United States Court of Appeals

For the First Circuit

Nos. 02-2064,

 02-2065

UNITED STATES,

Appellee,

v.

DANA EUGENE MCGOVERN; MCGOVERN'S AMBULANCE SERVICE, INC.,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MAINE

[Hon. George Z. Singal, U.S. District Judge]

Before

Torruella, Circuit Judge,

Bownes, Senior Circuit Judge,

and Lynch, Circuit Judge.

Leonard I. Sharon and Sharon, Leary & Detroy on brief for

appellant.

F. Mark Terison, Senior Litigation Counsel, and Paula D.

Silsby, United States Attorney, on brief for appellee. 

May 21, 2003
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LYNCH, Circuit Judge. Dana McGovern, the owner and

operator of McGovern's Ambulance Service, Inc. (MAS), and his

company pled guilty to Medicare and Medicaid fraud, 18 U.S.C.

§ 1347 (2000), as well as obstruction of a federal audit, 18 U.S.C.

§ 1516, and money laundering, 18 U.S.C. § 1956(a)(1). He admitted

to more than $800,000 of fraud. McGovern's sentence was enhanced

for obstruction of justice, arising out of his earlier submission

of false information to federal auditors before that audit led to

the criminal investigation and prosecution. McGovern appeals the

enhancement, arguing that the attempted obstruction did not occur

"during the course of the investigation . . . of the instant

offense of conviction." U.S.S.G. § 3C1.1. We reject this argument

on the grounds that the Medicare and Medicaid audits had an

adequate link to the ensuing criminal proceedings and so were

during the course of the investigation of the offense of

conviction.

I.

Dana McGovern was the sole shareholder, Director and

President of MAS. MAS was based in Calais, Maine, had business

locations elsewhere in Maine, and owned a Canadian affiliate. MAS,

which was licensed by the Maine Emergency Medical Services Office

of the state's Department of Public Safety, provided transportation

by ambulance and wheelchair van for Medicare and Medicaid

beneficiaries.
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Medicaid is a health care program jointly funded by

federal and state sources that provides health insurance and

nursing home coverage to low income individuals. It is

administered by the Centers for Medicare and Medicaid Services

(CMS) and by state agencies such as the Maine Department of Human

Services. Medicare is a federally subsidized health insurance

program for the elderly and for persons with certain disabilities

that is administered by CMS and private contractors. See generally

Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & the

Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 74 n.24 (1st Cir.

2003) (contrasting Medicare and Medicaid programs). The Medicare

and Medicaid programs are both health care benefit programs as

defined in 18 U.S.C. § 24(b). See San Lazaro Ass'n v. Connell, 286

F.3d 1088, 1093 (9th Cir. 2002); United States v. Herman, 172 F.3d

205, 206 (2d Cir. 1999); United States v. Sriram, 147 F. Supp. 2d

914, 942 (N.D. Ill. 2001).

Medicaid and Medicare each have specific ambulance

regulations and billing instructions, which McGovern had in his

possession. Reimbursements can include a base rate, mileage for

basic or advanced life support services, and separate payments for

administration of oxygen and other incidentals. Providers can only

bill for "loaded mileage," which is when the beneficiary is in the

vehicle. Providers cannot charge for the distance traveled to a

pick-up point or from a drop-off point. Further, an ambulance
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cannot be used if the patient is healthy enough to use any other

method of transportation, such as a wheelchair van, regardless of

whether a van is actually available. In addition, an ambulance

cannot be used for routine transport to and from a doctor's office.

Each time it transported a patient, the MAS ambulance

crew was required by regulations to fill out a "run sheet," which

required the name of the patient, the place of departure, the

destination, and the names of the MAS employees in the ambulance.

Completed run sheets were placed in a locked box and retrieved by

or delivered to McGovern. McGovern used the run sheets as a basis

to bill Medicare and Medicaid for each ambulance run. He

personally handled the submission of the ambulance billings to

Medicare and Medicaid until early 1998. At that time, a part-time

employee, Ruth Campbell, was hired to enter the billing information

established by McGovern and then submit Medicare bills

electronically. Campbell was not authorized to make changes in the

pricing, and even after she was hired McGovern continued to input

and submit some of the bills himself.

Defendants defrauded Medicare and Medicaid from August

1996 to November 1999 by billing for unnecessary services and for

services they had not rendered. At McGovern's instruction, MAS

employees used ambulances to transport patients who were able to

take taxis and other alternative forms of transportation, and used

run sheets for ambulances when transporting beneficiaries by
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wheelchair van. MAS employees, as instructed, also falsified parts

of run sheets by, for example, inaccurately representing nonreimburseable destinations (such as a doctor's office) as

reimburseable destinations (such as a hospital). McGovern prepared

and submitted bills to Medicare and Medicaid based on these

inaccurate run sheets, which had been falsified at his express

instructions.

McGovern also falsified run sheets himself. When

employees refused to misrepresent a destination, for example, he

wrote the name of a hospital over the name of the doctor's office,

which had been written by an employee. In addition, he told at

least one MAS employee to leave blank the mileage traveled,

presumably so he could fill in excess miles. MAS repeatedly

charged Medicare and Medicaid for excess mileage. Furthermore, the

box for administration of oxygen was checked on some run sheets

after the run sheets were completed and placed in the lockbox.

Finally, MAS repeatedly charged Medicare and Medicaid for advanced

life support services in situations where employees accurately

represented (on the run sheets they placed in the lockbox) that

they had provided only basic life support services.

Complaints led to administrative audits by the U.S.

Department of Health and Human Services in 1995 and 1998. In 1995,

Medicare investigated a complaint that MAS transported a

beneficiary 200 feet, but billed Medicare for 6 miles. By phone
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and letter, a Medicare fraud investigator explained to McGovern the

correct Medicare billing practices regarding loaded mileage. As a

result of this investigation, Medicare recouped $2,691.65 for

inappropriate mileage charges in 1994 and 1995, but did not then

instigate a criminal investigation.

In March 1998, Medicare received a complaint from a

Medicare beneficiary about MAS. MAS had transported nursing home

residents to shelters during a storm earlier that year.

Investigators found that MAS falsely billed Medicare for a trip to

the hospital (which, unlike a trip to a shelter, is reimburseable),

exaggerated the loaded mileage, falsely billed for advanced life

support services, and transported via ambulance a beneficiary whose

medical condition apparently permitted her to travel by other

means.

This finding led to progressively more expansive reviews

by Medicare and Medicaid. These audits uncovered numerous

suspicious claims. Medicaid, for example, discovered that MAS

wheelchair vans had routinely (and improperly) billed for

"unloaded" miles (when the patient was not in the vehicle). As a

result, Medicaid administratively collected from MAS $158,254.22 in

overpayments for wheelchair van reimbursements.

McGovern and MAS submitted false run sheets to

investigators conducting these administrative audits. On or about

September 25, 1998 and January 5, 1999, defendants submitted to the
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Medicare and Medicaid representatives a total of nineteen run

sheets containing false information about the services rendered to

beneficiary Judith Mahar between July 1997 and January 1998. The

run sheets falsely indicated that oxygen was given to Mahar and

that an ambulance, rather than a wheelchair van, was used to

transport her. The boxes for administration of oxygen were checked

after employees completed the run sheets and placed them in the

lockbox. McGovern also sent a letter to Medicare investigators

blaming excess or inappropriate charges on the "new

girl" (Campbell) whom he said was doing MAS's billing.

The findings of the administrative audits led to the

initiation of a federal criminal investigation. McGovern and MAS

were indicted on November 16, 2000. That indictment was superseded

by a 214-count indictment on May 15, 2001. Counts 210 and 211 of

the superseding indictment charged the defendant with obstruction

of a federal audit pursuant to 18 U.S.C. § 1516. They charged

defendant with submission to auditors of the nineteen falsified run

sheets pertaining to Mahar. The remaining counts alleged

violations of 18 U.S.C. § 1347 (health care fraud) and 18 U.S.C. §

1956(a)(1) (money laundering) and sought forfeiture of cash and

property pursuant to 18 U.S.C. § 982(a)(1), (7). The indictment

covered the same wrongdoing during the same period as the Medicare

and Medicaid audits. This is true of both the charges for
1 Note 8 provides:

If the defendant is convicted both of an obstruction

offense (e.g., 18 U.S.C. § 3146 (Penalty for failure to

appear); 18 U.S.C. § 1621 (Perjury generally)) and an

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obstruction of a federal audit and the underlying conduct that the

obstruction sought to hide.

Both McGovern and MAS entered guilty pleas on January 9,

2002. McGovern and MAS each pled guilty to 40 counts, including

both counts of obstructing a federal audit, 22 counts of fraud, 16

counts of money laundering, and 2 forfeiture counts. The remaining

counts, for fraud and money laundering, were later dismissed.

At the sentencing hearing on July 30, 2002, the principal

disputed issue was whether McGovern was subject to a two-level

upward enhancement for obstructing or impeding the administration

of justice pursuant to U.S.S.G. § 3C1.1, which states:

If (A) the defendant willfully obstructed or impeded, or

attempted to obstruct or impede, the administration of

justice during the course of the investigation,

prosecution, or sentencing of the instant offense of

conviction, and (B) the obstructive conduct related to

(i) the defendant's offense of conviction and any

relevant conduct; or (ii) a closely related offense,

increase the offense level by 2 levels. 

The parties stipulated that the administrative audits which

McGovern obstructed (by submitting false run sheets) were not a

part of any criminal investigation. The district court held that

McGovern was subject to the two-level upward enhancement for

obstructing the administrative audits under either note 4 or note

8 to U.S.S.G. § 3C1.1.1 Note 4 says:
underlying offense (the offense with respect to which the

obstructive conduct occurred), the count for the

obstruction offense will be grouped with the count for

the underlying offense under subsection (c) of § 3D1.2

(Groups of Closely Related Counts). The offense level

for that group of closely related counts will be the

offense level for the underlying offense increased by the

2-level adjustment specified by this section, or the

offense level for the obstruction offense, whichever is

greater.

Since we affirm on the basis of U.S.S.G. § 3C1.1 note 4(c), we do

not reach note 8.

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The following is a non-exhaustive list of examples of the

types of conduct to which this adjustment applies:

. . . .

(c) producing or attempting to produce a false,

altered, or counterfeit document or record during

an official investigation or judicial proceeding.

The district court found that McGovern had a total

offense level of 23 and a criminal history category of I. The

applicable guideline range is 46 to 57 months and a fine of $10,000

to $100,000. Absent the upward enhancement for obstruction of

justice, the applicable guideline range would have been 37 to 46

months and a fine of $7,500 to $75,000. The court sentenced

McGovern to 49 months in prison and to 3 years of supervised

release. The court also ordered restitution of $729,875.19, for

which defendants were jointly and severally liable, and a mandatory

special assessment of $3,800. It waived a fine, on the grounds

that McGovern would not have the means to pay. The court found

that MAS had a total offense level of 24. It sentenced MAS to five
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years of probation, restitution of $729,875.19, and a mandatory

special assessment of $15,200.

Since the district court did not impose an upward

enhancement pursuant to U.S.S.G. § 3C1.1 on MAS, this appeal

concerns only McGovern himself.

II.

"We review the legal determination of the guideline's

meaning and scope de novo, but allow due deference to the district

court's factfinding, reviewing it only for clear error." United

States v. Duclos, 214 F.3d 27, 31 (1st Cir. 2000) (citations

omitted). An interpretation of a guideline in the notes and other

commentary is given controlling weight unless it is plainly

erroneous, unconstitutional, contrary to a federal statute, or

inconsistent with the guideline itself. Stinson v. United States,

508 U.S. 36, 45 (1993).

McGovern contests the district court's ruling that the

obstruction occurred "during the course of the investigation,

prosecution, or sentencing of the instant offense of conviction."

U.S.S.G. § 3C1.1. He argues that the administrative audits by

Medicare and Medicaid were not "official investigation[s]" pursuant

to note 4(c) because there was no pending criminal proceeding at

the time of the administrative audit and, absent a qualifying
2 McGovern adequately preserved the issue for appeal by

objecting to the presentence report (PSR) on this precise ground

(that U.S.S.G. § 3C1.1 does not apply to obstruction of an

administrative audit because an audit is not an official

investigation) and then arguing the point at length during the

sentencing hearing. See United States v. Fox, 889 F.2d 357, 358-

59, 361 (1st Cir. 1989) (treating issue as adequately preserved

where defendant objected on this basis to the PSR).

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investigation, no enhancement could be made.2 McGovern notes that

the administrative audit was undertaken before the criminal

investigation, and that the government expressed its determination

at the sentencing hearing to avoid "even . . . the appearance that

the administrative proceedings are driven by the criminal

investigation."

The guideline itself contains no requirement of an

"official" investigation. And while note 4 does refer to an

"official investigation," it does so by way of example. There is

no requirement that the investigation be "official."

McGovern's real claim is that there is an insufficient

nexus to show that he "attempted to obstruct . . . the

administration of justice during the course of the investigation .

. . of the instant offense of conviction." U.S.S.G. § 3C1.1. He

seems to make both temporal- and identity-type arguments. He

contends that the conduct took place before there was any criminal

investigation and that Medicaid/Medicare audits are not

investigations of the offense of conviction. This court has

already rejected both types of arguments.
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In United States v. Emery, 991 F.2d 907 (1st Cir. 1993),

we rejected the temporal argument, holding that the fact that there

was no pending federal criminal investigation at the time of the

obstruction did not disqualify a defendant from an enhancement

where there was a "close connection between the obstructive conduct

and the offense of conviction." Id. at 911; see United States v.

Mills, 194 F.3d 1108, 1115 (10th Cir. 1999) (U.S.S.G. § 3C1.1 nexus

requirement satisfied where prison guard destroyed compromising

evidence before any investigation was initiated); United States v.

Barry, 938 F.2d 1327, 1335 (D.C. Cir. 1991) ("[T]he enhancement

[§ 3C1.1] applies if the defendant attempted to obstruct justice in

respect to the investigation or prosecution of the offense of

conviction, even if the obstruction occurred before the police or

prosecutors began investigating or prosecuting the specific offense

of conviction."). Emery also holds that the investigation need not

even be federal, so long as some investigation is underway. 991

F.2d at 912.

In United States v. Pilgrim Market Corp., 944 F.2d 14

(1st Cir. 1991), we addressed the identity argument, holding that

obstruction of a U.S. Department of Agriculture investigation of

the sale of contaminated meat was an investigation for purposes of

the guideline where the subject matter of the administrative

investigation and the indictment was the same, and the obstructive

conduct was meant to hide evidence of criminal wrongdoing. Id. at
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20-21. It does not matter whether the underlying administrative

investigation was itself civil or criminal so long as the

investigation which has been obstructed has a sufficient connection

to the offense of conviction. See United States v. LaSalle Nat'l

Bank, 437 U.S. 298, 314 (1978) (a federal audit has an

"interrelated criminal/civil nature" since it has "the normally

inseparable goals of examining whether the basis exists for

criminal charges and for the assessment of civil penalties").

Purporting to rely on United States v. Magana-Guerrero,

80 F.3d 398 (9th Cir. 1996), McGovern argues that administrative

audits are not official investigations pursuant to note 4(c). This

reliance is misplaced. The main issue in the relevant part of

Magana-Guerrero is whether actual obstruction is a prerequisite for

an upward enhancement pursuant to note 4(h) (then 3(h)) of U.S.S.G.

§ 3C1.1. See 80 F.3d at 400-01. Here, there was actual

obstruction. McGovern's argument mixes apples and oranges. It is

already the rule of this circuit that there must be a common-sense

connection between the obstructed investigation and the offense of

conviction. Emery, 991 F.2d at 911.

The evidence supporting the enhancement was ample. The

decision of the district court to impose a two-level upward

enhancement pursuant to note 4(c) to U.S.S.G. § 3C1.1 was plainly

correct.

Affirmed.