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The Supreme Court hears arguments today in a case testing the limits of lying when you work for the government. The story involves power, influence and money, all used to silence critics of a big hospital in Albany, Georgia. An investigator working for the local district attorney testified falsely against critics of the hospital. Now the Supreme Court considers whether police investigators have total immunity from being sued for giving false testimony before a grand jury. Here's NPR legal affairs correspondent Nina Totenberg.

NINA TOTENBERG, BYLINE: Our story begins in 2003, when a general surgery practice of six doctors in Albany, Georgia wanted to open an outpatient surgery center and found their plans strongly opposed by Phoebe Putney Memorial Hospital and its political allies.

Charles Rehberg, the business manager for the practice, decided to do a little investigating. Using his skills as a CPA and certified forensic accountant, he got hold of the non-profit hospital's public IRS form and he learned some startling things. Among them, in 2002 the hospital CEO was earning close to three quarters of a million dollars a year; the hospital had a bank account in the Cayman Islands; and hospital officers spent $33,000 in travel expenses to the Cayman Islands.

Rehberg, the business manager for the practice, and one of the practice's surgeons, Dr. John Bagnato, were so astonished that they started sending out anonymous faxes to business and community leaders with what they called Phoebe factoids.

CHARLES REHBERG: I think that there was no option to do it any way but anonymously.

TOTENBERG: Charles Rehberg.

REHBERG: Phoebe is such a powerful local institution. They're the largest employer. They're the wealthiest institution. They're incredibly connected politically and otherwise.

TOTENBERG: The Phoebe factoids caused quite a stir. And the hospital complained to district attorney Ken Hodges, asking him to find out who was sending out the factoid faxes. With the D.A.'s subpoena power, it didn't take long to find out that Rehberg and Bagnato were the culprits. At the same time, the hospital also hired its own private investigators, men whom Rehberg would soon come face to face with.

REHBERG: They pulled into the parking lot in kind of police raid fashion, real fast, blocked in my vehicle and began shouting my name. And they proceeded to tell me that they had been investigating me and that I was about to be the target of a large lawsuit.

TOTENBERG: The hospital did indeed file a $66 million lawsuit against the faxers. And when Rehberg and Bagnato didn't back off, they were indicted on charges of telephone harassment, aggravated assault, and burglary.

REHBERG: I was just stunned. I hadn't done anything wrong, yet I'd been indicted and I was actually facing up to 47 years in prison.

TOTENBERG: The evidence leading to the indictment was presented to the grand jury by the D.A.'s chief investigator, James Paulk. Paulk's lawyer, John Jones, concedes that Paulk did not investigate the alleged assault or the alleged burglary. Indeed, he concedes now that there was no burglary and there was no assault.

JOHN JONES: He testified in the grand jury about the aggravated assault and about the battery based upon what the district attorney told him to testify.

TOTENBERG: In short, Jones says Paulk was following orders from the district attorney. When the indictment ran into trouble, the district attorney's office brought a second indictment, and then a third. All were thrown out. Ultimately, the hospital would drop its $66 million lawsuit against Rehberg and Bagnato. At the same time, it settled a countersuit out of court, paying the faxers an undisclosed and reportedly substantial sum. But Rehberg's other suit against the district attorney and investigator Paulk stayed alive, only to be tossed out by a federal appeals court in Atlanta. Today's case is an appeal of that decision, insofar as it applies to investigator Paulk.

The Supreme Court has ruled that prosecutors are totally immune from damage suits for their trial-related actions, no matter how illegal those actions might have been. But investigative actions are not similarly protected, whether it's police or prosecutors doing the investigating. Thus, for instance, the court ruled 25 years ago that if police or prosecutors file false affidavits to obtain an arrest warrant, they can be sued for damages because such affidavits are part of the investigative process, not part of the trial.

So one of the questions in this case is whether a grand jury proceeding is a trial or investigative proceeding. Lawyer Jones, representing investigator Paulk, contends that testimony in the grand jury is like testimony at trial.

JONES: It's the same testimony. It's the same type of judicial proceeding, and the court has said you get absolute immunity.

TOTENBERG: But Rehberg's lawyer, Andrew Pincus, counters that the purpose of a grand jury is to investigate.

ANDREW PINCUS: If you're the complaining witness, if you're the person who sets the prosecution in motion and allows it to proceed - which clearly Mr. Paulk was - then you shouldn't be absolutely immune. You should be able to be held responsible if what you say is false.

TOTENBERG: Pincus notes that this lawsuit was brought under a post-Civil War statute enacted by Congress to provide citizens with a remedy for abuses of government power.

PINCUS: And this incident fits just squarely in what Congress had in mind. This is an abuse of government power that caused someone to suffer not only financial injuries, but also a lot of personal hardship and personal angst for him and his family. And our position is that Mr. Paulk shouldn't get special, absolute immunity that protects him totally, no matter how false and how knowingly false his statements were.

TOTENBERG: Paulk's lawyer concedes that this case does have the aura of a private prosecution.

JONES: Oh, no question, no question.

TOTENBERG: And you don't think there should be a recourse for that?

JONES: Oh, absolutely. There is a recourse. And what you do is, if someone has committed perjury, you prosecute them or fire them.

TOTENBERG: Investigator Paulk, he contends, didn't knowingly give false testimony. He just did what he was told to do by the DA.

JONES: He's looking at it, like, hey, I did absolutely nothing wrong here, and yet I'm holding the bag.

TOTENBERG: Perhaps, but Paulk remains the DA's chief investigator today, and if after trial he were held liable, it would be the county, though its insurer, that would pay damages. Those are a lot of ifs, though, and it's uncertain at best whether the Supreme Court will ever let there be a damages trial in this case. Nina Totenberg, NPR News, Washington.

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