United States v. Iwuala , 789 F.3d 1 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 13-2497
UNITED STATES OF AMERICA,
Appellee,
v.
BLESSING SYDNEY IWUALA,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Howard, Selya and Kayatta,
Circuit Judges.
W. Daniel Deane, with whom Brian D. Duffy and Nixon Peabody
LLP were on brief, for appellant.
Mark T. Quinlivan, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
appellee.
June 10, 2015
SELYA, Circuit Judge. This case is a poster child for
the adage that easy money often leads to hard lessons. For several
months, defendant-appellant Blessing Sydney Iwuala was awash in a
flood of easy money as a Medicare-approved provider of durable
medical equipment (DME). But when the easy money dried up, he
found himself facing criminal prosecution on multiple charges of
health-care fraud. The trial did not go well for the defendant,
and he now challenges both his conviction and his sentence. After
careful consideration of his asseverational array, we affirm.
I. BACKGROUND
In 2007, the defendant — a college graduate who had
obtained a master's degree in business administration while in
Nigeria — opened Above All Home Care and Medical Supply, Inc.
(Above All), a DME supplier. The following year, Above All gained
Medicare approval, which authorized it to bill Medicare directly
after filling DME prescriptions for Medicare beneficiaries.
Despite securing this certification, the defendant's
business lagged. His fortunes changed dramatically when, in 2009,
he entered into a business arrangement with John Nasky. The
defendant had known Nasky for two years both through their mutual
involvement in the community of Nigerian immigrants in the Boston
area and through the defendant's publication of a magazine covering
Nigerian-American cultural and social events as far away as Texas.
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The two men traveled in the same social circles and often saw each
other at social events.
Nasky operated his own medical supply and medical billing
business with an office in Massachusetts. He represented himself
as having a client base in Texas. Nasky had a problem: in June of
2008, his supply company had been placed on payment suspension by
Medicare due to a suspicion of fraudulent billing. Nasky had
prescriptions to fill and inventory in Texas, but he could not bill
Medicare and expect to get paid. So Nasky and the defendant
reached an agreement: in exchange for a supply of blank Above All
forms and the right to bill Medicare in Above All's name, Nasky
would obtain DME prescriptions for Medicare beneficiaries, fill
them from his inventory in Texas, and bill for the prescribed
equipment in Above All's name. Whatever proceeds Above All
received would be split 65% to Nasky and 35% to the defendant.
This was easy money for the defendant, who had to do no more than
maintain his storefront in Massachusetts and funnel money to Nasky
when Medicare paid Above All.
The scheme was fraudulent through and through: the Above
All billings submitted by Nasky were based largely on illicitly
obtained Medicare beneficiary identification numbers, forged
prescriptions, and reimbursement requests for unnecessary medical
equipment that in many instances was never delivered.
-3-
The plotters prospered: Above All billed Medicare for
over $1,000,000 of DME between February and May of 2009 and
received payments of more than $400,000. But these halcyon days
did not last long. In July, Nasky was charged with Medicare fraud
as a result of his involvement in a separate scheme. Above All
submitted no further claims to Medicare after that time, and its
Medicare provider status was subsequently terminated.
In due course, a federal grand jury sitting in the
District of Massachusetts indicted the defendant on one count of
conspiracy to commit health-care fraud, see 18 U.S.C. § 1349, four
substantive counts of health-care fraud, see id. §§ 2, 1347, and
one count of making a false statement to the government, see id.
§ 1001. During an eight-day trial, the defendant maintained that
his business arrangement with Nasky was above board, that he was an
innocent dupe, and that he did not know at the time that any of the
claims submitted were bogus. The jury rejected his defense,
finding him guilty on four counts.1 The district court imposed a
42-month term of immurement, and this timely appeal followed.
II. ANALYSIS
In this venue, the defendant challenges certain of the
district court's evidentiary rulings, the sufficiency of the
government's proof, and the way in which the court calculated loss
1
One substantive health-care fraud charge was voluntarily
dismissed by the government. See Fed. R. Crim. P. 48(a). The jury
acquitted the defendant on the false statement count.
-4-
in constructing his guideline sentencing range. We examine these
plaints one by one.
A. Evidentiary Rulings.
The defendant reproves the district court's admission of
evidence relating to Nasky's reputation and criminal history. We
describe what transpired before addressing the defendant's
argument.
Prior to trial, the defendant moved in limine to preclude
the government from adducing evidence that Nasky was known as a
"419" — a slang term in the Nigerian-American community for
"crook."2 The district court denied the motion subject to "the
court's policing of the boundaries of any so-called '419'
evidence."
At trial, the government sought to show the defendant's
guilty knowledge through, inter alia, his awareness of Nasky's
reputation in the social circles that both of them frequented. To
this end, the government called Sunday Joseph Edem (Nasky's
coconspirator in a different fraud), who testified over objection
that Nasky was "very flamboyant . . . . [a]lways dressing — showing
off, like we call — in Nigeria . . . '419.'"
Edem later testified, again over objection, that Nasky
carried on a lifestyle in which he always wanted to be noticed and
2
The derivation of this term is direct: section 419 of
chapter 38 of the Nigerian criminal code makes it a felony to
commit theft by false pretenses.
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treated like a celebrity or a "man of the hour." Without
objection, Edem went on to testify how Nasky drew attention to
himself at restaurants by paying everyone's bill or even tossing
money out of buckets at parties as people followed him. In the
same vein, Ana Gonzalez (who had been employed in Nasky's
Massachusetts office) testified without objection that Nasky often
wore distinctive clothing and gold necklaces and rings.
When asked specifically whether Nasky had a particular
reputation in the community, Edem responded: "He had a reputation
that you couldn't trust him with money. . . . You couldn't trust
him with your wife . . . . You could not trust him in a business
deal." The jury also heard that Nasky had been convicted of
health-care fraud in 2000; that he was arrested on July 29, 2009
for his participation in a health-care fraud that did not involve
the defendant; and that he later pleaded guilty to the latter
charges. The defendant himself elicited the information regarding
Nasky's 2000 conviction, and he failed to object to the admission
of evidence concerning Nasky's 2009 arrest and conviction.
In his summation, the prosecutor referenced the testimony
of both Edem and Gonzalez, stating:
Could the defendant really not have
known that Nasky was a fraud? . . . You heard
testimony from [Edem]. . . . Remember his
description about Nasky, the way he looked,
the ridiculous jewelry that he wore, the
particular way that he carried himself, with
the money being thrown [out of] the buckets?
. . . Ana Gonzalez also testified that Nasky
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wore distinctive gold jewelry . . . . There
were warning signs flashing everywhere that
[Nasky] was not an honest businessman, someone
not to be trusted.
The prosecutor added: "[Y]ou now know that Nasky was someone who
previously went to prison. . . . Is it really plausible that the
defendant didn't know that either?"
The defendant now contends that the district court abused
its discretion in admitting the 419 testimony and other evidence of
Nasky's appearance, reputation, and prior bad acts. This evidence,
he says, was not admissible for any proper purpose and unfairly
prejudiced him. The defendant adds that the prosecutor's summation
(to which no contemporaneous objection was made) improperly
capitalized on evidence of Nasky's lifestyle and criminal history,
in effect inviting the jury to infer guilt by association.
We ordinarily review a district court's rulings admitting
or excluding evidence for abuse of discretion. See United States
v. Gobbi, 471 F.3d 302, 311 (1st Cir. 2006). But when a party has
failed to object at trial either to an evidentiary ruling or to
closing argument, our review is for plain error. See United States
v. Raymond, 697 F.3d 32, 37-38 (1st Cir. 2012); United States v.
Sepulveda, 15 F.3d 1161, 1188 (1st Cir. 1993). Here, the defendant
objected to only some bits and pieces of the evidentiary mosaic
that he now challenges, and much of that mosaic came in without
objection.
-7-
In a veiled effort to skirt this looming obstacle, the
defendant implies that his pretrial motion in limine served to
preserve his objection to all of the evidence regarding Nasky's
reputation and prior bad acts. But this is a bridge too far:
where, as here, a trial court "tentatively denies a pretrial motion
in limine, or temporizes on it," any objections to the contested
evidence must be renewed at trial. United States v. Noah, 130 F.3d
490, 496 (1st Cir. 1997). Elsewise, plain error review obtains.
See Raymond, 697 F.3d at 38.
At bottom, we are faced with a situation in which a
handful of the district court's challenged evidentiary rulings
engender abuse of discretion review while the remainder engender
plain error review. Still, we see no need to dismantle the
evidentiary mosaic piece by piece. Even assuming, favorably to the
defendant, that abuse of discretion review applies throughout, the
defendant's challenge fails.
To begin, we set to one side the defendant's lament about
the 419 terminology and the evidence of Nasky's flamboyant habits
and attire. The only definition of "419" related to the jury was
that the numerals referred to a "show off," and the meaning of the
numerals is not otherwise common knowledge. Consequently, Edem's
use of this term simply became part of the evidentiary array that
illustrated Nasky's attention-getting dress and lifestyle.
-8-
This evidence, along with the government's references to
it in closing argument, may have needlessly embellished the jury's
image of Nasky. Nevertheless, it could not have carried great
weight in proving the defendant's knowledge of fraud. Whether it
served, though, as a basis for an inference that fit as a piece of
a larger picture is a question that the jurors were fairly left to
answer.
Next, we reject the defendant's assertion that the
evidence of Nasky's reputation as a con man was barred by Federal
Rule of Evidence 404. Rule 404(a)(1) precludes the admission of
evidence of "a person's character or character trait" for the
purpose of proving that "on a particular occasion [that] person
acted in accordance with the character or trait." That same
evidence may be admitted, though, when it has special relevance to
an issue in the case (such as knowledge or intent), as long as
neither bad character nor propensity is a link in the inferential
chain. See United States v. Salameh, 152 F.3d 88, 123 (2d Cir.
1998); see also United States v. Varoudakis, 233 F.3d 113, 118 (1st
Cir. 2000) (discussing "special relevance" in context of Federal
Rule of Evidence 404(b)).
In the case at hand, the evidence of Nasky's reputation
in the community was specially relevant: it was competent to show
that when the business arrangement evolved, Nasky's reputation
should have forewarned the defendant against taking his
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representations at face value. After all, evidence of a person's
reputation may be admitted to show the knowledge or state of mind
of some other person. For example, in an extortion case, a
defendant's reputation for violence or association with organized
crime may be admitted to show the victim's state of mind, including
his reasonable belief in the defendant's threat of violence. See,
e.g., United States v. Goodoak, 836 F.2d 708, 714-15 (1st Cir.
1988); United States v. Russo, 708 F.2d 209, 214 (6th Cir. 1983).
Similarly, a tenant's reputation as a drug dealer may be admitted
to show a landlord's knowledge that the tenant was using the
premises for drug trafficking. See, e.g., United States v. Certain
Real Prop. & Premises, 945 F.2d 1252, 1260 (2d Cir. 1991). So it
is here: evidence of Nasky's reputation as a fraudster was
admissible to prove the defendant's knowledge that the business
venture that Nasky proposed was a scam.
In an effort to snatch victory from the jaws of defeat,
the defendant asserts that the reputation evidence should not have
been admitted because proof was lacking that the defendant knew of
Nasky's reputation for fraud. This assertion is triply flawed.
For one thing, the defendant failed to challenge the admission of
the reputation evidence in the court below on this ground.
Although the defendant objected to this evidence on relevancy
grounds, an objection to the admission of evidence on one ground
does not preserve other grounds for appeal. See United States v.
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Holmquist, 36 F.3d 154, 168 (1st Cir. 1994); see also Fed. R. Evid.
103(a)(1). For another thing, the defendant's opening brief in
this court never raised the lack-of-knowledge point. While the
defendant did advance the argument in his reply brief, that was too
little and too late. See United States v. Torres, 162 F.3d 6, 11
(1st Cir. 1998); Sandstrom v. ChemLawn Corp., 904 F.2d 83, 86 (1st
Cir. 1990).
Even assuming that this argument was merely forfeited
rather than waived, there was surely no plain error in admitting
the reputation evidence. Other proof allowed the jury to infer
that the defendant had the opportunity to learn the gist of what
Edem knew about Nasky's reputation in their shared community.
After all, the defendant knew Nasky personally long before the
scheme began and told investigators that he and Nasky traveled in
the same circles. Given this predicate, there was no clear or
obvious error in the admission of the reputation evidence. See
United States v. Duarte, 246 F.3d 56, 60 (1st Cir. 2001)
(requiring, at a minimum, "clear or obvious error" to show plain
error and overcome a forfeiture).
Evidence of Nasky's 2009 arrest was also admissible.
That evidence was introduced not to show Nasky's bad character but,
rather, to show why the defendant's dealings with Nasky came to an
end. Such evidence may be admitted in a conspiracy case to show
the background and development of the conspiratorial relationship
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or to fill in details of the plot. See United States v. Escobar-de
Jesús, 187 F.3d 148, 169 (1st Cir. 1999); United States v. Pitre,
960 F.2d 1112, 1119 (2d Cir. 1992).
The prosecutor's summation does not change this calculus.
Once evidence is properly introduced, either party may ask the jury
to draw reasonable inferences from it concerning issues that are
fairly in the case. See United States v. Pires, 642 F.3d 1, 14
(1st Cir. 2011); United States v. O'Shea, 426 F.3d 475, 485 (1st
Cir. 2005). That is what happened here. The prosecutor argued
simply that Nasky's appearance and self-promotion gave some warning
signs to the defendant that Nasky was not a legitimate businessman.
Similarly, we reject the defendant's muddled suggestion
that the evidence of Nasky's prior conviction for fraud was barred
by Rule 404. To be sure, Rule 404(b)(1) precludes the admission of
evidence of "a crime, wrong, or other act" to prove propensity.
But that proscription does not apply at all in the circumstances of
this case: Nasky's 2000 conviction was not brought up by the
government but, rather, by the defendant.3 A party cannot be heard
to complain about the prejudicial effect of evidence that he
himself introduced.4 See United States v. Majeroni, 784 F.3d 72,
3
The defendant does not assign error to the admission of
evidence of Nasky's conviction following his 2009 arrest (and, in
any event, that evidence was admitted without objection).
4
We add that when the prosecutor referred to the conviction
in his closing argument, he did so only for the permissible purpose
of showing the defendant's knowledge and intent. See Raymond, 697
-12-
77 (1st Cir. 2015); United States v. Munson, 819 F.2d 337, 342 (1st
Cir. 1987).
The defendant further posits that the admission of the
reputation evidence, in concert with the evidence of Nasky's 2000
conviction and 2009 arrest and conviction, transgressed Federal
Rule of Evidence 403. This is a heavy lift: "[O]nly rarely — and
in extraordinarily compelling circumstances — will we, from the
vista of a cold appellate record, reverse a district court's on-
the-spot judgment concerning the relative weighing of probative
value and unfair effect." Raymond, 697 F.3d at 38 (quoting Freeman
v. Package Mach. Co., 865 F.2d 1331, 1340 (1st Cir. 1988)). There
are no such compelling circumstances here. The central issue in
the case was whether the defendant was hoodwinked by Nasky (as he
claimed) or whether he knowingly participated in the scheme to
defraud Medicare (as the government claimed). Evidence of Nasky's
reputation in their shared community was probative as to whether
the defendant knowingly participated in or was willfully blind to
the fraudulent design of the scheme that Nasky proposed. See,
e.g., Noah, 130 F.3d at 496 (concluding that when defendant "staked
his defense on the proposition that he was an innocent dupe,
victimized by a lawless employee," prior bad act evidence was
F.3d at 38; see also Fed. R. Evid. 404(b)(2). The conviction was
never used by the government to show propensity.
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highly relevant to show "guilty knowledge, the existence of a
criminal plan, and the absence of mistake").
Nor can it be said that the district court abused its
broad discretion in ruling that the probative value of this
evidence was not substantially outweighed by the prospect of unfair
prejudice. Before the need to exclude particular evidence arises,
"there must be a significant tipping of the scales against the
evidentiary worth of the proffered evidence." United States v.
Aguilar-Aranceta, 58 F.3d 796, 800 (1st Cir. 1995) (internal
quotation mark omitted). Here, the evidence bore on a critical
element of the charged crimes — the defendant's mens rea. Although
the evidence painted a manifestly unattractive picture of Nasky and
certainly hurt the defendant's chances at trial, Rule 403 has never
been interpreted to bar evidence simply because it is prejudicial.
See United States v. Rodriguez-Estrada, 877 F.2d 153, 156 (1st Cir.
1989) ("By design, all evidence is meant to be prejudicial[.]")
The rule bars only unfair prejudice, see id., and we discern no
unfair prejudice here.
The prosecutor's closing argument does not shift the
balance. The prosecutor scrupulously refrained from suggesting
that Nasky's character or reputation alone evidenced the
defendant's guilt. Nor did he ask the jury to infer, either
expressly or by implication, that the defendant must have been
complicit in the scheme merely because he associated with Nasky.
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Instead, the prosecutor used the challenged evidence only as one of
several points supporting the government's position that the
defendant must have realized the fraudulent nature of his dealings
with Nasky.
B. Sufficiency of the Evidence.
We turn next to the defendant's challenge to the
sufficiency of the evidence. This challenge was preserved by means
of a motion for judgment of acquittal, see Fed. R. Crim. P. 29,
which the district court denied. We review this denial de novo.
See United States v. Gomez, 255 F.3d 31, 35 (1st Cir. 2001).
In evaluating a challenge to the sufficiency of the
evidence, a reviewing court must scrutinize all the evidence in the
light most hospitable to the government's theory of the case. See
id. The court then must determine whether the evidence, when
viewed in that light and with all permissible inferences drawn in
favor of the verdict, would allow a "rational factfinder to
conclude beyond a reasonable doubt that the defendant committed the
charged crime." Id. (internal quotation mark omitted). Under this
regime, all credibility disputes must be resolved in favor of the
verdict. See United States v. Piper, 298 F.3d 47, 59 (1st Cir.
2002); United States v. Martin, 228 F.3d 1, 10 (1st Cir. 2000).
So, too, the court may not speculate as to the weight afforded to
individual pieces of evidence: rather, it must recognize that the
jury need not evaluate each piece of evidence in isolation but may
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draw conclusions from the evidence as a whole. See Martin, 228
F.3d at 10; United States v. Spinney, 65 F.3d 231, 234 (1st Cir.
1995).
In the last analysis, the government need not disprove
every theory compatible with the defendant's innocence. See
Spinney, 65 F.3d at 234. It is enough that the verdict is
supported by a "plausible rendition of the record." Gomez, 255
F.3d at 35 (internal quotation mark omitted).
We move now from the general to the specific, starting
with the conspiracy count. The defendant does not challenge the
government's proof of the existence of the conspiracy. Instead, he
zeroes in on the two remaining elements of the offense, arguing
that the evidence was too thin to prove either that he knew of the
existence of the conspiracy or that he knowingly participated in
it. Ably represented, he slices and dices the government's case,
characterizing it as circumstantial and asserting that each piece
of circumstantial evidence, viewed in isolation, admits of an
equally plausible inference compatible with innocence. On this
view, he submits, the jury must perforce have entertained a
reasonable doubt as to his guilt. See United States v. Flores-
Rivera, 56 F.3d 319, 323 (1st Cir. 1995).
With respect to the three substantive counts of health-
care fraud, the defendant makes much the same argument.
Specifically, he asserts that the evidence was insufficient to
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prove his knowledge of, and his specific intent to execute, a fraud
on Medicare vis-à-vis each of the named beneficiaries.
To prove conspiracy to commit health-care fraud under 18
U.S.C. § 1349, the government must prove beyond a reasonable doubt
that an agreement existed to commit the underlying substantive
offense (here, health-care fraud under 18 U.S.C. § 1347), that the
defendant knew of the agreement, and that he voluntarily joined it
with the intent to commit the underlying offense. See United
States v. Willett, 751 F.3d 335, 339 (5th Cir. 2014); Gomez, 255
F.3d at 35. Guilty knowledge and intent may be proven solely by
circumstantial evidence. See United States v. O'Brien, 14 F.3d
703, 706 (1st Cir. 1994).
In this case, the government adduced evidence from which
a rational jury could have concluded that the defendant both knew
of the existence of the conspiracy to defraud Medicare and
voluntarily chose to participate in it. Nasky did not come to the
defendant as a stranger: the two men had known each other for a
substantial period of time, traveled in the same circles, and
exchanged telephone calls on average monthly during the two years
preceding the birth of the scheme.
What is more, the terms of their business arrangement
were highly suspicious. Nasky offered to give the defendant 35% of
the revenue from prescriptions and inventory already in hand in
exchange for nothing more than the use of Above All's name and
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Medicare provider number. Things that sound too good to be true
usually are, and the defendant knew that he was being paid
substantial sums for doing nothing more than giving Nasky free rein
with Above All's forms and provider number and remitting Nasky's
share to him when payments were received. Furthermore, the jury
rationally could have found that the defendant learned that Nasky
was no longer able to bill Medicare through his own company — a
fact that Nasky freely shared with others such as Edem and
Gonzalez. From that point forward, the grounds for suspicion
escalated.
There was more. Remittance notices, received by Above
All, accompanied each Medicare payment. Each notice set out
information about the particular beneficiary, the item or items
billed for that beneficiary, and the amount Medicare paid for each
such item. For 67 out of 88 Texas-based beneficiaries, Above All
billed Medicare in the same amount for the same type of equipment
— typically, $12,650 for a power wheelchair, related accessories,
multiple braces, and a heat lamp. Even the most fervent believer
in coincidence would have raised an eyebrow over those remarkable
similarities. See, e.g., United States v. Cruz-Arroyo, 461 F.3d
69, 75 (1st Cir. 2006) (concluding that one "would have to believe
in the Tooth Fairy" to believe a certain set of facts "merely
coincidental" (internal quotation mark omitted)).
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Other evidence made pellucid that the linkage forged
between the defendant and Nasky was not a legitimate arm's-length
business relationship. The defendant transferred substantial sums
to Nasky, allegedly for equipment purchases — yet during the
Medicare investigation he was unable to produce even a single
invoice to support his averment that Above All actually bought
equipment through Nasky. To add fuel to the fire, these monetary
transfers took place in unorthodox ways: sometimes in cash,
sometimes by wire transfer, sometimes by check, and not always to
Nasky or to his business (on occasion, monies were sent to Nasky's
wife or to her beauty supply company). Even after Nasky was
arrested in 2009, the defendant sent him money in jail.
Importantly, Nasky told the defendant that he needed his
share of the proceeds quickly in order to "take care of some
people." The defendant's awareness of that fact was strong
evidence of his guilty knowledge — and his awareness was heightened
when, at a later point during the conspiracy, Nasky stated to the
defendant in so many words that he paid people to obtain
prescriptions.
The pattern of telephone calls between the defendant and
Nasky likewise indicated a connection more sinister than one would
expect of a business owner and an independent service provider.
For example, on May 6, 2009 — at the height of the fraud — a
Medicare auditor conducted an unannounced site inspection at Above
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All. During this inspection, the auditor reviewed a sampling of
Above All's customer files and compared its inventory to its recent
Medicare billings. The auditor asked the defendant to provide
invoices to authenticate Above All's recent equipment billings
because its inventory seemed woefully scant in comparison to those
billings. On that same day, the defendant and Nasky exchanged 11
telephone calls. One of those occurred between the auditor's
arrival at Above All and the start of the defendant's interview
with her, and seven others occurred after the site visit had
concluded. On the following day, there were seven more calls
between the defendant and Nasky. Although the defendant tries to
put an innocent face on this avalanche of calls, the jury
reasonably could have inferred that the avalanche was sparked by
more than a simple request for copies of invoices.
There was still more. The evidence indicates that the
defendant hid his business relationship with Nasky. Over 90% of
Above All's claims involved Texas-based beneficiaries. Yet, the
auditor who conducted the May 6 site visit testified that the files
she reviewed concerned only Massachusetts-based beneficiaries (none
from Texas). Furthermore, when she requested information about
Above All's inventory supply, the defendant responded that he
purchased equipment from another (legitimate) company and never
said a word about his significant ties with Nasky. Nor was the
defendant's penchant for keeping people in the dark about his
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supposedly legitimate dealings with Nasky limited to the Medicare
auditor. A witness who worked for Above All throughout 2009
testified that he was not aware that the defendant had any business
relationship with Nasky.
Finally, the reputation evidence buttresses the other
evidence. Nasky offered the defendant a business arrangement that
was wildly unconventional and promised great rewards for minimal
effort. Given Nasky's known reputation as a fraudster,5 the jury
could have used this evidence as one of several pieces of evidence
contributing to a reasonable inference of the defendant's guilty
knowledge and willing participation. See, e.g., United States v.
Mitchell, 31 F.3d 628, 631, 633 (8th Cir. 1994).
To say more would be to paint the lily. We agree with
the defendant that the tapestry of the government's case is woven
from strands of circumstantial evidence, and many of these strands,
taken singly, might admit of an innocent explanation premised on
the defendant's professed naivety and Nasky's deftness as a
fraudster. But the sum of an evidentiary presentation often is
greater than its individual parts. See Bourjaily v. United States,
5
Edem's testimony largely concerned Nasky's reputation in
Texas. But the defendant, wearing his journalist's hat, traveled
to Texas on several occasions to report on social functions in the
Nigerian-American community for his magazine. The defendant's
presence in Texas, together with evidence that he knew Nasky well,
that the two spoke regularly, and that they traveled in the same
social circles, afforded a sufficient foundation for a finding that
he was aware of Nasky's dubious reputation in Texas as well as
Massachusetts.
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483 U.S. 171, 180 (1987); Harrington v. Aggregate Indus. - Ne.
Region, Inc., 668 F.3d 25, 34 (1st Cir. 2012). Particularly in
fraud cases, it is familiar lore that the government may carry its
burden of proof wholly through circumstantial evidence. See, e.g.,
O'Brien, 14 F.3d at 706.
Our duty here is not to reweigh the evidence, see Martin,
228 F.3d at 10, but to evaluate whether a rational jury could have
concluded beyond a reasonable doubt that the defendant knowingly
and willfully conspired to commit health-care fraud, see Willett,
751 F.3d at 339; Gomez, 255 F.3d at 35. Given the weight and
texture of the evidence as a whole, we believe that the jury, using
common sense to draw a series of reasonable inferences, reached
just such a conclusion.6 See Spinney, 65 F.3d at 238 ("Chains of
inference are a familiar, widely accepted ingredient of any process
of ratiocination. This method of reasoning . . . should not be
forbidden to a criminal jury.").
We need not tarry over the sufficiency of the evidence on
the three substantive counts of Medicare fraud. The district
court's instructions permitted the jury to convict the defendant on
these charges either as a principal, see 18 U.S.C. § 1347, or as an
aider and abettor, see id. § 2.
6
In light of this holding, we have no occasion to consider
the government's alternative theory that the defendant's guilty
knowledge was proven by evidence of his willful blindness.
-22-
Proof of a violation of 18 U.S.C. § 1347 requires a
showing that the defendant knowingly and willfully executed a
scheme to defraud a government health-care program. See Willett,
751 F.3d at 339. In criminal cases, willfulness generally means
that an act was undertaken with a "bad purpose," that is, with
knowledge that the act is unlawful. Bryan v. United States, 524
U.S. 184, 191-92 (1998). Aiding and abetting requires proof that
the defendant "consciously shared the principal's knowledge of the
underlying criminal act, and intended to help the principal"
accomplish it. United States v. Taylor, 54 F.3d 967, 975 (1st Cir.
1995). In the case of health-care fraud, proof of guilt either as
a principal or as an aider or abettor requires proof of specific
intent, which may be established by circumstantial evidence. See
Willett, 751 F.3d at 339; Taylor, 54 F.3d at 975.
Whatever the theory, the evidence here is sufficient to
support the jury's verdict on each substantive count of health-care
fraud. Each count was premised on a Medicare claim submitted by
Above All for a specified Texas-based beneficiary who testified at
trial. The circumstances of these claims shared many of the badges
of fraud that characterized the overall scheme. All of the claims
were predicated on forged prescriptions; used an identical
(fraudulent) diagnosis code; and resulted in a billing by Above All
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to Medicare for no fewer than 11 articles of unnecessary and/or
unwanted medical equipment.7
Viewing this evidence in the reflected light of the
abundant evidence of widespread fraud, we think it without serious
question that a rational jury could have concluded — as this jury
did — that the defendant knowingly and willfully both perpetrated
and aided and abetted health-care fraud vis-à-vis these
beneficiaries.
C. Sentencing.
The defendant's final assignment of error implicates his
sentence. At the disposition hearing, the district court set the
guideline sentencing range (GSR) at 51 to 63 months, premised on a
criminal history category of I and a total offense level of 24.
The offense level was driven in large part by a 16-level
enhancement for an intended loss of more than $1,000,000 but not
more than $2,500,000. See USSG §2B1.1(b)(1)(I)-(J). The court
sentenced the defendant to a below-the-range incarcerative term of
42 months.
On appeal, the defendant contests only the loss
calculation. He argues that the sentencing court erred by treating
the total amount billed to Medicare as intended loss, failing to
credit repayments that the defendant made to Medicare, and
7
To make the cheese more binding, one of these three
beneficiaries identified the defendant as the person who had
delivered the unwanted medical equipment to her home.
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including billings for certain purportedly legitimate claims. We
review the district court's application of the relevant sentencing
guidelines (including its selection of a loss-calculation method)
de novo. See United States v. Alphas, ___ F.3d ___, ___ (1st Cir.
2015) [No. 14-2228, slip op. at 9]; United States v. Pennue, 770
F.3d 985, 991 (1st Cir. 2014); United States v. Stergios, 659 F.3d
127, 135 (1st Cir. 2011).
The guideline that deals with theft and fraud offenses,
including health-care fraud, provides that the defendant's offense
level should be enhanced in proportion to the loss associated with
the offense. See USSG §2B1.1(b)(1); id. at App. A. In determining
the loss amount, the sentencing court must consider the greater of
actual or intended loss. See United States v. Innarelli, 524 F.3d
286, 290 (1st Cir. 2008); USSG §2B1.1, comment. (n.3(A)). Actual
loss is the "reasonably foreseeable pecuniary harm that resulted
from the offense." USSG §2B1.1, comment. (n.3(A)(i)). Intended
loss is "the pecuniary harm that was intended to result from the
offense," including harm that "would have been impossible or
unlikely to occur." Id. at n.3(A)(ii). These principles inform
the defendant's assignment of sentencing error.
The parties — who agree on little else — do not dispute
that actual loss is no greater than $446,712 (the total paid by
Medicare to Above All). Here, however, the sentencing court
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thought that intended loss controlled — and its calculation of
intended loss is more controversial.
At sentencing, the government urged the court to treat as
intended loss the face amount of the fraudulent claims that Above
All billed to Medicare ($1,097,160). This amount includes the
claims associated with 90 beneficiaries, two from Massachusetts and
88 from Texas. The defendant countered that the amount billed to
Medicare was not a suitable basis for a finding of intended loss.
He argued instead that the proper measure of intended loss was the
amount actually paid by Medicare. In support, he noted that
Medicare pays claims according to a fee schedule predicated in part
on a percentage of the amount claimed and, therefore, always pays
less than the amount billed. See 42 C.F.R. § 414.210 (explaining
that Medicare generally pays for DME "on the basis of 80 percent of
the lesser of . . . [t]he actual charge for the item [or] [t]he fee
schedule amount for the item"). The court below resolved this
contretemps in favor of the government.8
Even though the defendant was sentenced in 2013, the
district court applied the 2008 edition of the sentencing
guidelines (the edition in effect when the offenses of conviction
8
The defendant asserts that the district court mistakenly
thought that he was arguing for a sentence based on actual loss,
not intended loss. A careful reading of the sentencing transcript
persuades us that the court understood the thrust of the
defendant's argument.
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occurred).9 The court proceeded to treat the amount billed to
Medicare as evidence of the amount of intended loss, set the loss
amount in excess of $1,000,000, and boosted the defendant's offense
level by 16 levels. The defendant assigns error to the court's
methodology.
Under the 2008 guidelines, as now, a sentencing court is
permitted to determine the amount of intended loss based on a
reasonable estimate. See Alphas, ___ F.3d at ___ [slip op. at 19];
United States v. McCoy, 508 F.3d 74, 79 (1st Cir. 2007). Compare
USSG §2B1.1, comment. (n.3(C)) (Nov. 2014), with id. (Nov. 2008).
Intended loss may include even those losses that were "impossible
or unlikely to occur," such as an insurance fraud where the claim
exceeds the insured value. USSG §2B1.1, comment. (n.3(A)(ii)). In
cases of health-care fraud, courts have regularly held that the
amount billed to Medicare is prima facie evidence of intended loss.
See, e.g., United States v. Isiwele, 635 F.3d 196, 203 (5th Cir.
9
In 2011, the Sentencing Commission amended the commentary to
USSG §2B1.1 to make explicit that where a defendant is convicted of
an offense involving theft from a government health-care program,
"the aggregate dollar amount of fraudulent bills submitted to the
. . . program shall constitute prima facie evidence of the amount
of the intended loss, i.e., is evidence sufficient to establish the
amount of the intended loss, if not rebutted." USSG App. C, Amend.
749 (codified at USSG §2B1.1, comment. (n.3(F)(viii))). Although
this amendment may have applied retroactively, see, e.g., David v.
United States, 134 F.3d 470, 476 (1st Cir. 1998); Isabel v. United
States, 980 F.2d 60, 62 (1st Cir. 1992), the government has not
pressed that point. Consequently, we deem any such argument
waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.
1990).
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2011); United States v. Miller, 316 F.3d 495, 504 (4th Cir. 2003).
These decisions draw their essence from the long-standing
presumption in the law that a "bill is a bill," that is, that the
face amount of a bill is presumptive evidence of the amount that
the person who submits it expects to obtain. Miller, 316 F.3d at
504. This is a variation of the hoary rule that the face value of
a fraudulent instrument may be treated as evidence of the amount
that the fraudster intended to swindle. See, e.g., Stergios, 659
F.3d at 135-36; United States v. Blastos, 258 F.3d 25, 30 (1st Cir.
2001); United States v. Geevers, 226 F.3d 186, 192-93 (3d Cir.
2000); see also United States v. Alli, 444 F.3d 34, 39 (1st Cir.
2006) (using limits on stolen credit cards as measure of intended
loss).
We most recently followed this practice in Alphas.
There, we held — in a case involving multiple insurance claims
"demonstrably rife with fraud" — that the sentencing court could
rely on the face amount of the claims as evidence of intended loss.
See Alphas, ___ F.3d at ___ [slip op. at 19]. "[T]he burden of
production will then shift to the defendant, who must offer
evidence to show" why the loss figure should be set at a lower
amount. Id. at ___ [slip op. at 19]. "After the record is fully
formed, the sentencing court must determine the amount of loss that
the government (which retains the burden of proof) is able to
establish." Id. at ___ [slip op. at 19]. That determination need
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only reflect "a reasonable estimate of the loss." Id. at ___ [slip
op. at 19](quoting USSG §2B1.1, comment. (n.3(C))).
Applying this case law, we hold that the sentencing court
did not err in treating the amounts billed to Medicare as
presumptive evidence of the amount of intended loss. But this does
not end the matter: the defendant argues that even if the
sentencing court appropriately used the amounts billed to Medicare
as a starting point, he rebutted any presumption that those amounts
were a suitable proxy for intended loss. This argument will not
wash.
Intended loss is the loss that a person standing in the
defendant's shoes reasonably would have expected to cause at the
time he perpetrated the fraud. See id. at ___ [slip op. at 9-10];
Innarelli, 524 F.3d at 291. The test for intent is based primarily
on the defendant's objectively reasonable expectations at the time
of the fraud. See Stergios, 659 F.3d at 135; Innarelli, 524 F.3d
at 291 & n.6; McCoy, 508 F.3d at 79. Even so, the defendant's
subjective intent plays a role in this analysis. See Innarelli,
524 F.3d at 291 & n.6; McCoy, 508 F.3d at 79.
The defendant argues that he intended to defraud Medicare
of no more than what Medicare actually paid. In support, he says
that any DME provider would have known that Medicare would not pay
the full amount billed. But this is too myopic a view: it
overlooks that the defendant, at the time of the fraud, was a DME
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provider who had joined forces with an inveterate fraudster in an
attempt to bilk Medicare out of as much as the traffic would bear.
There is no reason to think that a fraudster in that position would
have intended to scoop anything less than as much as he could from
Medicare. See Geevers, 226 F.3d at 193 (observing that even though
a check kiter "may not have expected to get it all, he could be
presumed to have wanted to"). At bottom, the defendant's problem
is that, professing great ignorance about the whole scheme, he
offered no direct evidence that he expected Medicare to pay less
than his cohort billed; and the indirect evidence that a reasonable
person would have so expected is not strong. In particular, there
is no evidence in this record that would have compelled the
district court to find that the defendant knew that the amount
billed was more than the scheduled amounts that Medicare routinely
paid.
The defendant has a final argument related to the loss
amount. He contends that he displayed an entitlement to credits
that he did not receive. Some background is needed to put this
contention into perspective.
The sentencing court arrived at $1,097,160 for intended
loss. The defendant submits that this figure should be offset by
$90,838 based on (i) sums that he refunded to Medicare during the
course of the fraudulent scheme (totaling $46,588) and (ii) sums
associated with purportedly legitimate claims for four specific
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beneficiaries (totaling $44,250). But even if the defendant is
correct — a matter on which we take no view — these offsets would
not reduce the intended loss amount below the cutoff point for the
16-level enhancement. See USSG §2B1.1(b)(1)(I) (establishing floor
for enhancement at more than $1,000,000). Accordingly, resolving
the defendant's contentions would serve no useful purpose; any
error in failing to offset these amounts would be harmless. See
Williams v. United States, 503 U.S. 193, 203 (1992); United States
v. Gerhard, 615 F.3d 7, 34 (1st Cir. 2010).
III. CONCLUSION
We need go no further. For the reasons elucidated above,
the defendant's conviction and sentence are
Affirmed.
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