Opinion ID: 749850
Heading Depth: 2
Heading Rank: 2

Heading: The Preferred Care (PCC) Allegations (Counts 36-109)

Text: 1 Mail Fraud (Counts 36-78) Kelly contends that the evidence does not support his Preferred Care mail fraud convictions for three reasons: (1) that he and Suba were under no duty or obligation to pay Preferred Care claims with Preferred Care money, hence, no crime was committed; (2) that Preferred Care premiums included $568,000 in other (general liability or commercial) insurance payments, a matter not alleged as mail fraud in the indictment; and (3) that, while conceding that the last twelve premium checks were mailed (Counts 67-78) (Kelly's assistant testified that she mailed them), he disputes evidence that the remaining were mailed earlier (Counts 36-66). Suba claims that the evidence does not support his Preferred Care mail fraud convictions because he had no fraudulent intent and that Preferred Care, as Garrison's alter ego, was not a victim for 18 U.S.C. § 1341 purposes. There was no evidence Suba claims that, as Healthmaster's risk manager, he knew that Healthmaster's insurance premiums were being reimbursed by Medicare or that he played any part in the Medicare reimbursement process itself, as others were responsible for preparing Healthmaster's cost reports submitted to Aetna. 21 The Government argues that a reasonable juror could find that Kelly, Suba, and Managed Risk used the United States mails to defraud Medicare when Preferred Care mailed checks totaling $1,420,237 to Managed Risk's Atlanta post office box. When a Preferred Care employee made a legitimate workers' compensation claim, Kelly and Suba covered up its house of cards, the Government contends, by paying the claim from the Augusta WC fund comprised of Medicare money. Meanwhile, the $1,420,237 was converted and distributed by Suba to himself, Mrs. Kelly and the Garrison children's trusts. If the claims were not paid, the Government argues, the Managed Risk shareholders would not have been able to keep pocketing the Preferred Care premiums and their house of cards would have folded. The mail fraud statute prohibits devising a scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, which is furthered by use of the mails. 18 U.S.C. § 1341; see also United States v. Funt, 896 F.2d 1288, 1292 (11th Cir.1990). To prove mail fraud, the Government must show that the defendant (1) intentionally participated in a scheme to defraud and (2) used the mails to execute the fraudulent scheme. See United States v. Hooshmand, 931 F.2d 725, 731 (11th Cir.1991). The Government need not produce direct proof of scienter in a mail fraud case, however; circumstantial evidence of criminal intent can suffice. United States v. Hawkins, 905 F.2d 1489, 1496 (11th Cir.1990). The Government must establish only that the fraudulent scheme existed; conviction for mail fraud need not rest on the success of the fraudulent scheme. United States v. Wingate, 997 F.2d 1429, 1433 (11th Cir.1993). Guilty knowledge can rarely be established by direct evidence, especially in respect to fraud crimes which, by their very nature, often yield little in the way of direct proof. See United States v. DesMarais, 938 F.2d 347, 352 (1st Cir.1991). In this case we conclude that the mails were used and the United States was defrauded at the conclusion of the following sequence of events: (1) Healthmaster (reimbursable) premiums were deposited into the trust fund; (2) Preferred Care (non-reimbursable) premiums were not paid into the trust fund, although Appellants had an apparent fiduciary obligation to do so, but were siphoned off via the mails to Managed Risk shareholders; (3) Preferred Care employees made $225,000 in claims which were paid by the trust; (4) the money in the trust used to pay the non-reimbursable claims was comprised of Medicare reimbursed money. 18 U.S.C. § 1341. We have examined the record as to the mailing of each of the forty-three checks charged in the indictment. We conclude that direct testimonial evidence of mailing exists as to Counts 67-78, and strong circumstantial evidence of mailing exists as to Counts 36-66. See Waymer, 55 F.3d at 570-571. As to Kelly, his arguments that no crime was committed because he had no duty to deposit the Preferred Care premiums in the trust fund, and, that the Preferred Care premiums contained general liability or commercial insurance are without merit. As to Suba, we find that there is ample circumstantial evidence to support the idea that he knew exactly what was going on. Although he claims he was only a risk manager for Healthmaster, he also managed and owned part of Managed Risk. Suba knew and participated in using, as Managed Risk's business address, that of an Atlanta post office, while operating Managed Risk on Healthmaster's Augusta premises. Strong circumstantial evidence is that the Preferred Care checks were addressed to this Atlanta post office box. Suba endorsed and deposited the Preferred Care checks in Atlanta or Marietta banks, other strong circumstantial evidence of mailing. Suba signed the twenty-seven checks distributing Preferred Care money to the Managed Risk shareholders, including a hefty $390,000 profit to himself. 22 The jury could reasonably infer Suba's guilty knowledge and participation in the scheme to defraud Medicare from the whole of the evidence presented and strong circumstantial evidence that the checks were mailed. Given the widespread nature of the Medicare fraud from these Preferred Care counts and the large amount of extra revenue generated to Suba and Kelly personally, only a conscious course of calculated ignorance could have kept Suba from knowing the truth. In fact, we think that Suba played more than a minor role in this operation. It is clear that he had more understanding of the underlying unlawful act than he cares to admit and that he was a knowing and willing participant in the conspiracy to defraud Medicare through this house of cards. The same is true for Kelly, who, second only to Garrison, held the reins of corporate control as chief financial officer of Healthmaster and had hands-on involvement in the operation of the business. Our review of the record persuades us that there was sufficient evidence to support both Kelly's and Suba's convictions on these counts. See United States v. O'Brien, 14 F.3d 703, 708 (1st Cir.1994)(where extensive circumstantial evidence formed a river of proof supporting a jury's conviction of an ambulance service owner on 420 counts relating to Medicare fraud). 2 Money Laundering (Counts 79-109) Kelly concedes that the financial transactions alleged in the money laundering counts occurred. He claims that money laundering did not occur because the financial transactions did not involve the proceeds of mail fraud. 23 Suba does not address this issue in his briefs other than in a sentencing context. The Government contends that a reasonable juror could find that Kelly and Suba laundered the mail fraud Preferred Care premiums by first depositing them in Managed Risk account and then distributing them to its shareholders. As evidence of Kelly's criminal intent, the Government points to his manipulation of the Garrison children's trust distribution deposits. Kelly forged the trustee's name on the signature card (of an account of which the trustee had no knowledge) and then forged the trustee's endorsement on the checks, also without his knowledge or permission. Laundering continued when Suba and Kelly deposited their distributions into their personal bank accounts. Kelly engaged in further money laundering by investing with two brokerage houses and purchasing South Carolina real estate. In order to prove the crime of money laundering, the Government must prove that Kelly and Suba conduct[ed] ... a financial transaction which in fact involve[d] the proceeds of specified unlawful activity.... See 18 U.S.C. § 1956; United States v. Cancelliere, 69 F.3d 1116, 1119 (11th Cir.1995). We think the evidence is clear that a reasonable juror could find that the Government sustained its burden of proving beyond a reasonable doubt that Kelly and Suba laundered the Preferred Care premiums at issue in the mail fraud counts by depositing them into Managed Risk accounts and distributing them to themselves as shareholders. Kelly's unlawful activity went two steps further when he forged the trustee's signature and endorsements and invested the proceeds in securities and real estate. Neither were these money laundering transactions open and notorious as Kelly contends. See United States v. Dobbs, 63 F.3d 391 (5th Cir.1995). We find no error regarding this issue.