriminalization is not a myth. Labyrinthine regulations often produce absurd outcomes, including prison sentences for individuals who do everything in their power, including consulting multiple attorneys, to comply with the law before acting.

A recent op-ed in The Washington Times illustrates the point, using a recent Medicaid fraud case that is currently in front of a federal appeals court:

Here's a quiz: Which of the following is a federal crime: (a) A hamster dealer needlessly tilting a hamster's cage while in transit; (b) subliminally advertising wine; or (c) selling a fresh steak with paprika on it?

Give up? The answer: all of the above.

Right now, there are approximately 4,500 federal criminal statutes and 300,000 administrative regulations that can be punished with imprisonment — and the list keeps growing. This is an invitation for our government to over-prosecute. Too often, federal prosecutors are accepting that invitation and rejecting more measured and effective administrative and civil remedies.

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In a case that was recently argued before a federal appeals court, executives at WellCare, a managed health care company in Florida, were prosecuted based on their reasonable interpretation of a Florida statute. Federal prosecutors, however, disagreed with the company's interpretation, even though Florida never issued any regulations contradicting the executives' reading of the law.

The legal framework WellCare operated in was complex. In a nutshell, Florida's Medicaid program required managed care companies to report expenses they paid for providing behavioral health care — like mental health services. If the company did not spend at least 80 percent of the premiums they received, they had to return some of the premium dollars to the state. The executives at WellCare read Florida's requirements as allowing them to classify as expenses the money that WellCare paid to its subsidiary that actually provided all the services.

Florida never clarified the law to say whether this was allowed or not, so WellCare did what businesses do — it consulted a lawyer. And WellCare's lawyers — both in-house and independent outside counsel — said that the way they were reading the law was reasonable. Other companies providing these services under Florida's Medicaid program read the law in a similar way. Admittedly, WellCare's interpretation made the company more money, but, of course, making money is what a corporation ought to do.

Federal prosecutors disagreed and brought criminal charges against its executives. The prosecutors argued that WellCare lied when it sent in expense forms reflecting its reading of the law. At trial, even the government's witnesses agreed that WellCare's interpretation of the law made sense. And because this complicated question of how to read a technical Florida health care law was improperly left to the jury instead of the judge, the executives were convicted after a month of stalled deliberations. The company's reasonable interpretation of a complex law — which was vetted by lawyers — was no sanctuary from a conviction for the company's executives.

The executives were sentenced to prison up to three years. Yet another company that used the same accounting method was only sued for breach of contract and didn't even have to pay back any money to Florida.

A federal appeals court has a chance to correct this and uphold a firmly established principle of criminal law: Where a citizen reasonably interprets complex regulatory law, a judge — not a jury — should throw out the case.

Whether prosecutors accuse you of violating Honduran lobster-packing laws even when the Honduran courts insist you didn't, or prosecute you for assuming that a gun license from one state would be valid in a neighboring state, far too many non-dangerous people end up in prison simply because their reasonable interpretation of the law differs with that of the government.