Court Opinion

ID: 2994590
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:15:33.46105+00
Date Added: 2024-06-11T11:45:21.745967
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1346

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

ELENA S. DUNCAN,

Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 98 CR 125--James T. Moody, Judge.

Argued September 29, 2000--Decided October 24, 2000

  Before EASTERBROOK, RIPPLE and EVANS, Circuit Judges.

  RIPPLE, Circuit Judge. Elena Duncan was charged
by indictment with four counts of mail fraud in
violation of 18 U.S.C. sec. 1341. A jury found
Ms. Duncan guilty on all four counts, and she was
sentenced to 52 months’ imprisonment. Ms. Duncan
now appeals her sentence. For the reasons set
forth in the following opinion, we affirm the
judgment of the district court.

I
BACKGROUND

  Ms. Duncan was convicted of a scheme to defraud
Medicare and Medicaid through her home health
care supply company, Home Care Connection
("HCC"). Ms. Duncan billed the Medicare and
Medicaid programs for supplies that patients
never ordered, for supplies that patients never
received, and for supplies that were not ordered
or prescribed by a physician. This appeal focuses
on the sentencing phase of the proceedings and
Ms. Duncan’s overbilling for "skin barriers." A
skin barrier is either a bandage or a form of
lotion or powder that serves the same purpose as
a bandage. The evidence submitted by the
Government at trial, which the jury was entitled
to accept, established that Ms. Duncan instructed
her employees to add skin barriers to all
patients’ orders, whether or not the patients
requested them. The Government introduced
evidence through a registered nurse knowledgeable
about the Medicare/Medicaid coding system that
Medicare and Medicaid only reimburse skin barrier
purchases in cases of ostomies, iliostomies or
colostomies. Ms. Duncan introduced evidence from
the manufacturers of skin barriers that such
barriers are also appropriately used in cases of
urinary incontinence, osteopetrosis, arthritis,
muscular atrophy, varicose veins, diabetes,
asthma, decubitus ulcers and intestinal
obstruction.

  After the jury found Ms. Duncan guilty of four
counts of mail fraud, the district court
conducted a sentencing hearing. The Government
introduced the testimony of Debra LaPosa, a
Medicaid fraud investigator, and Lynn Hemberger,
a special agent from the United States Department
of Health and Human Services, to establish the
amount of loss caused by Ms. Duncan’s fraud.
LaPosa and Hemberger employed a three-step
process to calculate the amount HCC overbilled.
In the first step, the investigators calculated
the amount HCC received for supplies that were
never given to patients, for supplies that were
not necessary for a patient’s medical condition
and for supplies that were never prescribed by a
physician. In the second step, the investigators
calculated the amount of money HCC received from
Medicare and Medicaid over and above the amounts
reflected in its delivery receipts. In the third
step, the investigators identified diagnoses for
which the use of skin barriers was not customary,
then calculated the amount of money HCC received
for dispensing skin barriers to treat these
diagnoses. LaPosa, who calculated the loss to
Medicaid, conducted the third step by hand after
reviewing each of the relevant files. Hemberger,
in contrast, calculated the loss to Medicare
under the third step using a computer.

  Hemberger testified that, in order to prevent
double counting any particular overbilling, she
subtracted the total amount she calculated under
the first and second steps from the computer-
generated amount calculated under the third step.
She further testified that LaPosa did not have to
account for the possibility of double counting in
the same manner because she could avoid double
counting as she went through the files
individually by hand. Hemberger also deducted
about $9,500 from her total calculation based on
documents provided to her by Ms. Duncan that
indicated that certain supplies may have been
dispensed pursuant to physicians’ orders./1
LaPosa’s and Hemberger’s calculations indicated
that the total loss to Medicare and Medicaid was
$358,272.88.

 The Government also introduced the testimony of
Tiawana Blackwell at the sentencing hearing.
Blackwell was a former employee of Opportunity
Medical ("OM"), a health care supply company
started by Ms. Duncan after she stopped operating
HCC. Ms. Duncan had fired Blackwell after
Blackwell allegedly had stolen from OM. Blackwell
originally had been called by Ms. Duncan at the
guilt phase of the trial, but the district court
had ruled that her testimony was irrelevant
because it related to OM rather than to HCC. At
the sentencing hearing, at which she was a
government witness, Blackwell testified that,
after her trial and before her sentencing, Ms.
Duncan had used OM to commit Medicare and
Medicaid fraud in much the same way she had used
HCC to commit fraud. Blackwell gave investigators
the names of three patients whose accounts had
been used in OM’s overbilling scheme. The
investigators confirmed that these patients, in
addition to others, had received supplies they
did not want or need. The investigators also
found forged physicians’ orders in these
patients’ files. Blackwell further testified that
Ms. Duncan had paid her $700 to testify falsely
at the trial that skin barriers were medically
necessary for all patients. Lastly, the
Government introduced evidence pertaining to one
of HCC’s clients, Dolly Bollinger. The evidence
indicated that Ms. Duncan had removed supplies
from Bollinger’s house after she learned that
Bollinger had been contacted by an investigator.

  The district court accepted the Government’s
calculation of the total amount of Ms. Duncan’s
fraud as $358,272.88. In accordance with United
States Sentencing Guideline sec. 2F1.1, the court
arrived at a base offense level of 15. The court
added 2 levels because Ms. Duncan was a leader or
supervisor under sec. 3B1.1C. The court also
accepted as credible the evidence indicating that
Ms. Duncan had continued to engage in Medicare
and Medicaid fraud after her jury conviction,
that she falsified documents in her patient files
once the investigation had begun and that she
went to Bollinger’s home to remove unnecessary
and excessive medical supplies after she learned
that Bollinger had been contacted by an
investigator. Based on this evidence, the court
increased Ms. Duncan’s offense level by 2 points
for obstruction of justice. Lastly, the court
concluded that Ms. Duncan’s criminal history
category of I did not reflect adequately the
seriousness of her crime or the likelihood that
she would repeat such conduct. The court stated
that Ms. Duncan’s post-conviction fraud would
have resulted in at least one additional charge
of mail fraud, which would have increased her
criminal history category to III. The court
therefore granted the Government’s request for an
upward departure and determined that Ms. Duncan
ought to be sentenced as having a criminal
history category of III and an offense level of
21./2 Based on this determination, the district
court sentenced Ms. Duncan to 52 months’
imprisonment.

II
DISCUSSION
A.

  Ms. Duncan first asks that we decide whether the
Government’s method for calculating the total
amount of the fraud, which the district court
accepted, overstates the total cost of HCC’s
fraud. She submits that the third step of the
Government’s methodology overstates the cost of
her fraud in two respects. She first contends
that LaPosa’s calculation of the amount of the
Medicaid fraud impermissibly counted twice some
overbillings. She points out that LaPosa did not
take the same precautions to avoid double
counting as Hemberger did in calculating the loss
to Medicare. As a second attack on the amount of
loss determination, Ms. Duncan argues that LaPosa
and Hemberger improperly included in their
calculations billings for skin barriers that were
supported by physicians’ orders.

  In response, the Government first submits that
Ms. Duncan has waived her double-counting
argument because she did not raise it in the
district court. Alternatively, with respect to
Ms. Duncan’s first argument, the Government
contends that, because LaPosa reviewed the files
by hand in performing her calculation, she was
able to detect and avoid any possible double
counting. With respect to Ms. Duncan’s second
argument, the Government maintains that Ms.
Duncan failed to offer evidence that some of
HCC’s billings for skin barriers were supported
by physicians’ orders.

  We review a district court’s calculation of loss
pursuant to U.S.S.G. sec. 2F1.1(b)(1) for clear
error. See United States v. Gee, No. 99-2348 et
al., 2000 WL 1277938 at *9 (7th Cir. Sept. 11,
2000). The Guidelines do not require that the
district court compute the loss with precision;
the court need only make a reasonable estimate of
the loss based on the information available.
U.S.S.G. sec. 2F1.1, Application Note 9. When a
defendant appeals a district court’s loss
calculation, she must show not only that the
calculation was inaccurate, but also that it was
"outside the realm of permissible computations."
United States v. Hassan, 211 F.3d 380, 383 (7th
Cir. 2000) (quoting United States v. Jackson, 25
F.3d 327, 330 (6th Cir. 1994)).

1.
  The Government is correct that a specific
double-counting objection was never presented to
the district court. However, Ms. Duncan did
object to the Government’s method of calculation
under the third step on the ground that each file
should have been reviewed individually. The
thrust of her objection was that, if the files
had been reviewed individually, some of the
billings would have been supported by physicians’
orders, thereby reducing the total cost of the
fraud. Had both investigators reviewed each file
individually, as Ms. Duncan argued they should
have, they presumably would have also uncovered
any instances of double counting. Although the
objection was not specifically addressed to the
issue of double counting, the district court was
certainly aware that Ms. Duncan objected to the
Government’s calculation under the third step
because it was overinclusive. We shall,
therefore, turn to Ms. Duncan’s specific
objections to the calculation accepted by the
district court.

2.

  Upon examination of the record, we cannot say
that the district court erred in accepting
LaPosa’s calculation of the Medicaid fraud
without adjusting it to account for double
counting, as Hemberger had done. The district
court had before it Hemberger’s testimony that
LaPosa did not have to make the same adjustments
as Hemberger because, rather than rely on a
computer, LaPosa had gone through the files
individually. Although both parties expended a
marginal effort on producing a clear and precise
record, we think that the district court was
entitled to rely on this difference in
methodology to conclude that no double counting
had occurred with respect to the Medicaid
billings.

3.

  We also see no basis for concluding that the
district court erred in its evaluation of the
possibility that some skin barrier billings were
considered fraudulent despite a physician’s
authorization for their use. The Government
introduced evidence before the district court
that indicated that skin barriers were not
covered for many of the diagnoses for which Ms.
Duncan billed for them. The court also heard
testimony from HCC employees that Ms. Duncan had
told them to add skin barriers to patients’
orders, regardless of whether the patients needed
them. The only evidence Ms. Duncan offered in
rebuttal was literature from skin barrier
manufacturers indicating that skin barriers had a
wider usage than Medicare and Medicaid allowed.
The district court was permitted to credit the
testimony offered by the Government over the
information provided in the product literature.

  We also note that Ms. Duncan turned over some
boxes of HCC’s files to Hemberger and LaPosa and
requested that they inspect them for possible
deductions from their loss calculations.
Hemberger testified that she examined the files
and gave Ms. Duncan "every advantage" she could
when it came to physicians’ orders that may have
supported HCC’s reimbursement requests for skin
barriers. Sent. Tr. at 107. Indeed, the district
court concluded that Ms. Duncan failed to provide
the court with "a single instance where a skin
barrier included in the Government’s calculation
was actually medically prescribed." Sent. Tr. at
191. We therefore conclude that the district
court did not clearly err in accepting the
Government’s calculation of the total loss to the
Medicare and Medicaid programs.

B.
  We now turn to Ms. Duncan’s contention that the
district court erred in increasing her criminal
history category based on evidence that she had
engaged in further fraud during the period
between her conviction and her sentencing. The
district court added three points to Ms. Duncan’s
criminal history category based on the
Government’s evidence that she had continued to
defraud Medicare and Medicaid during this time.

  Ms. Duncan notes that sec. 4A1.1(d) of the
Guidelines instructs a sentencing court to
increase a defendant’s criminal history category
when the defendant commits an offense "while
under any criminal justice sentence." Section
4A1.1(e) of the Guidelines similarly instructs a
sentencing court to increase a defendant’s
criminal history category if the defendant, inter
alia, offends again less than 2 years after her
release from prison. However, Ms. Duncan argues,
there is no similar increase provided for
defendants who have been tried for another
offense and not yet sentenced. She relies on our
decision in United States v. Connor, 950 F.2d
1267, 1276 (7th Cir. 1991), and contends that we
recognized there that Congress rationally has
determined that defendants who offend after
previously having been sentenced are more
dangerous than those who offend before they have
been sentenced. Ms. Duncan concludes that,
because she had not yet been sentenced at the
time she allegedly used OM to commit additional
fraud, she ought not be considered as dangerous
as other defendants who offend again after having
been sentenced.
  The starting point of our analysis is U.S.S.G.
sec. 4A1.3. That section reads in pertinent part:

If reliable information indicates that the
criminal history category does not adequately
reflect the seriousness of the defendant’s past
criminal conduct or the likelihood that the
defendant will commit other crimes, the court may
consider imposing a sentence departing from the
otherwise applicable guideline range.

We review a district court’s decision to depart
upwardly from the Guidelines under sec. 4A1.3
according to a three-part test./3 First, the
district court must state adequate grounds for
the departure; the adequacy of these grounds is
reviewed de novo. Second, the facts cited to
support the departure must actually exist in the
record; the standard of review under this step is
the clear error standard. Third, the degree of
the departure must be linked to the structure of
the Guidelines; the extent of the district
court’s departure is reviewed deferentially.

  We employed this three-part test and sanctioned
a sentencing court’s decision to increase a
defendant’s criminal history category when the
defendant has committed offenses similar to the
offense of conviction during the time between
conviction and sentencing in United States v.
Tai, 41 F.3d 1170, 1177 (7th Cir. 1994). In that
case, we held that a district court properly
added two levels to the defendant’s criminal
history category when the defendant, convicted of
extortion, continued to extort victims from
prison prior to sentencing. We stated that, when
a defendant commits similar offenses after
conviction, it reflects the defendant’s disregard
for the law and the likelihood that she will
commit further offenses in the future. See id.
When a district court upwardly departs on this
basis, it sufficiently links its departure to the
structure of the Guidelines when it analogizes
the post-conviction/pre-sentence conduct to a
prior sentence and increases the defendant’s
criminal history category accordingly. See id. at
1176-77.

  The district court’s approach is in conformity
with our holding in Tai. As in Tai, Ms. Duncan
engaged in additional fraudulent conduct between
the time of her conviction and her sentencing.
The district court explicitly stated that, based
on this additional conduct, her initial criminal
history category did not reflect the seriousness
of her crime or the likelihood that she would
commit further crimes in the future. There is,
moreover, a factual basis for the district
court’s determination in the record. Blackwell
testified that, subsequent to her conviction and
prior to her sentencing, Ms. Duncan continued to
defraud Medicare and Medicaid through her new
company, OM. Although Ms. Duncan argues that
Blackwell’s testimony is an insufficient basis on
which to depart upwardly because Blackwell had
reason to lie under oath, the district court
found her to be a credible witness. Finally, the
district court did link the extent of its
departure to the Guidelines. It treated Ms.
Duncan’s post-conviction/pre-sentence fraud as if
it had been a prior sentence and increased her
criminal history category accordingly, as
suggested by U.S.S.G. sec. 4A1.1A.

  Ms. Duncan alternatively relies on U.S.S.G. sec.
4A1.2(a)(4). This section states in pertinent part:

(4) Where a defendant has been convicted of an
offense, but not yet sentenced, such conviction
shall be counted as if it constituted a prior
sentence under sec.4A1.1(c) if a sentence
resulting from that conviction otherwise would be
countable.

If this section were applicable, the district
court would have enhanced Ms. Duncan’s criminal
history category by only one point. However, this
provision applies only when the intervening
criminal conduct has resulted in a conviction for
which the defendant has not yet been sentenced.
By its terms, therefore, this provision is not
applicable to Ms. Duncan’s case because she had
not been convicted for the OM fraud. Therefore,
unlike the situation posited in this guideline,
it could not be reasonably anticipated that, in
due course, an additional sentence would be
imposed./4
  In increasing Ms. Duncan’s sentence, the
district court acted in conformity with the
Guidelines and our case law. We shall not disturb
its determination.

C.

  We now examine whether the district court
clearly erred in adding two levels to Ms.
Duncan’s base offense level for obstruction of
justice.

  The district court determined that Ms. Duncan
had obstructed justice by offering to pay
Blackwell $700 to testify falsely that skin
barriers were medically necessary for all
patients, by producing false documents to
mitigate the loss to the victims of the fraud and
by removing medical supplies from Bollinger’s
home to thwart an ongoing investigation. Ms.
Duncan argues that there was an insufficient
factual basis for each of the district court’s
findings and that any allegedly false testimony
solicited from Blackwell was immaterial because
the district court ruled that Blackwell’s trial
testimony was irrelevant. The Government responds
that the factual basis for the court’s
conclusions is sufficient and that Blackwell’s
false testimony was material because, if it had
been given at trial, it would have tended to
influence an issue under consideration.

  A district court’s finding that a defendant has
obstructed justice within the meaning of U.S.S.G.
sec. 3C1.1 is reviewed for clear error. See
United States v. Frazier, 213 F.3d 409, 416 (7th
Cir. 2000). The Guidelines explicitly state that
suborning or attempting to suborn perjury is a
form of obstruction for which the two-level
increase should be applied, see U.S.S.G. sec.
3C1.1, Application Note 4(b), as is producing
false or altered documents, see id. at
Application Note 4(c), and concealing evidence,
see id. at Application Note 4(d).

  There is factual support in the record for each
of the district court’s determinations regarding
the obstruction enhancement. Specifically,
Blackwell testified that Ms. Duncan offered her
$700 to testify falsely at trial. Despite Ms.
Duncan’s arguments at trial that Blackwell was
inherently untrustworthy and had reason to lie,
the district court found her testimony credible.
Also, the Government produced evidence that there
were prescriptions in certain HCC patients’ files
that physicians denied having written. Lastly,
the court heard evidence that Bollinger asked Ms.
Duncan to remove the excess medical supplies from
her home, but that Ms. Duncan failed to do so
until she learned that Bollinger had been
contacted by investigators who wanted to
videotape the excess supplies. Based on this
evidence, it is difficult to say that the
district court clearly erred in concluding that
Ms. Duncan suborned perjury from Blackwell,
falsified prescriptions in patient files and
tried to conceal evidence by removing supplies
from Bollinger’s home.

  As to Ms. Duncan’s claim that Blackwell’s
testimony was not material because the district
court ruled that it was irrelevant, the
Guidelines define "material" as "tend[ing] to
influence or affect the issue under
determination." U.S.S.G. sec. 3C1.1, Application
Note 6. All that is required for an obstruction
enhancement is that the suborned perjury could
affect, to some reasonable probability, the
outcome of the judicial process; the suborned
perjury does not have to succeed in affecting the
outcome. See United States v. Buckley, 192 F.3d
708, 710 (7th Cir. 1999), cert. denied, 68
U.S.L.W. 3725 (U.S. May 22, 2000) (No. 99-9189).
The testimony that Ms. Duncan asked Blackwell to
give certainly could have affected the outcome of
her trial. If Blackwell had testified that skin
barriers were medically necessary for all
patients, as Ms. Duncan had asked her to do, it
is possible that Ms. Duncan would not have been
held responsible for overbilling for skin
barriers./5 It is of no consequence that
Blackwell never actually testified falsely.
Obstruction of justice took place when Ms. Duncan
encouraged Blackwell to testify falsely in an
effort to improve her chances of acquittal.

Conclusion

  The district court committed no reversible error
in the computation of Ms. Duncan’s sentence.
Accordingly, the judgment of the district court
must be affirmed.

AFFIRMED

/1 Ms. Duncan claims that this deduction was taken
to compensate for double counting that she thinks
occurred in the various steps of the
calculations. See Appellant’s Br. at 5. However,
Hemberger’s testimony at the sentencing hearing
indicates that this deduction was taken to give
Ms. Duncan the benefit of the doubt when
Hemberger found questionable physicians’ orders
in HCC’s files that purported to support HCC’s
billings for medical supplies. See Sent. Tr. at
107.

/2 The district court also added 2 levels pursuant
to sec. 2F1.1 because the scheme involved more
than minimal planning and defrauded more than one
victim. This enhancement is not at issue in this
appeal.

/3 See United States v. Sarna, 28 F.3d 657, 661 (7th
Cir. 1994), quoted in United States v.
Archambault, 62 F.3d 995, 1000-01 (7th Cir.
1995).

/4 A situation of this sort confronted the court in
United States v. Connor, 950 F.2d 1267, 1276 (7th
Cir. 1991), the case upon which Ms. Duncan
relies. In Connor, the defendant had attempted to
escape while awaiting trial on federal charges.
He pleaded guilty to the escape charge and that
offense was grouped with the convictions
resulting from the other federal charges for
sentencing. Because the escape charge did not
result in any additional penalty under the
pertinent grouping formula, the district court
sought to increase the sentence through an upward
departure. This court reversed the resulting
enhancement on the ground that the Sentencing
Commission had provided for the situation when it
adopted the grouping formula that the district
court had employed. Thus, Connor involved a
situation in which the defendant’s commission of
other criminal activity had already been factored
into the sentencing scheme and, therefore, could
not serve as the basis of another upward
departure.

/5 Blackwell was first called as a witness by the
defense during the guilt phase of the trial. The
district court ruled that her testimony about OM
was irrelevant because it involved activity not
charged in the indictment. The defense chose not
to ask her about the usages of skin barriers
despite her status as a registered nurse. Such an
inquiry would not have been irrelevant. Nor would
such a question have been irrelevant at
sentencing when the district court focused on the
amount of loss incurred by the Government. Thus,
had either the defense or the Government asked
her, in an appropriate context, about the use of
skin barriers, her answer would have been
relevant and could have possibly affected the
outcome of the proceeding.