Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-02771/USCOURTS-ca8-07-02771-0/pdf.json

Parties Involved:
Audrey Joan Phythian
Appellant
United States
Appellee

Document Text:

1

The Honorable Joan N. Ericksen, United States District Judge for the District

of Minnesota.

 United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 07-2771

___________

United States of America, *

*

Appellee, *

* Appeal from the United States

 v. * District Court for the

* District of Minnesota.

Audrey Joan Phythian, also known as *

Audrey Joan Goossen, *

* 

Appellant. *

___________

Submitted: April 14, 2008

Filed: June 23, 2008

___________

Before WOLLMAN, BEAM, and RILEY, Circuit Judges.

___________

RILEY, Circuit Judge.

After a jury trial, Audrey Joan Phythian (Phythian) was convicted on all counts

of a nine count indictment—three counts of theft or embezzlement in connection with

healthcare, three counts of money laundering, and three counts related to her receipt

of social security disability benefits. The district court1

 sentenced Phythian to

concurrent 52-month sentences on each count. Phythian appeals her conviction

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The exclusion was for ten years. After ten years, Phythian was eligible for

reinstatement, but she never sought reinstatement. As such, Phythian is still excluded

from submitting claims. 

3

Goossen also applied for social security disability benefits. On Goossen’s

behalf, Phythian completed a benefit application report dated April 22, 2005, stating

Goossen was unable to use a check book or handle a savings account because “I forget

and double pay, [and] lose the check books and account books.” 

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asserting there was insufficient evidence to support her conviction on any of the

counts. Finding sufficient evidence to support each count and no error, we affirm.

 

I. BACKGROUND 

During the 1980s, Phythian operated a medical billing business. In August,

1985, Phythian was excluded from participation in the Medicare and Medicaid health

insurance program because of a prior criminal conviction related to defrauding the

Medicaid program. Her debarment prohibited Phythian from submitting claims to the

Medicare or Medicaid programs on behalf of healthcare providers.2

 

 

In approximately 2000, Phythian and her husband, Milt Goossen (Goossen),

purchased a medical billing business doing business as Progressive Health Care

Management (PHCM). Goossen was registered as the business’s manager; however,

Goossen never had any involvement with PHCM in any capacity, and Goossen failed

to disclose this fact in an April 2005 report to the Social Security Administration

(SSA). In fact, Phythian oversaw PHCM’s day to day operations, opened and

maintained PHCM’s business bank account with Preferred Bank and was listed, along

with Goossen, as an owner of this account. Goossen was incapable of managing a

bank account, so Phythian effectively controlled this account.3

Phythian employed her son, Jeff Gusciora (Gusciora) to do menial tasks for

PHCM including making deliveries to and pickups from PHCM’s clients. Gusciora

described himself as a “gopher” running errands. Gusciora also made bank deposits

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for PHCM. Phythian would prepare envelopes with checks and deposit slips for

Gusciora with instructions on the envelopes specifying the accounts into which

Gusciora was to deposit the checks. Gusciora characterized his computer work as

“idiot work.” 

Phythian, through PHCM, contracted with healthcare providers to process and

submit health insurance claims on behalf of the healthcare providers. Among the

healthcare providers contracting with PHCM for this service were Mark Wheaton

(Wheaton), Peter J. Dorsen (Dorsen), and Steven D. Moe (Moe). Wheaton and

Dorsen were authorized Medicare providers providing healthcare services to Medicare

and Medicaid beneficiaries. The healthcare providers would give PHCM information

about the medical services and benefits provided to patients, as well as the patients’

identifying information, descriptions of the services provided to the patients and the

dates of service. PHCM then submitted claims for reimbursement on behalf of the

providers to health insurance programs including Medicare, Medicaid and private

payors. The health insurance programs would then pay the submitted claims with

checks made payable to the healthcare providers, which were delivered either to the

providers or to PHCM. When checks were sent to PHCM, PHCM was responsible for

either delivering the checks to the provider or depositing the checks directly into the

provider’s bank account. Phythian and PHCM were not authorized to deposit the

reimbursement checks into PHCM’s bank account. 

Without the knowledge or authorization of the healthcare providers, certain

funds of the healthcare providers were embezzled and deposited into PHCM’s bank

account. Phythian then wrote checks, drawn on the PHCM account, to Goossen

totaling over $100,000. Phythian deposited the checks written to Goossen into a

Wells Fargo bank account jointly owned by Phythian and Goossen. Next, Phythian

cashed checks drawn on the Wells Fargo account at casinos or made ATM

withdrawals from the Wells Fargo account and gambled with the money, all without

Goossen’s knowledge. 

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In addition to the PHCM business, Phythian and Goossen also owned and

operated AM Antiques from February 2001 through July 2004. AM Antiques sold

antiques in an antiques mall, continuing operations until the antiques mall ceased

operations in July 2004. 

 

In April 2000, Phythian applied for social security disability insurance (SSDI),

claiming she was unable to work beginning in April 1999. Her application for

benefits was denied. Phythian reapplied for SSDI in August 2003, claiming a

disability onset date of September 30, 2000—the date Phythian asserts she was no

longer able to work. The SSA approved Phythian’s application for SSDI benefits and

paid Phythian a lump sum of $17,050 for back benefits and monthly payments of

approximately $1,140 which continued until March 2006. From April 2000 until

March 2006, SSA periodically required Phythian to disclose whether she had been

working or currently was working. Phythian always denied working. In 2006, the

SSA reopened Phythian’s application to consider denying benefits. Phythian certified

she had not been working since July 1, 2003. On March 7, 2006, the SSA terminated

Phythian’s SSDI benefits, concluding she had been working. 

On February 22, 2006, a federal grand jury returned a nine-count indictment

against Phythian charging her with embezzlement from healthcare providers in

violation of 18 U.S.C. §§ 669 and 24(b), money laundering in violation of 18 U.S.C.

§ 1956(a)(1)(B)(i), and social security disability insurance fraud in violation of 42

U.S.C. § 408(a)(3) and (4). On February 9, 2007, after a three day trial, the jury

returned a verdict finding Phythian guilty on all counts. This appeal follows. 

II. DISCUSSION

Phythian asserts there was insufficient evidence presented at her jury trial to

allow a reasonable jury to convict her of any of the nine counts of the indictment.

This court reviews the sufficiency of the evidence supporting a conviction de novo,

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“viewing evidence in the light most favorable to the government, resolving conflicts

in the government’s favor, and accepting all reasonable inferences that support the

verdict.” United States v. Washington, 318 F.3d 845, 852 (8th Cir. 2003) (citing

United States v. Grimaldo, 214 F.3d 967, 975 (8th Cir. 2000)). “[W]e reverse only

if no reasonable jury could have found the defendant guilty beyond a reasonable

doubt.” United States v. Pruneda, 518 F.3d 597, 605 (8th Cir. 2008). 

 

A. Conversion of Funds—Embezzlement

Counts 1 though 3 of the indictment alleged Phythian embezzled funds from

Wheaton, Dorsen, and Moe in violation of 18 U.S.C. § 669. This statute applies to a

person who “knowingly and willfully embezzles, steals, or . . . converts to the use of

any person other than the rightful owner, or intentionally misapplies any of the

moneys, funds, . . . or other assets of a health care benefit program.” 18 U.S.C. § 669.

This statute only requires proof of embezzlement or conversion, and does not, as

asserted by Phythian, require proof of forgery. 

The evidence adduced at trial established Phythian managed PHCM’s financial

affairs, controlling the receipt and deposit of checks. Phythian had reimbursement

checks made out to healthcare providers deposited into accounts controlled by PHCM.

This was done without any authority to do so. Goossen may have owned PHCM, but

Goossen testified he never managed PHCM, was not employed by PHCM, and

Phythian handled all PHCM’s financial matters. Although Phythian’s son, Gusciora,

physically made the deposits into the PHCM bank accounts, he did so having received

the checks from Phythian, which checks had already been falsely and fraudulently

endorsed, together with deposit slips in envelopes prepared by Phythian directing

Gusciora to deposit the checks into accounts specified by Phythian. Further, the

evidence demonstrated Phythian gambled away most of the funds after engaging in

numerous financial transactions, involving multiple bank accounts, which acted to

conceal the transactions from Phythian’s husband, Goossen. This evidence was more

than sufficient for a reasonable jury to find Phythian embezzled funds. 

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B. Social Security—False Statements and Concealment of Facts

Counts 4 through 6 allege Phythian knowingly concealed her true physical

condition and capabilities from the SSA and made false statements to the SSA in

violation of 42 U.S.C. § 408(a)(3) and (4). 

1. Count 4 

Count 4 charged Phythian with concealing information from the SSA in

violation of § 408(a)(4). This statute applies to any person

having knowledge of the occurrence of any event affecting (1) his initial

or continued right to any payment under this subchapter, or (2) the initial

or continued right to any payment of any other individual in whose

behalf he has applied for or is receiving such payment, conceals or fails

to disclose such event with an intent fraudulently to secure payment

either in a greater amount than is due or when no payment is authorized.

42 U.S.C. § 408(a)(4).

The government must prove the following: (1) [Phythian] had

knowledge of an event affecting [her] right to receive or to continue to

receive payments; (2) [Phythian] knowingly concealed or failed to

disclose this event to the [SSA]; and (3) [Phythian] concealed or failed

to disclose this event with the intent to fraudulently secure payment of

Social Security disability benefits in an amount greater than was due

[her] or when no payment to [her] was authorized.

United States v. Baumgardner, 85 F.3d 1305, 1310-11 (8th Cir. 1996) (citing United

States v. Phillips, 600 F.2d 535, 536 (5th Cir. 1979)). At trial, both Phythian’s

husband and son testified Phythian managed PHCM and maintained the books for

both PHCM and AM Antiques. Further, Wheaton, Dorsen, and Moe all testified

Phythian worked at PHCM and was their principal point of contact. The SSA advised

Phythian on multiple occasions that she needed to report any work, even self

employment, but Phythian never reported working. As such, a reasonable jury easily

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could find Phythian concealed her work from the SSA intending to secure SSDI

payments fraudulently. 

Phythian’s assertion the evidence did not support a finding she fraudulently

intended to secure payment is unavailing. “Intent frequently cannot be proven except

by circumstantial evidence; the determination [of intent] often depends on the

credibility of witnesses, as assessed by the factfinder.” United States v. Henderson,

416 F.3d 686, 692 (8th Cir. 2005) (citation omitted). The jury may infer Phythian’s

intent from her conduct—failing to report she was working while managing PHCM

and AM Antiques and serving as the primary point of contact for Wheaton, Dorsen,

and Moe. Reviewing the evidence in the light most favorable to the verdict, a

reasonable jury could readily find Phythian violated § 408a(4). 

2. Counts 5 and 6 

Counts 5 and 6 alleged Phythian violated 42 U.S.C. § 408(a)(3), which makes

it an offense “any time [to] make[] or cause[] to be made any false statement or

representation of a material fact for use in determining rights to payment [of SSDI

benefits].” Count 5 charged Phythian with falsely stating in 2003 she was not

working and was unable to work. Count 6 charged Phythian with falsely stating in

2006 she had not done any work since she became disabled, that she was not then

working, and that she was unable to work.

Phythian incorrectly asserts the government needed to prove she was ineligible

to receive SSDI. Rather, the government was only required to prove Phythian’s

statements were materially false. See 42 U.S.C. § 408(a)(3) (making it an offense to

make “any false statement or representation of a material fact.”). A statement is

material if it has “a natural tendency to influence or was capable of influencing the

government agency or official.” United States v. Baker, 200 F.3d 558, 561 (8th Cir.

2000) (citing United States v. Gaudin, 515 U.S. 506, 509 (1995)). Phythian’s

statements clearly had “a natural tendency to influence” the SSA in making its

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eligibility determination, as the ability to work is critical to the SSA’s determination.

Phythian’s statements to the SSA that she was not working, and failing to report she

was working, were false and material representations and omissions. As such,

sufficient evidence supports the jury’s verdict. 

C. Concealment—Money Laundering

Counts 7 through 9 of the indictment charged Phythian with knowingly

depositing checks payable to another person in violation of 18 U.S.C.

§ 1956(a)(1)(B)(i). There are four elements to this offense: (1) defendant conducted,

or attempted to conduct a financial transaction which in any way or degree affected

interstate commerce or foreign commerce; (2) the financial transaction involved

proceeds of illegal activity; (3) defendant knew the property represented proceeds of

some form of unlawful activity; and (4) defendant conducted or attempted to conduct

the financial transaction knowing the transaction was “designed in whole or in part []

to conceal or disguise the nature, the location, the source, the ownership or the control

of the proceeds of specified unlawful activity.” 18 U.S.C. § 1956(a)(1)(B)(i); see

United States v. Covey, 232 F.3d 641, 645-46 (8th Cir. 2000); United States v.

Esterman, 324 F.3d 565, 569 (7th Cir. 2003). Phythian asserts there was insufficient

evidence of any intent to conceal or disguise and the government is attempting to take

acts of embezzlement and overextend the conduct to support the money laundering

charges.

 

For proceeds to be laundered, there must first be wrongfully obtained proceeds.

See United States v. Shoff, 151 F.3d 889, 891 (8th Cir. 1998). Money laundering

“‘[p]roceeds’ are funds obtained from prior, separate criminal activity.” United States

v. Savage, 67 F.3d 1435, 1441 (9th Cir. 1995). Here, the prior criminal activity was

the embezzlement, which was complete once Phythian deposited health insurance

checks into PHCM’s Preferred Bank account without the knowledge or authorization

of the healthcare providers. The proceeds of these deposited checks were then

laundered through separate financial transactions such as writing checks to Goossen

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for deposit into Phythian’s and Goossen’s joint Wells Fargo account, all without

Goossen’s knowledge. Phythian would then cash checks drawn on the Wells Fargo

account at casinos or make ATM cash withdrawals from the Wells Fargo account at

casinos. There was sufficient evidence ill-gotten proceeds existed before the money

laundering actions.

Where a defendant commingles “illegal proceeds with the identity or the funds

of a legitimate and usually preexisting business . . . . [s]uch commingling effectively

conceals the nature, source, ownership, and/or control of the unlawful proceeds.”

Shoff, 151 F.3d at 891 (internal citations omitted). Where the jury heard evidence

Phythian deposited the embezzled funds into the PHCM account, then wrote checks

to Goossen totaling over $100,000, and next cashed these checks and gambled with

the money, all without Goossen’s knowledge, there was sufficient evidence for a

reasonable jury to convict Phythian of money laundering. 

III. CONCLUSION

We affirm.

______________________________

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