Court Opinion

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Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

3-17-2008

USA v. Fake
Precedential or Non-Precedential: Non-Precedential

Docket No. 07-1284

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                                                                   NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT

                                        No. 07-1284

                             UNITED STATES OF AMERICA

                                                v.

                                     CLIFFORD FAKE,

                                                         Appellant

                     On Appeal from the United States District Court
                         for the Middle District of Pennsylvania
                            (D.C. Criminal No. 1:05-cr-00426)
                     District Judge: Honorable William W. Caldwell

                     Submitted Pursuant to Third Circuit LAR 34.1(a)
                                    March 14, 2008

      Before: FUENTES, CHAGARES, and VAN ANTWERPEN, Circuit Judges.

                                   (Filed March 17, 2008)

                                OPINION OF THE COURT

VAN ANTWERPEN, Circuit Judge.

       Appellant Clifford Fake appeals the 218-month sentence he received following his

guilty plea to a charge of health care fraud resulting in serious bodily injury to others.

Fake argues that the District Court erred in calculating his advisory Guidelines range. For
the reasons set forth below, we will affirm the District Court’s sentence.

                                             I.

       Because we write solely for the benefit of the parties, we will set forth only those

facts necessary to our analysis.

       Appellant Clifford Fake was charged in an October 26, 2005 indictment with

health care fraud resulting in serious bodily injury, pursuant to 18 U.S.C. § 1347, and

with criminal forfeiture, pursuant to 18 U.S.C. § 982(a)(7) and 28 U.S.C. § 246(c). Fake

entered into a plea agreement with the Government and pled guilty to these charges on

April 20, 2006. In anticipation of sentencing, a Pre-Sentence Report (“PSR”) was

prepared.

       On January 24, 2007, the District Court held a hearing to consider evidence

relating to the calculation of Fake’s Guidelines range and to address Fake’s objections to

the PSR. At the hearing, the Government offered documentary evidence and the

testimony of Special Agent Brockman, the agent who investigated the fraud. The

evidence adduced at that hearing and contained in the PSR revealed that Fake and his

wife, Tina, began operating a residential home for care-dependent and elderly individuals

in the fall of 2000. The home was called the Reaching Out Personal Care Home

(“Reaching Out”) and was located in Lebanon County, Pennsylvania. In order to run

Reaching Out, the Fakes applied to three government programs that reimbursed such

homes for the care they provided. These programs, which were operated by agencies of

the Commonwealth of Pennsylvania, were designed to allow homes to provide residential

                                             1
care for persons who are care-dependent and have limited financial resources. The

programs required that Fake submit an application in order to qualify for reimbursements.

At least one of the programs required Fake to disclose whether he had ever been

convicted of a “serious crime.” Fake stated that he had not, despite having numerous

criminal convictions, including two for aggravated assault. Agent Brockman testified that

program officials would not have certified Fake had they known this information. As part

of their participation in the programs, the Fakes also had to submit plans detailing the care

they would provide and their recognition of the standards of care required by the

programs.

       From 2000 to 2005, Reaching Out cared for 21 care-dependent individuals and

employed 6 care-givers, not including the Fakes. Of the 21 patients, 20 received medical

benefits either through the various programs or through funding paid directly to the

patient by the Veterans Administration or Social Security. Fake and his wife were the

supervisors and managers of the home. Fake was largely responsible for preparing time

sheets indicating the hours worked by the employees and the care provided. These time

sheets had to be approved by the care-giver and the patient. Once approved, the time

sheets were sent to the various programs and the Fakes received money for the care given.

Over the course of the time the Fakes ran their operation, they received $236,853.21 from

the compensation programs. The money was paid, according to the evidence introduced

by the Government, with the understanding that the Fakes were providing adequate care

and were accurately listing the hours worked by each employee. According to the

                                             2
Government’s evidence, Fake and the other employees routinely falsified the time sheets,

often overstating the amount of care provided, stating that hours were worked when in

fact no care-giver was on duty, and covering up the substandard care and neglect suffered

by the patients. Fake also had stamps of some of the patients’ signatures made. These

signature stamps were used to “sign” the time sheets, rather than having the patient sign

the form.

       In addition to the falsification of the time sheets, Fake and his associates also

tolerated, and in some cases perpetrated, the neglect and abuse of the patients at Reaching

Out. Although the staff at the home was required to submit a plan detailing the care the

home would provide, the care at Reaching Out fell far below the standards they agreed to

uphold.1 As many as ten patients, according to the PSR, suffered bodily harm as a result

of being neglected and abused by Fake and others. These acts of neglect and abuse

included ignoring patients’ complaints of pain, verbally abusing patients, refusing to

provide medical care, covering up the circumstances surrounding the death of one patient,

physically assaulting patients, and failing to clean patients or provide them with sanitary

living conditions. In one such case, a patient reported that Fake himself had thrown him

into a room, breaking the patient’s arm. The evidence also revealed that Fake made some

of the elderly patients shovel snow and stuff newspapers for his paper route. Fake and

others also provided improper and inadequate diets for the patients, serving snack cakes

       1
       For example, one patient reported that she was locked in a basement and received
only one half-hour of care a day.

                                              3
to a diabetic patient, forcing a patient to eat off the floor, and serving discarded and

expired food retrieved from grocery store dumpsters.

       In addition to these abusive and neglectful acts, patients reported that Fake and

others took the pain medications meant for patients and diverted them to their own use.

According to the evidence, Fake also forged and executed documents and falsely received

funding from a church organization by failing to provide information relating to a patient.

Additionally, Fake withheld certificates of deposit in excess of $60,000 that belonged to a

patient, and had no intention of returning them.

       In the spring of 2005, when investigators became aware of the conditions and

abuse at Reaching Out, they obtained and executed search warrants and interviewed

patients. Four employees were charged with misprision of a felony and ultimately pled

guilty. Fake was aware of the investigation, but he continued to prepare false time sheets

until authorities obtained a second search warrant for Fake’s residence. Upon searching

his house, authorities discovered falsified time sheets listing hours of care that were to be

performed on dates in the future, as well as the signature stamps. They also discovered

pain medications taken from patients. Fake was charged in the Lebanon County Court of

Common Pleas with multiple counts of abuse, neglect, and assault based on his actions

involving seven of the patients. Fake pled guilty to these charges and was sentenced to

up to 20 years in prison.

       Following the conclusion of the evidence offered by the Government at the pre-

sentencing hearing, Fake testified that he was not responsible for what went on at

                                               4
Reaching Out and that he did not falsify the time sheets or abuse the patients. He also

testified that the guilty pleas to neglect and abuse of the patients he entered in Lebanon

County were involuntary. His objections to the PSR and the sentence calculation rested

almost entirely on his testimony. The judge, after hearing Fake’s testimony and noting

the contradictions with the record, found Fake not credible. The judge expressly adopted

the PSR and the facts it detailed.

       After hearing the evidence and reviewing the PSR, the District Court determined

that Fake’s criminal history score was V and his un-enhanced offense score was 7,

resulting in an advisory Guidelines range of 12-18 months imprisonment.2 The PSR

recommended that Fake’s offense level be adjusted upward based on the following

Guidelines adjustments: § 2B1.1(b)(1)(G) (12-level increase based on $236,853.21

amount of loss); § 2B1.1(b)(2)(A)(i) (2-level increase for offense involving 10 or more

victims); § 2B1.1(b)(12)(A) (2-level increase for conscious or reckless risk of bodily

injury or death); § 3A1.1(b)(1) (2-level increase for vulnerability of victims); §

3A1.1(b)(2) (2-level increase because offense involved large number of vulnerable

victims); § 3B1.1(a) (4-level increase for leadership role); § 3B1.3 (2-level increase for

abuse of trust); and § 3C1.1 (2-level increase for obstruction of justice). With all of the

adjustments, Fake’s offense level was 35, and his advisory Guidelines range was 262-327

       2
       Fake’s sentencing range was calculated based on the 2006 version of the
Sentencing Guidelines. Thus, all references to the Guidelines in this opinion will be to
the 2006 version unless otherwise specified.

                                              5
months. The statutory maximum penalty for the crime to which Fake pled guilty was 240

months, however, which made this the Guidelines sentence to which Fake was exposed.

The District Court ultimately adopted the PSR’s recommendations and determined his

sentence based on an offense level score of 35. The District Court sentenced Fake to 240

months, but subtracted the time he had already served in Lebanon County prison, thus

resulting in a sentence of 218 months. The District Court also ordered that Fake pay

restitution in the amount of $236,853.21. Fake timely appealed the District Court’s

calculation of his Guidelines range.3

                                            II.

       The United States District Court for the Middle District of Pennsylvania had

jurisdiction over this criminal case pursuant to 18 U.S.C. § 3231. This Court has

appellate jurisdiction pursuant to 28 U.S.C. § 1291.

       Fake challenges the applicability of the various sentencing adjustments used to

calculate his ultimate Guidelines range. We review for clear error the factual findings

used by the District Court to support the application of a sentencing adjustment. See

United States v. Grier, 475 F.3d 556, 570 (3d Cir. 2007) (en banc). These factual

       3
       In this appeal, Fake does not challenge the application of the adjustments set forth
in §§ 2B1.1(b)(12)(A), 3A1.1(b)(1), or 3A1.1(b)(2). Although he has therefore waived
any challenge to those adjustments, we hold that the District Court did not commit clear
error when applying those adjustments.

                                             6
findings must be supported by a preponderance of the evidence.4 See Grier, 475 F.3d at

568.

                                             III.

       Fake challenges the District Court’s calculation of the amount of the loss resulting

from Fake’s fraud and the District Court’s factual findings supporting the application of

the sentencing adjustments set forth at U.S.S.G §§ 2B1.1(b)(2)(A)(I), 3B1.1, 3B1.3, and

3C1.1. We will address each of Fake’s arguments in turn.

A. Amount of Loss

       Fake contends that the District Court erred in calculating his advisory Guidelines

range by setting the amount of loss resulting from his fraudulent activities at

$236,853.21.5 Pursuant to U.S.S.G. § 2B1.1, if the amount of loss resulting from

       4
        Fake contends that the appropriate standard is the “clear and convincing” standard
and cites to our decision in United States v. Kikumura, 918 F.2d 1084 (3d Cir. 1990). In
our recent decision in Grier, however, we stated clearly that the “preponderance of the
evidence” standard is the appropriate standard. See Grier, 475 F.3d at 568. We also
distinguished Kikumura and noted that that decision may not be applicable in the post-
Booker era. See id. at 568 n.8.
       5
        In his brief, Fake repeatedly refers to this amount as the amount of “restitution,”
though he appears to be challenging the use of the amount for the purposes of calculating
the advisory Guidelines range, which makes it the “amount of loss.” If indeed Fake is
challenging the District Court’s decision to require him to pay this amount as restitution,
we hold that the District Court did not err in ordering restitution. Restitution was
permitted as a matter of law in this fraud case, and the District Court did not abuse its
discretion when it set the amount of restitution at $236,853.21, which was the total
amount the agencies paid out to Fake under false pretenses. See United States v. Fallon,
470 F.3d 542, 548 (3d Cir. 2006) (discussing when restitution is appropriate); see also 18
U.S.C. §§ 3663A, 982(a)(7) (relating to forfeiture of fraudulently obtained assets); United
States v. Lessner, 498 F.3d 185, 201 (3d Cir. 2007) (discussing restitution calculation).

                                              7
fraudulent activity is between $200,000 and $400,000, the defendant’s offense score

should be increased by 12 points. See U.S.S.G. § 2B1.1. Because the amount of loss for

the purposes of the § 2B1.1 adjustment is a factual determination, we will only reverse

the District Court’s findings where we are “left with the definite and firm conviction that

a mistake has been committed.” See Grier, 475 F.3d at 570. See also United States v.

Jiminez, 513 F.3d 62, 86 (3d Cir. 2008) (noting that findings as to amount of loss must be

supported by a preponderance of the evidence); United States v. Ali, 508 F.3d 136, 145

(3d Cir. 2007) (same).

       Fake argues that the Government did not meet its burden of persuading the District

Court that he is responsible for the total loss suffered by the various compensation

programs. See Appellant’s Br. at 24. As we explained in our recent decision in Jiminez,

“once the Government makes out a prima facie case of the loss amount, the burden of

production shifts to the defendant to provide evidence that the Government’s evidence is

incomplete or inaccurate.” Jiminez, 513 F.3d at 86 (citing United States v. Geevers, 226

F.3d 186, 193 (3d Cir. 2000)). The Government demonstrated that Fake lied on his

application and would otherwise not have been eligible for reimbursement from the

programs. The Government also introduced evidence that Fake did not provide the level

of care that he was required to provide under the programs’ guidelines, including

evidence of his guilty pleas in Lebanon County to charges that he neglected or assaulted

some of the patients in his care. The falsified time sheets further reveal that Fake was

being reimbursed for care that he either did not render or rendered in a shoddy and

                                             8
unprofessional manner. Finally, the Guidelines permitted the District Court to impose the

entire loss resulting from a “jointly undertaken criminal activity” on Fake as the result of

reasonably foreseeable acts or omissions of others. See U.S.S.G. § 1B1.3(a)(1)(B).

Given the evidence that Fake would not have been eligible for reimbursement had the

programs been aware of the false statements on the application, the falsified time sheets,

the substandard care being rendered, and the neglect and abuse suffered by the patients,

the Government made out a prima facie case for holding Fake responsible for the entire

amount paid out by the various programs.

       In order to satisfy his burden, then, Fake must present evidence that the

Government’s calculation is inaccurate or incomplete. Fake testified that he was not

responsible for the care of the neglected patients. He also suggested both in his testimony

and in his responses to the PSR that he did not falsify the time sheets, that his guilty pleas

in the state court were involuntary, and that someone else provided the negative response

about his criminal history on the application form. Fake also seems to argue that the fact

that the Government did not demonstrate how many of the hours listed on the time sheet

reflected actual care provided to the patients demonstrates that the Government’s loss

calculation is incorrect. He did not offer any evidence at the hearing, however, other than

his testimony, to demonstrate the actual amount of care given. Given the contradictions

and inconsistencies in Fake’s testimony, the District Court did not err when it deemed

Fake’s testimony not credible. See App. at 180-81. Thus, Fake has not met his burden of

producing evidence to demonstrate why the calculation of the amount of loss offered by

                                              9
the Government was incorrect.

       The District Court’s calculation of the amount of loss was not clearly erroneous.

Had Fake revealed his criminal history or had the compensation programs discovered the

abuse and neglect suffered by Fake’s patients, he would not have received any of the

money ultimately paid out by the programs. The District Court thus did not err in

enhancing Fake’s offense level pursuant to U.S.S.G. § 2B1.1 based on its determination

that the total loss for which Fake was responsible was the entire amount paid out by the

programs.

B. Number of Victims

       Fake next contends that the District Court erred when it rejected Fake’s objection

to the PSR and adopted the Probation Department’s determination that there were ten or

more victims of Fake’s crimes. Pursuant to U.S.S.G. § 2B1.1(b)(2)(A)(i), if a defendant’s

offense involves ten or more victims, the defendant’s offense score should be raised by

two points. The Application Notes to § 2B1.1 define “victim” to mean “any person who

sustained any part of the actual loss” or “any individual who sustained bodily injury as a

result of the offense.” U.S.S.G. § 2B1.1(b)(2)(A)(i) cmt. n.1.

       The Government offered evidence to demonstrate that the three programs paid

money to Fake, who likely would have been ineligible for compensation absent the false

statements on his application, for substandard care that otherwise would not have been

reimbursable absent the falsified time sheets. Thus, these programs were three victims of

the fraud. Additionally, the programs were funded by the United States Department of

                                            10
Health and the Pennsylvania Department of Public Welfare. The District Court did not

err when it determined that these two agencies were victimized, as the agencies would not

have paid the money to the programs absent Fake’s fraud. Furthermore, according to

evidence adduced at the sentencing hearing, almost all of the fifteen patients who did not

qualify for the compensation programs received money for care directly from the

Veterans’ Administration or Social Security.6 They turned this money over to Fake and

his associates in exchange for the care that Fake held himself out as being able to provide.

The evidence in the record supports the conclusion that these people were defrauded into

relinquishing this money in exchange for care that was at best substandard, and at worst

non-existent.

       In addition to the financial losses suffered by the three programs, two state

agencies, and approximately fifteen patients who were receiving benefits directly from

the government, the evidence in the record supports the conclusion that at least seven

patients suffered bodily harm resulting from abuse or neglect, according to Fake’s guilty

pleas in the Lebanon County Court of Common Pleas; six of these patients were

participants in the various programs. In addition to the abuse and neglect for which he

was convicted in Lebanon County, there is evidence in the record that at least three other

persons suffered abuse and neglect as a result of Fake’s actions. Thus, at least ten

       6
        The Government did not include the amount of money these agencies paid
directly to the patients for medical care in the calculation of the total loss. See App. at 51-
52.

                                              11
patients suffered bodily harm in the form of abuse and neglect as a result of the fraud

perpetrated by Fake.7

       In sum, there is sufficient evidence in the record to support the District Court’s

conclusion that there were at least ten victims of Fake’s fraud. As such, the District Court

did not clearly err in enhancing Fake’s offense score pursuant to § 2B1.1(b)(2)(A)(i).

C. Leadership Role

       Fake also challenges the District Court’s upward adjustment of his offense score

based on his leadership role in the fraud. Pursuant to U.S.S.G. § 3B1.1(a), a defendant’s

offense level can be increased by four levels if “the defendant was an organizer or leader

of a criminal activity that involved five or more participants or was otherwise extensive.”

See U.S.S.G. § 3B1.1(a). According to the Guidelines, the phrase “organizer or leader”

does not necessarily mean that the defendant must be the sole or primary leader of the

activity; a person who exercises management responsibility, is involved in recruiting for

the activity, or oversees some or all of the participants in the crime can receive the four-

level adjustment set forth in § 3B1.1(a). See U.S.S.G. § 3B1.1(a) cmt. n.2, n.4.

       With regard to the number of participants in the fraud, the District Court did not

       7
       Fake attempted at the sentencing hearing to narrow the scope of his culpability by
arguing that he was not responsible for the care of many of those who suffered neglect or
bodily harm. However, pursuant to U.S.S.G. § 1B1.3, the District Court was entitled to
consider the conduct of Fake’s associates in determining Fake’s sentence, provided that
the harm suffered by the patients was a reasonably foreseeable harm or injury arising
from the fraud. Here, there is sufficient evidence in the record to conclude that these
harms were reasonably foreseeable.

                                              12
clearly err when it adopted the statements in the PSR and found that there were seven

participants in the fraud scheme, not including Fake. See App. at 80; PSR. ¶ 5. With

regard to his role in the fraud, Fake argues that it was his wife who was the leader and

organizer of the scheme. Although he had a higher position than some of the other

employees of the care center, Fake argues, he was subordinate to his wife. See App. Br. at

28-29. The information elicited at the sentencing hearing, as well as documents offered

as proof of the fraud, reveal that Fake was the person who prepared the false time sheets

that were submitted for compensation. See App. at 80, 162-63. The employees who pled

guilty in prior proceedings acknowledged that the time sheets prepared by Fake were

inaccurate in terms of the hours actually spent serving the patients. See id. Fake signed

off on some of the hours listed on the time sheets, and in some cases used signature

stamps to forge the signatures of other employees or patients in order to submit the time

sheets to the various programs. See id. Additionally, testimony revealed that Fake’s

name was on the checks used by Reaching Out and that there were entries, in handwriting

identified as belonging to Fake, in the ledger listing Reaching Out’s financial holdings.

See id. at 81-83. Thus, Clifford Fake held himself out as one of the principal operators of

Reaching Out. See id. at 84. Finally, Fake admits that the time sheets he submitted for

reimbursement, which list him as having provided 2,644 hours of care to patients,

overestimate the amount of care he provided. See id. at 161-62 (“My [Fake’s] testimony

is that I did not give care to anyone at 700 North Railroad.”).

       Given that the modus operandi of the conspirators in this case was to submit

                                             13
inaccurate time sheets in order to secure compensation for care that was either not

provided or was provided in a substandard manner, Fake’s role as the bookkeeper and

preparer of the time sheets that were submitted for reimbursement was central to the

scheme. Thus, the District Court’s determination that Fake was a leader of the operation

for the purposes of § 3B1.1(a) was supported by a preponderance of the evidence, and the

District Court’s upward adjustment of Fake’s offense score was not error.

D. Abuse of Position of Trust

       Fake also challenges the District Court’s upward adjustment of his offense score

based on his abuse of a position of trust. According to U.S.S.G. § 3B1.3, a defendant’s

offense level may be increased if “the defendant abused a position of public or private

trust.” U.S.S.G. § 3B1.3. In reviewing whether the adjustment applies, we must

determine that a position of trust existed, and that the position of trust was abused. See

United States v. Thomas, 315 F.3d 190, 204-05 (3d Cir. 2002).

       Fake’s role in this fraud, according to the evidence adduced at sentencing, was that

of a care-giver to elderly persons who were dependent on the staff of Reaching Out for

care. See App. at 86. Because he was qualified by the various compensation programs as

a care-giver, Fake entered into a trust relationship with the patients he oversaw. See id. at

87. Fake was also the bookkeeper and controlled the flow of money provided by patients

and the various government programs he defrauded. Thus, applying the Thomas

framework, Fake was in a position of trust with respect to the compensation programs, as

well. See Thomas, 315 F.3d at 204. Based on Fake’s role in the fraud, the District Court

                                             14
did not err in adopting the PSR’s determination that Fake was in a position of trust. As

Fake diverted money and medication intended for the patients to his own use and abused

and neglected the patients in his care, Fake abused that position of trust. The District

Court therefore did not clearly err in applying the § 3B1.3 adjustment.

E. Obstruction of Justice

       Fake’s final challenge is to the applicability of the obstruction of justice

adjustment set forth in U.S.S.G. § 3C1.1. According to this section, if a defendant

willfully obstructs or impedes an investigation, prosecution, or sentencing, the sentencing

court may increase the defendant’s offense level by two levels. U.S.S.G. § 3C1.1. At the

sentencing hearing in this case, Agent Brockman testified that Fake first became aware

that he was under investigation on February 10, 2005, when a search warrant was

executed at Reaching Out. See App. at 90. Despite the investigation, Fake continued to

prepare false time sheets, according to the evidence in the record. See id. at 90-91. Fake

moved the signature stamps, which he used to falsify the time sheets, to his residence, and

they were only discovered when agents searched Fake’s home. See id. at 92-93. At the

sentencing hearing, Fake denied abusing or neglecting the patients, despite the fact that he

pled guilty in Lebanon County court to doing so. See id. at 150-55. Fake also disputed

the hours and time sheets that he signed, arguing that he was not responsible for the

fraudulent activity despite the fact that he was pleading guilty. See, e.g., id. at 156-58.

Additionally, the District Court found Fake’s testimony and denials incredible. See id. at

180. Thus, there is sufficient evidence in the record to support the District Court’s

                                              15
conclusion that Fake obstructed justice by concealing evidence, falsifying records, and

making false or misleading statements to the District Court. See U.S.S.G. § 3C1.1, cmt.

n.4. The District Court did not clearly err in adjusting Fake’s sentence upward pursuant

to § 3C1.1.

                                            IV.

       We have considered all other arguments made by the parties on appeal, and

conclude that no further discussion is necessary. For the foregoing reasons, the

conviction and sentence of the District Court will be affirmed.

                                            16