Opinion ID: 441741
Heading Depth: 2
Heading Rank: 2

Heading: The Activities of the Defendants

Text: 5 Opti-Center, Inc. was a Georgia corporation engaged in selling retail eyewear that began doing business in Florida's Tampa Bay area in 1976. Opti-Center had a lease arrangement with Montgomery Ward and operated as the Montgomery Ward Optical Department in eight of its stores in and around Tampa. Except for a brief interval in 1980, Columbus optometrist Dr. Donald Gold was the President and majority shareholder of Opti-Center from its inception until its sale to the U.S. Vision Company in 1981. Patricia Warren was Regional Manager for the eight Tampa Bay area stores, with responsibilities that included hiring and firing of personnel, training, coordination, scheduling, and monitoring of inventory. Sue Conway was an optician who started out as the manager of the Opti-Center unit at the East Lake Square Mall in 1978; she was later promoted to the position of district manager in charge of the Dale Mabry unit and two other stores. Gary Highsmith was another optician who joined Opti-Center in April 1980 and became the manager of Opti-Center's Lakeland store. 6 The evidence presented at the trial established that Dr. Gold was a hard-driving businessman who carefully supervised almost every detail of Opti-Center's operations. When optician Howard Gilbert applied for a position with Opti-Center in the fall of 1977, for example, Dr. Gold was present at his interview and instructed him in the use of a sales tract that was employed in all of Opti-Center's stores. Dr. Gold told Gilbert that he should memorize the tract--which was essentially a structured sales presentation designed to overcome any objections a potential customer might have to purchasing eyewear--before reporting to work. Gilbert also testified that Dr. Gold told him that he would expect Gilbert's store to produce at least $600 a day in sales. 7 Dr. Gold followed through on these initial instructions by making occasional inspection tours of his individual stores. Gilbert recalled that Dr. Gold would usually stop by four or five times a year. He was often accompanied by Patricia Warren, who in her capacity as regional manager made frequent inspection visits. On these occasions, Gilbert reported, they would quiz the opticians and other salespersons on the use of the sales tract and observe their handling of potential customers. If an employee's knowledge of the sales tract appeared defective, he would be sent home with orders not to return until he had committed it to memory. Dr. Gold and Warren also instructed their salespersons not to wait for potential customers to enter the optical department, but to aggressively seek them out by approaching shoppers as they were passing through the store aisles nearby. Gilbert estimated that nine out of ten people we sold glasses to were people that were not thinking about buying glasses when they walked into Montgomery Wards'. Dr. Gold's obsessive concern for the bottom line was also reflected by his practice of calling the stores at the end of each day to inquire about the sales figures. Gilbert testified that Warren usually called each of the stores three or four times a day as well, and the store manager would be harshly reprimanded and told to do better if sales were down. 8 The pressure that Dr. Gold put upon Opti-Center employees to generate ever-increasing sales figures gradually led the company and its personnel into illegal activity. Opti-Center's slide into criminality began in the summer of 1979. Gilbert had been transferred to the Opti-Center unit at Clearwater, where he found that it was often difficult to make sales because the senior citizens who made up most of the store's clientele were usually unable to pay the full purchase price in cash. Gilbert discussed this problem with Warren and suggested that it would be easier to make sales if the company changed its policy against accepting claims on assignment. Dr. Gold approved the change, and the sales figures of the Clearwater store improved dramatically. 9 One of the principal growth areas at the Clearwater unit was cataract glasses. At some point in the autumn of 1979, Gilbert sold a pair of cataract sunglasses on assignment to a customer who had purchased a pair of regular cataract glasses from him shortly before. When Blue Cross subsequently paid on the assignment, Gilbert realized that he could boost his sales figures by urging customers who came into the store to purchase regular cataract glasses to acquire a pair of cataract sunglasses at the same time. There was a slight hitch, however: Blue Cross proved unwilling to pay for more than one pair of glasses when two pairs were submitted on the same claim form. Warren and Gilbert conferred about this problem, concluded that the computer at Blue Cross was misreading the claim form, and decided to start submitting two separate forms with different dates for the two pairs of glasses. This practice of falsifying one of the dates seemed to take care of the problem, and Opti-Center had no further difficulties collecting from Blue Cross on each pair of glasses. 3 10 Because these simultaneous sales of both regular and dark-tinted cataract glasses--known as double-cataract sales by company employees--could bring in as much as $450 from a single sale, they soon became a major focus of Gilbert's business. He redesigned the sales tract to accomodate the special concerns of cataract customers, and business at the Clearwater store boomed. Dr. Gold and Warren were delighted, and they began urging Opti-Center employees at other stores to emulate Gilbert's techniques. Gilbert testified that Dr. Gold was fully aware of what was involved in the new sales procedure, since he often examined the sales files on his inspection visits and frequently inquired about the high levels of accounts receivable that were generated by accepting so many double cataract sales on assignment. At no time did Dr. Gold raise any objection to this procedure, despite the fact that he had signed a pleading in 1975 acknowledging that he had received and read a communication from the State of Georgia explaining that its state health insurance program was identical to Medicare and including as an attachment section 2130 of the Carrier's Manual, which explicitly stated that payment could not be made for cataract sunglasses. In addition, at least one Opti-Center employee with prior experience elsewhere had told Gilbert and Warren in early 1980 that they were wrong about Medicare paying for cataract sunglasses. 11 Nevertheless, Gilbert continued making double cataract sales and soon ventured into other fraudulent practices as well. In addition to spacing out the sales dates on the 1490 forms, Gilbert began changing the prices on glasses that cost the same amount in order to make them appear different from one another. Then he began billing Medicare for more expensive lenses than he had actually provided a customer--such as charging Medicare for bifocal lenses when he had in fact supplied the customer with less expensive single-vision lenses. On some occasions when he had merely changed the lenses within a customer's existing frames, Gilbert billed Medicare for both the lenses and a pair of frames. He also charged Medicare for the cost of mistakes and re-doing lenses that proved unsatisfactory to customers. Gilbert's initiative and productivity were duly rewarded by Opti-Center with several raises before he left the company in the autumn of 1980. 12 The techniques that Gilbert had pioneered gradually infected the other Opti-Center stores in the Tampa area as Dr. Gold and Warren put pressure on other employees to emulate Gilbert's success. When Sue Conway became a district manager in the spring of 1980, Warren urged her to boost sales at her two units by instructing her personnel to make double cataract sales. Gary Highsmith likewise began stressing double cataract sales when he was hired as the store manager of the Lakeland unit in April 1980. When Sue Conway and Warren visited the Lakeland store a month later, Conway examined Highsmith's Medicare files (which were located in a drawer labeled cataract city) and noticed that he always used the same two procedure codes, the same description, and the same price on the 1490 forms, regardless of what type of glasses he had actually sold. This practice apparently sped processing of the assigned claims, helping to reduce the total of accounts receivable. In addition, the lens descriptions and procedure codes used by Highsmith permitted him to claim the maximum amount ($250) that Medicare refunded on eyewear. 13 Conway explained Highsmith's practices to Warren and, with her approval, implemented similar procedures at her own stores. When Conway's units experienced a significant increase in sales, Warren bragged about their success to other Opti-Center employees and urged them to adopt Conway's procedures as well. Dr. Gold was apparently delighted with the new sales techniques, telling Conway in the summer of 1980 that he wanted Medicare sales to comprise 50% of their business. 14 By the summer of 1980, double cataract sales had become an important source of business at almost all of the Opti-Center stores. Although some of Opti-Center's employees may have heretofore been genuinely ignorant about the extent of Medicare's coverage, such claims became less plausible after Blue Cross sent out a letter in June 1980 to all eyewear providers in Florida advising them that Medicare did not cover cataract sunglasses or routine eyewear for which there was no medical necessity. Nevertheless, the fraudulent practices continued. When Opti-Center opened a new store called Tampa Bay Center in the autumn of 1980, fifty percent of its business involved Medicare claims, and over ninety percent of those were double cataract sales. The flood of 1490 forms became so great that a substantial backlog accumulated. Conway sought assistance from Dr. Gold, urging him to hire additional personnel to handle the Medicare paperwork, but he refused. Dr. Gold also complained to Warren that Conway should spend less time filling out forms and more time out on the sales floor. 15 The rapid growth of Medicare-based business at the Tampa area stores required Opti-Center to hire a number of new opticians, some of whom objected to the company's Medicare billing practices. When Nancy Shepard was hired as an optician in November 1980, she told Warren that Medicare beneficiaries were entitled to only one pair of eyewear per year, and then only if the request was accompanied by a doctor's prescription. Warren challenged her understanding of the Medicare program, and Shepard replied that this had been the law when she worked for an opthamologist two days before. Warren replied that the law had been changed. Another employee, Debbie Develle, also objected to Opti-Center's practice of telling customers that they were entitled to new glasses every year, even without a doctor's prescription. When Develle's supervisor told her that her perception of the law was incorrect, Develle called a toll-free number at Blue Cross in Jacksonville and confirmed that her prior understanding was in fact accurate. When Sue Conway brushed aside this information, Develle promptly resigned. Conway did pass along Develle's claims to Warren, but the latter took no action. At about the same time Linda Robinson, the manager of the Tampa Bay Center store, likewise became concerned about rumors that billing Medicare for the double-cataract sales was illegal and she also called Blue Cross to confirm her suspicions. Robinson informed Warren of what she had learned, but the company's only response was to demote Robinson to the position of a floater, who shifted between different stores as the volume of business required. Robinson subsequently left the company. 16 Thus, by the autumn of 1980, it was becoming increasingly difficult for company officials to close their eyes to the illegality of Opti-Center's billing practices. Sue Conway admitted at trial that she had realized as early as August of 1980 that some of the claims were improper. As a result of some information she had come across earlier that summer, Conway had instructed her subordinates that Medicare would pay for routine eyewear. Blue Cross subsequently rejected one of the claims on the grounds that no illness or injury was involved. Since it was company policy not to dispense glasses until full payment was received, this created a problem with regard to customers whose glasses were ready but who might not be able to pay the full amount if their claims were disallowed by Medicare. Conway falsely amended the claims to indicate that the customers were aphakic and resubmitted the claims to Medicare. Conway instructed her employees not to bill Medicare for such sales in the future, and in November of 1980 she confessed to Warren that she had done some illegal things with Medicare billings. Warren responded that she did not want to hear about it. In early 1981, however, Conway learned that some of her employees had continued to charge Medicare for routine eyewear. She took this problem to Warren, and they decided--after clearing it with Dr. Gold--to issue some refunds. The refunds appear to have been made primarily in cases where the claims falsely stated that the patient had had cataract surgery or where the glasses were never even ordered for the customer. Conway indicated that no effort was made to match the reasons offered on the refund voucher sent to Blue Cross with the actual inaccuracies on the original claim. 17 Sue Conway initially handled the refund process, but in April 1981 her sister Mary was hired by Warren to take responsibility for the company's medical insurance paperwork. Warren instructed Mary Conway to refund any orders where the customer had not had cataract surgery, where Medicare had paid two or three times on a single order of glasses, or where Medicare had been charged for glasses that were never made or provided to the customer. 4 Warren told her not to refund amounts paid for cataract sunglasses, lens reworkings, or glasses not based on a prescription, however, Warren also indicated that it was not necessary to provide an accurate explanation on the refund voucher that was sent to Medicare. Instead, Conway was to arbitrarily select one of three different generalizations: overpayment, submitted improperly, and wrong procedure code. 18 Mary Conway then started to work through the files at each of the Opti-Center stores in the Tampa area. She noticed double cataract sales at all of the units, as well as overpayments and billings for routine eyewear. The fraudulent practices were particularly widespread at the Lakeland store, where Gary Highsmith was in charge. Although double cataract sales were supposed to have ceased at all stores in April 1981, Highsmith was still making them when Mary Conway began her examination of the files at the Lakeland store in June of that year. She also noted that there were many cases in the files at the Lakeland store where Medicare had been billed for glasses that were never made, and where the Opti-Center work order was blank because Highsmith had never bothered to obtain a prescription. Conway issued over $6,000 in refunds from the Lakeland store for that reason alone. Highsmith did not appear particularly surprised or dismayed at the widespread evidence of fraud in his files; Mary Conway testified that he sometimes greeted her holding up his fingers like prison bars in front of his face and joking, We are all going to go to Alcatraz. 19 In February 1981, Dr. Gold began negotiations with William Schwartz, President of the U.S. Vision Company, who was interested in purchasing Opti-Center. 5 The negotiations initially faltered because Dr. Gold balked at Schwartz' request for the company's books and records. According to Schwartz' testimony at trial, Dr. Gold asserted that this financial information was merely academic, explaining that his company operated very differently from U.S. Vision and that direct comparisons could therefore be misleading. Dr. Gold indicated that he was essentially selling a method of doing business--that rather than relying on advertising or supplying eye examinations as part of its service, he had devised a method to sell eyeglasses off the aisle of the store, whereby his employees hovered on the aisle of the store and convinced the customer to come into the department to get their eyeglasses cleaned rather than waiting for the customer to come in and ask for a pair of glasses or order a pair. Dr. Gold emphasized to Schwartz that his approach required constant checking on it, frequent calls. He said it took a hands-on type of management to--because you had to worry every hour as to how many people were brought into the department .... [I]t took his constant calls and the use of Mrs. Warren in the store to make sure that the employees did this on an hourly and daily basis. 20 Dr. Gold urged Schwartz to continue Opti-Center's focus on cataract sales, noting that this was especially valuable because instead of a fifty dollar pair of glasses, you might have a two hundred fifty dollar or three hundred fifty dollar pair of glasses generated on the basis of cleaning somebody's glasses. Dr. Gold also attributed Opti-Center's success to its policy of accepting sales on assignment. When Schwartz expressed some concern about the problem of getting customers to pay the deductible or the remaining twenty percent balance, Dr. Gold replied that the trick was to price the glasses high enough so that it became immaterial whether the company ultimately managed to collect on the balance or the deductible. 21 Schwartz and Dr. Gold eventually managed to reach an agreement and the sale of the company was finalized on July 23, 1981. Approximately one week before the date of the sale, Warren told Sue Conway that Dr. Gold had called and requested that they remove all of the Medicare records from the eight Tampa area stores, taking care to do so after hours so that no one would know what they were doing. Warren and the two Conway sisters accordingly met at the East Lake store after it closed on Saturday evening. While they were there, Warren received a telephone call from Dr. Gold, and Sue Conway overheard them discussing when they would be removing the records from the various stores. Over the course of the next three or four days, Warren and the Conway sisters collected the records of all sales that had been billed to Medicare and re-filed them in the trunks of Warren's and Mary Conway's cars. About a week after the company was sold, Sue Conway visited Warren at home and asked what they should do with the captive Medicare records. Warren called Dr. Gold to find out. When Warren explained why she was calling, Dr. Gold first asked her if anyone else was present. Warren lied and told him, No, Susie is not here, whereupon Dr. Gold apparently told Warren to dispose of the records. Conway heard Warren reply, Don, we can't just ditch the records, but he insisted, and further instructed Warren that he is not to be connected with it in any way, he was not involved, and to not say that he had anything to do with it and just have the records disappear. Warren and Conway decided that this was just too risky, and the records eventually found their way back to the respective stores. 6 22 After the sale to U.S. Vision was finalized, Schwartz had his first opportunity to examine the sales records in the Opti-Center stores in the Tampa Bay area. 7 He was astonished to discover that anywhere from twenty-five percent to forty percent of the sales orders were for cataract patients, a far higher volume than at U.S. Vision's other stores. Schwartz noticed that many of the cataract sales to Medicare patients involved two pairs of glasses; that in many cases Medicare had been billed for sales of cataract sunglasses or routine eyewear; and that there were instances where glasses were charged to Medicare even though no prescription was obtained. He also found cases where Medicare had been billed for glasses that were never made or delivered to the customer. Schwartz brought up these apparent irregularities with Dr. Gold, who suggested that some of the forms probably reflected clerical mistakes, while in other cases he defended Opti-Center's handling of the claims. Schwartz was unpersuaded, and he substantially revised the company's processing of Medicare claims after the sale to conform to his understanding of the law. 8 Although U.S. Vision continued to utilize Dr. Gold's sales tract in the months immediately following the sale, the new procedures had a dramatic impact on Medicare-related business at the former Opti-Center stores. It disappeared, Schwartz subsequently testified. There was [sic] virtually no more Medicare sales. During the eighteen months preceding the sale of the company, in contrast, Medicare billings had totaled $346,000. 23 In the autumn of 1981, the Department of Health and Human Services commenced an investigation into Opti-Center's Medicare billing practices under the direction of Special Agent Frank Cioffi. This investigation ultimately resulted in the indictment and conviction of Dr. Gold, Warren, Highsmith, Opti-Center, Inc., and Sue Conway. All except the latter appeal.