United States v. Anthony Valdez , 726 F.3d 684 ( 2013 )

Case: 12-50027 Document: 00512338659 Page: 1 Date Filed: 08/12/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 12, 2013
No. 12-50027 Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee
v.
ANTHONY FRANCIS VALDEZ,
Defendant - Appellant
Appeal from the United States District Court
for the Western District of Texas
Before HIGGINBOTHAM, OWEN, and GRAVES, Circuit Judges.
JAMES E. GRAVES, JR., Circuit Judge:
The defendant Anthony Valdez, a psychiatrist, challenges multiple
aspects of his trial and sentence in this money laundering and health care fraud
case. He argues that there is insufficient evidence to support his conviction for
money laundering; that the district court erred in applying various
enhancements to his sentence; that the jury should have been retained to decide
issues relating to the forfeiture of his property; that the court erred in admitting
evidence of medical malpractice; and that the cumulative effect of multiple
errors requires reversal. We affirm the conviction and sentence, including the
judgment of forfeiture.
Case: 12-50027 Document: 00512338659 Page: 2 Date Filed: 08/12/2013
No. 12-50027
I. Factual and Procedural Background
Anthony Valdez operated two pain management clinics under the name
of International Institute of Pain Management, located in El Paso and San
Antonio, Texas. The indictment alleged that Valdez provided patients with
prolotherapy, a “medical procedure purported to strengthen lax ligaments or to
relieve pain by injecting an irritant. . . such as dextrose, glycerin, calcium and
phenol, around a painful joint to provoke a biological response that results in the
growth of new cells.” However, Valdez billed federal and state health insurance
programs Medicare, Medicaid and Tricare (collectively called “the Programs”) for
facet joint injections, which temporarily eliminate pain by injecting anesthetics
and/or steroids into facet joints in the vertebrae, and peripheral nerve injections,
which temporarily eliminate pain by injecting anesthetics near a nerve.
Prolotherapy is not reimbursable by the Programs, whereas facet joint and
peripheral nerve injections are reimbursable. The indictment alleged that
Valdez submitted insurance claims to the Programs under the codes for facet
joint and peripheral nerve injections rather than the prolotherapy injections
actually performed. The indictment further alleged that Valdez billed for “Level
4” office visits, which entail extended examination and evaluation, that did not
occur, and that he trained and instructed his employees to perform and
fraudulently bill for the same services. The indictment also alleged that Valdez
engaged in financial transactions involving the proceeds of health care fraud
with the intent to promote unlawful activity and to conceal the proceeds of his
health care fraud, and engaged in monetary transactions with criminally derived
funds of $10,000 or more. The indictment included a forfeiture demand.
Valdez was tried by a jury and convicted of one count of conspiracy to
commit health care fraud, 18 U.S.C. §§ 1349 and 1347 (Count 1); six counts of
health care fraud relating to six specific patients, id. § 1347 (Counts 2-7); six
counts of false statements relating to health care matters relating to six specific
2
Case: 12-50027 Document: 00512338659 Page: 3 Date Filed: 08/12/2013
No. 12-50027
insurance claims, id. §1035 (Counts 8-13); one count of money laundering, id. §
1956(a)(1) (Count 14); and two counts of engaging in monetary transactions in
property derived from unlawful activity, id. § 1957 (Counts 15-16).
Trial testimony from patients and expert doctors supported the allegations
that Valdez actually performed prolotherapy when he billed the Programs for
facet joint or peripheral nerve injections. The evidence included testimony that
during a Texas Department of Insurance medical review, Valdez told Dr.
Suzanne Novak that he did prolotherapy, and during that same review told Dr.
Howard Smith that he only performed prolotherapy but called it “reconstructive
anesthetic blocks” in order to bill insurance carriers who would not cover
prolotherapy. Trial evidence, including testimony from employees, patients, and
doctors, including doctors who reviewed video of Valdez performing procedures,
indicated that Valdez’s medical practices were consistent with prolotherapy and
inconsistent with facet joint or peripheral nerve injections, including that he
injected too much solution to be performing facet joint injections, repeatedly
injected patients which would not be advisable if the injections were facet joint
or peripheral nerve injections, did not have a fluoroscope (a type of x-ray
machine typically used for facet injections), did not have steroids that are
typically injected in facet joint injections but did have solutions consistent with
prolotherapy, used a patient encounter form that included a section for
prolotherapy but not facet joint or peripheral nerve injections, and advertised
prolotherapy but not facet joint or peripheral injections. The evidence also
supported the allegations that Valdez trained his employees to perform
prolotherapy but not facet joint or peripheral nerve injections, including
testimony from Rose Chavez, office manager at the El Paso clinic, who stated
that prolotherapy was performed at both clinics, but not facet joint or peripheral
nerve injections. Chavez also testified that she spoke to Valdez about the billing
for prolotherapy after reading some material from a pain management seminar
3
Case: 12-50027 Document: 00512338659 Page: 4 Date Filed: 08/12/2013
No. 12-50027
that stated that prolotherapy was not reimbursable by the Programs. Chavez
testified that she mentioned the billing information to Valdez, but Valdez
instructed Chavez to disregard it.
With regard to money laundering, at trial the government presented
Emmanuel Gomez, an FBI agent who analyzed Valdez’s financial records. Agent
Gomez testified about Valdez’s receipt and spending of reimbursements from the
Programs over the course of the five-year period. The evidence showed that the
proceeds of the fraudulent billing scheme were directly deposited from the
Programs into two of Valdez’s bank accounts. Based on Agent Gomez’s analysis
of the financial records, Valdez wrote checks from these accounts to pay
employee salaries and loans, to make investments, to purchase property, to
make deposits into multiple investment accounts, and to purchase multiple
vehicles classified as business transportation.
At sentencing, the district court adopted the pre-sentence investigation
report (“PSR”), calculated a guidelines range of life, overruled all of Valdez’s
objections to the PSR, and imposed the following sentence:
Counts 1-7: 120 months, 18 U.S.C. §§ 1347, 1349
Count 8: 60 months, 18 U.S.C. § 1035 (to run consecutive)
Counts 9-13: 60 months, 18 U.S.C. § 1035Count 14: 240 months, 18 U.S.C. 1956(a)(1)
Counts 15-16: 120 months, 18 U.S.C. § 1957The district court sentenced Valdez to the statutory maximum for all offenses,
and ordered that the 60-month sentence for Count 8 run consecutive with the
other sentences, for a total of 300 months of confinement.
The court also imposed three years of supervised release on all counts,
ordered $13,356,645.44 restitution to federal and state insurance programs and
private insurers, and ordered a mandatory assessment of $1600. The court also
ordered forfeiture of Valdez’s property, as requested by the government,
4
Case: 12-50027 Document: 00512338659 Page: 5 Date Filed: 08/12/2013
No. 12-50027
including the contents of multiple bank accounts, real property, the proceeds
from the sale of real property, four vehicles, and a money judgment of over nine
million dollars.
II. Discussion
A. Money Laundering Conviction
Valdez argues that the evidence was insufficient to support his conviction
on one count of money laundering under 18 U.S.C. § 1956(a)(1). “We apply de
novo review to a challenge to the sufficiency of the evidence, viewing the
evidence in the light most favorable to the verdict and upholding the verdict if,
but only if, a rational juror could have found each element of the offense beyond
a reasonable doubt.” United States v. Pennell, 409 F.3d 240, 243 (5th Cir. 2005).
Section 1956(a)(1) requires the government to prove the following
elements: (1) Valdez conducted a financial transaction; (2) which he knew
involved proceeds arising from a specified unlawful activity; (3) with the intent
to promote or further those illegal actions (“the promotion prong”); or (4) with
the knowledge that the transaction’s design was to conceal or disguise the nature
or source of the illegal proceeds (“the concealment prong”). See 18 U.S.C. §
1956(a)(1)(A)(i), (B)(i); Pennell, 409 F.3d at 243. The two prongs are alternative
ways to commit the offense; since Valdez was charged with both prongs in one
count, the government must establish guilt under one prong or the other. See,
e.g., United States v. Meshack, 225 F.3d 556, 580 n.23 (5th Cir. 2000), amended
on reh’g in part, 244 F.3d 367 (5th Cir. 2001); United States v. Seher, 562 F.3d
1344, 1361-62 (11th Cir. 2009) (reviewing cases from multiple circuits). Valdez
argues that there is insufficient evidence supporting either prong and that the
district court plainly erred by not giving a specific unanimity jury charge
regarding money laundering. We find that although there is insufficient
evidence of concealment money laundering, there is sufficient evidence to
sustain Valdez’s conviction for money laundering based on promotion of
5
Case: 12-50027 Document: 00512338659 Page: 6 Date Filed: 08/12/2013
No. 12-50027
unlawful activity, and that it was not plain error for the court not to give a
specific unanimity instruction.
1. Concealment Money Laundering
The concealment prong of § 1956(a)(1) requires the government to
establish that the dirty money transactions are “designed. . . to conceal or
disguise the nature, the location, the source, the ownership, or the control” of the
money involved. 18 U.S.C. § 1956(a)(1)(B)(i); see United States v. Brown, 553
F.3d 768, 786 (5th Cir. 2008). To establish the design element, the government
must demonstrate that the charged transactions had the purpose, not merely the
effect, of “mak[ing] it more difficult for the government to trace and demonstrate
the nature of th[e] funds.” Brown, 553 F.3d at 787 (citing Cuellar v. United
States, 553 U.S. 550 (2008)). We have explained that: “In one sense, the
acquisition of any asset with the proceeds of illegal activity conceals those
proceeds by converting them into a different and more legitimate-appearing
form. But the requirement that the transaction be designed to conceal implies
that more than this trivial motivation to conceal must be proved.” United States
v. Willey, 57 F.3d 1374, 1384 (5th Cir. 1995) (citations omitted). Here, the
government relied on Valdez’s transfers of funds from his operating accounts to
investment accounts, and on Valdez’s purchases of property and
investments—all done openly, in his name—as proof of concealment money
laundering. None of the transactions pointed to by the government show a
specific intent to conceal the nature, location, source or ownership of the funds
used. Valdez did not use false names, third parties, or any particularly
complicated financial maneuvers, which are usual hallmarks of an intent to
conceal. See United States v. Burns, 162 F.3d 840, 848-49 (5th Cir. 1998); Willey,
57 F.3d at 1385 (noting that “a showing of simply spending money in one’s own
name will generally not support a money laundering conviction”). There is
virtually no evidence of a design to conceal, beyond the “trivial motivation”
6
Case: 12-50027 Document: 00512338659 Page: 7 Date Filed: 08/12/2013
No. 12-50027
shown by the acquiring of assets with the proceeds of criminal activity, which
Willey instructs is insufficient to establish the necessary intent. Willey, 57 F.3d
at 1384. We thus find that there is insufficient evidence of concealment money
laundering, and turn to the promotion prong of the money laundering conviction.
2. Promotion Money Laundering
To establish money laundering under the promotion prong of § 1956(a)(1),
the government must show that the dirty money transaction was conducted with
the specific intent to promote the carrying on of the health care fraud. 18 U.S.C.
§ 1956(a)(1)(A); see United States v. Brown, 186 F.3d 661, 670 (5th Cir. 1999).
Here, the government has characterized two types of transactions as promotion
of unlawful activity: (1) Valdez’s use of dirty money to purchase vehicles
characterized as “business transportation,” including vans used to transport
patients to and from his pain management clinic; and (2) Valdez’s use of dirty
money to make irregular payments and “loans” to his employees. Because we
find that there is sufficient evidence to support the money laundering conviction
based on the payments to employees, it is unnecessary for us to address the
purchase of the vehicles.
The government established that Valdez made payments to employees
who participated in the fraudulent scheme, whom Valdez had trained or
instructed to perform procedures and fraudulently bill the Programs for
procedures not performed or office visits that did not occur. The government
relies on United States v. Warshak, a case in which the Sixth Circuit noted that
“it is . . . true that a number of cases support the proposition that payments to
employees may constitute sufficient evidence of an intent to promote an unlawful
activity.” 631 F.3d 266, 318 (6th Cir. 2010) (citing United States v. Alerre, 430
F.3d 681, 693 (4th Cir. 2005) (“[T]he promotion element [was] satisfied when a
defendant paid his subordinate employee for being involved in an unlawful
scheme, because such payments compensated the employee for his illegal
7
Case: 12-50027 Document: 00512338659 Page: 8 Date Filed: 08/12/2013
No. 12-50027
activities and encouraged his continued participation.”)). Valdez argues that
these payments to employees were simply payroll payments and thus legitimate
business expenses, which cannot constitute promotion money laundering. See
United States v. Miles, 360 F.3d 472, 477 (5th Cir. 2004); Brown, 186 F.3d at
671. However, we need not go so far as to hold that normal payroll payments
to employees of a business that is not wholly illegitimate constitute promotion
of illegal activity. The record shows that many of the “payroll” payments Valdez
made to employees were in fact very irregular, classified not as salary but as
“loans,” undercutting Valdez’s argument that they were normal business
expenses rather than payments to secure loyalty or cooperation in the
fraudulent scheme. Further, there is a clear nexus between the payments and
the fraud. The record reflects that Valdez made the payments to subordinates
responsible for carrying out essential elements of the fraud: performing
prolotherapy injections and submitting fraudulent claims predicated on those
injections. At trial, Rose Chavez testified that she was responsible for preparing
the fraudulent claims to Medicare. Chavez also testified that Luis Cordova
performed prolotherapy injections that she billed to Medicare. Additionally, two
of Valdez’s former patients testified that they received prolotherapy injections
from Dr. Benson Chee, Irma Sanchez, Ricardo Rios, Luis Cordova, James Shea,
and Alejandro Rios. All of these employees, in addition to several others,
received payments from Valdez, including irregular payments characterized not
as payroll but as “loans.” The evidence also establishes that at least one of the
employees who received the payments—office manager Rose Chavez—knew that
Valdez’s billing practices were fraudulent. Indeed, Chavez testified that she
continued to knowingly submit fraudulent claims because she knew that by not
saying anything, she would continue to get paid. Viewing this evidence in the
light most favorable to the verdict, we conclude that a jury could draw the
reasonable inference that these employees received payments to encourage their
8
Case: 12-50027 Document: 00512338659 Page: 9 Date Filed: 08/12/2013
No. 12-50027
continued participation in the fraudulent scheme, and thus that the payments
promoted the ongoing healthcare fraud. We therefore affirm Valdez’s conviction
of money laundering.
3. Unanimity Instruction
Valdez also argues that the district court erred by not giving the jury a
specific unanimity charge regarding the money laundering count. Though a
general unanimity charge was given, Valdez argues that the district court was
required to instruct the jury that it had to unanimously agree that he was
guilty of money laundering based on promotion, concealment, or both, and that
a general verdict on that count is not sufficient. Valdez did not object to the
instruction; thus, we review only for plain error. See United States v. Alford,
999 F.2d 818, 824 (5th Cir. 1993). In Alford, a previous case in which the
defendant made a similar argument, this court held that “The district court’s
failure to include a unanimity instruction in this case does not rise to the level
of plain error.” Id. Valdez argues that Alford conflicts with Richardson v.
United States, which held that a jury in a “continuing criminal enterprise” case
is required to agree unanimously not only that the accused committed a
continuing series of violations, but also which specific violations made up the
continuing series. See 526 U.S. 813, 815 (1999) (interpreting 21 U.S.C. §
848(a)). This court has already considered and rejected the argument that
Richardson alters the holding of Alford. See Meshack, 225 F.3d at 579-80.
Valdez’s argument is foreclosed. The district court did not plainly err by not
giving a specific unanimity instruction on the money laundering count.
B. Sentencing Enhancements
Valdez also argues that the district court miscalculated the applicable
sentencing range under the 2010 U.S. Sentencing Guidelines Manual by
erroneously applying multiple sentencing enhancements. The specific
9
Case: 12-50027 Document: 00512338659 Page: 10 Date Filed: 08/12/2013
No. 12-50027
enhancements he challenges are: (1) the 2-level vulnerable victim enhancement,
§ 3A1.1(b)(1); (2) the 2-level multiple vulnerable victims enhancement, §
3A1.1(b)(2); (3) the 2-level abuse of trust enhancement, § 3B1.3; (4) the 2-level
mass-marketing enhancement, § 2B1.1(b)(2)(A)(ii); (5) the 2-level sophisticated
means enhancement, § 2B1.1(b)(9)(C), and; (6) the district court’s calculation of
loss under § 2B1.1(b)(1), which increased his offense level by 22 levels,
§2B1.1(b)(1)(L).
We review sentences for reasonableness under an abuse of discretion
standard. See United States v. Cisneros-Gutierrez, 517 F.3d 751, 764 (5th Cir.
2008). First, we determine whether the district court committed any procedural
error, such as improperly calculating the Guidelines range. Id. If there is no
procedural error or the error is harmless, we may review the substantive
reasonableness of the sentence. Id. Valdez argues only that the district court
procedurally erred by miscalculating the applicable Guidelines range. Because
Valdez objected to all the enhancements that he now challenges on appeal, we
review the district court’s interpretation and application of the Guidelines de
novo, and review findings of fact for clear error. Cisneros-Gutierrez, 517 F.3d at
764 (quotation omitted). “There is no clear error if the district court’s finding
is plausible in light of the record as a whole.” Id.
1. Vulnerable Victim and Multiple Vulnerable Victims
The district court added two levels to Valdez’s offense level based on §
3A1.1(b)(1) which applies “If the defendant knew or should have known that a
victim of the offense was a vulnerable victim,” and added two additional levels
based on § 3A1.1(b)(2), which applies if “the offense involved a large number of
vulnerable victims.” A“vulnerable victim” is a person “who is a victim of the
offense of conviction” and any relevant conduct, as defined by § 1B1.3, “who is
unusually vulnerable due to age, physical or mental condition, or who is
10
Case: 12-50027 Document: 00512338659 Page: 11 Date Filed: 08/12/2013
No. 12-50027
otherwise particularly susceptible to the criminal conduct.” § 3A1.1(b) cmt. n.
2. For purposes of this enhancement, “victim” is defined broadly. Specifically,
“the 2–level adjustment of §3A1.1(b)(1) applies not only to victims of the offense
of conviction, but also to victims of any relevant conduct for which the
Guidelines make the defendant accountable.” United States v. Salahmand, 651
F.3d 21, 26 (D.C. Cir. 2011); see also United States v. Moon, 513 F.3d 527, 541
(6th Cir. 2008); United States v. Zats, 298 F.3d 182, 186-87 (3d Cir. 2002). The
district court applied both enhancements because a number of Valdez’s patients
were elderly Medicare recipients and low-income Medicaid recipients.
On appeal, Valdez does not argue that his patients were not “vulnerable,”
but argues that the primary victim of the offense was the federal government
and that no patients were victims at all because the government did not prove
that any of them were harmed medically or financially.1
This court has “previously recognized that a physician’s patients can be
victimized by a fraudulent billing scheme directed at insurers or other health
care providers.” United States v. Sidhu, 130 F.3d 644, 655 (5th Cir. 1997). In
applying this enhancement to similar cases involving health care fraud, we
have drawn a distinction between fraud schemes that “benefitted” patients, see
United States v. Gieger, 190 F.3d 661, 664 (5th Cir. 1999) (finding that patients
were not victims where scheme to submit false claims for ambulance services
provided them with a free ride to the hospital), and cases “in which patients
suffered harm or at least potential harm from the fraudulent scheme,” id.; see
United States v. Burgos, 137 F.3d 841, 844 (5th Cir. 1998) (finding that patients
were victims where they “were often admitted to the hospital needlessly or their
stays in the hospital were extended beyond what was necessary”); Sidhu, 130
1
Valdez is clearly correct that the United States government is not a vulnerable victim.
United States v. Gieger, 190 F.3d 661, 665 (5th Cir. 1999).
11
Case: 12-50027 Document: 00512338659 Page: 12 Date Filed: 08/12/2013
No. 12-50027
F.3d at 655 (patients were victims where they “were often debilitated by pain
or depression, and easily became addicted to the treatment proffered by [the
defendant] to support his fraud”); United States v. Bachynsky, 949 F.2d 722, 735
(5th Cir. 1991) (patients were victims where unnecessary treatment was
frequently ineffective and in some cases harmful to the patients).
Although Valdez argues that his patients benefitted from his treatment,
the district court’s finding that at least some of his patients were victims of his
relevant conduct is “plausible in light of the record as a whole.”
Cisneros-Gutierrez, 517 F.3d at 764. At trial, Dr. Smith and Dr. Novak testified
that Valdez risked causing numbness, weakness, pain and possibly permanent
nerve damage to his patients. Both doctors referenced specific patients,
including one who received approximately 357 injections, and one who received
500 injections in a three-year period. The pre-sentence investigation report
showed that multiple patients reported that employees of Valdez’s clinic told
them they had to have the injections in order to have their prescriptions for
pain medication filled. Valdez treated his Medicare- and Medicaid-dependent
patients, who were seeking treatment for pain, “during the commission” of his
fraudulent billing, when he required patients to receive the injections and then
billed the Programs for those injections. See Salahmand, 651 F.3d at 27 (noting
that defendant treated patients “during the commission” of identity theft
offense when he was posing as a doctor). Valdez has not shown that the district
court clearly erred in finding that Valdez’s treatment exposed patients to risks
of harm, and sometimes to medical treatment they did not want, and that pain
management patients who needed medication were vulnerable to his conduct
of requiring they receive the injections so he could fraudulently bill for them.2
2
The government also points to evidence concerning Valdez’s prescription of controlled
substances, including to patients who were addicted or who had attempted suicide. We do not
rely on any evidence concerning prescription drugs in affirming application of the
12
Case: 12-50027 Document: 00512338659 Page: 13 Date Filed: 08/12/2013
No. 12-50027
We find that the district court correctly applied the enhancement based on the
vulnerability of Valdez’s Medicare and Medicaid pain management patients,
who it construed as victims of Valdez’s relevant underlying conduct.
Lastly, the high number of injection procedures reflected in Valdez’s
patient files and billing records, and the evidence adduced at trial that
indicated that Valdez did not perform facet joint injections or peripheral nerve
injections but actually performed prolotherapy in many, possibly even all,
instances in which he billed for injections, demonstrates that the district court’s
finding that a large number of pain management patients were vulnerable
victims of Valdez’s offenses is plausible in light of the record as a whole. The
district court did not err in applying the additional 2-level “multiple vulnerable
victims” enhancement.
2. Abuse of Trust
Valdez next challenges the application of a 2-level enhancement under §
3B.1.3 for abusing a position of trust. This section provides an enhancement for
defendants who have “abused a position of public or private trust . . . in a
manner that significantly facilitated the commission or concealment of the
offense.” § 3B1.3. Valdez relies on precedent from the 11th Circuit to argue that
a Medicare-funded care provider, as a matter of law, does not occupy a position
of trust vis-a-vis Medicare. See United States v. Mills, 138 F.3d 928, 941 (11th
Cir. 1998). However, as Valdez acknowledges, this argument is foreclosed by
circuit precedent. See United States v. Miller, 607 F.3d 144, 149 (5th Cir. 2010)
(holding that owner of a medical supply store who fraudulently billed Medicare
occupied position of trust vis-a-vis Medicare); United States v. Iloani, 143 F.3d
921, 922-23 (5th Cir. 1998) (holding that chiropractor occupies a position of
enhancement in this case.
13
Case: 12-50027 Document: 00512338659 Page: 14 Date Filed: 08/12/2013
No. 12-50027
trust with regard to the insurance companies that he bills). The district court
did not err in applying the § 3B1.3 abuse of trust enhancement.
3. Mass-Marketing
Valdez next challenges the district court’s imposition of a 2-level mass-
marketing enhancement under § 2B1.1(b)(2)(A)(ii). The Guidelines define
mass-marketing as a “plan, program, promotion, or campaign that is conducted
through solicitation by telephone, mail, the Internet, or other means to induce
a large number of persons to . . . purchase goods or services. . . .” § 2B1.1 cmt.
n. 4(A); see United States v. Magnuson, 307 F.3d 333, 335 (5th Cir. 2002). The
district court applied the enhancement based on a flier that Valdez sent via
mail to 16,626 El Paso residents in December 2006 and four television
commercials shown on local news from April 2008 to December 2009, all
advertising his International Institute of Pain Management and “reconstructive
therapy,” which was prolotherapy. Valdez relies on United States v. Miller, 588
F.3d 560, 562, 568 (8th Cir. 2009) to argue that the enhancement does not apply
where the mass-marketing is not targeted at the specific victims of the fraud,
which he argues were the Programs. This argument is foreclosed by circuit
precedent. In Isiwele, this court rejected the Eighth Circuit’s reasoning in
Miller and upheld the application of the mass-marketing enhancement to a
defendant who had recruited beneficiaries in a scheme to submit fraudulent
bills to Medicare for power wheelchairs. See United States v. Isiwele, 635 F.3d
196, 204-05 (5th Cir. 2011). Likewise, Valdez solicited patients to receive
injections, for which he then fraudulently billed the Programs. The district
court did not err in applying the 2-level §2B1.1(b)(2)(A)(ii) mass-marketing
enhancement.
14
Case: 12-50027 Document: 00512338659 Page: 15 Date Filed: 08/12/2013
No. 12-50027
4. Sophisticated Means
Valdez next challenges the application of the 2-level “sophisticated
means” enhancement under § 2B1.1(b)(9)(C). Sophisticated means are defined
as “especially complex or especially intricate offense conduct pertaining to the
execution or concealment of an offense. . . Conduct such as hiding assets or
transactions, or both, through the use of fictitious entities, corporate shells, or
offshore financial accounts also ordinarily indicates sophisticated means.” § 2
B1.1 cmt. n. 8(B). The district court applied this enhancement because, based
on the FBI’s analysis of Valdez’s bank records, it concluded that Valdez was
attempting to hide his assets by depositing proceeds from the fraudulent billing
scheme into his investment accounts.
Valdez argues that his transfers from his operating accounts to his
investment accounts do not constitute sophisticated means. We agree. Valdez
used no false names, fictitious entities, shell companies or complicated financial
transactions, or any other particularly sophisticated means to hide or conceal
the assets. We have affirmed the application of the sophisticated means
enhancement in cases involving some method that made it more difficult for the
offense to be detected, even if that method was not by itself particularly
sophisticated. For example, in Clements, we upheld application of the
enhancement where the defendant repeatedly converted received funds into
multiple cashier’s checks made out to himself, which he then deposited into his
wife’s separate bank account, because his actions “obscure[d] the link between
the money and . . . himself,” and “undeniably made it more difficult for the IRS
to detect his evasion.” United States v. Clements, 73 F.3d 1330, 1340 (5th Cir.
1996); see also United States v. Conner, 537 F.3d 480, 492 (5th Cir. 2008)
(traveling to 23 different states to obtain information about credit accounts and
using a fictitious name and business to conduct fraudulent transactions
15
Case: 12-50027 Document: 00512338659 Page: 16 Date Filed: 08/12/2013
No. 12-50027
involved sophisticated means); United States v. Wright, 496 F.3d 371, 379 (5th
Cir. 2007) (depositing a check into an account and then using money to
purchase a cashier’s check in another name involved sophisticated means);
United States v. Charroux, 3 F.3d 827, 837 (5th Cir. 1993) (participation in land
flip scheme to purchase property for inflated price involved sophisticated means
where defendants “structured elaborate transactions to hide their revenues”).
Here, however, the sole reason given for applying this enhancement is
that Valdez took money directly deposited from Medicare into his operating
account, which was in his name, and moved it into his investment accounts,
which were also in his name. Even though this court reviews the factual
finding that Valdez used sophisticated means for clear error, see Clements, 73
F.3d at 1340, there is no indication that this open and transparent direct
deposit and movement of funds involved sophisticated means or could have
made it more difficult for his offense of health care fraud to be detected. We
hold that the district court erred in applying the 2-level § 2B1.1(b)(9)(C)
sophisticated means enhancement.
5. Loss Calculation
Valdez next challenges the district court’s loss calculation. The amount
of loss resulting from fraud is a specific offense characteristic that increases the
base offense level under the Guidelines. See § 2B1.1(b)(1). “Loss” is defined as
“the greater of actual loss or intended loss.” § 2B1.1 cmt. n. 3(A). “Actual loss”
includes “the reasonably foreseeable pecuniary harm that resulted from the
offense.” Id. cmt. n. 3(A)(i). “Intended loss” means “the pecuniary harm that
was intended to result from the offense,” and includes “intended pecuniary
harm that would have been impossible or unlikely to occur (e.g., as in a
government sting operation, or an insurance fraud in which the claim exceeded
the insured value).” Id. cmt. n.3(A)(ii). We review the district court’s method of
16
Case: 12-50027 Document: 00512338659 Page: 17 Date Filed: 08/12/2013
No. 12-50027
determining loss de novo, while we review background factual findings for clear
error. Isiwele, 635 F.3d at 202.
Here, the district court calculated the amount of intended loss at over
forty-four million dollars based on the gross amount of the fraudulent claims
Valdez submitted to the Programs. Valdez argues that because he never
expected full reimbursement, the loss intended by his actions was significantly
less than this amount. The intended loss calculation raised his offense level by
22. §2B1.1(b)(1)(L).
In health care fraud cases, this court has explained that “our case law
requires the government [to] prove by a preponderance of the evidence that the
defendant had the subjective intent to cause the loss that is used to calculate
his offense level.” Isiwele, 635 F.3d at 203 (quoting United States v. Sanders,
343 F.3d 511, 527 (5th Cir. 2003)). In the health care fraud context,
the amount fraudulently billed to Medicare/Medicaid is prima facie
evidence of the amount of loss [the defendant] intended to cause,
but the amount billed does not constitute conclusive evidence of
intended loss; the parties may introduce additional evidence to
suggest that the amount billed either exaggerates or understates
the billing party’s intent.
Id. (internal quotation marks and citations omitted); see also United States v.
Singh, 390 F.3d 168, 193-94 (2d Cir. 2004) (remanding for re-sentencing to give
the defendant an opportunity to show that the total amount he expected to
receive was less than the amount he actually billed to Medicare/Medicaid).
Here, Valdez objected to the loss calculation at sentencing and argued to
the district court that the evidence showed that he did not subjectively intend
to cause the loss of the full amount that he billed the Programs. He argued that
for years he consistently billed a high amount, knowing that he would only be
reimbursed for a fraction of what was billed. Valdez points to trial testimony
by Rose Chavez, his office manager, who testified for the government. Her
17
Case: 12-50027 Document: 00512338659 Page: 18 Date Filed: 08/12/2013
No. 12-50027
statements were introduced via an undercover recording with Chavez, who
stated on the recording that: “Those are our rates, which are usually based on
three times on [sic] what Medicare covers, that’s pretty much standard
practice.” Valdez argues that this evidence rebutted the finding that he
subjectively intended to cause the loss of the full amount he billed the
Programs. The district court did not reference this evidence in making the loss
calculation.
Based on the clear guidance in Isiwele, we find that it was error for the
district court to calculate the intended loss without considering the evidence in
the record that rebutted the prima facie evidence of intended loss. However, we
note that even if we assume there was error in the intended loss calculation,
and use the amount Valdez actually received from the program to calculate
loss—which comes to around thirteen million dollars—Valdez would still receive
a 20-level enhancement. See § 2B1.1(b)(1)(K).
6. Harmfulness of Sentencing Errors
We have found that the district court erred in applying the 2-level
sophisticated means enhancement, and in applying a 22-level increase based
on loss calculation without considering the evidence that tended to show that
Valdez did not have the subjective intent to cause the loss of the full amount
that he billed the Programs. We now consider whether those errors were
harmless. See United States v. Ibarra-Luna, 628 F.3d 712, 713-14 (5th Cir.
2010) (holding that an error in the calculation of the applicable Guidelines
range is subject to a harmless error analysis). “[T]he harmless error doctrine
applies only if the proponent of the sentence convincingly demonstrates both (1)
that the district court would have imposed the same sentence had it not made
the error, and (2) that it would have done so for the same reasons it gave at the
prior sentencing.” Id. at 714. To satisfy that high burden, there must be
18
Case: 12-50027 Document: 00512338659 Page: 19 Date Filed: 08/12/2013
No. 12-50027
“evidence in the record that will convince us that the district court had a
particular sentence in mind and would have imposed it, notwithstanding the
error.” Id. at 718 (quoting United States v. Huskey, 137 F.3d 283, 289 (5th Cir.
1998)).
Here, the court sentenced Valdez to 300 months. The original offense
level was 43, which together with his criminal history category I, set forth a
Guidelines range of life. However, even accounting for the district court’s
erroneous application of the sophisticated means enhancement and the loss
calculation, the offense level would still be 41.3 The Guidelines range applicable
to an offense level of 41, in criminal history category I, is 324-405 months.
Thus, the 300 month sentence is within the adjusted Guidelines range.
That the sentence would remain within the adjusted Guidelines range is
insufficient to indicate harmlessness; “the crux of the harmless-error inquiry is
whether the district court would have imposed the same sentence, not whether
the district court could have imposed the same sentence.” United States v.
Delgado-Martinez, 564 F.3d 750, 753 (5th Cir. 2009). There are two additional
factors present in this case which clearly indicate “(1) that the district court
would have imposed the same sentence had it not made the error, and (2) that
it would have done so for the same reasons it gave at the prior sentencing.”
3
For the health care fraud group of offenses: Base offense level of 6, § 2B1.1(a)(2), plus
20 levels for the calculation of loss, § 2B1.1(b)(1)(K); 2 levels for mass marketing, §
1B1.1(b)(2)(a); 2 levels for reckless risk of death or serious bodily injury (not challenged on
appeal), § 2B1.1(b)(13)(A); 2 levels for vulnerable victim, § 3A1.1(b)(1); 2 levels for multiple
vulnerable victims, § 3A1.1(b)(2); 2 levels for abuse of trust, § 3B1.1; and 4 levels for an
aggravated role in the offense (not challenged on appeal), § 3B1.1(a). Total offense level: 40.
For the money laundering group of offenses: Base offense level of 30, § 2S1.1(a)(2)
(adjusted upwards for specific offense characteristics, including 20 levels for loss calculation,
2 levels for mass marketing, and 2 levels for reckless risk of death or serious bodily injury);
plus 1 level for violation of § 1957 (not challenged on appeal),§ 2S1.1(b)(2)(A); 2 levels for
vulnerable victim, § 3A1.1(b)(1); 2 levels for multiple vulnerable victims, § 3A1.1(b)(2); 2 levels
for abuse of trust, § 3B1.1; and 4 levels for an aggravated role in the offense (not challenged
on appeal), § 3B1.1(a). Total offense level: 41. The group with the highest level is used.
19
Case: 12-50027 Document: 00512338659 Page: 20 Date Filed: 08/12/2013
No. 12-50027
Ibarra-Luna, 628 F.3d at 714. First, the district court imposed consecutive
sentences for factually related offenses. This court has recognized that “the
imposition of consecutive sentences may, under some circumstances,
demonstrate” that a Guidelines error was harmless. See United States v.
Woods, 440 F.3d 255, 260 (5th Cir. 2006); United States v. Garza, 429 F.3d 165,
170 (5th Cir. 2005) (identifying imposition of consecutive sentences as one of
only two circumstances in which this court has found a Booker sentencing error
to be harmless). Where one of the consecutive sentences is for “entirely
unrelated conduct,” this court ascribes no motivation to the district court “other
than adherence to the default rule that totally unrelated crimes should
ordinarily receive distinct punishment.” Woods, 440 F.3d at 260. Here, by
contrast, the district court imposed multiple concurrent sentences and one
consecutive sentence on one of the counts of health care fraud. The conduct was
all part of the same fraudulent scheme and all the charges were factually
related offenses. Thus, the court’s “conscious decision not to award a concurrent
sentence,” United States v. Prones, 145 Fed. App’x 481, 482 (5th Cir.2005), cert.
granted, judgment vacated on other grounds, 549 U.S. 1093 (2006), shows that
the court purposefully fashioned a sentence it thought was fair in the
circumstances, and weighs in favor of finding that the sentencing errors were
harmless, id.; cf. Woods, 440 F.3d at 260. The second factor tending to
demonstrate that the sentencing errors were harmless is the district court’s
statement that it would impose the same 300-month sentence on remand. At
the sentencing hearing, the district court stated:
THE COURT: I’ll inform you right now, Mr. Torres [defense counsel
at sentencing], if you take up an appeal and the appeal comes back
for re-sentencing, I will fashion a sentence that will meet the
300-month sentence that I’ve given him. If I miscalculated the
guideline range and it comes back because of that, there’s still a lot
to work with.
20
Case: 12-50027 Document: 00512338659 Page: 21 Date Filed: 08/12/2013
No. 12-50027
This unequivocal statement certainly constitutes “evidence in the record that
will convince us that the district court had a particular sentence in mind and
would have imposed it, notwithstanding the error.” Ibarra-Luna, 628 F.3d at
718. Though Valdez argues that this statement indicates that the judge was
biased, it is merely a characterization of the discretion the district court had in
fashioning this sentence. Where the sentence remains within the adjusted
Guidelines range, this statement is clear evidence that the district court “would
have imposed the same sentence” absent the guidelines calculation errors, not
simply that it “could have. . . .” Delgado-Martinez, 564 F.3d at 753.
We therefore hold that although the district court erred with respect to
the sophisticated means and loss calculation enhancements, those errors were
harmless, and affirm the sentence.
C. Forfeiture
Valdez next argues that it was error for the district court not to inquire
whether either party requested that the jury make the forfeiture determination
with regard to specific property, as provided by Federal Rule of Criminal
Procedure 32.2(b), before the jury began deliberations. The district court issued
an order of forfeiture, which imposed a money judgment against Valdez in the
amount of $9,741,649, and ordered him to forfeit to the United States all of his
right, title, and interest in two real properties, four vehicles, and the contents
of several bank and investment accounts. Because Valdez failed to object, we
review this claim for plain error pursuant to Rule 52.4 Fed. Rule Crim. P. 52(b).
On plain error review, Valdez “bears the burden of proving (1) error, (2) that is
plain, and (3) that affects his substantial rights.” Johnson, 520 U.S. at 466-67;
4
Contrary to Valdez’s argument that the errors implicating the interpretation of a Rule
of Criminal Procedure are somehow immune from the rule requiring preservation, even “the
seriousness of the error claimed does not remove consideration of it from the ambit of the
Federal Rules of Criminal Procedure.” Johnson v. United States, 520 U.S. 461, 466 (1997).
21
Case: 12-50027 Document: 00512338659 Page: 22 Date Filed: 08/12/2013
No. 12-50027
Puckett v. United States, 556 U.S. 129, 135 (2009). If the first three prongs are
satisfied, the court has “the discretion to remedy the error . . . if the error
seriously affect[s] the fairness, integrity or public reputation of judicial
proceedings.” Puckett, 556 U.S. at 135.
Criminal forfeiture is a part of sentencing imposed after conviction; it is
not a substantive element of the offense. See Libretti v. United States, 516 U.S.
29, 41 (1995). There is no constitutional right to a jury determination of
forfeiture. Id. at 49. However, Rule 32.2(b) provides that “if the indictment or
information states that the government is seeking forfeiture, the court must
determine before the jury begins deliberating whether either party requests
that the jury be retained to determine the forfeitability of specific property if it
returns a guilty verdict.” Fed. R. Crim. Pro. 32.2(b)(5)(A). We assume that the
district court clearly erred in not determining whether either party requested
that the jury determine forfeiture, given the clarity of the instructions in Rule
32.2. Id.; see United States v. Marquez, 685 F.3d 501, 509-10 (5th Cir. 2012).
With regard to the effect on his substantial rights, Valdez argues that since the
district court imposed the full forfeiture sought by the government, there is a
reasonable probability that a jury would have imposed less forfeiture. However,
the government produced trial evidence showing that Valdez kept the proceeds
of his health care fraud in his bank and investment accounts, and used the
proceeds of the fraud to purchase specific property, vehicles, and investments.
Regardless, even assuming that Valdez could show that the failure to submit
forfeiture to the jury affected his substantial rights, we find that the error does
not meet the final requirement of the plain error standard. See Johnson, 520
U.S. at 469-70. Given that there is no constitutional right to a jury
determination of forfeiture, that there is sufficient evidence tying the forfeited
property to the proceeds of Valdez’s health care fraud, and that during the trial
22
Case: 12-50027 Document: 00512338659 Page: 23 Date Filed: 08/12/2013
No. 12-50027
Valdez never indicated that he wished the jury to determine forfeiture, we
decline to vacate the forfeiture order on plain error review.
D. Admission of Medical Malpractice Evidence
Valdez next argues that the district court erred in admitting testimony
of physician witnesses who referred to Valdez’s prolotherapy procedures as
substandard or not medically necessary. He argues the testimony was not
relevant pursuant to Federal Rule of Evidence 402 and that the prejudicial
effect outweighed any probative value pursuant to Federal Rule of Evidence
403. He did not object to the testimony at trial, and thus review is for plain
error. See United States v. Gonzalez-Rodriguez, 621 F.3d 354, 362 (5th Cir.
2010).
The specific testimony challenged by Valdez includes: (1) two doctors’
testimony that the standard of medical care required using fluoroscopy in facet
joint injections, and that Valdez did not use a fluoroscope in his practice; (2) one
doctor’s testimony that Valdez’s practice of not obtaining consent forms before
performing facet joint injections would violate the medical standard of care; (3)
two doctors’ testimony that it would not be “medically reasonable” or “medically
accepted” to give a patient the number of facet joint injections that Valdez
administered or to give them as frequently as he did; (4) one doctor’s testimony
that the standard of care required that medications with expired dates be
thrown away, after the government had introduced photographs taken from
Valdez’s office which appeared to show expired medications, and; (5) a pain
management doctor’s testimony that, after conducting a peer review of Valdez’s
practice, that “I found it [the medical care provided by Valdez] substandard.”
The district court gave the jury a limiting instruction regarding any
testimony of medical malpractice. That instruction provided:
You have heard evidence of acts of the defendant which may be
similar to those charged in the superseding indictment, but which
23
Case: 12-50027 Document: 00512338659 Page: 24 Date Filed: 08/12/2013
No. 12-50027
were committed on other occasions. You also heard opinion
testimony alleging medical malpractice by the defendant. You must
not consider any of this evidence in deciding if the defendant
committed the acts charged in the superseding indictment.
Valdez did not object to this instruction. This limiting instruction concerning
medical malpractice testimony was added by the district court.
We hold that there was no error in admitting the testimony here, much
less plain error. The opinion testimony concerning medical malpractice was
elicited in response to Valdez’s defense, which was that he was actually
performing facet joint injections as defined by the Medicare guidelines. Because
Valdez contended that all the procedures which the government argued were
prolotherapy were actually facet joint injections, it was necessary for expert
doctors for the government to explain the difference between facet joint
injections and prolotherapy, including the testimony that if Valdez were actually
performing facet joint injections as he contended, then they were not correctly
performed. The medical testimony as a whole focused on a core factual
dispute—whether Valdez was performing prolotherapy or facet joint
injections—and the testimony that Valdez now complains about was largely
ancillary to that purpose. The judge gave a limiting instruction on his own
initiative. A limiting instruction minimizes the danger of undue prejudice. See,
e.g., United States v. Cooks, 589 F.3d 173, 183 (5th Cir. 2009). While some of the
government’s questioning went beyond the purpose of distinguishing
prolotherapy from facet joint injections, such as the questioning about whether
expired medications should be thrown out or questions about whether Valdez’s
practice was substandard in general, those questions were limited in the context
of the medical testimony as a whole, and the danger of any potential resulting
prejudice was reduced by the limiting instruction. For these reasons, Valdez has
not proven that the introduction of this testimony was error.
24
Case: 12-50027 Document: 00512338659 Page: 25 Date Filed: 08/12/2013
No. 12-50027
E. Cumulative Error
Valdez next argues that cumulative errors during his trial necessitate
reversal. See United States v. Delgado, 672 F.3d 320, 343-44 (5th Cir. 2012)
(describing the cumulative error doctrine). The only errors that we have
found—erroneous application of two sentencing enhancements and the failure
to inquire whether either party requested that the jury determine
forfeiture—relate to sentencing and thus clearly do not require reversal of the
convictions.
Valdez also argues that four times, government witnesses testified to a
legal conclusion that improper billing was fraud, or that in the witness’s opinion,
Valdez had committed fraud. Federal Rule of Evidence 704(a) prohibits a
witness from offering an opinion on the legal conclusion that a defendant had
the mental state that constitutes an element of the offense; however, the
defendant must make a timely objection to preserve the error if it occurs. See
United States v. Setser, 568 F.3d 482, 495 (5th Cir. 2009). Valdez objected only
to one instance of this testimony. Further, the district court instructed the jury
that it should not accept the opinions of experts, but must make their own
judgments about the evidence. Given the brevity of the challenged comments
and the overall weight of the incriminating evidence against Valdez, any error
was harmless and does not justify reversal. See Setser, 568 F.3d at 495.
III. Conclusion
For the foregoing reasons, we AFFIRM the conviction and sentence.5
5
Valdez also requested reassignment on remand, arguing that the district court showed
bias against him. We need not reach this issue because we do not remand the case. However,
we note that we find no evidence of bias in this case.
25