Julian Omidi and his business, Surgery Center Management, LLC, operated a massive health insurance fraud scheme known as 'Get Thin.' Using a high-pressure call center, the defendants recruited patients for weight loss surgeries and other procedures, often without medical necessity. They falsified patient data, fabricated diagnoses, and submitted false claims to insurance companies for thousands of procedures, including Lap-Band surgeries and sleep studies. After a lengthy trial, Omidi was convicted of mail fraud, wire fraud, and money laundering, and the district court ordered a forfeiture judgment of nearly $100 million. The defendants argued that the forfeiture should be limited to proceeds traceable only to falsified claims, contending that some patients received legitimate, medically necessary care and that the entire business was not 100% fraudulent.
The Ninth Circuit reviewed the statutory language of 18 U.S.C. § 981(a)(1)(C) and § 981(a)(2)(A), which define 'proceeds' broadly as property obtained 'directly or indirectly' from the offense. The court rejected the defendants' reliance on United States v. Rutgard, a case involving money laundering under a different statute that required proof that the specific funds were 'involved in' the illegal transaction. The court explained that § 981 uses the more expansive 'derived from' language, which does not support a '100% Fraud Rule.' The court reasoned that because the entire business model was permeated with fraud from the initial patient recruitment through the call center, all proceeds flowing through that funnel were indirectly derived from the scheme. Citing sister circuit decisions, the court held that when the nucleus of a business model is fraudulent, proceeds from even potentially legitimate downstream transactions must be forfeited.
The decision solidifies the government's ability to forfeit gross proceeds from fraud schemes where the entire operation is tainted by fraud, even if some individual transactions were legitimate. It clarifies that the '100% Fraud Rule' does not exist under 18 U.S.C. § 981, ensuring that defendants cannot shield proceeds from forfeiture by arguing that some parts of their business were lawful. The judgment is affirmed, and the forfeiture of nearly $100 million stands.