Court Opinion

ID: 213764
Source: CourtListenerOpinion
Date Created: 2011-04-01 15:30:37+00
Date Added: 2024-06-11T17:28:17.112726
License: Public Domain

[DO NOT PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                        ________________________                 FILED
                                                        U.S. COURT OF APPEALS
                                                          ELEVENTH CIRCUIT
                               No. 10-13101                   APRIL 1, 2011
                           Non-Argument Calendar               JOHN LEY
                         ________________________               CLERK

                     D.C. Docket No. 1:09-cr-20928-UU-1

UNITED STATES OF AMERICA,

                                                       Plaintiff-Appellee,

                                    versus

EFREN MENDEZ,
a.k.a. Efren Mendez Valdez,

                                                       Defendant-Appellant.

                         ________________________

                  Appeal from the United States District Court
                      for the Southern District of Florida
                        ________________________

                                (April 1, 2011)

Before WILSON, FAY and BLACK, Circuit Judges.

PER CURIAM:
      Efren Mendez appeals his 78-month sentence for conspiracy to commit

health care fraud, in violation of 18 U.S.C. § 1349. He argues, first, that the

district court erred in applying a two-level enhancement to his base offense level,

pursuant to U.S.S.G. § 2B1.1(b)(9)(C), for the use of sophisticated means. The

government, which took the position at sentencing that the sophisticated-means

enhancement was inapplicable, now contends that the district court did not err in

imposing the enhancement. Additionally, Mendez argues on appeal that the

district court failed to consider adequately the 18 U.S.C. § 3553(a) sentencing

factors. For the reasons set forth below, we affirm.

                                          I.

      Between October 13, 2003, and November 5, 2004, Research Center of

Florida, Inc. (“Research Center”) submitted Medicare claims for more than $21

million, on which Medicare actually paid $10,944,088. The majority of the claims

were for treatment of HIV-positive patients with prescription drugs, but, in fact,

little or none of the claimed treatment was provided to the patients. Mendez was

Research Center’s vice president and an unnamed co-conspirator (“CC1”) was its

president.

      Research Center obtained its patients from two sisters, Caridad and Barbara

Perez. Mendez agreed to pay the sisters 30% of what Research Center made from

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billing for the patients. Dr. Jose Napoles sometimes met with CC1 and Mendez to

recommend which treatments to bill, based on how much Medicare was paying for

those treatments. They did not discuss what treatments the patients needed.

Mendez and CC1 agreed to the arrangement with the sisters and decided which

types of claims to submit to Medicare. They caused Research Center employees,

including Mendez’s codefendant, Damian Beltran, to prepare and sign forms in

which they falsely purported to have provided the specified treatments. Mendez

and CC1 submitted the false and fraudulent claims to Medicare.

      The sisters arranged for another individual, Idalmis Gonzalez, to pay cash

kickbacks to the patients whom the sisters supplied to the clinic. CC1 and Mendez

gave the cash for the kickbacks to either Gonzalez or Barbara. Research Center

also paid Barbara, Caridad, and Napoles for providing patients and billing advice

by making payments into shell companies controlled by those three individuals.

CC1 signed all of the checks to the shell companies, except for one check signed

by Mendez.

      During the period at issue, Research Center paid Mendez $755,636.66.

Research Center also wrote checks to three additional shell companies: Research

Center Phase I-IV of Florida Corp., whose president and vice president were CC1

and Mendez; Olmen International Investment LLC (“Olmen”), whose sole officer

                                        3
was Mendez’s ex-wife, Olga Perez; and Efol Investment LLC (“Efol”), whose sole

officer during the relevant period was Olga. Research Center Phase I-IV, in turn,

transferred part of its payments to Efol, Olmen, and entities that appeared to

benefit its other officers.

       In September and October 2004, Research Center wrote four checks, all

signed by CC1, to a law firm. On November 30, 2004, Olga signed two Efol

checks to the law firm, but those checks were deposited back into the Efol account

the next day. On December 1, Mendez signed two Research Center checks to the

firm, which were deposited back into Research Center’s account the next day. On

December 17, Olga signed another Efol check to the firm. Of the funds that were

paid into the law firm but not redeposited in the payers’ accounts, half of the

money from Research Center and all of the money from Efol was used to purchase

a piece of undeveloped land, which was then placed in Efol’s name. In April

2005, Mendez paid his personal income taxes with money from Olmen and Efol.

In August 2005, Efol traded its parcel of land back to the seller in exchange for a

different parcel of land. The next year, Efol sold that lot for approximately

$502,000, and subsequently wired $500,000 to a bank account in Spain.

       In 2009, a federal grand jury returned a superseding indictment charging

Mendez in seven counts: (1) conspiracy to commit health care fraud, in violation

                                          4
of 18 U.S.C. § 1349, (2) health care fraud, in violation of 18 U.S.C. § 1347, (3)

conspiracy to pay health care kickbacks, in violation of 18 U.S.C. § 371, (4)

conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), and

(5-7) money laundering, in violation of 18 U.S.C. § 1957. He pled guilty to Count

1 pursuant to a written agreement by which the government would dismiss the

remaining counts.

      In calculating Mendez’s guideline sentencing range, the probation office

applied a base offense level of 6, pursuant to U.S.S.G. § 2B1.1(a)(2). Because

Mendez was responsible for a loss of $16,835,185.60, his offense level was

increased by 20 levels, pursuant to § 2B1.1(b)(1)(K). Another two levels were

added, pursuant to § 2B1.1(b)(9)(C), for the use of sophisticated means. With

respect to Mendez’s role in the offense, the probation office concluded that CC1

appeared to be the most culpable individual in this case, but that Mendez was a

manager or supervisor. Accordingly, a three-level role adjustment was added,

pursuant to U.S.S.G. § 3B1.1(b). With a 3-level reduction for acceptance of

responsibility, U.S.S.G. § 3E1.1(a)-(b), Mendez had a total offense level of 28.

His absence of a criminal history placed him in criminal history category I and

yielded a guideline range of 78 to 97 months’ imprisonment.

                                         5
      Both the government and Mendez objected to the application of a

sophisticated-means enhancement. The government argued that the offense

involved only a single clinic, whose true owners’ names were on the corporate

records, and application of the enhancement to this case would require application

to all cases involving fraud by HIV clinics. The government also noted that the

enhancement had not been applied to the defendants in related cases. Mendez

argued that there was no evidence of especially complex or intricate conduct

pertaining to the execution or concealment of the offense, and there was no

deliberate act to conceal or hide any transaction in which Mendez or Research

Center was involved. Mendez also submitted a brief sentencing memorandum that

described the circumstances of his arrival in the United States from Cuba, his

family, his remorse, and his position that the offense did not involve sophisticated

means.

      At the sentencing hearing, the court stated that Mendez was a principal of

Research Center, not a mere employee, and he had a role in directing the

distribution of the money. The use of shell corporations to move the money

around would warrant the two-level enhancement for the use of sophisticated

means. The government argued that Mendez’s role as a principal in the company

was reflected in the aggravating-role enhancement. It contended that the fraud, as

                                          6
opposed to the money laundering, was not unusually sophisticated. The court

asserted that “the fraud doesn’t stop with the fraud, because the fraud generates

fraud proceeds,” so “[t]he fraud stops where the money ends.”

      Mendez argued that the sophisticated-means enhancement was intended to

address concealment that was carried out in a sophisticated, intricate way, and the

fraud did not involve “an especially complex setup” as compared to other

Medicare-fraud cases. Furthermore, Beltran, his codefendant, had not been

subject to the enhancement, and the logic should be the same because they were

co-conspirators. The court described the scheme as having involved “creating an

entity which purports to provide legitimate medical services and then creates a

charade by which those services are not performed,” as well as creating

“documents for submission to a [g]overnment agency reflecting that services were

rendered that were not rendered, . . . includ[ing] medical diagnoses and perhaps

the results of scientific diagnostic tests.” The court maintained that Mendez’s and

Beltran’s situations were different because Beltran did not set up the clinic, decide

how to attract patients, or determine which services would be performed, and he

was a mere employee with no managerial responsibility.

      The government added that “it would be really unfair” to apply the

enhancement to Mendez, not only in comparison to the universe of Medicare-fraud

                                          7
cases, but because Mendez had been involved in only the first of the six related

clinics involved in this overall investigation. Furthermore, in the 22 convictions

that had taken place so far with respect to this investigation, no defendant received

a sophisticated-means enhancement, even if his or her fraud was more

sophisticated than Mendez’s, unless he or she was involved in operating more than

one clinic and using “nominee” owners to conceal the principals’ identities. The

government acknowledged that the use of shell corporations to send some of his

money to a foreign country was “not . . . irrelevant,” but it considered the fact that

he had operated the clinic openly in his own name to be more significant. It

opined that evidence of money laundering was not the same as evidence that the

fraud was sophisticated in nature.

      Mendez added that the other clinics’ use of nominee owners affected the

issues of concealment and complexity of the “setup,” but in the case of Research

Center, everyone’s real name was used. He further asserted that the shell

companies had not been formed for illicit purposes, but, rather, had been formed

on the advice of another attorney for the purpose of investing in real estate.

      The court stated that “the money in these cases finds its way offshore time

and time and time again,” and the reason for that “has to do with concealment and

. . . ensuring that the defendant is going to be able to enjoy the fruits of the fraud.”

                                           8
The government has difficulty recovering the money in such cases because it is

sent offshore. The court concluded that this fact could not be separated from the

fraud. The facts of the case reflected sophistication in both the execution and the

concealment of the disposition of the funds. There was overlap with the role-

adjustment determination, as the offense involved the formation of a corporation, a

decision as to its business purpose of providing sophisticated medical services, a

business model of creating a fiction that those services were being provided, and

execution of a charade that involved recruiting and paying patients, as well as

creating tens of thousands of documents to support $20 million in billing. The

scheme was made more sophisticated by the use of shell corporations to distribute

funds and move the money offshore. Thus, the enhancement applied.

      Both parties recommended a low-end guideline sentence. Mendez and his

attorney both declined to make any further statement before the court imposed

sentence. The court stated that it had “considered the statements of the parties, the

presentence report containing the advisory guidelines, and the statutory factors.”

Mendez was sentenced to 78 months’ imprisonment and ordered to pay restitution.

Mendez objected only to the sophisticated-means enhancement.

                                         II.

                                          9
      We review for clear error the district court’s finding that the defendant used

sophisticated means. United States v. Robertson, 493 F.3d 1322, 1329-30 (11th

Cir. 2007). “A factual finding is clearly erroneous when[,] although there is

evidence to support it, the reviewing court on the entire evidence is left with the

definite and firm conviction that a mistake has been committed.” Id. at 1330

(quotation marks omitted).

      Section 2B1.1(b)(9) imposes a two-level increase “[i]f (A) the defendant

relocated . . . a fraudulent scheme to another jurisdiction to evade law enforcement

or regulatory officials; (B) a substantial part of a fraudulent scheme was

committed from outside the United States; or (C) the offense otherwise involved

sophisticated means.” Application Note 8 explains,

      “[S]ophisticated means” means especially complex or especially
      intricate offense conduct pertaining to the execution or concealment
      of an offense. For example, in a telemarketing scheme, locating the
      main office of the scheme in one jurisdiction but locating soliciting
      operations in another jurisdiction ordinarily indicates sophisticated
      means. Conduct such as hiding assets or transactions, or both,
      through the use of fictitious entities, corporate shells, or offshore
      financial accounts also ordinarily indicates sophisticated means.

U.S.S.G. § 2B1.1, comment. (n.8(B)). There is no requirement that each of the

defendant’s actions be sophisticated; it is sufficient if the totality of the scheme

                                          10
was sophisticated. United States v. Ghertler, 605 F.3d 1256, 1267 (11th Cir.

2010).

      In each case in which we have upheld the application of a sophisticated-

means enhancement, the defendant used false identities, fraudulent accounts, or

fictitious entities to conceal his participation in the scheme or to execute and

conceal the fraudulent transactions. See id. at 1260, 1267-68 (noting that

defendant developed inside information on victim companies, impersonated high-

ranking company officials, forged false company documents, referenced a

confidential internal account number, and used unwitting third parties to receive

the cash transfers); United States v. Jennings, 599 F.3d 1241, 1246, 1248, 1254

(11th Cir. 2010) (describing the formation and use of two fictitious insurance

companies to issue illegitimate insurance, the use of third-party administrators to

shield the fictitious entities from claimants and regulators, and the provision of

misleading certificates of insurance to conceal the fraud); United States v. Clarke,

562 F.3d 1158, 1165-66 (11th Cir.), cert. denied, 130 S.Ct. 809 (2009) (upholding

U.S.S.G. § 2T1.1(b)(2) enhancement because defendant concealed tax fraud by

depositing salary into accounts not registered in his own name, using those

accounts to pay his personal creditors, and instructing his employers to pay his

insurance premiums directly to the carriers); Robertson, 493 F.3d at 1327, 1331-32

                                          11
(upholding U.S.S.G. § 2F1.1(b)(5)(C) enhancement where defendant in software-

purchasing scam used false names and addresses and fictitious entities to obtain

discounts and avoid payments); United States v. Campbell, 491 F.3d 1306, 1315

(11th Cir. 2007) (upholding § 2T1.1(b)(2) enhancement where defendant used

campaign accounts and credit cards issued to other people in order to conceal cash

expenditures in an attempt to impede the discovery of the existence and extent of

his tax fraud).

      For a period of about one year, Research Center employees prepared and

signed forms in which they falsely purported to have treated certain patients with

prescription drugs, and Mendez and CC1 submitted those claims to Medicare.

Mendez and CC1 sometimes received advice from Napoles as to which treatments

would garner higher payments. Caridad and Barbara recruited patients, and the

patients, Caridad, Barbara, and Napoles each received kickbacks for their

participation. Mendez was openly identified as an officer of Research Center, and

either he or this then-wife was openly identified as an officer of the three shell

companies—Research Center Phase I-IV, Olmen, and Efol—discussed by the

district court. None of the three shell companies was involved in carrying out or

concealing the fraudulent billing. These facts do not bear the hallmarks of

sophistication that we have identified in previous cases.

                                          12
       Nevertheless, the three shell companies were used to manage a portion of

the proceeds of the fraud, either as legitimate holding companies or as fictional

money-laundering entities, and $500,000 of those proceeds were eventually

transferred to an overseas account. The district court referred to this activity as

“the execution and the concealment of the disposition of the funds,” which it

considered to be part of the overall scheme because “the fraud stops where the

money ends.” Mendez does not argue on appeal that the district court erred in

considering these facts as part of its sophisticated-means analysis. See United

States v. Cunningham, 161 F.3d 1343, 1344 (11th Cir. 1998) (holding that issues

not raised on appeal are abandoned). Therefore, the language in Application Note

8 that addresses the use of “corporate shells or offshore financial accounts” in the

scheme is satisfied. Although the applicability of the enhancement is a very close

question, we are not “left with [a] definite and firm conviction” that the district

court erred in applying the sophisticated-means enhancement.1 See Robertson,

493 F.3d at 1329-30.

                                              III.

       1
         Mendez does not argue on appeal that the district court erroneously conflated the
sophisticated-means analysis and the aggravating-role analysis. For this reason, and because we
uphold the enhancement on the basis of the shell-company transactions, we do not address
whether the district court’s reasoning in this regard constituted impermissible double-counting.
See Cunningham, 161 F.3d at 1344.

                                               13
      We review a sentence for reasonableness in a two-step process. First, we

must ensure that the district court did not commit any significant procedural error,

such as failing to consider the 18 U.S.C. § 3553(a) factors or failing to explain the

sentence adequately. Gall v. United States, 552 U.S. 38, 51, 128 S.Ct. 586, 597,

169 L.Ed.2d 445 (2007). Here, Mendez objected to the application of the

sophisticated-means enhancement, but he did not object that the district court had

failed to consider the § 3553(a) factors. Therefore, to the extent that Mendez

intends to raise a procedural challenge to the court’s consideration of the

sentencing factors, we review for plain error. See United States v. Massey, 443

F.3d 814, 818 (11th Cir. 2006). Under this standard, Mendez must show (1) an

error that (2) is plain, (3) affects substantial rights, and (4) seriously affects the

fairness, integrity, or public reputation of judicial proceedings. United States v.

Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 1776, 123 L.Ed.2d 508 (1993).

      Second, we review the substantive reasonableness of the sentence under an

abuse-of-discretion standard. United States v. Irey, 612 F.3d 1160, 1188 (11th

Cir. 2010) (en banc), petition for cert. filed, (Nov. 24, 2010) (No. 10-727). We

will reverse a sentence under this standard only if the district court has made a

clear error of judgment. Id. at 1189. The appellant bears the burden of

                                            14
establishing that the sentence is unreasonable. United States v. Talley, 431 F.3d

784, 788 (11th Cir. 2005).

      After United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d

621 (2005), sentencing is a two-step process that requires the district court first to

“consult the Guidelines and correctly calculate the range provided by the

Guidelines,” then to consider the factors in 18 U.S.C. § 3553(a) and determine a

reasonable sentence. Talley, 431 F.3d at 786. Those factors include: (1) the

nature and circumstances of the offense and the history and characteristics of the

defendant; (2) the need to reflect the seriousness of the offense, to promote respect

for the law, and to provide just punishment for the offense; (3) the need for

deterrence; (4) the need to protect the public; (5) the need to provide the defendant

with training or medical care; (6) the kinds of sentences available; (7) the

sentencing guideline range; (8) pertinent policy statements of the Sentencing

Commission; (9) the need to avoid unwarranted sentencing disparities; and

(10) the need to provide restitution to the victims. Id. (discussing § 3553(a)).

      The sentence must be sufficient, but no greater than necessary, to punish,

deter, protect the public, and provide the training and care outlined in the statute.

§ 3553(a). In Irey, 612 F.3d at 1196-97, we rejected the term “parsimony

principle” to describe this requirement, noting its tendency “to slant the discussion

                                          15
toward shorter sentences” and pointing out that “[t]he requirement is not merely

that a sentencing court . . . be stingy enough to avoid one that is too long, but also

that it be generous enough to avoid one that is too short.”

      Here, Mendez submitted a sentencing memorandum to the district court that

discussed his background and his remorsefulness. After resolution of the

sophisticated-means objections, both parties argued that a sentence at the low end

of the guideline range would be reasonable. The court stated that it had

considered the parties’ statements, the presentencing investigation report, the

advisory guideline range, and the statutory sentencing factors. It then imposed the

low-end guideline sentence requested by the parties. Mendez did not request

clarification as to the court’s weighing of the § 3553(a) factors. Therefore, to the

extent that Mendez intends to raise a procedural challenge, he has not shown that

the court committed plain error. See Massey, 443 F.3d at 818.

      To the extent that Mendez challenges the weighing of the § 3553(a) factors,

most of his argument focuses on the district court’s decision to apply the

sophisticated-means enhancement and the fact that not all of the related defendants

received the same enhancement. This argument is inapposite to a discussion of

substantive reasonableness. See Talley, 431 F.3d at 786 (noting that correct

calculation of the guideline range and consideration of the § 3553(a) factors are

                                          16
separate steps in the sentencing process). Mendez’s contention that the

“parsimony principle” constitutes a cap on the permissible length of a sentence is

incorrect. See Irey, 612 F.3d at 1197. Otherwise, Mendez merely makes the

conclusory assertion that the district court did not adequately consider his

background, his lack of a criminal history, the improbability that he will reoffend,

“the circumstances underlying and precipitating the offense,” or “the facts of this

individual case.” He does not explain why a 78-month sentence, at the low end of

his guideline range, is excessive in light of these factors, or which relevant facts

and circumstances he believes to have been overlooked. Mendez has not shown

that the district court committed a clear error of judgment in its assessment of the

§ 3553(a) factors. See id. at 1189. The 78-month sentence was not an abuse of the

court’s discretion. See id. at 1188.

      For the foregoing reasons, we affirm Mendez’s sentence.

      AFFIRMED.

                                          17