Appeals court rules convicted CEO doomed by evidence, not by attorney’s conflict of interest

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The 7th Circuit Court of Appeals ruled Tuesday that Barnes & Thornburg had a conflict of interest when defending James Burkhart against federal fraud charges, but that the disgraced CEO of American Senior Communities failed to show he suffered as a result.

Burkhart was charged with 32 counts and accused of participating in a scheme in which the nursing home operator’s vendors inflated their invoices and then kicked back profits to Burkhart and other company officials.

When federal agents executed a search warrant on Burkhart’s home in Carmel during the investigation, he contacted what is now Faegre Drinker Biddle & Reath. However, the firm declined to provide representation because of a conflict it had with the Health and Hospital Corp. of Marion County, which owned the nursing homes that American Seniors had been operating.

HHC was one of the victims of the scheme, incurring financial losses.

On Faegre’s recommendation, Burkhart contacted Larry Mackey at Barnes & Thornburg and signed an engagement letter with the firm in September 2015. Apparently undisclosed and unknown to Burkhart at the time was that HHC was a client of Barnes & Thornburg as well.

Burkhart pleaded guilty in January 2018 to three counts—conspiracy to commit mail, wire, and health care fraud, conspiracy to violate the Anti-Kickback Statute and money. In exchange, the government dismissed the remaining 17 counts and he was sentenced to 9-1/2 years.

After his sentencing, Burkhart learned of Barnes & Thornburg’s conflict of interest and filed a lawsuit in December 2018. He challenged his conviction and alleged the law firm’s conflict violated his Sixth Amendment right to effective counsel.

Since 2003, Barnes & Thornburg had represented HHC on a range of matters including lobbying, white collar investigations and civil litigation. Mackey and other attorneys of Burkhart’s defense team had defended HHC in a False Claims Act involving allegations that HHC and its CEO, Matthew Gutwein, made misrepresentations to the federal government for increased payouts.

Also, while representing Burkhart, Barnes & Thornburg began representing HHC in a whistleblower retaliation suit brought by an employee who alleged she was terminated for reporting the submission of false bills.

A Southern Indiana District Court ruled against the appeal. And on Monday, the 7th Circuit affirmed the ruling, agreeing that the conflict of interest did not “adversely affect Burkhart’s representation.”

On the conflict of interest, however, the appellate panel was clear.

“Nobody disputes that Barnes & Thornburg was conflicted in its representation of Burkhart,” Judge Michael Scudder wrote for the court. “The question is not close.”

However, the panel noted Burkhart had to go a step further by establishing that the conflict impaired his lawyer’s performance. In addition, because he resolved his case by a plea agreement, Burkhart must show that his counsel’s conflict affected both the attorney’s actions and the defendant’s decision to plead guilty.

In reviewing the case, the 7th Circuit found the conflict did not impair Burkhart’s defense.

Notably, the government had strong evidence and just months before Burkhart was scheduled for trial, his three co-defendants, including his younger brother, Joshua, all pleaded guilty and agreed to testify against Burkhart. As a result, Mackey advised Burkhart to plead guilty.

“The district court was right to conclude that nothing in the record shows that Barnes & Thornburg improperly shaded its advice to induce Burkhart to plead guilty,” Scudder wrote. “To the contrary, the advice reflected a reasonable response to the dire circumstances facing Burkhart. Perhaps above all else, Barnes & Thornburg clearly saw the insurmountable hurdle Burkhart faced in the prosecution—the strength of the government’s case.”

The 7th Circuit reviewed Barnes & Thornburg’s actions and did not see any indication the firm acted contrary to Burkhart’s interests. During the 2 1/2 years the firm represented Burkhart, it moved to dismiss the charges, hired multiple experts, expired multiple defenses, developed trial exhibits and issued trial subpoenas. Also, it conducted three mock jury exercises which all ended with unanimous votes to convict and the jurors describing Burkhart as manipulative and greedy as well as being a crook.

Even two weeks before Burkhart signed the plea agreement, Barnes & Thornburg was still working diligently on his defense. The 7th Circuit agreed with the district court’s conclusion that the firm would not have done such extensive trial preparation if it had always planned to coax Burkhart to take an 11th-hour plea.

Moreover, the 7th Circuit continued, that same diligence manifested itself in the plea negotiations. Barnes & Thornburg took care to ensure that Burkhart would receive a sentence that was below the advisory range of 10 to 12 years.

“Barnes & Thornburg’s efforts yielded tangible benefits for Burkhart,” Scudder wrote. “By pleading guilty, he was able to receive acceptance of responsibility credit and, in turn, a lower advisory Guidelines range.

“He also was able to present himself in a more favorable light at sentencing by emphasizing his remorse and underscoring his good works in the community. The district court committed no error in rejecting the contention that Barnes & Thornburg’s conflict of interest—and not the overall strength of the government’s case and the weakness of possible defenses—is what came to shape the firm’s advice that Burkhart avoid trial.”

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5 thoughts on “Appeals court rules convicted CEO doomed by evidence, not by attorney’s conflict of interest

  1. Since the COI involved a large law firm, I assume no ethics charges will be pursued by the IN Supreme Court Disc Commission. They have a history of looking the other way when an attorney from a lathe law firm is involved.

  2. May all of the predators taking bites of the big Money pot flowing through nursing homes causing Indiana to have the worst rated nursing homes spend their last days in one of the nursing homes they exploited.

  3. I agree with the court’s decision but all too often it appears that lawyers who get entangled in messes like this are always let off the hook. It surely diminishes the faith in our legal system in the eyes of the public. It is hard to deny that they take care of their own.

  4. Barnes should have disclosed upfront. But the mock jury exercises reported in the story really tell the story: sometimes the client is guilty and no amount of lawyering will get him or her off the hook.