NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 16a0299n.06

No. 15-3655

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

PETER TSAI,

Defendant-Appellant.

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ON APPEAL FROM THE 

UNITED STATES DISTRICT 

COURT FOR THE SOUTHERN 

DISTRICT OF OHIO

Before: KETHLEDGE, WHITE, and DAVIS,

* Circuit Judges.

KETHLEDGE, Circuit Judge. Peter Tsai pled guilty to smuggling and conspiring to 

commit health-care fraud. The district court sentenced him to 78 months in prison. He argues 

that the district court improperly pressured him to plead guilty and then imposed an unreasonable 

sentence. We affirm the conviction and sentence.

I.

Tsai was born in Taiwan and moved with his family to Bad Axe, Michigan, where his 

father ran a successful obstetrics practice and his mother worked as a midwife. By his own 

account, he had a happy childhood as a “science and computer geek.” He attended the 

Cranbrook School before receiving a bachelor’s degree from Wesleyan University and a medical 

degree from the University of Alabama at Birmingham. He moved to Huntington, West Virginia 

for a residency at St. Mary’s Hospital, and settled down as a general practitioner for the 

Department of Veterans Affairs.

 

*

The Honorable Andre M. Davis, Senior Circuit Judge for the United States Court of 

Appeals for the Fourth Circuit, sitting by designation.
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There his career began to slide. Not long after hiring Tsai, the VA fired him for 

“unprofessional and improper conduct, misuse of government equipment, waste of time and the 

accessing of unauthorized and pornographic websites.” Tsai and his girlfriend, a psychiatric 

aide, moved across the Ohio River to start a medical-imaging center in Coal Grove, Ohio. Tsai’s 

parents put up $900,000 for a computerized tomography (CT) scanner and assumed a $600,000 

mortgage on an office building. The new Watkins-Tsai Imaging Center floundered: Tsai had 

trouble showing up to work, and days passed without any patients.

Tsai’s parents intervened. They helped him set up a medical practice, Advanced Family 

Medical Center, across the hall from the imaging center. They also moved to Ohio to oversee 

operations, and brought in Tsai’s cousin to handle patient billing. Advanced Family took off, 

and the imaging center’s fortunes changed for the better. At first, the offices’ stock-in-trade was 

the treatment of purportedly arthritic knees: Tsai would “diagnose” his Advanced Family 

patients, including teenagers as young as 15, with osteoarthritis after briefly touching their knees. 

Then he would direct them to the imaging center so that the patients could receive injections of 

Synvisc (an arthritis medication), guided by unnecessary CT scans of their knees.

After focusing for several years on his patients’ knees, Tsai started diagnosing nearly all

of his patients with piriformis syndrome, a rare condition that causes pain in the lower back and 

legs. These diagnoses too would create work for his CT scanner, since piriformis treatments 

required a general scan of the patient’s hip and another scan to guide Tsai’s injection of lidocaine 

and steroids into the patient. Many of Tsai’s patients returned for repeated steroid injections and 

CT scans. One patient received 85 scans over a period of three years. Tsai kept his patients 

coming back by making their prescriptions for pain medications contingent on more scans and 

injections. Tsai diagnosed piriformis quickly—usually after a quick touch of the patient’s 
No. 15-3655, United States v. Tsai

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back—and liberally. An Advanced Family employee testified at trial that Tsai once walked into 

the clinic’s waiting room near the end of a workday and went around to each patient, saying

“You need a shot”; “You need a shot”; “You need a shot.” One person in the waiting room at 

that time went to the front desk after Tsai told her she needed a shot and said, “I’m not even a 

patient here.”

Tsai’s billing practices were no more discreet. He submitted most of his claims to 

Medicare under two billing codes, 77011 and 77012, covering different kinds of CT scans. In 

September 2009, a federal contractor hired to root out Medicare fraud noticed that Watkins-Tsai 

had submitted 96% of all the 77011 claims in the State of Ohio in 2008. In June 2011, agents 

from various state and federal agencies obtained a warrant to search Tsai’s clinic and the 

imaging center. They seized office records, computer hard drives, and Synvisc boxes bearing

French and Turkish labels, along with empty, discarded Synvisc boxes marked “Approved for 

Canada Only.” Investigators eventually concluded that between 2005 and 2011, Tsai and his 

parents had billed Medicaid and Medicare for approximately $2 million in unnecessary medical 

procedures. Investigators also surmised that, to cut costs, Tsai had illegally imported and 

administered Synvisc that was not approved for use in the United States.

A federal grand jury indicted Tsai, his parents, and his cousin for health-care fraud and 

conspiracy to commit health-care fraud. See 18 U.S.C. §§ 1347, 1349. The grand jury charged 

Tsai with additional counts of smuggling and money laundering related to the purchase of the 

foreign Synvisc. See 18 U.S.C. §§ 545, 1956(a)(2)(A); 21 U.S.C. § 352. Tsai and the other 

defendants pled not guilty and went to trial in August 2014. At trial, the government presented 

its case through the testimony of three law-enforcement agents and six former Watkins-Tsai and 

Advanced Family employees, including Tsai’s now-ex-girlfriend (and the mother of his three 
No. 15-3655, United States v. Tsai

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children). These witnesses testified that Tsai did the following: regularly told schedulers at 

Watkins-Tsai to hold imaging appointment slots open for new Advanced Family patients whom

Tsai had not yet even examined; ignored warnings from CT technicians and other employees 

regarding the health dangers of over-exposing patients, including juvenile patients, to CT 

radiation; performed scans and Synvisc injections on both knees of patients who complained of 

pain only in one knee; and performed mass “diagnoses” in the waiting room of Advanced 

Family.

At the end of the third day of trial, the district court dismissed the jury and asked the 

government about the schedule for the rest of its case-in-chief. The government responded that it 

planned to call nine more witnesses. The court asked whether there had been “any subsequent 

plea negotiations since I last – since we last talked in the courtroom” and whether the 

prosecution had “given calculations as to where you believe their clients might be on the 

sentencing guidelines[.]” The government and Tsai’s counsel told the court that the parties had 

discussed a potential sentencing guidelines range for Tsai. The court then told counsel the 

following:

All right. I, of course, can’t get involved in plea negotiations, but 

for whatever it’s worth, my impression so far is that, and it’s only 

part of the government’s case, but I think the government seems to 

have a very good case. That may change, you know, when 

defendants, you know, other witnesses or when defendants do 

something. But if what I heard is true and it’s not rebutted at all, it 

will affect my determinations in sentencing if the defendants are 

convicted. Anything further for the day?

The government and counsel for Tsai’s father told the court that they had nothing else to say.

The next day, per an agreement with the government, Tsai pled guilty to two of the 

indictment’s four counts against him in exchange for the dismissal of the other two counts. 

Under the agreement, the government recommended reducing by two levels Tsai’s sentencing-
No. 15-3655, United States v. Tsai

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guidelines offense level in recognition of his acceptance of responsibility for his crimes. See 

U.S.S.G. § 3E1.1(a). The plea agreement stipulated that Tsai “is pleading guilty because [Tsai] 

is in fact guilty” and that his plea was made “freely and voluntarily” and was “not the result of 

force or threats or of promises apart from those set forth” in the agreement. At Tsai’s change-ofplea hearing, the district court asked Tsai whether he was pleading guilty of his “own free will.” 

Tsai answered “yes.”

Ten months later, at Tsai’s June 2015 sentencing hearing, Tsai’s counsel discussed his 

client’s reasons for pleading guilty midway through trial:

[T]he matter to proceed to trial here was not made for any 

unprincipled reason. And it’s not my intention here to argue any 

of the evidence that we would have presented and whatnot, but it 

became clear at the end of day four, I think, day three or day four, 

that the right thing to do was to enter a plea here and that this case 

wasn’t going to get any better despite our original hopes. And I 

just want you to understand, he understood that, my client did that, 

and this trial did come to an end.

And part of the hope of that, Your Honor – I understand 

there are issues out there of potential patient harm, not just 

financial – but one of the reasons that we stopped the trial was so 

that we didn’t go further into this and make things worse.

A few minutes later, the government highlighted how things might have gotten worse for 

Tsai if the government had continued to present its case at trial. Specifically, “the case ended 

before we really got deep into the [fraudulent] billing issues,” and the jury would have “heard 

more about the Synvisc that was bought from Turkey” and about the risks associated with the 

administration of improperly labeled Synvisc. The government also emphasized the following:

another point that we hadn’t gotten to in the trial was the steroid 

part of it. These were shots that involved steroid injections for the 

piriformis, and as Dr. Akbik put in his report and was going to 

testify, the highest dose a person is supposed to get in a year, 

calendar year, equals about 240 to 350 milligrams per patient per 

year. Some patients received between 3,000 and 6,000 milligrams 

over a three-year period, so they’re averaging 1- to 2,000 
No. 15-3655, United States v. Tsai

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milligrams. That’s three to four times what they’re allowed to 

have in a year for three straight years, and he would have testified 

about the damage that that can cause.

Meanwhile, Tsai’s counsel conceded at sentencing that, “If we take a look at the nature 

and circumstance of the offense . . . I think this [presentence report] is actually accurate.” That 

report included, among other things, the following conclusion:

Peter Tsai’s patients who were overexposed to radiation due to the 

unnecessary CT scans can also be considered victims, as they 

trusted their doctor to make decisions for the betterment of their 

health; however, he showed a lack of regard for their health due to 

the overexposure to radiation.

When the district court sentenced Tsai, it stated that the trial testimony regarding “the 

abuse with the [CT] scan, the overuse of the [CT] scan, the ignoring the professionals, the 

women who did the CT scans and the nurses who worked there, was extremely concerning. I 

sometimes go to bed at night thinking to myself, ‘I wonder how many people are walking around 

Coal Grove, Ohio, that have had way too much radiation?’ And yes, it’s speculative, but who 

knows when that’s going to have a harmful effect on them.” The court noted that the harm 

caused by Tsai’s behavior was not limited to the fraud perpetrated on Medicare and Medicaid: 

“in addition to the money in this case, it’s the harm that was done to people, the harm that was 

done to the patients, the harm that was done to the employees. That just can’t be overlooked. 

And if there ever was a case that should be at the top of the guidelines, this is that case[.]” The 

court then sentenced Tsai to 78 months’ imprisonment, which was at the top of his guidelines 

range.

Tsai timely appealed.
No. 15-3655, United States v. Tsai

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II.

A.

Tsai argues that he was “coerced” into pleading guilty when the district court commented 

at the end of the third day of trial that “the government seems to have a very good case.” He 

contends that the court’s comments amounted to a violation of Federal Rule of Criminal 

Procedure 11(c)(1), which bars courts from participating in discussions between criminal 

defendants and the government regarding plea agreements. Tsai never raised this argument in 

the district court, so he must show not only that the district court clearly erred, but also that the 

alleged error affected his substantial rights. See Fed. R. Crim. P. 11(h); United States v. Ushery, 

785 F.3d 210, 221 (6th Cir. 2015).

The government concedes that the district court’s comments regarding plea negotiations 

“did not follow best practices.” Gov’t Br. at 45. Even if one assumes that the district court 

violated Rule 11, however, Tsai must show that the error affected his substantial rights. And to 

do that Tsai must show “a reasonable probability that, but for the error, he would not have 

entered the plea.” Ushery, 785 at 221 (quoting United States v. Dominguez-Benitez, 542 U.S. 74, 

83 (2004)).

Tsai has not carried his burden here. To the contrary, his counsel’s representations in the 

district court show that he entered a plea mid-trial because it appeared the trial would only get 

worse for him. As his trial counsel said at sentencing, “it became clear at the end of . . . day 

three . . . that the right thing to do was to enter a plea here and that this case wasn’t going to get 

any better despite our original hopes.” Entry of a plea mid-trial also spared Tsai from facing the 

second half of the government’s case, which would have shown the serious harm that Tsai 
No. 15-3655, United States v. Tsai

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inflicted on his patients. As Tsai’s counsel acknowledged, “we stopped the trial . . . so that we 

didn’t go further into this and make things worse.”

Tsai contends that the timing of his change of plea—the day after the district court’s brief

comments on the merits—indicates that the court’s comments caused him to plead guilty. But 

the change of plea also followed a full day of testimony that was devastating to Tsai’s claim of

innocence. As the district court later commented at sentencing, “I’ve never seen such an 

amazing array of witnesses in a case, nurses, technicians, people who had worked there, who all 

told exactly the same story. That usually doesn’t happen. [The government] must have beat the 

bushes quite a bit to find those folks, because their testimony was extremely compelling.” Tsai 

has not shown that his own trial counsel’s explanation for the change of plea can reasonably be 

doubted. His claim is without merit.

B.

Tsai argues that the district court’s sentence was procedurally unreasonable. In 

particular, Tsai contends that the court erred when it sentenced him to a prison term at the high 

end of his guidelines range based in part upon what Tsai calls the “speculative harm” that he 

inflicted on his patients through overexposure to radiation.

When a district court imposes a sentence, it must take into consideration “the nature and 

circumstances of the offense” and the “seriousness of the offense.” 18 U.S.C. § 3553(a). Here, 

per the sentencing guidelines, the court principally based Tsai’s guidelines range on the 

monetary harm his scheme caused the public fisc. But the district court properly concluded that 

this monetary loss did not capture the full seriousness of the offense, because Tsai put his 

patients’ health at considerable risk by means of unnecessary CT scans and shots. Moreover, at 

sentencing, Tsai accepted the findings of the court’s presentencing report, including its 
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conclusion that Tsai “showed a lack of regard” for the health of his patients, “who were 

overexposed to radiation due to . . . unnecessary CT scans.” And the trial testimony showed that 

Tsai deliberately ignored warnings from his own employees that he was putting his patients’ 

health in grave danger. The district court was entirely correct to consider those risks in 

sentencing Tsai.

Tsai also argues that his sentence is substantively unreasonable, but through his plea 

agreement he waived his right to make that argument.

The district court’s judgment is affirmed.