Judge schedules trial in Hertel & Brown fraud case. Will any guilty pleas come first? (2024)

U.S. District Judge Susan Paradise Baxter issues schedule after ruling on disclosure of evidence in case against Erie physical therapy business accused in $22 million overbilling scheme over 14 years.

The $22 million fraud case against the Erie-based Hertel & Brown is scheduled to go to trial in early 2025.

The case is on course to go before a jury more than three years after a grand jury in U.S. District Court in Erie indicted the physical therapy practice, its two owners and 18 employees on charges that they conspired to overbill private insurers and Medicare and Medicaid.

Following months in which little activity marked the docket, U.S. District Judge Susan Paradise Baxter established a trial schedule on Tuesday in videoconferences with the U.S. Attorney's Office and a phalanx of defense lawyers.

Baxter tentatively set the trial date for Jan. 27. She said she is likely to move it to Feb. 18 to avoid possible scheduling conflicts.

No matter when the trial occurs, its prospective length will reflect its status as the largest-ever white-collar criminal prosecution in Erie. The prosecutor, Assistant U.S. Attorney Christian Trabold, told Baxter that his case will last four to five weeks, with the defense case to follow.

At this point, Baxter said, all 21 defendants will be tried together.

"I am contemplating one mass trial," Baxter said.

Baxter said she has a courtroom that can host such a large case.

In a scheduling order she filed Tuesday, Baxter explained why a trial could not occur sooner.

The case, Baxter said in the order, "is unusual and complex due to the number of Defendants, the nature of the alleged offenses and the existence of novel questions of fact and law."

Will any defendants plead guilty before trial?

Hertel & Brown Physical & Aquatic Therapy has pleaded not guilty, as have all the other defendants, including owners Aaron W. Hertel and Michael R. Brown. Underlying the conversations at Tuesday's hearing was the expectation that some defendants would plead guilty — "early resolutions," as Baxter said — though no one offered details.

"We just don't know how many defendants will go to trial," Baxter said. "That could be everyone. It could be significantly less."

Her remarks echoed what Trabold said in court in March 2022, four months after the indictment was returned. Trabold then said a "number" defendants were cooperating and were ready to testify at trial. His statement signaled plea deals were under discussion.

On Tuesday, Trabold said nothing to indicate plea talks had ceased. He said he does not expect any defendants to plead guilty until Baxter rules on defense requests that she suppress evidence.

What led to judge establishing a trial date?

Before Tuesday's hearing, the most significant date in the case had been Aug. 29.

Baxter in May set that date for a hearing on a request of two defendants — physical therapistsJacqueline Renee Exley and Julie Ann Johnson — that the judge toss statements that the FBI said Exley and Johnson gave to agents in the investigation.

Lawyers for other defendants also said they plan to file suppression motions. They said they had to wait on Baxter to rule on what types of evidence the U.S. Attorney's Office had to continue to provide to the defense before trial. Baxter issued those rulings late Monday.

With those rulings out of the way, Baxter on Tuesday said she would accept additional suppression motions in August and hold hearings in October and rule in December. The resolution of the suppression motions, she said, would then put the case on schedule to go to trial starting on Jan. 27 or Feb. 18.

Establishing that schedule required Baxter to reschedule another large trial over which she is presiding. It is the 58-defendant drug case against accused members of the Erie street gang 4-Nation and their associates.

Baxter had set that trial for Jan. 25. She said on Tuesday that she would schedule it for a later date to accommodate a trial in the Hertel & Brown case, which is older. The 4-Nation defendants were indicted a year ago.

What are the charges in Hertel & Brown case?

In the Hertel & Brown case, the November 2021indictment— and a superseding indictment, returned in May 2022 — charge all the defendants with one count each of the felonies of health care fraud and criminal conspiracy to commit wire fraud and health care fraud.

The U.S. Attorney's Office is alleging Hertel & Brown; Aaron Hertel, 45, and Michael Brown, 47; and the 18 other employees conspired to overcharge Medicare, Medicaid and private insurers $22 million over 14 years, starting shortly after Hertel & Brown launched in January 2007 and ending in October 2021.

All the defendants are free on unsecured bonds of $10,000. Hertel & Brown remains in operation, though with one office, in a plaza on West 12th Street, just east of Pittsburgh Avenue, down from five offices overall.

As Baxter summarized the case in one of her rulings on Monday, the defendants are accused of participating "in a scheme whereby false or inflated billing statements were submitted to various public and private health insurance entities in order to obtain payment for services that were not authorized or were not actually rendered to H & B's patients in the manner described."

Contact Ed Palattella atepalattella@timesnews.com or 814-870-1813. Follow him on X@ETNpalattella.