good morning may it please the court counsel my name is jennifer macaulay and i represent the appellant early belfry this is a sentencing appeal and the issues before the court involve sentencing guideline calculations involving loss amount rolen hants meant sophisticated means and violation of administrative conditions mr bell pled guilty to conspiracy to defraud the united states and failure to account for withheld taxes and his plea agreement stipulated to a base offense level of twenty six which would be for at least eighteen points for law and at least two points for leadership offense  tonight levels who would be i'm sorry i think would be two levels not points right would be for criminal history correct ok thank you sorry about that but the plea agreement left open the possibility for the government to seek additional and announcements which would be the two level enhancement for leadership and they and handsome it for last over nine million five hundred thousand dollars and a determining this last because it seems to me that there is no real comment gives us the right answer or there will be the most extremely helpful answer anyway i agree where do you point out last definition providing for the exclusion from loss of certain economic benefits transferred to victims to be measured at the time of detection and so that would tend to in my mind in a situation work the complaint in the position of the government and the p s r and adopted by the district court was that had medicaid known that mr bell free was excluded and that he was in any  model health care that they wouldn't have paid so is there any allegation or was there is there any evidence that it had mr bell free been permitted to conduct this kind of business so he didn't have this administrative order against him was the business otherwise a legitimate business that was run properly according to rules and right it appears to be so there isn't any evidence there wasn't any evidence brought forth by the government save that that assertion that they could have maybe made a case but there's no evidence of that of of anything going wrong except for that tax debt and so that that could be in you know a problem with the way that they were doing the books the district court commented the tax where the tax was the tax that that the taxes that were not paid taxes that were withheld from wages and not paid to the government and so that's that's the second count that mr belfry pled guilty to what about the commentary which you might say are analogous situations where the commission says no credit for the defendant for the value of items provided if there is fraud involved yeah why wouldn't by analogy the same will apply here that there shouldn't have been any payments at all but for the misrepresentation so no credit for the value of the services provided i think that particular commentary if if you're referring to the commentary that was brought forth in the government's brief and that commentary relates to businesses and goods where there's actually  there is it's a different kind of a situation then we're we have valid services nobody has questioned that but part of strive that's what i'm looking at here ok not limited i s limited to just to you what is your replied it's not limited to services not goods where services were fraudulent be rendered where goods were falsely represented were goods for which regulatory approval was required but not obtained or was banned by fraud specifically says good so why why doesn't why do we even need analogy why doesn't that apply ok well we're not missing goods and we don't have services fraudulent lee rendered the p c a services were provided to the people who know women but the goods you're saying it was services that were provided yes but the same rule for services i think if the services weren't provided or if they were fraudulent we provided like friend since if they were evidence that doesn't this mean that if the goods are provided you still won't get credit for the value of the good but i think you can take the idea behind that would be that you can take the goods back like the goods exist a service has been rendered in it's rendered and it's done and unless that service is fraudulent the rendered that it it it  should not not be taken into account which is what what i had argued would support the nat loss approach there's nothing model healthcare made some mistakes in the bookkeeping and some things really went downhill quickly as the district court judge noted he told mr she told mr belford that it appears that you got in over your head and that is what happened on the financial side he tried very hard to get that the taxes straightened out but the only the one doesn't apply that only apply apply only applies services the other one done doesn't apply to this offense which says this is in the health care offense just because it's brought under the title twenty six if i think that  federal healthcare fence involving a good government health care program we have the aggregate dollar amount you know there's no credit now what just just because this is this is i say no that's not that's not going to satisfy the court but i just thought i'd give everybody i don't know but but i do believe that there was an assertion rather than work i thought it was a novel  do think that the parties may need to look at this before i verify it to the court had had both understood that this was not a health care fraud it was not charged as health care fraud it's defined in the guideline right yes so that's my understanding if i could reserve some time for about on health care defenses a defined terms or what you're saying i think it's a reference to a charge under that under that statutory provision well that's not my question what the judge kelly was saying it's a defined term in the sentencing guidelines as well well could you know where to find i can find it all right thank you ye mr lewis maybe you can fill in the blank here think you're on a good morning it may please the court counsel your honors i don't have the citation but it is to the term federal health care offense is defined in title eighteen because that term is used throughout various places in title eighteen and in the guidelines i believe it's it's in the definitional section of title eighteen early as you think that applies to the guidelines the title eighteen definition i i would bet what makes me think that is that i would bet that in the commentary was probably a reference to that word as a definition term and eighteen u s c section twenty four that sounds that ring a bell that does eight would apply to court did not your honor because the p s r the probation officer concluded in her interpretation of the law that it was and would not qualify because the statute that he pled guilty to is not specifically cited as one of the statutes under title section twenty four in title eighteen we i respectfully think that that may be wrong but we decided not to challenge that conclusion because it is an open question and in fact  under the circumstances the guidelines were already sufficiently high for our purposes that we were going to get to the sentence that we were limited to advocate for the hundred and twenty months so let me let me ask you a similar question head had mr he not been prohibited from aging in this kind of business because of his prior conviction the order was there anything other otherwise fraudulent of the business putting aside  he was indicted the theory of health care fraud in this case your honor did include false billings misrepresentations by mr i thoroughly belfry the owner of model healthcare and his brother who owned integrated healthcare it did those allegations we did have evidence of that we were preparing to present that at trial he did not plead guilty to that form of fraud but he pled guilty to was misrepresenting to the state of minnesota in the medicaid process his involvement and participation in ownership of the business and the concealment of his involvement in other words they represented that here are the owners and here are the managers and dilly bar is not one of them when he really was and he also pled guilty to concealing the fact that one of the owners and managers had been convicted previously of a federal health medicaid fraud so so that i understand that would prohibit his involvement but what you're saying is that the company itself had fraudulent activity can you give me just just briefly what's the nature of when you say fraudulent billing which you mean that there was evidence of that your honor that we learned about in the case but it wasn't part of the record presented to the trial court but i will tell the court that it's not in the record so at this record is there anything in this record that would suggest that other than his inability to participate in this kind of a program and run this kind of business that there was anything unlawful or fraudulent about the business itself that's the way that you phrase it your honor makes me want to say yes the business itself was a fraud because the business was created specifically to be able to deceive the government about i mean but the operation is yet the operation i understand your position  except for the multitude of tax crimes that occurred at the entire time both personal and the corporate withholding crimes that is part of the record because it was part of the plea in the plea agreement there was evidence that we were going present but it was never presented because we didn't get to trial and it wasn't part of the p s r because the fraud that mr belfry admitted was deceiving the government about his role and his criminal conviction so there was no evidence in the record before  judge montgomery about things that there is evidence that exists for but it wasn't part of the record and it wasn't part of the sentencing because when you're talking about these services i guess i'm trying to figure out which provision most appropriately applies here and when you're talking about another if in fact the records so it's an otherwise lawful business but for a frenchman it's ability to even do it i don't know whether that then affects what the law is your honor with respect the record doesn't show either way i think you can't look at the record and assume it would be an otherwise lawful business i think you have to look at the record and say we don't know and it's not it will never be known how much fraud there was going on in the provision of services or the billing or anything like that and why why would we then why would that be enough of this business and who is actually going to be running a day to day and who at the governor who at the business has a medicaid prior medicaid conviction that's the fraud which mr belfry admitted in his plea agreement was a material was material information the government would have wanted to know and which caused them caused the state of minnesota funded by the us and the state to pay him about twenty million dollars over the course of ten years so he lied on an important point causing the state to lose money by paying him funds and the important point here is your honor with respect to those enhanced mints and the credits against the lost they talk about services and goods provided to the victim the victim here is the government of the state of minnesota if there were goods and services provided and there probably were then they were provided to third parties the beneficiaries the recipients of the services it's the state minnesota wants those services it's a government program right nesota and the and united states want a business with integrity run by a person who is known and disclosed and who is not a convict under the federal medicaid statutes the state wants businesses owned and run by lost and what comes to mind is that do you happen to know how would this have been treated for last purposes if it had been a tax evasion plea and the in the question how would you know how that would be treated at the at our how is loss treated for a tax yes your honor i do what would happen was that the court would look at how much money the defendant got which in this case is approximately four and a half million dollars the court would then use the formula under the tax guidelines to calculate what the taxable amount of that would be which would be about two million dollars and the court would impose the sentence based on a tax loss of about two million dollars plus probably here enhanced me for conducting criminal conduct in you don't enhance months as not or adjustments i'm sorry your honor but no we're talking about the lost trying to clear clear procedural error in the in the last component of determining a range and what you've just told me is that the last district court determined is nine times what it would have been if if this had been a tax evasion fraud convict x fraud conviction on a legitimate business partner on a non fraudulent business yes if it had been a non fraudulent operated business if he'd been entitled to the money lawfully if he hadn't committed fraud to get the money and just not paid taxes on it then it would have been the the guidelines level for the tax two million dollar tax level i mean that's after i don't know if it would be nine times or guidelines fraud the full amount that they paid is quote bikini ery arm is that the yes your honor in fact it was would have been more but we only had records for the eight years but yes that is the theory and mr belford stipulated to the facts underlying that the that the state would not have paid him a dime if they had known he was running the business and lying about running the business and lying about his criminal history that's in his plea agreement and it wouldn't it would not make a difference in this case because the intended loss was to get as much money as he could from the state and the actual loss was whatever he got from the state as you say the same on these facts is that your point i believe so your honor because the this case so if those commentary don't apply then the court is below must make a reasonable estimate of the loss based on the evidence available to it in this case it's not  we believe it is because there's no evidence to rebut that the defendant if the court were to win if your burden to prove the prove the net net again to the to the defendant in terms of actual loss or a larger intended net gain not gross revenues we've got many many cases at least more than one that i've helped author that say that well your honor our theory and what if it's a net gain standard i think the most but you look at you look at how he profited well now how much not how many dollars flowed through his company the closest analogy in the commentary your honor suggests which the court has discussed already that in a in a fraud case like this a government benefits fraud and a federal health care fraud if if there hadn't been this question of the definition then it would have been clear that you take the dollars paid and then it's the defendant's burden to rebut it that health care offense if that if that applies only you've conceded now you haven't you haven't proven that are or contested that it doesn't apply now or now or in the ordinary world of actual or intended last and i think it seems to me that this is very difficult to sustain but we did understand your honor and negotiating the plea that this could be a question and because the defendant was making this claim that well why don't i get credit for this and that's why we stipulated  well in this case you're the problem we reversed judgement gomery on this issue before in this case you're out of the problem was that we there wasn't evidence and it would have been extremely difficult for probably either side to show how much of the billing was fraudulent how much of it wasn't because of the records because of the nature of the operation because of how they had to move things around or you're assuming that that if it was a fraudulent billing therefore the gross amount of the billing is actual loss in the case law does not support that i think the guidelines would say that if it's for health care friends ok but you won't knowledge that you you lost that one and didn't care about enough to to use that legal issues can we get a finding on that legal issue which would support this a credit even if the even if the commentary that's been cited doesn't apply specifically where's the default rule that he gets credit there isn't one the default rule is the district court makes a reasonable estimate of the loss based on circumstances and facts and when that can't be done at all because there's just not enough evidence or ability then the court may use the defendants again under the guidelines which is why we had that y cannot be determined otherwise correct and if it gets to this question of what's the offset then the loss cannot be determined because it will never be known and it's not part of the record and there isn't an ability to prove it and if it were a political defendant the burden and he did not attempt to prove it is this is your your burden to either prove it to health care or offense so that that general rule doesn't apply or percent done apply for some other reason we were you're in the vagueness in the where the commentary applies and the  alternative measure of loss thank you rogers variance you mean if the court was wrong to increase the level to the twenty it was wrong to use the eighteen million dollar figure she did say that she would have applied t it's in this your honor i believe that that it was not ordered in the total amount i believe it was ordered in the smaller amount monetary or that otherwise is readily measurable in money and what we are this isn't measurable in money this is a principled loss on the part of the state of minnesota the principle has been violated that the person who is associated with this business must not be excluded so it is not a monetary loss on their part so i think the money the money they paid money for p c s services but their loss wasn't in money their loss was like a dignitary tort we should not have been put in a position to pay somebody who should not have been paid because they were excluded but i don't think that does fit within peculiarly harm under the statu