By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
The other field Lillehaug, like some of his predecessors, has emphasized is white-collar crime, particularly health care fraud, environmental crimes, and investment scams. One of the office's most successful recent cases was the prosecution of Gary Lefkowitz, a California-based real estate magnate who built a high-flying lifestyle on a pyramid scheme involving tax credits for low-income apartment construction. He was convicted on 47 fraud-related counts last July and sentenced to 24 years in prison, a sentence that may constitute one of the heaviest ever handed out in such a case.
ut not all of Lillehaug's white-collar prosecutions went that well. In August 1994, his and the state Attorney General's office jointly announced what was hailed as one of the largest health care fraud cases in the country: Illinois-based Caremark Inc. and California-based Genentech were charged with conspiring to pay off an Edina doctor so he would prescribe human growth hormone to short children. Caremark pleaded guilty in June 1995 and agreed to pay $161 million in fines and penalties. But the doctor, and five officials for the two companies, chose to go to court--where, after listening to the prosecution's case for almost two months, Judge David Doty ruled that it wasn't worth even sending most of the case to the jury.
Doty's decision under what's known as Rule 29 acquitted the five company officials; he also removed 12 counts against the doctor, leaving the jury to consider 19. The defense called no witnesses and presented no evidence, and the doctor was acquitted on all but two counts. (His conviction has since been overturned because of juror misconduct.)
What's remarkable about the Caremark case is not just the prosecution's spectacular failure in court--while it's common for a judge to throw out a count or two, complete evisceration of the government's case is very rare--but how eerily it presaged the action, six months later, in another federal court room. This time the judge's name was Richard Kyle, and the doctor's was John Najarian; again, the defense asked for a Rule 29 decision after the government presented a case it had taken three years and $400,000 to assemble. With the cameras waiting outside, Kyle dismissed the heart of the prosecution, six counts of conspiracy to commit fraud in the University of Minnesota's program to manufacture the transplant drug ALG. He said the government had not proven Najarian was even responsible for the program.
The defense went on to make its case in a few hours, calling only three witnesses (Najarian, his wife, and their accountant); then the jury came back with a not-guilty verdict on all 15 remaining counts. After it was read, Kyle told the courtroom that he had some additional comments. "I have some questions as to why we were here at all, quite frankly," he said as the government lawyers cringed. "Not because there weren't things that were wrong with the [ALG] program, but it was a program that was looked at by the FDA for 15 or 20 years with what I guess I could describe as benign neglect. It went on. I think everyone knew what was going on. I think it was run out of the University of Minnesota, and I think the University of Minnesota knew what was going on and certainly was the beneficiary of the financial success of that program.
"Converting all of this... to a criminal proceeding of the magnitude that we saw here, it seems to me, has gone beyond the bounds of common sense. We had a program here in Minnesota, which for all of its problems and shortcomings was a good program, literally saved thousands of lives. [And the indictment] was added on to with charges of tax fraud, mail fraud, embezzlement and stealing. I think in football you kind of call the penalty for piling on."
There are a lot of people who quarrel with Kyle's comments--especially the implication that Najarian's being a good guy should have had any bearing on how he was treated in the justice system. Lillehaug won't talk specifically about the judge's comments anymore, but he says "when you charge anyone who's got power, wealth, influence, or all three, there will be people whose noses are bent out of shape. We can't let calculations like that enter into our prosecution decisions."
Kyle's opinions aside, however, many of the people who followed the Najarian case charged Lillehaug with serious bad judgment. True, the prosecution had begun laying its case back in 1992, and Najarian's lawyers say they expected an indictment as early as 1993. But the charges didn't take final shape until a year and a half after Lillehaug took office, and it was their nature and number that rankled Kyle and most other observers.
One commonly heard theory among lawyers familiar with the case is that the government had allowed the university to push it toward an aggressive prosecution of Najarian, hoping the buck would stop there (a claim university general counsel Mark Rotenberg denies as "ridiculous"). Another, voiced most publicly by Hamline law professor Joe Daly, was that Lillehaug and his colleagues goofed badly in their construction of the case. By using words like "callous disregard of patients," he says, they suggested that "Dr. Najarian is an evil man. And there's not a humane person in Minnesota who was going to believe that. He may have done things that were poor administrative leadership, made mistakes. But in my mind and my students', and I think the jury's mind, none of those things were deserving of a prosecutor coming after him for criminal offenses. They were the kinds of things that, if it had been you and me, we would have been hauled into the tax office and slapped and scared and our checkbooks gone over, and we would have been assessed a serious interest penalty and told not to do it again."