United States v. McMahon ( 1998 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 95-5919
NORWOOD MCMAHON, a/k/a Woody,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 95-5920
JOHN W. MCMAHON,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
No. 95-5921
ASSOCIATED HEALTH SERVICES, d/b/a
The Health Development Center,
Defendant-Appellant.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CR-95-82)
Argued: December 4, 1996
Decided: June 8, 1998
Before RUSSELL* and MICHAEL, Circuit Judges, and DAVIS,
United States District Judge for the District of Maryland,
sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Nina Jean Ginsberg, DIMURO, GINSBERG & LIEBER-
MAN, P.C., Alexandria, Virginia; Lisa Bondareff Kemler, MOFFITT,
ZWERLING & KEMLER, P.C., Alexandria, Virginia, for Appellants.
Robert William Wiechering, Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Vir-
ginia, for Appellee. ON BRIEF: Helen F. Fahey, United States Attor-
ney, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria,
Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
At the times relevant to the events giving rise to this case, Appel-
lant Norwood McMahon ("Dr. McMahon") was authorized to practice
chiropractic medicine in Virginia. Based on direct and circumstantial
evidence of a broad-based scheme, which was executed over several
years, designed to defraud insurers and other third party payers of
_________________________________________________________________
*Judge Russell participated in the hearing of this case at oral argument
but died prior to the time the decision was filed. The decision is filed by
a quorum of the panel. See 28 U.S.C.A. § 46(d) (West 1993).
2
health care benefit payments to which he and his clinic were not enti-
tled, Dr. McMahon was convicted by a jury in the United States Dis-
trict Court for the Eastern District of Virginia of numerous offenses.1
His co-defendant and brother, Appellant John McMahon, was con-
victed of a single count of structuring a financial transaction to avoid
the filing of a currency transaction report in violation of 31 U.S.C.
§§ 5322, 5324(3). Raising a host of issues, Appellants contend that
the trial court committed errors in its rulings and determinations
which singly and in combination deprived each of them of a fair trial.
Finding no reversible error, we affirm.
I.
Taking the facts in the light most favorable to the government, see
United States v. Burgos, 94 F.3d 849, 862-63 (4th Cir. 1996), cert.
denied, ___ U.S. ___, 117 S.Ct. 1087 (1997), the prosecution pre-
sented substantial evidence at trial sufficient to permit a reasonable
jury to make the following findings. As the Appellants have asserted
several claims of evidentiary insufficiency, the facts and inferences
reasonably arising therefrom supportive of the government's theories
shall be set forth in some detail.
In late 1988, together with Dr. Brett Fuller, Dr. McMahon began
Associated Health Services, Inc.2 This corporation operated two chi-
ropractic clinics, with Dr. McMahon operating the facility in Manas-
sas, Virginia, under the trade name The Health Development Center.
Drs. McMahon and Fuller discussed with a third chiropractor, Dr.
_________________________________________________________________
1 The indictment contained 51 substantive counts and a forfeiture
count. Ultimately, Dr. McMahon was convicted of count 1 (conspiracy
to defraud the United States, to commit mail fraud and to defraud the
Internal Revenue Service), 18 U.S.C. § 371; counts 2-12 (false claims),
18 U.S.C. § 287; counts 13-32 (mail fraud), 18 U.S.C. § 1341; counts
34-39 (money laundering), 18 U.S.C. § 1956(a)(1)(B)(i); counts 40-44
(money laundering), 18 U.S.C. § 1956(a)(1)(B)(ii); and structuring a
financial transaction for the purpose of evading reporting requirements,
31 U.S.C. § 5322, 5324(3). Under all counts but count one, he was
charged both as a principal as well as an aider and abetter, 18 U.S.C. § 2.
2 Associated Health Services, Inc. was also convicted of certain indict-
ment counts, but is not a party to this appeal.
3
Michael Sweeney, the desirability of hiring a medical doctor to work
part-time at their respective clinics. The purpose of hiring a medical
doctor, inter alia, was to make it possible to bill chiropractic services
under the medical doctor's name so as to circumvent limitations on
insurance coverage for chiropractic care.
Specifically, Drs. McMahon and Sweeney traveled to Florida in
January 1988 and met with a chiropractor who had an established
practice with a medical doctor on staff. They learned during their visit
that, generally, the chiropractor and medical doctor each had to bill
insurers separately for their particular services. Nevertheless, Drs.
McMahon and Sweeney agreed to disregard this admonition so as to
maximize the amount of money they could receive from third party
payers, such as insurance companies.
In late 1988, Drs. McMahon, Fuller and Sweeney hired Suigit
Singh, M.D., a medical doctor, to work in their clinics. Dr. Singh
spent approximately one day a week at each of the three clinics, and
each of the three chiropractors contributed a third of her salary. In a
typical day at Dr. McMahon's clinic, Dr. Singh would examine 10-15
patients. She would conduct an initial exam and thereafter write a pre-
scription for chiropractic care. She did not supervise any care or treat-
ment rendered by Dr. McMahon or any other licensed or nonlicensed
(e.g., massage therapists) providers employed at the clinic. She did
not review Dr. McMahon's treatment notes, and she rarely even spoke
to a chiropractor about a specific patient.
Dr. Singh was not aware that chiropractic services, massage ther-
apy, and other treatments were being billed to third party payers under
her name and provider number. When she learned of the billing prac-
tices, she resigned her position at the three clinics, and directed that
her signature not be placed on any correspondence from the clinics.
After resigning her position, Dr. Singh requested that her signature
stamps be returned from the clinics. Dr. Sweeney returned the signa-
ture stamp used at his clinic, but Dr. McMahon did not return the
stamp available at his clinic, although he represented to Dr. Sweeney
that he had discarded it. In fact, Dr. McMahon continued to use Dr.
Singh's signature stamp and to bill under Dr. Singh's signature and
provider number for several months after she resigned. Additionally,
according to evidence of handwriting analysis and the testimony of a
4
patient who had never been examined by Dr. Singh, the jury could
have found that Dr. McMahon actually forged prescriptions for chiro-
practic treatments.
Detailed evidence was presented at trial concerning the billing
practices at Dr. McMahon's clinic. This evidence disclosed that prior
to Dr. Singh's tenure, the clinic experienced difficulties obtaining
insurance coverage for chiropractic patients as a result of limitations
on the dollar amount of benefits for such services, or limitations on
the number of visits allowed for such services. After Dr. Singh was
hired, Dr. McMahon altered the billing procedures at the clinic. For
example, a new insurance verification form was instituted, and Dr.
McMahon instructed his staff to call insurance companies to obtain
information concerning available coverages to new clinic patients, but
to conceal the fact that they were calling on behalf of a chiropractic
clinic.
Thus, whether a patient was directed to see Dr. Singh for a "pre-
scription" for chiropractic care was largely determined by the avail-
ability of, and type of, insurance coverage enjoyed by the patient.
Moreover, if a new patient appeared at the clinic on a day other than
the day when Dr. Singh was present, the patient would generally
receive chiropractic treatment, and the claim form for that treatment
would be held until the patient could see Dr. Singh, who would issue
a prescription for chiropractic care.
During the years that the scheme was in place, the clinic received
numerous inquiries from insurance companies regarding the identity
of the service provider in many instances. Dr. McMahon instructed
his employees that insurance company representatives were to be told,
falsely, that Dr. Singh had performed and/or actively supervised treat-
ments. Dr. McMahon also instructed employees to bill spinal manipu-
lations and other chiropractic treatments as "office visits" with Dr.
Singh, in those instances where he knew that insurance companies
would not accept a claim of chiropractic treatment by a medical doc-
tor.
To place the scheme in its professional setting and to meet the
anticipated defense of "good faith," the government presented testi-
mony of several witnesses with experience and expertise in the rele-
5
vant fields. Joseph Osbourne of Blue Cross and Blue Shield of
Virginia ("BCBS"), one of the benefit providers which covered some
chiropractic services, testified. Osbourne outlined how medical pro-
fessionals apply to BCBS to receive a provider number. When claims
are submitted to BCBS, the provider number of the professional is
included on the claim. The provider can then receive direct reim-
bursement if appropriate under the coverage of the patient. On the
claim, a code would be included to designate the specific service that
was rendered. Osborne testified that BCBS requires that chiropractic
services be billed under a specific code and not as an "office visit,"
and that a professional employee of a medical doctor cannot use his
or her employer's provider number; rather, each must use a personal,
individual provider number. BCBS does not reimburse for chiroprac-
tic services that are billed under a medical doctor.
Osbourne explained that BCBS maintains a toll free number for
inquiries on billing procedures, offers seminars to providers with
questions regarding billing procedures, and regularly issues bulletins
to providers on the subject. Patricia Dyer McMahon, the former office
manager (and estranged wife) of Dr. McMahon, who pled guilty to
filing a false claim against the government in connection with her
employment at Dr. McMahon's clinic, testified that she attended such
a BCBS seminar in 1989.
In connection with the government's investigation of Dr. Mc-
Mahon, BCBS audited his claims for the period covered by the inves-
tigation. The audit disclosed that Dr. McMahon's clinic submitted
6,590 separate claims to BCBS, that 4,878 of these were billed under
Dr. Singh's provider number, but that medical records revealed Dr.
Singh actually provided services in only 87 of the instances studied.
BCBS paid $145,746.49 in claims to the clinic during the relevant
time period, of which $139,468.10 should not have been paid.
****
Appellant John McMahon was a stockbroker, investment adviser
and licensed real estate broker. He had a B. S. degree in business
administration, finance and marketing, and an additional two years of
relevant education and training necessary to receive the designation
of Certified Financial Planner.
6
There was significant circumstantial evidence that John McMahon
had in depth exposure and training in the various statutes, rules and
regulations relevant to the financial services and investment industry,
in which he was employed starting in 1989, including those relating
to cash transactions and the reports mandated by law attendant to such
transactions. For example, his employer, Manna Financial Services,
had a Standard Operating Procedure Manual ("SOP") provision deal-
ing with the receipt of cash. John McMahon admitted at trial that as
part of his duties and responsibilities at Manna Financial, he was
familiar with the SOP, including the IRS Form 8300 relating to cash
transactions.3 In addition, an incident at Manna Financial in 1992
involving a cash transaction had resulted generally in a heightened
awareness at the firm of the IRS Currency Transaction Reporting
("CTR") requirements among the ten employees of Manna Financial.
In addition to the Form 8300, the Manna Financial SOP contained
several pages of provisions explaining the reporting requirement on
cash transactions in a business. This included additional guidance that
the structuring of a single transaction into separate transactions
_________________________________________________________________
3 While it is for reporting cash payments received in a trade or business,
the Internal Revenue Service Form 8300 ("Report of Cash Payments
Over $10,000 Received in a Trade or Business") also contains on the
reverse additional guidance concerning cash transactions generally. Spe-
cifically, in the instructions, it explains the concept of structuring and
that,
. . . a transaction is related even though it occurs during a period
of more that 24 hours if the recipient knows, or has reason to
know, that each transaction is one of a series of connected trans-
actions.
J.A. at 1654. Further, it provides notice that financial institutions are
required to file CTRs (Form 4789) for these cash transactions. The "Pen-
alties" section of the instructions admonishes:
Civil and criminal penalties including up to 5 years of imprison-
ment are provided for failure (or causing the failure) to file a
report, for filing (or causing the filing) of a false or fraudulent
report, and for structuring a transaction.
Id.7
involving less than $10,000 each, when they are connected in reality,
can lead to reporting requirements.4
John McMahon was also required to review and be familiar with
the periodic "Notice to Members" routinely mailed to member firms
of the National Association of Securities Dealers ("NASD"). Manna
Financial was a member firm of the NASD and routinely received
these "Notice to Members." Copies of the notice were habitually
maintained by Manna Financial for approximately one year after their
receipt, and the brokers at Manna Financial, such as John McMahon,
were required and expected to be familiar with the materials.
The government introduced the "Notice to Members" from Febru-
ary and March 1989, which were sent to Manna Financial and main-
tained in the normal course of business. The February 1989 "Notice
to Members" is headlined "Reporting Suspicious Currency and Other
Questionable Transactions to the IRS/Customs Hotline." The notice
alerts members to be on the lookout for suspicious cash transactions
and provides the number for a U.S. Customs hotline to report such
transactions. The notice specifically included the following:
. . . a person structures a transaction when that person,
acting alone or in conjunction with or on behalf of, other
persons, conducts or attempts to conduct one or more trans-
actions in currency, in any amount, at one or more financial
institutions, on one or more days in any manner, to evade
the currency-reporting requirements. Therefore, it is impor-
tant for all members to be alert for individuals who may be
attempting to launder money by intentionally structuring
transactions to evade the currency-reporting requirements
and to elude law enforcement authorities.
J.A. at 1662. The notice further cautioned that"[s]uch arrangements
can constitute a criminal violation for evasion of the regulations'
currency-reporting requirements." Id. at 1661.
_________________________________________________________________
4 In addition, as a member of NASD, John McMahon was required to
be familiar with the requirements of the NASD Manual, which contains
information in respect to currency reporting requirements.
8
The March 1989 "Notice to Members" is headlined "Treasury
Finalizes Two Amendments Re: Currency Transaction; Reissues Cur-
rent Currency Transaction Report Form." Once again, the notice
advised members that evading currency reporting requirements is a
criminal violation. It also contained the final Treasury definition of
structuring.5
John McMahon was the principal financial adviser to his brother.
They were in frequent contact during early 1993, and they would
speak on a weekly basis about the management of Dr. McMahon's
financial and investment accounts. In the course of the government's
investigation, on February 25, 1993, an FBI Special Agent served on
Dr. McMahon a grand jury subpoena calling for the production of
extensive personal financial information. The jury reasonably could
have inferred that Dr. McMahon and his brother consulted with each
other in connection with Dr. McMahon's responsibility to produce
records to the grand jury in response to the subpoena.
On February 24 and 26, 1993, counsel retained by Dr. McMahon
conducted legal research on the issue of money laundering. This fact
was discovered by the government when investigators obtained pos-
session of a bill sent to Dr. McMahon by his then counsel. The bill
_________________________________________________________________
5 That definition was set forth as follows:
Structure (structuring). For purposes of section 103.53, a per-
son structures a transaction if that person, acting alone, or in con-
junction with or on behalf of other persons, conducts or attempts
to conduct one or more transactions in currency, in any amount,
at one or more financial institutions, on one or more days, in any
manner, for the purpose of evading the reporting requirements
under section 103.22 of this Part. "In any manner" includes, but
is not limited to, the breaking down of a single sum of currency
exceeding $10,000.00 into smaller sums, including sums at or
below $10,000 or the conduct of a transaction, or series of cur-
rency transactions, including transactions at or below $10,000.
The transaction or transactions need not exceed the $10,000
reporting threshold at any single financial institution on any sin-
gle day in order to constitute structuring within the meaning of
this definition.
J.A. at 1665.
9
had been discarded in the trash dumpster in the parking lot at the
clinic operated by Dr. McMahon.
Within a couple of weeks thereafter, in March 1993, at the direc-
tion of Dr. McMahon, John McMahon began liquidating the stocks in
Dr. McMahon's personal brokerage/margin account held by U.S.
Clearing Corporation in New York. This was done in a series of trans-
actions, followed immediately by six wire transfers of the resulting
funds to a Virginia bank account in the name of Gravitech, a dormant
business account controlled by Appellants. Each of the six wire trans-
fers ordered by John McMahon was for an amount less than $10,000.6
Thus, the gravamen of the antistructuring conviction (the only
count on which John McMahon was convicted) was the March 1993
transactions described in this paragraph. From March 17 through
March 31, 1993, five checks drawn on the Gravitech account were
presented to Horizon Bank by Appellants on a closely-coordinated
schedule. For example, Dr. McMahon presented the first check, in the
amount of $4,900, at 12:30 p.m. on March 17, 1993, after a $5,000
wire transfer from New York had been effected as ordered by John
McMahon six days earlier. Less than an hour later, at 1:14 p.m. on
the same day, John McMahon, located at Manna Financial's offices
_________________________________________________________________
6 John McMahon offered evidence in his defense, including his own
testimony. Thus, the jury had before it John McMahon's testimony that
the seemingly suspicious timing of the stock sales and wire transfers
effected to liquidate the investment account was in fact driven by market
conditions, and not an attempt to maintain less than $10,000 in the
Gravitech account at the time of each subsequent cash withdrawal from
the Gravitech account discussed in text. However, there was evidence
which seriously undermined this explanation. The jury learned that
within days of the completion of the Gravitech-related transactions, John
McMahon also liquidated approximately 75% of Dr. McMahon's IRA
stock account in a single transaction, with no significant change in the
prevailing "market conditions." Moreover, Barry Richard Smith, Execu-
tive Vice-President at Manna Financial and John McMahon's supervisor,
testified that it was "unusual" to send the funds from a margin account
in a series of transactions rather than in one transaction. He further testi-
fied that he had never before seen a margin account at Manna Financial
liquidated in the manner John McMahon conducted the transaction for
his brother.
10
a block or so away from Horizon Bank, faxed a document to U.S.
Clearing in New York directing that an additional $9,000 be wired to
the Gravitech account at Horizon Bank. At 1:11 p.m. the next day,
March 18, John McMahon presented a check drawn on the Gravitech
account for $9,000. The remaining three checks were negotiated
under similar circumstances. The government never uncovered evi-
dence of the final disposition of the cash funds so removed from the
dormant Gravitech account, totaling $32,300 in the five transactions,
each for less than $10,000, and no evidence was presented at trial
which disclosed the disposition of these cash funds.
II.
The first two assignments of error raised by Dr. McMahon relate
to the manner in which the district court handled issues arising from
information contained in the billing invoice from his attorney, which
was recovered from the trash container on the parking lot of Dr. Mc-
Mahon's clinic. The district court concluded, after hearing extensive
argument on the issue, that Dr. McMahon had waived his attorney-
client privilege in respect to the document when he disposed of it in
the trash without effectively destroying it. Nevertheless, the district
court was sensitive to the potential harm to Dr. McMahon's fair trial
rights if the letter were simply admitted into evidence as a trial
exhibit. Thus, by way of a compromise, rather than admit the letter,
the district court permitted Dr. McMahon to enter into a stipulation
regarding the letter, while preserving the issue of waiver for appeal.7
_________________________________________________________________
7 The trial judge announced the stipulation to the jury as follows:
[T]his document was a bill to Dr. Norwood McMahon dated
3/9/93, from an attorney . . . . The bill contained billable hours
of speaking together with attorneys at the U.S. Attorney's Office
regarding possible charges which the government was contem-
plating against Dr. McMahon, and a grand jury subpoena that
was served on Dr. McMahon on 2/25/93.
The bill also charged for some time spent researching the law
concerning possible charges to be brought against Dr. McMahon.
The bill included time spent researching the Money Laundering
Statute on 2/24/93, and 2/26/93.
J.A. 969-70.
11
Before us, Dr. McMahon contends that it was error for the court
to allow into evidence the stipulation (and to allow the government
to argue in summation on the basis of the stipulation) because doing
so "violated the attorney-client privilege and imposed a penalty on Dr.
McMahon's exercise of his Sixth Amendment rights." Appellants'
Brief at 21. We disagree.
The district court correctly ruled that when Dr. McMahon dis-
carded the intact letter in the dumpster located in the parking lot of
his clinic, he waived the attorney-client privilege in respect to (1) the
existence of the attorney-client relationship, as well as (2) the content
of the document, to the extent the document contained what were
intended to be confidential communications. Cf. Suburban Sew'n
Sweep, Inc. v. Swiss-Berina, Inc., 91 F.R.D. 254, 260-61 (N.D. Ill.
1981) (client waived attorney-client privilege when intact document
discarded), cited with approval in relevant part in In re Grand Jury
Proceedings, 727 F.2d 1352, 1358 (4th Cir. 1984).8
The government correctly argues, moreover, that the content of the
document (and more directly, the stipulation admitted in lieu of the
_________________________________________________________________
8 In Sew `n Sweep, the district court reasoned that a client had a respon-
sibility to take steps effectively to destroy a discarded document contain-
ing confidential communications:
Though this case presents a very close question, the court con-
cludes that . . . the privilege not be applied to these documents.
The likelihood that third parties will have the interest, ingenuity,
perseverance and stamina, as well as risk possible criminal and
civil sanctions, to search through mounds of garbage in hopes of
finding privileged communications, and that they will then be
successful, is not sufficiently great to deter open attorney-client
communication. Furthermore, if the client or attorney fear such
disclosure, it may be prevented by destroying the documents or
rendering them unintelligible before placing them in a trash
dumpster. While requiring this degree of precaution may seem
extreme, if the parties feel that the likelihood of disclosure is suf-
ficiently great, the precautions may be justified, and it is within
their power to decide what precautions to take, and so to protect
against disclosure.
91 F.R.D. at 260-61.
12
document) rationally supported the inference that Dr. McMahon
knowingly and willfully engaged in transactions, with fraudulently
obtained funds, which were designed to avoid reporting requirements.
That is, a reasonable fact finder could infer that Dr. McMahon, with
knowledge of the government's investigation, and having been served
with a grand jury subpoena for financial records, had consulted with
counsel on the legal issues surrounding alleged or suspected money
laundering transactions.
As for the Sixth Amendment argument, Dr. McMahon did not raise
any such claim before the district court and, indeed, did not object at
all to the government's closing argument. Accordingly, the constitu-
tional claim asserted before us has not been preserved, and we do not
consider it.
III.
Dr. McMahon next contends that the district court committed
reversible error in connection with its handling of certain expert wit-
ness issues. Specifically, he contends that reversal is required
because: (1) the district court erred when it accepted as an expert
government witness Dr. James Seeber, a chiropractor who had served
on the Virginia Board of Medicine, the state regulatory body with
jurisdiction over the healing arts, including chiropractic medicine;
(2) the jury very likely was mislead because Dr. Seeber testified as
both an expert and non-expert fact witness; and (3) Dr. Seeber com-
mitted perjury. We discern no error in these regards.
Fed. R. Evid. 702 provides:
If scientific, technical, or other specialized knowledge will
assist the trier of fact to understand the evidence or to deter-
mine a fact in issue, a witness qualified as an expert by
knowledge, skill, experience, training, or education, may
testify thereto in the form of an opinion or otherwise.
We have repeatedly held that a trial court's decision in accepting or
rejecting the qualifications of an expert is reviewed for abuse of dis-
cretion. Westfield Ins. Co. v. Harris, 134 F.3d 608, 612 (4th Cir.
13
1998); United States v. Powers, 59 F.3d 1460, 1470-71 (4th Cir.
1995); Hardin v. Ski Venture, Inc., 50 F.3d 1291, 1296 (4th Cir.
1995); Kopf v. Skyrm, 993 F.2d 374, 378 (4th Cir. 1993); United
States v. Harris, 995 F.2d 532, 534 (4th Cir. 1993).
Dr. Seeber testified as to his qualifications and experience. He had
been a chiropractor since 1973, spent five years in practice with a
medical doctor (one of the key areas of inquiry in this case), had
served in several capacities with the Virginia Chiropractic Associa-
tion, was familiar with Blue Cross bulletins sent to members of the
profession and had reviewed patient files in connection with his testi-
mony in this case. Notably, defense counsel asked no questions of Dr.
Seeber on voir dire, and seemingly waived any objection to Dr. See-
ber's qualifications to testify as an expert.
Moreover, contrary to Dr. McMahon's contention, Dr. Seeber's
status as both an expert witness and a fact witness did not taint the
fairness of the trial. While it is undoubtedly true that depending upon
the circumstances of an individual case, a witness occupying such a
dual status may generate concerns, cf. United States v. Thomas, 74
F.3d 676, 683 (6th Cir.) (police officer), cert. denied, 116 S.Ct. 1558(1996); United States v. Foster, 939 F.2d 445, 453 (7th Cir. 1991)
(police detective), this case is not remotely one of those circum-
stances. The record does not suggest in any way that the jury was con-
fused as to Dr. Seeber's testimony, or that prejudice resulted from Dr.
Seeber's testimony in his respective capacities. We find no abuse of
discretion in the district court's rulings in regard to its admission of
the testimony of Dr. Seeber.
Finally, the claim that Dr. Seeber committed perjury is far off the
mark. The record discloses merely that Dr. Seeber testified at trial (in
response to a question by the district judge) that, to his best recollec-
tion, a case, not unlike the present case, of improper billing by a chi-
ropractor using a medical doctor's provider information, had received
publicity from the state regulatory body while he served on that body.
Counsel for Dr. McMahon conducted a post-trial examination of the
files of the state body, and have developed discrepancies, largely if
not entirely immaterial, between Dr. Seeber's recollection of the tim-
ing and sequence of events he testified to at trial, on the one hand, and
14
the actual historic record of those disciplinary proceedings, on the
other hand. No basis for reversal is suggested by this showing.
IV.
Dr. McMahon next complains that reversal of his convictions for
conspiracy, false claims and mail fraud is mandated because the
insurance regulations he transgressed in executing his scheme to
defraud are so vague and ambiguous that to permit criminal prosecu-
tion for such violations would violate his due process rights. This con-
tention lacks merit.
The gist of the scheme perpetrated by Dr. McMahon was to operate
his clinic, ostensibly in a legitimate fashion, under a so called "holis-
tic, multidisciplinary" approach. Under this approach, Dr. McMahon
had on staff, in addition to chiropractors, a medical doctor, a podia-
trist and physical therapists. The government's theory, supported by
non-expert and expert testimony, and direct and circumstantial evi-
dence, was that, with this infrastructure in place, Dr. McMahon inten-
tionally manipulated his office procedures and the insurance
companies' billing requirements so as to conform claims for services
rendered for chiropractic care and related treatments to the most plau-
sible interpretation of the relevant regulations and, when that was
impractical, simply to forge signatures (by use of signature stamps or
otherwise), and, ultimately, to misrepresent outright the identify of the
professional providing the particular service. In response to this evi-
dence, Dr. McMahon argued in his defense that the claims were prop-
erly submitted under the medical doctor's provider number, or were
administrative errors. Dr. McMahon's "good faith" defense was thor-
oughly covered by the district court's instructions, see J.A. at
1436-38, and Dr. McMahon raises no claim relating to the accuracy
or adequacy of those instructions.
In a lengthy exegesis in his brief, see Appellants' Brief at 32-44,
under the rubric of due process, Dr. McMahon simply reiterates the
factual arguments in support of a reasonable doubt as to his specific
intent to violate the law, which was presented to (and rejected by) the
jury at trial. These arguments are unavailing here as they were below.
The existence of good faith disagreements between practitioners and
responsible insurance officials over the meaning and application of
15
admittedly relevant, if less than entirely clear, regulations, at the mar-
gins of debatable cases, do not equate to a due process violation on
this record. Nor does evidence (generated in cross examination of the
government's witnesses) that other providers, treating other patients
under other circumstances, may have innocently misapplied reim-
bursement guidelines undermine the fairness of the jury's conclusion
beyond a reasonable doubt that in Dr. McMahon's instance, he har-
bored no good faith misunderstanding as to the requirements of the
regulations.
It suffices here to observe that the government introduced substan-
tial evidence, summarized supra, from which a reasonable juror could
conclude that the victim insurers in this case took pains to provide
help to providers so that program requirements regarding reimburs-
able treatments were fully understood, including bulletins, handbooks,
seminars and the like. In this regard, there was direct evidence from
Dr. McMahon's wife that this material was received at the McMahon
clinic. Other evidence, e.g., the creation of a new insurance form, and
the institution of new procedures designed to hurdle barriers to insur-
ance coverage and to do so anonymously, lent credence to the govern-
ment's theory that Dr. McMahon did not commit innocent, good faith
mistakes in undertaking his "holistic, multidisciplinary" approach to
chiropractic care.
Thus, we have no hesitation in rejecting the due process claim
based on the alleged vagueness of the regulations. To the contrary, the
jury was entitled to conclude on the evidence in this record that the
regulations were more than adequately understood by Dr. McMahon,
and that, indeed, it was his insightful understanding of the regulations
which impelled him to engage in the scheme in the first place.
V.
Dr. McMahon next contends that the evidence at trial was insuffi-
cient to prove the elements of money laundering. Specifically, he con-
tends that the evidence was insufficient to prove beyond a reasonable
doubt that he knew that the funds transferred by wire from New York
to Virginia constituted the proceeds of specified unlawful activity, or
that the transactions were intended to conceal or disguise the nature,
location or source of ownership of the funds. See 18 U.S.C.
16
§ 1956(a)(1)(B). Dr. McMahon seems to contend that the "open and
notorious" quality of the wire transfers and the related withdrawals
from the dormant Gravitech account fatally undermine the govern-
ment's proof on the money laundering counts. We reject this argu-
ment.
In reviewing whether the evidence was sufficient to convict a
defendant, "the relevant question is whether, after viewing the evi-
dence in the light most favorable to the prosecution, any rational trier
of fact could have found the essential elements of the crime beyond
a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319 (1979).
The jury is responsible for weighing the credibility of the evidence
and resolving any apparent conflicts. United States v. Murphy, 35
F.3d 143, 148 (4th Cir. 1994).
To convict a defendant of conducting a "money laundering" finan-
cial transaction under 18 U.S.C. § 1956(a)(1)(B), the government
must prove that (1) the funds involved in the transaction were the
"proceeds of specified unlawful activity;" (2) the defendant knew that
they were "the proceeds of some form of unlawful activity;" and
(3) the transaction was intended by the defendant either (i) to con-
ceal or disguise the proceeds' nature, source, control, location, or
ownership, or (ii) to avoid a federal reporting requirement. See
United States v. Campbell, 977 F.2d 854, 856-57 (4th Cir. 1992).9
The government presented substantial evidence demonstrating the
existence of a fraudulent scheme in which use of the mails was an ele-
ment ("specified unlawful activity"), persisting for several years,
designed to obtain insurance benefits to which Dr. McMahon was not
legitimately entitled. Government witnesses employed commonly
_________________________________________________________________
9 Indictment counts 34-39 were based on Appellants' alleged intent to
"conceal or disguise the proceeds' nature, source, control, location, or
ownership," i.e., the wire transfers, in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i); counts 40-44 were based on their alleged intent to
"avoid a federal reporting requirement," i.e., the structured withdrawals
from Horizon Bank in Virginia, in violation of 18 U.S.C.
§ 1956(a)(1)(B)(ii). The jury acquitted John McMahon of all counts,
including the money laundering counts listed here, except the substantive
structuring count, count 45, discussed infra.
17
accepted accounting methods to trace the funds generated by Dr. Mc-
Mahon in executing this scheme. The government is not required to
prove the absence of untainted funds, or that the funds used in the
money laundering transaction were exclusively derived from the spec-
ified unlawful activity. United States v. Wilkinson, 137 F.3d 214, 222
(4th Cir. 1998); United States v. Moore, 27 F.3d 969, 976 (4th Cir.
1994).
Nor is there a lack of substantial evidence to support the jury's
finding that the government had proven beyond a reasonable doubt
the intent "to conceal or disguise the nature, location, source owner-
ship or control of the proceeds" of "specified unlawful activity." The
transactions in question involved personal funds belonging to Dr. Mc-
Mahon held in a brokerage account, transferred by wire to a dormant
business account, shortly after he had received a subpoena for per-
sonal financial records in connection with a federal investigation of
a fraudulent billing scheme. In sum, there was substantial evidence to
support the jury's finding, as required by the district court's instruc-
tions, that Dr. McMahon intended to conceal or disguise the nature,
location, source ownership or control of the proceeds.
Contrary to Dr. McMahon's assertions, the mere fact that a "paper
trail" was generated by the transactions did not diminish the probative
value of the government's proof by circumstantial and direct evidence
of his intent attendant to the transactions. Thus, we are satisfied that
there was substantial evidence supporting the disputed elements of the
money laundering counts.
VI.
Both Appellants challenge their convictions for unlawful structur-
ing (count 45) on extremely narrow grounds. Specifically, John Mc-
Mahon contends that the government's circumstantial evidence was
insufficient to establish proof beyond a reasonable doubt that he knew
of a bank's obligation to report a customer's withdrawal of cash (in
contrast to a reporting requirement arising from a deposit of cash). Dr.
McMahon argues, in turn, that since the only basis for his conviction
was, according to him, the jury's assumption that his brother advised
him of the reporting requirement, his conviction also is unsupported
18
by substantial evidence. We disagree with both strands of this argu-
ment.
We recently explained:
Financial institutions are required by law to file a CTR for
a transaction or series of transactions involving currency in
excess of $10,000. See United States v. Beidler , 110 F.3d
1064 (4th Cir. 1997); 31 U.S.C. § 5313(a). It is unlawful for
a depositor to structure the deposits for the purposes of
avoiding the reporting requirement. See 31 U.S.C.
§ 5324(a)(3). When the unlawful conduct occurred in this
case the Government was required to show that the defen-
dant willfully violated the antistructuring law. See 31 U.S.C.
§ 5322(a)(b) (1988). "To establish that a defendant `will-
fully violated' the antistructuring law, the Government must
prove that the defendant acted with knowledge that his con-
duct was unlawful." Ratzlaf v. United States , 510 U.S. 135,
137, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994).
United States v. Messer, 139 F.3d 895, #6D 6D6D# (4th Cir. 1998).
We have been cited to no authority, and we have found none,
which supports the contention that the government's burden in a
structuring prosecution is to prove specifically that a defendant knew
that cash deposits (if those are the facts shown by the evidence)
and/or cash withdrawals (if those are the facts) trigger a reporting
requirement. To the contrary, the statute, and the Supreme Court's
decision in Ratzlaf, make it plain that the prohibition relates to
transactions engaged in willfully with the specific intent to evade or
cause the evasion of the reporting requirements. For example, in
Ratzlaf the Court summarized: "In § 5322, Congress subjected to
criminal penalties only those `willfully violating' § 5324, signaling its
intent to require for conviction proof that the defendant knew not only
of the bank's duty to report cash transactions in excess of $10,000,
but also of his duty not to avoid triggering such a report." 510 U.S.
at 146-47. (emphasis added).
Appellants concede that "the jury certainly could have concluded
that [John McMahon] knew what a trade or business was required to
19
file when it received cash in excess of $10,000." Appellants' Brief at
52. We hold that this concession indicates Appellants' agreement that
the government introduced sufficient evidence to prove knowledge of
illegality of the transaction, which is the only burden the law imposes
upon the government.
In any event, even apart from the above concession, the circum-
stantial evidence against Appellants, summarized supra, was substan-
tial, and supports the jury's finding, as required by the district court's
instructions, that Appellants acted willfully to violate the antistructur-
ing statute prosecuted in count 45. We have held that, in reviewing
for sufficiency of the evidence of a structuring conviction, we permit
a jury to infer willfulness from the defendant's attempt at conceal-
ment of the structuring activity. United States v. Beidler, 110 F.3d
1064, 1069 (4th Cir. 1997). We are persuaded that the evidence in this
case -- the seriatim wire transfers of funds into the Gravitech
account, and the fact that, for a period of time up until the structured
transaction, the Gravitech account was a dormant account in the name
of a non-operating business -- constitutes evidence of an attempt at
concealment, notwithstanding the "paper trail" the transactions gener-
ated. Furthermore, we have also observed that
[i]n the wake of Ratzlaf, other courts have sustained convic-
tions for willful violations of the antistructuring law only
when the prosecution has presented "something more" than
evidence of structuring itself. Specifically, in addition to the
structuring itself, courts have relied on evidence of a defen-
dant's general consciousness that he acted illegally or
evidence that a defendant had some special status or exper-
tise from which a jury could reasonably infer that he knew
structuring was illegal. See, e.g., United States v. Simon, 85
F.3d 906, 909-10 (2d Cir. 1996) (in addition to evidence of
structuring, defendant, as a stockbroker, was familiar with
the reporting requirements and, in fact, was required to file
CTRs in his business).
United States v. Ismail, 97 F.3d 50, 58 (4th Cir. 1996) (emphasis
added). This observation has relevance under the circumstances of
this case. John McMahon's status as a highly educated and trained
stockbroker/certified financial planner, literally surrounded for years
20
prior to the suspicious activities by information about the evils of
structuring, was a significant and weighty piece of the government's
evidentiary matrix on which the jury could reasonably rely in reach-
ing its verdict.
Accordingly, although we agree with the district court that, as to
John McMahon, the evidence on the willfulness element of the
antistructuring count was not overwhelming, we have no hesitation in
affirming the antistructuring conviction of each Appellant. We are
persuaded that the jury's guilty verdicts were rationally based on per-
missible inferences about Appellants' knowledge of the law's require-
ments, and that Appellants willfully aided and abetted each other in
effecting the $32,300 transfer of funds from New York to and through
the Gravitech account at Horizon Bank, with the intent to cause Hori-
zon Bank to fail to do what it would have been legally obliged to do
-- file a CTR -- in the absence of the structuring.
VII.
John McMahon contends that he was deprived of a fair trial by vir-
tue of the admission into evidence of the NASD notices regarding the
antistructuring statutes. We discern no abuse of discretion in the dis-
trict court's admission into evidence of these exhibits. Moreover, the
reasonableness of the inference that John McMahon very likely
reviewed them after he commenced work at Manna Financial a few
weeks or so after they were received was amply supported by the tes-
timony of his supervisor at the firm.
VIII.
John McMahon also complains of the district court's instruction on
"deliberate ignorance." The decision whether to give a jury instruction
and the content of an instruction are reviewed for abuse of discretion.
United States v. Russell, 971 F.2d 1098, 1107 (4th Cir. 1992), cert.
denied, 506 U.S. 1066 (1993). We recently noted in a closely analo-
gous case:
Generally, one cannot be convicted based upon what one
should have known . . . . Actual knowledge can be found if
21
the defendant was aware to a high probability of the true
nature of the transactions and deliberately chose to avoid
finding the truth for fear the true nature would be revealed.
Such "willful blindness" extends the reach of the actual
knowledge requirement. See Campbell, 977 F.2d at 857.
Messer, 139 F.3d at ___. We have also noted that "where the evidence
presented in the case supports both actual knowledge. . . and deliber-
ate ignorance, a willful blindness instruction is proper." United States
v. Abbas, 74 F.3d 506, 513 (4th Cir.), cert. denied, 517 U.S. 1229(1996).
Although the government presented substantial circumstantial evi-
dence in its case-in-chief of John McMahon's actual knowledge of the
illegality of structuring, John McMahon generated the issue of willful
ignorance through his own testimony during the defense case. Fur-
thermore, the inference of willful ignorance was supported by evi-
dence of the elaborate machinations disclosed by the transfer of the
$32,300 in eleven discrete steps, i.e., six wire transfers (involving a
fee of $15 each) and five trips to the bank, over a short period of time.
Accordingly, the district court did not abuse its discretion in charging
the jury on "deliberate ignorance."
IX.
Finally, John McMahon contends that the district court erroneously
declined to admit evidence of his "consciousness of innocence." This
claim arises from a proffer by John McMahon to testify concerning
an ambiguous and unconsummated effort at plea bargaining. This Cir-
cuit has not had occasion to pass upon the issue of admissibility of
so-called "consciousness of innocence" evidence, which is said to be
present where a defendant rejects an offer of immunity in return for
testifying on behalf of the government. See United States v. Biaggi,
909 F.2d 662, 690 (2d Cir. 1990), cert. denied , 499 U.S. 904 (1991).
We need not do so here because it is clear that the district court did
not commit an abuse of discretion in concluding that the ambiguous
discussions between counsel never rose to the level of an offer of
immunity from the government to John McMahon.
22
X.
For the reasons discussed above, we conclude that the district court
committed no reversible error, that the Appellants received a funda-
mentally fair trial. The judgments of conviction are accordingly
AFFIRMED.
23