United States v. Hall: Affirmative Defense Burden under the AKS Safe-Harbor and Joint Restitution for Health-Care Conspiracies

Introduction

The Fifth Circuit’s decision in United States v. Hall, No. 24-10515 (5th Cir. Apr. 15, 2025), clarifies two critical legal questions: first, whether the “safe-harbor” exception to the federal Anti-Kickback Statute (AKS) is an affirmative defense that the defendant must prove, and second, the proper scope of restitution under the Mandatory Victims Restitution Act (MVRA) in health-care fraud and money-laundering conspiracies. Richard Hall and several partners formed two compounding pharmacies—Rxpress and Xpress Compounding—to bill federal health programs. They paid marketers commission-based fees and lavish perks to induce physicians’ prescriptions, allegedly violating 42 U.S.C. § 1320a-7b(b). After a jury convicted Hall on multiple AKS and money-laundering counts, the district court sentenced him to 52 months’ imprisonment and over $59 million in restitution. Hall appealed, challenging jury instructions on the AKS safe harbor and “employee” status, the omission of a “recipient” instruction, and the scope of restitution. The Fifth Circuit affirmed on all points.

Summary of the Judgment

The court held that the AKS safe-harbor provision (42 U.S.C. § 1320a-7b(b)(3)(B)) is an affirmative defense. Once the government proves a kickback violation, the burden shifts to the defendant to establish safe harbor by a preponderance of the evidence.
The district court’s jury instructions defining “employee” under the safe harbor—guided by the Supreme Court’s ERISA common-law test in Nationwide Mutual Insurance Co. v. Darden—were correct and non-abusive of discretion.
The district court did not err in refusing Hall’s proposed instruction on whether a payee was in a position to make or influence referrals; the charge correctly instructed the jury to determine if payments were “to induce” referrals.
Under the MVRA, the court properly based restitution on the full scope of the conspiracy and “relevant conduct,” including all federal health-care program losses of over $59 million, holding Hall jointly and severally liable.
Accordingly, the Fifth Circuit affirmed Hall’s convictions, sentences, and restitution order in full.

Analysis

1. Precedents Cited

Dixon v. United States, 548 U.S. 1 (2006): Held that statutory exceptions are affirmative defenses for which the defendant bears the burden of proof.
McKelvey v. United States, 260 U.S. 353 (1922): Established the maxim that a defendant relying on a statutory exception must “set it up and establish it.”
United States v. Dickson, 40 U.S. 141 (1841): Reinforced that exceptions located in separate statutory clauses are affirmative defenses.
United States v. Miles, 360 F.3d 472 (5th Cir. 2004): Defined “remuneration” under the AKS and required a finding that payments were made “to induce” referrals.
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992): Adopted a multifactor common-law test for “employee” status under ERISA, including but not limited to right of control.
Circuit decisions (George, Vernon, Ekwebelem, Turner): Held that the AKS safe harbor is an affirmative defense and that defendants must prove it by a preponderance of the evidence.
Pattern Jury Instructions (5th Cir. Crim. § 2.109B): Advise that AKS safe harbors are affirmative defenses, citing Darden.
MVRA cases (King, Swenson): Confirm that restitution for a conspiracy may cover all foreseeable losses within the scope of the scheme.

2. Legal Reasoning

Statutory Text and Affirmative Defense. 42 U.S.C. § 1320a-7b(b)(2) criminalizes “any remuneration . . . to induce” federally reimbursed referrals. The safe-harbor clause, § 1320a-7b(b)(3)(B), is placed in a separate subsection and excepts only “amount[s] paid by an employer to an employee (who has a bona fide employment relationship).” Under black-letter criminal law, when a statute forbids conduct in one clause and creates an exception in another, the exception is an affirmative defense. The government need not disprove it; rather, the defendant bears the burden of proof by a preponderance. The Fifth Circuit applied Dixon, McKelvey, and the “general rule” of statutory construction to affirm that the safe harbor is an affirmative defense, not an element to be disproved by the prosecution.

Definition of “Employee.” Hall sought a jury instruction elevating the right-to-control factor to dispositive status. The court declined, explaining that Darden’s common-law test uses multiple non-exhaustive factors (control, skill, tools, location, payment method, integration into business, benefits, tax treatment) and that no single factor is decisive. The district court’s instructions closely tracked the Fifth Circuit’s pattern, correctly summarizing Darden and did not abuse its discretion.

Kickback Recipient Instruction. Hall requested that the jury be told to evaluate whether recipients were in a position to make or influence referrals. The court refused, holding that Miles and subsequent cases make clear that the inquiry is simply whether payments were “to induce” referrals. The instruction given mirrored Marchetti (96 F.4th 818), which upheld an AKS instruction focusing on intent to induce unlawful referrals. The refusal did not impair Hall’s defense.

Restitution under the MVRA. The MVRA requires full restitution to victims of “an offense against property” and defines victims to include those “directly harmed . . . in the course of the scheme.” Hall’s money-laundering conspiracy conviction encompassed the proceeds from the kickback scheme. Under cases such as King and Swenson, conspirators are jointly and severally liable for foreseeable losses within the conspiracy’s scope. The district court did not err in basing restitution on the government’s total loss of more than $59 million, rather than Hall’s personal gain.

3. Impact

Prosecutors and defense counsel in AKS cases must recognize the safe harbor as an affirmative defense; jury instructions must place the burden of persuasion on defendants to prove safe harbor by a preponderance.
Courts will apply the multifactor Darden test to define “employee” under health-care statutes, ensuring no one control factor dominates.
Restitution calculations under the MVRA in health-care fraud will continue to look to the full scope of conspiratorial conduct and “relevant conduct” rather than individual gains.
Trial courts may rely on pattern jury instructions to satisfy due-process requirements on complex statutory defenses and need not craft bespoke definitions beyond established tests.

Complex Concepts Simplified

Affirmative Defense: A defendant’s claim that, even if the prosecution proves all elements, an exception applies that excuses criminal liability.
Burden of Persuasion vs. Production: The obligation to convince the jury of a claim (persuasion) versus the obligation to introduce some evidence (production).
Preponderance of the Evidence: The standard requiring that a claim be more likely true than not (greater than 50% probability).
Darden Factors: A non-exhaustive list of considerations—control, tools, payment method, benefits, tax treatment—used to determine employee status.
Joint and Several Liability: In conspiracy restitution, each conspirator may be held responsible for the entire loss if it was a foreseeable part of the scheme.
Relevant Conduct: Under federal sentencing and restitution law, all criminal acts “within the scope” of a conspiracy count toward sentencing and restitution.

Conclusion

United States v. Hall reaffirms that the AKS safe harbor is an affirmative defense for which defendants bear the burden of proof, clarifies that “employee” status must be assessed via the ERISA‐derived Darden factors, and underscores that restitution under the MVRA may encompass all foreseeable losses of a healthcare-fraud and money-laundering conspiracy. By aligning jury instructions with established pattern language and reinforcing text‐based statutory interpretation, the Fifth Circuit’s decision provides litigants and trial courts a clear roadmap for future AKS and restitution disputes.