In United States v. Schena, --- F.4th ---, No. 23-2989 (9th Cir. 2025), the Court affirmed Mark Schena’s convictions for violating the Eliminating Kickbacks in Recovery Act (EKRA), which criminalizes, among other things, the payment of “remuneration . . . to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory.” 18 U.S.C. § 220(a)(2)(A).
The Court held that § 220(a)(2)(A) covers marketing intermediaries who interface with those who do the referrals, and that under EKRA, there is no requirement that the payments be made to a person who interfaces directly with patients. The Court concluded that a reasonable jury could find that Schena was paying marketers with the goal that individuals would be referred to his company, Arrayit.
The Court also addressed what it means to “induce a referral” in this context. The Court held that a percentage-based compensation structure for marketing agents, without more, does not violate § 220(a)(2)(A), but the evidence is sufficient to show wrongful inducement when, as here, the defendant pays remuneration to a marketing agent to have him unduly influence doctors’ referrals through false or fraudulent representations about the covered medical services.
The disagreement between Schena and the government rests on two other aspects of § 220(a)(2)(A): (1) whether EKRA applies to payments made to marketing intermediaries, as opposed to the referring doctors or persons who otherwise interact directly with patients, and, (2) if payments to marketing intermediaries are covered, what it means to “induce a referral” in the context of that type of payment relationship.The first question is whether 18 U.S.C. § 220(a)(2)(A) covers payments to marketers designed to induce referrals, or whether the provision is limited to payments made to the persons who are doing the actual patient referrals, most typically doctors and other medical professionals. Schena maintains it is the latter. And if payments to marketers are to be covered, he maintains they are covered only if the marketers directly engage with patients. We disagree and hold that 18 U.S.C. § 220(a)(2)(A) covers marketing intermediaries who interface with those who do the referrals.We now turn to the connection between the payments and the goal of obtaining referrals. That connection turns on the statutory language “to induce.”If a payment is made directly to a person who is making the referral, such as a doctor, the payment induces the referral by the very fact of the payment itself. Such a payment is by definition unlawful under EKRA. But we must consider what it means to “induce a referral” in the context of a case such as this, in which the defendant is alleged to have made payments to a marketing agent “to induce a referral of an individual.” We conclude that a percentage-based compensation structure for marketing agents, without more, does not violate 18 U.S.C. § 220(a)(2)(A). But the evidence is sufficient to show wrongful inducement when, as here, the defendant pays remuneration to a marketing agent to have him unduly influence doctors’ referrals through false or fraudulent representations about the covered medical services.“[I]nduce” has a “longstanding history” in criminal law. Although “[i]n ordinary parlance, ‘induce’ means [t]o lead on; to influence; to prevail on; to move by persuasion or influence,” it has a “specialized, criminal-law” meaning that “incorporat[es] common-law liability for solicitation and facilitation.” Id. at 774 (internal quotations omitted). Criminal solicitation “is the intentional encouragement of an unlawful act,” and criminal facilitation (also known as aiding and abetting) “is the provision of assistance to a wrongdoer with the intent to further an offense’s commission.” Id. at 771. We take from Hansen that the term “induce” connotes not mere causation, but wrongful causation. And it makes sense to read EKRA as incorporating the “well-established legal meaning[]” of “induce,” because “when Congress ‘borrows terms of art in which are accumulated the legal tradition and meaning of centuries of practice, it presumably knows and adopts the cluster of ideas that were attached to each borrowed word.’”
