Opinion ID: 1446782
Heading Depth: 3
Heading Rank: 2

Heading: Sufficient Evidence Supports Defendant White's Conviction

Text: Defendant White raises a sufficiency of the evidence challenge to his conviction on Counts 1-5 (Conspiracy to Commit Medicare Fraud (Count 1), Scheme to Defraud the Medicare Program (Counts 2 through 4), and Use of a False Document (Count 5)). [5] White insists that his convictions cannot be sustained because nothing in the record suggests that his interpretation of the related-party regulation . . . was incorrect, much less `knowingly and willfully' false or fraudulent, and accordingly, the evidence was insufficient to show he possessed the requisite fraudulent intent . . . to accomplish the substantive crimes at issue. (Def. White's Br. at 44-45) Additionally, Defendant White challenges his conviction for money laundering and money laundering conspiracy (Counts 6 through 13). Viewing the evidence in the light most favorable to the prosecution, we find that a rational trier of fact could find the essential elements of each of the offenses underlying Defendant White's conviction beyond a reasonable doubt.
A rational finder of fact could conclude beyond a reasonable doubt that Defendant White engaged in a scheme to defraud Medicare. Title 18 U.S.C. § 1347 criminalizes Medicare fraud and, by its terms, provides that: Whoever knowingly and willfully executes, or attempts to execute, a scheme or artiface (1) to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. 18 U.S.C. § 1347. To sustain a Medicare fraud conviction under § 1347, the government must prove that the defendant (1) knowingly devised a scheme or artifice to defraud [Medicare] in connection with the delivery of or payment for [Medicare] benefits, items, or services; (2) executed or attempted to execute this scheme or artifice to defraud; and (3) acted with intent to defraud. United States v. Raithatha, 385 F.3d 1013, 1021 (6th Cir.2004), judgment vacated on other grounds, 543 U.S. 1136, 125 S.Ct. 1348, 161 L.Ed.2d 94 (2005). Thus, the government must prove the defendant's specific intent to deceive or defraud. United States v. Frost, 125 F.3d 346, 354 (6th Cir.1997). On appeal, Defendant White primarily argues he did not have the requisite intent because he apparently did not know the transactions were related party transactions under the Medicare statute and regulations. At the outset, it should be noted that the question of intent is generally considered to be one of fact to be resolved by the trier of the facts . . . and the determination thereof should not be lightly overturned. United States v. Wagner, 382 F.3d 598, 612 (6th Cir.2004) (quoting United States v. Daniel, 329 F.3d 480, 487 (6th Cir.2003)). Moreover, testimony adduced at trial supports more than a reasonable inference that Defendant White intended to defraud Medicare. Specifically, DeVarona's trial testimony substantially supports such a view: [6] Q. . . . [C]an you please outline in very brief terms what exactly you did to make yourself guilty of [conspiracy to defraud Medicare]? . . . A. WeI, participated in a scheme designed by [Defendant] White to submit inflated contracts to Medicare so the Medicare dollars would flow to our companies. Q. And how was that accomplished . . . ? A. By submitting inflated contracts amongst related parties to Medicare and not disclosing the fact that these companies were related parties. Q. And you said they were related parties. How were they related? A. Because Mr. White and ourselves controlled these Medicare providers even though we were not the officers nor directors of these companies. Q. Were any of the other defendants involved in this? A. . . . Barnett and . . . Macejko were the nominee [sic] owners of the Medicare licensed facilities, and [Defendant] Suhadolnik was the person in charge of the finances for all the operations here in Ohio to get the money to the companies. . . . [Barnett and Macejko] were placed in an ownership position so that they could sign off on documents that would tell Medicare that these were independent facilities, where in reality they weren't. They were placed there and served at the direction of Mr. White. (J.A. at 924-25) A reasonable jury could certainly have taken DeVarona's testimony to establish White's intent and knowledge that the Medicare related party rule applied to the transactions between companies they controlled. Feldman's testimony on the development of Pathways and the PathwaysYOH transactions provides additional support for such a finding. He stated that White had asked Barnett and Macejko to become owners of Pathways because they would do whatever he asked them to do, and they would be in a sense absentee landlords. (J.A. at 1051) Additionally, Feldman testified that White had set the terms of an agreement for NHS to provide day-to-day management services to Pathways, with Barnett, Macejko, and himselfas nominal President of NHS merely signing off. The evidence further supports a finding of intent to defraud Medicare by concealing related party status. Defendant White accomplished this both by failing to disclose the status on cost reports submitted to Medicare, many of which White directly controlled, and by essentially recruiting sham owners for facilities certified as Medicare providers, which later contracted with third-party service and management providers also under his control. Viewing the evidence in the light most favorable to the prosecution, a reasonable jury could find Defendant White knowingly and willfully devised this scheme. White had developed a reputation as a Medicare guru over years of extensive involvement in health care services and with Medicare providers. He spearheaded the formation of HealthSecure and its various subsidiary medical billing and staffing companies. White proposed the Pathways facility, later acquired by Macejko and Barnett, and then entered into a management agreement (via Montrose) with Pathways. Most directly on point, DeVarona testified about a meeting White called in September 1996 at which he proposed the creation of a network of Medicare facilities. These facilities, according to White's proposal, would be owned by third parties but controlled by him, would enter into agreements with third party medical service providers also under his control, and would pay those facilities at significantly inflated rates. The trial record additionally shows that White executed this scheme by actually entering into the transactions, and submitting and receiving reimbursement for management fees billed to the Medicare providers he controlled.
A reasonable trier of fact could also find beyond a reasonable doubt that Defendant White conspired to commit Medicare fraud. Title 18 U.S.C. § 371 proscribes conspiracy to defraud the federal government. To prove conspiracy to defraud, the government must show (1) an agreement to accomplish an illegal objective against the United States; (2) one or more overt acts in furtherance of the illegal purpose; and (3) the intent to commit the substantive offense, i.e., to defraud the United States. United States v. Douglas, 398 F.3d 407, 413 (6th Cir.2005). The agreement need not be explicit; rather, a tacit or mutual understanding among the parties will suffice. United States v. Ellzey, 874 F.2d 324, 328 (6th Cir.1989) (citing United States v. Bavers, 787 F.2d 1022, 1026 (6th Cir.1985)). Further, conspiracy to defraud may be proven by circumstantial evidence that reasonably supports an inference of participation in some common plan. Ellzey, 874 F.2d at 328; see also United States v. Suba, 132 F.3d 662, 672 (11th Cir.1998). First, DeVarona's testimony, which we reviewed at length in the preceding discussion, establishes an explicit agreement to criminally defraud the Medicare program. Yet, even if not taken as an express agreement, a reasonable jury could find that the testimony of DeVarona and of Feldman demonstrates the type of tacit or mutual understanding among the parties required to establish an implicit conspiracy to defraud. See Ellzey, 874 F.2d at 328. Second, on the evidence adduced at trial, Defendant White plainly committed overt acts in furtherance of his scheme to defraud Medicare. This is evidenced by Defendant White's prominent role in several of the companies involved, including HealthSecure, Montrose, Pathways, and NHS; a financial services agreement between Montrose and Pathways, executed by White and Barnett, whereby Montrose contracted to provide billing and management services in exchange for fees totaling $46,500 a month; Feldman's testimony that Defendant White directed him to sign an agreement on behalf of NHS to provide oversight services to Pathways at a fee of $55,000 per month; additional testimony that Defendant White later took control of operations at NHS and installed Defendant Suhadolnik as CFO of the company; and Medicare cost reports submitted on Pathways' behalf including management fees charged by Montrose and NHS alike, expressly indicating those parties were not related under the related party rule. Third, we have already determined that a reasonable jury could find Defendant White intended to defraud the Medicare program and need not revisit that point here. Of course, an exhaustive recitation of the evidence is neither necessary nor desirable here. Suffice it to say the government put forth a substantial body of evidence, we have reviewed it, and, viewing that evidence in the light most favorable to the government, it amply supports Defendant White's conviction for conspiracy to commit Medicare fraud.
Sufficient evidence also supports Defendant White's conviction for use of a false document. Title 18 U.S.C. § 1001(a)(3) prohibits knowingly and willfully mak[ing] or us[ing] any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry. 18 U.S.C. § 1001(a)(3). Here, the government must prove (1) the defendant made a statement; (2) the statement is false or fraudulent; (3) the statement is material; (4) the defendant made the statement knowingly and willfully; and (5) the statement pertained to an activity within the jurisdiction of a federal agency. Raithatha, 385 F.3d at 1022. Thus, the government must prove that the defendant knew the statement was false or fraudulent. 18 U.S.C. § 1001(a)(3); United States v. Brown, 151 F.3d 476, 486 (6th Cir.1998). The 1998 Medicare cost report submitted on behalf of Pathways contained the false statement that Pathways had no related party costs. Belcher had prepared the cost report at White's direction and, in so doingas he testified at trialhad approached White about the related party question. Belcher expressed his concern that Montrose and Pathways were related parties and that, accordingly, the full management fee should not be included in the cost report. (J.A. at 851) Belcher testified that Defendant White responded by directing him to include the full charge in the report. In view of the foregoing, we find that Defendant White has failed to sustain his heavy burden on this issue, and that there was sufficient evidence at trial to support his convictions for Medicare fraud, conspiracy to commit Medicare fraud, and use of a false document.
Finally, we find that, viewing the evidence in the light most favorable to the prosecution, sufficient evidence supports Defendant White's conviction for money laundering. Here, Defendant White argues that the payments were used not in furtherance of unlawful activity but to pay legitimate business expenses, and that there was no unlawful activity (Medicare fraud). White further asserts that § 1957(a) requires the acts of money laundering to be distinct from the unlawful activity and that the transactions challenged here would be part of a purported scheme to defraud Medicare, and thus not distinct. Title 18 U.S.C. § 1956(a)(1)(A)(i) makes it a violation to knowingly conduct[] or attempt[] to conduct . . . a financial transaction which in fact involves the proceeds of specified unlawful activity . . . (A)(i) with the intent to promote the carrying on of specified unlawful activity. To prove money laundering under this Section, the government must show that Defendant (1) conducted a financial transaction that involved the proceeds of unlawful activity; (2) knew the property involved was proceeds of unlawful activity; and (3) intended to promote that unlawful activity. United States v. McGahee, 257 F.3d 520, 526 (6th Cir.2001) (citing United States v. King, 169 F.3d 1035, 1039 (6th Cir.1999)). Similarly, 18 U.S.C. § 1957(a) makes it a crime for parties to knowingly engage[] or attempt[] to engage in a monetary transaction in criminally derived property of a value greater than $10,000 [which] is derived from specified unlawful activity. 18 U.S.C. § 1957(a). The government must demonstrate that the Defendant (1) engaged in a financial transaction involving the proceeds of unlawful activity; (2) knew the proceeds derived from unlawful activity; and (3) the proceeds exceeded $10,000 in value. Id. Finally, 18 U.S.C. § 1956(h) separately proscribes conspiracy to commit money laundering under 18 U.S.C. §§ 1956 and 1957. The elements of conspiracy to commit money laundering include (1) an agreement or understanding entered into by two or more persons to commit money laundering, (2) the performance of an overt act in furtherance of the agreement, and (3) Defendant's knowing and deliberate participation in the conspiracy. United States v. Conley, 37 F.3d 970, 976-77 (3d Cir.1994) (citing United States v. Rankin, 870 F.2d 109, 113 (3d Cir.1989)). Viewing the evidence in the light most favorable to the prosecution, a reasonable jury could convict Defendant White of the offense of money laundering under both §§ 1956 and 1957, and conspiracy to commit money laundering. DeVarona testified at trial that NHS and later HSCS billed Douglas at inflated rates for staffing services. Douglas would then submit those costs to Medicare for reimbursement and would pay NHS or HSCS their inflated staff charges. Evidence of one such payment was introduced at trial, and the transfer was in the amount of $62,477. Subsequently, as DeVarona testified, Defendant White engineered agreements with two Florida community mental health centers: All Professional and Renaissance. With respect to each, Defendant agreed to provide staffing to the facilities and to hold their bills until they became Medicare certified, in exchange for the facilities agreeing to use HSCS, NHS and Montrose as their third-party service and management service providers. Defendant White set the rates for the services. The record indicates that White marked up certain of HSCS' nursing and social work services by a factor of 3.2. Further, DeVarona testified that the various third-party service providers carried the receivables until All Professional and Renaissance were certified by borrowing funds from Pathways or from YOH (via HealthSecure or HSCS). Defendant White argues that Sparks's testimony at trial shows that Montrose used the funds to pay legitimate business expenses, not to further unlawful activity. During cross-examination, however, Sparks admitted that although the Montrose payroll records revealed a draw of money[] to Defendant White's wife, as well as loans to both Defendant White and Mrs. White, she did not audit those loans and advances. (J.A. at 1328-29) At any rate, Sparks' testimony does not necessarily defeat the overwhelming evidence introduced at trial to show proceeds from unlawful activity being filtered back into funding further unlawful activity. Further, Defendant White argues the transactions were part of the criminal offense of defrauding Medicare and not subsequent laundering of those proceeds. (Def. White's Br. at 75) This argument lacks merit inasmuch as the criminal offense of defrauding Medicare occurred when Defendant knowingly engaged in related party transactions billing for services at an inflated rate. The offense of money laundering, however, as discussed above, occurred when Defendant directed the transfer of fraudulently obtained funds to organizations which subsequently engaged in further fraudcharging Medicare inflated rates for payment to an undisclosed related party. [7] Consequently, sufficient evidence supports Defendant White's conviction on Counts 6 through 13 of the indictment for the money laundering and money laundering conspiracy.