1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-11-1999

USA v. Universal Rehab

Precedential or Non-Precedential:

Docket 97-1412

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"USA v. Universal Rehab" (1999). 1999 Decisions. Paper 38.

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Filed February 11, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-1412 

UNITED STATES OF AMERICA, 

 Appellant 

v. 

UNIVERSAL REHABILITATION SERVICES 

(PA), INC., 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

D.C. Criminal Action No. 94-cr-00147-1 

District Judge: Hon. Robert F. Kelly 

Nos. 97-1413 & 97-1467 

UNITED STATES OF AMERICA 

v. 

ATTILA HORVATH, 

 Appellant/Cross-Appellee 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

D.C. Criminal Action No. 94-cr-00147-2 

District Judge: Hon. Robert F. Kelly 
Nos. 97-1414 & 97-1468 

UNITED STATES OF AMERICA 

v. 

RICHARD J. LUKESH, 

 Appellant/Cross-Appellee 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

D.C. Criminal Action No. 94-cr-00147-3 

District Judge: Hon. Robert F. Kelly 

Argued: May 22, 1998 

Before: ROTH, MCKEE, and GARTH, Circuit Judges 

(Opinion filed February 11, 1999) 

 Michael R. Stiles 

 United States Attorney 

 Walter S. Batty, Jr. 

 Assistant United States Attorney 

 Chief of Appeals 

 Valli F. Baldassano (Argued) 

 Suzanne B. Ercole (Argued) 

 Assistant United States Attorneys 

 Suite 1250 

 615 Chestnut Street 

 Philadelphia, PA 19106 

 Attorneys for Appellee/ 

 and Cross-Appellant 

 2 
 Thomas Colas Carroll, Esquire 

 (Argued) 

 Carroll & Cedrone 

 The Curtis Center, Suite 750 

 Independence Square West 

 Philadelphia, PA 19106 

 Attorney for Appellants/ 

 and Cross-Appellees 

OPINION OF THE COURT 

ROTH, Circuit Judge: 

Defendants, Universal Rehabilitation Services, Inc.

(Universal), Attila Horvath, and Richard Lukesh, were 

charged with mail fraud and false claims in a 39 count 

indictment. The government alleged that they conducted a 

Medicare fraud scheme over a three-year period. The jury 

convicted the defendants only on a mail fraud count, Count 

One, the earliest count of the indictment. The government 

now argues that evidence of illegal activity, which occurred 

after the date of the offense in Count One but still within 

the three-year period of the originally charged scheme, can 

be used to sustain the verdict of guilty on Count One. 

In this appeal, we must determine to what extent postoffense evidence can be considered to support the 

conviction on Count One. We must also decide whether the 

District Court properly admitted into evidence the guilty 

pleas of two testifying mid-level managers after defendants 

had represented to the court that they would not, on cross 

examination, challenge the credibility of these witnesses or 

otherwise make the pleas admissible. 

I. Facts 

The corporate defendant, Universal, provided 

rehabilitative services, including speech therapy, to 

Medicare patients in nursing homes. The patients served 

were primarily the elderly. Universal submitted claims for 

the patients it treated to Independence Blue Cross (IBC), 

which administered Medicare coverage. IBC would then 

submit claims to Medicare. 

 3 
Medicare is authorized to reimburse speech therapy 

treatments that are both medically reasonable and 

necessary. Pursuant to 42 U.S.C. S 1395 et seq. and its 

implementing regulations, manuals are published that 

provide Medicare coverage guidelines. These include four 

criteria to determine if the treatment is medically

reasonable and necessary, and therefore reimbursable: 1) 

the therapy must be safe and effective for treatment of the 

patient's condition; 2) the services provided to the patient 

must be of a level of complexity that the services can only 

be provided by a certified speech pathologist; 3) where 

restorative treatment is ordered, there must be an 

expectation that the services being provided to the patient 

will bring about significant improvement in a reasonable 

period of time; and 4) the frequency and duration of 

services must be reasonable and necessary for the patient's 

condition. 

Universal therapists would evaluate patients in accord 

with the physician's orders and prepare a plan of 

treatment. The evaluation and plan of treatment must state 

whether the treatment is in fact necessary. The evaluation 

and plan is then approved (signed) by the doctor. As 

treatment progresses, speech therapists create progress 

notes. If treatment is to continue, Medicare requires that 

the need for it be certified every 30 days by a medical 

doctor. Medicare will continue to pay for speech therapy as 

long as patients are making progress toward the goals 

established in the plan of treatment. The doctor executes 

the 30 day certification by signing a Medical Information 

Form (MIF), which contains a summary, primarily from the 

therapists' progress notes, of the previous 30 days of 

treatment, as well as a recommended course of treatment 

for next 30 days. 

Universal submitted electronic Medicare bills to IBC. 

Essentially, IBC would review Universal's reimbursement 

claims. Universal and IBC often disagreed about the

interpretation of Medicare guidelines and the propriety of 

the bills submitted. At some point, IBC began requesting 

that Universal supply the following documentation to 

support the electronic bills: a) the evaluation and plan of 

treatment, b) the progress notes, and c) the MIFs. 

 4 
Claims that were rejected would be "rewritten" by 

Universal staff. Depending on the reason for rejection, the 

"rewriting" to obtain reimbursement might be fraudulent. 

For example, if information was missing from a form, 

Universal personnel would "rewrite" the form to include the 

missing information. Other "rewriting," however, was not as 

innocuous. For example, a mid-level corporate employee 

pled guilty to mail fraud for falsifying the performance 

record of a patient on certain speech therapy tests to create 

the "appearance" that the patient had made progress, 

thereby rendering the services reimbursable. In fact, the 

patient was not making progress and the services should 

not have been reimbursable. Another type of "rewriting" 

consisted of changing evaluations and MIFs after the doctor 

had signed them. The doctor's signature would then be 

taped and xeroxed onto the "rewritten" forms. 

The government alleged that a mail fraud scheme 

occurred from the summer of 1988 through September 21, 

1991, during which 1) evaluations and plans of treatment 

were rewritten to create the "appearance" of patients who 

could properly receive reimbursable therapy; 2) MIFs 

containing physician's certifications were falsified, that is, 

altered after the doctor originally signed them and the 

signature photocopied back on; and 3) progress notes were 

altered to conform with the falsified evaluation and MIFs. A 

grand jury indicted Attila Horvath, Vice President and 

Director of Finance at Universal; Richard Lukesh, Director 

of Operations at Universal; Universal, the corporation itself; 

and three other Universal employees for mail fraud, in 

violation of 18 U.S.C. S 1341 (Counts One through 

Seventeen, charging 17 mailings in furtherance of the 

fraud), and false claims, in violation of 18 U.S.C.S 287 

(Counts Eighteen through Thirty-nine). 

After a jury trial, Horvath, Lukesh and Universal were 

convicted on Count One and acquitted on each of the other 

38 counts, representing 16 other mailings and false claims 

that arose from the practice of falsifying speech therapy 

documents. Count One charged that, in furtherance of the 

scheme, Blue Cross mailed a check, dated May 10, 1989, to 

Universal. The check represented a claim for treatment 

 5 
rendered to a patient, Mildred Hynds, from February 15 to 

28, 1989.1 

Before trial, defendants had moved in limine to prevent 

the government from presenting evidence that government 

witnesses Judy Blum Bonjo and Penny Martin, employees 

of Universal, had pled guilty to mail fraud.2 Defendants 

promised that they would not challenge these witnesses' 

credibility on cross-examination. Defendants argued that 

the guilty pleas were not relevant under Rule 401 of the 

Federal Rules of Evidence and, if relevant, were more 

prejudicial than probative under Rule 403. The District 

Court denied the motion in limine. Defendants appeal this 

evidentiary ruling. 

After the verdict, defendants moved for a Fed. R. Crim. P. 

Rule 29 judgment of acquittal, arguing that there was 

insufficient evidence to support the jury's verdict. The court 

denied the motion. Defendants appeal this ruling as well.3 

The District Court had subject matter jurisdiction over 

federal indictments, charging violations of the federal 

criminal code. We have appellate jurisdiction over 

defendants' direct appeal from a judgment of conviction. 28 

U.S.C. S 1291. 

II. Sufficiency of the Evidence 

Immediately after the jury returned its verdict of 

conviction on Count One, defendants moved for acquittal 

under Rule 29, arguing that there was insufficient evidence 

_________________________________________________________________ 

1. Counts Two, Three, and Four also involved the mailing of checks that 

pertained to Mildred Hynds. Count Twenty-seven charged a false claim 

arising out of a bill that was submitted for the treatment of Hynds. 

2. Blum Bonjo testified that she had pled guilty to Count One of the 

indictment before the jury. App. 2190. Martin was charged in a separate 

indictment and testified that she had pled guilty to one count of mail 

fraud. 

3. The government also filed a cross-appeal, claiming that the District 

Court erred at sentencing in refusing to consider the fraud loss from the 

"virtually identical" conduct charged in the other 38 acquitted counts as 

relevant conduct under Section 1B1.3 of the Sentencing Guidelines. 

Because of our holding on defendants' appeal, we do not reach the 

government's cross-appeal. 

 6 
to sustain the verdict. The District Court denied the motion 

as to all three defendants. United States v. Universal 

Rehabilitation Services, Inc., Attila Horvath, and Richard 

Lukesh, No. 94-147, E.D.Pa., slip op. 3-12, May 31, 1996. 

We review de novo the district court's denial of a postverdict judgment of acquittal. United States v. Iafelice, 978 

F.2d 92 (3d. Cir. 1992). 

We apply the same legal standard as the District Court. 

We must view the evidence in the light most favorable to 

the jury verdict and presume that the jury properly

evaluated the credibility of the witnesses, found the facts, 

and drew rational inferences. Id. at 94. In that light, we 

"must affirm the convictions if a rational trier of fact could 

have found defendant[s] guilty beyond a reasonable doubt, 

and the verdict is supported by substantial evidence." U.S. 

v. Coyle, 63 F.3d 1239, 1243 (3d Cir. 1995). 

"The mail fraud statute, 18 U.S.C. S 1341, proscribes any 

scheme or artifice to defraud in which the defendant 

participated with the specific intent to defraud and in 

which the mails were used `in furtherance of the fraudulent 

scheme.' " Coyle, 63 F.3d at 1243."Proof of specific intent 

. . . may be found from a material misstatement of fact 

made with reckless disregard for the truth." United States 

v. Hannigan, 27 F.3d 890, 892 n.1 (3d Cir. 1994). As such, 

the government must prove that a scheme to defraud 

existed, that each defendant participated in that scheme, 

and that each participated with specific intent to defraud. 

United States v. Pflaumer, 774 F.2d 1224, 1233 (3d Cir. 

1985). 

It follows from the above that an individual must join a 

scheme while the scheme exists; that is, that the scheme 

and a defendant's knowing participation in it must occur 

over the same period of time. In this case, the government 

alleged in the thirty-nine count indictment that a scheme 

took place from the summer of 1988 through September 

21, 1991. However, the jury convicted the defendants only 

on Count One, the May 10, 1989, mailing. The jury 

acquitted the defendants on the remaining 38 counts, 

relating to mailings and false claims after May 10, 1989. 

Thus, we must define the period of time which constitutes 

the scheme for which the jury convicted the defendants. 

 7 
Because of the acquittals on Counts Two through Thirtynine, the scheme could not have run through the entire 

period which the government charged in the indictment. 

Nevertheless, May 10, 1989, the date of the offense charged 

in Count One, is not necessarily the evidentiary cut-off. We 

must determine whether events that took place after May 

10, 1989, up until September 1991, can be used to support 

the jury verdict on the May 10 mailing. 

The government argues that the scheme is not bound in 

time by the May 10, 1989, mailing -- that the Hynds check, 

the subject of Count One, was a mailing in furtherance of 

a broad three year scheme. However, as we made clear in 

United States v. Pflaumer, 774 F.2d 1224 (3d Cir. 1985), in 

the context of a conspiracy to commit mail fraud in

violation of 18 U.S.C. S 371, the conspiracy at issue "was a 

conspiracy to violate the mail fraud statute, which end[s] 

with the last mailing." Id. at 1232. As such, willful 

membership in the scheme must have existed on or before 

May 10, 1989, the date of the mailing for the count of 

conviction. There is no concept of retroactive joinder in mail 

fraud schemes after the last culpable mailing. Moreover, 

because the defendants were acquitted of the lateroccurring mail fraud counts, those mailings cannot be 

considered to be "culpable mailings." 

Furthermore, the fact that Pflaumer concerned conspiracy 

to commit mail fraud, not just mail fraud, is a distinction 

without a difference under the circumstances of this case. 

A conspiracy to violate a substantive prohibition in a 

federal statute ends when the unlawful object of the 

conspiracy has been accomplished. Grunewald v. United 

States, 353 U.S. 391, 406-15 (1957). In Pflaumer, the object 

of the conspiracy was the use of the mails to effectuate a 

scheme to defraud states of tax revenues. Although the 

scheme to defraud the states may have continued past the 

last mailing, the use of the mails to effectuate the scheme 

ceased upon the last mailing. 774 F.2d at 1232. 

As was the situation in Pflaumer, the object of the

scheme here was mail fraud, the mailing was in 

furtherance of the scheme, and the mailing marks the end 

of the scheme. To be sure, subsequent words and deeds 

may bear on whether a person was participating and 

 8 
participating willfully in a scheme. For example, a

statement by a defendant after the end of the scheme may 

make clear that he was in fact willfully participating in, or 

had knowledge of, the scheme before it ended. There must, 

however, be substantial evidence of participation before the 

mailing. United States v. Pearlstein, 576 F.2d 531, 537 (3d 

Cir. 1978). 

A. Evidence That a Crime Was Committed 

The question then is whether there is sufficient evidence 

of events prior to the May 10, 1989, mailing to sustain the 

jury verdict? To sustain the jury verdict, in addition to 

demonstrating that each defendant willfully joined the mail 

fraud scheme, the government must produce sufficient 

evidence that a mail fraud scheme existed. This means that 

there must be sufficient evidence that the Hynds mailing 

was in furtherance of a mail fraud scheme, i.e. , that the 

services to Mildred Hynds for which defendants billed and 

were paid $1,411 by IBC's check # 0249905, dated May 10, 

1989, were unauthorized under Medicare coverage 

guidelines and that defendants' misrepresentation of these 

services was part of the scheme to defraud. 

Defendants argue that there was no evidence that a 

crime was in fact committed. They argue that the evidence 

indicates that the treatment rendered to Hynds was 

authorized by her physician as medically necessary and 

appropriate. The record reveals a different story. Carol 

Pomilio, a speech therapist at Universal, testified that 

Medicare initially rejected the Hynds billing. In order to 

obtain reimbursement, the February 15, 1989, evaluation 

and plan of treatment, which the doctor had signed, was 

destroyed and replaced by one with an altered evaluation 

that did not accurately reflect Hynds' treatment plan. The 

doctor's signature was then xeroxed onto the altered 

document. As documentary support for this treatment plan, 

Pomilio lowered the scoring percentages on the progress 

notes. The fact that the treatment was originally ordered by 

a doctor does not neutralize the fraud; i.e., that the billing 

for the continued treatment, based on falsified progress 

notes and a xeroxed doctor's signature, was fraudulent. 

There is no doubt that, as defendants argue, the 

rewriting of or resubmission of rewritten documents is not 

 9 
per se fraudulent. In fact, Julia Blum Bonjo, another 

Universal speech therapist, testified that a large part of her 

job consisted of legitimate rewriting or redrafting of 

documents. However, when the rewriting consisted of

misrepresentation of a patient's test results with the intent 

of obtaining otherwise unauthorized reimbursement, there 

is sufficient evidence to find an underlying scheme to 

defraud, which is required as an element of the offense of 

mail fraud. 

The next question we must consider is whether there is 

sufficient evidence that each of the defendants willfully 

joined the scheme to commit mail fraud. United States v. 

Pearlstein, 576 F.2d at 537. In this connection, the 

government must prove that each defendant willfully joined 

the scheme before May 10, 1989, the date of the last 

mailing in furtherance of the scheme. It must show that 

each defendant possessed the requisite intent to defraud. 

Proof is required that "defendants must either have devised 

the fraudulent scheme themselves, or have wilfully 

participated in it with knowledge of its fraudulent intent." 

Id. A defendant need not personally be involved with the 

actual mailing to be liable so long as there was knowledge 

that the use of mails would follow in the ordinary course of 

business or that such use can reasonably be foreseen. 

United States v. Sturm, 671 F.2d 749, 751 (3d Cir. 1982); 

United States v. Funt, 896 F.2d 1288, 1294 (11th Cir. 1990).4 

B. Evidence Linking Defendant Horvath to the Crime 

We will first examine the evidence against defendant 

Attila Horvath up to and through the May 10, 1989, mailing 

of the count of conviction. The government must prove that 

Horvath willfully joined the scheme before that date. The 

District Court enumerated specific record references to 

Horvath's knowledge and willful participation in the scheme 

upon which the jury could have relied. However, once we 

_________________________________________________________________ 

4. Defendants also contend in their appeals that there was insufficient 

evidence of the use of the mails. We have reviewed the evidence of the 

business practices and of specific reference to the correspondence in 

question, and we will affirm the District Court on this point. See United 

States v. Burks, 867 F.2d 795 (3d Cir. 1989); United States v. Hannigan, 

27 F.3d 890 (3d Cir. 1994). 

 10 
eliminate the post-May 1989 evidence, there is little of any 

significance. 

(1) There is the testimony of Wendy Gold, who was 

Director of Speech Therapy before Penny Martin. Gold 

testified that on April 28, 1989, she discussed with Horvath 

and Lukesh the problem of over-utilization, i.e., treating 

patients unnecessarily to increase production. Moreover, 

Gold discussed with Horvath the fact that many of the 

patients in the nursing homes with which Universal 

contracted would not qualify for Medicare therapy. At this 

meeting and in subsequent memos, dated May 8 and May 

15, 1989, there was extensive discussion about ways to 

increase productivity. There was, however, no evidence that 

anyone suggested falsification in billing. Gold took the 

position that asking therapists to do what Universal wanted 

done in order to increase production would not be ethical. 

Gold subsequently quit due to pressure to increase 

production. 

(2) Judy Blum Bonjo, Director of Utilization Review, 

testified that her department was directed by Horvath in an 

April 15, 1991, memo to bill the "risk patients" in order to 

reduce documentation backlogs. This evidence is not

relevant, however, because it refers to an event more than 

2 years after the Count One mailing. Additionally, Horvath 

argues that the memo refers to billing prior to receipt of all 

the paperwork, not to falsifying information. 

Blum Bonjo also testified that Horvath directed her to bill 

without physician signatures and without some requisite 

documentation in place. This evidence is problematic 

because there is no reference to its date. Horvath asserts, 

and the Government does not controvert, that this 

reference is to the same April 15, 1991, memo and for that 

reason occurred after the Count One mailing. 

(3) Penny Martin, Director of Speech Therapy after Gold, 

testified that Horvath wanted patient documentation

billable no matter what had to be done. Martin explained 

that Horvath ran weekly meetings and closely monitored 

the results of speech therapy practices at Universal. 

Furthermore, Martin explained that between 1989 and

1991 Blum Bonjo met with Lukesh on a daily basis and 

 11 
with Horvath and Lukesh on a weekly basis. Once again, 

Horvath asserts, and the Government does not controvert, 

that Martin's testimony refers to her observations of what 

Horvath told her in June 1990, one year after the Count 

One mailing. In fact, Martin did not join Universal until 

August 1989, several months after the Count One mailing. 

Examined as a whole, the record is extremely sparse as 

to Horvath's willful participation in the scheme before May 

10, 1989. The only evidence that clearly concerns premailing events is the Gold testimony. This testimony, 

however, only establishes pressure to bill, not pressure to 

bill falsely. Although we hesitate to overturn a jury verdict, 

we conclude in this instance that, after we exclude the 

post-mailing evidence, upon which the jury likely relied, 

there is little to support the jury's verdict. As such, we hold 

that the District Court erred in denying Horvath's motion 

for judgment of acquittal. We will remand the case to the 

District Court to enter a judgment of acquittal for Horvath. 

C. Evidence Linking Defendant Lukesh to Crime 

Contrary to Horvath, the relevant evidence against 

Lukesh is stronger. 

1) Lukesh admitted he was aware that documents were

being rewritten in order to "augment" the billing record. A 

memo, dated Oct. 28, 1988, directed therapists "to be 

creative" in getting Medicare reimbursements. On crossexamination, Lukesh testified that one such "creative way" 

to get reimbursed was to rewrite the document to change 

the patient profile. Defendants point out that no witness 

ever testified to interpreting the term "creative" to imply 

falsification. Nevertheless, the jury could infer Lukesh's 

state of mind from his choice of words. 

2) Lukesh authored a document in the spring of 1988

known as the "billing hold" which became an administrative 

measure at Universal. This directive was designed to gather 

information on what billing documents were being held up 

and for what reason. It was provided to the speech 

therapists, often with specific directions on how to alter 

speech therapy documents. While it is possible that Lukesh 

did not intend that the rewriting of documents, pursuant to 

this directive, would be fraudulent (Lukesh testified that he 

 12 
believed documents were merely being corrected or 

augmented), the jury was certainly entitled to infer that 

Lukesh had knowledge of the fraudulent billing practices. 

3) Lukesh was present at an April, 1989, meeting where 

Blue Cross alerted Universal that documents "were being 

improperly altered and inappropriate patients were being 

treated." Lukesh's contention as to the billing hold directive 

described above, that he believed documents were merely 

being corrected or augmented, is belied by this meeting 

with Blue Cross. The information gathered by Lukesh at the 

meeting, together with his authoring of the directive, lead to 

the permissible inference that Lukesh knew, well before the 

Count One mailing, that his employees were falsifying 

documents. 

4) Karen Lightman Pallies, a speech therapist from 

January 1989 through September 1989, testified that she 

was required to falsify her therapy documentation and that 

Lukesh told the therapists at a pre-May 1989 meeting that 

reports were being rejected by Blue Cross and the 

therapists would have to keep rewriting these reports until 

they were accepted. Pallies did admit that re-writing could 

involve simply "documenting accurate historical facts" as 

distinguished from "making something up." 

5) Blum Bonjo and Martin testified that Lukesh was 

aware that documents were being altered before being 

submitted to Blue Cross for payment. The testimony by 

Martin is problematic because she started working after the 

Count One mailing. Furthermore, Lukesh asserts, and the 

government does not controvert, that Blum Bonjo's 

testimony refers to events around April 1990, after the 

mailing. 

6) Therapist Audrey Isaak told the jury that she attended 

regular staff meetings between 1988 and 1991 and at one, 

Lukesh told the staff that "our documentation need[s] to be 

written in such a way that payment would be granted." 

Clearly, the evidence against Lukesh is more substantial 

than that against Horvath. Certainly Lukesh's authoring of 

documents designed to effectuate a policy of resubmitting 

bills and rewriting the documents underlying them, a policy 

that led therapists to submit fraudulent documents,

 13 
provides evidence of intent on Lukesh's part. When this 

evidence is coupled with the fact that Lukesh was informed 

by Blue Cross of the fraudulent practices, there was 

sufficient evidence that Lukesh willfully joined the scheme 

to commit mail fraud. 

D. Evidence Linking the Corporation to the Crime 

Universal, the corporate defendant, argues as the basis 

for its post-verdict judgment of acquittal motion that there 

was not substantial evidence that it directed its employees 

to falsify claims. "A corporation is criminally responsible for 

the unlawful acts of its employees or other agents, provided 

such unlawful acts are done on behalf of the corporation 

and within the scope of the agent's employment or apparent 

authority." United States v. American Radiator & Standard 

Sanitary Corp., 433 F.2d 174, 205 (3d Cir. 1970). 

Universal argues that there was never a corporate policy 

of falsifying claims and that no individual was directed to 

falsify claims on behalf of the company. Universal contends 

that the individual defendants were acting on their own. 

This argument has no merit. As the District Court 

explained, without even considering the guilt of the highlevel officials Horvath and Lukesh, the evidence was 

sufficient for the jury to have concluded that Carol Pomilio 

was acting within the scope of her authority and in the 

course of her employment with the intent to benefit

Universal when she knowingly misled Medicare by altering 

Hynds' patient documentation. Additionally, numerous 

witnesses testified that they were pressured to bill for 

treatment to inappropriate patients and to rewrite patient 

documentation in order to make claims reimbursable, i.e., 

to benefit the corporation. For these reasons, wefind 

sufficient evidence to support the conviction of defendant 

Universal. 

III. Admissibility of the Guilty Plea of a Testifying Co- 

 Defendant 

Julia Blum Bonjo, a speech therapist at Universal, pled 

guilty to Count One, the mail fraud count on which the 

other defendants were later convicted. Penny Martin also 

pled guilty in a separate information to one count of mail 

fraud. In exchange for the pleas, Blum Bonjo and Martin 

 14 
agreed to testify as government witnesses. Before the trial, 

defendants moved to bar testimony of the pleas. In their 

motion, defendants argued that the plea agreements were 

irrelevant, and, even if they were relevant, they were more 

prejudicial than probative. Defendants represented that 

they would not examine Blum Bonjo or Martin in any way 

that would make this evidence admissible, i.e., they would 

not challenge their credibility. Moreover, defense counsel 

asserted that, even if the government was skeptical about 

his representation that he would not challenge the 

credibility of Blum Bonjo or Martin on cross examination, 

the proper procedure was for the court to then permit the 

government to prove the pleas on redirect. 

The District Court denied defendants' motion. Relying on 

United States v. Gaev, 24 F.3d 473 (3d Cir. 1994), the court 

explained that, although a guilty plea cannot be used to 

establish a co-conspirator's guilt, it can be introduced for 

some valid purpose. After enumerating the proper purposes 

for which the pleas could be admitted, the trial judge found 

that the probative value of the evidence outweighed its 

prejudicial effect and admitted it, denying defendants' 

motion. The defendants assert that this ruling was 

erroneous and that the error was not harmless, arguing 

that "there is a high probability that the jury's conviction 

on Count One -- in light of its acquittal verdicts on close to 

40 other counts -- was influenced by the Bonjo plea to 

Count One."5 

The decision to admit or exclude the evidence is 

committed to the sound discretion of the district court. In 

re Merritt Logan Inc., 901 F.2d 349, 359 (3d Cir. 1990). We 

use an abuse of discretion standard to review the District 

Court's decision not to exclude evidence under Rule 403. 

United States v. Gaev, 24 F.3d 473, 476 (3d Cir. 1994). 

We note at the outset the well-settled proposition that 

plea agreements of co-conspirators cannot be used as 

evidence of a defendant's guilt. Gaev, 24 F.3d at 476. We 

stated in United States v. Gambino, 926 F.2d 1355 (3d Cir. 

1991) that: 

_________________________________________________________________ 

5. In her testimony, Blum Bonjo stated that she had pled guilty to 

"Count One." 

 15 
 [t]here are strong considerations against using a co- 

 conspirator's guilt as substantive evidence of another 

 defendant's guilt. "The foundation of [this] policy is the 

 right of every defendant to stand or fall with the proof 

 of the charge made against him, not against somebody 

 else . . . . The defendant ha[s] a right to have his guilt 

 or innocence determined by the evidence presented 

 against him, not by what has happened with regard to 

 a criminal prosecution against someone else.

926 F.2d at 1363 (quoting in part Bisaccia v. Attorney 

General of New Jersey, 623 F.2d 307, 312 (3d Cir. 1980)). 

However, we have recognized certain valid purposes for 

which co-conspirators' guilty pleas can be admitted. See, 

e.g., Gaev, 24 F.3d 476-77 (enumerating proper purposes). 

The District Court here explained that a plea was 

admissible for a number of valid purposes. First, the court 

explained that a plea was admissible to assist the jury in 

assessing the credibility of the testifying witness. As we 

explained in Gambino, "by eliciting the witness' guilty plea 

on direct examination, the government dampens attacks on 

credibility, and forecloses any suggestion that it was 

concealing evidence." 926 F.2d at 1363. But, defendants in 

their pre-trial motion pledged not to challenge Blum Bonjo's 

and Martin's credibility based on their plea agreements. 

Thus, there was no reason to allow the government this 

pre-emptive strike on direct examination. See United States 

v. Thomas, 998 F.2d 1202, 1205 (3d Cir. 1993). 

The District Court also justified its ruling on the motion 

in limine after the trial by referring to defendants' crossexamination of Blum Bonjo. The court explained that

defendants challenged critical aspects of Blum Bonjo's 

participation in the activities that formed the basis for the 

mail fraud charge. One cannot, however, use defense

counsel's behavior after denial of the motion as any 

indication of what he would have done had his motion been 

granted by the court. 

The District Court also explained that the pleas were 

admissible to make clear that defendants were not being 

singled out for selective prosecution. Indeed in United 

States v. Inadi, 790 F.2d 383 (3d Cir.), rev'd on other 

 16 
grounds, 106 S.Ct. 1121 (1986), we allowed the admission 

of a co-conspirator's guilty plea "in order to rebut defense 

counsel's persistent attempts on cross-examination to raise 

an inference that the co-conspirators had not been 

prosecuted, and that [the defendant] had been singled out 

for prosecution." Id. at 384, n.2. But that is not the case 

here. Defense counsel in his motion in limine pledged not 

to engage in questioning on cross examination that would 

render the pleas admissible. Certainly, if the defense had 

raised an inference of selective prosecution, this tactic 

would have been covered by counsel's pledge. However, 

selective prosecution never became an issue in this case. In 

Thomas, where selective prosecution was also not an issue, 

we explained that "there was no need to mention the guilty 

pleas to deter any concern that Thomas was being singled 

out for prosecution." 998 F.2d at 1205. Moreover, even if 

the implication of selective prosection had become an issue, 

it could have been dealt with by instructing the jury that 

the issue of selective prosecution was not their concern. Id. 

The trial court suggested a further reason to admit the 

plea -- to explain the witnesses' firsthand knowledge of the 

defendant's misdeeds. See United States v. Halbert, 640 

F.2d 1000, 1005 (9th Cir. 1981). But a witness's guilty plea 

doesn't establish her basis of knowledge. The witness's 

testimony itself will establish that basis. 

After the valid purposes for which the plea may be 

admissible are proffered, the trial court must balance the 

probative value of the testimony with its prejudicial effect. 

The standard for the balancing is that of Federal Rule of 

Evidence 403.6 That is, the prejudice that inures to the 

defendant by the admission of a co-conspirator's guilty plea 

may be overcome by its probative value. Furthermore, in 

some circumstances, a limiting instruction against the use 

of the plea as substantive evidence of defendant's guilt, as 

_________________________________________________________________ 

6. Fed. R. Evid. 403 provides: 

 Although relevant, evidence may be excluded if its probative value 

is 

 substantially outweighed by the danger of unfair prejudice, 

 confusion of the issues, or misleading the jury, or by 

considerations 

 of undue delay, waste of time, or needless presentation of 

 cumulative evidence. 

 17 
was given in this case, reduces that prejudice. United States 

v. Werme, 939 F.2d 108, 114 (3d Cir. 1991). However, in 

Gaev, we recognized that "there may be cases where the 

inference of guilt from the co-conspirator's plea agreement 

is sufficiently strong that even limiting instructions will not 

effectively contain it." 24 F.3d at 478. This is one of those 

cases. 

Notwithstanding the limiting instruction here, the jury, 

having heard evidence accusing defendants of 39 counts of 

mail fraud and false claims, acquitted all 3 defendants on 

38 of the counts. The only count of conviction was the one 

to which the government's star witness, Blum Bonjo, a midlevel employee, had pled guilty. In addition, the patient 

involved in Count One, Mildred Hynds, was also involved in 

four other counts on which defendants were acquitted. It 

would appear then that whether a particular patient needed 

treatment, at least in the Hynds case, was not a 

determining factor in the jury verdict. Moreover, the 

government has conceded in its cross-appeal that the 

conduct charged in the other 38 counts was virtually 

identical to the conduct charged in Count One. The 

evidence cited by the government, in arguing that there is 

sufficient evidence to support the convictions on Count 

One, is for a large part the same evidence that the jury 

heard and then found not to support conviction on 38 of 

the counts. There is, therefore, the strong possibility that 

Blum Bonjo's guilty plea to that count was considered by 

the jury as direct evidence against the defendants.

Concerning the probative value of the pleas, as we have 

described above, the proffered reasons for admitting the 

evidence were weak. Therefore, notwithstanding the 

discretion due a district court judge making an evidentiary 

determination, we find that the probative value of the pleas 

was substantially outweighed by the danger of unfair 

prejudice. Despite the fact that we have found sufficient 

evidence to support Lukesh and Universal's convictions, the 

evidence on the count of conviction was very similar to the 

evidence supporting the thirty-eight acquitted counts. In 

view of the fact that the only distinguishing evidence on the 

count of conviction is the consideration of the coconspirators' guilty pleas, we must conclude that the denial 

 18 
of defendants' motion in limine and the subsequent 

introduction at trial of evidence of Blum Bonjo's and 

Martin's guilty pleas was reversible error. We will reverse 

the judgment of conviction as regards Lukesh and Universal.7 

CONCLUSION 

 For the reasons stated above, we will reverse the 

conviction of Attila Horvath for the insufficiency of the 

evidence against him and remand his case to the District 

Court for entry of a judgment of acquittal. We will reverse 

the convictions of defendants Lukesh and Universal and 

remand their cases to the District Court for a new trial. 

_________________________________________________________________ 

7. As regards Horvath, our holding that the post-verdict judgment of 

acquittal should have been granted renders moot his appeal of the denial 

of the motion in limine. 

 19 
GARTH, Circuit Judge, dissenting: 

The majority of the panel (my colleagues Judges Roth 

and McKee) have reviewed the record and reversed the 

conviction of the defendant Attila Horvath ("Horvath"), who 

had been charged with mail fraud in conducting a Medicare 

fraud scheme over a three-year period.1 In doing so, they 

have directed Horvath's acquittal on Count One2 despite the 

credible evidence found against him by the jury and despite 

the District Court's application of the undeniably correct 

standard, under United States v. Glasser, 315 U.S. 60 

(1942), which requires affirmance of a conviction so long as 

the verdict is supported by substantial evidence, with all 

reasonable inferences viewed in a light most favorable to 

the Government. That standard, to which this Court 

adheres, requires an affirmance of the defendants' 

convictions on this appeal. 

A. 

In light of the majority's rejection of the jury's verdict, 

which is tested by the Glasser standard just adverted to, 

and in light of an even more erroneous holding that

completely eviscerates the deference which we are required 

to give to a District Court's discretionary ruling to admit 

pleas of codefendants,3 I must respectfully dissent. 

_________________________________________________________________ 

1. The damage from Medicare fraud has been extensive. See, e.g., 

Medicare Contractors Aren't Pursuing Fraud, Audit Shows, USA TODAY, 

Dec. 2, 1998, at A1; Probers Allege Medicare Fraud by Columbia/HCA, 

CHICAGO TRIBUNE, Feb. 11, 1998, at N3 (disclosing investigation of 

nationwide Medicare fraud by large health care organization); Fraud and 

Waste in Medicare, N.Y. TIMES, Aug. 1, 1997, at A30 (stating 

government estimates approximately $23 billion per year lost to Medicare 

fraud). 

2. Count One charged that Horvath, Lukesh and Universal violated 18 

U.S.C. section 1341, which proscribes use of the mails in furtherance of 

a fraudulent scheme. 

3. See General Elec. Co. v. Joiner, 522 U.S. 136 (1997) (recognizing, in 

context of expert testimony, that trial courts have discretion to admit 

such testimony, and rejecting standard that "fail[s] to give the trial 

court 

the deference that is the hallmark of abuse of discretion review"). A long 

line of cases from this Court has respected the District Court's 

discretion 

 20 
B. 

Indeed, I dissent not only from the majority's insistence 

on refusing the admission of the guilty pleas of 

codefendants Penny Martin and Judy Blum Bonjo on the 

record presented here, but I strongly urge the full court to 

grant en banc consideration to what can only be 

characterized as an aberration in our jurisprudence-- an 

aberration dictated in the first instance by the suspect 

holding in United States v. Thomas, 998 F.2d 1202 (3d Cir. 

1993). In Thomas, in the face of a compelling and reasoned 

dissent by Judge Rosenn of this Court, our own precedents, 

decisions from our sister Circuits,4 and fully documented 

and detailed discretionary rulings by the District Court 

Judge, the same distorted result as to the exclusion of a 

plea agreement gave rise to the same miscarriage of justice 

that we now see here. 

Our court -- the full court -- should undertake to clarify 

this significant aspect of our criminal jurisprudence by 

vacating the instant majority opinion, by rehearing the 

issue en banc, and by reaffirming the standard that Judge 

Scirica of this Court found appropriate in Gaev . It should 

re-align the Third Circuit on the correct and proper course, 

which provides for the acceptance of guilty pleas at trial by 

codefendants when the correct standard of a District 

Court's discretion is applied to the facts and when the 

proper purposes of credibility, selective prosecution and 

establishing firsthand knowledge are found, as they were 

unquestionably applied by the District Court and found 

here. Such a course would comport with the jurisprudence 

_________________________________________________________________ 

in admitting pleas of codefendants. See United States v. Gaev, 24 F.3d 

473 (3d Cir.), cert. denied, 513 U.S. 1015 (1994); United States v. 

Gambino, 926 F.2d 1355 (3d Cir.), cert. denied, 502 U.S. 956 (1991); 

United States v. Newman, 490 F.2d 139 (3d Cir. 1974); United States v. 

Gullo, 502 F.2d 759 (3d Cir. 1974). Indeed, this Court has held 

repeatedly that admission of a plea, without more, is not ordinarily 

reversible. See, e.g., United States v. Restaino, 369 F.2d 544 (3d Cir. 

1966). 

4. See, e.g., United States v. Tse, 135 F.3d 200 (1st Cir. 1998); United 

States v. Casto, 889 F.2d 562 (5th Cir. 1989), cert. denied, 493 U.S. 

1092 (1990); United States v. Louis, 814 F.2d 852 (2d Cir. 1987). 

 21 
of our sister Circuits that have wisely, and in accord with 

prevailing legal standards, accepted such evidence.

Based on the record before us, I believe (1) that the 

evidence was sufficient to support Horvath's conviction, and 

(2) that the District Court did not abuse its discretion in 

admitting the codefendants' guilty pleas, and that the guilty 

pleas were admitted for a proper purpose and did not 

invalidate the convictions of all the defendants. Therefore, 

I would hold the majority's disregard of the District Court's 

rulings and its reversal of those convictions is unwarranted 

and violates both the District Court's and this Court's 

proper standards of review. 

C. 

Although not addressed in the majority opinion, see

Majority Op. at 6 n.3, I further conclude that pursuant to 

the teaching of United States v. Watts, 519 U.S. 148 (1997), 

the District Court grievously erred in not considering 

acquitted and uncharged conduct pursuant to Section

2F1.1 of the Guidelines in calculating the Sentencing 

Guidelines range of each of the defendants. 

Accordingly, I dissent from the majority's decision to 

remand Horvath's case to the District Court to enter a 

judgment of acquittal, and to reverse the convictions of 

Lukesh and Universal and remand for a new trial on Count 

One. 

I 

As the majority opinion notes, see Majority Op. at 6, 

Horvath, Lukesh and Universal appealed the denial by the 

District Court of their post-conviction motion for a 

judgment of acquittal, or in the alternative, a new trial. 

These defendants had moved for relief on the basis of 

insufficiency of the evidence and claimed that the 

admission of the codefendants' guilty pleas were unduly 

prejudicial. 

Prior to that motion, however, these defendants had

made an in limine motion to exclude testimony concerning 

the plea agreements entered into by the codefendants. The 

 22 
District Court took the matter under advisement, accepted 

submissions by the parties and heard argument as to the 

applicable legal principles. The District Court, in its 

discretion, denied the motion, concluding that 

 if [Bonjo and Martin] testify the jury is going to 

 certainly wonder whether or not they have been 

 charged. It's going to wonder perhaps what they have 

 been promised by the prosecutor if anything and what 

 they may be getting in return for their testimony. 

 I think in weighing all of those factors with the possible 

 prejudice that I am going to allow the Government to 

 bring out the fact of the guilty plea and the fact of the 

 guilty plea agreement. 

The District Court considered the issue again after the 

conclusion of the trial. In denying these defendants' postconviction motion, the District Court first noted that, in a 

motion challenging the sufficiency of the evidence, the court 

 must view the evidence in the light most favorable to 

 the government. A claim of insufficiency places a very 

 heavy burden on the [defendants]. [The court] must 

 affirm the convictions if a rational trier of fact could 

 have found defendant[s] guilty beyond a reasonable 

 doubt, and the verdict is supported by substantial 

 evidence. 

 The mail fraud statute, 18 U.S.C. S 1341, proscribes 

 any "scheme or artifice to defraud" in which the 

 defendant participated with the specific intent to 

 defraud and in which the mails were used "in

 furtherance of the fraudulent scheme." The scheme 

 "need not be fraudulent on its face but must involve 

 some sort of fraudulent misrepresentations or 

 omissions reasonably calculated to deceive persons of 

 ordinary prudence and comprehension." Proof of 

 specific intent is required, which "may be found from a 

 material misstatement of fact made with reckless 

 disregard for the truth." United States v. Coyle, 63 F.3d 

 1239, 1243 (3d Cir. 1995) (citations omitted). Thus, a 

 mail fraud conviction stands where the evidence 

 demonstrates a defendant's willful participation in a 

 scheme to defraud with knowledge of its fraudulent 

 23 
 nature. See United States v. Pearlstein, 576 F.2d 531, 

 537 (3d Cir. 1978). 

In denying the motion, the District Court conducted a 

careful review of the evidence indicating a crime had been 

committed, and the evidence connecting each defendant to 

the crime. After outlining the testimony and documentation 

connecting Horvath and the other defendants to the crime 

charged in Count One, the District Court summarized the 

evidence as follows: 

 In the instant case, the individual defendants' guilty 

 knowledge could rationally be inferred beyond a 

 reasonable doubt from (1) the active parts Horvath and 

 Lukesh played in the daily operation of the speech 

 therapy practice, (2) [d]efendants' knowledge and 

 monitoring of Universal's billing problems -- the 

 number of patient cases being billed and met with 

 record requests, denials and increased scrutiny by 

 Blue Cross . . . (3) the testimony of key administrators, 

 Julia Blum Bonjo, Penny Martin and Wendy Gold, 

 recalling how Horvath and Lukesh wanted patient 

 documentation billable no matter what had to be done 

 to it, and (4) the directives given to speech therapists 

 by their supervisors, under tremendous pressure from 

 Lukesh and Horvath, to pick up patients, even though 

 inappropriate, to warrant skilled services, and to 

 rewrite patient documentation to make patient services 

 "billable" and reimbursable by Medicare. 

The District Court found this evidence sufficient to support 

the jury's finding that a crime had been committed and that 

Horvath and Lukesh (and, through their actions, Universal) 

had the intent required under the mail fraud statute. 

Neither the appellants nor the majority have given any 

reason to question that conclusion by the District Court or 

the jury's verdict. 

The District Court next addressed the issue of admission 

of the plea agreements. It reiterated its concern over 

selective prosecution, and noted as well that the testimony 

from Bonjo and Martin would assist the jury in assessing 

credibility. I believe that the majority has artfully finessed 

the issue of admitting the codefendants' guilty pleas, 

 24 
without ever providing reasons or presenting evidence that 

the District Court had abused its discretion - indeed, 

without ever even holding that the District Court Judge did 

so. In so doing, the majority has not dealt fairly with the 

jurisprudence dealing with this subject, and has ignored a 

completely developed record. I thus turn first to the District 

Court's rulings admitting the guilty pleas. I do so observing 

that the admission of the guilty pleas at trial does not 

impact upon the other, independently sufficient evidence 

against the defendants. 

II 

The panel majority has reversed the Count One 

convictions of Lukesh and Universal because of the putative 

prejudicial effect that the introduction of Bonjo's and 

Martin's guilty pleas had at trial. Although the majority 

does not address this issue with respect to Horvath, it is 

obvious that the admission of the guilty pleas did not affect 

the other evidence presented to the jury to support

Horvath's conviction. As the defendants were acquitted of 

thirty-eight (38) counts of the indictment but were

convicted of the very count to which Bonjo pleaded guilty, 

defendants contend -- and the majority concurs-- that the 

guilty pleas were not admitted for a proper purpose and 

were so prejudicial that their admission constitutes 

reversible error. Majority Op. at 17-19. 

I strongly disagree. In my view, the pleas of both Bonjo 

and Martin,5 after careful consideration and discussion in 

accordance with our requirements set forth in Gaev, were 

properly admitted. Even if not properly admitted, the 

evidence adduced at trial, combined with the curative 

instructions given by the District Court, rendered any error 

harmless. Indeed, the majority admits as much when it 

declares that the evidence against Lukesh and Universal is 

sufficient to support the jury's verdict. Majority Op. at 13- 

14. 

_________________________________________________________________ 

5. Bonjo was charged in the same indictment as Horvath, Lukesh and 

Universal. Martin, it appears from the record, was charged separately by 

information and pled guilty to one count of mail fraud. 

 25 
The District Court, at the time of both Bonjo's and

Martin's testimony, gave a curative instruction, advising the 

jury that the purpose for admitting testimony concerning 

their respective plea agreements was so that they could 

"adequately assess the credibility" of the testimony. The 

jury was also instructed that the jury was not to consider 

the plea agreements as evidence of the guilt of Horvath, 

Lukesh or Universal. The District Court, while charging the 

jury at the end of the trial, instructed the jury again, as 

follows: 

 Julia Blum Bonjo and Penny Martin entered into plea 

 agreements with the Government. Such plea 

 agreements are expressly approved as lawful and 

 proper by the United States Supreme Court and are 

 appropriate, are proper. Each witness' decision to plead 

 guilty is a personal decision about her own guilt. You 

 may not consider this evidence against the defendants 

 on trial nor may you draw any conclusions or inferences 

 of any kind about the guilt of the defendants on trial 

 from the fact that a prosecution witness pled guilty to 

 similar charges. 

 The testimony of such witnesses, as I indicated, should 

 be scrutinized with caution and give it the weight that 

 you think should be given under all of the 

 circumstances. 

 And I indicated to you during the trial that the fact 

 that [Bonjo and Martin] entered pleas of guilty could 

 not be considered by you in determining the guilt or 

 innocence of any of the people on trial here. The only 

 reason the plea and the plea agreement were brought 

 out was so that you would know all of the 

 circumstances surrounding the entry of the plea, you'd 

 know the terms under which the plea was entered and 

 you could judge for yourselves whether the witness in 

 the trial is testifying truthfully or whether the witness 

 has a motive to embellish testimony or vary from the 

 truth. 

 That is the only basis or the only reason why the plea 

 and the plea agreement were admitted. 

 26 
(Emphasis added.) This Court reviews a District Court's 

decision to admit evidence of plea agreements for abuse of 

discretion, and we have been directed in no uncertain 

terms to defer to that discretion. See Joiner, 522 U.S. at 

136; Gaev, 24 F.3d at 476. 

Although a co-conspirator's guilty plea cannot be used as 

substantive evidence of a defendant's guilt, evidence of a 

guilty plea or plea agreement may be introduced for other 

permissible purposes. Judge Rosenn, in a cogent analysis 

of this issue in United States v. Thomas, included as proper 

purposes "(1) to bolster the credibility of the co-conspirators 

as prosecution witnesses; (2) to quell the inference that the 

co conspirators were not punished and that [the 

defendants] w[ere] thus `singled-out' for punishment; and 

(3) to establish the basis for the co-conspirators'firsthand 

knowledge of the crime about which they testified. Each of 

these is a proper purpose for admitting a guilty plea." 998 

F.2d at 1208 (Rosenn, J., dissenting). See also Gaev, 24 

F.3d at 476; Gambino, 926 F.2d at 1363; United States v. 

Werme, 939 F.2d 109, 113 (3d Cir. 1991), cert. denied, 502 

U.S. 1092 (1992); United States v. Inadi, 790 F.2d 383, 384 

n.2 (3d Cir. 1986). To this list should be added the 

overarching principle that trial judges have broad discretion 

to admit testimony under Rule 403 that "discloses the 

purpose, knowledge or design of a particular person." 

Glasser, 315 U.S. at 80; cf. Joiner, 522 U.S. 136 

(recognizing, in context of expert testimony, that trial courts 

have discretion to admit such testimony, to which this 

Court must defer). The mere admission of a plea is not 

ordinarily reversible. See, e.g., Restaino, 369 F.2d 544. 

Other Circuits have also held that admission of a plea by a 

co-conspirator is appropriate for purposes other than to 

persuade a jury of a defendant's guilt. See, e.g., Tse, 135 

F.3d 200; Casto, 889 F.2d 562; Louis, 814 F.2d 852.

In Gaev, this Court summarized that the underlying 

principle concerning the admissibility of a plea agreement 

as follows: "If a co-conspirator who appears as a witness 

has pleaded guilty, the trier of fact should know about the 

plea agreement in order properly to evaluate the witness's 

testimony, unless that would unduly prejudice the 

defendant." 24 F.3d at 476 (emphasis added). Moreover, as 

 27 
the credibility of the Government's witnesses normally is 

critical to the successful prosecution of a case, this Court 

has acknowledged that the strategic admission of a guilty 

plea "dampens attacks on credibility, and forecloses any 

suggestion that [the Government] was concealing evidence. 

Such disclosure is appropriate." Gambino, 926 F.2d at 

1363. 

Here, the District Court permitted the introduction of the 

guilty pleas because of credibility concerns that might arise 

in the minds of the jurors as to Bonjo's and Martin's 

testimony. In addition, the District Court determined that 

the admission of the guilty pleas would allay the jurors' 

concerns -- that might arise in the absence of such

admission -- that Horvath and Lukesh were subjected to 

selective prosecution. In making these rulings, the District 

Court, following this Court's direction in Gaev, balanced the 

probative and prejudicial impact of the pleas. The District 

Court found that, as in Gaev, credibility was an issue 

because the witnesses' testimony was challenged, and that 

the limiting instructions cured any prejudice. Even more so 

than in Thomas, here the District Court found "specific 

issues of credibility" that warranted admission of the pleas. 

These determinations were well within the District 

Court's discretion, and this Court must (and I emphasize 

the word must) accord the proper deference such rulings on 

admissibility by the District Court. Cf. Joiner, 522 U.S. 136 

(finding discretionary decisions of trial court must be 

upheld in absence of manifest error). 

A fair reading of the record reveals that the District Court 

admitted the pleas for a proper purpose, and the 

Government's limited use of the guilty pleas at trial caused 

no undue prejudice that would not have been corrected by 

the District Court's curative instructions. This is not a case 

in which the prosecution placed "undue emphasis" upon 

the pleas, Restaino, 369 F.2d at 545, to convince the jury 

of the defendants' guilt. Nor is this a case in which the 

curative instruction failed to advise the jury not to consider 

the admission of guilt by the witness against the 

defendants. See Newman, 490 F.2d 139; Gullo, 502 F.2d 

759. Here, another co-defendant (Vicki Meitus) was 

acquitted of the charge alleged in Count One. This fact, 

 28 
when combined with the curative instruction, more than 

amply supports the conclusion that admission of the pleas 

was not an abuse of discretion. See Restaino, 369 F.2d at 

546. 

Indeed, the majority at no point claims that the District 

Court Judge abused his discretion -- nor could it in light 

of the careful and detailed consideration that Judge Kelly 

gave to the evidence in accordance with this Court's 

direction in Gaev. See Appendix 1768-72; Memorandum of 

May 31, 1996 at 16-20. Nor does the majority point to any 

evidence in the record that could support a determination 

that the District Court abused its discretion. 

The only reason I can discern that the majority gives in 

holding that the guilty pleas were not admitted for a proper 

purpose was because Horvath, Lukesh and Universal 

pledged not to raise the issue of the accomplices' guilty 

pleas. Majority Op. at 16-17. Thus, the majority concludes 

that there was no need preemptively to bolster the 

credibility of the witnesses with the admission of their 

guilty pleas because the defendants would not have 

attacked Blum Bonjo and Martin on credibility grounds. 

In so holding, however, the majority totally ignores prior 

directions of this Court that guilty pleas can be admissible 

even in the absence of an attack on a witness' credibility. 

See Gambino, 926 F.2d at 1363 ("[E]ven in the absence of 

this attack [on the Government witness' credibility], the 

elicited testimony [i.e., the guilty plea] was proper here.") 

See also Thomas, 998 F.2d at 1208 (Rosenn, J., dissenting). 

As Gambino has not been overruled, it remains the rule in 

this Circuit. The absence of an attack on a witness's 

credibility is simply insufficient for a court to find that a 

judge abused his discretion in admitting the plea; here, the 

District Court cited Gambino in its post-trial ruling for 

precisely this proposition. To hold otherwise, as the 

majority does, not only presents a conflict with Gambino,6 

but it would for all time foreclose the government's 

admission of evidence of a guilty plea on direct examination 

of its witnesses by the preemptive promise by defense 

_________________________________________________________________ 

6. See Internal Operating Procedure 9.1 ("[N]o subsequent panel 

overrules the holding in a published opinion of a previous panel"). 

 29 
counsel not to question the witness concerning the plea. 

That rule is not the rule of this Circuit. See Gaev, 24 F.3d 

at 477-78 ("While plea agreements have often been 

admitted in response to actual or anticipated attacks on a 

witness's credibility, an attack is not always necessary to 

justify their introduction") (emphasis added). 

I urge that the Court consider this issue en banc because 

the majority opinion here -- as the majority opinion did in 

Thomas, which concerned an almost identical set of facts -- 

in effect rules out the use of any guilty plea, without regard 

to the discretion of the District Court, so long as defense 

counsel promises not to question the witness concerning 

the plea. Thomas and the analysis of the majority in the 

present case, when seen through the lens of Gaev, 

Gambino, Newman, Gullo and Restaino, makes a mockery of 

the holdings in those cases. To resolve the conflict between 

these precedents and Thomas and this case, the Court as 

a whole should confront this issue. 

III 

The majority has concluded that the evidence presented 

at trial was insufficient to support the conviction of 

Horvath, Majority Op. at 12, although there was sufficient 

evidence to support the convictions of Lukesh and 

Universal. Majority Op. at 13-14. My reading of the record 

leads me to a contrary conclusion with regard to Horvath. 

Because I conclude that the jury's verdict can be easily 

sustained by the evidence produced at trial, and that the 

admission of Bonjo's and Martin's guilty pleas does not 

affect this conclusion, I would affirm the conviction of 

Horvath. 

The District Court enunciated and applied the correct 

standard in reviewing a challenge to a jury verdict based on 

insufficiency of evidence. In reviewing a jury verdict, the 

court "must view the evidence in the light most favorable to 

the jury verdict and presume that the jury verdict properly 

evaluated credibility of the witnesses, found the facts, and 

draw rational inferences." United States v. Iafelice, 978 F.2d 

92, 94 (3d Cir. 1992). A conviction must be sustained if the 

verdict is supported by substantial evidence, and all 

 30 
reasonable inferences must be viewed in a light most 

favorable to the Government. Id. This Court must simply 

determine whether "the conclusion chosen by the fact 

finders was permissible." United States v. McGill, 964 F.2d 

222, 230 (3d Cir. 1992), cert. denied, 506 U.S. 1023 (1992). 

If there is substantial evidence to support the verdict, we 

will not reverse even though this Court may have decided 

the case differently. United States v. Sain, 141 F.3d 463, 

470 (3d Cir. 1998). 

Despite the majority's emphasis upon the fact that much 

of the evidence that the District Court relied upon to link 

Horvath to the fraudulent scheme did not directly relate to 

the Hynds incident charged in Count One, the elements of 

mail fraud do not necessitate that a defendant participate 

in every act executed in furtherance of that scheme. As the 

District Court noted, relying on Pearlstein, 576 F.2d at 541, 

the jury can infer the requisite intent from circumstantial 

evidence. 

To obtain a conviction under section 1341, the 

Government must establish (1) the existence of a scheme to 

defraud; (2) the participation by the defendant in the 

particular scheme charged with the specific intent to 

defraud; and (3) the use of the United States mails in 

furtherance of the fraudulent scheme. See United States v. 

Hannigan, 27 F.3d 890, 892 (3d Cir. 1994). 

Here, the evidence showed that Horvath, the Director of 

Finance, and Lukesh, the Director of Operations, actively 

participated in the daily operations of Universal and worked 

closely together. Both knew that Universal was having 

difficulty with Independence Blue Cross in getting its 

speech therapy services reimbursed. In addition, the 

testimony from the Universal administrators (i.e., Martin, 

Blum Bonjo, and Wendy Gold) indicated that Horvath 

and Lukesh created a "coercion" culture in which pressure 

was placed upon Universal's employees to obtain 

reimbursement in any way possible. 

Specifically, Gold testified that Horvath and Lukesh had 

placed her under enormous pressure to increase 

production, which included pressure to rewrite the patient 

documentation. Blum Bonjo testified that she met with 

 31 
Horvath and Lukesh together weekly for discussions about 

cases in which Medicare denied reimbursement for the 

speech services rendered and also testified that Universal 

handled non-billable cases by rewriting patient 

documentation to make such treatment billable. 

Similarly, Martin testified that Horvath said that "he 

wanted the documentation billable no matter what had to 

be done to it." Some of the cases were put on hold (meaning 

that they would not be submitted for billing) because they 

did not seem appropriate for billing to Medicare. Martin 

testified that when the number of claims on hold were high, 

Horvath instructed that the claims be billed without 

doctors' signatures. Further, Martin stated that the 

documentation had to be rewritten and altered and 

originals had to be destroyed in order to avoid 

discrepancies in the documentation. Finally, the District 

Court reviewed the evidence presented at trial and found 

that Horvath was very active in the daily operations of 

Universal from the outset of the scheme, and closely 

monitored the results of the speech therapy practice. 

Horvath, through his approval of Universal's "rewriting" 

policy, sanctioned the fraudulent scheme alleged in Count 

One, for which he was found guilty. 

In my view, there is no question that the jury's verdict 

linking Horvath to the fraudulent scheme is supported by 

the record. There was sufficient evidence to convince the 

jury, and this Court should not "weigh evidence or 

determine the credibility of witnesses." United States v. 

Casper, 956 F.2d 416, 421 (3d Cir. 1992) (quoting Glasser, 

415 U.S. at 80). Reversal for insufficiency of evidence 

should not be granted except where the failure of the 

prosecution is "clear." Id. That situation is not present here. 

See also United States v. Anderson, 108 F.3d 478, 480-81 

(3d Cir. 1997) ( "Only when the record contains no 

evidence, regardless of how it is weighed, from which the 

jury could find guilt beyond a reasonable doubt, may an 

appellate court overturn the verdict"); United States v. 

McGlory, 968 F.2d 309, 321 (3d Cir.), cert. denied, 506 U.S. 

956 (1992). 

The question, then, for the jury to answer was whether 

the evidence sufficiently established that Horvath was 

 32 
connected to the conduct charged in Count One. The jury 

determined that there was, and the record more than fairly 

supports that determination. 

IV 

As the majority has reversed the convictions on all three 

defendants, its opinion does not discuss the sentence 

imposed by the District Court, which was the subject of the 

government's cross-appeal. Although I would affirm the 

respective convictions of Horvath, Lukesh and Universal, I 

would reverse the District Court's sentence calculation 

under the Sentencing Guidelines ("the Guidelines"), as 

presumably the issue of uncharged and acquitted conduct 

can arise again in this case. 

The majority opinion, oddly enough, does not reflect the 

sentences imposed upon the defendants. Let me do so. The 

District Court sentenced Universal to two years' probation 

and a $25,000 fine. Horvath and Lukesh were sentenced to 

three years of probation each. Horvath was fined $10,000, 

plus $705.20 in restitution. Lukesh was fined $15,000, 

plus restitution of $705.20. 

Under Section 1B1.3 of the Guidelines, a District Court 

can consider relevant conduct when calculating a 

defendant's guideline range whether or not that conduct 

was formally charged. See United States v. Watts, 519 U.S. 

148, 152-53 (1997); see also U.S.S.G. S 1B1.3 cmt. 1 ("The 

principles and limits of sentencing accountability under 

this guideline are not always the same as the principles 

and limits of criminal liability. [T]he focus is on the specific 

acts and omissions for which the defendant is to be held 

accountable . . . rather than on whether the defendant is 

criminally liable.") In addition, under Watts, a defendant's 

guideline range is affected even by acquitted conduct, as 

long as that conduct has been proved by a preponderance 

of the evidence. See Watts, 519 U.S. at 156. See also United 

States v. Cianci, 154 F.3d 106 (3d Cir. 1998); United States 

v. Baird, 109 F.3d 856 (3d Cir. 1997) (finding conduct 

uncharged pursuant to plea agreement may be considered 

at sentencing). 

 33 
Notwithstanding the Guidelines and Watts, at sentencing, 

the District Court declined to consider uncharged and 

acquitted conduct when calculating defendants' guidelines 

ranges. Instead, the District Court only considered the loss 

associated with the conviction obtained in Count One-- 

totaling $1,411.20 -- without explaining why it was not 

considering the uncharged and acquitted conduct that the 

Government sought to be included. I believe that this 

omission was an abuse of discretion. 

While I conclude that the evidence proved that Horvath, 

Lukesh, and Universal could be held accountable for the 

relevant (i.e., uncharged or acquitted) conduct, at the very 

least, the District Court should have made findings of fact 

as to why it declined to consider that conduct in the 

calculation of the sentences of Horvath, Lukesh and

Universal. See, e.g., E.C. Ernst, Inc. v. Koppers Co. Inc., 626 

F.2d 324 (3d Cir. 1980) (remanding because District Court 

failed to make factual findings and thus this Court could 

not determine how District Court assessed evidence). The 

District Court merely identified the standard under Watts 

and its conclusion not to consider the relevant conduct 

without stating its reasons, stating "I find under the Watts 

case that the burden is preponderance of the evidence and 

decline to include that conduct in the specific offense 

characteristics." 

Given that the District Court ruled in denying the postconviction motion that there was substantial evidence to 

support the underlying conviction in Count One, I fail to 

understand how the District Court could conclude that the 

Government had not met its burden by a preponderance of 

the evidence of Horvath, Lukesh, and Universal's 

involvements in the other related counts of the very same 

scheme to defraud. 

The inclusion of uncharged and acquitted conduct, which 

may have amounted to a total loss of $343,500, would have 

resulted in an increase of eight levels under the Guidelines. 

See U.S.S.G. S 2F1.1(I). Horvath had an offense level of 8, 

providing a guidelines range of 0-6 months, and Lukesh 

had an offense level of 10, providing a guideline range of 6- 

12 months. If uncharged and acquitted conduct were 

considered at sentencing, however, Horvath's sentencing 

 34 
range could have increased to 21-27 months (i.e., to offense 

level 16) and Lukesh's range could have increased to 27-33 

months (i.e., offense level 18). 

Accordingly, I would hold the defendants accountable at 

sentencing for the uncharged and acquitted conduct with 

which they were involved in executing their fraudulent 

scheme. 

V 

In its opinion, the majority has reversed a jury verdict 

founded on sufficient evidence and has reversed detailed 

evidentiary rulings by the District Court. In doing so, the 

majority has violated four appellate strictures: 1) it has 

ignored our established standard of review under Glasser, 

which requires that all reasonable inferences be resolved in 

favor of the government in an appeal challenging sufficiency 

of the evidence; 2) it has substituted its own "jury verdict" 

for that of the enpanelled jury; 3) it has refused to give the 

required deference to a District Court Judge's discretionary 

rulings; and 4) it has perpetuated a jurisprudential conflict 

over the admission of codefendant guilty pleas at trial. 

The trial transcript and post-conviction order reveal that 

the District Court carefully considered the arguments 

raised by the defendants, and rejected them in accordance 

with principles long established by prior panels of this 

Court. Under these circumstances, when the issues raised 

on appeal concern evidentiary issues addressed by the 

District Court in a careful analysis that considered the 

arguments for both sides, I am unable to agree that the 

District Court abused its discretion -- a claim that not even 

the majority justifies. 

In sum, therefore, I cannot subscribe to the majority 

opinion because I believe that the guilty pleas were 

admitted for a proper purpose and because there was

sufficient evidence to support Horvath's conviction. The 

evidence revealed an elaborate scheme of fraud on the 

medical insurance system of this country, which, although 

 35 
not acknowledged by the majority, is a continuing problem 

that has cost our country dearly.7 

I also conclude that the District Court erred in failing to 

state its reasons for not considering the uncharged and 

acquitted conduct of the defendants at sentencing. 

Accordingly, I respectfully dissent. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

7. See note 1, supra. 

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