Federal Judge Dismisses Health Care Fraud Case After Uncovering Prosecutor Misconduct

A federal judge has dismissed a sweeping health care fraud case against a Maryland businessman after finding multiple instances of prosecutor misconduct. The defendant worries the prosecutor and FBI agent who targeted him are still on the job.

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Getting a federal case dismissed because of government misconduct is rare. Justice Department says it happens in a tiny fraction of the thousands of prosecutions the federal government brings every year. But when these problems do become public, they can have a huge impact on people's lives. This is the story of one of them. Here's NPR's Carrie Johnson.

CARRIE JOHNSON, BYLINE: Reddy Annappareddy is standing at the kitchen counter in his spotless townhouse near the Baltimore airport. He's heating up some water to make his lawyer a coffee.

REDDY ANNAPPAREDDY: How many sugars, buddy?

JOHNSON: Annappareddy has been spending a lot of time with his attorneys ever since the FBI raided his pharmacy chain in July 2013 and slapped him with health care fraud charges. In one day, it was all over for the pharmacy delivery business he had grown into a $50 million operation that reached across six states and, he says, nearly all over for him. Alone in a hotel room, Annappareddy says he contemplated suicide.

ANNAPPAREDDY: I took a gallon of scotch and 70 Benadryl pills. And then I went into bathtub, and then I cut my both, you know, wrists.

JOHNSON: He cut both his wrists. Hours later, he woke up alive but weak. He went to the hospital. The FBI arrived, and eventually they transferred him back home to face justice in Maryland. It was a hard fall. Just two years earlier, he'd won an award, Entrepreneur of the Year for the state of Maryland. He was even featured in a public radio podcast that traced his unlikely career arc from working nights at Rite-Aid to owning his own drug store empire.

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DICK GORDON: He's a pharmacist who figured out that people just want to be helped, so he designed his own pharmacy, offering things like free home delivery and counseling and a priority on customer service.

JOHNSON: But after the Justice Department came calling, Annappareddy lost his house on three-and-a-half acres. He lost his garage full of luxury cars. He refused, however, to give up faith in his own innocence. Federal prosecutors charged people who worked for him, hoping to win their cooperation against him at trial. Four of them pleaded guilty. And that trial didn't go well for Annappareddy. The lead prosecutor, Sandra Wilkinson, told the jury he billed health insurance programs for prescription pills that customers never received. The prosecutor said he fleeced the government out of several million dollars. In December 2014, he was convicted.

ANNAPPAREDDY: The government is saying fraud. And I'm not fraud. I'm going to fight it. I told my wife, I'm going to fight this again.

JOHNSON: The judge told him to go home on house arrest and prepare to spend the next 12 years in federal prison. Instead, Annappareddy found new lawyers. And what they found would change his life all over again.

JOSH GREENBERG: There are a ton of things that are wrong in this case. I mean, I couldn't even - it's far too many to mention for a radio interview.

JOHNSON: That's Josh Greenberg. He's a lawyer who joined Annappareddy's defense after the conviction. Greenberg spent hours sifting through evidence. Before long, he'd uncovered a pattern of problems with the government's case. Experts who followed the case say they've never seen anything like it. Sol Wisenberg is a former prosecutor who studies government misconduct.

SOL WISENBERG: Let me tell you, this was a colossal screw-up.

JOHNSON: Wisenberg says the problems added up.

WISENBERG: The thing about this case is you had an accumulation of outrageous conduct. Number one, you had false evidence that was presented at trial, very important false evidence which the government later admitted was false.

JOHNSON: At trial, the Justice Department prosecutors claimed millions of dollars in losses. In fact, defense lawyers say, there were no losses. There was a surplus. Government experts had double-counted and made other basic mistakes. Lawyer Josh Greenberg.

GREENBERG: The false evidence went to the core of the case. And I believe that the prosecutors and agents were at least reckless, if not knowing, in presenting that false evidence.

JOHNSON: Greenberg kept badgering the government for evidence. And then he got a major surprise.

GREENBERG: Friday, August 19, 2016 in the evening, I was eating dinner with my family. And that happens to be my birthday.

JOHNSON: Greenberg sneaked a peek at his phone underneath the dining room table. After months of wrangling, the government had been forced to disclose a bombshell, a memo from an FBI agent describing an order from the prosecutor Sandra Wilkinson to destroy four boxes of documents out of hundreds of such boxes.

GREENBERG: And those documents went to the heart of the case. They were delivery signature logs that showed that patients had received prescriptions. And the whole issue in the case or one of the main issues in the case was, you know, were these prescriptions actually delivered? And these documents that Ms. Wilkinson ordered destroyed would have shown that the prescriptions were in fact delivered.

JOHNSON: The document destruction tipped the balance in the case. In a Baltimore courtroom days later, Judge George Russell concluded that prosecutors had violated Reddy's right to due process. The judge said the conduct by government lawyers and agents shocked the conscience of the court. He dismissed the prosecution with prejudice, meaning the government could not bring the case again. Sol Wisenberg, the expert who closely followed the case, explains.

WISENBERG: Almost every motion this new defense team made after the conviction to come in and get new evidence the government opposed. Every piece of exculpatory evidence that came out, the government had opposed it coming out. And I think the judge was very troubled by that.

JOHNSON: Sitting in the courtroom that day, wearing his blue cotton shirt with a PharmaCare logo, Annappareddy's life changed yet again.

ANNAPPAREDDY: I mean, you know, I got hurt. I got destroyed. But still I consider myself lucky. Imagine if I didn't fight after the conviction.

JOHNSON: Months later in his townhouse, Annappareddy says his finances have not recovered. A former employee and his wife moved into the downstairs apartment to help pay the rent. This year, the court threw out the convictions of some of his codefendants, possibly saving them from deportation. Defense lawyer Josh Greenberg isn't done fighting.

GREENBERG: This is a situation that really cries out for independent investigation. A private citizen would be prosecuted if she intentionally destroyed evidence that is material to a pending case. I find it shocking that the U.S. attorney's office has allowed Sandra Wilkinson to remain the head of the Major Crimes Section after Judge Russell made these findings.

JOHNSON: A spokeswoman for the U.S. attorney, Rod Rosenstein, declined comment. Rosenstein recently became the second in command at the Justice Department, the deputy attorney general. In court last year, prosecutor Sandra Wilkinson told the judge she did not destroy the boxes of evidence in bad faith. And she said Annappareddy's defense team had been ruthless in exploiting every mistake by the prosecution. Now it's the prosecutors and agents who are under investigation by the Justice Department unit that examines allegations of misconduct. Carrie Johnson, NPR News.

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