Court Opinion

ID: 74134
Source: CourtListenerOpinion
Date Created: 2010-04-26 08:40:25+00
Date Added: 2024-06-11T08:50:57.691136
License: Public Domain

[ PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS
                                                                 FILED
                     FOR THE ELEVENTH CIRCUIT
                                                      U.S. COURT OF APPEALS
                                                        ELEVENTH CIRCUIT
                       ________________________              10/06/99
                                                          THOMAS K. KAHN
                              No. 98-9557                     CLERK
                         Non-Argument Calendar
                       ________________________

                     D. C. Docket No. 1:98-cr-63-01

UNITED STATES OF AMERICA,
                                                               Plaintiff-Appellee,

                                  versus

JAMES E. MCCLENDON,
                                                         Defendant-Appellant.

                       ________________________

                Appeal from the United States District Court
                   for the Northern District of Georgia
                     _________________________
                            (October 6, 1999)

Before BLACK, CARNES and HULL, Circuit Judges.

PER CURIAM:
      James E. McClendon, Defendant-Appellant, pled guilty to conspiring to

commit Medicaid fraud in violation of 18 U.S.C. § 371 and money laundering in

violation of 18 U.S.C. § 1957 and was sentenced to seventy-eight months’

incarceration. McClendon appeals this sentence. Specifically, McClendon argues

on appeal that the district court erred in declining to group the fraud and money

laundering counts together for the purposes of sentencing pursuant to United States

Sentencing Guideline § 3D1.2(d). McClendon also asserts that the district court

incorrectly based one of his two criminal history points on a misdemeanor

insufficient-funds check charge. Upon review, we affirm.

                              I.   BACKGROUND

A.    Facts

      McClendon and his co-defendant, James Fletcher, became affiliated in early

1994. At the time, McClendon, a psychiatrist, operated numerous clinics in

Atlanta, Georgia for which he had several separate Medicaid provider numbers.

Fletcher operated an entity known as Human Resources Inc., Concept (“HRIC”)

and McClendon contracted with Fletcher to serve as the medical provider for the

company. HRIC was advertised to parents of Medicaid eligible children as an

after-school or summer program offering assistance with homework, exposure to

areas of academic or artistic enrichment, and “non-traditional counseling.”

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Unbeknownst to the parents, HRIC also billed Medicaid for psychiatric services

allegedly provided to the children enrolled in the program.

      Pursuant to Medicaid regulations, payment is only permitted for

psychotherapy services provided by a physician. During the course of his

association with Fletcher, however, McClendon regularly billed Medicaid for

services provided to enrolled children by other members of his staff, none of whom

was a physician. In addition, very few, if any, of the children actually received

psychotherapy. Further, McClendon frequently billed Medicaid for psychotherapy

allegedly provided when children were either absent or on a field trip, and when

McClendon himself was out of the country.

      During the fourteen month period covered by the indictment, McClendon

submitted over 77,000 false claims to Medicaid involving more than 4,000

children. Medicaid was billed approximately $8,600,000 and actually paid out

$6,600,000. Typically, payment was made through checks payable to McClendon

or one of his businesses. McClendon would then draft checks payable to HRIC for

some of the amount received from Medicaid. McClendon ultimately transferred

approximately $3,300,000 to Fletcher and/or HRIC in this manner.

      Some of the proceeds transferred to HRIC were then deposited into an HRIC

cash management account with Merrill Lynch. From that account, monies were

                                          3
transferred into a Merrill Lynch account in McClendon’s name, from which

McClendon then transferred the money into his separate corporate accounts or

withdrew it for personal use. In addition, some of the proceeds were transferred

from the HRIC account to an investment venture controlled by McClendon and

Fletcher called Partners, Inc. It appears, however, that Partners, Inc. had no

legitimate business purpose.

B.    Procedural History

      McClendon and Fletcher were charged in a forty-four count indictment in

the Northern District of Georgia on February 25, 1998. The indictment charged,

among other things, conspiracy to commit Medicaid fraud in violation of 18 U.S.C.

§ 341 and money laundering in violation of 18 U.S.C. § 1957. On August 11,

1998, McClendon entered a negotiated plea of guilty to conspiracy to commit

Medicaid fraud and three counts of money laundering.

      An initial sentencing hearing was held on November 17, 1998. At this

hearing, McClendon challenged the Probation Officer’s determination that the

fraud and money laundering counts should be grouped separately in calculating his

offense level. In addition, McClendon argued that three 1985 misdemeanor

charges for bad checks should not be included in the calculation of his criminal

history because the offenses occurred more than ten years prior to the conduct in

                                          4
the instant case. The district court adjourned the hearing in order to further

consider the parties’ arguments regarding the grouping of charges.

      Sentencing resumed on November 2, 1998, at which time the district court

declined to group the fraud and money laundering counts. The district court

specifically found that the nature and measure of the harm resulting from the two

offenses differed in that there were separate victims of the two offenses and the

offense level for each count is determined in a different manner under the

Guidelines. In addition, the district court found that McClendon’s scheme to

defraud Medicaid was not dependant upon the money laundering. Also at this

second hearing, McClendon conceded that the law did not support his position

regarding his prior bad check convictions. As a result, McClendon was sentenced

to seventy-eight months’ incarceration as to the money laundering counts, and

sixty months as to the fraud count, to run concurrently.

                                II.   DISCUSSION

A.    Grouping of Offenses

      McClendon’s first argument on appeal is that the district court erred in

failing to group his fraud and money laundering counts together for the purposes of

sentencing. This Court reviews a district court’s application of the Guidelines to

the facts de novo. See United States v. Bernardine, 73 F.3d 1078, 1079 (11th Cir.

                                          5
1996). The district court’s factual findings, however, are reviewed for clear error.

See United States v. Lewis, 115 F.3d 1531, 1536 (11th Cir. 1997).

      Section 3D1.1 of the Sentencing Guidelines provides that the first step in the

process of determining the sentence of a defendant convicted of more than one

count is for the court to group the counts of conviction into groups of “Closely

Related Counts” pursuant to section 3D1.2. U.S.S.G. § 3D1.1.1 Section 3D1.2, in

turn, provides that all counts “involving substantially the same harm” shall be

grouped together, and describes four situations in which counts are considered to

involve substantially the same harm.2 McClendon argues on appeal only that the

      1
          This Guidelines section provides, in relevant part, that:
              (a) When a defendant has been convicted of more than one count,
              the court shall:
                    (1) Group the counts resulting in conviction into
                    distinct       Groups of Closely Related Counts
                    (“Groups”) by applying the rules specified in § 3D1.2.
                   ...
      U.S.S.G. § 3D1.1(a) (Nov. 1997).
      2
          Section 3D1.2 states:
      § 3D1.2.      Groups of Closely Related Counts
                    All counts involving substantially the same harm shall be grouped together
                    into a single Group. Counts involve substantially the same harm within the
                    meaning of this rule:
                    (a)      When counts involve the same victim and the same act or transaction.
                    (b)      When counts involve the same victim and two or more acts or
                             transactions connected by a common criminal objective or
                             constituting part of a common scheme or plan.
                    (c)      When one of the counts embodies conduct that is treated as a specific
                             offense characteristic in, or other adjustment to, the guideline
                             applicable to another of the counts.

                                              6
counts to which he pled guilty should be grouped pursuant to subsection (d) of

U.S.S.G. § 3D1.2, and, as a result, we will address only that subsection.3

       Subsection (d) of section 3D1.2(d) states that counts involve substantially

the same harm:

       [w]hen the offense level is determined largely on the basis of the total
       amount of harm or loss, the quantity of a substance involved, or some
       other measure of aggregate harm, or if the offense behavior is ongoing
       or continuous in nature and the offense guideline is written to cover
       such behavior.

In addition, this subsection lists guideline sections representing offenses that “are

to be grouped” and guideline sections representing offenses that are “specifically

                       (d)    When the offense level is determined largely on the basis of the total
                              amount of harm or loss, the quantity of a substance involved, or some
                              other measure of aggregate harm, or if the offense behavior is
                              ongoing or continuous in nature and the offense guideline is written
                              to cover such behavior. . . .
       3
         In arguing that grouping is not appropriate in this case, the Government relies
in part upon United States v. Jenkins, 58 F.3d 611 (11th Cir. 1995) (declining to
group transportation of stolen goods and money laundering charges). Specifically, the
Government asserts that, like in Jenkins, the victims of the two offenses here differ,
different conduct is criminalized by the relevant offenses, the offense level for fraud
does not determine the offense level for money laundering, and the guidelines
applicable to the two counts measure different harms. The Government is correct that
these factors were listed by the Jenkins court as the basis for it’s determination that
grouping was not appropriate. A closer look at these factors, however, reveals that
they largely mirror the four definitions of offenses involving “substantially the same
harm” given in U.S.S.G. § 3D1.2 (a), (b), (c), and (d). Because, as stated above, McClendon
asserts only that grouping is appropriate pursuant to subsection (d), several of the Jenkins factors
are not helpful to our analysis in this case.

                                                 7
excluded” from grouping, and states that a case-by-case determination should be

made as to the grouping of other offenses pursuant to subsection (d). U.S.S.G. §

3D1.2(d). Both the relevant fraud guideline, § 2F1.1, and money laundering

guideline, § 2S1.2, are listed in the first category.

       McClendon concedes, however, that the mere listing of both of these

guidelines as offenses that “are to be grouped” does not automatically necessitate

grouping. See United States v. Harper, 972 F.2d 321, 322 (11th Cir. 1995).4 In

Harper, the defendant argued that his convictions for money laundering and drug

trafficking should be grouped for the purposes of sentencing. Despite the fact that

the relevant guidelines for the two offenses were both listed as offenses that “are to

       4
        Indeed, our sister circuits have split on the issue of whether the grouping of
fraud and money laundering counts is appropriate pursuant to section 3D1.2(d).
Compare United States v. Landerman, 167 F.3d 895 (5th Cir. 1999) (finding that grouping would
be appropriate because the money laundered was reinvested into and perpetuated the fraudulent
scheme); United States v. Emerson, 128 F.3d 557 (7th Cir. 1997) (finding grouping appropriate
when the defendant was convicted of laundering money “with the intent to promote the carrying on
of a specified unlawful activity” pursuant to 18 U.S.C. § 1956(a)(1)(A)(i)); United States v. Wilson.
98 F.3d 281 (7th Cir. 1996) (finding grouping appropriate in a Ponzi scheme); United States v.
Leonard, 61 F.3d 1181 (5th Cir. 1995) (finding grouping appropriate in a telemarketing fraud
scam); with United States v. Napoli, 179 F.3d 1 (2d Cir. 1999) (declining to group fraud and money
laundering counts because the two guidelines measure different types of harm, do so differently, and
grouping could lead to unintended consequences in many cases); United States v. Kneeland, 148
F.3d 6 (1st Cir. 1998) (finding that grouping would not be appropriate because the money guideline
range was not “largely determined” by the aggregate amount of harm or loss); United States v.
O’Kane, 155 F.3d 969 (8th Cir. 1998) (same); United States v. Taylor, 984 U.S. 298 (9th Cir. 1993)
(declining to group because the two guidelines measure harm differently); United States v. Johnson,
971 F.2d 562 (10th Cir. 1992) (declining to group fraud and money laundering counts resulting
from a Ponzi scheme because the guidelines for the two offenses measure different harms).

                                                 8
be grouped,” this Court disagreed. The Harper court explained that automatic

grouping of offenses listed in the first category can detract from the purpose of

section 3D1.2—“to combine offenses involving closely related counts.” Id.

(citing U.S.S.G. § 3D1.2, comment (n.6)). Because money laundering and drug

trafficking were not found to be of the same general type, and the facts in Harper

did not show the offenses to be closely related, this Court concluded that the

offenses should not be grouped. Id.

      The comment accompanying section 3D1.2 cited by the Harper court states

that “[c]ounts involving offenses to which different offense guidelines apply are

grouped together under subsection (d) if the offenses are of the same general type

and otherwise meet the criteria for grouping under this subsection.” U.S.S.G. §

3D1.2, comment (n. 6). This Court has, in at least one circumstance, allowed the

grouping of fraud and money laundering counts. See United States v. Mullens,

65 F.3d 1560 (11th Cir. 1995). The law of this circuit thus tells us that fraud and

money laundering “otherwise meet the criteria for grouping” and the remaining

question is whether, under the particular facts in this case, are the offenses closely

related.

      For example, Mullens involved a Ponzi scheme in which money contributed

by new investors was “laundered” when paid out to old investors as false profits.

                                           9
The laundered funds were thereby used as a means to lure new victims into the

scheme and to prevent old investors from discovering the fraud. This Court thus

concluded that both the fraud and the money laundering were “integral cogs in

continuing the scheme” and, as a result, grouping was appropriate. Id. at 1564; see

also United States v. Adams, 74 F.3d 1093, 1102 n.12 (11th Cir. 1996) (noting

without discussion that “[f]raud and money laundering convictions . . . can be

grouped under U.S.S.G. § 3D1.2(d)).

      McClendon asserts that the laundering of funds here was a similarly integral

part of the fraud scheme and thus so closely related as to warrant grouping. Unlike

the Ponzi scheme in Mullens, and Wilson, 98 F.3d 281 (7th Cir. 1996), on which

McClendon also relies, however, the money laundered in this case was not used as

a means to lure new victims into the scheme. Instead, it appears that much of the

$3,300,000 at issue was either funneled to Partners, Inc., cycled back to

McClendon’s other businesses, or withdrawn for personal use. Also, although the

transfer of funds between accounts here did make it more difficult for investigators

to trace the proceeds of the fraud, it was not a key to preventing the discovery of

the scheme. Rather, it appears that the main connection between the laundered

funds and the fraud scheme in this case is that the money represented the proceeds

of the fraud. As this Court stated in Harper, to find that this connection alone is

                                          10
sufficient to justify grouping would “mean that every act of money laundering

would be closely related to the underlying crime which produced the money to be

laundered.” Harper, 972 F.2d at 322-323 (quoting United States v. Porter, 909

F.2d 789, 793 (4th Cir. 1990)). Such a result was not contemplated by the

Guidelines. Thus, this Court finds that the district court did not err in declining to

group the fraud and money laundering counts given the particular facts in the

instant case.

B.    Criminal History Calculation

      McClendon also asserts that the district court erred in assigning a criminal

history point for his prior misdemeanor convictions of three counts of bad checks.

Guideline section 4A1.2(c)(1) provides, in relevant part, that misdemeanor

convictions for “Insufficient funds check” are to be counted in calculating the

criminal history only if (A) the sentence was a term of probation of at least one

year or a term of imprisonment of at least thirty days; or (B) the prior offense was

similar to an instant offense. McClendon asserts that, pursuant to this provision,

his bad check convictions should not have been included. McClendon, however,

received concurrent sentences of twelve months’ probation for his convictions, and

therefore the Government contends that this argument is frivolous.

                                          11
       Because McClendon failed to raise this argument below when given an

opportunity to object to his sentence, we will review the question only if failure to

do so would result in manifest injustice. See United States v. Jones, 899 F.2d

1097, 1102 (11th Cir. 1990), overruled on other grounds, United States v. Morrill,

984 F.2d 1136, 1137 (11th Cir. 1993) (en banc); United States v. Williams, 144

F.3d 1397 (11th Cir. 1998). This Court equates manifest injustice with review for

plain error. United States v. Newsome, 998 F.2d 1571, 1579 (11th Cir. 1993).

Having considered the argument raised by McClendon, we find no plain error.

                               III.   CONCLUSION

      We find that the district court did not err in declining to group the fraud and

money laundering counts together for the purposes of sentencing. In addition, the

district court properly assigned a criminal history point for McClendon’s prior

misdemeanor bad check convictions.

      AFFIRMED.

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