In U.S. v. Medina, No. 05-14864 (May 11, 2007), the Court, on an appeal of convictions of Medicare Health Care Fraud and money laundering, reversed all convictions of one defendant, reserved some convictions of co-defendants, and vacated the sentence for incorrect loss calculations.
The scheme involved bringing patients to the defendants’ pharmacies in exchange for illegal kickbacks for patients and doctors. No evidence indicated, however, that Medicare was billed for unnecessary medical procedures. A confidential informant met with the defendants to exchange, for a fee, their checks for cash, but admitted on cross-examination that one defendant, Medina, a secretary, was always sent out of the room to avoid her hearing them talk about the kickback scheme.
As to the secretary, the Court found the evidence was insufficient to sustain her convictions. The Court noted that the fraud offense was based on making a knowingly false statement to Medicare. Here, the false statement would have been the pharmacies’ written promise to abide by Medicare’s regulations, including its prohibition on kickbacks. However, no evidence established the secretary’s awareness of the kickbacks.
As to the other defendants, none of the counts of convictions that predated the statement to Medicare could be sustained. The kickbacks, in and of themselves did not constitute fraud, and those which occurred before the statements were not the subject of a false statement. The Court rejected the government’s reliance on other evidence as proof of fraud, including its argument that it did not call certain witnesses to establish an element of the offense because they would not make "ideal witnesses." "The government cannot ignore [its] burden [of proof] simply because the witnesses who can establish the required elements are less than ideal."
The Court also vacated the money laundering counts which related to the fraud counts it had set aside, since money laundering involves the proceeds of activity known by the defendants to be illegal. The Court, however, upheld money laundering convictions as to the principal of the crime, finding that the acts occurred after she signed documents certifying (falsely) that she would follow Medicare regulations.
As to the general conspiracy charge, under 18 U.S.C. § 371, the Court upheld the convictions of two defendants, but again vacated the secretary’s conviction, finding that her lack of awareness of the kickback conspiracy, and of the conspiracy’s other objectives, left insufficient evidence to convict.
Turning to sentencing, the Court noted that the district court failed to make a sufficient loss calculation, and instead sentenced the defendants for the entire amount Medicare was billed in the period, without explanation. However, in the absence of evidence of Medicare’s payment of unnecessary medical claims, or that the patient kickback scheme resulted in any actual loss to Medicare, this calculation was inadequate. The Court therefore remanded the case for resentencing.
