United States Court of Appeals

For the First Circuit

Volume I of II

Nos. 02-1966, 02-1967

UNITED STATES OF AMERICA,

Appellant / Cross-Appellee,

v.

WILLIAM THURSTON,

Defendant, Appellee / Cross-Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, Senior U.S. District Judge]

Before

Lynch, Lipez, and Howard, Circuit Judges. 

Michael K. Loucks, Assistant U.S. Attorney, with whom

Michael J. Sullivan, U.S. Attorney, and Susan G. Winkler and Gary

S. Katzmann, Assistant U.S. Attorneys, were on brief, for

appellant.

Matthew D. Brown, with whom Joseph P. Russoniello and

Cooley Godward LLP were on brief, for appellee.

February 4, 2004
1 The original panel opinion in this case issued on August 4,

2003. Thurston then filed a petition for rehearing challenging,

inter alia, our holding that the district court erred in granting

a downward departure for good works. The Federal Defender Office

and District of Massachusetts Criminal Justice Act Board filed an

amicus brief in support of Thurston's petition, arguing that the

panel had misconstrued the de novo review provisions contained in

§ 401 of the Prosecutorial Remedies and Tools Against the

Exploitation of Children Today Act of 2003 (PROTECT Act), Pub. L.

No. 108-21, 117 Stat. 650. We asked for the government's response,

which we received on November 18, 2003. 

The arguments persuaded the panel that certain revisions to

the original discussion of the effects of the PROTECT Act on

Thurston's good works departure were appropriate. Accordingly, we

have withdrawn our prior opinion and substituted this one. The

discussion of the PROTECT Act is revised; the remaining portions of

the original opinion are essentially unchanged. 

2 The ferritin iron test measures the number of atoms per

molecule of circulating ferritin. Ferritin is a binding protein

that delivers iron to iron storage cells.

-2-

LYNCH, Circuit Judge. William Thurston, a vice president

of Damon Clinical Testing Laboratories, Inc., appeals his

conviction for conspiring to defraud the Medicare program of over

five million dollars.1 The charged conspiracy involved the

manipulation of physicians into ordering unnecessary ferritin blood

tests2 for Medicare beneficiaries in violation of 18 U.S.C. § 371.

The essence of the scheme charged was that Damon, through

Thurston and others, bundled the ferritin blood test -- previously

ordered by doctors less than two percent of the time -- into a

panel of blood tests known as the LabScan, which was ordered thirty

to forty percent of the time. When doctors or patients (instead of

insurers) paid for the bundled LabScan, Damon provided the ferritin

test for free, leading doctors to believe there was no extra charge
-3-

for this test. Doctors were not told that, when Medicare paid for

the bundled LabScan, Medicare was charged extra for the ferritin

test. Indeed, both a letter and marketing materials indicated the

added ferritin test was "free"; that is, that there was no charge

beyond the standard LabScan charge. Those unnecessary ferritin

tests were not free to Medicare. Damon charged Medicare roughly

$21 per ferritin test on top of the approximately $24 charged for

the LabScan. Nor were doctors told that the ferritin test could be

ordered separately; the test requisition form did not offer that

option. The physicians, then, were induced to order and to certify

as medically necessary a large number of ferritin tests that were

not medically necessary. 

The government's theory was that Damon did this to offset

Medicare's 1988 reduction in reimbursement rates of sixteen

percent, which was projected to cause Damon an estimated annual

loss of $800,000 in revenues. In just one of Thurston's labs, the

orders for ferritin tests were expected to increase from

approximately three hundred per month to roughly ten thousand per

month. Thurston testified that he was innocent, and that he

neither had knowledge of nor responsibility for key components of

the conspiracy. The jury disagreed.

Although the sentencing guidelines called for a sentence

of sixty-three to seventy-eight months, the district court

sentenced Thurston to only three months' imprisonment. It did so
-4-

by granting a downward departure to "correct" a perceived disparity

between a five-year sentence of imprisonment for Thurston and the

sentence of three years' probation given to the company president,

Joseph Isola, who had pled nolo contendere and assisted the

government. Its second ground for departure was its sense that the

good works Thurston did for his church and community were

extraordinary.

This sentence outraged the prosecutors, who appealed,

arguing that the district court lacked the power to depart downward

for any of the reasons it gave, and that, even if a departure were

appropriate, the extent of the departure was excessive. The

government also appeals the district court's failure to impose a

fine, on the basis that the sentencing guidelines, if not the

statute, mandated a fine. Finally, the prosecution argues that if

some departure for good works was warranted, the district court was

required to address an issue it avoided: the government's request

for an upward departure on the ground that Thurston had obstructed

justice by committing perjury on the witness stand.

Thurston also appeals, arguing that the conviction must

be vacated because the prosecution was barred by the statute of

limitations, because he was entitled to a jury instruction and to

acquittal on the basis that he reasonably interpreted the law to

mean he could rely on the physicians' certifications of medical

necessity, and because of other errors. In addition, Thurston
3 This Act is also known as the Amber Alert bill. It includes

changes put forward in the so-called Feeney Amendment, which

appears as § 401 of the Act.

-5-

argues that his sentence was too high because his base offense

level calculation depended on an amount of loss, either actual or

intended, that was unproven and excessive. Thurston also defends

the downward departure.

Several important issues are raised by these appeals.

The government's appeal requires us to address the effect of the

new Prosecutorial Remedies and Tools Against the Exploitation of

Children Today Act of 2003 (PROTECT Act), Pub. L. No. 108-21, 117

Stat. 650,3 on the standard that the courts of appeals use to

review downward departure decisions by district judges in

sentencing, as well as the availability of a downward departure for

a record of good works under U.S.S.G. § 5H1.11. Thurston's appeal

invites, inter alia, clarification of the defense doctrine

concerning a defendant's reasonable interpretation of the law; the

issue of when a statute of limitations defense must be raised; the

ramifications of a trial judge's failure to respond to jury

instructions proposed by counsel; the evidence needed to show an

intended loss; and the question whether fines are mandatory.

In the end we sustain the conviction but find that the

sentence was in error.
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I. FACTS

We state the facts as the jury could reasonably have

found them, including a fair description of the defense evidence.

A. Background

Medicare provides certain medical services and care,

including clinical laboratory testing services, to persons aged

sixty-five and older and to persons with disabilities. At the time

of the conspiracy, Medicare was administered by the Health Care

Financing Administration (HCFA), a division of the U.S. Department

of Health and Human Services. HCFA in turn contracted with private

insurance companies ("carriers" and "intermediaries") to handle

claims for reimbursement to Medicare program beneficiaries. By

law, Medicare only reimburses clinical laboratory services if those

services were medically necessary for the treatment or diagnosis of

a beneficiary's illness or injury. 42 U.S.C. § 1395y(a)(1)(A)

(2000); see also 42 C.F.R. § 424.10(a) (1988). Medicare did not

generally reimburse screening tests. Medicare reimbursed onehundred percent of the cost of necessary clinical blood tests.

Damon was, at the time, a Massachusetts corporation that

provided clinical laboratory testing services to physicians,

hospitals, health maintenance organizations, and their patients

nationwide. Approximately thirty percent of Damon's revenues were

from Medicare. Damon owned and operated a national system of

clinical laboratories, and Damon was an approved Medicare provider.
-7-

When Damon billed the Medicare program, it submitted to the

carriers a HCFA 1500 form saying that it certified the lab tests

were medically necessary. Physicians did not see those bills.

Thurston served as Regional Vice President of Damon from

1987 to 1990, and was responsible during all or part of this time

for Damon's regional laboratories in Newbury Park, California;

Phoenix; Chicago; and San Francisco. His office was at the Newbury

Park lab; he traveled to the other labs and was in regular phone

contact. Thurston was promoted to Senior Vice President of

Operations in 1990. Thereafter, he relocated to the company

headquarters in Needham, Massachusetts and supervised only the San

Francisco lab. Another company purchased Damon in August 1993;

Thurston later switched employers and moved to Utah.

B. Theories of Prosecution and Defense

The government's theory was that the defendants tricked

doctors into ordering medically unnecessary tests, for which

Medicare paid. Damon added little-used tests to more popular

panels of tests; it then tricked doctors by concealing that the

panels could be ordered without the added tests and that Medicare

was being charged for the tests. To conceal from doctors

that Medicare was being charged, and to encourage doctors to order

ferritin tests regardless of medical necessity, the defendants

charged doctors and patients little or no extra fee for the added

tests; provided literature saying that ferritin was provided free;
-8-

otherwise failed to disclose to doctors the cost to Medicare of the

expanded LabScan; and made it difficult to order the bundled test

without ferritin.

The defense theories were that there was no conspiracy

and, if there were, that Thurston was not a knowing participant.

The defense contended that Damon complied with existing Medicare

regulations, which neither prohibited bundling nor imposed a

requirement on the lab to disregard a physician's certification

that tests were medically necessary. It further argued that even

if Thurston's interpretation of the regulations was incorrect, it

was objectively reasonable, and so Thurston lacked the required

criminal intent. Thurston's defense was also that any fraud was

carried out by his subordinates, without his knowledge. He

testified that he did not instruct the labs to add ferritin; did

not authorize or condone any decision to forego a fee increase for

doctors or private-pay patients on the expanded LabScan; did not

instruct subordinates to conceal that doctors could order a LabScan

without ferritin; and had nothing to do with requisition forms or

particular pieces of marketing literature.

C. Evidence of Conspiracy to Defraud

1. Addition of Ferritin

In late 1987, HCFA announced that effective April 1,

1988, Medicare would reduce by almost sixteen percent the fees paid

to laboratories, including Damon, for providing clinical laboratory
-9-

services to beneficiaries. If Damon maintained its existing

practices and fee structure, then Damon would lose $800,000 in

revenues during the first year alone, as Thurston knew. Of that

amount, more than $500,000 of the annual losses would occur at

Thurston's four regional laboratories.

There were corporate discussions, which included

Thurston, about how to offset this loss. As a result, Damon added

its ferritin test to the LabScan, a panel of more than a dozen

blood chemistry tests performed by a single machine on one blood

sample. The ferritin test was performed on separate equipment.

Damon bundled ferritin with the LabScan from 1988 to at least mid1993. The LabScan had been requested on at least thirty-five to

forty percent of the orders submitted to Thurston's regional

laboratories. By contrast, doctors rarely ordered the ferritin

test. The general manager of one of the laboratories Thurston

oversaw estimated that only one to two percent of the orders for

blood tests included a request for a ferritin test.

Nothing in the medical literature at the time showed

ferritin was necessary for all persons receiving LabScans. Indeed,

it was not. A family practitioner testified that he needed

ferritin less than ten percent of the time it was included as part

of the LabScan. Similarly, an internist testified that he needed

the ferritin test for very few of his Medicare patients.
4 There was abundant evidence that Thurston instructed his

subordinates to add ferritin. For example, the general manager of

the Chicago lab had contemporaneous notes of a conversation with

Thurston in 1988 indicating that Thurston told him to add ferritin

to the LabScan. The manager of the San Francisco lab also

testified that Thurston called him and told him to add the ferritin

test to the LabScan.

-10-

The plan to add ferritin to the LabScan was discussed at

a general managers meeting in January 1988 and at a mid-year

financial meeting for the western region in March 1988. Thurston

attended both meetings. In late March, Thurston personally

approved the addition of ferritin to the LabScans offered by the

Newbury Park, San Francisco, and Phoenix labs.4 Thurston initially

acquiesced when the Phoenix lab sought permission not to add

ferritin; in August 1988, however, after Thurston saw the financial

results from the addition of ferritin at his other labs, Thurston

ordered the Phoenix lab to add the test to the LabScan.

Thurston presented evidence that the decision to add

ferritin was made at a lower level for legitimate reasons.

Thurston and Isola testified that at the general managers meeting

in early 1988, management decided to allow individual laboratories

to determine whether to add ferritin to the LabScan. There was

also testimony that Damon's sales force made requests to the sales

managers and general managers of individual labs to add ferritin to

the LabScan, on the grounds that the new test would make the panel

more competitive.
5 The defense argues that the CERs were prepared for the

related purpose of justifying, to Damon executives, the purchase of

equipment to carry out a higher volume of ferritin tests.

-11-

2. Differential Charging for Ferritin Test

(a) Thurston's Knowledge of Price Differential

Medicare provided one reimbursement for the ferritin test

and a separate reimbursement for the LabScan panel. In 1988, for

example, Medicare paid $24.05 for a LabScan and $20.86 for a

ferritin test.

Thurston's labs submitted to him capital expenditure

requests (CERs) to help with the decision whether to bundle the

tests. CERs were financial projections comparing the additional

revenues (from Medicare reimbursements) and costs (partly from the

purchase of new equipment) that would result from the addition of

ferritin to the LabScan.5 These CERs assumed there would be no

increase in the charge to doctors and patients for a LabScan with

ferritin. Thurston discussed and then signed the CERs. They

projected losses of revenue from doctors and patients (who would

receive free ferritin tests) and massive increases in revenue from

Medicare reimbursements. One lab, for example, projected that the

number of ferritin tests performed for Medicare beneficiaries would

grow from 25 per month to 1,946 per month -- increasing revenues by

$10,308 per month. Overall, Thurston's labs projected that they

would increase their Medicare reimbursements by approximately $1.16

million per year by adding ferritin to the LabScan; if multiplied
6 CHAMPUS is the Civilian Health and Medical Program of the

Uniformed Services, a health benefit and insurance program for

dependants of military personnel that is administered by the

Department of Defense.

-12-

by five years, this increase would be $5.8 million. The capital

expenditure requests were best-case projections, assuming that

every doctor who would otherwise have ordered a LabScan without

ferritin would now order a LabScan with ferritin.

Damon sought reimbursement (at different rates) for

ferritin tests from Medicare, CHAMPUS,6 and other insurers, but

provided them for free to doctors and patients. Thurston said he

was unaware doctors were not being charged. But Thurston approved

the decision by a number of his labs to adopt this policy of

differential pricing depending on the client, and the CERs assumed

no price increase for doctors and patients. Thurston instructed a

subordinate to add ferritin at no charge to doctors; Thurston was

present at a meeting in which another executive announced the nocharge policy; and Thurston received a memo saying that there was

no price increase for doctors at a lab he oversaw. Witnesses

testified that physicians are highly price-sensitive about charges

for lab work and might object to the automatic inclusion of

ferritin unless the test were provided for free. At least

initially, many or all of Thurston's labs increased the charge to

private insurance companies for a LabScan based on the addition of

ferritin. However, any price increase for private insurers on the
-13-

expanded LabScan was much smaller than the cost increase to

Medicare.

Thurston presented evidence that two of his labs did

increase the price for physicians; that this price increase

provoked complaints by doctors; that he was informed of these

complaints; and that he responded that doctors could not obtain a

LabScan with ferritin unless they paid the higher price. He also

presented evidence that the no-charge approach was a deviation from

corporate policy and was initiated by the heads of individual labs;

that he did not find out about any price differential until years

after it had been implemented; and that he sought to correct any

price differential as soon as he discovered it. Thurston testified

that he did not authorize, condone, or ratify a decision not to

increase the price of the LabScan based on the addition of

ferritin.

(b) Concealing Price Differential from Doctors

Thurston's labs took steps to conceal from doctors that,

in addition to the LabScan charge, Medicare would pay an extra fee

for the ferritin tests. No letters were sent to doctors advising

them that Medicare would be charged separately for the ferritin

test. To the contrary, in April and May 1988, letters were sent to

physicians notifying them that the ferritin test was going to be

automatically added at "no extra cost." In Newbury Park, stickers

were also printed and added to physicians' brochures and
-14-

directories saying, "Ferritin Automatically Included at No Charge."

Of course, as to Medicare patients, these statements were untrue.

Thurston testified that he did not pre-approve the

letters or stickers saying ferritin would be provided free to

customers. Thurston portrayed himself as a hands-off manager who

trusted subordinates to build in a charge to physicians and to

accurately promote the expanded LabScan.

Several physicians testified they were initially unaware

that Damon charged Medicare for the ferritin component of the

expanded LabScan. A number of Damon customers protested, and even

switched labs, when they belatedly discovered Damon was charging

Medicare for ferritin tests conducted as part of the LabScan. When

doctors told Damon sales representatives that they did not need the

additional test, some were told that a LabScan without ferritin

would cost more than a LabScan with ferritin. A major client

referred Damon to a newspaper article criticizing the practice of

bundling tests into panels and profiles, and warned Damon that its

failure to educate doctors about the composition of and

alternatives to its panels would subject it to ongoing criticism.

Thurston was informed of these complaints, which were written up in

monthly management reports he received in 1989 and 1990. Despite

these complaints, Thurston did not cause a letter to be sent to

doctors informing them of the extra charge for ferritin to

Medicare.
-15-

Damon also collaborated with HMOs operating on a

capitation basis (i.e., paying a flat monthly fee for each HMO

member) to reduce utilization of bundled tests such as the LabScan.

For example, one of Thurston's labs added to its HMO requisition

form a checkbox for a LabScan without ferritin. Damon made no such

effort to assist Medicare.

3. Availability of LabScan Without Ferritin

Thurston instructed subordinates to take specific steps

that hid the fact that the LabScan could be ordered without

ferritin and made it difficult for doctors to order the LabScan

separately. For example, Thurston told the general manager of the

Newbury Park lab not to advertise or promote the fact that doctors

could still order a LabScan without ferritin. Similarly, Thurston

helped make the decision to omit, from the Newbury Park letter

announcing to doctors the addition of ferritin to the LabScan, the

test code for ordering a LabScan without ferritin. The standard

requisition forms used by Thurston's labs did not change following

the addition of ferritin to the LabScan; there was a checkbox for

the "LabScan" (which now included ferritin) but no box for the

"LabScan without ferritin" or the "LabScan with ferritin."

During the conspiracy period, there were at least two

ways for doctors to order the LabScan without ferritin. They could

handwrite such an order on a standard requisition form, or they

could request and obtain a customized requisition form with a
-16-

checkbox for the LabScan without ferritin. A number of doctors and

institutions took advantage of these options.

Thurston testified that he did not tell anyone to conceal

or refrain from advertising that the LabScan could be ordered

without ferritin. There was testimony that, after Thurston learned

in 1991 that the front of a requisition form used by one of his

labs did not disclose the inclusion of ferritin in the LabScan, he

instructed a subordinate to list it on the front and the form was

so amended.

4. Apolipoprotein

Damon also added an apolipoprotein test to its coronary

risk panel in 1989. Before apolipoprotein was added to the panel,

clients ordered it very rarely. The standard requisition forms

Damon used after adding apolipoprotein to the panel also did not

offer a checkbox for a coronary risk panel without apolipoprotein.

Following the addition of apolipoprotein, the cost to doctors of

the coronary risk panel increased by five dollars. Medicare

reimbursed apolipoprotein separately at a rate well above five

dollars. Thurston participated in the decisions about the

addition, the requisition forms for, and the extra charges for

apolipoprotein.

D. Thurston's "Reasonable Interpretation" as Evidence of Lack of

 Criminal Intent

Thurston presented evidence that from 1988 to 1993 it was

an industry-wide practice for labs to rely on the doctors who
7 Damon was separately indicted for conspiracy to defraud

HCFA, on the basis of the same events.

-17-

ordered tests to make determinations of medical necessity.

Because, prior to 1994, doctors did not normally share their

diagnoses with labs, labs did not have the information required to

gauge medical necessity. Damon employees did not believe that they

certified tests as medically necessary when they submitted HCFA

1500 forms with Medicare bills. Instead, they believed it was the

doctors who ordered LabScans who made the certification.

Two expert witnesses testified that it was appropriate in

1988 to include ferritin in a blood chemistry panel. The bundling

of different tests into panels was lawful under Medicare

regulations. There was testimony that technological changes during

the 1980s made it possible to automate the ferritin test, which

presumably made it much cheaper to conduct. Witnesses for both

sides testified that by 1988 some of Damon's competitors offered

ferritin as part of their blood chemistry panel and so Damon added

the test to stay competitive.

II. PROCEDURAL HISTORY

A. Indictment and Trial

On January 22, 1998, a thirty-nine paragraph single-count

indictment charged Thurston and three other former Damon executives

-- Joseph Isola, Beno Kon, and Gerald Cullen -- with conspiring to

defraud HCFA in violation of 18 U.S.C. § 3717 by causing doctors to
-18-

order unnecessary tests by adding a test for ferritin to a preexisting panel of diagnostic blood tests, and by adding a test for

apolipoproteins to a profile used to assess coronary artery

disease. The conspiracy period was from July 1987 to August 1993.

Isola, President of Damon, pled no contest and, pursuant

to his plea agreement, was sentenced to three years' probation and

a one-hundred dollar special assessment. Kon, Corporate

Controller, died during the proceedings. Cullen, Senior Vice

President for Operations, was tried before the district court in

October 2001 and acquitted at the close of the government's

evidence. In addition, Damon pled guilty on October 11, 1996 to

conspiracy to defraud by bundling ferritin with the LabScan and

apolipoprotein with the cardiac risk panel. The company was

sentenced to pay a $35,273,141 fine, and later entered into a civil

settlement under which it paid the United States and the state

Medicaid programs an additional $83,756,904.

Thurston was tried before a jury in November and December

2001. The trial lasted three weeks. At the close of the

government's evidence, the district court granted Thurston's motion

for judgment of acquittal as to the indictment's apolipoprotein

allegations, ordered these allegations stricken, and explained to

the jury that only the ferritin allegations remained. The jury

found Thurston guilty. Thurston's subsequent motions for judgment
-19-

of acquittal and for a new trial were denied. The procedural

rulings at trial that Thurston attacks are described below.

B. Sentencing

The district court sentenced Thurston to three months'

imprisonment (with a judicial recommendation that the term be

served in a halfway house), followed by twenty-four months of

supervised release (of which the first three months were to be

served in home detention). The court imposed a one-hundred dollar

special assessment and no fine. The Pre-Sentence Report (PSR) had

recommended a Total Offense Level of twenty-six and a Criminal

History Category of one. The PSR identified the base offense level

as six. It recommended a fourteen-level upward enhancement for an

intended loss of at least five million dollars; a two-level

enhancement for more than minimal planning; and a four-level

enhancement for a leadership role. It also suggested that an

enhancement for obstruction of justice was appropriate, on the

grounds that Thurston perjured himself at his trial. The PSR

recommended the statutory maximum term of sixty months'

imprisonment and noted that both the statute and the guideline

allowed for a fine. It calculated that Thurston had a net worth of

$1,526,904.

The defense contested the PSR's recommendations.

Thurston requested a three-level decrease because the substantive

offense of defrauding the United States was incomplete; a four-
8 U.S.S.G. § 2F1.1 was deleted by consolidation with U.S.S.G.

§ 2B1.1 effective November 1, 2001. See United States v. GonzalezAlvarez, 277 F.3d 73, 77 n.3 (1st Cir. 2002). Under the current

guidelines, a loss exceeding $2.5 million warrants an eighteenlevel upward enhancement. U.S.S.G. § 2B1.1(b)(1). When the

guidelines in effect at the time of sentencing are more stringent

than those in effect at the time of the offense, the latter are

normally used, partly to avoid any hint of an ex post facto

increase in penalty. United States v. Maldonado, 242 F.3d 1, 5

(1st Cir. 2001) (citing United States v. Harotunian, 920 F.2d 1040,

1041-42 (1st Cir. 1990)). 

-20-

level decrease because Thurston was a minimal participant; and a

two-level decrease for acceptance of responsibility. Thurston

requested a downward departure on the grounds that he had an

extraordinary record of charitable work and community service; that

the offense constituted aberrant behavior; and that there was the

potential for a large disparity with Isola's sentence.

The government argued that Thurston should receive a twolevel upward enhancement for obstruction of justice. Otherwise, it

accepted the recommendations of the PSR. The parties agreed that

any restitution had been made by Damon, the corporate defendant.

The district court sentenced Thurston at a hearing on

June 26, 2002 to three months' imprisonment, a period of supervised

release, and no fine. The district court granted a fourteen-level

enhancement for the size of the intended loss, see U.S.S.G.

§ 2F1.1(b)(0) (1992 version),8 a four-level enhancement for an

aggravated role in the offense, see U.S.S.G. § 3B1.1(a) (1992

version), and a two-level enhancement for more than minimal

planning, see U.S.S.G. § 2F1.1(b)(2) (1992 version). The court did
-21-

not explicitly rule on the government's request for an obstruction

of justice enhancement, see U.S.S.G. § 3C1.1 (1992 version), or

Thurston's request for a three-level decrease for failure to show

completion of the substantive offense, see § 2X1.1 (1992 version).

Thurston's adjusted offense level of twenty-six and criminal

history category of one yielded a guidelines sentencing range of

sixty-three to seventy-eight months' imprisonment; this range was

trumped by the statutory maximum of sixty months for a violation of

18 U.S.C. § 371.

During the hearing, the government confirmed that

Thurston had been offered (and had rejected) a plea agreement

"along the lines" of the one that Isola had accepted. Over the

government's objections and arguments, the district court then

departed downward on the basis of Thurston's record of charitable

work and community service and the disparity between Thurston's and

Isola's sentences. The court then solicited the government's

recommendation about the extent of the departure. The government

responded that, if the court chose to depart, then it should depart

no further than the sentencing guidelines for a perjury conviction,

which would be an offense level of twenty (six less than that of

the underlying offense), for a sentencing range of thirty-three to

forty-one months' imprisonment. The court then departed by at

least sixteen levels.
-22-

The government appealed the sentence and Thurston

appealed his conviction and sentence.

III. THURSTON'S APPEAL FROM HIS CONVICTION

Thurston was convicted under 18 U.S.C. § 371, which

provides:

If two or more persons conspire either to commit any

offense against the United States, or to defraud the

United States, or any agency thereof in any manner or for

any purpose, and one or more of such persons do any act

to effect the object of the conspiracy, each shall be

fined under this title or imprisoned not more than five

years, or both.

A. Statute of Limitations

Thurston argues that the trial court erred in not

granting his post-verdict Rule 29 motion for acquittal, because the

government had not proved an overt act during the limitations

period, and in not sua sponte instructing the jury on the statute

of limitations.

The statute of limitations for 18 U.S.C. § 371 crimes is

the general five-year statute of limitations contained in 18 U.S.C.

§ 3282. Here, that five years ran back from January 22, 1998, the

date of the indictment, less the six weeks during which Thurston

agreed to toll the limitations period. The government, therefore,

had to prove an overt act was done on or after December 11, 1992.

The indictment properly alleged at least eight overt acts within

the limitations period.
9 By contrast, in a civil case, a defense of statute of

limitations must be raised in an answer or it is lost. Fed. R.

Civ. P. 8(c); In re Cumberland Farms, Inc., 284 F.3d 216, 225-27

(1st Cir. 2002). 

-23-

Thurston did not raise the defense of statute of

limitations either before or at trial, did not request an

instruction on the defense, and did not object when the judge

instructed without addressing the issue. Thurston first raised the

issue by Rule 29 motion after the verdict. The government says

Thurston raised the issue too late. There is a preliminary

question of when such a motion should be raised, a question

affecting our standard of review.

"The statute of limitations is a defense and must be

asserted on the trial by the defendant in criminal cases . . . ."

Biddinger v. Comm'r of Police, 245 U.S. 128, 135 (1917). Here the

indictment adequately pled facts to establish that the crime was

within the limitations period. Thurston was not required to raise

the defense before trial under Rule 12(b)(3), Fed. R. Crim P. Nor

would it have made sense for him to do so, since the defense

depended on what the government proved or failed to prove at trial.

In a criminal case a defendant need only plead as to the accusation

of guilt in the indictment and need not raise the statute of

limitations as an affirmative defense before trial.9 Thurston

mistakes these truisms for an argument that he need not raise the
10 A defendant may waive the defense of statute of limitations

by several means, including by entry of plea of guilty, see

Acevedo-Ramos v. United States, 961 F.2d 305, 308 (1st Cir. 1992),

or by a voluntary agreement, usually written, such as in a tolling

agreement, see United States v. Spector, 55 F.3d 22, 24 (1st Cir.

1995). None of those situations is present here.

11 Our reasoning that the argument has been forfeited would be

different if compliance with the limitations period were either

jurisdictional or an element of the offense that the government had

the burden of proving. Here, when the limitations defense is not

an issue of law but is based on facts to be proven, the defense

must be raised at trial at the latest.

-24-

limitations defense at all before the jury delivers a verdict of

guilt.

The government says Thurston has waived10 the issue and

may not raise it at all. Absent an explicit agreement to waive the

defense, we treat the issue as a forfeiture and not a waiver,

contrary to the government's argument. This was not an intentional

relinquishment or abandonment of a known right, the definition of

a waiver. The issue of failure to assert the defense was viewed as

forfeiture in United States v. O'Bryant, 998 F.2d 21, 23 n.1 (1st

Cir. 1993). The rule we use -- that the defense of statute of

limitations must be raised at trial and, if not, is forfeited but

not waived -- is the rule in most circuits. See United States v.

Ross, 77 F.3d 1525, 1536 (7th Cir. 1996) ("[I]t is widely accepted

that a statute of limitations defense is forfeited if not raised at

the trial itself.") (citing cases). 

Thurston has indeed forfeited11 the defense that the

government did not prove facts that an overt act occurred within
12 For example, government witness Dr. Johnson testified that

he ordered the LabScan regularly for Medicare patients; rarely

needed a ferritin test; and, when he discovered that Damon charged

Medicare separately for ferritin, demanded that ferritin be removed

from panels he ordered. As demonstrated by a lab report the

defense introduced into evidence, Dr. Johnson continued ordering

the LabScan with ferritin for Medicare patients through mid-1993.

-25-

the limitations period. The defense should have been raised at

trial. Waiting until after the jury has rendered a verdict of

guilt to raise a limitations defense for the first time is

inconsistent with the characterization of the statute of

limitations as an affirmative defense and would unfairly sandbag

the government.

Because this was a forfeiture and not a waiver, there is

still plain error review available under Fed. R. Crim. P. 52. See

United States v. Olano, 507 U.S. 725, 731-32 (1993). Our

conclusion is straightforward. The government's evidence

established overt acts by the conspirators within the limitations

period, so there was no error at all as to the statute of

limitations, much less plain error.

The government showed that labs overseen by Thurston (and

his co-conspirators) submitted tens of thousands of reimbursement

claims to Medicare after December 11, 1992 for ferritin tests

conducted as part of LabScan orders. The government also presented

ample evidence that many of these tests were medically unnecessary

and were submitted by doctors unaware that Medicare would be

charged separately for ferritin.12 It was not credible that the
-26-

ferritin test, ordered less than two percent of the time, suddenly

became medically necessary thirty to forty percent of the time

within the life span of the conspiracy.

Thurston also argues he was entitled to a jury

instruction on the limitations point. By failing to request a jury

instruction and failing to object to the lack of an instruction, he

has forfeited the argument. Fed. R. Crim. P. 30; see United States

v. Gallant, 306 F.3d 1181, 1187 (1st Cir. 2002) ("[A] party unhappy

with a trial court's jury instruction [must] promptly state the

precise objection after the instruction has been given."). As

there was no error, the plain error standard was not met. See Fed.

R. Crim. P. 30, 52(b). 

B. Purported Lack of Criminal Intent and the Requested Reasonable

 Interpretation Instruction

Procedurally, the issue of reasonable interpretation

comes up in two ways: denial of Thurston's Rule 29 motions and

denial of his request for a jury instruction. Thurston's three

Rule 29 motions -- at the end of the government's case, at the end

of the defense case, and after the verdict -- all argued that he

lacked the needed criminal intent. Our review is of whether a

rational fact finder could conclude, beyond a reasonable doubt,

that the government proved the elements of the crime, including

intent. United States v. Moran, 312 F.3d 480, 487 (1st Cir. 2002).

Thurston also requested a jury instruction on reasonable
13 The instruction he requested stated in part: 

Mr. Thurston contends that an independent clinical

laboratory does not violate any aspect of Medicare law in

providing physicians with a profile or panel that contains a

serum ferritin test, so long as the physician is given

reliable and accurate information about the test and the

choice to select the profile or panel with or without the

added test.

Mr. Thurston also contends that an independent clinical

laboratory does not violate any aspect of Medicare law in

submitting a claim for reimbursement, using a HCFA form or

otherwise, so long as the blood tests performed were ordered

by a physician.

I instruct you as a matter of law that these are

reasonable interpretations of the Medicare statutes,

regulations and rules.

In order for you to find Mr. Thurston guilty on the basis

that he caused physicians to order medically unnecessary tests

for their patients, the government must prove beyond a

reasonable doubt that these were not Mr. Thurston's

interpretations of the pertinent Medicare laws.

-27-

interpretation of the law13 and preserved his objection to the

court's rejection of the instruction. 

Thurston argued he reasonably interpreted the law as

requiring that the treating physician, not the test lab, certify to

the HCFA that the test ordered was medically necessary and

reasonable, and that he and the company were entitled to rely on

that physician certification. Specifically, Thurston contended

that in the relevant time period an independent clinical lab did

not violate any aspect of Medicare law by: (1) providing physicians

with a panel containing a ferritin test, so long as the physician

was given reliable and accurate information about the test and
14 Thurston argues it would be nonsensical to ask clinical

testing laboratories to guarantee that a test ordered by a doctor

was in fact medically necessary. That question simply is not

raised here.

-28-

could select the panel without the test; or (2) submitting a

reimbursement claim, using a HCFA form or otherwise, so long as a

physician ordered the test performed. This is one of his primary

arguments on appeal.

Whether a particular defense doctrine is germane depends

on the crime charged and the facts of the case. This is where

Thurston's argument falters. He argues that he could not have had

the needed intent because employees of clinical labs, including

Thurston, "were unaware that they were actually certifying the

medical necessity of each test performed for every patient" and

they could reasonably interpret the law to mean that the treating

physician, not the laboratory, made the certification. The

argument is beside the point.14

Thurston was not charged with making a false statement to

the United States, the falsity of which turned on an ambiguity in

what the law required. Nor was he charged with failing to make a

statement required by law in a situation of parallel ambiguity. He

was not charged with falsely certifying the medical necessity of

the tests ordered. He was charged with the crime of conspiracy to

defraud the United States by inducing physicians through deceit and

trickery into certifying tests as medically necessary when the
-29-

ferritin tests were not necessary, thus leading Medicare to pay for

unnecessary services.

Thurston's knowledge of the Medicare regulations and of

the fact that the ordering physicians would certify the medical

necessity of the tests was, ironically, part of the proof of the

crime, not a defense. Thurston cannot, under 18 U.S.C. § 371,

knowingly conspire to mislead and manipulate doctors into

certifying medically unnecessary tests which led to improper

payment of Medicare funds and then defend on the basis that he

committed no fraud because the doctors, not he, were the ones who

certified the tests as necessary.

Thurston's reliance on United States v. Prigmore, 243

F.3d 1 (1st Cir. 2001), is misplaced. Prigmore is part of a line

of cases charging false statements or failure to make required

statements, holding that intent should be measured against an

objectively reasonable understanding of the legal requirements to

be met, and that a statement is not in fact false or fraudulent if

it is based on an objectively reasonable interpretation of that

legal requirement. See id. at 17-18. This court first applied

this principle in United States v. Rowe, 144 F.3d 15, 21-23 (1st

Cir. 1998), to a statement that was not in fact false under an

objectively reasonable interpretation of a disclosure requirement.

In Prigmore, the conspiracy charged was to defraud and impair the

functioning of the Food and Drug Administration, in connection with
-30-

its oversight and regulation of medical devices, through failure to

file reports which were required under certain conditions. The

fraud alleged was the failure to submit a pre-market approval

information supplement to the FDA, but whether such a supplement

was required depended on the interpretation of certain regulations.

The same conditional requirement was true of certain testing

reports. The question was whether defendants could objectively and

reasonably understand one regulatory phrase, "affecting the safety

or effectiveness of the device," as being circumscribed by another

regulatory phrase, "intended . . . conditions of use." See 243

F.3d at 15.

No similar question was presented here. Here, the

underlying crime was one of manipulating doctors into making false

certifications so Damon could receive unwarranted Medicare

payments. There is no material question about ambiguity in the

underlying legal requirements and no germane question about the

meaning of the law. There was also no issue of lack of fair notice

of what the law requires, a concern underlying the Prigmore/Rowe

line of cases. A reasonable person knows it is wrong to trick

others into doing something wrong that one does not do directly

oneself, especially in order to obtain personal gain. The Prigmore

doctrine has no application given the crimes charged and the facts

involved. Because the nature of the crime charged made the
15 As examples of disagreements, Thurston gives the following.

The government filed objections to Thurston's requested

instructions concerning character evidence and reputation (No. 7);

Thurston's status as vice-president (No. 10); the definition of

"knowingly" (No. 16); the definition of "willfully" (No. 17); proof

of specific intent to participate (No. 18); the definition of

"overt act" (No. 21); the good-faith defense (No. 22); and

Thurston's reasonable interpretation of Medicare laws (No. 23).

Counsel for Thurston objected to three of the government's

requested instructions, each of which concerned an element of the

offense: conspiracy (No. 18); unlawful objectives (No. 19); and

overt acts (No. 22).

-31-

reasonable interpretation doctrine irrelevant, the jury instruction

issue disappears.

C. Failure of District Court to Respond To Requested Instructions

Thurston argues that the district court violated Rule 30,

Fed. R. Crim. P., which provides:

(a) In General. Any party may request in writing

that the court instruct the jury on the law as

specified in the request. The request must be

made at the close of the evidence or at any

earlier time that the court reasonably sets.

When the request is made, the requesting party

must furnish a copy to every other party.

(b) Ruling on a Request. The court must inform the

parties before closing arguments how it intends

to rule on the requested instructions.

Thurston is correct: the district court failed to inform the

parties of how it intended to rule on each of the requested

instructions before closing arguments, as required by the rule.

A description of the interactions of court and counsel

sets the stage. Each side submitted extensive requests for

instructions, and there were disagreements.15 The court did resolve
-32-

the most serious disputes over some of the instructions (for

instance, on the reasonable interpretation/Prigmore question) and

told counsel these rulings before closing argument. The court did

not, though, review all of the requests. Thurston's counsel did

not object to this silence before giving his closing.

Defense counsel did raise an issue after closing, and

before the jury was instructed, that he wanted to put on record his

specific objections to the government's requests. He did not say

he had been prejudiced in any way by the court's failure to rule on

the requested instructions before he gave his closing. The court

replied that it would neither rule on nor hear argument on the

proposed instructions. Rather, the court stated its understanding

that the appropriate time to object was at the end of the

instructions. Nonetheless, it did hear argument on the

government's Request No. 8 (the compelled witness rule), and

declined to give the instruction. It also heard argument on the

government's proposed instructions No. 18 (conspiracy); No. 19

(unlawful objectives); and No. 22 (overt act). The only proposed

defense instruction called to the court's attention was No. 24, on

missing witnesses.

The district court did not, as Rule 30 requires, tell

counsel before closing argument its disposition of all of the

requested instructions. But counsel for Thurston had an obligation
-33-

to bring this to the court's attention before the closing and did

not do so.

Without addressing the issue of whether Thurston has thus

forfeited the Rule 30 argument, we choose to simply evaluate

whether defense counsel's closing argument was adversely affected.

See United States v. Owens, 167 F.3d 739, 753 (1st Cir. 1999). It

was not. One telling indicium that there was no prejudice is that

trial counsel did not ever say to the court he would be prejudiced

if he had to proceed with his closing without knowing the court's

disposition of the remaining requested instructions.

An even more telling indicium of lack of prejudice is

that Thurston's appellate counsel has been unable to identify any

specific areas of prejudice occasioned by the trial court's lapse.

While in theory such a lapse could cause prejudice, the most that

is argued here is that there was "no detailed reference to

important legal concepts regarding criminal conspiracy and the

state of mind by which Thurston would be judged." Appellate

counsel does not identify those "important legal concepts," and we

see none. As to Thurston's state of mind, the trial judge did

instruct on the government's burden to show Thurston had a specific

intent to participate in the conspiracy and to defraud the United

States. The court instructed the jury to consider Thurston

individually to determine if he willfully joined the conspiracy.

The court, in turn, defined "willfully." The court also explicitly
-34-

rejected Thurston's reasonable interpretation instruction, and it

instructed on good faith. These circumstances belie any claim of

prejudice and Thurston's claim fails.

D. Motion for New Trial Based on Dismissal of Apolipoprotein 

 Charge

Thurston and his co-defendants were originally charged

with conspiracy to commit fraud as to both the ferritin and the

apolipoprotein tests. At the close of the government's case the

court granted Thurston's motion for judgment of acquittal on the

apolipoprotein test, struck those references from the indictment,

and instructed the jury that this issue was no longer before it.

The government did not thereafter refer to this issue.

Thurston now argues that the court should have granted

Thurston a new trial after the jury returned because the

apolipoprotein evidence irretrievably tainted the trial. The

government rejoins that counsel should have raised the issue

sooner.

Again, we bypass the issue of forfeiture and reject the

argument that dismissal of the apolipoprotein charges tainted the

proceedings. Thurston's argument that none of this evidence would

have been admitted if the ferritin charges were tried alone is

based on an unlikely premise. Where the evidence admitted as to a

dismissed count would have been admissible as to a remaining count,

the defendant has not suffered prejudice. United States v. Rooney,

37 F.3d 847, 855-56 (2d Cir. 1994) (collecting cases); see United
-35-

States v. Weiner, 3 F.3d 17, 22 (1st Cir. 1993) (jury properly

considered evidence relating to counts dismissed prior to verdict,

since evidence was relevant to remaining counts).

The government would have introduced such evidence in any

event as relevant to rebut central defense themes that, because

Damon had such a decentralized decision-making structure, Thurston

was not involved in key decisions. The apolipoprotein evidence

contradicted Thurston's claims about the extent and consequences of

Damon's decentralized approach to the make-up, pricing, and

marketing of its panels. 

There was little risk of prejudice for other reasons.

The government did not mention the apolipoprotein evidence in its

closing, and exhibits pertaining only to apolipoprotein were

removed before the documents were submitted to the jury. Further,

most of the testimony and documentary evidence in the first half of

the case, before the court ruled on the Rule 29 motion, dealt with

ferritin. These factors further minimized the likelihood of any

taint. 

Thurston's conviction is affirmed.
United States Court of Appeals

For the First Circuit

Volume II of II

Nos. 02-1966, 02-1967

UNITED STATES OF AMERICA,

Appellant / Cross-Appellee,

v.

WILLIAM THURSTON,

Defendant, Appellee / Cross-Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, Senior U.S. District Judge]

Before

Lynch, Lipez, and Howard, Circuit Judges. 

Michael K. Loucks, Assistant U.S. Attorney, with whom

Michael J. Sullivan, U.S. Attorney, and Susan G. Winkler and Gary

S. Katzmann, Assistant U.S. Attorneys, were on brief, for

appellant.

Matthew D. Brown, with whom Joseph P. Russoniello and

Cooley Godward LLP were on brief, for appellee.

February 4, 2004
-36-

IV. SENTENCING APPEALS

A. Thurston's Appeal: Loss Calculation

Much of Thurston's guidelines sentence range (sixty-three

to seventy-eight months) was driven by the loss calculation. Both

the PSR and the government recommended an intended loss figure of

more than five million dollars but less than ten million dollars.

This resulted in a fourteen-level increase in the base offense

level.

Thurston, not surprisingly, targets this loss

calculation. He makes two arguments. The first is that the

government was precluded by a comment to U.S.S.G. § 2F1.1 from ever

relying on intended loss unless the government first established

what the actual loss was and then established that the intended

loss was greater. This is a pure issue of guidelines

interpretation, which we review de novo. See United States v.

Gonzalez-Alvarez, 277 F.3d 73, 77 (1st Cir. 2002). The second

argument is that the court's conclusion had insufficient factual

support for a number of reasons, a contention reviewed for clear

error.

The guidelines interpretation argument turns on a comment

that provides:

Consistent with the provisions of § 2X1.1 (Attempt,

Solicitation or Conspiracy), if an intended loss that the

defendant was attempting to inflict can be determined,

this figure will be used if it is greater than the actual

loss.
-37-

U.S.S.G. § 2F1.1, cmt. n.7 (Fraud and Deceit) (1992 version).

Thurston argues that because the government did not show

actual loss, it cannot turn to intended loss. The argument is

simply wrong as a matter of the wording of the comment. The

comment directs the use of an intended loss figure when it is

greater than the actual loss figure; the comment does not restrict

the sentencing court's ability to rely on intended loss when there

is no actual loss calculation available. Defendant's reading also

makes little sense: it may be easier as a matter of proof to show

intended loss than actual loss. Conspirators are held accountable

for the loss they intend to commit. Finally, it is obvious on

these facts that the intended loss was greater than the actual loss

-- some doctors quit using Damon when, to their disgust, they

realized what the scheme was.

Thurston next mounts a series of fact-based attacks on

the intended loss figure of more than five million dollars. That

figure is supported by the capital expenditure requests each of the

labs prepared to obtain funding to buy the equipment needed to

perform the increased ferritin testing the labs anticipated. Each

CER included a financial analysis, one component of which was the

estimated new revenue from bundling the tests. Thus, the intended

loss calculation was based on the conspirators' own financial

calculations.
-38-

Thurston argues the CERs, being mere financial

projections, are not an adequate basis for an intended loss figure;

that the CERs were based on an assumed best-case scenario in which

no physician who ordered Labscans would decline to get ferritin

tests; that, in any event, not all physicians who ordered the

bundled test were tricked into doing so; that the conspiracy was

not proven to last five years; that the conspiracy ended before

five years had elapsed for several labs, given the different dates

on which the labs bundled the tests; and that later, only one lab

reported to Thurston.

A number of these are quickly dispatched. The jury

verdict of guilt disposes of the question of the length of the

conspiracy. Thurston's promotion out of management of three of the

labs is irrelevant since he earlier conspired to produce losses

intended to go on for years.

Thurston also argues that the intended loss had to be

reduced under U.S.S.G. § 2X1.1(b)(2) because the government's proof

did not establish that the conspirators had "completed all the acts

the conspirators believed necessary on their part for the

successful completion of the substantive offense." Id. There is

no merit to the argument. There was successful completion of the

offense: the tests were bundled and doctors were misled into

ordering unnecessary ferritin tests. The complaints from customers

about Damon's practices were confirmation the scheme had worked.
-39-

The closer question is the degree of precision the

government must reach in showing intended loss. It is true that

the CERs set forth best-case scenarios which assumed all doctors

would order the bundled test without culling out the ferritin test.

If the CERs stood alone, defendant would have a better argument.

But they are supplemented by the fact that Damon made it extremely

difficult for doctors to cull out the ferritin and order the

Labscan without a ferritin test.

Further, the conspirators tried to hide from doctors the

fact that there was a significant cost to Medicare associated with

the bundling. The conspirators were maximizing the probability

that all doctors would accept the bundling, without culling and

without protest. The fact that the conspirators were not entirely

successful in fooling all doctors does not lessen their intent. 

We have noted before that intended loss does not have to

be determined with precision; the court needs only to make a

reasonable estimate in light of the available information. United

States v. Blastos, 258 F.3d 25, 30 (1st Cir. 2001). There was good

evidence of intent and some "prospect of success" for the fraud to

reap over five million dollars, and that is all that the case law

requires. United States v. Orlando-Figueroa, 229 F.3d 33, 48 (1st

Cir. 2000). The best-case CER projection was a loss to Medicare

over the charged five-year life of the conspiracy of $5,800,230.

It was reasonable for the district court to estimate that the
-40-

intended loss exceeded five million dollars, even allowing for the

one to two percent normal order rate for ferritin tests. The

government met its burden and Thurston offered little in rebuttal

except his protestations of innocence. There was no clear error.

B. Government's Appeal

Given an intended loss of five million dollars,

Thurston's crime led to the statutory maximum sentence of five

years. The district court departed downward from the Guidelines

range by sixteen levels, however, sentencing Thurston to three

months' imprisonment to be followed by twenty-four months of

supervised release. The court imposed no fine and recommended that

the term of imprisonment be served in a halfway house.

1. Standard of Review: The PROTECT Act

On April 30, 2003, section 401 of the PROTECT Act became

effective. That section changes the applicable standard of review

for certain issues in appeals from departures from the sentencing

guidelines. Section 401 amends 18 U.S.C. § 3742(e), which now

provides: 

(e) Consideration. -- Upon review of the record, the

court of appeals shall determine whether the sentence --

. . . .

(3) is outside the applicable guideline range, and

(A) the district court failed to provide the

written statement of reasons required by

section 3553(c);
-41-

(B) the sentence departs from the applicable

guideline range based on a factor that --

(i) does not advance the objectives set

forth in section 3553(a)(2); or

(ii) is not authorized under section

3553(b); or

(iii) is not justified by the facts of

the case; or

(C) the sentence departs to an unreasonable

degree from the applicable guidelines range,

having regard for the factors to be

considered in imposing a sentence, as set

forth in section 3553(a) of this title and

the reasons for the imposition of the

particular sentence, as stated by the

district court pursuant to the provisions of

section 3553(c); . . . .

. . . .

The court of appeals shall give due regard to the

opportunity of the district court to judge the

credibility of the witnesses, and shall accept the

findings of fact of the district court unless they are

clearly erroneous and, except with respect to

determinations under subsection (3)(A) or (3)(B), shall

give due deference to the district court's application of

the guidelines to the facts. With respect to

determinations under subsection (3)(A) or (3)(B), the

court of appeals shall review de novo the district

court's application of the guidelines to the facts.

(emphasis added).

This changed the law. Under Koon v. United States, 518

U.S. 81 (1996), the courts of appeals were not to review a

departure decision de novo, but were to ask whether the sentencing

court abused its discretion in granting the departure. Id. at 91,

96-100. In appeals from sentencing departures, we had, before the
-42-

PROTECT Act, engaged in a three-part review: "(1) we determine[d]

whether the stated ground for departure [was] theoretically

permissible under the guidelines; (2) if so, we examine[d] the

record to assess whether there [was] adequate factual support; and

(3) we determine[d] the appropriateness of the degree of

departure." United States v. Bogdan, 302 F.3d 12, 16 (1st Cir.

2002). Whether the stated ground for departure was theoretically

permissible -- the first part -- was a question of law reviewed de

novo. United States v. Bradstreet, 207 F.3d 76, 81 (1st Cir.

2000); see also United States v. Diaz, 285 F.3d 92, 97-98 (1st Cir.

2002). Under Koon, our review under the remaining two parts was

for abuse of discretion only. See Koon, 518 U.S. 96-100; United

States v. Lujan, 324 F.3d 27, 31 n.5 (1st Cir. 2003); United States

v. Martin, 221 F.3d 52, 55 (1st Cir. 2000).

After the PROTECT Act, the statute requires de novo

review not merely of the ultimate decision to depart, but also of

"the district court's application of the guidelines to the facts."

§ 3742(e). If this court agrees that the decision to depart was

justified under the guidelines, however, the extent of the

departure granted by the district court is reviewed deferentially,

just as it was prior to the PROTECT Act. Id.; United States v.

Frazier, 340 F.3d 5, 14 n.4 (1st Cir. 2003); see also United States

v. Mallon, 345 F.3d 943, 946 (7th Cir. 2003); United States v.

Jones, 332 F.3d 1294, 1300(10th Cir. 2003). 
-43-

(a) Retroactivity

Thurston argues that the PROTECT Act should not be

interpreted to apply to this case and that, if it does apply, it is

retroactive and invalid. He makes two statutory intent arguments:

(1) that the internal structure of the statute means it should not

be applied to cases already pending on appeal; and (2) that the

presumption against retroactivity should apply.

First, Thurston argues that Congress meant application of

the de novo review provisions in the PROTECT Act to be deferred

until appeals arise from sentences entered after the Act became

effective. This is evident, Thurston says, since the Act imposed

a new requirement for the district judge to give a written

statement of reasons. From this, Thurston argues, all provisions

of the Act were meant to apply only to post-Act sentencing. The

argument is plausible, but we are unpersuaded. Even before the

PROTECT Act, a trial court was required to give some reasons,

though not necessarily in writing, for a downward departure. See

18 U.S.C. § 3553(c)(pre-PROTECT Act version); United States v.

Sclamo, 997 F.2d 970, 973 (1st Cir. 1993) (discussing discouraged

ground for departure); United States v. DeMasi, 40 F.3d 1306, 1324

(1st Cir. 1994) (same). A requirement that this statement of

reasons be written, rather than oral, has no particular connection

to the appellate standard of review.
-44-

Although the Act does not expressly say that its de novo

review provision applies to pending appeals, it does give an

effective date of April 30, 2003. The effective date of a statute

does not by itself establish that it has any application to conduct

that occurred at an earlier date. See INS v. St. Cyr, 533 U.S.

289, 317 (2001) (quoting Landgraf v. USI Film Prods., 511 U.S. 244,

257 (1994)). Still, we agree with the Eighth Circuit that the new

statute applies to appeals pending as of the effective date of the

statute. See United States v. Aguilar-Lopez, 329 F.3d 960, 962-63

(8th Cir. 2003). Subject to constitutionally based retroactivity

concerns, it is certainly within Congress's power to change a

standard of review. See, e.g., Hines v. Sec'y of Dep't of Health

& Human Servs., 940 F.2d 1518, 1523 (Fed. Cir. 1991); Consumers

Union of U.S. v. FTC, 801 F.2d 417 (D.C. Cir. 1986); cf. Bierce v.

Waterhouse, 219 U.S. 320, 336-37 (1911). Much of the conduct

regulated by this part of the PROTECT Act is that of the courts of

appeals (and indirectly, the district courts now under closer

scrutiny), and that involves conduct dating from April 30, 2003

forward.

Thurston's fall-back argument is that applying a changed

standard of review to a case already on appeal would have an

impermissible effect on him under the Supreme Court's retroactivity

jurisprudence. See Landgraf, 511 U.S. at 264. Not so. The change

of a standard of appellate review is one in procedure for the
16 In Thurston's case, there could be no reliance interest in

any event, since this court used a de novo standard of review at

the time he committed the crime. Before Koon was decided in 1996,

the rule in this circuit was that we would review de novo whether

"taking the reasons for departure stated by the district court at

face value, those reasons will as a matter of law justify

abandonment of the guidelines." United States v. Wogan, 938 F.2d

1446, 1447 (1st Cir. 1991).

17 Since the original panel opinion issued in this case, every

other circuit to address the question has similarly held that the

PROTECT Act does not have an impermissibly retroactive effect when

applied to cases pending as of the Act's effective date. See

United States v. Stockton, 349 F.3d 755, 764 n.4 (4th Cir. 2003);

United States v. Bell, 351 F.3d 672, 674-75 (5th Cir. 2003); United

States v. Mallon, 345 F.3d 943, 946-47 (7th Cir. 2003); United

States v. Willey, 350 F.3d 736, 738-39 (8th Cir. 2003).

-45-

courts; procedural changes that do not affect substantial rights

are not usually considered impermissibly retroactive. This

legislation is little different than the Supreme Court's changing

the standard of review by directing the courts of appeals to decide

ultimate Fourth Amendment questions de novo. Cf. Ornelas v. United

States, 517 U.S. 690, 697 (1996). The PROTECT Act's alteration of

the appellate standard of review upsets no legitimate reliance

interest by a defendant; it could not have induced alteration of

the behavior that led to the crime.16 We see no unfairness to

defendants in Congress's requiring a closer look by appellate

courts at whether a district court committed an error in deciding

that the guidelines permitted a departure. It is the substance of

the sentencing rules, both in the Guidelines and in the underlying

statutes, that affects defendants.17 

(b) Separation of Powers
-46-

Thurston makes a cursory argument that the PROTECT Act

presents serious constitutional separation-of-powers questions. At

the request of the Senate, the Chief Justice, expressing the views

of the U.S. Judicial Conference, did advise the Senate of the

Conference's opposition to portions of the bill, including

alteration of the standard of review. See Letter from Chief

Justice William H. Rehnquist to Senator Patrick Leahy (undated),

available at http://www.nacdl.org/public.nsf/2cdd02b415ea

3a64852566d6000daa79/departures/$FILE/Rehnquist_letter.pdf. The

U.S. Sentencing Commission requested that Congress not act until

the Commission had the opportunity to analyze data and study the

matter. See Letter from Judge Diana Murphy, Chair of the U.S.

Sentencing Commission, et al., to Senators Orrin Hatch and Patrick

Leahy (April 2, 2003), available at http://www.nacdl.org/

public.nsf/2cdd02b415ea3a64852566d6000daa79/departures/$FILE/stcg

_comm_current.pdf. But judicial opposition to legislation on

policy grounds is one thing; unconstitutionality is quite another.

No real theory of unconstitutionality has been presented by this

appeal, and so the issue is waived. See United States v. Zannino,

895 F.2d 1, 17 (1st Cir. 1990).

(c) Scope of De Novo Review

A different argument was advanced in the petition for

rehearing concerning the scope of de novo review under the PROTECT
18 Ordinarily, this court does not consider arguments raised

for the first time in a petition for rehearing. United States v.

Bongiorno, 110 F.3d 132, 133 (1st Cir. 1997); Am. Policyholders

Ins. Co. v. Nyacol Prods., Inc., 989 F.2d 1256, 1264 (1st Cir.

1993); Kale v. Combined Ins. Co., 924 F.2d 1161, 1169 (1st Cir.

1991). Because of the importance of this issue of statutory

construction, however, we bypass Thurston's failure to raise the

point earlier and consider the argument on its merits.

-47-

Act.18 The final sentence of § 3742(e) requires the court of

appeals to review de novo all determinations by the district court

"under subsection (3)(A) or (3)(B)," the texts of which are set

forth above. In his petition for rehearing, Thurston, ably

assisted by amicus, argues that subparagraphs (3)(B)(i) and

(3)(B)(ii) apply only in cases involving "unmentioned" departures,

i.e., departures on grounds not expressly considered by the

Sentencing Commission. On this theory, because good works

departures are specifically authorized (albeit discouraged) by the

guidelines, this court is not authorized to ask whether, in

Thurston's case, such a departure 

(i) does not advance the objectives set forth in

section 3553(a)(2); or 

(ii) is not authorized under section 3553(b)[.]

§ 3742(e)(3)(B). Instead, the argument goes, this court is bound

to accept the judgment of the Sentencing Commission that good works

departures are consistent with § 3553(a)(2) and (b), and

accordingly must limit its review to whether a good works departure

"is not justified by the facts of the case" under subparagraph

(iii). 
-48-

The government's response to this argument is less than

clear. The United States contends that "[n]othing in [the PROTECT

Act] limits consideration of the factors in § 3553(a)(2) or the

Commission's intentions as set out [in] § 3553(b)(1)[] to

unmentioned departures, as amicus curiae argues." That statement

is true as a literal matter, but it does not answer the practical

question raised by amicus: whether subparagraphs (i) and (ii)

permit the courts of appeals to revisit the Commission's

determination that a particular ground for departure (e.g.,

exceptional good works) comports with those provisions. The

government does not directly answer that question. It does,

however, strongly oppose amicus's argument that the courts of

appeals are barred from considering the purposes of sentencing, the

structure and purposes of the sentencing guidelines, or similar

aids in evaluating the propriety of departures in particular cases.

In the end, there is less to this dispute than meets the

eye. For the reasons explained below, we agree with the defense

that a court of appeals, in reviewing a departure under

§ 3742(e)(3)(B)(i) and (ii), must accept and may not look behind

the Sentencing Commission's determination that a particular

categorical basis for departure is permissible or impermissible.

At the same time, we agree with the government that under

subparagraph (iii), a court of appeals is free to weigh the

purposes of sentencing, the intentions of the Commission, and any
-49-

other relevant considerations in deciding whether a particular

departure is "justified by the facts of the case." This reading

both reaffirms the authority of the Sentencing Commission and

broadens appellate review of sentencing departures on grounds not

considered by the Commission.

We start with the focus of an appellate court's inquiry

under § 3742(e)(3)(B). Although most of § 3742(e) is concerned

with "the sentence" actually imposed, see § 3742(e) (preamble),

subsection (e)(3)(B) directs the court of appeals to focus on the

"factor" cited by the district court as the basis for granting a

departure. See § 3742(e)(3)(B) ("the sentence departs from the

applicable guideline range based on a factor that . . . ."

(emphasis added)). Amicus argues, and we agree, that the initial

question under § 3742(e)(3)(B) is whether the district court

selected a categorical basis for departure that the U.S. Sentencing

Commission has considered and authorized. Because the Commission

has already declared certain factors to be permissible grounds for

departure, Congress could not reasonably have intended

§ 3742(e)(3)(B) as a warrant to second-guess the Commission's

policy judgments on those matters. If, on the other hand, the

district court cited as its basis for departure a factor that the

Commission has not expressly considered, then the court of appeals

must make its own determinations under subparagraphs (3)(B)(i) and

(ii). Where, as here, the departure was based on a factor
19 Section 3742(j) provides:

(j) Definitions. -- For purposes of this section -- 

(1) a factor is a "permissible" ground of

departure if it – 

(A) advances the objectives set forth in

section 3553(a)(2); and 

(B) is authorized under section 3553(b); and

(C) is justified by the facts of the case;

and

(2) a factor is an "impermissible" ground of

departure if it is not a permissible factor

within the meaning of subsection (j)(1). 

-50-

considered by the Commission (i.e., exceptional good works), de

novo review extends only to whether the departure was "justified by

the facts of the case." § 3742(e)(3)(B)(iii). 

Implicit in this conclusion is an analysis of the word

"factor" in § 3742(e)(3)(B). That term, in this context, must be

read to mean a categorical basis for departure, independent of the

facts of the case (for example, "good works" generally). The

PROTECT Act inserted a new subsection (j) in § 3742 that

forthrightly equates the term "factor" with "ground of departure."19

In addition, the sentencing guidelines themselves, before the

PROTECT Act, employed the word "factor" to refer generally to a

basis for departure. See, e.g., U.S.S.G. § 5K2.0 (2002) ("Grounds

for Departure"). The Supreme Court adopted the same usage in Koon.

See, e.g., 518 U.S. at 98 (referring to "whether a discouraged

factor nonetheless justifies departure"). Interpreting the term

"factor" in § 3742(e)(3)(B) to refer to a categorical basis for
20 Amicus also points to evidence in the legislative history

of the PROTECT Act that Congress was troubled by departures on

unmentioned grounds. Representative Tom Feeney, the sponsor of the

amendment that became § 401, was particularly interested in

limiting such departures. Feeney stated that under the Supreme

Court's decision in Koon, district judges were permitted to depart

downward based on "any factor not explicitly disapproved by the

sentencing commission . . . . So judges can make up exceptions as

they go along." 149 Cong. Rec. H2422-23 (daily ed. March 27, 2003)

(statement of Rep. Feeney). At a different point, Rep. Feeney

referred to a need to prevent "ad hoc departures based on vague

grounds, such as 'general mitigating circumstances.'" Id. at

H2423.

These statements certainly illuminate one of Congress's

purposes in the PROTECT Act, but they do not meaningfully assist

our interpretation of § 3742(e)(3)(B). Rep. Feeney's concerns

about unmentioned departures are consistent with the overarching

purpose of the PROTECT Act to reduce the incidence of downward

departures generally. Moreover, Congress apparently rejected Rep.

Feeney's initial proposal to eliminate all departures on

unmentioned grounds. See id. at 2420-21. And none of the parties

has cited, and we have not discovered, any legislative history

addressing the specific issue here: whether Congress intended the

courts of appeals to engage in de novo review under subparagraphs

(i) and (ii) of § 3742(e)(3)(B) even where the ground for departure

selected by the district court has been expressly approved by the

Sentencing Commission. 

-51-

departure is also consistent with this court's own guidelines

cases, which have frequently used the term in that way. See, e.g.,

United States v. Mejia, 309 F.3d 67, 70 (1st Cir. 2002) (referring

to "factors that are either encouraged or discouraged bases for

departure"); United States v. Bogdan, 284 F.3d 324, 328 (1st Cir.

2002) (referring to "factors that are explicitly or implicitly

proscribed by the Sentencing Guidelines as bases for departure").20

On the other hand, there is some support for the contrary

view, inherent in the government's position, that "factor" refers

not to the categorical basis for departure but to the district
21 This interpretation is also consistent with § 3742(f),

another provision amended by the PROTECT Act. That section

establishes the circumstances under which the court of appeals may

remand a case for re-sentencing. Subparagraph (2) addresses

remands in departure cases. In language obviously intended to

mirror the substance of § 3742(e)(3), it permits the court of

appeals to vacate a departure and remand if "the district court

failed to provide the required statement of reasons in the order of

judgment and commitment, or the departure is based on an

impermissible factor, or is to an unreasonable degree . . . ."

§ 3742(f)(2) (emphasis added). 

-52-

court's fact-specific justification for departing in a particular

case. For example, 18 U.S.C. § 3553(a), which was amended by the

PROTECT Act, is entitled "Factors to be considered in imposing a

sentence" (emphasis added), and it requires district courts to take

account of such case-specific matters as "the nature and

circumstances of the offense and the history and characteristics of

the defendant." § 3553(a)(1). Nevertheless, we are persuaded that

the word "factor" in § 3742(e)(3)(B) is better understood as a

shorthand for a categorical basis for departure. Congress, in

enacting the PROTECT Act, plainly employed the term in that way in

§ 3742(j), and we hold that it intended the word to have the same

meaning in § 3742(e)(3)(B).21

It is also apparent that Congress did not intend

§ 3742(e)(3)(B)(i) and (ii) as a license for the courts of appeals

to second-guess the Sentencing Commission's determinations that

specific factors are permissible or impermissible. In Part K of

Chapter 5 of the sentencing guidelines, the Commission has

identified specific mitigating and aggravating factors that, in the
-53-

Commission's view, may justify departure. See U.S.S.G. § 5K2.0

(2002 ed.) ("[T]his subpart seeks to aid the court by identifying

some of the factors that the Commission has not been able to take

into account fully in formulating the guidelines. . . . Presence

of any such factor may warrant departure from the guidelines . . .

."). The Commission has also prohibited departures based on

certain factors. See, e.g., § 5H1.10 (race, sex, national origin,

creed, religion, and socio-economic status); § 5K1.2 (defendant's

refusal to assist authorities in investigating other persons); see

also U.S.S.G. § 5K2.0(d) (Nov. 2003 ed.) ("Prohibited Departures").

For appellate courts to revisit such determinations anew in every

case would undermine the authority of the Sentencing Commission,

reduce uniformity in sentencing, and risk "recreat[ing] the

location-based sentencing swings that Congress sought to minimize

when it opted for a guideline paradigm." United States v. Snyder,

136 F.3d 65, 69 (1st Cir. 1998). Prior to the PROTECT Act, the

Sentencing Commission's judgments were not open to such attacks.

See, e.g., Koon, 518 U.S. at 95-96 (explaining that if the

Commission has forbidden a particular ground of departure, "the

sentencing court cannot use it as a basis for departure" (emphasis

added)); United States v. Rivera, 994 F.2d 942, 949 (1st Cir. 1993)

(Breyer, J.) (even if forbidden factors are present to such an

extent that the case is outside the relevant guideline's heartland,
22 This conclusion is slightly different from amicus's position

that subparagraphs (i) and (ii) simply "do not apply" to mentioned

departures. There is no basis in the statute to hold those

subparagraphs inapplicable to certain types of departures.

Properly framed, the question is whether a ground for departure

endorsed by the Commission can ever fail the tests set forth in

§ 3742(e)(3)(B)(i) and (ii). We answer that question in the

negative.

-54-

"the sentencing court is not free to consider departing"). There

is no reason to think Congress intended to change that rule. 

Accordingly, we hold that where the Commission has

expressly considered and forbidden or approved (even if

discouraged) a particular factor for departure, the court of

appeals is bound to accept that determination and cannot revisit it

under subparagraphs (i) or (ii) of § 3742(e)(3)(B).22 So in

Thurston's case, because the Commission has determined that

departures based on exceptional good works are authorized, we do

not inquire whether such departures comport with subparagraphs (i)

or (ii), and instead proceed directly to the question whether the

departure "is not justified by the facts of the case."

§ 3742(e)(3)(B)(iii). 

There is a second component, which we do not accept, to

the defense's interpretation of § 3742(e)(3)(B). Amicus argues

that in evaluating whether a departure on a particular ground is

"justified by the facts of the case" under subparagraph (iii), this

court may not refer to the underlying purposes of sentencing, the

Commission's intent in its guidelines and policy statements, or
23 Hypothetically, the Commission's statutory authority could

be undercut if an appellate court were to construe an approved

basis for departure so narrowly that, as a practical matter, no set

of facts could ever qualify. But that circumstance is extremely

unlikely and, in any event, is not presented here. 

-55-

other extra-record considerations. The reason, amicus says, is the

same: it is the province of the Commission to weigh such

considerations, and Congress could not have intended the court of

appeals to re-weigh those issues when reviewing a specific

sentencing departure.

We reject this argument for several reasons. First, the

PROTECT Act asks whether the departure is "justified" by the facts

of the case. That calls for an evaluative judgment, not a

mechanical exercise. See Webster's Third New Int'l Dictionary 1228

(1993) ("justify" means "to prove or show to be just, desirable,

warranted, or useful"). Nothing in the statute purports to

constrain the sources that the reviewing court may consider.

Second, we see no serious risk that the Commission's legitimacy or

authority will be undermined if a court of appeals refers to the

purposes of sentencing, the goals of the guidelines, or other

policy considerations in determining whether, on the facts before

the court, a particular defendant fits within a particular

categorical "factor."23 Third, those considerations were a regular
24 Before the PROTECT Act, § 3742(e)(3) simply required the

court of appeals to determine whether the sentence imposed by the

district court was "unreasonable" in light of, inter alia, "the

factors to be considered in imposing a sentence." 18 U.S.C.

§ 3742(e)(3) (2000). Those factors, which appear in § 3553(a),

include the purposes of sentencing. See, e.g., United States v.

Smith, 14 F.3d 662, 666 (1st Cir. 1994) (referring to the

"sentencing system's purposes" in rejecting a downward departure).

-56-

part of the test that Congress required of the courts of appeals

under § 3742(e)(3) even prior to the PROTECT Act.24 

Fourth, the district court not only may but must consider

the purposes of sentencing and the Commission's relevant guidelines

and policy statements when it imposes a sentence. See 18 U.S.C.

§ 3553(a); see also id. § 3553(b) ("In the absence of an applicable

sentencing guideline, the court shall impose an appropriate

sentence, having due regard for the purposes [of sentencing] set

forth in subsection (a)(2)."). The PROTECT Act requires this court

to apply de novo review under § 3742(e)(3)(B)(iii), and it would be

anomalous for Congress to have required plenary review but

restricted the sources of law or fact that may inform that review.

Adopting amicus's interpretation would produce the counterintuitive

conclusion that Congress, in expanding appellate review of

departures in the PROTECT Act, simultaneously prevented the courts

of appeals in some cases from reviewing aspects of the district

court's reasoning. Congress could not have intended such a result.

For similar reasons, we reject the government's

suggestion that we adopt bright-line rules against the
-57-

consideration of certain kinds of information in our exercise of de

novo review under subparagraph (3)(B)(iii). In particular, the

government urges that we cannot consult district court opinions (at

least to the extent not tested on appeal) or databases of

sentencing decisions. Nothing in the PROTECT Act precludes us from

considering such sources. To be certain, experience gained under

the Act with the passage of time may show that particular kinds of

information have greater or lesser value. Databases of sentencing

outcomes, for example, may or may not prove pertinent, depending on

their scope and the types of information they report. But we

decline to adopt any mechanical rule restricting the information

that the court may consider under § 3742(e)(3)(B)(iii). 

(d) Deferential Review After the PROTECT Act

We also reject a final argument by the defense, said to

be drawn from Ornelas v. United States, 517 U.S. 690 (1996), that

de novo review involves deference not only to the district court's

determinations of historical fact, but also to its ultimate

conclusions –- for example, whether a defendant's good works are

"exceptional." It is true that in sentencing cases, "appellate

review must occur with full awareness of, and respect for, the

trier's superior 'feel' for the case." United States v. DiazVillafane, 874 F.2d 43, 49-50 (1st Cir. 1989). We do agree that

this court must defer to a sentencing court's findings of

historical fact, even after the PROTECT Act. The Act did not alter
25 The court stated:

[I]n granting the motion for downward departure, I'm

basing it on two grounds.

First, the downward departure is justified because of the

defendant Thurston's record of charitable work and community

service[, which] is unique, extensive and extraordinary. I

think the record should reflect that in over fourteen years of

sentencing defendants, it's my judgment that no one had a more

extraordinary devotion to charitable work, community service,

and especially his dedication to his church.

And the second ground is that which is set out in the

United States Sentencing Commission Guidelines Manual under

Chapter 1, Part A, Section 3, which is entitled . . . "The

Basic Approach, paren, policy statement, closed paren,"

setting forth the rationale of the guidelines, it's cited here

that Congress sought reasonable uniformity in sentencing by

narrowing the wide disparity in sentences imposed for similar

criminal offenses committed by similar offenders.

Congress sought proportionality in sentencing through a

-58-

the provision in § 3742(e) that the district court's findings of

fact must be accepted unless clearly erroneous. See § 3742(e).

Other circuits agree with this interpretation of the Act. Mallon,

345 F.3d at 946; Jones, 332 F.3d at 1300 n.9. Indeed, the

government concedes this point. To the extent amicus suggests that

the court of appeals should defer to the district court's

application of the departure guidelines to the facts, however, its

argument is refuted by the plain text of § 3742(e). After the

PROTECT Act, that kind of deference is not ours to give.

2. The Downward Departures

The government argues that each of the stated grounds for

downward departure was in error.25 First, it contends that the
system that imposes appropriately different sentences for

criminal conduct of differing severity.

We have a situation here where coconspirator Isola, the

president of Damon and the architect, at least the prime

architect of this conspiracy, received a sentence of three

years' probation, and it is, in my judgment, a violation of

the fundamental purpose of the Sentencing Commission

Guidelines to impose a sentence which is not at least somewhat

similar to that incurred by a coconspirator who was more

involved in the conspiracy t[h]an this defendant.

-59-

district court was forbidden to depart downward based on a

disparity between Thurston's sentence and the sentence of the

company president, a cooperating co-conspirator who pled guilty.

Second, it argues that departures for good works are discouraged,

and that the facts do not justify a finding that Thurston's good

works are so exceptional as to warrant such a departure.

(a) Disparity With Co-Defendant

The district court felt there was an unfair disparity

between a five-year sentence of imprisonment for Thurston and the

three-year probation sentence for co-conspirator Isola. It viewed

Isola as "the architect, at least the prime architect of this

conspiracy." Apparently the district court felt that Isola,

Thurston's superior, was the guiltier of the two, and that this

fact overshadowed other differences between their cases. Isola

pled nolo contendere to willful blindness about the apolipoprotein

conspiracy. 

As the law of this circuit makes clear, basing the

departure on grounds of disparity in sentence alone between
-60-

Thurston and Isola was beyond the district court's authority.

United States v. Wogan, 938 F.2d 1446, 1448 (1st Cir. 1991); see

also United States v. Romolo, 937 F.2d 20, 25 n.5 (1st Cir. 1991).

Sidestepping circuit precedent, the district court referred to a

statute that requires a sentencing court to consider not only the

Commission's Sentencing Guidelines and policy statements, but also

"the need to avoid unwarranted sentence disparities among

defendants with similar records who have been found guilty of

similar conduct." 18 U.S.C. § 3553(a)(6). This provision was

unchanged by the PROTECT Act.

Yet the same statute also requires that the court "shall

impose a sentence of the kind, and within the range [of the

pertinent Guidelines], unless the court finds that there exists an

aggravating or mitigating circumstance of a kind, or to a degree,

not adequately taken into consideration by the Sentencing

Commission." 18 U.S.C. § 3553(b)(1). That is why, since as early

as 1991, this court has interpreted the statute to preclude

sentencing judges from departing downward based on "a perceived

need to equalize sentencing outcomes for similarly situated codefendants, without more." Wogan, 938 F.2d at 1448 (emphasis

added).

The "more" that is needed refers to circumstances not

adequately considered by the Commission, and none have been shown

here with regard to disparity. In the pre-guidelines era, the
26 Good works may also be considered in setting a sentence

within the guidelines range or in setting certain conditions. This

does Thurston no good, however, since the applicable guidelines

range is sixty-three to seventy-eight months, all above the

statutory maximum of sixty months.

-61-

district court's attempt to avoid perceived unfairness would have

had greater weight. The guidelines bind us and they bind the

district court. The downward departure based on disparity in

sentences among co-defendants was impermissible.

(b) Good Works

The second ground, based on Thurston's good works, poses

the most difficult issue in the case. We have found disparity

alone an impermissible ground; it is possible the trial court would

not have granted so extensive a departure based on good works

alone. It may also be that if the court had granted a modest

departure on the second ground, the government would not have

appealed. But the trial court did not differentiate and the

government on appeal argues that any departure at all based on good

works (like the departure for disparity) was contrary to law.

The sentencing guidelines discourage downward departures

from the normal sentencing range based on good works -- that is,

civic, charitable, or public service. U.S.S.G. § 5H1.11. Such

departures are permitted only when the good works are

"exceptional."26 See U.S.S.G. ch. 5, pt. H, introductory cmt.

(departures based on discouraged factors should occur only "in

exceptional cases"); Koon, 518 U.S. at 95; United States v.
27 During the trial, numerous witnesses for both sides

testified to Thurston's reputation for honesty and integrity.

During the sentencing phase, many of Thurston's friends and family

members explicitly or implicitly said they thought the jury verdict

was incorrect.

Good character is covered by the aberrant behavior guidelines,

and there is no argument on appeal that Thurston was entitled to a

departure on those grounds.

-62-

Pereira, 272 F.3d 76, 80 (1st Cir. 2001). The district court based

its conclusion that Thurston's good works were exceptional on

Thurston's "record of charitable work and community service[, which

is] unique, extensive and extraordinary." The court continued, "I

think the record should reflect that in over fourteen years of

sentencing defendants, it's my judgment that no one had a more

extraordinary devotion to charitable work, community service, and

especially . . . to his church." Thurston is a member of a church,

tithes ten percent of his income, and devotes hours every week to

unpaid service with the church in a variety of positions. Letters

from his fellow congregants characterize him as a man of principle

and impeccable character27 -– characterizations undermined, of

course, by the jury's finding of guilt. In any event, it is

Thurston's record of good works, objectively measured, and not his

good character that is at issue.

In addition to his church activities, Thurston has taken

family members and others into his home and has been helpful to his

neighbors. For example, the parents of a woman undergoing

rehabilitation at a local medical center stayed at Thurston's home
-63-

for several weeks. On another occasion, Thurston and his family

laid sod for an infirm neighbor. Save for his crime, Thurston

appears to have lived a creditworthy life.

The issue, however, is not whether Thurston engaged in

"good works" within the meaning of § 5H1.11 -- plainly he did --

but whether those works were exceptional enough to overcome the

judgment of the Sentencing Commission that a record of good works

is a discouraged basis for departure -- that is, good works are

"not ordinarily relevant" to the decision whether to depart from

the guidelines. § 5H1.11. We hold that a departure for good works

was not justified on the facts of this case. 

This circuit, even before the PROTECT Act, reversed

departures based on discouraged factors where the record did not

indicate that the defendant's circumstances were genuinely

exceptional. For example, in United States v. Bogdan, 284 F.3d 324

(1st Cir. 2002), the defendant was a caring and generous father who

had gone out of his way to support his ex-wife and who had

expressed deep remorse for his crime. This court concluded that

Bogdan's case was not so exceptional as to qualify for a downward

departure based on either family responsibilities or acceptance of

responsibility, both of which are discouraged factors. See id. at

329-30. When, on remand, the district court again granted a

downward departure because it thought Bogdan's sentence

"unconscionable," this court again reversed. See United States v.
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Bogdan, 302 F.3d 12, 15, 16-17 (1st Cir. 2002). The Bogdan cases

illustrate that the "exceptional case" hurdle for discouraged

departures is a very high one. See also Pereira, 272 F.3d at 82-83

(family responsibilities departure, a discouraged factor, requires

a showing of something akin to irreplaceability to qualify as

exceptional); United States v. Craven, 239 F.3d 91, 100 (1st Cir.

2001) (departure on discouraged ground of extraordinary presentence

rehabilitation requires, at a minimum, a showing of a fundamental

change in attitude). 

The case law under § 5H1.11 offers little guidance as to

when a defendant's good works may be characterized as exceptional.

What is clear, however, is that the problem is not merely one of

quantity. The context of the defendant's good works is important.

Here, Thurston's position as a prominent corporate executive weighs

in our analysis. It is hardly surprising that a corporate

executive like Thurston is better situated to make large financial

contributions than someone for whom the expenses of day-to-day life

are more pressing; indeed, business leaders are often expected, by

virtue of their positions, to engage in civic and charitable

activities. Those who donate large sums because they can should

not gain an advantage over those who do not make such donations

because they cannot. See United States v. Morken, 133 F.3d 628,

629-30 (8th Cir. 1998) (reversing a downward departure because the

defendant's good works were not exceptional in light of his income
28 See Mary Kreiner Ramirez, Just in Crime: Guiding Economic

Crime Reform After the Sarbanes-Oxley Act of 2002, 34 Loy. U. Chi.

L.J. 359, 372-76 (2003) (discussing the Sentencing Commission's

concern that white-collar crimes have been "grossly undersentenced"); id. at 396-401 (collecting data on the undersentencing of white-collar crimes and arguing that the prevalence

of downward departures in white collar cases threatens to undermine

the integrity of the Sentencing Guidelines); see also Testimony of

Sentencing Commissioner Stephen Breyer Before the Senate Committee

on the Judiciary, Oct. 22, 1987, reproduced in 146 PLI/Crim 811,

824 (1987) ("[T]he Commission considers present sentencing

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and preeminence in a small town); United States v. Kolbach, 38 F.3d

832, 838-39 (6th Cir. 1994) (vacating a good works departure

because "it is usual and ordinary, in the prosecution of similar

white collar crimes involving high-ranking corporate executives .

. . to find that a defendant was involved as a leader in community

charities, civic organizations, and church efforts" (emphasis in

original)); United States v. McHan, 920 F.2d 244, 248 (4th Cir.

1990) (similar). 

Thurston's religion plays no role in our analysis of

whether his good works are exceptional. It is a neutral fact. Cf.

§ 5H1.10 (religion is "not relevant in the determination of a

sentence"). 

The purposes of the sentencing guidelines, by contrast,

are highly relevant. One of the goals of the entire guidelines

regime was to minimize discrepancies in the treatment of "white

collar" and "blue collar" crimes. Congress and the Sentencing

Commission were clear that under the pre-guidelines regime,

sentences for white collar crimes were too lenient.28 The
practices, in which white collar criminals receive probation more

often than other offenders who committed crimes of comparable

severity, to be unfair."); 28 U.S.C. § 994(m) (2000) ("The

[Sentencing] Commission shall insure that the guidelines reflect

the fact that, in many cases, current sentences do not accurately

reflect the seriousness of the offense."). The recent enactment of

enhanced penalties for many white collar crimes only underscores

Congress's disinclination towards leniency for white collar

criminals. See Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204,

§§ 801-1107, 116 Stat. 745, 800-10.

29 For other circuit court cases involving Medicare and

Medicaid fraud, see United States v. Baxtonbrown-Smith, 278 F.3d

1348 (D.C. Cir. 2002) (fraud exceeding two million dollars); United

States v. Liss, 265 F.3d 1220 (11th Cir. 2001) (kickback scheme for

referrals); United States v. Regueiro, 240 F.3d 1321 (11th Cir.

2001) (fraud exceeding fifteen million dollars); United States v.

McClendon, 195 F.3d 598 (11th Cir. 1999) (fraud exceeding three

million dollars); and United States v. Polin, 194 F.3d 863 (7th

Cir. 1999) (Medicare kickback scheme).

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Commission intended its guidelines and policy statements to

"equalize punishments for 'white collar' and 'blue collar' crime."

United States v. Rivera, 994 F.2d 942, 955 (1st Cir. 1993) (Breyer,

J.).

Against that background, the nature of Thurston's offense

mitigates against concluding that his good works are "exceptional."

Health care fraud is a serious crime and the federal interest in

combating it is powerful. The federal government spent

approximately $249 billion on Medicare in 2002. One group has

estimated that about three percent of the $1.4 trillion the country

spent on health care in 2001 was lost to fraud.29 See "A Sick

Business," The Economist, June 28, 2003, at 64 (citing data from

National Health Care Anti-Fraud Association); see also National
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Health Care Anti-Fraud Association, Health Care Fraud, at 2,

available at http://www.nhcaa.org/pdf/all_about_hcf.pdf (n.d.).

Health care fraud affects the financial integrity of programs meant

to aid tens of millions of people in need of health care. Every

dollar lost to fraud is a dollar that could have provided medical

care to the elderly or the disabled. Almost by definition,

Medicare fraud is white collar fraud, most often committed by

educated people with responsible jobs. Thurston's executive

position at Damon, which gave him the resources to undertake many

of his charitable works, also enabled him to perform the crime.

That fact seriously undercuts Thurston's claim that his good works

are "exceptional" in context.

Were it not for the statutory maximum, Thurston would

have been sentenced to imprisonment for more than five years under

the guidelines. Thurston's good works are admirable, but

considered in context, they are not so exceptional as to justify

reducing the sentence for the grave crime that he committed. 

The downward departure for good works is reversed. 

3. Upward Departure

The government's argument that Thurston's conduct

warranted an upward adjustment for obstruction of justice based on

perjury at trial need not be resolved, given our disposition of the

other issues. The statute caps his period of incarceration at
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sixty months. It is noteworthy, though, that Thurston's testimony

on key matters of fact was contradicted by multiple witnesses.

4. Fine

The government argues that the sentencing judge erred by

failing to impose a fine on Thurston in accordance with the

guidelines. Thurston argued, and the district court accepted, that

he should not receive a fine because that would create an

unacceptable disparity between his sentence and that of codefendant Isola. Sentence disparity is an unacceptable basis for

refusing to impose a fine and is plain error for the reasons

discussed earlier.

Thurston contends that the government has forfeited its

argument that a fine must be imposed by failing to object after the

judge ruled. The government earlier took the position that a fine

must be imposed and also argued that the court could not refuse to

impose a fine on the basis of disparity -- the only argument

Thurston presented. In these circumstances, the issue was not

forfeited. See Gallant, 306 F.3d at 1187-88 (holding that a

sentencing issue was not forfeited as a result of counsel's failure

to object after the court's ruling); cf. United States v. Meserve,

271 F.3d 314, 325 (1st Cir. 2001) (motion to strike unnecessary to

preserve evidentiary issue where party objected prior to trial

court's ruling). Even were this an instance of forfeiture, the

district court committed plain error in its rationale. 
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Before this court, Thurston attempts to defend the

decision not to impose a fine on the basis that the statutory

definition of his crime, which provides that a fine may be

assigned, trumps the guidelines, which provide that a fine must be

assigned barring special circumstances. The crime of which

Thurston was convicted, 18 U.S.C. § 371, provides for a prison

term, a fine, or both. By contrast, U.S.S.G. § 5E1.2(a) says, "The

court shall impose a fine in all cases, except where the defendant

establishes that he is unable to pay and is not likely to become

able to pay any fine." (emphasis added). The defendant did not

establish, or even seek to establish, inability to pay. The

sentencing judge made no finding, implicit or explicit, that

Thurston could not pay. The PSR estimated that Thurston had a net

worth of over $1.5 million, and the minimum fine under the

guidelines was $12,500. 

Because the sentence fixed by U.S.S.G. § 5E1.2(a) is

within the range contemplated by 18 U.S.C. § 371, the guideline is

not trumped by the statute. See United States v. Page, 84 F.3d 38,

43 (1st Cir. 1996) ("There is no reason why the Guidelines may not

make their own classifications within the statutes, and hence

definitions which the courts must observe, so long as these are not

internally inconsistent or in violation of the Constitution or a

federal statute."). Here, there is no inconsistency and the

district court was required to impose a fine. 
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V. CONCLUSION

Thurston's conviction is affirmed. Thurston's sentence

is vacated; the downward departure based on good works and

purported disparity is reversed; and the order that no fine be

imposed is reversed. The case is remanded for imposition of the

statutory maximum sentence of sixty months in prison and for

imposition of an appropriate fine. So ordered.