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. e du/thir dc ir c uit_1999/38Filed 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. KellyNos. 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

2Thomas 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, we re charged with mail fraud and false claims in a 39 co unt indictment. The government alleged that they conduc ted 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 gove rnment now argues that evidence of illegal activity, which occurred

after the date of the offense in Count One but stil l within the three-year period of the originally charged sch eme, can be used to sustain the verdict of guilty on Count O ne.

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

conviction on Count One. We must also decide whethe r the District Court properly admitted into evidence the guilty pleas of two testifying mid-level managers after de fendants had represented to the court that they would not, o n cross examination, challenge the credibility of these wit nesses 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 se rved were primarily the elderly. Universal submitted cla ims for the patients it treated to Independence Blue Cross (IBC), which administered Medicare coverage. IBC would the n submit claims to Medicare.

3Medicare 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 tha t provide Medicare coverage guidelines. These include four criteria to determine if the treatment is medically reasonable and necessary, and therefore reimbursabl e: 1) the therapy must be safe and effective for treatmen t of the patient's condition; 2) the services provided to th e patient must be of a level of complexity that the services can only be provided by a certified speech pathologist; 3) w here restorative treatment is ordered, there must be an expectation that the services being provided to the patient will bring about significant improvement in a reaso nable period of time; and 4) the frequency and duration o f services must be reasonable and necessary for the p atient's

condition.

Universal therapists would evaluate patients in acc ord with the physician's orders and prepare a plan of treatment. The evaluation and plan of treatment mus t state whether the treatment is in fact necessary. The eva luation and plan is then approved (signed) by the doctor. A s treatment progresses, speech therapists create prog ress notes. If treatment is to continue, Medicare requir es that the need for it be certified every 30 days by a med ical doctor. Medicare will continue to pay for speech th erapy as long as patients are making progress toward the goa ls established in the plan of treatment. The doctor ex ecutes the 30 day certification by signing a Medical Infor mation Form (MIF), which contains a summary, primarily fro m the therapists' progress notes, of the previous 30 days of treatment, as well as a recommended course of treat ment for next 30 days.

Universal submitted electronic Medicare bills to IB C. Essentially, IBC would review Universal's reimburse ment claims. Universal and IBC often disagreed about the interpretation of Medicare guidelines and the propr iety of the bills submitted. At some point, IBC began reque sting that Universal supply the following documentation t o support the electronic bills: a) the evaluation and plan of treatment, b) the progress notes, and c) the MIFs.

4Claims that were rejected would be "rewritten" by

Universal staff. Depending on the reason for reject ion, the "rewriting" to obtain reimbursement might be fraudu lent. For example, if information was missing from a form

, Universal personnel would "rewrite" the form to inc lude the missing information. Other "rewriting," however, wa s not as innocuous. For example, a mid-level corporate emplo yee pled guilty to mail fraud for falsifying the perfor mance 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 fac t, the patient was not making progress and the services sh ould not have been reimbursable. Another type of "rewrit ing" consisted of changing evaluations and MIFs after th e 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 trea tment were rewritten to create the "appearance" of patien ts who could properly receive reimbursable therapy; 2) MIF s containing physician's certifications were falsifie d, that is, altered after the doctor originally signed them and the signature photocopied back on; and 3) progress note s were altered to conform with the falsified evaluation an d MIFs. A grand jury indicted Attila Horvath, Vice President and Director of Finance at Universal; Richard Lukesh, D irector of Operations at Universal; Universal, the corporat ion 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 t he 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 w ere 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 t herapy documents. Count One charged that, in furtherance o f the scheme, Blue Cross mailed a check, dated May 10, 19 89, to Universal. The check represented a claim for treatm ent

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

28, 1989.1

Before trial, defendants had moved in limine to pre vent the government from presenting evidence that govern ment witnesses Judy Blum Bonjo and Penny Martin, employe es of Universal, had pled guilty to mail fraud.2 Defen dants promised that they would not challenge these witnes ses' credibility on cross-examination. Defendants argued that the guilty pleas were not relevant under Rule 401 o f the Federal Rules of Evidence and, if relevant, were mo re prejudicial than probative under Rule 403. The Dist rict Court denied the motion in limine. Defendants appea l this evidentiary ruling.

After the verdict, defendants moved for a Fed. R. C rim. P. Rule 29 judgment of acquittal, arguing that there w as 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 fed eral criminal code. We have appellate jurisdiction over defendants' direct appeal from a judgment of convic tion. 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 acqui ttal under Rule 29, arguing that there was insufficient evidence

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1. Counts Two, Three, and Four also involved the ma iling of checks that pertained to Mildred Hynds. Count Twenty-seven char ged a false claim arising out of a bill that was submitted for the tr eatment of Hynds.

2. Blum Bonjo testified that she had pled guilty to Count One of the indictment before the jury. App. 2190. Martin was c harged in a separate indictment and testified that she had pled guilty t o one count of mail

fraud.

3. The government also filed a cross-appeal, claimi ng that the District Court erred at sentencing in refusing to consider t he fraud loss from the "virtually identical" conduct charged in the other 38 acquitted counts as

relevant conduct under Section 1B1.3 of the Sentenc ing Guidelines. Because of our holding on defendants' appeal, we do not reach the government's cross-appeal.

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

as to all three defendants. United States v. Univer sal 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. Iaf elice, 978 F.2d 92 (3d. Cir. 1992).

We apply the same legal standard as the District Co urt. We must view the evidence in the light most favorab le to the jury verdict and presume that the jury properly evaluated the credibility of the witnesses, found t he facts,

and drew rational inferences. Id. at 94. In that li ght, 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 evidenc e." U.S. v. Coyle, 63 F.3d 1239, 1243 (3d Cir. 1995).

"The mail fraud statute, 18 U.S.C. S 1341, proscrib es any scheme or artifice to defraud in which the defendan t participated with the specific intent to defraud an d in
which the mails were used `in furtherance of the fr audulent scheme.' " Coyle, 63 F.3d at 1243."Proof of specifi c 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). A s such, the government must prove that a scheme to defraud existed, that each defendant participated in that s cheme, 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 j oin a scheme while the scheme exists; that is, that the s cheme and a defendant's knowing participation in it must occur over the same period of time. In this case, the gov ernment alleged in the thirty-nine count indictment that a scheme took place from the summer of 1988 through Septembe r 21, 1991. However, the jury convicted the defendant s 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 const itutes the scheme for which the jury convicted the defenda nts.

7Because of the acquittals on Counts Two through Thi rtynine, the scheme could not have run through the ent ire period which the government charged in the indictme nt. Nevertheless, May 10, 1989, the date of the offense charged in Count One, is not necessarily the evidentiary cu t-off. We must determine whether events that took place after May 10, 1989, up until September 1991, can be used to s upport 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 furthera nce of a broad three year scheme. However, as we made clea r in United States v. Pflaumer, 774 F.2d 1224 (3d Cir. 1 985), in the context of a conspiracy to commit mail fraud in violation of 18 U.S.C. S 371, the conspiracy at iss ue "was a conspiracy to violate the mail fraud statute, which end[s] with the last mailing." Id. at 1232. As such, willf ul membership in the scheme must have existed on or be fore May 10, 1989, the date of the mailing for the count of conviction. There is no concept of retroactive join der in mail fraud schemes after the last culpable mailing. More over,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 consp iracy to commit mail fraud, not just mail fraud, is a dis tinction

without a difference under the circumstances of thi s case. A conspiracy to violate a substantive prohibition i n a federal statute ends when the unlawful object of th e conspiracy has been accomplished. Grunewald v. Unit ed States, 353 U.S. 391, 406-15 (1957). In Pflaumer, t he object of the conspiracy was the use of the mails to effec tuate a scheme to defraud states of tax revenues. Although the scheme to defraud the states may have continued pas t the last mailing, the use of the mails to effectuate th e 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 th e end of the scheme. To be sure, subsequent words and dee ds may bear on whether a person was participating and

8participating willfully in a scheme. For example, a

statement by a defendant after the end of the schem e may make clear that he was in fact willfully participat ing in, or had knowledge of, the scheme before it ended. There must, however, be substantial evidence of participation b efore 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 ev idence of events prior to the May 10, 1989, mailing to sus tain the jury verdict? To sustain the jury verdict, in addit ion to demonstrating that each defendant willfully joined the mail fraud scheme, the government must produce sufficien t

evidence that a mail fraud scheme existed. This mea ns that there must be sufficient evidence that the Hynds ma iling was in furtherance of a mail fraud scheme, i.e. , t hat the services to Mildred Hynds for which defendants bill ed and were paid $1,411 by IBC's check # 0249905, dated Ma y 10, 1989, were unauthorized under Medicare coverage guidelines and that defendants' misrepresentation o f 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 ev idence 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 o rder to obtain reimbursement, the February 15, 1989, evalua tion and plan of treatment, which the doctor had signed, was destroyed and replaced by one with an altered evalu ation that did not accurately reflect Hynds' treatment pl an. The doctor's signature was then xeroxed onto the altere d document. As documentary support for this treatment plan, Pomilio lowered the scoring percentages on the prog ress notes. The fact that the treatment was originally o rdered by a doctor does not neutralize the fraud; i.e., that the billing for the continued treatment, based on falsified pro gress notes and a xeroxed doctor's signature, was fraudul ent.

There is no doubt that, as defendants argue, the rewriting of or resubmission of rewritten documents is not

9per se fraudulent. In fact, Julia Blum Bonjo, anoth er

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 off ense of

mail fraud.

The next question we must consider is whether there is

sufficient evidence that each of the defendants wil lfully joined the scheme to commit mail fraud. United Stat es v. Pearlstein, 576 F.2d at 537. In this connection, th e government must prove that each defendant willfully joined the scheme before May 10, 1989, the date of the las t mailing in furtherance of the scheme. It must show that each defendant possessed the requisite intent to de fraud. 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 wit h the actual mailing to be liable so long as there was kn owledge that the use of mails would follow in the ordinary course of business or that such use can reasonably be foresee n. United States v. Sturm, 671 F.2d 749, 751 (3d Cir. 1982); United States v. Funt, 896 F.2d 1288, 1294 (11th Ci r. 1990).4

B. Evidence Linking Defendant Horvath to the Crime

We will first examine the evidence against defendan t Attila Horvath up to and through the May 10, 1989, mailing of the count of conviction. The government must pro ve that Horvath willfully joined the scheme before that dat e. The District Court enumerated specific record reference s to Horvath's knowledge and willful participation in th e scheme upon which the jury could have relied. However, onc e we

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4. Defendants also contend in their appeals that th ere 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); Unite d States v. Hannigan, 27 F.3d 890 (3d Cir. 1994).

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

significance.

(1) There is the testimony of Wendy Gold, who was Director of Speech Therapy before Penny Martin. Gol d testified that on April 28, 1989, she discussed wit h Horvath and Lukesh the problem of over-utilization, i.e., t reating patients unnecessarily to increase production. More over, Gold discussed with Horvath the fact that many of t he 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 Ma y 15, 1989, there was extensive discussion about ways to increase productivity. There was, however, no evide nce that anyone suggested falsification in billing. Gold too k the position that asking therapists to do what Universa l wanted done in order to increase production would not be e thical. Gold subsequently quit due to pressure to increase production.

(2) Judy Blum Bonjo, Director of Utilization Review

, testified that her department was directed by Horva th 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 mo re than 2 years after the Count One mailing. Additionally, Horvath argues that the memo refers to billing prior to rec eipt of all the paperwork, not to falsifying information.

Blum Bonjo also testified that Horvath directed her to bill without physician signatures and without some requi site documentation in place. This evidence is problemati c 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 f or 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 expl ained that Horvath ran weekly meetings and closely monito red the results of speech therapy practices at Universa l. Furthermore, Martin explained that between 1989 and 1991 Blum Bonjo met with Lukesh on a daily basis an d

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

Horvath asserts, and the Government does not contro vert, that Martin's testimony refers to her observations of what Horvath told her in June 1990, one year after the C ount One mailing. In fact, Martin did not join Universal until August 1989, several months after the Count One mai ling.

Examined as a whole, the record is extremely sparse as to Horvath's willful participation in the scheme be fore May 10, 1989. The only evidence that clearly concerns p remailing events is the Gold testimony. This testimon y, however, only establishes pressure to bill, not pre ssure to bill falsely. Although we hesitate to overturn a ju ry verdict, we conclude in this instance that, after we exclude the post-mailing evidence, upon which the jury likely r elied, there is little to support the jury's verdict. As s uch, 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 r ecord. A memo, dated Oct. 28, 1988, directed therapists "to be creative" in getting Medicare reimbursements. On cr ossexamination, Lukesh testified that one such "creati ve way" to get reimbursed was to rewrite the document to ch ange the patient profile. Defendants point out that no w itness ever testified to interpreting the term "creative" to imply falsification. Nevertheless, the jury could infer L ukesh'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 adminis trative measure at Universal. This directive was designed t o gather information on what billing documents were being he ld up and for what reason. It was provided to the speech therapists, often with specific directions on how t o alter speech therapy documents. While it is possible that Lukesh did not intend that the rewriting of documents, pur suant to this directive, would be fraudulent (Lukesh testifi ed that he

12believed documents were merely being corrected or

augmented), the jury was certainly entitled to infe r that Lukesh had knowledge of the fraudulent billing prac tices.

3) Lukesh was present at an April, 1989, meeting wh ere Blue Cross alerted Universal that documents "were b eing improperly altered and inappropriate patients were being treated." Lukesh's contention as to the billing hol d directive described above, that he believed documents were me rely being corrected or augmented, is belied by this mee ting with Blue Cross. The information gathered by Lukesh at the meeting, together with his authoring of the directi ve, lead to the permissible inference that Lukesh knew, well be fore the Count One mailing, that his employees were falsifyi ng documents.

4) Karen Lightman Pallies, a speech therapist from January 1989 through September 1989, testified that she was required to falsify her therapy documentation a nd that Lukesh told the therapists at a pre-May 1989 meetin g that reports were being rejected by Blue Cross and the therapists would have to keep rewriting these repor ts until they were accepted. Pallies did admit that re-writi ng could involve simply "documenting accurate historical fac ts" as distinguished from "making something up."

5) Blum Bonjo and Martin testified that Lukesh was aware that documents were being altered before bein g submitted to Blue Cross for payment. The testimony by Martin is problematic because she started working a fter 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 at tended 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 substa ntial than that against Horvath. Certainly Lukesh's autho ring of documents designed to effectuate a policy of resubm itting bills and rewriting the documents underlying them, a policy that led therapists to submit fraudulent documents,

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

evidence is coupled with the fact that Lukesh was i nformed by Blue Cross of the fraudulent practices, there wa s sufficient evidence that Lukesh willfully joined th e scheme

to commit mail fraud.

D. Evidence Linking the Corporation to the Crime

Universal, the corporate defendant, argues as the b asis for its post-verdict judgment of acquittal motion t hat there

was not substantial evidence that it directed its e mployees to falsify claims. "A corporation is criminally res ponsible for the unlawful acts of its employees or other agents, provided such unlawful acts are done on behalf of the corpor ation and within the scope of the agent's employment or a pparent authority." United States v. American Radiator & St andard Sanitary Corp., 433 F.2d 174, 205 (3d Cir. 1970).

Universal argues that there was never a corporate p olicy of falsifying claims and that no individual was dir ected 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 th e highlevel officials Horvath and Lukesh, the evidence wa s sufficient for the jury to have concluded that Caro l 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 alt ering Hynds' patient documentation. Additionally, numerou s witnesses testified that they were pressured to bil l 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, wefi nd sufficient evidence to support the conviction of de fendant

Universal.

III. Admissibility of the Guilty Plea of a Testifyi ng 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 Ma rtin

14agreed to testify as government witnesses. Before t he 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 w ere 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., the y 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 examin ation, the proper procedure was for the court to then perm it the government to prove the pleas on redirect.

The District Court denied defendants' motion. Relyi ng on United States v. Gaev, 24 F.3d 473 (3d Cir. 1994), the court explained that, although a guilty plea cannot be us ed to establish a co-conspirator's guilt, it can be intro duced for some valid purpose. After enumerating the proper pu rposes for which the pleas could be admitted, the trial ju dge found that the probative value of the evidence outweighed its prejudicial effect and admitted it, denying defenda nts' motion. The defendants assert that this ruling was erroneous and that the error was not harmless, argu ing that "there is a high probability that the jury's c onviction 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 c ourt. In re Merritt Logan Inc., 901 F.2d 349, 359 (3d Cir. 1 990). We

use an abuse of discretion standard to review the D istrict

Court's decision not to exclude evidence under Rule 403. United States v. Gaev, 24 F.3d 473, 476 (3d Cir. 19 94).

We note at the outset the well-settled proposition that plea agreements of co-conspirators cannot be used a s evidence of a defendant's guilt. Gaev, 24 F.3d at 4 76. We stated in United States v. Gambino, 926 F.2d 1355 ( 3d Cir. 1991) that:

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

"Count One."

15[t]here are strong considerations against us ing 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 wi th 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 pres ented against him, not by what has happened with r egard to a criminal prosecution against someone else.

926 F.2d at 1363 (quoting in part Bisaccia v. Attor ney General of New Jersey, 623 F.2d 307, 312 (3d Cir. 1 980)).

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 purp oses). The District Court here explained that a plea was admissible for a number of valid purposes. First, t he 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' gu ilty plea on direct examination, the government dampens attac ks on credibility, and forecloses any suggestion that it was concealing evidence." 926 F.2d at 1363. But, defend ants in their pre-trial motion pledged not to challenge Blu m Bonjo's and Martin's credibility based on their plea agreem ents. Thus, there was no reason to allow the government t his pre-emptive strike on direct examination. See Unite d 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 defendant s' crossexamination of Blum Bonjo. The court explained that defendants challenged critical aspects of Blum Bonj o's participation in the activities that formed the bas is for the mail fraud charge. One cannot, however, use defense

counsel's behavior after denial of the motion as an y indication of what he would have done had his motio n been granted by the court.

The District Court also explained that the pleas we re admissible to make clear that defendants were not b eing singled out for selective prosecution. Indeed in Un ited States v. Inadi, 790 F.2d 383 (3d Cir.), rev'd on o ther

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

of a co-conspirator's guilty plea "in order to rebu t 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 singl ed out for prosecution." Id. at 384, n.2. But that is not the case here. Defense counsel in his motion in limine pledg ed not to engage in questioning on cross examination that would render the pleas admissible. Certainly, if the defe nse had raised an inference of selective prosecution, this tactic would have been covered by counsel's pledge. Howeve r, 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 si ngled out for prosecution." 998 F.2d at 1205. Moreover, e ven if the implication of selective prosection had become an issue, it could have been dealt with by instructing the ju ry that the issue of selective prosecution was not their co ncern. Id.

The trial court suggested a further reason to admit the plea -- to explain the witnesses' firsthand knowled ge of the defendant's misdeeds. See United States v. Halbert, 640 F.2d 1000, 1005 (9th Cir. 1981). But a witness's gu ilty plea doesn't establish her basis of knowledge. The witne ss's testimony itself will establish that basis.

After the valid purposes for which the plea may be admissible are proffered, the trial court must bala nce the probative value of the testimony with its prejudici al effect. The standard for the balancing is that of Federal R ule of Evidence 403.6 That is, the prejudice that inures t o the defendant by the admission of a co-conspirator's gu ilty 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

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6. Fed. R. Evid. 403 provides:

Although relevant, evidence may be excluded if its probative value

is substantially outweighed by the danger of un fair prejudice, confusion of the issues, or misleading the j ury, or by

considerations of undue delay, waste of time, or needless p resentation of

cumulative evidence.

17was given in this case, reduces that prejudice. Uni ted 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 a greement is sufficiently strong that even limiting instructi ons will not effectively contain it." 24 F.3d at 478. This is on e of those

cases.

Notwithstanding the limiting instruction here, the jury, having heard evidence accusing defendants of 39 cou nts of mail fraud and false claims, acquitted all 3 defend ants 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 p atient involved in Count One, Mildred Hynds, was also invo lved in four other counts on which defendants were acquitte d. 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, t he government has conceded in its cross-appeal that th e conduct charged in the other 38 counts was virtuall y identical to the conduct charged in Count One. The evidence cited by the government, in arguing that t here is sufficient evidence to support the convictions on C ount One, is for a large part the same evidence that the jury heard and then found not to support conviction on 3 8 of the counts. There is, therefore, the strong possibi lity that Blum Bonjo's guilty plea to that count was consider ed 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 admittin g the evidence were weak. Therefore, notwithstanding the discretion due a district court judge making an evi dentiary determination, we find that the probative value of the pleas was substantially outweighed by the danger of unfai r prejudice. Despite the fact that we have found suff icient evidence to support Lukesh and Universal's convicti ons, the evidence on the count of conviction was very simila r to the evidence supporting the thirty-eight acquitted coun ts. In view of the fact that the only distinguishing evide nce on the

count of conviction is the consideration of the coconspirators' guilty pleas, we must conclude that t he denial

18of defendants' motion in limine and the subsequent

introduction at trial of evidence of Blum Bonjo's a nd Martin's guilty pleas was reversible error. We will reverse the judgment of conviction as regards Lukesh and Un iversal.7

CONCLUSION

For the reasons stated above, we will revers e the conviction of Attila Horvath for the insufficiency of the evidence against him and remand his case to the Dis trict 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.

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7. As regards Horvath, our holding that the post-ve rdict judgment of acquittal should have been granted renders moot his appeal of the denial

of the motion in limine.

19GARTH, Circuit Judge, dissenting:

The majority of the panel (my colleagues Judges Rot h and McKee) have reviewed the record and reversed th e conviction of the defendant Attila Horvath ("Horvat h"), who had been charged with mail fraud in conducting a Me dicare fraud scheme over a three-year period.1 In doing s o, they have directed Horvath's acquittal on Count One2 des pite 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 s o long as the verdict is supported by substantial evidence, w ith all reasonable inferences viewed in a light most favora ble 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 advert ed to, and in light of an even more erroneous holding that completely eviscerates the deference which we are r equired to give to a District Court's discretionary ruling to admit pleas of codefendants,3 I must respectfully dissent

.

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1. The damage from Medicare fraud has been extensiv e. See, e.g., Medicare Contractors Aren't Pursuing Fraud, Audit S hows, USA TODAY, Dec. 2, 1998, at A1; Probers Allege Medicare Fraud by Columbia/HCA, CHICAGO TRIBUNE, Feb. 11, 1998, at N3 (disclosing i nvestigation of nationwide Medicare fraud by large health care orga nization); 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 Unive rsal violated 18 U.S.C. section 1341, which proscribes use of the ma ils in furtherance of

a fraudulent scheme.

3. See General Elec. Co. v. Joiner, 522 U.S. 136 (1 997) (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 disc retion review"). A long line of cases from this Court has respected the Dis trict Court's

discretion

20B.

Indeed, I dissent not only from the majority's insi stence on refusing the admission of the guilty pleas of codefendants Penny Martin and Judy Blum Bonjo on th e 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 su spect holding in United States v. Thomas, 998 F.2d 1202 ( 3d Cir. 1993). In Thomas, in the face of a compelling and r easoned dissent by Judge Rosenn of this Court, our own prec edents, decisions from our sister Circuits,4 and fully docu mented and detailed discretionary rulings by the District Court Judge, the same distorted result as to the exclusio n 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 jurispruden ce 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 . I t should re-align the Third Circuit on the correct and prope r course, which provides for the acceptance of guilty pleas a t trial by

codefendants when the correct standard of a Distric t Court's discretion is applied to the facts and when the proper purposes of credibility, selective prosecuti on and establishing firsthand knowledge are found, as they were unquestionably applied by the District Court and fo und here. Such a course would comport with the jurispru dence

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in admitting pleas of codefendants. See United Stat es 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 Co urt has held repeatedly that admission of a plea, without more, is not ordinarily reversible. See, e.g., United States v. Restaino, 3 69 F.2d 544 (3d Cir. 1966).

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

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

prevailing legal standards, accepted such evidence.

Based on the record before us, I believe (1) that t he evidence was sufficient to support Horvath's convic tion, and (2) that the District Court did not abuse its discr etion in admitting the codefendants' guilty pleas, and that the guilty pleas were admitted for a proper purpose and did no t

invalidate the convictions of all the defendants. T herefore, I would hold the majority's disregard of the Distri ct Court's rulings and its reversal of those convictions is un warranted

and violates both the District Court's and this Cou rt's proper standards of review.

C.

Although not addressed in the majority opinion, see Majority Op. at 6 n.3, I further conclude that purs uant to the teaching of United States v. Watts, 519 U.S. 14 8 (1997), the District Court grievously erred in not consider ing acquitted and uncharged conduct pursuant to Section 2F1.1 of the Guidelines in calculating the Sentenci ng 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 ente r a judgment of acquittal, and to reverse the convictio ns 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 b y 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 un duly prejudicial.

Prior to that motion, however, these defendants had made an in limine motion to exclude testimony conce rning the plea agreements entered into by the codefendant s. The

22District Court took the matter under advisement, ac cepted

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 go ing to certainly wonder whether or not they have be en charged. It's going to wonder perhaps what t hey have been promised by the prosecutor if anything and what they may be getting in return for their test imony.

I think in weighing all of those factors wit h the possible prejudice that I am going to allow the Gover nment to bring out the fact of the guilty plea and th e fact of the guilty plea agreement.

The District Court considered the issue again after the conclusion of the trial. In denying these defendant s' postconviction motion, the District Court first noted t hat, in a motion challenging the sufficiency of the evidence, the court

must view the evidence in the light most fav orable to the government. A claim of insufficiency pla ces a very heavy burden on the [defendants]. [The court ] must

affirm the convictions if a rational trier o f fact could have found defendant[s] guilty beyond a reas onable doubt, and the verdict is supported by subst antial

evidence.

The mail fraud statute, 18 U.S.C. S 1341, pr oscribes any "scheme or artifice to defraud" in which the defendant participated with the specific int ent to

defraud and in which the mails were used "in

furtherance of the fraudulent scheme." The s cheme

"need not be fraudulent on its face but must involve some sort of fraudulent misrepresentations o r omissions reasonably calculated to deceive p ersons of ordinary prudence and comprehension." Proof of specific intent is required, which "may be f ound from a

material misstatement of fact made with reck less disregard for the truth." United States v. C oyle, 63 F.3d 1239, 1243 (3d Cir. 1995) (citations omitted ). Thus, a

mail fraud conviction stands where the evide nce demonstrates a defendant's willful participa tion in a scheme to defraud with knowledge of its frau dulent

23nature. 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 h ad been committed, and the evidence connecting each defenda nt to the crime. After outlining the testimony and docume ntation 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 defendan ts' guilty knowledge could rationally be inferred beyon d a reasonable doubt from (1) the active parts H orvath and Lukesh played in the daily operation of the speech therapy practice, (2) [d]efendants' knowledg e and monitoring of Universal's billing problems - - the number of patient cases being billed and met with record requests, denials and increased scrut iny by Blue Cross . . . (3) the testimony of key ad ministrators, Julia Blum Bonjo, Penny Martin and Wendy Gol d, recalling how Horvath and Lukesh wanted pati ent

documentation billable no matter what had to be done to it, and (4) the directives given to speec h therapists by their supervisors, under tremendous press ure from Lukesh and Horvath, to pick up patients, eve n though inappropriate, to warrant skilled services, and to rewrite patient documentation to make patien t services "billable" and reimbursable by Medicare.

The District Court found this evidence sufficient t o support the jury's finding that a crime had been committed and that Horvath and Lukesh (and, through their actions, Uni versal) had the intent required under the mail fraud statut e. 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 admi ssion of the plea agreements. It reiterated its concern o ver selective prosecution, and noted as well that the t estimony from Bonjo and Martin would assist the jury in asse ssing credibility. I believe that the majority has artful ly finessed the issue of admitting the codefendants' guilty ple as,

24without ever providing reasons or presenting eviden ce that

the District Court had abused its discretion - inde ed, without ever even holding that the District Court J udge did so. In so doing, the majority has not dealt fairly with the jurisprudence dealing with this subject, and has ig nored a completely developed record. I thus turn first to t he District Court's rulings admitting the guilty pleas. I do so observing that the admission of the guilty pleas at trial doe s not impact upon the other, independently sufficient evi dence 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 ma jority 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 acquit ted 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-- th at the guilty pleas were not admitted for a proper purpose and were so prejudicial that their admission constitute s 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 discus sion in accordance with our requirements set forth in Gaev, were properly admitted. Even if not properly admitted, t he evidence adduced at trial, combined with the curati ve 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 Unive rsal is sufficient to support the jury's verdict. Majority Op. at 13-

14.

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5. Bonjo was charged in the same indictment as Horv ath, Lukesh and Universal. Martin, it appears from the record, was charged separately by information and pled guilty to one count of mail fr aud.

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

Martin's testimony, gave a curative instruction, ad vising the jury that the purpose for admitting testimony conce rning their respective plea agreements was so that they c ould "adequately assess the credibility" of the testimon y. The jury was also instructed that the jury was not to c onsider the plea agreements as evidence of the guilt of Hor vath, Lukesh or Universal. The District Court, while char ging the jury at the end of the trial, instructed the jury a gain, as

follows:

Julia Blum Bonjo and Penny Martin entered in to plea agreements with the Government. Such plea agreements are expressly approved as lawful and proper by the United States Supreme Court an d are appropriate, are proper. Each witness' decis ion to plead guilty is a personal decision about her own guilt. You may not consider this evidence against the d efendants on trial nor may you draw any conclusions or inferences of any kind about the guilt of the defendant s on trial from the fact that a prosecution witness ple d guilty to similar charges.

The testimony of such witnesses, as I indica ted, 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 gui lty 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 p lea, you'd know the terms under which the plea was ente red and you could judge for yourselves whether the w itness in the trial is testifying truthfully or whethe r the witness has a motive to embellish testimony or vary from the

truth.

That is the only basis or the only reason wh y the plea and the plea agreement were admitted.

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

decision to admit evidence of plea agreements for a buse of discretion, and we have been directed in no uncerta in 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 u sed as substantive evidence of a defendant's guilt, eviden ce of a guilty plea or plea agreement may be introduced for other permissible purposes. Judge Rosenn, in a cogent ana lysis 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 inferenc e that the co conspirators were not punished and that [the defendants] w[ere] thus `singled-out' for punishmen t; 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 pl ea." 998 F.2d at 1208 (Rosenn, J., dissenting). See also Gae v, 24 F.3d at 476; Gambino, 926 F.2d at 1363; United Stat es v. Werme, 939 F.2d 109, 113 (3d Cir. 1991), cert. deni ed, 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 th e overarching principle that trial judges have broad discretion to admit testimony under Rule 403 that "discloses t he 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 t his Court must defer). The mere admission of a plea is not ordinarily reversible. See, e.g., Restaino, 369 F.2 d 544. Other Circuits have also held that admission of a p lea by a co-conspirator is appropriate for purposes other th an 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 ag reement as follows: "If a co-conspirator who appears as a w itness has pleaded guilty, the trier of fact should know a bout the plea agreement in order properly to evaluate the wi tness's testimony, unless that would unduly prejudice the defendant." 24 F.3d at 476 (emphasis added). Moreov er, as

27the credibility of the Government's witnesses norma lly is

critical to the successful prosecution of a case, t his Court has acknowledged that the strategic admission of a guilty plea "dampens attacks on credibility, and foreclose s any suggestion that [the Government] was concealing evi dence. 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 m ight arise in the minds of the jurors as to Bonjo's and Martin 's testimony. In addition, the District Court determin ed that the admission of the guilty pleas would allay the j urors' 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, ba lanced the probative and prejudicial impact of the pleas. The District Court found that, as in Gaev, credibility was an is sue because the witnesses' testimony was challenged, an d that the limiting instructions cured any prejudice. Even more so than in Thomas, here the District Court found "spec ific 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 emph asize the word must) accord the proper deference such rul ings on admissibility by the District Court. Cf. Joiner, 52 2 U.S. 136 (finding discretionary decisions of trial court mus t be upheld in absence of manifest error).

A fair reading of the record reveals that the Distr ict Court admitted the pleas for a proper purpose, and the Government's limited use of the guilty pleas at tri al caused no undue prejudice that would not have been correct ed by

the District Court's curative instructions. This is not a case in which the prosecution placed "undue emphasis" up on the pleas, Restaino, 369 F.2d at 545, to convince t he jury of the defendants' guilt. Nor is this a case in whi ch 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,

28when combined with the curative instruction, more t han

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 Di strict Court Judge abused his discretion -- nor could it i n light of the careful and detailed consideration that Judg e 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 determi nation

that the District Court abused its discretion.

The only reason I can discern that the majority giv es 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 co ncludes 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 groun ds.

In so holding, however, the majority totally ignore s prior directions of this Court that guilty pleas can be a dmissible

even in the absence of an attack on a witness' cred ibility. See Gambino, 926 F.2d at 1363 ("[E]ven in the absen ce of this attack [on the Government witness' credibility ], the elicited testimony [i.e., the guilty plea] was prop er here.") See also Thomas, 998 F.2d at 1208 (Rosenn, J., diss enting). As Gambino has not been overruled, it remains the r ule in

this Circuit. The absence of an attack on a witness 's credibility is simply insufficient for a court to f ind that a judge abused his discretion in admitting the plea; here, the District Court cited Gambino in its post-trial ruli ng for precisely this proposition. To hold otherwise, as t he majority does, not only presents a conflict with Ga mbino,6 but it would for all time foreclose the government' s admission of evidence of a guilty plea on direct ex amination of its witnesses by the preemptive promise by defen se

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6. See Internal Operating Procedure 9.1 ("[N]o subs equent panel overrules the holding in a published opinion of a p revious panel").

29counsel 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 attac ks on a witness's credibility, an attack is not always nece ssary to justify their introduction") (emphasis added).

I urge that the Court consider this issue en banc b ecause the majority opinion here -- as the majority opinio n did in Thomas, which concerned an almost identical set of facts -- in effect rules out the use of any guilty plea, wit hout regard to the discretion of the District Court, so long as defense counsel promises not to question the witness concer ning the plea. Thomas and the analysis of the majority i n the present case, when seen through the lens of Gaev, Gambino, Newman, Gullo and Restaino, makes a mocker y of the holdings in those cases. To resolve the conflic t between these precedents and Thomas and this case, the Cour t as

a whole should confront this issue.

III

The majority has concluded that the evidence presen ted at trial was insufficient to support the conviction of Horvath, Majority Op. at 12, although there was suf ficient 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 Ho rvath. Because I conclude that the jury's verdict can be e asily sustained by the evidence produced at trial, and th at the admission of Bonjo's and Martin's guilty pleas does not affect this conclusion, I would affirm the convicti on of

Horvath.

The District Court enunciated and applied the corre ct standard in reviewing a challenge to a jury verdict based on insufficiency of evidence. In reviewing a jury verd ict, the court "must view the evidence in the light most fav orable to the jury verdict and presume that the jury verdict properly evaluated credibility of the witnesses, found the f acts, and

draw rational inferences." United States v. Iafelic e, 978 F.2d 92, 94 (3d Cir. 1992). A conviction must be sustain ed if the verdict is supported by substantial evidence, and a ll

30reasonable inferences must be viewed in a light mos t

favorable to the Government. Id. This Court must si mply determine whether "the conclusion chosen by the fac t finders was permissible." United States v. McGill, 964 F.2d 222, 230 (3d Cir. 1992), cert. denied, 506 U.S. 102 3 (1992). If there is substantial evidence to support the ver dict, we will not reverse even though this Court may have de cided 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 r elate to the Hynds incident charged in Count One, the elemen ts of mail fraud do not necessitate that a defendant part icipate 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 circum stantial

evidence.

To obtain a conviction under section 1341, the Government must establish (1) the existence of a sc heme 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 St ates v. Hannigan, 27 F.3d 890, 892 (3d Cir. 1994).

Here, the evidence showed that Horvath, the Directo r of Finance, and Lukesh, the Director of Operations, ac tively participated in the daily operations of Universal a nd worked closely together. Both knew that Universal was havi ng difficulty with Independence Blue Cross in getting its speech therapy services reimbursed. In addition, th e testimony from the Universal administrators (i.e., Martin, Blum Bonjo, and Wendy Gold) indicated that Horvath and Lukesh created a "coercion" culture in which pr essure was placed upon Universal's employees to obtain reimbursement in any way possible.

Specifically, Gold testified that Horvath and Lukes h had placed her under enormous pressure to increase production, which included pressure to rewrite the patient documentation. Blum Bonjo testified that she met wi th

31Horvath and Lukesh together weekly for discussions about

cases in which Medicare denied reimbursement for th e speech services rendered and also testified that Un iversal 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 ha d to be done to it." Some of the cases were put on hold (meaning that they would not be submitted for billing) becau se they did not seem appropriate for billing to Medicare. M artin

testified that when the number of claims on hold we re high,

Horvath instructed that the claims be billed withou t doctors' signatures. Further, Martin stated that th e documentation had to be rewritten and altered and originals had to be destroyed in order to avoid discrepancies in the documentation. Finally, the Di strict Court reviewed the evidence presented at trial and found that Horvath was very active in the daily operation s of Universal from the outset of the scheme, and closel y monitored the results of the speech therapy practic e. Horvath, through his approval of Universal's "rewri ting" 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 ve rdict linking Horvath to the fraudulent scheme is support ed by

the record. There was sufficient evidence to convin ce the jury, and this Court should not "weigh evidence or determine the credibility of witnesses." United Sta tes v. Casper, 956 F.2d 416, 421 (3d Cir. 1992) (quoting G lasser, 415 U.S. at 80). Reversal for insufficiency of evid ence should not be granted except where the failure of t he prosecution is "clear." Id. That situation is not p resent here. See also United States v. Anderson, 108 F.3d 478, 4 80-81 (3d Cir. 1997) ( "Only when the record contains no evidence, regardless of how it is weighed, from whi ch the jury could find guilt beyond a reasonable doubt, ma y an appellate court overturn the verdict"); United Stat es 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 whet her the evidence sufficiently established that Horvath was

32connected 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 senten ce imposed by the District Court, which was the subjec t of the government's cross-appeal. Although I would affirm the respective convictions of Horvath, Lukesh and Unive rsal, I

would reverse the District Court's sentence calcula tion under the Sentencing Guidelines ("the Guidelines"), as presumably the issue of uncharged and acquitted con duct can arise again in this case.

The majority opinion, oddly enough, does not reflec t the sentences imposed upon the defendants. Let me do so . The District Court sentenced Universal to two years' pr obation and a $25,000 fine. Horvath and Lukesh were sentenc ed to three years of probation each. Horvath was fined $1 0,000, plus $705.20 in restitution. Lukesh was fined $15,0 00, plus restitution of $705.20.

Under Section 1B1.3 of the Guidelines, a District C ourt can consider relevant conduct when calculating a defendant's guideline range whether or not that con duct was formally charged. See United States v. Watts, 5 19 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 princ iples 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 defend ant is criminally liable.") In addition, under Watts, a de fendant's guideline range is affected even by acquitted condu ct, as long as that conduct has been proved by a preponder ance of the evidence. See Watts, 519 U.S. at 156. See al so United States v. Cianci, 154 F.3d 106 (3d Cir. 1998); Unit ed States v. Baird, 109 F.3d 856 (3d Cir. 1997) (finding cond uct uncharged pursuant to plea agreement may be conside red at sentencing).

33Notwithstanding the Guidelines and Watts, at senten cing,

the District Court declined to consider uncharged a nd acquitted conduct when calculating defendants' guid elines ranges. Instead, the District Court only considered the loss

associated with the conviction obtained in Count On e-- totaling $1,411.20 -- without explaining why it was not considering the uncharged and acquitted conduct tha t the Government sought to be included. I believe that th is

omission was an abuse of discretion.

While I conclude that the evidence proved that Horv ath, 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 t he calculation of the sentences of Horvath, Lukesh and Universal. See, e.g., E.C. Ernst, Inc. v. Koppers C o. 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 con duct without stating its reasons, stating "I find under the Watts case that the burden is preponderance of the eviden ce and decline to include that conduct in the specific off ense characteristics."

Given that the District Court ruled in denying the postconviction motion that there was substantial eviden ce to support the underlying conviction in Count One, I f ail to

understand how the District Court could conclude th at the Government had not met its burden by a preponderanc e of the evidence of Horvath, Lukesh, and Universal's

involvements in the other related counts of the ver y same scheme to defraud.

The inclusion of uncharged and acquitted conduct, w hich may have amounted to a total loss of $343,500, woul d have resulted in an increase of eight levels under the G uidelines. See U.S.S.G. S 2F1.1(I). Horvath had an offense lev el of 8, providing a guidelines range of 0-6 months, and Luk esh had an offense level of 10, providing a guideline r ange of 6- 12 months. If uncharged and acquitted conduct were considered at sentencing, however, Horvath's senten cing

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

level 16) and Lukesh's range could have increased t o 27-33 months (i.e., offense level 18).

Accordingly, I would hold the defendants accountabl e at sentencing for the uncharged and acquitted conduct with which they were involved in executing their fraudul ent

scheme.

V

In its opinion, the majority has reversed a jury ve rdict

founded on sufficient evidence and has reversed det ailed 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 Gl asser, which requires that all reasonable inferences be re solved in favor of the government in an appeal challenging su fficiency of the evidence; 2) it has substituted its own "jur y verdict" for that of the enpanelled jury; 3) it has refused to give the required deference to a District Court Judge's disc retionary rulings; and 4) it has perpetuated a jurisprudentia l conflict over the admission of codefendant guilty pleas at t rial.

The trial transcript and post-conviction order reve al that the District Court carefully considered the argumen ts raised by the defendants, and rejected them in acco rdance with principles long established by prior panels of this Court. Under these circumstances, when the issues r aised on appeal concern evidentiary issues addressed by t he District Court in a careful analysis that considere d the arguments for both sides, I am unable to agree that the

District Court abused its discretion -- a claim tha t not even the majority justifies.

In sum, therefore, I cannot subscribe to the majori ty opinion because I believe that the guilty pleas wer e 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 t he medical insurance system of this country, which, al though

35not acknowledged by the majority, is a continuing p roblem

that has cost our country dearly.7

I also conclude that the District Court erred in fa iling 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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