Los Angeles DA’s office drops indictments in high profile fraud case

The Los Angeles County district attorney’s office is dropping indictments and plans to file new charges against a number of individuals accused of participating what has been described as one of the state’s largest insurance fraud scams.

Fifteen people, including Dr. Munir Uwaydah, were indicted in 2015 for their part in a $150 million insurance scam, which prosecutors allege involved unnecessary surgeries, kickbacks to attorneys for recruiting patients to clinics and billing for procedures that never happened.

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On Wednesday, prosecutors notified attorneys representing the defendants there would be new charges filed on Thursday but did not disclose any details about how many there will be or what they involve. A spokesperson for the D.A.’s office declined comment. Prosecutors and investigators have worked on the case since at least 2010 and three grand juries have been impaneled.

There were 132 counts were filed in the case. They include aggravated mayhem, tax evasion and insurance fraud. Eventually, 75 of those counts were dropped, including the most serious charges.

One of the defendants, Marisa Schermbeck-Nelson, had the charges against her dismissed last year after L.A. County Superior Court Judge Kathleen Kennedy found there were statute of limitation issues and that prosecutors withheld exculpatory evidence from the grand jury. At hearing in June of last year, Kennedy was critical of how prosecutors presented other parts of their case to the grand jury characterizing it as, “incredibly sloppy, ill-conceived, inept, incompetent.”

Aside from evidentiary issues, the prosecution team has been accused of reviewing attorney-client privilege material. In court documents, defense attorney Benjamin Gluck claims the dozens of prosecutors and investigators repeatedly reviewed attorney-client paperwork they obtained as part of a seizure of 260,000 documents found in a storage facility. Gluck claims he learned of this when he accidentally received a 183 page spreadsheet created by the prosecution, detailing what they reviewed, including privileged information. Prosecutors have said they were following internal protocols and have suggested this could be a fishing expedition on the part of defense attorneys.

Last month Judge Kennedy granted a defense motion to have a hearing to determine if the privilege was broken by the prosecution. The defense team will have an opportunity to question several prosecutors and investigators about the handling of the privileged material, although it’s not clear the hearing will still happen. It was scheduled for March 24. If prosecutors take the stand, it will be highly unusual.

“It’s extremely rare,” said Loyola Law School Professor Laurie Levenson. She added violating the attorney-client privilege rules is a serious matter and one that can be addressed through retraining and a better understanding of protocols.

This isn’t the first time the D.A.’s office has been embroiled in a controversy of attorney-client privilege documents. A prosecutor on the corruption case involving a member of the Los Angeles Coliseum was removed after admitting he read attorney-client emails. It was one of several prosecutorial blunders on the case, prompting a rebuke from the judge who suggested the D.A.’s office might want to seek advice from the U.S. Attorney’s office when it comes to the complex cases.  

The judge was Kathleen Kennedy.