UNITED STATES of America, Plaintiff-Appellee,
v.
Jeffrey Allan FISCHER, Defendant-Appellant.
Nos. 96-3587, 97-2877 and 98-2091.
United States Court of Appeals,
Eleventh Circuit
March 4, 1999.
Appeal from the United States District Court for the Middle District of Florida. (No. 95-239-CR-ORL-22),
Anne C. Conway, Judge.
Before ANDERSON and HULL, Circuit Judges, and HANCOCK*, Senior District Judge.
HULL, Circuit Judge:
A jury convicted appellant Jeffrey Allan Fischer on thirteen counts, including violations of
18 U.S.C.
§§ 371 (conspiracy), 666 (fraud and bribery involving an organization receiving federal funds), 1341 (mail
fraud), 1343 (wire fraud), and 1957 (money laundering).1 Fischer appeals his convictions and
sixty-five-month sentence.
Fischer contends, inter alia, that his convictions on two counts under § 666 and on a related
conspiracy count should be reversed because the Government did not prove the statutory prerequisite that the
agency affected by Fischer's wrongdoing "receives, in any one year period, benefits in excess of $10,000
*
Honorable James H. Hancock, Senior U.S. District Judge for the Northern District of Alabama, sitting
by designation.
1
The jury convicted Fischer of one count of fraud involving an organization receiving federal funds, in
violation of
18 U.S.C. § 666(a)(1)(A) (Count I); one count of giving a kickback to an agent of an
organization receiving federal funds, in violation of
18 U.S.C. § 666(a)(2) (Count II); one count of mail
fraud, in violation of
18 U.S.C. § 1341 (Count III); two counts of wire fraud, in violation of
18 U.S.C. §
1343 (Counts IV-V); one count of conspiracy to commit fraud involving an organization receiving
federal funds, to give and accept a kickback involving an organization receiving federal funds, and to
commit wire fraud, in violation of
18 U.S.C. § 371 (Count VI); and seven counts of money laundering, in
violation of
18 U.S.C. § 1957 (Counts VII-XIII).
under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of
Federal assistance."
18 U.S.C. § 666(b).2 After review, we affirm Fischer's convictions and sentence.
I. BACKGROUND
A. $1.2 Million Loan
At trial, the evidence established that in 1993 Fischer, as president and part-owner of QMC, arranged
for West Volusia Hospital Authority ("WVHA") to loan $1.2 million to QMC. Fischer negotiated this loan
with WVHA's chief financial officer, Robert Caddick. On June 30, 1993, Fischer and Caddick executed the
loan agreements between QMC and WVHA.
As security for the $1.2 million loan, Fischer pledged QMC's accounts receivable and a $1 million
letter of credit QMC had obtained for this purpose through a foreign bank, First Asia Development Bank
("FADB"). However, QMC's accounts receivable already were pledged to another QMC creditor. In
addition, the $1 million letter of credit did not appear to be legitimate, and even if it were, its terms severely
limited WVHA's ability to collect the $1 million.3
Furthermore, questions were raised about WVHA's authority to loan money to QMC. The questions
arose both before WVHA loaned the $1.2 million to QMC, and later, when WVHA's board of directors
2
Fischer also challenges (1) the sufficiency of the evidence regarding his intent to defraud and to bribe,
(2) the particularity of the indictment, (3) the admission of evidence relating to his prior fraud
convictions, (4) certain statements by the prosecutor during opening statement and closing argument, (5)
the district court's decision not to hold an evidentiary hearing in reference to a Brady violation alleged in
Fischer's motions for a new trial, and (6) the district court's finding that Fischer had the ability to pay
restitution. After careful consideration of each of these claims, we affirm the judgment of the district
court. See 11th Cir.R. 36-1.
3
After reviewing the $1 million letter of credit, the account representative at WVHA's bank expressed
concerns to Caddick and to Fischer about the legitimacy of the letter of credit and about WVHA's ability
to collect on the letter of credit, if necessary. The account representative's concerns were based on the
facts that she had never heard of FADB and that the letter of credit had not been signed, would expire
even before the WVHA-QMC loan matured, and required QMC's approval before WVHA could collect
on it.
2
discovered the loan had been made. WVHA, a local government agency funded by a bond issue, was
authorized to invest its excess funds in only instruments backed by the federal government.4
Nonetheless, WVHA made the $1.2 million loan to QMC on July 2, 1993. QMC used the $1.2
million to repay creditors and to raise the salaries of QMC's five owner-employees, including Fischer. In
addition, Fischer had QMC lend at least $100,000 to a company owned by the FADB representative who had
assisted QMC with the $1 million letter of credit. Fischer also had QMC open options-trading accounts using
these loan proceeds. In a short time, Fischer lost about $400,000 of the loan proceeds through his
options-trading on QMC's behalf.5
In February 1994, WVHA's auditors disclosed the $1.2 million loan to QMC in the annual audit
report. Through this report, WVHA's board of directors and the chairman of WVHA's finance committee first
learned about the $1.2 million loan. Shortly thereafter the board asked that the loan be called. The due date
for the loan was July 1, 1994.
On July 1, 1994, QMC did not have the funds to repay the loan. Later that month, Fischer persuaded
FADB to send QMC a $1.2 million draft to repay WVHA. QMC endorsed this draft and presented it to
WVHA, which in turn presented the draft to its bank. However, FADB refused to honor the draft when
presented by WHVA's bank. Thus, WVHA was unable to collect the $1.2 million owed by QMC.
B. $10,000 Kickback to Caddick
The evidence indicated that, in June 1993, Caddick requested a $10,000 loan from QMC at the end
of one of Fischer and Caddick's initial meetings about the possibility of the $1.2 million loan. After QMC
4
As a result of a proposal presented by Caddick in April 1993, WVHA's finance committee did expand
Caddick's investment authority. At trial, however, evidence indicated that investment in loans to private
entities, such as QMC, still would not have been authorized.
5
To show that Fischer had a pattern of fraudulently obtaining money and then using that money to
speculate in the securities market, the Government introduced evidence that Fischer, while a broker for
E.F. Hutton, had embezzled two million dollars of his clients' money. Fischer thereafter lost the two
million dollars in failed investments. As a result of these actions, Fischer was convicted on three counts
of mail fraud on April 12, 1985.
3
received the $1.2 million loan from WVHA, QMC paid $10,000 by check to Caddick's mother, Stella
Greenfield, in August 1993. This $10,000 check, paid with Fischer's approval, was marked "consulting
fees"—even though Greenfield never performed any services for QMC. Greenfield sent the proceeds of the
$10,000 check to Caddick, pursuant to Caddick's instructions.
In January 1994, a QMC bookkeeper sought an invoice to correspond with the earlier $10,000 check
to Greenfield. The bookkeeper received an invoice dated August 1, 1993. A notation appeared on the invoice
in Fischer's handwriting, indicating that the payment was for a "loan origination fee."
Another attempt to cover up QMC's $10,000 payment to Caddick apparently was made after QMC
defaulted on the $1.2 million loan from WVHA and that default became the subject of an investigation and
widespread publicity. In this cover-up attempt, Caddick allegedly approached QMC's vice-president, Charles
Kramer, with a "contract" for programming services Caddick purportedly had performed for QMC. Caddick
allegedly asked Kramer to sign and backdate the "contract" to create a retroactive justification for the $10,000
payment. However, Kramer refused.
C. WVHA's Receipt of Federal Benefits
To establish that Fischer had violated 18 U.S.C. §§ 666(a)(1) and (a)(2), the Government was
required to prove that WVHA was an agency receiving, in any one year period, "benefits in excess of
$10,000" under a federal assistance program.
18 U.S.C. § 666(b).6 At trial, the Government introduced
6
In relevant part,
18 U.S.C. § 666 provides as follows:
(a) Whoever, if the circumstance described in subsection (b) of this section exists—
(1) being an agent of an organization, or of a State, local, or Indian tribal
government, or any agency thereof—
(A) embezzles, steals, obtains by fraud, or otherwise without authority knowingly
converts to the use of any person other than the rightful owner or intentionally
misapplies, property that—
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such organization,
4
evidence that WVHA was a county agency responsible for operating two county hospitals. The Government
also introduced testimony from WVHA's director of finance that "most health care organizations collect a
majority of their funds from programs that are funded by the federal government." Asked to give an example
of how much money WVHA specifically collected in 1993 from the federal government under the Medicare
program alone, WVHA's director of finance testified that WVHA had collected between ten and fifteen
million Medicare dollars in 1993.
Later on, WVHA's director of finance explained further that different government programs pay
differently. WVHA's director of finance then testified:
A specific example is that we get paid, hospitals get paid a fixed amount from the federal government
on in-patient Medicare patients, patient[s] who are greater than the age of 65. So raising the prices
for services that are primarily used for individuals in that group has no impact. There's no increase
in revenue.
Thus, according to the testimony of WVHA's director of finance, even if the hospital charges the patient an
increased amount for services, the hospital is paid only a fixed amount from Medicare for those services.
II. DISCUSSION7
government, or agency; or
....
(2) corruptly gives, offers, or agrees to give anything of value to any person, with
intent to influence or reward an agent of an organization or of a State, local, or
Indian tribal government, or any agency thereof, in connection with any business,
transaction, or series of transactions of such organization, government, or agency
involving anything of value of $5,000 or more;
shall be fined under this title, imprisoned not more than 10 years, or both.
(b) The circumstance referred to in subsection (a) of this section is that the organization,
government, or agency receives, in any one year period, benefits in excess of $10,000
under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance,
or other form of Federal assistance.
18 U.S.C. § 666(a)-(b).
7
The issues we discuss here involve statutory interpretation and sufficiency of the evidence. We
review de novo issues of statutory interpretation. United States v. MacAllister,
160 F.3d 1304, 1306 (11th
5
A. Scope of § 666(b)
The statutory prerequisite for a conviction under
18 U.S.C. § 666 is that the organization or agency
affected by the fraud, unauthorized conversion, bribery, or other prohibited act "receives, in any one year
period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan,
guarantee, insurance, or other form of Federal assistance."
18 U.S.C. § 666(b). In the present case, the
primary issue is whether WVHA received "benefits" under a federal assistance program for purposes of §
666(b). After review, we find that WVHA's receipt of between ten and fifteen million dollars in Medicare
funds qualified as receipt of "benefits" under a federal assistance program and that the Government presented
sufficient evidence to satisfy the requirements of
18 U.S.C. § 666(b).
This Court previously addressed the scope of § 666(b) in United States v. Copeland,
143 F.3d 1439
(11th Cir.1998). At issue in Copeland was whether Lockheed, a prime contractor for the United States
Department of Defense, qualified as an organization receiving "benefits" for purposes of § 666(b). Id. at
1441. Defendant Copeland, a manager at one of Lockheed's plants, had been convicted of violating
18 U.S.C.
§ 666 by accepting bribes from individuals including co-defendant Winders.
Id. at 1440. In turn, defendant
Winders had been convicted of violating
18 U.S.C. § 666 by giving bribes to co-defendant Copeland.
Id.
On appeal, the defendants argued that their convictions under § 666 should be reversed because the
Government had failed to prove that Lockheed met the requirements of § 666(b). Id.
In reviewing the defendants' claims in Copeland, this Court examined the statutory language and
construed § 666(b) as requiring that the "benefits" an organization or agency receives from the federal
government be linked to some form of federal assistance. Id. at 1441. Specifically, this Court recognized
that organizations engaging in contractual relationships with the federal government would fall within the
scope of the statute, if those "contractual relationships constitut[ed] some form of 'Federal assistance.' " Id.
Cir.1998). We also review de novo sufficiency of the evidence, viewing the evidence in the light most
favorable to the Government and drawing all reasonable inferences and credibility choices in favor of the
jury's verdict. United States v. Trujillo,
146 F.3d 838, 845 (11th Cir.1998).
6
This Court also determined that "organizations engaged in purely commercial transactions with the
government" were excluded from the scope of § 666(b) because those organizations were not in relationships
involving some form of federal assistance. Id.
Based on the evidence at trial, this Court in Copeland concluded that Lockheed's relationship with
the government did not come within the scope of § 666(b) because Lockheed's transactions as a defense
contractor were "purely commercial." Id. at 1442. Nothing in the record indicated that Lockheed had
received "benefits" under a federal program involving a contract or any other form of federal assistance. Id.
The record did contain evidence that Lockheed received funds from the government through its defense
contracts, but those funds were not "benefits" within the meaning of § 666(b) because those funds were not
received under a federal program involving federal assistance. Id. Instead, those funds were received as a
result of "purely commercial transactions with the government." Id. Because this statutory prerequisite of
receiving "benefits" under a program of federal assistance was not met, this Court vacated Copeland's and
Winders's convictions under § 666. Id.
B. Sufficiency of the Government's Evidence Under § 666(b)
The evidence in the present case contrasts sharply with that in Copeland. Whereas Lockheed
received federal dollars through purely commercial transactions, WVHA, as an agency responsible for the
administration of two hospitals, actually received payments from the federal government under several federal
assistance programs. For example, evidence introduced at the trial in this case clearly established that, in
1993, WVHA received between ten and fifteen million dollars under the federal Medicare assistance program.
In fact, WVHA's finance director's testimony indicated that the ten to fifteen million dollars WVHA collected
under the Medicare program in 1993 was paid directly to WVHA for providing health care services to
covered individuals.
Section 666(b) provides that the "benefits" an organization receives under a federal program can be
in the form of "a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance."
7
18 U.S.C. § 666(b) (emphasis added). Because WVHA received payments under a federal assistance
program, WVHA received a type of "benefits" expressly covered by § 666(b). Thus, the statutory prerequisite
for Fischer's convictions under § 666 was satisfied.
Having reached this result based entirely on the plain language of § 666(b), we normally would not
examine the legislative history of the statute. See United States v. Copeland,
143 F.3d 1439, 1441 (11th
Cir.1998). However, as this Court observed in Copeland, some circuits have found § 666(b) to be ambiguous
on its face. Id. As a result, it is worth noting that the legislative history of § 666(b) also supports our
conclusion. The statute's legislative history indicates that the language of § 666(b) is to "be construed
broadly, consistent with the purpose of this section to protect the integrity of the vast sums of money
distributed through Federal programs from theft, fraud, and undue influence by bribery." S.Rep. No. 225,
98th Cong., 2d Sess. 369-70 (1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3510-11. In this case, our
determination that WVHA is an agency receiving "benefits" within the meaning of § 666(b) serves the
statute's purpose of protecting from fraud, theft, and undue influence by bribery the money distributed to
health care providers, and WVHA in particular, through the federal Medicare program and other similar
federal assistance programs.8
C. "Target Recipient" Analysis Not Required
Fischer's main argument that the Medicare funds received by WVHA are not "benefits" for purposes
of § 666(b) relies on a narrow construction of "benefits" that does not consider the context in which the term
appears. Fischer primarily bases his argument on a district court decision in United States v. LaHue, 998
8
Although the legislative history may seem to indicate otherwise, we observe that this Court already
has held that the government is not required to prove a direct link between the federal assistance and the
fraudulent conduct in issue. United States v. Paradies,
98 F.3d 1266, 1288-89 (11th Cir.1996)
(recognizing that a "connection to federal funds" is not required for a conviction under § 666). Instead, §
666(b) only requires the government to prove that WVHA is an agency that receives "benefits in excess
of $10,000" under a federal assistance program, as we have already determined that the government has
done. See
18 U.S.C. § 666; United States v. Copeland,
143 F.3d 1439, 1441 (11th Cir.1998). Thus, here
the government was not required to prove a direct link between the Medicare funds received by WVHA
and either Fischer's fraudulently obtaining and converting the $1.2 million loan from WVHA or Fischer's
bribing an agent of WVHA in connection with the $1.2 million loan.
8
F.Supp. 1182 (D.Kan.1998). In LaHue, the court concluded that a group of physicians who received
Medicare funds and, more specifically, funds under Medicare Part B,9 as payment for their services had not
received "benefits" for purposes of
18 U.S.C. § 666(b).
Id. at 1186-87, 1192.
After reviewing the framework of the Medicare statute, the LaHue court concluded that Medicare
patients, and not Medicare providers, are the "target recipients" of Medicare "benefits".
Id. at 1185-86. In
particular, the court observed that, under Part B of the Medicare program, patients may either pay their health
care providers and then seek reimbursement from Medicare or may assign their "benefits" to their providers,
allowing the providers to collect funds from Medicare.
Id. at 1185. The LaHue court acknowledged that,
under this framework, Medicare Part B providers "ultimately receive funds traceable to a federal program,"
but the court emphasized that these providers "do so only through patient payments or assignments."
Id. at
1187. Thus, according to LaHue, the physicians' group involved in the case received funds under Part B of
Medicare after those "benefits" had reached the "target recipients" of the program.
Id. at 1187-88.
Finding the language of § 666(b) ambiguous as to whether these payments and assignments of funds
that are traceable to Medicare Part B, but received "after" the funds have reached the "target recipients,"
qualify as "benefits" for purposes of § 666(b), the LaHue court examined the statute's legislative history. Id.
at 1188-89. The LaHue court interpreted this legislative history, along with the few cases that have examined
and applied § 666(b), as consistent with the court's conclusion that once the funds from a federal program
reach the "target recipient," they cease to be "benefits" under a federal assistance program for purposes of §
666(b). Id. at 1187-90.
We decline to adopt LaHue 's "target recipient" analysis. We first note that, in this case, the
testimony of WVHA's finance director indicated that in 1993 WVHA received ten to fifteen million dollars
from the Medicare program. The finance director's testimony did not clearly establish whether WVHA
received funds directly from the Medicare program or received funds as an assignee under Part B or even Part
9
The Medicare program is divided into two parts, Part A and Part B. See
42 U.S.C. § 1395, et seq.
9
A of the federal program. Thus, there is a possibility in this case that WVHA received funds directly from
the Medicare program without having been assigned the right to receive those funds by a patient. However,
even if WVHA received funds as an assignee, the plain language of § 666(b) does not distinguish between
an organization, government, or agency that receives "benefits" directly under a federal program and an
organization, government, or agency that receives "benefits" as an assignee under a federal program.
Moreover, the language of § 666(b) also does not require that "the organization, government, or
agency receiv[ing] ... benefits" be the "target recipient" of the federal program at issue. Instead, the language
focuses on the source of the "benefits", requiring that the "benefits" have been received "under a Federal
program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance."
18 U.S.C. § 666(b) (emphasis supplied). Thus, in context, the use of the term "benefits" serves to emphasize
not that the recipient must be a "target recipient", but rather that the funds must have been received by the
organization, government, or agency as part of an "assistance" program, rather than a purely commercial
transaction—the federal government's purchase of goods from a contractor, for example. See United States
v. Copeland,
143 F.3d 1439 (11th Cir.1998).
III. CONCLUSION
For all of the foregoing reasons, Fischer's convictions and sentence are AFFIRMED.
10
