Opinion ID: 77178
Heading Depth: 3
Heading Rank: 5

Heading: Micheal Iheagwara

Text: Michael Iheagwara, a licensed pharmacist, incorporated two pharmacies that were allegedly involved in the fraud scheme, La Moderna and, later, Maz Pharmacy. He argues that his conviction for conspiracy must be vacated because the district court erred in finding that Rule 408 of the Federal Rules of Evidence 14 did not apply to criminal proceedings,13 and thus erroneously admitted evidence arising from a state administrative complaint against him. The administrative complaint at issue was brought by the Florida Department of Health against Maz Pharmacy. In his representative capacity as an owner of Maz Pharmaceuticals, Inc., Iheagwara signed a statement in response to the complaint wherein he agreed to: (i) admit as true the drug-alteration allegations made in the administrative complaint; and (ii) permit the Department of Health to enter a fine and final order in order to avoid more formal administrative proceedings and the potential penalties arising therefrom. The district court overruled Iheagwara’s objection to the admission of the statement, holding that Rule 408 did not bar its admission because Rule 408 does not apply to criminal proceedings. Rule 408 provides that “[e]vidence of . . . furnishing . . . a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount.” Fed. R. Evid. 408. Our sister circuits are divided on the question of whether Rule 408 applies to criminal cases: the Second, Sixth, and Seventh Circuits have held that the Rule applies only in civil cases, 13 Iheagwara also argues that the district court erred at sentencing by departing upward under the sentencing guidelines and by ordering restitution so excessive as to violate the Eighth Amendment. We find no merit in either of these arguments. 15 while the Fifth and Tenth Circuits have held it applicable in both civil and criminal cases. Compare, Manko v. United States, 87 F.3d 50, 54-55 (2d Cir. 1996) (holding Rule 408 inapplicable in criminal cases), United States v. Logan, 250 F.3d 350, 367 (6th Cir. 2001) (same), and United States v. Prewitt, 34 F.3d 436, 439 (7th Cir. 1994) (same), with United States v. Hays, 872 F.2d 582, 588-59 (5th Cir. 1989) (holding that Rule 408 prevents the introduction of settlement agreements in a criminal proceeding) and United States v. Bailey, 327 F.3d 1141, 1146 (10th Cir. 2003) (same). While we note the division of eminent authorities on this issue, we are persuaded that Rule 408 applies to both criminal and civil proceedings. First, the plain language of Rule 1101(b) renders each of the Federal Rules of Evidence – including Rule 408 – generally applicable to criminal cases and proceedings. Fed. R. Evid. 1101(b) (“These rules apply generally to civil actions and proceedings, including admiralty and maritime cases, [and] to criminal cases and proceedings . . . .”); see also, United States v. Meadows, 598 F.2d 984, 989 (5th Cir. 1979) (“[W]e assume the applicability of Rule 408 to govern the admission of related civil settlement negotiations in a criminal trial.”).14 14 In Bonnard v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as binding precedent all Fifth Circuit precedent handed down prior to the close of business on September 30, 1981. 16 Furthermore, where the drafters of the Rules intended to prevent the application of a particular Rule to criminal cases, they provided so expressly. See Bailey, 327 F.3d at 1146 n.6 (citing Fed. R. Evid. 803(8)(b) as indicating that “the drafters of the Rules knew how to expressly exclude criminal proceedings from the Rules’ application when they wanted to . . . .”). Where the drafters of Rule 408 did not expressly preclude application of Rule 408 to criminal cases, we are reluctant to construe that decision as inadvertent. While some courts have read the Rule’s use of the terms “claim” and “validity” to imply that Rule 408 was meant to apply only to civil cases, see, e.g., Prewitt, 34 F.3d at 439, we find the structure of the Rules and the express command of Rule 1101(b) more compelling. Second, the last sentence of Rule 408 specifically states that the Rule “does not require exclusion when the evidence is offered for another purpose, such as . . . proving an effort to obstruct a criminal investigation or prosecution.” Fed. R. Evid. 408. Indeed, the advisory committee’s notes explain that evidence of “an effort to ‘buy off’ the prosecution or a prosecuting witness in a criminal case” provides one example of evidence that is generally subject to Rule 408, but that is rendered admissible by the Rule’s last sentence. Fed. R. Evid. 408, advisory committee’s note (1972 proposed rules) (emphasis added). If the drafters of Rule 408 intended the Rule to apply solely in civil cases, there would be no occasion to 17 carve out an exception for certain circumstances in criminal cases, much less to add an advisory note directly concerning the Rule’s effect in criminal cases. See United States v. Skeddle, 176 F.R.D. 254, 257 (N.D. Ohio 1997); see also State v. Gano, 988 P.2d 1153, 1159 (Haw. 1999) (holding that parallel state rule of evidence applied to criminal cases, because “constru[ing] the rule as applying only in civil proceedings would render the final sentence of the rule unnecessary”). Third, applying Rule 408 to criminal cases furthers the policy interests that undergird the Rule. The advisory committee’s notes clarify that there are two justifications for the exclusions that Rule 408 requires: (i) the evidence is irrelevant, as the compromise at issue may have been motivated by a desire for peace rather than any concession as to the merits of the party’s position; and (ii) the exclusion promotes settlement of disputes. Fed. R. Evid. 408, advisory committee’s note (1972 proposed rules). It is self-evident that a defendant in a civil suit is far less likely to offer to settle a claim if evidence of that offer can later be introduced to prove criminal liability for the same conduct. Limiting Rule 408 to civil proceedings thus undermines the public policy in favor of compromise that the Rule aims to further. Moreover, while the Second Circuit has found that the interest in accurate determinations in criminal trials outweighs the interest in promoting civil settlements, this rationale overlooks a basic premise 18 underlying Rule 408: evidence of compromise is not necessarily probative of liability. Indeed, the advisory committee’s notes indicate that evidence of a settlement offer is often irrelevant to liability for the charged conduct, because “the [settlement] offer may be motivated by a desire for peace rather than from any concession of weakness of position.” Fed. R. Evid. 408, advisory committee’s note (1972 proposed rules). In this light, permitting the admission of civil settlement offers in subsequent criminal prosecutions actually compromises the accuracy of the jury’s determination. As the Fifth Circuit explained, “[i]t does not tax the imagination to envision the juror who retires to deliberate with the notion that[,] if the defendants had done nothing wrong, they would not have paid the money back.” United States v. Hays, 872 F.2d 582, 589 (5th Cir. 1989); see also, Bailey, 327 F.3d at 1145 (discussing “the dramatic effect [that] evidence of an admission of liability could have upon a criminal defendant”); Gano, 988 P.2d at 1159 (“[T]he potential impact of evidence regarding a civil settlement agreement is even more profound in criminal proceedings than it is in civil proceedings.”). For these reasons, we join the Fifth and Tenth Circuits in holding that Rule 408 applies to both civil and criminal proceedings. It follows that the evidence and testimony at issue was inadmissible under Rule 408, and that the district court 19 abused its discretion in admitting the evidence.15 See Koon v. United States, 518 U.S. 81, 100 (1996) (“A district court by definition abuses its discretion when it makes an error of law.”). However, a non-constitutional error is harmless if, viewing the proceedings in their entirety, a court determines that the error “did not affect the verdict, or had but very slight effect.” See United States v. Magluta, 418 F.3d 1166, 1180 (11th Cir. 2005) (internal marks omitted); see also Kotteakas v. United States, 328 U.S. 750, 762, 764 (1946). Here, as we detail below, the government presented overwhelming evidence of Iheagwara’s knowledge of and participation in the conspiracy. Therefore, we find that the admission of Iheagwara’s statement was merely cumulative and did not affect the verdict. The government presented evidence that Iheagwara incorporated both La Moderna Pharmacy (a d/b/a for M&M Pharmacy), which he co-owned with Marco Burgos, and Maz Pharmacy. Pharmacy technician Odalys Regil, who pled guilty and cooperated with the prosecution, testified that Iheagwara hired her to work at La Moderna and trained her to compound the aerosol medication, and also described La Moderna’s standard procedures for compounding the aerosol medication under Iheagwara’s direction. According to Regil, she and Iheagwara 15 While Iheagwara argues for the first time on appeal that the evidence at issue also violates Rule 403, we need not reach this issue, as our holding on Rule 408 grounds is dispositive. 20 did not accurately weigh the chemicals mixed in the compounds; haphazardly dispensed the medication into individual dosage vials, often ignoring the amount specified on the prescription; did not clean the machine used to dispense medication into individual vials, so that it developed a green fungus in the dispensing hoses; allowed a night crew to label the medication, unsupervised by a pharmacist; and would print dates on medication labels that did not match the actual date dispensed (as they should). The jury could reasonably conclude that these egregious violations indicate Iheagwara’s knowledge that he was manufacturing and dispensing medication only to create a facade of legitimacy for the fraud scheme, and not to actually serve sick patients. Additionally, Regil testified that while she worked at La Moderna, she and Iheagwara sold half portions of medicine to Jose Arias, and that the two also sold unaffixed labels to Jose Arias on the side, receiving a cash payment which they shared. Later, Regil and Iheagwara left La Moderna, at which point they opened a DME company to continue the scheme, and Iheagwara established Maz Pharmacy. Mercedes Jerez, who worked at Sunshine Medical DME and also pled guilty in the case, testified that Maz Pharmacy would sell Sunshine labels unaffixed to medication, as well as labels backdated by several months. Special Agent Tony Illas testified that the compounding area at Maz 21 Pharmacy was “sloppy,” “sticky,” and “filthy.” Illas also told the jury that Maz Pharmacy labels were seized pursuant to a search of J&A Billing,16 and that the printed sheets contained prescription labels for patients from different months on the same sheet. These anomalous sheets provided evidence that the labels were not printed in conjunction with actual dispensations of medication to patients, but rather were generated simply to create an appearance of legitimacy in the records. Maz Pharmacy labels seized during a search of First Option Medical Center similarly included different months on the same printed sheet. Additionally, Investigator Louis Collado testified that when they visited Maz Pharmacy, he found pre- and post-dated aerosol medication prepared for dispensal; the pharmaceutical orders contained only half the contents indicated on the labels. The testimony of Agent Cesar Arias corroborates Collado’s testimony. Finally, while we have specifically described only the evidence implicating Iheagwara individually, we note that the government presented overwhelming evidence that a fraud conspiracy existed, generally. Because the substantial evidence incriminating Iheagwara assures us that the erroneous admission of the statement was harmless, we affirm Iheagwara’s conviction and sentence.17 16 J&A Billing submitted the DME companies’ claims to Medicare. 17 Iheagwara argues that because the district court instructed the jury that the settlement statement was admissible only against Iheagwara, and not Maz Pharmacy co-owners Magnus Ogbenna and Azubueze Ikejiani, the jury’s acquittal of Ogbenna and Ikejiani alone demonstrates 22