Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca5-02-20034/USCOURTS-ca5-02-20034-0/pdf.json

Parties Involved:
Carrie Hamilton
Appellant
United States of America
Appellee

Document Text:

United States Court of Appeals

Fifth Circuit

F I L E D

February 13, 2004

Charles R. Fulbruge III

Clerk

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________

NO. 02-20017

_______________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ALICE MILES, RICHARD MILES and CARRIE HAMILTON,

Defendants-Appellants.

_________________________________________________________________

Appeals from the United States District Court

for the Southern District of Texas

________________________________________________________________

Before GARWOOD, JONES, and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:

In October 1999, a federal grand jury in the Southern

District of Texas filed a 32-count indictment charging Carrie

Hamilton, Richard Miles, Alice Miles, and Harold Miles with

multiple crimes related to fraud on the Medicare program. A jury

acquitted Harold Miles, convicted Richard Miles of two mail fraud

counts, and convicted Alice Miles and Carrie Hamilton of 28 and 29

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1 Richard Miles was sentenced to 97 months imprisonment, three years

of supervised release, 300 hours of community service, and a $200 special

assessment. Alice Miles was sentenced to 168 months imprisonment, three years

of supervised release, and a $2,100 special assessment. Carrie Hamilton was

sentenced to 204 months imprisonment, three years of supervised release, and a

$2,100 special assessment. In addition, all three defendants were jointly and

severally ordered to make restitution to the federal government in the amount of

$4,292,246.72.

2

counts, respectively.1 The three remaining defendants appeal on a

variety of grounds, the most significant of which challenge their

convictions for money laundering promotion and illegal Medicare

kickbacks. We reverse the money laundering promotion and kickback

counts. We also reverse the court’s sentencing finding that

Medicare is a “financial institution” within the meaning of

U.S.S.G. 2B1.1(b)(12)(A). We otherwise affirm the convictions and

remand for resentencing.

I. BACKGROUND

Affiliated Professional Home Health (“APRO”) was formed

in 1993 in Houston, Texas by Carrie Hamilton, Alice Miles, and

Richard Miles. Richard Miles, a vice-principal of a Houston-area

high school, was married to Alice Miles, a registered nurse, and is

the brother of both Hamilton, also a registered nurse, and Harold

Miles, an APRO employee. When APRO obtained certification from the

Texas Department of Health and a Medicare provider number, the

company began to treat Medicare-covered patients and obtain

reimbursement for in-home visits to such patients.

Medicare requires home health care providers to report

their expenses and number of patient visits. In turn, Medicare

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3

calculates a “per-visit” rate which it then uses to reimburse the

home health provider over the next year. At the end of each year,

providers are required to submit their actual expenses to Medicare

so that it can determine whether it has under- or overpaid the

provider for that year. The expenses reported by providers to

Medicare include the direct costs of patient care, including

salaries and employee benefits as well as general operating

expenses such as office rent and equipment. Indirect costs may be

expensed to Medicare on a pro-rata basis according to the

proportion of Medicare patients served by the provider. Medicare

also reimburses a wide variety of additional expenses incurred by

home health care providers such as mileage incurred in travel to

and from patient residences. The touchstone for reimbursement is

that costs must be reasonable, related to patient care, and

necessary for the provider’s business functions. See 42 U.S.C.

§ 1395f(b); 42 U.S.C. § 1995x(v).

In an effort to promote efficiency despite the cost-plus

nature of reimbursement, Medicare contracts with intermediary

agencies to audit providers’ cost reports. Further, because the

Medicare reimbursement system offers the not-so-wily criminal

numerous avenues to defraud the federal government, intermediary

agencies closely monitor provider reports for fraudulent activity.

APRO’s relationship with Medicare was conducted through Palmetto

Government Benefits Association (“Palmetto”), a subsidiary of South

Carolina Blue Cross/Blue Shield.

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4

In this case, the Government presented evidence that the

defendants, through APRO, submitted cost reports that grossly

inflated expenses for items ranging from mileage to employee

salaries. For example, Hamilton was reimbursed for a whopping

282,000 travel miles from 1994-1996, a period when she also

frequently visited Louisiana casinos. Alice Miles, another avid

gambler, was reimbursed for 150,000 travel miles over three years,

while her husband, whose primary job kept him occupied for most of

the work day, was reimbursed for 180,000 miles over four years.

APRO also obtained reimbursement for costs that included

personal expenses such as renovations to the Hamiltons’ home,

renovations to the Miles’ parents’ residence, and various home

appliances. Eventually, the amount of money coming in to APRO for

fake charges became so large that in order to sustain the claimed

level of expenses over the next year — so that APRO would not have

to return overpayments to the federal government — the APRO

principals began to use a variety of other methods to bilk Medicare

out of taxpayer funds. These methods included their writing largedollar checks to employees for “expenses” or “back pay” and then

requiring the employees to cash the checks and hand the funds back

to the APRO principals. Appellants billed expenses to Medicare for

two or three times the actual cost incurred. At times, they

engaged in more intricate schemes involving the splitting of large

reimbursement checks into smaller cashier’s checks which were then

deposited into the APRO principals’ bank accounts or used for

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personal expenses. On one occasion, Hamilton split an APRO check

into cash and three cashier’s checks at one bank. She deposited

two of the cashier’s checks into her own account at another bank

and used a portion of the funds to obtain a fourth cashier’s check

to purchase a new Ford Mustang convertible. The third cashier’s

check from the original bank was cashed at the Star Casino.

Beginning in May 1997, Palmetto, the Health Care

Financing Administration (“HCFA”) and the Texas Department of

Health systematically uncovered APRO’s extensive effort to defraud

Medicare. That October, Medicare acted to stem the flow of federal

funds to APRO by suspending its provider number. APRO filed a

federal lawsuit alleging racial bias on the part of HCFA and the

Texas Department of Health. The district court preliminarily

enjoined Medicare to reinstate APRO’s provider status pending the

litigation, but this court reversed the grant of relief. See

Affiliated Prof’l Home Health Care Agency v. Shalala, 164 F.3d 282

(5th Cir. 1998). In June 1998, federal agents executed a search

warrant at APRO’s premises and seized various business records.

The investigation and raid eventually led to the 32-count

indictment filed against the four defendants and the convictions

here at issue.

II. DISCUSSION

A. Money Laundering Promotion Convictions

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Carrie Hamilton and Alice Miles were convicted on Counts

8-13 of the indictment, which charged them with aiding and abetting

money laundering promotion, a crime perpetrated by anyone who

. . . knowing that the property involved in a financial

transaction represents the proceeds of some form of

unlawful activity, conducts or attempts to conduct such

a financial transaction which in fact involves the

proceeds of specified unlawful activity . . . with the

intent to promote the carrying on of specified unlawful

activity.

18 U.S.C. § 1956(a)(1)(A)(I). This statute criminalizes all

financial transactions that involve funds or property that are

derived from specified illegal activity, where the transactions are

intentionally aimed at promoting specified unlawful activity. The

counts at issue here involved specific payments made by APRO for

office rent (Counts 8 and 12), payroll (Count 11), and payroll

taxes (Counts 9, 10 and 13). Both Hamilton and Alice Miles claim

that the evidence adduced at trial was insufficient to support

their convictions under this statute.

1. Standard of Review

In evaluating whether the evidence produced at trial is

sufficient to support a jury conviction, this court examines

whether a rational jury, viewing the evidence in the light most

favorable to the prosecution, could have found the essential

elements of the offense to be satisfied beyond a reasonable doubt.

See United States v. Rivera, 295 F.3d 461, 466 (5th Cir. 2002). In

reviewing the evidence presented at trial, we draw all reasonable

inferences in favor of the jury’s verdict. Id. We do not evaluate

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7

whether the jury’s verdict was correct, but rather, whether the

jury’s decision was rational. Id.

2. Discussion

To sustain a conviction under the money laundering

promotion statute, the Government must show that the defendant:

(1) conducted or attempted to conduct a financial transaction,

(2) which the defendant then knew involved the proceeds of unlawful

activity, (3) with the intent to promote or further unlawful

activity. See United States v. Delgado, 256 F.3d 264, 275 (5th

Cir. 2001). Neither defendant argues on appeal that the financial

transactions underlying Counts 8-13 were not in fact conducted, or

that the funds used in these transactions were not, at least in

part, the proceeds of unlawful activity. Rather, both defendants

contend that as the funds were used to pay APRO’s “ordinary

business expenses,” the transactions do not demonstrate an intent

to promote or further the Medicare fraud taking place at APRO.

In examining the question of intent necessary for a money

laundering promotion conviction, this court has held that the

Government must present either direct proof of an intent to promote

such illegal activity or proof that a given type of transaction, on

its face, indicates an intent to promote such illegal activity.

See United States v. Brown, 186 F.3d 661, 670-71 (5th Cir. 1999).

Absent such proof, this court has held that a defendant may not be

convicted where the “proceeds of some relatively minor fraudulent

transactions” are used to pay the operating expenses of “an

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2 The “above board” business expenses at issue in Brown were for:

(1) parts, paints, and materials; (2) the floor plan, cars that had

been traded in, floor plan interest, and a charge back; (3) software

support and office supplies; (4) conversions; (5) used cars;

(6) disposal of waste oil and used oil filters; (7) t-shirts, caps,

coffee mugs; (8) yearbook advertisements; (9) a computer system

lease; (10) advertising representation; (11) Graves's travel

expenses; (12) extended warranties on used automobiles; (13) glass

replacement; (14) automobile association membership fees;

(15) photocopier supplies; and (16) a health plan.

Brown, 186 F.3d at 668 n.13.

8

otherwise legitimate business enterprise.” Id. at 671. In Brown,

this court reversed the money laundering promotion convictions of

a defendant who deposited fraudulently obtained funds in the

operating account of a generally legitimate car dealership and used

the funds to pay for a variety of legitimate business expenses.2

The Brown court noted that a number of cases in this circuit have

cautioned against allowing the “money laundering statute” to turn

into a “money spending statute.” See id. at 670 (internal

quotation marks and citations omitted). As a result, the court

held that strict adherence to the specific intent requirement

contained in the text of the money laundering promotion statute is

important to ensure that only “conduct that is really distinct from

the underlying specified unlawful activity” is punished under this

provision. See id. Brown emphasized that without such close

scrutiny on the question of intent, the money laundering promotion

statute would “simply provide overzealous prosecutors with a means

of imposing additional criminal liability any time a defendant

makes benign expenditures with funds derived from unlawful acts.”

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9

See id. Such a result would be inconsistent with the overall

statutory scheme created by Congress to address money laundering.

See id. at 670-71 (discussing, e.g., a separate money laundering

statute, 18 U.S.C. § 1957(a), which sets a $10,000 minimum on

prosecutions for the mere expenditure of unlawfully obtained

funds).

On the other end of the factual spectrum, however, are

cases where, “[w]hen a business as a whole is illegitimate, even

individual expenditures that are not intrinsically unlawful can

support a promotion money laundering charge.” See United States v.

Peterson, 244 F.3d 385, 392 (5th Cir. 2001). In Peterson, this

court upheld the money laundering promotion conviction of a

defendant who used fraudulently obtained funds to pay the general

operating expenses of a business whose only purpose was to engage

in fraudulent transactions. Id. at 391-92. The Peterson court

distinguished the real estate sales business in that case from the

car dealership in Brown because “all of the property owners who

paid fees to [the real estate company] were treated to . . .

fraudulent misrepresentations.” Id. at 391 (emphasis added).

Indeed, in Peterson, fewer than one percent of the clients received

any value for their fees. This court characterized the real estate

business in Peterson as “a sham and . . . [a] fraudulent telemarketing scheme.” See id. at 388-90 (quoting United States v.

Reissig, 186 F.3d 617, 619 (5th Cir. 1999)) (internal quotation

marks omitted).

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10

The question at issue here is whether a rational jury

could find that APRO, as a whole, was an illegitimate business,

such that otherwise normal and legitimate payments for rent (Counts

8 and 12), payroll (Count 11), and payroll taxes (Counts 9, 10, and

13) might properly be understood as evincing Carrie Hamilton’s and

Alice Miles’s specific intent to promote money laundering. This

case falls somewhere between Brown and Peterson in terms of the

size and scope of the fraud in relation to APRO’s legitimate

business, but the particular payments for which the Government

indicted APRO were quintessentially normal business expenditures.

It appears from the trial record that APRO did not simply

exist to bilk the federal government out of money. APRO patients

actually received the home health care services that Medicare

contracted with APRO to provide. Even the Government’s indictment

avers that the money laundering activities did not begin until

August 1995, nearly two years after APRO was approved by Medicare.

Given that APRO was in business for four and a half years, from

December 1993 through June 1998, and that actual patients received

actual health care services, a rational jury could not find that

APRO was a wholly illegitimate enterprise along the lines of the

real estate scam in Peterson.

At the same time, however, it is important to note that

the scale and scope of the fraud taking place at APRO certainly

exceeded the “relatively minor fraudulent transactions” at issue in

Brown. See Brown, 244 F.3d at 391. Ninety-five percent of APRO’s

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patients were Medicare beneficiaries, and an equivalent amount of

its revenue during its entire existence derived from the Medicare

program. The APRO defendants engaged in a wide range of activities

that fraudulently overcharged Medicare and netted them a

substantial amount of illicit revenue. The appellants were held

jointly and severally liable for restitution of over $4 million in

overcharges to Medicare.

While this substantial level of fraud provided a good

reason for the Government’s aggressive prosecution of the APRO

principals, it does not suffice to prove their specific intent to

promote the Medicare fraud by means of rent, payroll and payroll

tax expenditures. Appellants’ prosecution for these payments falls

far closer to the facts in Brown than to Peterson. In Brown, as in

this case, when a legitimate business pays customary, reasonable

and legal operating expenses, neither it nor its principals should

be subject to money laundering promotion for those payments. The

crime of money laundering promotion is aimed not at maintaining the

legitimate aspects of a business nor at proscribing all

expenditures of ill-gotten gains, but only at transactions which

funnel ill-gotten gains directly back into the criminal venture.

To hold otherwise would be to ignore Brown’s warning that the money

laundering statute is not a mere money spending statute.

This is not to suggest that the government can never hold

the principals of a legitimate business responsible for money

laundering promotion. The correct distinction, for purposes of

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12

inferring specific intent, is between payments that further or

promote illegal money laundering with ill-gotten gains and payments

that represent customary costs of running a legal business. See,

e.g., Brown, 186 F.3d at 668 n.12 (noting that the government could

have selected transactions such as the deposit of illegally

obtained funds into a business account as the basis for a money

laundering promotion charge rather than indicting appellant for the

benign expenditures at issue there).

For these reasons, we REVERSE the convictions of Carrie

Hamilton and Alice Miles on Counts 8-13 for money laundering

promotion.

B. Medicare Kickback Convictions

Carrie Hamilton and Alice Miles were also convicted on

Counts 21-31 of the indictment, which charged them with paying

healthcare kickbacks in violation of 42 U.S.C. § 1302a-7b(b)(2)(A),

which provides that:

[W]hoever knowingly and willfully offers or pays any

remuneration (including any kickback, bribe or rebate)

directly or indirectly, overtly or covertly, in cash or

in kind to any person to induce such person . . . to

refer an individual to a person for the furnishing or

arranging for the furnishing of any item or service for

which payment may be made in whole or in part under a

Federal health care program.

This statute criminalizes the payment of any funds or benefits

designed to encourage an individual to refer another party to a

Medicare provider for services to be paid for by the Medicare

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13

program. The appellants contend that the evidence was insufficient

to support their convictions on these charges.

The government’s case rested on evidence that APRO paid

Johnnie and Melvin Jones, the owners of Premier Public Relations

(“Premier”), to distribute information regarding APRO’s home health

services to doctors in the Houston area. The understanding between

APRO and Premier provided that Premier would deliver literature and

business cards to local medical offices. The Jones’s also

occasionally distributed plates of cookies to doctors’ offices.

When a physician determined that home health care services were

needed for a patient, the physician’s office might contact Johnnie

Jones, who would then furnish APRO with the patient’s name and

Medicare number for billing purposes. APRO paid Premier $300 for

each Medicare patient who became an APRO client as a result of

Premier’s efforts.

According to the Government, APRO’s payments to Premier

constituted improper kickbacks under the Medicare kickback statute.

In order to obtain a conviction under this statute, the Government

must show that a defendant: (1) knowingly and willfully made a

payment or offer of payment, (2) as an inducement to the payee,

(3) to refer an individual, (4) to another for the furnishing of an

item or service that could be paid for by a federal health care

program. See 18 U.S.C. § 1320a-7b(b)(2)(A) (2003). APRO’s

payments to Premier were based on the number of Medicare patients

that APRO secured from Premier’s activities. The only issue in

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3 Appellants also argue that their conduct might have violated a

companion provision of the Medicare kickback statute which prohibits payments

that are intended to induce a party to “purchase, lease, order, or arrange for

or recommend purchasing, leasing or ordering any good, facility, service or item

for which payment may be made in whole or in part under a Federal health care

program.” 42 U.S.C. § 1320a-7b(b)(2)(B) (2003). Under this line of reasoning,

APRO’s payments to Premier might have been “recommendations” to doctors who then

“referred” patients to APRO. Thus, their payments to third parties such as

Premier may only be prosecuted under subsection (B), while payments directly to

primary care providers must be prosecuted under subsection (A). Compare United

States v. Polin, 194 F.3d 863, 865-67 (7th Cir. 1999) (subsections of the

Medicare kickback statute “do not distinguish between physicians and laypersons,” but rather “refer to the difference between the referral of individuals

(Subsection A) and the recommendation of specific services (Subsection

B)”).Regardless of any potential overlap in coverage by the two provisions,

however, we need not speculate on its extent in this opinion because APRO’s

activities did not run afoul of the Subsection A crime with which they were

charged.

14

dispute is whether Premier’s activities constituted referrals

within the meaning of the statute.

The appellants assert that they cannot have violated this

statute because Premier never actually referred anyone to APRO, but

simply engaged in advertising activities on behalf of APRO. The

statute, they contend, was designed to ensure that a doctor’s

independent judgment regarding patient care is not compromised by

promises of payment from Medicare service providers. Premier did

not unduly influence the doctors’ decisions.3

Based on the evidence adduced at trial, we agree with the

appellants. In this case, Premier supplied promotional materials

to Houston-area doctors describing APRO’s home health care

services. After a doctor had decided to send a patient to APRO,

the doctor’s office contacted Premier, which then supplied the

necessary billing information to APRO and collected payment. There

was no evidence that Premier had any authority to act on behalf of

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15

a physician in selecting the particular home health care provider.

Indeed, at least one defense witness testified at trial that

Premier had no role in selecting the particular home health care

provider but that the decision was made by the doctor’s staff from

among ten agencies, including APRO. The payments from APRO to

Premier were not made to the relevant decisionmaker as an inducement or kickback for sending patients to APRO.

There are, however, certain situations where payments to

non-doctors would fall within the scope of the statute. For

example, in Polin, a pacemaker monitoring service made payments to

a pacemaker sales representative based on the number of patients

that he signed up with the service. See id. at 864-65. The

salesman’s responsibilities included selling pacemakers, attending

implant procedures, and making sure that patients were monitored

following implantation. See id. In fulfilling this latter

responsibility, the salesman testified that when a physician

decided to use an outside service, the salesman would contact a

service provider and set up the monitoring for the patient. See

id. at 865. That is, the salesman would make the decision as to

which service provider to contact for the patient. The salesman in

Polin admitted that he could be overruled by a physician, but he

had never been overruled in the course of his fourteen-year career.

See id. Under our reading of the statute, because the salesman in

Polin was the relevant decisionmaker and his judgment was shown to

have been improperly influenced by the payments he received from

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4 The district court improperly applied the four-level enhancement

under the 2000 Sentencing Guidelines to Richard Miles. As Richard Miles was

sentenced on December 20, 2001, the applicable guidelines were those promulgated

by the Sentencing Commission as of November 1, 2001. See 18 U.S.C.

§ 3553(a)(4)(A). As a result, if the enhancement were applicable, Richard Miles

should have been sentenced based on the same two-level enhancement that had been

applied to Alice Miles and Carrie Hamilton, who were sentenced three days

earlier. The court’s error is immaterial, however.

16

the monitoring service, the Seventh Circuit correctly upheld the

conviction of the individuals who paid the salesman in Polin.

Polin is simply different from this case.

Because APRO’s payments to Premier were not illegal

kickbacks under 18 U.S.C. § 1302a-7b(b)(2)(A), we reverse the

convictions of Carrie Hamilton and Alice Miles on Counts 21-31.

C. Financial Institution Fraud Enhancement

During sentencing, the district court applied a two-level

enhancement under 2001 Sentencing Guideline 2B1.1(b)(12)(A) to

Hamilton and Alice Miles. This enhancement provides that where a

defendant derives “more than $1,000,000 in gross receipts from one

or more financial institutions as a result of the offense, increase

by 2 levels.” See U.S.S.G. § 2B1.1(b)(12)(A) (2001). The district

court also applied a four-level enhancement to Richard Miles under

2000 Sentencing Guideline 2F1.1(b)(8)(B).4 All three defendants

contend that Medicare is not a financial institution within the

meaning of these guidelines.

The Government concedes that under a recent decision of

this court, Medicare is not a “financial institution” within the

meaning of the relevant guideline. See United States v. Soileau,

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17

309 F.3d 877, 881 (5th Cir. 2002). While Soileau dealt with the

2000 Sentencing Guidelines, the relevant provision is in pertinent

part identical in the 2001 Guidelines. We vacate the sentences

containing this incorrect enhancement and remand for resentencing.

D. Sophisticated Money Laundering Scheme Enhancement

In sentencing Alice Miles and Carrie Hamilton, the

district court applied the sophisticated money laundering

enhancement under Guideline § 2S1.1(b)(3), which provides, inter

alia, that if an “offense involved sophisticated laundering” the

offense level may be increased by two levels. See U.S.S.G. §

2S1.1(b)(3) (2001). Both appellants challenge the application of

this enhancement.

We review the district court’s application of the

sentencing guidelines de novo and its findings of fact under the

clearly erroneous standard. See Davidson, 283 F.3d at 683. The

guideline is relatively new and this court has not yet examined its

application. However, this court has reviewed for clear error a

district court’s factual determination whether sophisticated means

were used in the commission of an offense under another sentencing

guideline. See United States v. Powell, 124 F.3d 655, 666 (5th

Cir. 1997) (examining 1995 Sentencing Guideline § 2T1.1); United

States v. Clements, 73 F.3d 1330, 1340 (5th Cir. 1996) (same).

Clear error should be the standard in this case, too, because

“layering” of transactions, which the court found to exist, is

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defined as a form of sophisticated money laundering by the

guidelines commentary. See U.S.S.G. § 2S.1.1, cmt. n.5(A) (2001).

The appellants’ presentence reports utilize Hamilton’s

transaction involving the $45,000 check as one example of the basis

for the enhancement. As discussed above, this transaction took

place in a series of steps: (1) on April 8, 1997, APRO issued a

check made payable to Hamilton for $45,000; (2) two days later,

Hamilton took the APRO check and exchanged it for three cashier’s

checks and $6,000 in cash at Independence Bank; (3) that same day,

Hamilton then deposited two of these checks in her account at Texas

Commerce Bank and took a fourth cashier’s check out from Texas

Commerce Bank; (4) again, on the same day, this fourth check was

used to purchase a brand-new Ford Mustang convertible; (5) and in

her fourth transaction of the day, Hamilton cashed the third

cashier’s check (from Independence Bank) at the Star Casino.

The commentary to § 2S1.1 defines “sophisticated

laundering” in part as “complex or intricate conduct . . . [which]

typically involves the use of . . . (iii) two or more levels (i.e.,

layering) of transactions, transportation, transfers or

transmissions, involving criminally derived funds that were

intended to appear legitimate.” See U.S.S.G. § 2S1.1, cmt. n.5(A)

(2001). The commentary binds this court unless it is plainly

erroneous or inconsistent with the guidelines. U.S. v. UriasEscobar, 281 F.3d 165, 167 (5th Cir. 2002). It is true that

Hamilton was not very successful in obscuring the source or

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19

destination of the illegally-obtained funds used in this series of

transactions. Nevertheless, the conduct Hamilton engaged in, even

though inept, is paradigmatic “layering,” a blatant attempt to hide

the flow of taxpayer money to her private use. When an individual

attempts to launder money through “two or more levels of

transactions,” the commentary clearly subjects an individual to the

sophisticated laundering enhancement.

Alice Miles argues that her sentence cannot be enhanced

under this provision because only Hamilton engaged in the

underlying conduct. However, as the Government notes, the jury

found Alice Miles guilty of participating in and aiding and

abetting a wide-ranging conspiracy with Hamilton to defraud the

federal government. One aspect of the scheme was to hide the

source of illegally derived funds. Hamilton’s particular

transaction constituted merely one incident in the jointly

undertaken activity, which was reasonably foreseeable to Alice.

Given the panoply of evidence concerning both defendants’ efforts

to illegally obtain and conceal these funds, Alice Miles’s sentence

was properly enhanced under this guideline.

E. Partial Jury Verdict Instruction

Appellant Richard Hamilton raises one conviction-related

issue that merits discussion. He contends that the district court

erred by not giving an Allen charge the first time the jury sent

a note to the judge. Because the court failed to give the Allen

charge on the first day of deliberations, Hamilton contends, a

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second Allen charge, given after four days of deliberations, became

coercive in nature.

Ordinarily we review a district court’s decision to give

an Allen charge for an abuse of discretion. United States v.

Lindell, 881 F.2d 1313, 1320 (5th Cir. 1989) (standard of review

for an Allen charge is abuse of discretion). However, where a

defendant fails to object to the charge, the charge is reviewed for

plain error. Id.

Richard Miles neither requested an Allen charge when the

jury sent its first note out nor objected to the district court’s

response to the jury’s first note. At least one reason for Miles’s

failure to propose an Allen charge is that the jury’s first note

did not suggest that an Allen charge was necessary. The note read,

in part: “Your Honor, if we do not agree on a particular count

(ex: 8 guilty and 4 not guilty) does that become a not guilty

verdict on that particular count?” The district court, after

conferring with the lawyers for both sides, responded, “If you do

not agree on a particular court, that does not become a not guilty

verdict on that particular count. To return a verdict on any count

as to any defendant, whether your finding is guilty or not guilty,

you must be unanimous.”

Only when the fourth note from the jury arrived,

indicating they were still deadlocked, and the judge expressed his

intention to give an Allen charge, did Miles’s counsel vigorously

object that “the Allen charge is an invention of the devil and

 Case: 02-20034 Document: 005157794 Page: 20 Date Filed: 02/13/2004
21

should be consigned to hell.” Given Miles’s counsel’s strong views

on the impropriety of the Allen charge and his resultant objection

to the charge, it is quite odd for Miles to suggest on appeal that

the district court should have given the charge earlier, if at all.

In light of Miles’s failure to request an Allen charge in

the first instance, compared with his timely objection to the

eventual Allen charge, whether the appropriate standard of review

is plain error or abuse of discretion could be disputed. At the

end of the day, however, we find no abuse of discretion and no

error, plain or otherwise, in the district court’s decision to give

the Allen charge following the jury’s fourth note. There is no

basis for holding that the modified Allen charge given by the

district court had any improper coercive effect on the jury.

F. Other Issues Raised by the Defendants

After a thorough review of the briefs and pertinent

portions of the record, we find no merit in the various other

issues raised by the appellants.

III. CONCLUSION

For the reasons discussed above, we reverse the

convictions of Carrie Hamilton and Alice Miles on Counts 8-13

(money laundering promotion) and 21-31 (Medicare kickbacks). In

addition, we vacate the sentences of all three appellants and

remand for resentencing on the ground that Medicare is not a

“financial institution” within the meaning of U.S.S.G. §

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22

2B1.1(b)(12)(A), in addition to resentencing based on the reversal

of the convictions noted above. On all other grounds, we affirm

the rulings of the district court, the jury verdict, and the other

bases for the sentences imposed by the district court.

The judgment of the district court is AFFIRMED in part,

REVERSED in part, and VACATED and REMANDED for resentencing.

 Case: 02-20034 Document: 005157794 Page: 22 Date Filed: 02/13/2004