Opinion ID: 522863
Heading Depth: 2
Heading Rank: 1

Heading: Reasonable Payment Instruction

Text: 40 The trial court refused to give instructions requested by the defendants to the effect that the government had to show the payments to Felci were not as compensation for services performed ... or were of substantially more value than the services performed or to be performed and that Felci could not be guilty unless he was substantially overpaid for his services. Instead, the judge instructed 41 that the Government has to prove that the payments were made with a corrupt intent, that they were made for an improper purpose. If you find that payments were made for two or more purposes, then the Government has to prove that the improper purpose is the primary purpose or was the primary purpose in making and receiving the payments. It need not be the only purpose, but it must be the primary purpose for making the payments and for receiving them. You cannot convict if you find that the improper purpose was an incidental or minor one in making the payments. 42 This was part of the court's instruction on inducement. Although there is a question as to whether a proper objection was taken to this instruction, we will assume that it was. 43 The trial court did not err in not specifically instructing the jury that the government had to prove that the payments received were not reasonable for the actual work done. The gravamen of Medicare Fraud is inducement. Giving a person an opportunity to earn money may well be an inducement to that person to channel potential Medicare payments towards a particular recipient. We are impressed by the Third Circuit's reasoning: 44 Even if the physician performs some service for the money received, the potential for unnecessary drain on the Medicare system remains. The statute is aimed at the inducement factor. 45 The text refers to any remuneration. That includes not only sums for which no actual service was performed but also those amounts for which some professional time was expended. Remunerates is defined as to pay an equivalent for service. Webster Third New International Dictionary (1966). By including such items as kickbacks and bribes, the statute expands remuneration to cover situations where no service is performed. That a particular payment was a remuneration (which implies that a service was rendered) rather than a kickback, does not foreclose the possibility that a violation nevertheless could exist. 46 United States v. Greber, 760 F.2d 68, 71 (3d Cir.) (emphasis added), cert. denied, 474 U.S. 988, 106 S.Ct. 396, 88 L.Ed.2d 348 (1985); see also United States v. Hancock, 604 F.2d 999, 1001-02 (7th Cir.) (under older statute which did not include remuneration, rejecting argument that fees for legitimate services could not be illegal kickbacks), cert. denied, 444 U.S. 991, 100 S.Ct. 521, 62 L.Ed.2d 420 (1979). 47 Whether the payments were at least in part for services rendered raises the issue of whether the government must show that such payments were made primarily or solely with a corrupt intent. In Greber, the court held that [i]f the payments were intended to induce the physician to use Cardio-Med's services, the statute was violated, even if the payments were also intended to compensate for professional services. 760 F.2d at 72 (emphasis added). This more expansive reading of the statute, id., implies that the issue of the sole versus primary reason for payments is irrelevant since any amount of inducement is illegal. We need not decide the exact reach of the statute since, in this case, the district court instructed that the defendants could only be found guilty if the payments were made primarily as inducements. At a minimum this comports with congressional intent. Greber, 760 F.2d at 71-72 (collecting and discussing cases). 48 The defendants based their case on the theory that the payments to Felci were only made for actual services performed. This, they contended, was the sole reason for the payments. They, therefore, object to the following instruction: 49 If you find the payments were made for two or more purposes, then the government has to prove that the improper purpose is the primary purpose or was the primary purpose in making and receiving the payments.... You cannot convict if you find that the improper purpose was an incidental or minor one in making the payments. 50 We find that this instruction was not reversible error. 51 The verdicts rendered indicate that the jury followed this instruction. The jury found the defendants guilty on the conspiracy and the two automobile payment charges, and not guilty on all but one check payment, on which they failed to agree. The jury could have believed that the check payments were compensation for work done with only an incidental improper purpose, but that the two automobiles were primarily given for an improper purpose and not for work done. 52 Finally, defendants argue that in light of recent congressional and administrative actions, reasonable payments for actual work is not a crime proscribed by the Medicare Fraud statute. The defendants, however, read too much into the amended statute and subsequent administrative actions. In 1987, Congress repealed 42 U.S.C. Sec. 1395nn and reenacted the provision in altered form at 42 U.S.C. Sec. 1320a-7b. The basic substantive provision for criminal liability has not been materially changed. 42 U.S.C. Sec. 1320a-7b(b)(1) and (2). Under this revision, the Secretary of Health and Human Services (HHS) is directed to promulgate regulations specifying payment practices that shall not be treated as a criminal offense. 42 U.S.C. Sec. 1320a-7b(b)(3)(D). Pursuant to this mandate, the Secretary of HHS initially proposed regulations on December 21, 1988, 53 Fed.Reg. 51,862 (1988), withdrew them on December 23, 1988, 53 Fed.Reg. 52,448 (1988), and reissued them on January 23, 1989, 54 Fed.Reg. 3088 (1989). Under these proposed regulations, a consulting arrangement would be exempted from illegality so long as the amount paid was consistent with fair market value in arms-length transactions. 19 The regulations have to our knowledge not been adopted; they have only been published for comment. 53 As defendants concede, these proposed changes do not govern their actions since the law was different at the time. They nonetheless contend that the proposed changes should inform our determination of whether reasonable payments for actual services can ever be illegal. Our response is twofold. First, even assuming that the statutory changes and proposed administrative actions show that a later Congress agrees with the defendants that Congress never intended to criminalize the kind of payments involved here, courts are chary of allowing a subsequent Congress' comments on the intent of prior legislation to control. CPSC v. GTE Sylvania, Inc., 447 U.S. 102, 117, 100 S.Ct. 2051, 2061, 64 L.Ed.2d 766 (1980) (we begin with the oft-repeated warning that 'the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.' ) (citation omitted). 54 Second, and more importantly, the relied upon changes in the statute do not support defendants' contentions and may in fact belie them. Congress did not explicitly change the statute to exclude reasonable payments for actual work done. At best, Congress allowed HHS to create safe harbors for certain types of transactions. The proposed regulation does not exempt every transaction in which the amount paid for services is an amount consistent with fair market value; rather, it exempts only a small subset of such transactions. To qualify, there must also be: (1) an agreement in writing; (2) specifying the services to be rendered; (3) for a term of more than one year; (4) with the compensation set in advance. Furthermore, under circumstances such as the present case where the consulting arrangement is not full-time, even more stringent requirements are necessary to meet the exemption from criminal liability. 20 HHS has thus decided not to create a safe harbor for transactions such as the present case. While we need not decide whether this implies that HHS deems such transactions to be illegal, we certainly do not see how this shows that HHS finds such transactions to be legal. 55 Moreover, the fact that Congress, in reenacting the substantive sections of the Medicare Fraud statute did not change them, implies that Congress approved prior interpretations such as Greber, 760 F.2d 68. See, e.g., Sierra Club v. Secretary of Army, 820 F.2d 513, 522 (1st Cir.1987); see also United States v. Tapert, 625 F.2d 111, 121 (6th Cir.) (An amendment to an existing statute is not an acknowledgement by Congress that the original statute is invalid.), cert. denied, 449 U.S. 1034, 101 S.Ct. 609, 610, 66 L.Ed.2d 496 (1980).B. Unconstitutionally Vague Statute 56 Defendants next claim that, if we read the Medicare Fraud statute to criminalize, under certain circumstances, reasonable payment for services rendered, the statute becomes unconstitutionally vague. 57 The Supreme Court has set forth the standards for determining whether a statute is void for vagueness: 58 A criminal statute must be sufficiently definite to give notice of the required conduct to one who would avoid its penalties, and to guide the judge in its application and the lawyer in defending one charged with its violation. But few words possess the precision of mathematical symbols, most statutes must deal with untold and unforeseen variations in factual situations, and the practical necessities of discharging the business of government inevitably limit the specificity with which legislators can spell out prohibitions. Consequently, no more than a reasonable degree of certainty can be demanded. Nor is it unfair to require that one who deliberately goes perilously close to an area of proscribed conduct shall take the risk that he may cross the line. 59 Boyce Motor Lines, Inc. v. United States, 342 U.S. 337, 340, 72 S.Ct. 329, 330-31, 96 L.Ed. 367 (1952) (footnotes omitted). More recently, the Court has expanded this teaching. 60 In Grayned v. City of Rockford, 408 U.S. 104, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972), the Court enunciated the twin values offended by vague statutes: (1) vague laws do not provide fair warning to the public; and (2) vague laws contribute to arbitrary and discriminatory enforcement and application. Id. at 108-09, 92 S.Ct. at 2298-99. Defendants argue only that the statute undercuts the notice prong; they do not argue that there has been arbitrary and discriminatory enforcement. 61 In Village of Hoffman Estates v. The Flipside, Hoffman Estates, Inc., 455 U.S. 489, 498-500, 102 S.Ct. 1186, 1193-94, 71 L.Ed.2d 362 (1982), the Court elaborated on the relevant factors for deciding vagueness. First, an economic regulation is subject to a less strict vagueness test. Id. Second, there is greater tolerance of enactments with civil rather than criminal penalties. Id. at 498-99, 102 S.Ct. at 1193. Third, a scienter requirement may mitigate a law's vagueness, especially with respect to the adequacy of notice to the [defendant] that his conduct is proscribed. Id. at 499, 102 S.Ct. at 1193. Finally, perhaps the most important factor ... is whether [the law] threatens to inhibit the exercise of constitutionally protected rights. Id. The court has also warned against mechanically appl[ying] the standards. Id. at 498, 102 S.Ct. at 1193. In Maynard v. Cartwright, --- U.S. ----, 108 S.Ct. 1853, 1858, 100 L.Ed.2d 372 (1988), the Court held that outside of the realm of the first amendment, vagueness challenges are judged on an as-applied basis. 62 When the Medicare Fraud statute is analyzed under the applicable standards, and in light of the fact that inducement is the gravamen of the offense, the statute passes constitutional muster even though the criminal nature of the statute requires a relatively strict test for constitutionality. Hoffman Estates, 455 U.S. at 499, 102 S.Ct. at 1194. First, there can be no doubt that the statute is an economic regulation which allows for greater latitude by Congress--the Medicare Fraud statute is directed at drains on the public fisc. See Greber, 760 F.2d at 71; Hancock, 604 F.2d at 1001. 21 Second, the statute is not the type that can be used to chill constitutionally protected rights and defendants do not so claim. Third and most importantly in this case is the factor of scienter. Under the Medicare Fraud statute, there is the standard requirement of knowing and willful acts. 42 U.S.C. Sec. 1395nn. The key to a Medicare Fraud case is the reason for the payment--was the purpose of the payments primarily for inducement. In addition to the knowing and willful requirement, this imposes a second and stronger scienter requirement. The unusually high scienter requirement mitigate[s] [any] vagueness, especially with respect to the adequacy of notice to the [defendant] that his conduct is proscribed. Hoffman Estates, 455 U.S. at 499, 102 S.Ct. at 1193. 22 C. Failure to Instruct re Mens Rea 63 The defendants next contend that the court's failure to instruct that the reasonableness of the payments to Felci was evidence of a lack of the mens rea element of the crime, that it was not committed knowingly and willfully, was a violation of due process. 64 Defendants did not object to the court's failure to give this particular instruction after the jury was initially instructed. After the charge, the defendants registered a general objection to all instructions not given. This is insufficient. See Carrillo v. Sameit Westbulk, 514 F.2d 1214, 1218-19 (1st Cir.1975) (discussing Fed.R.Civ.P. 51, the civil procedure analogue to Fed.R.Crim.P. 30); see also United States v. Monteiro, 871 F.2d 204, 208 (1st Cir.1989) (Defendant's objections to the jury instructions were repeated after the instructions were given as required by this Circuit.). There followed a series of objections on various specific instructions, none of which dealt with the present issue. Under such circumstances, the omission will only be reviewed for plain error. See, e.g., United States v. Sedlak, 720 F.2d 715, 721 (1st Cir.1983), cert. denied, 465 U.S. 1037, 104 S.Ct. 1312, 79 L.Ed.2d 709 (1984). Here, we see no error, much less plain error. The judge gave an appropriate explanation of the scienter element of the crime: 65 The fourth element I told you is that the defendants have to act, have to have been shown to have acted knowingly and willfully. Knowingly simply means to do something voluntarily, to do it deliberately, not to do something by mistake or by accident or even negligently. Willfully means to do something purposely, with the intent to violate the law, to do something purposely that law forbids. 66 The judge told the jurors that in deciding this issue, the defendants' conduct and statements including the circumstances surrounding the conduct and statements were relevant. Since the entire defense revolved around the defendants' actions and the reasons for them, we see no error in the court refusing to instruct explicitly every aspect of the defense. 67