United States v. Beverly , 284 F. App'x 36 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-4855
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
KENNETH D. BEVERLY,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Henry E. Hudson, District
Judge. (3:05-cr-00526-HEH)
Argued: May 14, 2008 Decided: July 21, 2008
Before WILLIAMS, Chief Judge, NIEMEYER, Circuit Judge, and
Alexander WILLIAMS, Jr., United States District Judge for the
District of Maryland, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Andrea E. Gambino, Chicago, Illinois, for Appellant. Paul
Torzilli, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Appellee. ON BRIEF: Chuck Rosenberg, United States Attorney,
Alexandria, Virginia, Gurney Wingate Grant, II, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Kenneth Beverly appeals his conviction for thirty-six counts
of health care fraud under 18 U.S.C. § 1347 (2008), and the 151-
month sentence imposed by the district court. Specifically,
Beverly contends that his conviction should be reversed because
there was insufficient evidence to sustain his conviction. In the
alternative, Beverly seeks re-sentencing on the ground that the
district court erred in its calculation of the appropriate advisory
sentencing guidelines, arguing that the court (1) incorrectly
applied a four-level enhancement to his offense level pursuant to
U.S. Sentencing Guidelines (“U.S.S.G.”) § 3B1.1 (2008), (2) erred
in increasing his offense level for abuse of trust pursuant to
U.S.S.G. § 3B1.3, and (3) erred in its calculation of the loss
amount pursuant to U.S.S.G. § 2B1.1(b). In addition, Beverly
questions the reasonableness of his sentence on the ground that the
district court failed to adequately consider the factors of 18
U.S.C. § 3553(a)(2008). After careful consideration of the record,
and finding no error, we affirm Beverly’s conviction and sentence.
I.
The evidence at trial, viewed in the light most favorable to
the government, see United States v. Allen, 491 F.3d 178, 185 (4th
Cir. 2007), revealed the following facts. Kenneth Beverly was the
founder, owner, and operator of Rights of Passage Enhanced, Inc.
2
(“ROPE”), a program designed to help individuals with mental
illnesses develop new skills and function in their living
environment. In 2001, ROPE became a licensed provider of
Psychosocial Rehabilitative Services (“PSRS”) under Medicaid.1
The Department of Medical Assistance Services (“DMAS”),
Virginia’s State Medicaid Agency, oversees healthcare providers who
furnish services to recipients qualified to receive Medicaid
benefits and is charged with ensuring that Medicaid pays only for
services properly rendered to eligible individuals. DMAS
periodically audits PSRS providers by conducting unannounced, on-
site utilization reviews of the providers’ facilities. On October
15-21, 2002, DMAS conducted a utilization review of ROPE, during
which DMAS found that ROPE was billing DMAS and receiving payments
for dozens of recipients who were not eligible to receive PSRS.
Recipients were deemed ineligible due to not having any mental
health diagnosis or due to suffering from mental or physical
impairments to such a degree that would prevent them from
benefitting from PSRS. DMAS employees also observed recipients
coloring and watching television, instead of engaging in an
activity-based program.
The utilization review concluded with a customary exit
interview, conducted by DMAS employee Karen Lawson (“Lawson”) on
1
Medicaid, administered by the state governments, is a federal
health care program that was established to provide healthcare to
low income individuals.
3
October 21, 2002. Lawson informed Beverly of the ineligibility
problems DMAS had detected, particularly the lack of mental health
diagnoses, such as dementia, which would make recipients ineligible
for the PSRS program. Beverly acknowledged that some of the ROPE
clients were ineligible for PSRS. Despite being informed of the
ineligibility problems, and also admitting to having knowledge of
some of those problems, Beverly continued to bill Medicaid for
patients who were ineligible to receive services offered by PSRS.
The thirty-six counts of health care fraud, which correspond to
Beverly’s conviction, resulted from claims paid by DMAS after the
exit interview. Many of those recipients were found to be
ineligible for the same reasons discussed during the exit
interview; eight of the recipients were the same individuals whose
charts were audited during the utilization review.
In addition to the continued submissions of claims to Medicaid
for ineligible recipients, Beverly created service agreements
between ROPE and his daughter, Keni Vanzant, to whom he issued
checks from ROPE’s account and subsequently placed those funds into
a bank account nominally designated as jointly held by Beverly and
Vanzant, but controlled by Beverly. For the year 2001, checks
totaling $110,881.71 were issued to Vanzant from ROPE’s account.
Vanzant, however, never saw any of these checks, and, in fact, was
never a ROPE employee and never performed any of the services
described in the consulting agreement.
4
The jury found Beverly guilty of thirty-six counts of health
care fraud, in violation of 18 U.S.C. § 1347. The jury also found
Beverly guilty of seven other counts, which are not at issue in
this appeal: Subornation of Perjury (Count 37), 18 U.S.C. § 1622;
Witness Tampering (Count 38), 18 U.S.C. § 1512; Material False
Statement (Counts 39-40), 18 U.S.C. § 1001; Tax Evasion (Count 41),
26 U.S.C. § 7201; Fraud and False Statements (Count 42), 26 U.S.C.
§ 7206; and Failure to File Tax Return, 26 U.S.C. § 7203 (Count
43). The district court sentenced Beverly to 151 months in prison.
This appeal followed.
II.
Beverly contends that there was insufficient evidence to
sustain his conviction. He argues that the evidence did not
establish a scheme to defraud Medicaid or that he made false or
fraudulent representations. In addition, Beverly claims that the
evidence did not establish that he possessed the requisite mens rea
to commit fraud – intent to defraud.
In evaluating a challenge to the sufficiency of evidence for
a conviction, we must determine whether, “construing the evidence
in the light most favorable to the government, any reasonable jury
could find the defendant guilty beyond a reasonable doubt.” Allen,
491 F.3d at 185. The government is given “the benefit of all
reasonable inferences from the facts proven to those sought to be
5
established.” Id. We must uphold the jury’s verdict “[i]f the
record reflects that the Government presented substantial evidence
from which a reasonable jury could convict.” United States v.
Godwin, 272 F.3d 659, 666 (4th Cir. 2001).
The health care fraud statute provides, in pertinent part:
Whoever knowingly and wilfully executes, or attempts to
execute, a scheme or artifice (1) to defraud any health
care benefit program; or (2)to obtain, by means of false
or fraudulent pretenses, representations, or promises,
any of the money or property owned by, or under the
custody or control of, any health care benefit program .
. . .”
18 U.S.C. § 1347. When determining what is meant by a “scheme or
artifice to defraud,” we must look to the “common-law understanding
of fraud,” which includes “acts taken to conceal, create a false
impression, mislead, or otherwise deceive.” United States v.
Colton, 231 F.3d 890, 898 (4th Cir. 2000). Also important to the
analysis of common law fraud is whether the defendant “fraudulently
produc[ed] a false impression upon the mind of the other party; and
if the result is accomplished, it is unimportant whether the means
of accomplishing it are words or acts of the defendant, or his
concealment or suppression of material facts not equally within the
knowledge or reach of the plaintiff.” Id. at 899.
The evidence adduced at trial, when viewed in the light most
favorable to the Government, supports the jury’s verdict that
Beverly engaged in conduct satisfying the elements of the health
care fraud statute.
6
A.
Beverly first argues that he did not engage in a “scheme to
defraud” Medicaid because he did not make any affirmative
misrepresentations or fraudulent concealments to DMAS. The
evidence presented at trial establishes otherwise. The testimony
of Karen Lawson, DMAS employee and court-certified expert in
Medicaid, demonstrated that ROPE billed Medicaid for patients who
were ineligible to receive PSRS services and failed to provide PSRS
to individuals documented to receive such services. Lawson
testified that proper documentation did not exist for many of the
patients, and in those instances where proper documentation did
exist, Lawson discovered that many of those patients did not meet
the criteria for PSRS. During the exit interview, Lawson informed
Beverly of these ineligibility problems, specifically noting that
several patients were physically and/or mentally impaired to such
a degree that would render them ineligible for PSRS (i.e., those
resulting from dementia, mental retardation, and physical
disabilities). Beverly even acknowledged that some of the patients
were ineligible for the PSRS program. Even more telling of
Beverly’s “scheme” is the fact that, following the exit-interview,
ROPE continued to bill Medicaid for PSRS on behalf of individuals
for whom no documented mental health evaluation was performed and
for individuals suffering from the same physical and mental
infirmities Lawson expressly discussed with Beverly.
7
In addition, Lawson opined that each of the thirty-six ROPE
patients, who correspond to the thirty-six counts of health care
fraud, were not eligible for PSRS. The reasons provided for the
patients’ ineligibility correspond to ineligibility problems Lawson
discussed with Beverly during the exit interview. Based upon these
facts, it was not unreasonable for the jury to conclude that
Beverly engaged in a scheme to defraud Medicaid. Contrary to
Beverly’s contention that he did not make any misrepresentations or
fraudulent concealments to DMAS, the jury could reasonably infer
that his misrepresentations were contained in the claims submitted
to DMAS, in which ROPE continued to seek payment for persons
ineligible to receive PSRS, even after being informed of the
ineligibility problems. We, therefore, find that sufficient
evidence was presented at trial from which a jury could reasonably
infer that Beverly perpetuated a scheme to defraud Medicaid.
B.
Beverly next contends that the evidence did not establish that
he acted with a specific intent to defraud Medicaid. Intent to
defraud, "may be inferred from the totality of the circumstances
and need not be proven by direct evidence.” Godwin, 272 F.3d at
666. In particular, intent “can be inferred from efforts to
conceal the unlawful activity, from misrepresentations, from proof
of knowledge, and from profits.” United States v. Davis, 490 F.3d
541, 549 (6th Cir. 2007) (affirming health care fraud convictions).
8
Beverly argues that the evidence did not establish that he
knowingly submitted or caused to be submitted any false information
to DMAS. This argument is devoid of merit given the evidence that
he continued to bill and receive payments from Medicaid even after
being informed, thus constituting knowledge, of the ineligibility
problems. In addition, Beverly orchestrated a consulting agreement
with Vanzant, through which he wrote checks totaling $110,881.71 in
2001. Essentially, Beverly was purportedly making payments to
Vanzant, who was unaware of such payments, for services never
performed by her, and channeled those funds into his personal bank
account. Even more troubling is that Beverly told Vanzant to lie
about her non-existent payments from ROPE.
In light of such evidence, the jury could reasonably infer
Beverly’s intent to defraud Medicaid. While Beverly posits that
the billing and record keeping could be characterized as careless
or negligent, we find that the mound of evidence before the jury
can be more appropriately characterized as intent to defraud.
In sum, the evidence presented at trial was sufficient to show
that Beverly concocted a scheme to defraud and possessed the
requisite intent to defraud Medicaid. We must, therefore, affirm
his conviction.
9
III.
Having resolved the issues related to Beverly’s conviction, we
now turn to his sentence. Beverly raises multiple challenges with
respect to his sentence, specifically that the district court erred
by: (1) applying a four-level enhancement to his offense level
pursuant to U.S.S.G. § 3B1.1; (2) increasing his offense level for
abuse of trust pursuant to U.S.S.G. § 3B1.3; (3) calculating the
loss amount pursuant to U.S.S.G. § 2B1.1(b); and (4) failing to
consider the 3553(a) factors.
“In assessing a challenge to a sentencing court’s application
of the Guidelines, [this Court] review[s] the [district] court’s
factual findings for clear error and its legal conclusions de
novo.” United States v. Allen, 446 F.3d 522, 527 (4th Cir. 2006).
A.
Beverly first contends that the district court erred in
imposing a four-level enhancement, pursuant to U.S.S.G. § 3B1.1(a),
for his participation as an “organizer or leader” of an “otherwise
extensive” criminal activity. He argues that the evidence did not
establish that he organized or led one or more other participants.
We review the decision to apply a sentencing adjustment based on
the defendant’s role in the offense for clear error. United States
v. Sayles, 296 F.3d 219, 224 (4th Cir. 2002).
10
Beverly’s Pre-Sentence Report proposed a four-level
enhancement for his role in the offense as “an organization or
leader of a criminal activity that involved five or more
participants or was otherwise extensive.” U.S.S.G. § 3B1.1(a). The
government, although conceding that Beverly’s criminal activity did
not involve five or more “participants,” asserted the four-level
enhancement was nevertheless appropriate because Beverly’s criminal
activity was “otherwise extensive.” The district court agreed.
To qualify for an adjustment under § 3B1.1(a), the defendant
must, at a minimum, have been the “organizer or leader” of “one or
more other participants.” U.S.S.G. § 3B1.1, cmt. (n.2). In
assessing whether an activity is “otherwise extensive,” we have
held that courts may consider “all persons involved during the
course of the entire offense, even the unknowing services of many
outsiders.” United States v. Ellis, 951 F.2d 580, 585 (4th Cir.
1991) (quoting U.S.S.G. § 3B1.1, cmt. (n.3)). The district court
must also consider “all relevant conduct as defined by U.S.S.G.
§ 1B1.3.”2 United States v. Perrin, 237 Fed. Appx. 899, 900 (4th
2
U.S.S.G. § 1B1.3 provides factors that determine the
guideline range, including:
(1)(A) all acts and omissions committed, aided, abetted,
counseled, commanded, induced, procured, or wilfully
caused by the defendant . . .
(3) all harm that resulted from the acts and omissions
specified in (a)(1) and (a)(2) above, and all harm that
was the object of such acts and omissions; and
(4) any other information specified in the applicable
guideline.
11
Cir. 2007); see also United States v. Fells, 920 F.2d 1179, 1183-84
(4th Cir. 1990)(holding that a district court should consider all
relevant conduct).
In determining whether criminal activity is “otherwise
extensive,” many reviewing courts have examined the “totality of
the circumstances, including not only the number of participants
but also the width, breadth, scope, complexity, and duration of the
scheme.” United States v. Dietz, 950 F.2d 50, 53 (1st Cir. 1991);
see also, United States v. Frost, 281 F.3d 654, 658 (7th Cir. 2002)
(finding that criminal activity was “otherwise extensive” where a
substantial portion of the defendants’ income was obtained by
fraud, and where the amount of loss was approximately $1.8
million); United States v. D'Andrea, 107 F.3d 949, 959 (1st Cir.
1997) (criminal activity was “otherwise extensive” where activity
involved fraud against financial institutions to obtain loans for
$8.1 million by submitting false financial information and
defendant used witting or unwitting services of others to obtain
loans); United States v. Sidhu, 130 F.3d 644, 655 (5th Cir. 1997)
(criminal activity was “otherwise extensive” where physician
submitted false claims for medical services, recruited numerous
office employees to provide billing and collection support for his
fraudulent practices, and where fraud could not have succeeded
without unwitting participation of his vulnerable patients and
unknowing assistance of employees); United States v. Massey, 48
12
F.3d 1560, 1572 (10th Cir. 1995) (fraudulent loan scheme was
“otherwise extensive” considering long duration and national scope
of the scheme, and the scheme operation had multiple locations and
involved many employees other than co-conspirators).
The record demonstrates that the district court considered the
individuals as well as the circumstances involved in this offense:
[Beverly] was the alter ego of a scheme to defraud the
Medicaid system that involved numerous employees. It
involved many, many clients, many of whom – most of whom
were not eligible to receive services. Extensive revenue
was derived from this [a loss of over $2.6 million]. He
had multiple locations. It was an operation much, much
larger than the average type of fraud scheme that this
court sees in connection with an operation of this type.
J.A. 553.
In addition, the evidence adduced at trial demonstrates that
at least one of Beverly’s employees, Vernita Webber (ROPE’s
bookkeeper), can be considered a “participant” under the
Guidelines. “Participant” is defined as “a person who is
criminally responsible for the commission of the offense, but need
not have been convicted.” U.S.S.G. § 3B1.1, cmt. (n.1). Webber
played an important financial role in ROPE’s operations. Despite
having knowledge that Vanzant never worked for or performed
services for ROPE, Webber, nevertheless, prepared and signed the
checks that falsely compensated Vanzant for so-called consulting
services provided to ROPE. Webber even admitted that she was
concerned that she would be charged with a crime. In addition to
13
Webber, Beverly used several other employees and individuals to
carry out his scheme: Aljanon Wills, ROPE’s day-to-day supervisor;
Marion Bennett, the outside contractor who performed billing
services for ROPE; and Vanzant, whom Beverly unwittingly used to
facilitate the transfer of ROPE funds to his personal bank account.
Based on this evidence, we find that the district court did
not err in finding that Beverly participated in criminal activity
that was “otherwise extensive.”
B.
Beverly next contends that the district court incorrectly
applied a two-level enhancement for abuse of trust under U.S.S.G.
§ 3B1.3. His argument is that the relationship between ROPE and
DMAS was commercial and not fiduciary; therefore, he is not subject
to the enhancement.
Whether a defendant occupied a position of trust is a “factual
determination reviewable for clear error.” United States v.
Bollin, 264 F.3d 391, 415 (4th Cir. 2001). We have also observed
that the determination of “whether a defendant held a position of
trust must be examined from the perspective of the victim.” United
States v. Godwin, 272 F.3d 659, 671 (4th Cir. 2001).
Pursuant to U.S.S.G. § 3B1.3, a two-level adjustment in the
base offense level is authorized “[i]f the defendant abused a
position of public or private trust . . . in a manner that
14
significantly facilitated the commission or concealment of the
offense.” U.S.S.G. § 3B1.3. The government notes that the victim
of Beverly’s health care fraud is Medicaid, and ultimately, the
American taxpayers. See United States v. Adam, 70 F.3d 776, 781-82
(4th Cir. 1995) (concluding that victims of Medicaid fraud were
“the American taxpayers”). Contrary to Beverly’s claim that his
relationship to DMAS was purely commercial, we have upheld
application of the abuse of trust enhancement in situations where
physicians or medical providers have defrauded Medicaid. See id.;
see also United States v. Bolden, 325 F.3d 471, 504-05 (4th Cir.
2003) (applying the two-level enhancement for abuse of trust to
nursing home operator who perpetuated scheme to defraud Medicaid).3
In Bolden, we pointed out that “[b]ecause of the discretion
Medicaid confers upon care providers . . . such providers owe a
fiduciary duty to Medicaid. Indeed, we see it as paramount that
Medicaid be able to ‘trust’ its service providers.” Id. at 505
n.41.
ROPE – founded, owned, and directed by Beverly – billed and
received payments from Medicaid for patients who were knowingly
deemed ineligible to receive PSRS services. Thus, he abused the
3
Reimbursed medical providers have also been held subject to
the abuse of trust enhancement by other circuits. See United States
v. Hoogenboom, 209 F.3d 665, 666, 671 (7th Cir. 2000) (enhancement
properly applied to psychologist who falsely billed Medicare);
United States v. Gieger, 190 F.3d 661, 663, 665 (5th Cir. 1999)
(enhancement properly applied to ambulance transportation service
provider who submitted fraudulent claims to Medicare).
15
public funds that were entrusted to ROPE for the benefit of
providing individuals with mental illnesses with PSRS services.
When viewed from the standpoint of the victims involved here,
Medicaid and the American taxpayers, we conclude that Beverly,
through his position at ROPE, abused the trust placed in him with
respect to proper billing and handling of Medicaid funds.
Therefore, just as we held in Bolden, we must rely on the
entrustment as evidence of the underlying trust relationship, see
Bolden, 325 F.3d at 504, and find that the district court committed
no error in applying the two-level enhancement.
C.
Beverly also challenges the district court’s calculation of
the amount of loss under U.S.S.G. § 2B1.1(b). He claims that the
district court erred in finding that he was responsible for over
$2.6 million in loss, when the loss amount charged and proved at
trial was only $161,000. In addition, he argues that the testimony
presented at the sentencing hearing was not reliable and did not
provide a sufficient basis for assessing an accurate loss figure.
We review the district court’s calculation of the amount of
loss under the clear error standard. United States v. Battle, 499
F.3d 315, 323 (4th Cir. 2007). To the extent that there was any
perceived inconsistency or unreliability, we have held that “[a]s
the sentencing judge, a district court judge is in the best
16
position to assess credibility, observe the demeanor of witnesses,
resolve conflicting evidence, and determine the weight of the
evidence.” United States v. Dyess, 478 F.3d 224, 245 (4th Cir.
2007). Morever, the sentencing guidelines provide, “[t]he court
need only make a reasonable estimate of the loss. The sentencing
judge is in a unique position to assess the evidence and estimate
the loss based upon that evidence. For this reason, the court’s
loss determination is entitled to appropriate deference.” U.S.S.G.
§ 2B1.1, cmt. n.3(C).
To support a loss amount of $2,603,573.39, the government
relied on sentencing testimony of Doug Johnson, lead Medicaid
investigator in this action, and Karen Lawson, DMAS employee and
court-certified expert in Medicaid. Johnson testified that in
addition to the amount for claims ROPE received on the thirty-six
individuals constituting the counts of conviction ($161,856.40), he
also calculated $966,855.01, which represented other claims for
patients whose ineligibility was apparent. The loss amount also
included funds from which ROPE billed DMAS for patients who were
eligible to receive PSRS but never provided PSRS services to those
patients. Johnson’s testimony was corroborated by Karen Lawson’s
sentencing testimony, who also noted that ROPE not only billed and
received payments for individuals who were ineligible for the
program, but that ROPE also billed DMAS, but never provided PSRS
services, for patients who were eligible to receive such services.
17
Given this evidence, we find no error in the district court’s
factual determination of the loss amount.
IV.
Lastly, Beverly contends that the district court did not
adequately consider the factors provided in 18 U.S.C. § 3553(a) and
imposed an excessive sentence.
Beverly argues that the district court erred by merely
mentioning, but not discussing, the § 3553(a) factors before
imposing sentence. We review the court’s sentencing decision for
“reasonableness.” United States v. Pauley, 511 F.3d 468, 473 (4th
Cir. 2007). While the district court must consider the various
§ 3553(a) factors and explain its sentence, it need not explicitly
reference § 3553 or discuss every factor on the record,
particularly when the court imposes a sentence within the guideline
range. United States v. Johnson, 445 F.3d 339, 345 (4th Cir.
2006). We have held that “[a] sentence within the proper
Sentencing Guidelines range is presumptively reasonable.” Allen,
491 F.3d at 193.
We must first note that Beverly’s 151-month sentence is within
the Guideline range. His 120-month sentence on Counts 1-36
corresponds to the statutory maximum for health care fraud, and the
Guideline range for his total offense level of 32, is 121-151
months. Therefore, falling within the Guideline range, Beverly’s
sentence is presumptively reasonable. Allen, 491 F.3d at 193.
18
Although the district court did not discuss each and every
element of § 3553(a), the court heard argument regarding the
§ 3553(a) factors, adequately calculated the range for sentence,
explained its decision to sentence Beverly at the high end of the
guideline range, and indicated that it considered the § 3553(a)
factors. We find that the district court adequately considered the
§ 3553(a) factors in stating its reasons for Beverly’s sentence.
Accordingly, we conclude that the sentence imposed by the district
court was reasonable.4
For the foregoing reasons, we affirm Beverly’s conviction and
sentence.
AFFIRMED
4
Lastly, Beverly contends that his sentence violates the
Eighth Amendment’s prohibition against cruel and unusual
punishment. The Eighth Amendment’s proportionality principle
“forbids only extreme sentences that are grossly disproportionate
to the crime.” Ewing v. California, 538 U.S. 11, 24 (2003). Having
found Beverly’s sentence to be reasonable, we cannot find that such
sentence constitutes cruel and unusual punishment.
19