United States v. Chris Vernon , 723 F.3d 1234 ( 2013 )

Case: 12-12767 Date Filed: 07/26/2013 Page: 1 of 84
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-12767
________________________
D.C. Docket No. 1:11-cr-00012-KD-N-7
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
CHRIS VERNON,
Defendant-Appellee.
________________________
No. 12-13266
________________________
D.C. Docket No. 1:11-cr-00012-KD-N-3
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
Case: 12-12767 Date Filed: 07/26/2013 Page: 2 of 84
versus
BUTCH BRILL,
Defendant-Appellant.
________________________
No. 12-13311
________________________
D.C. Docket No. 1:11-cr-00012-KD-N-8
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JEFF VERNON,
Defendant-Appellant.
________________________
Appeals from the United States District Court
for the Southern District of Alabama
________________________
(July 26, 2013)
Before HULL and PRYOR, Circuit Judges, and SCHLESINGER, ∗ District Judge.
∗
Honorable Harvey E. Schlesinger, United States District Judge for the Middle District of
Florida, sitting by designation.
2
Case: 12-12767 Date Filed: 07/26/2013 Page: 3 of 84
HULL, Circuit Judge:
These three consolidated appeals arise from a single prosecution involving
health care fraud and violations of the Anti-Kickback laws regulating Alabama
Medicaid, which is funded in part by the United States government. Defendant
Jeff Vernon appeals his convictions on numerous grounds, including the district
court’s denial of his motion for a judgment of acquittal under Federal Rule of
Criminal Procedure 29. Defendant Butch Brill also appeals the district court’s
denial of his Rule 29 motion. The government appeals the district court’s order
setting aside the jury’s guilty verdicts as to Chris Vernon and granting his Rule 29
motion.
This prosecution involves “factor” medication, which is a special, expensive
medication used to treat hemophilia, a blood clotting disease. Defendants Chris
Vernon and Jeff Vernon were executives of MedfusionRx, LLC (“Medfusion”),
which is a specialty pharmacy that fills prescriptions for factor medication. Their
dispensing factor medication, especially to Medicaid recipients, was a profitable,
and indeed, lucrative business due to the high Medicaid reimbursement rate. In
order to gain more factor medication business, Medfusion made sizable payments
to individuals and businesses if they would refer their hemophiliac clients to
Medfusion for prescription filling. Specifically, Medfusion paid 45 to 50 percent
of its profits on filling factor medication prescriptions to the individual or business
3
Case: 12-12767 Date Filed: 07/26/2013 Page: 4 of 84
that referred that client to Medfusion for prescription filling. Those kickback
payments for referrals form the basis of the charges against Chris Vernon and Jeff
Vernon.
Meanwhile, Butch Brill worked for a business that received those kickback
payments. Butch Brill was convicted of conspiring with others, including his
estranged wife Lori Brill, to increase the kickback payments he received by
committing health care fraud. Specifically, the conspirators falsified records in
order to justify the ordering of more factor medication than was necessary.
After review of the extensive trial record and with the benefit of oral
argument, we affirm the convictions of Jeff Vernon and Butch Brill. As to Chris
Vernon, we vacate the district court’s Rule 29 acquittal of him on counts ten,
eleven, and twelve, we reverse the alternative award of a new trial, and remand for
reinstatement of the jury’s guilty verdicts and sentencing on those counts.
I. PROCEDURAL HISTORY
A. Second Superseding Indictment
A federal grand jury in the Southern District of Alabama returned a second
superseding indictment (“indictment”) against eight defendants: Butch Brill, Chris
Vernon, Jeff Vernon, Lori Brill, Travis Goodwin, Tony Goins, Eric Mosley, and
Leroy Waters.
4
Case: 12-12767 Date Filed: 07/26/2013 Page: 5 of 84
Two defendants, Travis Goodwin and Leroy Waters, pled guilty and testified
at trial. Six defendants went to trial. This appeal concerns the convictions of three
defendants: Butch Brill, Chris Vernon, and Jeff Vernon.
Count one of the indictment charged defendants Butch Brill, Lori Brill, and
Travis Goodwin with conspiracy to falsify factor medication records, in violation
of the health care fraud statutes, 18 U.S.C. §§ 1347(a), 1349. Counts two and three
charged them with substantive counts of health care fraud, in violation of 18
U.S.C. § 1347 and aiding and abetting health care fraud, in violation of 18 U.S.C.
§§ 2, 1347.
Count nine charged defendants Chris Vernon, Jeff Vernon, and Lori Brill
with conspiracy to pay money to Lori Brill to induce her to refer Medicaid clients
to the Vernons’ company, Medfusion, and to increase Medfusion’s profits, in
violation of the Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b); 18 U.S.C. § 371.
Counts ten, eleven, and twelve charged them with substantive violations of the
Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b).
Count fourteen charged defendants Chris Vernon, Jeff Vernon, and Leroy
Waters with conspiracy to pay money to Leroy Waters to induce him to refer
Medicaid clients to Medfusion and to increase Medfusion’s profits, in violation of
the Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b); 18 U.S.C. § 371. Counts
5
Case: 12-12767 Date Filed: 07/26/2013 Page: 6 of 84
fifteen, sixteen, and seventeen charged them with substantive violations of the
Anti-Kickback statute. 1
B. Rule 29 Motions
The joint jury trial of the six defendants began on January 30, 2012. After
the government rested its case, the defendant-appellants here—Butch Brill, Chris
Vernon, and Jeff Vernon—each moved for a judgment of acquittal under Rule
29(a).
The district court: (1) denied Butch Brill’s Rule 29(a) motion as to counts
one and three and took it under advisement as to count two; (2) granted Chris
Vernon’s Rule 29(a) motion as to counts fourteen through seventeen and reserved
ruling as to the other counts; and (3) reserved ruling on Jeff Vernon’s Rule 29(a)
motion.
On February 8, 2012, Butch Brill and Jeff Vernon each called one witness
and rested. Chris Vernon did not present evidence. At the close of the evidence,
all three defendants renewed their Rule 29(a) motions for acquittal, which the
district court took under advisement.
C. Jury Verdict
1
Counts thirteen and eighteen charged defendants Chris Vernon and Jeff Vernon with
additional substantive violations of the Anti-Kickback statute. Before trial, the district court
granted the government’s motion to voluntarily dismiss these counts.
6
Case: 12-12767 Date Filed: 07/26/2013 Page: 7 of 84
On February 13, 2012, the jury found defendant Butch Brill: (1) guilty of
count one, the health care fraud conspiracy; and (2) not guilty of counts two and
three, the substantive health care fraud violations.
The jury found defendants Chris Vernon and Jeff Vernon: (1) not guilty of
count nine, the conspiracy to make unlawful referral payments to HMS/Lori Brill;
and (2) guilty of counts ten, eleven, and twelve, the substantive Anti-Kickback
statute violations involving referral payments to co-defendant Lori Brill. 2
The jury also found defendant Jeff Vernon: (1) guilty of count fourteen, the
conspiracy to make unlawful referral payments to Waters; and (2) guilty of counts
fifteen, sixteen, and seventeen, the substantive Anti-Kickback statute violations
involving referral payments to co-defendant Waters.
After the verdict, the district court denied all pending Rule 29(a) motions.
D. Post-Trial Motions
Post-trial, each defendant filed a Rule 29(c) motion for acquittal. Chris
Vernon and Jeff Vernon also filed Rule 33 motions for a new trial.
2
Although co-defendant Lori Brill did not appeal here, we note the verdict as to her
because we later on discuss her interaction with the three defendants in this appeal. The jury’s
verdict as to Lori Brill was similar: (1) guilty of the conspiracy offense in count one; (2) not
guilty of the substantive health care fraud violations in count two; (3) guilty of the substantive
fraud violation in count three; (4) not guilty of the conspiracy offenses in counts four and nine;
and (4) guilty of the substantive violations of the Anti-Kickback statute in counts ten, eleven, and
twelve.
7
Case: 12-12767 Date Filed: 07/26/2013 Page: 8 of 84
After a hearing, the district court granted Chris Vernon’s Rule 29 motion for
a judgment of acquittal on counts ten, eleven, and twelve, which were his only
convictions. Alternatively, the district court granted Chris Vernon’s motion for a
new trial on those counts. The district court denied Jeff Vernon’s and Butch Brill’s
post-trial motions.
E. Sentences
The district court sentenced Butch Brill to fifteen months’ imprisonment,
followed by three years’ supervised release, with no fine. A few days later, the
district court sentenced Jeff Vernon to three years’ probation, with a $1,750,000
fine due immediately. The district court required that Jeff Vernon serve 180 days
of his sentence at a residential re-entry center, which he has since completed.
Although Butch Brill and Jeff Vernon appeal their convictions, they do not
challenge their sentences. The government, however, appeals the district court’s
Rule 29 acquittal of Chris Vernon on counts ten, eleven, and twelve.
Because all three appeals involve Rule 29 motions and the sufficiency of the
evidence, we recount in detail the evidence at trial. And given that the evidence
regarding Chris Vernon and Jeff Vernon is closely intertwined, we first discuss the
evidence about their making kickback payments to co-defendants Lori Brill and
Leroy Waters for referrals of factor medication clients and then the merits of their
8
Case: 12-12767 Date Filed: 07/26/2013 Page: 9 of 84
two appeals. Afterwards, we outline the evidence regarding Butch Brill and
discuss his appeal.
II. TRIAL EVIDENCE
A. Medfusion Rx, LLC
Throughout all events in this case, Medfusion was a specialty pharmacy
based in Birmingham, Alabama. Specialty pharmacies dispense critical, rare, and
expensive medications, and they also provide certain health care services to their
clients, including infusion and educational services. As a specialty pharmacy,
Medfusion filled prescriptions for medications used to treat long-term, serious
diseases, including hemophilia.
Medfusion was a successful business. It is undisputed that between 2005
and 2010, Medfusion grew from $12 million in sales to over $200 million.
Medfusion supplied drugs in 45 states and had physical locations in 4 states.
Defendants Jeff Vernon and Chris Vernon were both officers of Medfusion,
and at least Jeff Vernon was a co-owner. Specifically, by 2008 and during 2009
(the time period covered by the indictment), Jeff Vernon was Medfusion’s chief
executive officer (“CEO”) and Chris Vernon was its chief financial officer
(“CFO”). Jeff had worked for Medfusion since around 2005, and Chris had
worked there since 2006.
9
Case: 12-12767 Date Filed: 07/26/2013 Page: 10 of 84
Although Jeff Vernon’s wife, Suzanne, established Medfusion, she by 2007
had stopped working there. By 2008, she had transferred part of her interest in
Medfusion to Jeff Vernon.
Before addressing the kickback payments here, we describe how Medfusion
dispensed and was paid for factor medication for Alabama Medicaid recipients.
B. Medicaid Reimbursements for Factor Medication
Alabama Medicaid is a state-administered program that provides health care
services for residents of Alabama who are either members of a low-income family
or are disabled adults. The program receives federal funding through the Centers
for Medicare and Medicaid Services.
Alabama Medicaid requires that a company or individual, including a
physician or a pharmacy, become a “provider” before it furnishes a Medicaid
recipient with health care services. To become a provider, a pharmacy like
Medfusion must complete an application and execute a provider agreement. In the
provider agreement, the specialty pharmacy must agree to comply with all federal
policies.
Persons who suffer from hemophilia—a disease that interferes with the
blood’s clotting ability—need and receive factor medication, a blood-clotting drug
administered via intravenous injections. Hemophiliacs generally inject one
10
Case: 12-12767 Date Filed: 07/26/2013 Page: 11 of 84
prophylactic dose of factor medication twice per week, and sometimes take
supplemental injections as needed.
Beginning on January 1, 2008, Alabama Medicaid required providers of
hemophilia services to Alabama Medicaid recipients to sign a document, entitled
“Hemophilia Management Standards of Care.” This document listed various
services that a health care provider must provide to a hemophiliac patient,
including, inter alia: (1) home or office delivery of factor medication; (2)
educational materials and programs; (3) medically necessary ancillary supplies; (4)
constant emergency telephone support; (5) access to clinical staff trained in
hemophilia treatment; (6) emergency delivery of factor medication within 24 hours
of a prescription; (7) monthly phone calls by a patient “case representative,”
assessing the patient’s state of well-being, incidence of adverse events, home
inventory of factor medication, and confirmation of next medication delivery date;
(8) tracking of the amount of factor medication a patient had on hand and was
using; and (9) an annual in-home assessment by a nurse or pharmacist trained in
hemophilia treatment.
On Medfusion’s behalf, Jeff Vernon signed a copy of these Standards of
Care on December 19, 2007. Thus, Medfusion, as a specialty pharmacy, agreed to
provide these services to the hemophiliac patients who filled their factor
medication prescriptions with Medfusion.
11
Case: 12-12767 Date Filed: 07/26/2013 Page: 12 of 84
Under Alabama Medicaid policy, factor medication prescriptions are usually
written for one-month allotments, and a patient usually files Medicaid claims for
factor medication prescriptions twelve times per year. These prescriptions include
both prophylactic doses and “as-needed” doses for emergencies. Although
hemophiliac patients need monthly prescriptions to obtain factor medication, a
patient may not actually need or use the maximum monthly allowable dosage.
Each monthly shipment of factor medication may vary depending on a
patient’s needs, which are reported in a “factor infusion log” that the patient’s
pharmacy is required by Alabama Medicaid to maintain. In these logs, a
hemophiliac patient records each time he or she receives an infusion of factor
medication and the number of units received during the infusion. Alabama
Medicaid requires specialty pharmacies like Medfusion to provide these logs for
their patients in order to discourage patients from stockpiling medication.
Factor medication is expensive. It was not uncommon for factor medication
to cost between $50,000 and $200,000 per patient, per month. In 2010, Alabama
Medicaid spent $23 million paying for factor medication for 90 patients. Alabama
Medicaid reimburses providers, like Medfusion, for recipients’ prescribed
medications.
In 2008, Alabama Medicaid implemented a new formula for paying
specialty pharmacies like Medfusion for factor medication. Under this new
12
Case: 12-12767 Date Filed: 07/26/2013 Page: 13 of 84
formula, Alabama Medicaid reimburses a specialty pharmacy the average sales
price, plus six percent, for a factor medication prescription. For each unit of factor
medication dispensed, Alabama Medicaid also paid the pharmacy a “furnishing
fee” which, between 2008 and 2010, rose from 15 to 18 cents. A single dose of
factor medication might consist of approximately 3,000 units. Thus, in 2008, a
specialty pharmacy received a furnishing fee of $450 for filling a prescription for
just one dose of factor medication, and in 2010, the specialty pharmacy received
$540 for one dose of factor medication. The furnishing fee was meant to cover the
patient services provided by specialty pharmacies. Additionally, each time a
specialty pharmacy filled a factor medication prescription, Alabama Medicaid also
paid that pharmacy a “dispensing fee,” which covered various administrative costs.
Often patients obtain prescriptions for far more factor medication than they
actually need, resulting in profits for specialty pharmacies that are sometimes
wrongfully shared with patients. A Food and Drug Administration (“FDA”)
investigator testified that Lori Brill informed him that it “was common knowledge
within the hemophilia community that if a hemophiliac patient wanted to obtain
more factor medication than he or she actually needed, [he or she] could often be
successful in doing that.” Lori Brill also told the investigator that, often,
inexperienced physicians could be persuaded to prescribe more factor medication
than a patient actually needed.
13
Case: 12-12767 Date Filed: 07/26/2013 Page: 14 of 84
At trial, the evidence suggested that factor medication prescriptions are
susceptible to health care fraud because factor medication is so expensive and
because publicly funded health care programs like Alabama Medicaid reimburse
pharmacies for filling factor medication prescriptions at very high rates.
Here, given the high reimbursement rates, Medfusion paid large sums to
individuals simply for referring hemophiliac patients to Medfusion for filling their
prescriptions. Medfusion recruited co-defendants Lori Brill (through her company
Hemophilia Management Specialties (“HMS”)) and Leroy Waters to refer their
clients to Medfusion for prescription filling. In turn, HMS/Lori Brill and Waters
received 45 percent and 50 percent respectively of any profits Medfusion earned
from the referred clients. We detail further the trial evidence about Medfusion’s
relationships with HMS/Lori Brill and then Waters and the sizable referral fees
Medfusion paid them.
C. Lori Brill’s/HMS’s Referrals to Medfusion
Lori Brill is a hemophilia carrier and has a son, David Skowronski, who is a
hemophiliac. Beginning in 2004, Lori Brill worked as an employee of a health
care services company, ECM Home Health Service, Inc. (“ECM”). At ECM, Lori
Brill worked as a “patient advocate” for hemophiliac patients.3 She attended
medical appointments with her clients, helped them with routine life tasks, and
3
Witnesses also used the term “patient manager” to refer to the same position.
14
Case: 12-12767 Date Filed: 07/26/2013 Page: 15 of 84
assisted them in filling prescriptions. Lori Brill also actively recruited new patients
for ECM.
By November 2007, Lori Brill had left ECM and formed and incorporated
her own company, Hemophilia Management Specialties (“HMS”).
By this time, Lori Brill had also developed a relationship with Medfusion.
Lori Brill began to refer her existing clients to Medfusion for the filling of their
factor medication prescriptions. Lori Brill admitted that, by September 2009, six
HMS clients had used Medfusion to fill factor medication prescriptions. To retain
control over where her clients filled their factor medication prescriptions, Lori Brill
continued to provide various services to her clients, serving as their patient
advocate.
For example, one of HMS’s former clients, Ashley Sprinkle, testified that
Lori Brill: (1) took Sprinkle to appointments with doctors; (2) spoke to doctors on
Sprinkle’s behalf; (3) took Sprinkle shopping for clothes and purchased the
clothes; (4) received Sprinkle’s factor medication prescriptions from doctors and
ensured that the prescriptions were filled; and (5) called Sprinkle to make sure that
she had an adequate supply of factor medication on hand. Lori Brill first began
performing these services for Sprinkle sometime around 2003 and was still doing
so during 2007 and 2008.
15
Case: 12-12767 Date Filed: 07/26/2013 Page: 16 of 84
Likewise, Travis Goodwin, another HMS client, testified that Lori Brill
helped him “get to see doctors, get appointments with doctors, make sure [he] got
[his] medicine, [and] make sure the doctor was treating [him] right.” Lori Brill
became Goodwin’s patient advocate in 2004. Goodwin, who pleaded guilty to
health care fraud before trial, testified that Lori Brill would sometimes order more
factor medication than needed and that some of his factor medication expired
before he could use it.
Additionally, Sherry Demouey, the mother of a hemophiliac, Cameron
Demouey, testified that Lori Brill contacted her and provided her with information
about hemophilia days after her son, Cameron, was born with the disease in 2002.
From that time forward, Lori Brill was Cameron Demouey’s “hemophilia
coordinator.” Lori Brill accompanied Sherry and Cameron Demouey to
Cameron’s medical appointments. Demouey stated that “when the doctor would
write the prescriptions, [Demouey] would go ahead and give them to [Lori Brill] . .
. and [Lori Brill] would take them from there . . . to the pharmacist, and then have
the medicine filled.”
An Alabama Medicaid clinical pharmacist testified that Alabama Medicaid’s
Standards of Care did not require that a specialty pharmacy arrange for someone to
attend doctors’ appointments with a hemophiliac patient and personally arrange for
the filling of prescriptions. The pharmacist stated that it was not “normal” for a
16
Case: 12-12767 Date Filed: 07/26/2013 Page: 17 of 84
pharmacy representative to attend a doctors’ appointment with a patient. Thus,
when Lori Brill attended doctors’ appointments with her clients, and arranged for
their prescriptions to be filled, she acted on her own behalf or for HMS. The only
work that she did for Medfusion was referring her existing clients for prescription
filling.
Medfusion paid HMS/Lori Brill a commission of 45 percent of the profits
that it earned from filling factor medication prescriptions for clients she referred to
Medfusion. Lori Brill/HMS did not charge their clients for any service, including
taking them to doctors’ visits. Rather Lori Brill/HMS made money out of
kickback payments from Medfusion after Medfusion filled an HMS-referred
client’s prescription.
Lori Brill sometimes even passed a share of these kickback payments on to
her clients, either by giving them jobs at HMS or a thrift store that she owned, or
by paying for them to go on shopping trips or social outings. For example,
Demouey testified that Lori Brill gave her jobs at HMS and at the thrift store, and
occasionally took her on shopping trips. Demouey also testified that she routinely
filled her son’s factor medication prescriptions through Medfusion, until she
became dissatisfied with Medfusion’s method of delivering the medication.
Demouey, who pled guilty to health care fraud before trial, testified that Lori Brill
directed her to falsify the tracking logs for several HMS clients.
17
Case: 12-12767 Date Filed: 07/26/2013 Page: 18 of 84
Likewise, Sara Spencer, the mother of two young hemophiliac boys who
were both HMS clients, stated that Lori Brill paid her $1,500 per month to be
HMS’s “marketing coordinator” from June 2007 until sometime in 2008.
According to Spencer, she worked approximately 20 hours per week and her duties
were limited to updating HMS’s website, searching the internet for news articles
about hemophilia, drafting newsletters, and making business cards. During some
of this period, from November 2007 until November 2008, Spencer filled at least
one of her sons’ factor medication prescriptions through Medfusion. 4
As noted earlier, Alabama Medicaid required that specialty pharmacies like
Medfusion provide various health care services to patients whose prescriptions
Alabama Medicaid covered. Medfusion did not provide these services.
For example, Sprinkle and Goodwin both testified that they did not receive
“home visits” from nurses while they were HMS clients. Similarly, Sprinkle stated
that, after she started filling her sons’ factor medication prescriptions through
Medfusion: (1) no Medfusion employee called to check on her medication
inventory; (2) Medfusion did not send a nurse to her home; (3) Medfusion did not
train her “with regard to appropriate medication use, realistic therapy expectations,
and positive outcomes related to therapeutic adherence”; (4) no Medfusion
4
HMS/Lori Brill also used other specialty pharmacies besides Medfusion, but we focus
only on HMS/Lori Brill’s interaction with Medfusion, owned and operated by defendants Chris
Vernon and Jeff Vernon.
18
Case: 12-12767 Date Filed: 07/26/2013 Page: 19 of 84
employee ever informed her of educational resources available to her or offered her
educational materials; and (5) Medfusion did not inform her of the availability of
constant emergency clinical care.
In July 2009, Medfusion’s corporate compliance officer, Stacy Walton, sent
an email to Chris Vernon, with Jeff Vernon carbon copied, expressing her concerns
that Goodwin had not received a home visit or educational training, despite the fact
that he had “been consistently getting shipments” of factor medication. Walton
also expressed concern that Sprinkle might not receive a home visit or “teaching”
when she was due for both in the following month.
Thus, the relationship between HMS/Lori Brill and Medfusion was based on
Lori Brill referring her Medicaid clients to Medfusion and in turn Medfusion
paying her kickbacks for doing so. This referral arrangement was lucrative for
both parties. For example, between 2007 and 2009, Medfusion received from
Alabama Medicaid: (1) approximately $1.3 million for filling prescriptions for
Goodwin; (2) over $1 million for filling prescriptions for Skowronski, Lori Brill’s
son; (3) approximately $125,000 for filling prescriptions for Cameron Demouey;
and (4) approximately $215,000 for filling prescriptions for Sprinkle. In just one
year, between September 2007 and October 2008, Medfusion earned a net profit of
$451,988.61 from filling factor medication prescriptions for Lori Brill’s clients
alone and paid her 45 percent or $203,394 of that sizable yearly profit.
19
Case: 12-12767 Date Filed: 07/26/2013 Page: 20 of 84
The record further showed that in the 22-month period between November
2007 and August 2009, Medfusion paid a total of $369,371 to HMS, consisting of:
(1) $50,000 in 2007; (2) $195,203 in 2008; and (3) $124,168 in 2009. The
Vernons fully knew that Medfusion was making sizable payments to Lori
Brill/HMS, and Lori Brill/HMS was not performing any work or services for
Medfusion other than referring clients for prescription filling.
D. HMS/Lori Brill’s Proposed Contract with Medfusion
Because they well knew about Medfusion’s hefty payments to Lori
Brill/HMS, the Vernons’ main defense at trial was that they thought Medfusion’s
payments to Lori Brill were lawful, and thus the government failed to prove any
willful crime. Although Lori Brill referred clients to Medfusion without any
written contract about her payments, the Vernons stress that their lawyer did draft a
proposed contract for HMS/Lori Brill. We discuss that contract briefly even
though Lori Brill never signed it.
In February 2008, Jeff Vernon had Medfusion’s attorney, Steven Benefield,
draft a contract between Medfusion and HMS. Benefield assisted in the formation
of Medfusion and routinely provided legal assistance to Medfusion, Jeff Vernon,
and Chris Vernon between 2003 and 2008. Benefield was Jeff Vernon’s “primary
lawyer and sort of his general counsel.”
20
Case: 12-12767 Date Filed: 07/26/2013 Page: 21 of 84
On April 14, 2008, Benefield sent the final draft version of that contract to
Jeff Vernon and Chris Vernon via email. The draft contract required that
HMS/Lori Brill perform specific marketing and compliance tasks, other than
simply referring her existing clients to Medfusion. It provided that HMS would
receive a commission of at least 45 percent, and not greater than 50 percent, of
Medfusion’s gross profits for prescriptions filled for HMS-referred clients.
Attorney Benefield testified that he believed that the draft contract was
lawful, stating: (1) “I have not made a communication that it’s unlawful because I
happen to believe it’s lawful. I did then; I still do”; and (2) “Had I concluded that
it was not lawful, I would have never sent it out.” As discussed later, what
Benefield did not know was that HMS/Lori Brill was not, and never was, actually
performing the marketing and compliance tasks in the proposed contract. What
Benefield did not know was that Lori Brill was only referring her clients and was
being paid simply for referrals.
In any event, Lori Brill did not sign the draft contract on HMS’s behalf. In
her FBI interview, Lori Brill claimed that she did not sign the contract because it
“called for all of her patients to fill their prescriptions at Medfusion, but she
wanted her patients to be able to fill their prescriptions wherever they wanted to.”
In other words, if her clients insisted on changing pharmacies, she wanted to be
21
Case: 12-12767 Date Filed: 07/26/2013 Page: 22 of 84
free to negotiate and receive referral fees from those pharmacies, and not be bound
to Medfusion.
Notably, the relationship between Medfusion and HMS/Lori Brill did not
change after Lori Brill declined to sign the contract. In an August 27, 2008, email,
Jeff Vernon advised Benefield: “Lori has never signed the contract you prepared.
Which, I am really not that concerned about.”
While Medfusion’s referral payments to co-defendant Lori Brill formed the
basis of counts ten, eleven, and twelve against the Vernons jointly, we now discuss
Medfusion’s payments to co-defendant Leroy Waters, which were the basis of
counts fifteen, sixteen, and seventeen against Jeff Vernon.
E. Leroy Waters’s Employment with Medfusion
Leroy Waters was a hemophiliac himself and had several family members
who were hemophiliacs. Waters was originally a patient of ECM’s. He later
became an ECM employee working in sales. During this time period and before
2006, Lori Brill was a co-worker of Waters’s at ECM.
Candi Marks Williams, who was also Waters’s co-coworker at ECM,
testified that, as a sales representative, Waters
would mostly manage his family which [were] his patients. It was
supposed to be recruitment, making sure that everything was okay,
taking them to the doctor if needed, picking them up, calling them on
a regular basis, making sure they had enough factor in case something
happened, dinners, lunches.
22
Case: 12-12767 Date Filed: 07/26/2013 Page: 23 of 84
Waters later became responsible for providing services for most of ECM’s African
American clients. Most of Waters’s clients were insured by Alabama Medicaid.
In July 2006, Lori Brill contacted Jeff Vernon and informed him that she
was not happy working at ECM. Lori Brill stated that she wanted to meet with Jeff
Vernon and Waters to talk “about some other options.” Jeff Vernon responded by
arranging a meeting with Lori Brill and Waters. At the scheduled meeting, Lori
Brill did not appear and Jeff Vernon met only with Waters.
At that meeting, Waters proposed that Medfusion hire him and Lori Brill.
After the meeting, Waters and Williams sent Jeff Vernon a document containing a
list of the initials of Waters’s Medicaid-recipient clients and the amounts of factor
medication that each normally needed. In other words, if Medfusion hired and
paid Waters, he would refer his clients to Medfusion for prescription filling.
About ten days after Jeff Vernon’s first meeting with Waters, Jeff Vernon
met with Waters, Williams, and Chestang. One account of the meeting came from
Jeff Vernon’s deposition testimony in an unrelated 2007 civil case that the
government introduced at trial. Jeff Vernon testified that, although Waters,
Williams, and Chestang told him what their salaries were at ECM, they “did not
discuss any compensation package” at Medfusion. Jeff Vernon also stated that the
meeting was only between himself and the three ECM employees, and that, when
Medfusion decided to hire Waters, Williams, and Chestang, Chris Vernon had no
23
Case: 12-12767 Date Filed: 07/26/2013 Page: 24 of 84
role “in computing any of the compensation packages for the ECM employees that
were coming onboard.”
Williams confirmed her attendance at the meeting, but testified that Chris
Vernon attended the meeting too, although Waters and Jeff Vernon “did most of
the talking.” Williams also stated that, during the meeting, Jeff Vernon proposed
that Medfusion pay Waters, Williams, and Chestang “bonuses probably every three
months.”
After this second meeting, Medfusion hired Waters, Williams, and Chestang.
The hires quickly turned out to be profitable for Medfusion. Waters brought most
of his ECM clients with him to Medfusion. Waters also began filling his own
factor medication prescriptions through Medfusion. As a result, Medfusion’s
number of factor medication clients roughly doubled.
Medfusion initially paid Waters a salary of approximately $100,000, plus a
portion of the profits Medfusion earned from filling prescriptions for his clients.
Although Medfusion began paying Waters in 2006, it was not until March 10,
2008, that he signed a written “Employment Agreement” with Medfusion to work
as a “hemophilia sales associate.” This contract provided that Waters agreed that
his position would be “full-time employment” and that he would “devote his . . .
best efforts and all of his . . . business time, attention and skills to the successful
24
Case: 12-12767 Date Filed: 07/26/2013 Page: 25 of 84
continuation of the business of [Medfusion].” Waters’s contract also stated that he
would receive “an annualized salary of 50% of net profit[s] from his sales.”
On June 30, 2008, Waters and Medfusion entered into a revised employment
agreement drafted by Medfusion’s attorney, Benefield. According to Benefield,
Jeff Vernon wanted Waters, who “was a salaried and commissioned sales
employee,” to become “a salaried employee with bonus, but which would
effectively cap his commission.” In the revised contract, Waters again agreed “to
devote [his] full professional and business time, attention, and efforts to the
business and affairs of [Medfusion] during the Term of [Waters’s] employment.”
The revised contract did provide a new method for paying Waters. It
entitled Waters to receive “an annualized salary of $92,000” and “a commission
for the past and future value of the sales to customers of Medfusion by [Waters]
equal to . . . a net payment of $289,500.”
Regardless of the precise contract terms, Medfusion paid Waters: (1)
approximately $400,000 in 2007; (2) approximately $700,000 in 2008, which
included a $200,000 loan from Medfusion to purchase a home; and (3)
approximately $325,000 in 2009. Waters also received various fringe benefits
from Medfusion. For example, Waters received a company vehicle, which he used
as his primary personal vehicle. Medfusion gave Waters a company credit card
25
Case: 12-12767 Date Filed: 07/26/2013 Page: 26 of 84
that Waters used for personal expenses, including charges at Wal-Mart, Alabama
Power, Blockbuster Video, Red Lobster, and casinos.
The evidence established, however, that Waters did not actually “devote” his
“best efforts” or “all of his business time” to working for Medfusion; nor did
Medfusion actually expect him to do so. Rather, in exchange for large payments,
Waters ensured that his hemophiliac clients, with whom he already had existing
relationships, filled their factor medication prescriptions through Medfusion.
Waters also did not recruit new clients to Medfusion, as his contract required.
Basically, Waters brought himself and his hemophiliac clients with him from
another pharmacy to Medfusion.
Williams, Waters’s former co-worker at ECM and at Medfusion, testified to
this end. Williams stated that Waters’s supposed “main duties” at Medfusion were
“[s]ales, recruitment, talking to the patients, lunches, dinners, taking care of any
problems that arise with them, doctors’ visits, things like that.” However, when
asked what Waters “really [did],” Williams stated: “Well, he went out of town a lot
to see his family and he would do lunches and dinners and he was mainly at the
casinos or the dog track . . . . [g]ambling . . . . [a]ny day of the week.”
Williams also testified that Waters encouraged his clients to order more
factor medication than they needed. For example, she testified that one of
Waters’s clients had a “pantry . . . full” of factor medication. When Williams’s son
26
Case: 12-12767 Date Filed: 07/26/2013 Page: 27 of 84
needed more factor medication, Waters shared with Williams some of the excess
factor medication dispensed to the client with the “pantry . . . full.” As another
example, Waters told Williams to call a client (Kyle) and tell him that he needed to
order more factor medication even though that client indicated he did not need it.
Like Lori Brill, Waters also passed some of his kickback earnings on to his
clients. Waters frequently paid his clients’ rent, phone bills, and power bills.
Williams testified that Waters said to her after making these payments, “‘Well, I
told [a client] she better not tell nobody, because I’ll get in trouble.’”
We recognize that Medfusion’s contracts with Waters identified him as an
“employee,” its organizational chart listed him as a “sales representative,” and
Medfusion issued a W-2 tax form for Waters for each year from 2006 to 2009. In
reports to the State of Alabama, Medfusion listed Waters as an employee
beginning in the fourth quarter of 2006 and ending in the fourth quarter of 2009.
However, the greater weight of the evidence showed that the purported
“employee” relationship between Waters and Medfusion was a sham. For
example, Waters worked from his home in Mobile, rarely, if ever, visited
Medfusion’s Birmingham headquarters, and received no oversight or direction
from Medfusion employees. Thus, Waters was able to spend most of his time at
casinos or performing other non-work related tasks. An FBI investigator (who
reviewed Waters’s bank records, casino records, and Medfusion company credit
27
Case: 12-12767 Date Filed: 07/26/2013 Page: 28 of 84
card records) used records to estimate the number of workdays that Waters spent
gambling at a casino. She reported that Waters gambled at a casino: (1) 72 or 73
workdays in 2007; (2) 85 workdays in 2008; and (3) 60 workdays in 2009.
Additionally, Medfusion’s payments to Waters were significantly greater
than what Medfusion paid other sales representatives, including Williams and
Chestang. Williams’s annual salary was $60,000 and Chestang’s was $85,000. In
comparison, the least annual amount that Waters received from Medfusion was
$325,000 in 2009. Nevertheless, Williams and Waters had the same job titles and
substantially the same responsibilities at Medfusion.
Moreover, although Waters’s contracts required him to comply “with all
policies and procedures relating to the reimbursement of . . . expenses,” Medfusion
did not require Waters to submit receipts for his credit card expenditures or to
prepare expense reports. Nor did Medfusion include on W-2 forms Waters’s credit
card spending as compensation.
With this general background, we next discuss the Anti-Kickback statute and
then the government’s appeal in Chris Vernon’s case.
III. THE ANTI-KICKBACK STATUTE
The Anti-Kickback statute is the basis for the charges against both Vernons.
42 U.S.C. § 1320a-7b(b). Section 1320a-7b(b), entitled “Illegal remunerations,”
has two subsections: 1320a-7b(b)(1) and 1320a-7b(b)(2). We set forth in full
28
Case: 12-12767 Date Filed: 07/26/2013 Page: 29 of 84
subsections (b)(1) and (b)(2) to lay the foundation for our analysis of the issues on
appeal.
Subsection (b)(1) of the statute criminalizes the soliciting or receiving of
money in return for the referral of Medicaid clients for the furnishing of items or
services as follows:
(1) whoever knowingly and willfully solicits or receives any
remuneration (including any kickback, bribe, or rebate) directly or
indirectly, overtly or covertly, in cash or in kind—
(A) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part under a
Federal health care program, or
(B) in return for purchasing, leasing, ordering, or arranging for
or recommending purchasing, leasing, or ordering any good,
facility, service, or item for which payment may be made in
whole or in part under a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined
not more than $25,000 or imprisoned for not more than five years, or
both.
Id. § 1320a-7b(b)(1) (emphasis added).
Then, subsection (b)(2) of the statute criminalizes the offering or paying of
money in return for referral of Medicaid patients for the furnishing of items or
services as follows:
(2) whoever knowingly and willfully offers or pays any remuneration
(including any kickback, bribe, or rebate) directly or indirectly,
overtly or covertly, in cash or in kind to any person to induce such
person—
29
Case: 12-12767 Date Filed: 07/26/2013 Page: 30 of 84
(A) to refer an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which
payment may be made in whole or in part under a Federal
health care program, or
(B) to purchase, lease, order, or arrange for or recommend
purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part under
a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined
not more than $25,000 or imprisoned for not more than five years, or
both.
Id. § 1320a-7b(b)(2) (emphasis added).
The two subsections are effectively the two sides of the same illegal
kickback coin: subsection (b)(1) criminalizes the soliciting or receiving of the
kickback and subsection (b)(2) criminalizes the offering or paying of the kickback.
IV. NO. 12-12767, UNITED STATES V. CHRIS VERNON
As stated, the jury found Chris Vernon guilty of the three substantive Anti-
Kickback statute violations alleged in counts ten, eleven, and twelve. Specifically,
the jury convicted Chris Vernon of paying kickbacks, directly or indirectly, to
HMS/Lori Brill for referrals of factor medication clients, as shown by these three
Medfusion corporate checks:
• No. 011407, a check dated June 23, 2008, for $35,345.49, payable to
“Hemophilia Management Specialties, Inc.”;
30
Case: 12-12767 Date Filed: 07/26/2013 Page: 31 of 84
• No. 013896, a check dated November 30, 2008, for $20,512.79, payable to
“Hemophilia Management Specialties, Inc.”; and
• No. 017649, a check dated August 12, 2009, for $18,759.27, payable to
“Hemophilia Management Specialties, Inc.”
Post-trial, the district court granted Chris Vernon’s motion for a judgment of
acquittal on counts ten, eleven, and twelve involving HMS, which the government
appeals.5
“The District Court’s determination that the evidence introduced at trial was
insufficient to support the jury’s verdict of guilt is [an] issue of law entitled to no
deference on appeal.” United States v. Miranda, 425 F.3d 953, 959 (11th Cir.
2005) (internal quotation marks omitted). Rather, “[w]e review de novo a district
court’s decision to grant a judgment of acquittal.” United States v. Khanani, 502
F.3d 1281, 1295 (11th Cir. 2007).
In addition, we “view the evidence in the light most favorable to the
government, and determine whether a reasonable jury could have found the
defendant guilty beyond a reasonable doubt.” Miranda, 425 F.3d at 959 (internal
quotation marks omitted). “The prosecution need not rebut all reasonable
hypotheses other than guilt” and the “jury is free to choose between or among the
conclusions to be drawn from the evidence presented at trial.” Id. (internal
5
The government does not appeal the district court’s pre-trial dismissal of counts fourteen
through seventeen against Chris Vernon regarding payments to co-defendant Leroy Waters.
31
Case: 12-12767 Date Filed: 07/26/2013 Page: 32 of 84
quotation marks omitted). Importantly, “the district court must accept all
reasonable inferences and credibility determinations made by the jury.” Id.
(internal quotation marks omitted).
We now examine the elements of the Anti-Kickback crime, which is the
subject of counts ten, eleven, and twelve, and then the relevant evidence as to Chris
Vernon.
A. The Anti-Kickback Statute
To convict Chris Vernon of substantive violations of the Anti-Kickback
statute, the government needed to prove that he (1) knowingly and willfully, (2)
paid money, directly or indirectly, to HMS/Lori Brill, (3) to induce her to refer
individuals to Medfusion for the furnishing of factor medication, (4) paid for by
Medicaid. See 42 U.S.C. § 1320a-7b(b)(2)(A).
Chris Vernon does not dispute that Medicaid paid Medfusion for furnishing
factor medication and that in turn, Medfusion paid 45 percent of its profits to
HMS. Rather, he argues the evidence failed to show he actually signed the
Medfusion checks that paid HMS and that even if he did, the evidence still failed
to show the required referral and willfulness elements of the charged crime. We
address each argument in turn.
B. Evidence that Chris Vernon Paid HMS
32
Case: 12-12767 Date Filed: 07/26/2013 Page: 33 of 84
As to who signed Medfusion’s checks, the government introduced copies of
the three Medfusion corporate checks payable to HMS that were charged in counts
ten, eleven, and twelve. Although no handwriting expert testified, the jury readily
could conclude from a visual examination of the physical checks that they are
signed “Chris Vernon” when compared to other examples of Chris’s signature
shown on documents introduced at trial.
Furthermore, the evidence showed the defendant Chris Vernon was the CFO
of Medfusion from 2006 to 2009, which further suggests he signed these three
checks in June 2008, November 2008, and August 2009 respectively. Indeed, as
early as July 27, 2006, Chris Vernon signed a Medfusion letter requesting a “motor
vehicle report” on Leroy Waters and written next to the Chris Vernon signature is
“CFO.” This 2006 signature is nearly identical to the signature on the three checks
payable to HMS. The government also introduced Medfusion’s “Employee
Reference Manual,” dated December 2008, which contained an organizational
chart, showing that Chris Vernon was Medfusion’s CFO.
In addition, Candi Williams testified that, when she started working at
Medfusion in 2006, she thought that Chris Vernon “was the accountant.”
Similarly, the government introduced a copy of an April 6, 2009, email which
Chris Vernon signed as “Chief Financial Officer / MedfusionRx, LLC.” In this
email, Chris Vernon indicated his full knowledge of how Medfusion made sizable
33
Case: 12-12767 Date Filed: 07/26/2013 Page: 34 of 84
payments to HMS, his involvement in the processing of the checks to HMS, and
how he even knew Medicaid paid 100 percent reimbursement to Medfusion, but
Blue Advantage paid only 80 percent:
Please review the March 09 commission report for HMS. I have
made a reduction to the payment for 16583.51. The reduction is for
Ashley Sprinkle’s previous commission payments for the dates of
service from 6-1-08 until 2-28-09. Ashley changed insurance from
Medicare/Medicaid to Blue Advantage. We were told her claims
would pay at 100% because she would meet the low income subsidy
dual eligible requirements. Blue Advantage does confirm that she is
dual eligible but continues to pay her claims at 80% of the allowable.
I have exhausted every avenue to appeal the payment from Blue
Advantage. If the 20% is recovered I will reissue payment to HMS. I
have removed Ashley Sprinkle from the March 09 spreadsheet and
will continue to reduce all future dispenses unless reimbursement
changes.
Let me know if it is ok to issue the March payment.
In light of all of this evidence, a reasonable jury readily could find that Chris
Vernon was Medfusion’s CFO when each of the three checks were written, and
that, in his capacity as CFO, he actually signed the checks. Thus, the evidence
amply established that Chris Vernon “paid remuneration” to HMS.
C. Payments “To Induce” HMS “to Refer” Patients to Medfusion
As to the referral element, we also reject Chris Vernon’s argument that the
evidence was insufficient to establish that Medfusion made payments to HMS “to
induce” HMS “to refer an individual” to Medfusion for the furnishing of factor
medication. See 42 U.S.C. § 1320a-7b(b)(2)(A) (emphasis added). Chris Vernon
34
Case: 12-12767 Date Filed: 07/26/2013 Page: 35 of 84
contends that the word “refer,” as used in the statute, is a term of art that means “a
request by a physician for an item or service.” He argues that because Lori Brill is
not a physician, she could not “refer” patients to Medfusion within the meaning of
subsection (b)(2)(A) of § 1320a-7b.
This argument wholly fails because the plain language of the statute is not
limited to payments to physicians who prescribe medication. Rather, it speaks
broadly to “whoever knowingly and willfully . . . pays any remuneration” to “any
person to induce such person . . . to refer an individual” to Medfusion for an item
or service paid by Medicaid. Id. (emphasis added).
Chris Vernon argues subsections (b)(2)(A) and (b)(2)(B) of the Anti-
Kickback statute distinguish between the actions of doctors in subsection (b)(2)(A)
and laypersons working in the health care field in subsection (b)(2)(B). See id.
§ 1320a-7b(b)(2)(A)–(B). We disagree because these subsections distinguish
between the referral of persons in subsection (b)(2)(A) and obtaining of goods and
services in subsection (b)(2)(B); they do not make the distinction Chris Vernon
argues. The text of the statute alone adequately refutes Chris Vernon’s argument.
In addition, we are persuaded by the Seventh Circuit’s decision in United
States v. Polin, 194 F.3d 863 (7th Cir. 1999), which rejected a similar argument.
In Polin, the Seventh Circuit affirmed the Anti-Kickback statute convictions of two
defendants, who were employees of a pacemaker monitoring service. The
35
Case: 12-12767 Date Filed: 07/26/2013 Page: 36 of 84
defendants made payments to an independent pacemaker sales representative,
Matthew Haberkorn, based on the number of patients referred by Haberkorn to the
defendants’ employer for pacemaker monitoring services. Id. at 864–65, 867.
The evidence showed that Haberkorn was responsible for selecting an outside
monitoring service once a physician determined that such services were necessary
and that although “the physician had the right to refuse any [monitoring] service he
chose, . . . [Haberkorn] had never been overruled by a physician during his
fourteen year career.” Id. at 865.
Nevertheless, the two defendants in Polin argued, as Chris Vernon does
here, that their payments to Haberkorn, who referred patients, did not violate the
statute because only a physician can “refer” a patient. The Seventh Circuit
disagreed, holding that the defendants’ reading of the statute would “lead to absurd
results.” Id. at 866. Because there was sufficient evidence that Haberkorn had the
capacity “to refer” patients, the defendants’ payments to Haberkorn gave rise to “a
classic case of an illegal kickback prohibited by [the Anti-Kickback statute in] 42
U.S.C. § 1320a-7b(b)(2)(A).” Id. at 867.
Like the sales representative Haberkorn in Polin, in this case Lori Brill was
effectively responsible for deciding which specialty pharmacy to use for the filling
of her HMS patients’ prescriptions. There was overwhelming evidence that Lori
Brill and other HMS employees, as “patient advocates,” had the capacity to, and
36
Case: 12-12767 Date Filed: 07/26/2013 Page: 37 of 84
did, refer their hemophiliac clients to Medfusion for the filling of their factor
medication prescriptions. Some of HMS/Lori Brill’s hemophiliac clients did not
even know which pharmacy filled their prescriptions because they gave control of
that decision to Lori Brill. The fact that Lori Brill and her HMS employees could
not actually prescribe the factor medication is irrelevant.
Additionally, in United States v. Starks, 157 F.3d 833 (11th Cir. 1998), this
Court affirmed convictions under the Anti-Kickback statute based on payments
made by Andrew Siegel, the non-physician director of a drug addiction treatment
center, to Angela Starks and Barbara Henry who were “community health aides”
working for a non-profit agency that advised pregnant women about possible
treatment for drug abuse. Id. at 835–37. Siegel instructed his employee to pay a
total of $250 for each patient Starks and Henry referred to the treatment center
Siegel operated. Id. at 836. Starks and Henry were not physicians and could not
prescribe treatment for the women they advised. See id. at 835–36. Nevertheless,
this Court affirmed the Anti-Kickback statute convictions of Siegel and Starks
(Henry did not appeal). Id. at 842. While the specific argument Chris Vernon
makes here was not made in Starks, the facts and the outcome in Starks are
instructive.
We recognize that Chris Vernon relies on United States v. Miles, 360 F.3d
472 (5th Cir. 2004), but that case is materially different. In Miles, the two
37
Case: 12-12767 Date Filed: 07/26/2013 Page: 38 of 84
defendants owned and operated Affiliated Professional Home Health (“APRO”), a
home health care company, and paid a public relations firm, Premier, to distribute
APRO’s marketing literature, business cards, and baked goods to doctors. Id. at
475, 479. When a doctor prescribed home health care services, and the doctor’s
staff decided to use APRO, the doctor or a member of his staff contacted Premier
and provided the patient’s billing information. Id. at 480. Premier then passed that
information on to APRO, who paid Premier an additional $300 for each Medicare
patient who became a client as a result of the firm’s marketing efforts. Id. at 479–
80.
On appeal, the Miles defendants argued that they did not violate subsection
(b)(2)(A) of the Anti-Kickback statute because Premier “never actually referred
anyone . . . , but simply engaged in advertising activities on behalf of APRO.” Id.
at 480. The Fifth Circuit agreed, holding that APRO’s payments to Premier were
not to induce a referral of a patient, because there was “no evidence that Premier
had any authority to act on behalf of a physician in selecting the particular home
health care provider.” Id. Premier also had no relationship with the patients. See
id. In short, “[t]he payments from APRO were not made to the relevant
decisionmaker as an inducement or kickback for sending patients to APRO.” Id.
(emphasis added). In contrast, Medfusion’s payments were made to the relevant
38
Case: 12-12767 Date Filed: 07/26/2013 Page: 39 of 84
decisionmaker, Lori Brill, as she had her own personal and existing relationships
with her clients and decided where to fill her clients’ prescriptions.
Even the Fifth Circuit in Miles specifically recognized “certain situations
where payments to non-doctors would fall within the scope of the statute” and
discussed Polin approvingly. Id. at 480–81 (“Under our reading of the statute,
because the salesman in Polin was the relevant decisionmaker and his judgment
was shown to have been improperly influenced by the payments he received from
the monitoring service, the Seventh Circuit correctly upheld the conviction of the
individuals who paid the salesman in Polin.”).
As his last no-referral argument, Chris Vernon contends that a patient could
only be “referred” to Medfusion if he was not already a Medfusion customer, and
that, at the times in 2008 and 2009 that the three checks alleged in the indictment
were issued, the patients already had been Medfusion customers for some time.
This argument also fails because the payments here were made for the continuing
referral of these patients by HMS/Lori Brill. The patients did not have contracts
with Medfusion that required them to fill their prescriptions with Medfusion. At
any time, Lori Brill could have moved their business to other specialty pharmacies.
To adopt Chris Vernon’s argument would lead to the absurd result that the first
kickback payment for a referral is unlawful, but future kickback payments for the
39
Case: 12-12767 Date Filed: 07/26/2013 Page: 40 of 84
same patient are lawful because they are not for an initial “referral.” We decline to
graft such a counterintuitive principle onto the Anti-Kickback statute.
In sum, there was sufficient evidence that Chris Vernon made not just
payments, but sizeable ones to HMS/Lori Brill for the purpose of inducing Lori
Brill to refer her Medicaid clients to Medfusion for prescription-filling services.
And there was extensive evidence (and no dispute on appeal), that several of
HMS’s clients were Medicaid recipients and that their prescriptions were covered
by Alabama Medicaid.
D. Evidence that Chris Vernon Acted “Willfully”
There was also ample evidence for a reasonable jury to conclude that Chris
Vernon acted “willfully” as required by § 1320a-7b(b)(2). The evidence showed
that Chris Vernon, as CFO, signed the three checks, knew HMS/Lori Brill was not
an employee of Medfusion but a third party entity, and knew the Medfusion’s
payments to her were payments for her referring clients to Medfusion for
prescription filling. The parties do not dispute the nature of the statute’s
willfulness standard but only whether the evidence sufficiently established it as to
Chris Vernon. We discuss what constitutes willfulness and then the evidence.
40
Case: 12-12767 Date Filed: 07/26/2013 Page: 41 of 84
The Anti-Kickback statute does not define the term “willfully.” 6 However,
in another Anti-Kickback statute case, this Court concluded that the Eleventh
Circuit Pattern Jury charge appropriately defines “willfully.” Starks, 157 F.3d at
837–38. In Starks, we affirmed the district court’s jury instruction that the word
“willfully,” “means the act was committed voluntarily and purposely, with the
specific intent to do something the law forbids, that is with a bad purpose, either to
disobey or disregard the law.” Id. (quoting 11th Cir. Pattern Jury Instr. 9.1). Here,
the district court gave this same pattern instruction.
Consistent with Starks, the district court here also advised the jury that
“[w]hile a person must have acted with the intent to do something that the law
forbids before you can find that the person acted willfully, the person need not be
aware of the specific law or rule that his or her conduct may be violating.” This
Court in Starks rejected the defendants’ argument that the Anti-Kickback statute
requires that a defendant had to have known that a specific “referral arrangement
violated the Anti-Kickback statute in order to be convicted.” Starks, 157 F.3d at
837. We held that “[the Anti-Kickback statute] is not a highly technical tax or
financial regulation that poses a danger of ensnaring persons engaged in apparently
innocent conduct.” Id. at 838. Rather, “the giving or taking of kickbacks for
6
Neither party disputes that Chris Vernon acted “knowingly.” Thus, we address only the
willfulness aspect of the statute’s mens rea requirement.
41
Case: 12-12767 Date Filed: 07/26/2013 Page: 42 of 84
medical referrals is hardly the sort of activity a person might expect to be legal.”
Id.
Here, the evidence more than sufficiently showed Chris Vernon’s
willfulness. Before the June and November 2008 checks, Chris Vernon knew: (1)
the commission-based nature of Medfusion’s payments to HMS/Lori Brill; (2) that
Lori Brill was not an employee of Medfusion; and (3) that the Anti-Kickback
statute criminalizes such commission-based arrangements between health care
providers and third parties.
Chris Vernon knew that Medfusion was paying HMS/Lori Brill 45 percent
of the profits that it received from filling factor medication prescriptions for her
HMS clients during 2008. Chris Vernon sent a chart to Jeff Vernon showing, for
the time period from September 2007 to October 2008, the profit of Medfusion and
the 45 percent calculation of the commission being paid to Lori Brill. As CFO,
Chris Vernon knew the monthly payments routinely exceeded $10,000. In April
2008, Chris Vernon received from Medfusion’s attorney, Benefield, the proposed
Medfusion-HMS/Lori Brill contract which referred to HMS as an “independent
contractor” of Medfusion. The contract included a “Payment Table” that set forth
the commission-based structure of HMS’s compensation from Medfusion. The
payment table provided that Lori Brill/HMS would receive a “Representative Fee
Percentage of Collected Gross Profit.” That percentage was to be: (1) 50 percent
42
Case: 12-12767 Date Filed: 07/26/2013 Page: 43 of 84
when it took less than 90 days for Medfusion to receive payment for filling a
prescription for an HMS client; (2) 47.5 percent when Medfusion received
payment within 91 to 180 days; and (3) 45 percent when Medfusion did not receive
payment for 181 days or more. Although Lori Brill did not sign it, the proposed
contract was to put in writing Medfusion-HMS/Lori Brill’s previous and ongoing
financial agreement. 7
Emails further established that Chris Vernon was intricately involved with
the actual calculation and payment of commissions to HMS/Lori Brill. These
emails, although written in 2009, evidenced a continued, unchanged financial
relationship between Medfusion and HMS/Lori Brill during 2008 and 2009. For
example, in the April 6, 2009, email, Chris Vernon told Jeff Vernon that he had
“made a reduction to [HMS/Lori Brill’s] payment for 16583.51” and advised that
“[t]he reduction [was] for Ashley Sprinkle’s previous commission payments for
the dates of service from 6-1-08 until 2-28-09.”
Further, on June 8, 2009, Lori Brill sent an email to Chris and Jeff Vernon,
writing:
7
In concluding that the government had not met its burden of proving willfulness, the
district court stressed that “[t]here was no evidence at trial that Chris Vernon was involved in
procuring the contract with HMS, that he was aware of the services to be provided for payment,
or that he ever participated in discussions concerning its legality.” We need not consider what
role Chris Vernon played in the preparation of the unsigned Medfusion-HMS/Lori Brill contract.
There was ample evidence indicating that, even if Chris Vernon did not actively participate in the
procuring of that contract, he was familiar with its terms.
43
Case: 12-12767 Date Filed: 07/26/2013 Page: 44 of 84
Chris and Jeff,
[C]ould you please review the distribution report you sent for May
2009[?] You reported the net profit as my commission for May and
then paid HMS 45% of my commission instead of the profit. The
profit to be commissioned on was $60,544.48. Could you please send
out any adjustments as soon as possible[?]
....
Lori Brill
Hemophilia Management Specialties, Inc.
On August 3, 2009, Chris Vernon forwarded to Jeff Vernon a chart detailing
Medfusion’s profits made from patients referred by Lori Brill. That chart lists: (1)
prescriptions that Medfusion filled for HMS patients between January 12, 2009,
and July 28, 2009; (2) the amounts that Medfusion received from insurers for
filling those prescriptions; (3) the costs of those prescriptions to Medfusion; (4)
Medfusion’s profits earned for each prescription; and (5) Medfusion’s profit
margin for each prescription.
Additionally, Chris Vernon knew that the Anti-Kickback statute makes
criminal commission-based payments by a health care provider to a non-employee,
like the payments Medfusion made to HMS/Lori Brill. Chris Vernon was a
sophisticated businessman, at the helm of a company that did many million dollars
in sales by 2010.
In November 2008, Medfusion’s own “corporate compliance plan” advised
Chris Vernon: (1) that “[a]ll employees shall comply with anti-kickback laws”; (2)
“[t]he federal anti-kickback laws are written to prevent MedfusionRX, LLC
44
Case: 12-12767 Date Filed: 07/26/2013 Page: 45 of 84
personnel and representatives from knowingly and willfully . . . paying . . . or
receiving any money . . . directly or indirectly from third parties in connection with
items or services billed to federal programs”; and (3) “[a]ll personnel and
representatives must be aware the payment may be unlawful even if the only
purpose of a payment scheme is to influence referrals.” This plan included various
references to the CFO’s role in administering this plan and even instructed that
“[e]mployees in the finance department . . . are expected to be vigilant in
identifying potential violations.”
Chris Vernon was also privy to Benefield’s 2009 email conversations with
Jeff Vernon about Medfusion’s failed attempts to bring the Medfusion-HMS/Lori
Brill relationship into compliance with the Anti-Kickback statute. On April 21,
2009, Medfusion’s attorney, Benefield, sent a copy of the unsigned Medfusion-
HMS/Lori Brill contract to James Pool, an attorney specializing in health care
regulation. Around that time, a large private equity company, Cressey and
Company (“Cressey”), was considering purchasing Medfusion. During the due
diligence process, Cressey’s executives wanted to ensure that certain Medfusion
contracts and business relationships, including its relationship with HMS/Lori
Brill, complied with health care regulatory statutes like the Anti-Kickback statute.
In response to this request, Benefield solicited Pool’s opinion on the HMS/Lori
Brill relationship and asked him “if there wasn’t some way that he could come up
45
Case: 12-12767 Date Filed: 07/26/2013 Page: 46 of 84
with . . . to structure this relationship so that it would fall within a check-the-box
safe harbor [of the Anti-Kickback statute].”
Pool was not able to come up with a way to ensure that the Medfusion-
HMS/Lori Brill relationship fell under a safe harbor provision, and Chris Vernon
knew about Pool’s unsuccessful efforts. For example, after Benefield sent Jeff
Vernon an invoice for Pool’s work, Jeff Vernon replied to Benefield and Chris
Vernon: “We will pay it. That is a substantial amount of money with no answers.
Has he come up with anything on HMS yet?” A few weeks later, Jeff Vernon sent
another email to Benefield and Chris Vernon, writing: “Is it not possible for Jim
Poole [sic] to come up with a contract where we get paid a rate as a pharmacy
service provider that would eliminate the kickback risk or put it on Lori?”
Although Pool was unable to restructure the Medfusion-HMS/Lori Brill
relationship to make it lawful, that did not stop Medfusion from trying to
“eliminate the kickback risk or put it on Lori.” On July 14, 2009, Jeff Vernon
emailed Victor Espinosa, an employee or executive of another specialty pharmacy,
carbon copying Chris Vernon. In that email, Jeff Vernon wrote,
We are in the process of restructuring MedfusionRx and we have one
sales person that is similar to your affiliates. Our council [sic] has
concerns about anti-kickback statutes. Is it possible for you to refer
me to your council [sic] since they would be familiar with the
situation?
46
Case: 12-12767 Date Filed: 07/26/2013 Page: 47 of 84
By the time Chris Vernon signed the August 12, 2009, check, he knew attorney
Pool had effectively concluded Medfusion’s relationship with HMS/Lori Brill
violated the Anti-Kickback statute. 8
Lest there be any doubt, by the time of the August 12, 2009 payment, Chris
Vernon also had received concerns in a July 31, 2009 email from Stacy Walton,
Medfusion’s corporate compliance officer, about “creative charting” to make it
appear that Medfusion was satisfying the factor medication–logging and home visit
requirements for Sprinkle and Goodwin as to factor medication, even though it had
not done so. Three days later, Jeff Vernon responded to Walton and Chris Vernon.
He instructed Chris Vernon: “[L]et me know which patients of Lori’s have
received meds the last two months.” He instructed Walton to arrange for Ashley
Sprinkle and Travis Goodwin to receive home visits and for Walton to “get charts
up to speed.” 9
8
Chris Vernon argues that, under the Anti-Kickback statute, a transaction might not fall
under one of the safe harbor provisions, and yet still comply with the statute. Thus, he contends
that this evidence does not necessarily show that Chris Vernon suspected that the relationship
between Medfusion and HMS was unlawful; only that he suspected that it did not fall under a
safe harbor provision. But Medfusion was making an effort to fit the relationship within a safe
harbor provision of the Anti-Kickback statute, from which effort a jury could infer that, absent a
safe harbor provision, Medfusion was concerned that the relationship would be illegal.
9
Chris Vernon argues that we should read the phrase “creative charting” to refer to “an
administrative concern . . . — not a concern about fraud.” While it is plausible that the phrase
might refer to something other than the falsifying of records submitted to Medicaid, in this
appeal of a grant of a motion for a judgment of acquittal, we view the evidence in the light most
favorable to the government. Thus, we conclude that a reasonable jury could, not that it
necessarily would be required to, construe the phrase as a reference to fraud.
47
Case: 12-12767 Date Filed: 07/26/2013 Page: 48 of 84
Given that Chris Vernon not only knew that Medfusion was paying
HMS/Lori Brill commissions based on her referrals of factor medication clients,
but also was aware that paying such kickbacks was illegal, a reasonable jury easily
could have found that he acted willfully when he signed each of the three
Medfusion checks payable to HMS.
Chris Vernon points out that this Court affirmed a jury’s finding of willful
violations of the Anti-Kickback statute where the violative transactions had
occurred in cash, and in various covert locations. See Starks, 157 F.3d at 836–37.
Chris Vernon stresses that the Medfusion payments to HMS were routine business
checks. However, nothing in Starks states that furtive activity is required to
establish willfulness under the Anti-Kickback statute. Such a requirement would
be contrary to the clear statutory language, which criminalizes the paying of “any
remuneration . . . overtly or covertly.” 42 U.S.C. § 1320a-7b(b)(2). In addition,
this Court in Starks merely stated that the evidence of furtiveness indicated that the
defendants knew they were breaking the law. 157 F.3d at 839 n.8. Here, there was
more than sufficient evidence that Chris Vernon actually knew that Medfusion’s
payments to HMS/Lori Brill violated the Anti-Kickback statute.
Because ample evidence supported the jury’s guilty verdicts on counts ten,
eleven, and twelve, the district court erred in granting Chris Vernon’s motion for a
judgment of acquittal on those counts.
48
Case: 12-12767 Date Filed: 07/26/2013 Page: 49 of 84
E. Alternative Grant of Motion for New Trial
In the alternative to an acquittal, the district court also granted Chris
Vernon’s motion for a new trial. The district court explained that “‘the evidence
preponderates sufficiently [heavily] against the verdict that a serious miscarriage of
justice may have occurred.’” The government appeals this alternative holding too.
“[W]e review the grant of a new trial based on the weight of the evidence
more closely than the grant of a new trial on other grounds.” United States v.
Almanzar, 634 F.3d 1214, 1222 (11th Cir.), cert. denied, 132 S. Ct. 316 (2011).
While “we do not review the grant of a new trial based on the weight of the
evidence de novo, our review is not much different.” Id. (internal quotation marks
omitted). This is because “we want to be sure that the judge did not simply
substitute her judgment for that of the jury.” Id. (internal quotation marks and
alterations omitted). Accordingly, when the record establishes that the evidence
did not “preponderate so heavily against the jury’s verdict as to lead to a
‘miscarriage of justice,’ we will conclude that the district court . . . exceeded its
authority by granting a new trial.” Id. (additional internal quotation marks and
alterations omitted).
For the reasons just explained, the trial evidence did not preponderate so
heavily against the jury’s guilty verdicts as to cause a miscarriage of justice. Thus,
the district court erred in granting Chris Vernon’s motion for a new trial.
49
Case: 12-12767 Date Filed: 07/26/2013 Page: 50 of 84
In sum, we vacate the district court’s award of a judgment of acquittal to
Chris Vernon on counts ten, eleven, and twelve, and we reverse the alternative
award of a new trial on those counts. We remand so that the district court can
enter judgment on the jury’s verdict on counts ten, eleven, and twelve and proceed
to the sentencing phase on Chris Vernon’s three convictions.
V. NO. 12-13311, UNITED STATES V. JEFF VERNON
We now turn to the appeal of co-defendant, Jeff Vernon, Medfusion’s CEO
during the period from 2007 to 2009. The jury convicted Jeff Vernon of the
substantive violations of the Anti-Kickback statute in counts ten through twelve
and fifteen through seventeen, and of the conspiracy to make unlawful referral
payments in count fourteen. We affirm these convictions and explain why Jeff
Vernon’s arguments on appeal lack merit.
A. Jury Instructions and Alleged Duplicitous Indictment
Jeff Vernon alleges that each of the six substantive anti-kickback counts in
the indictment (counts ten through twelve and fifteen through seventeen) were
duplicitous and that the jury instructions erred by not curing that problem.
Specifically, as to these six substantive counts, Jeff Vernon argues that his
indictment was unconstitutionally duplicitous because each count did not allege a
single crime, but improperly combined two separate crimes: (1) a violation of
§ 1320a-7b(b)(1), which prohibits soliciting or receiving kickbacks, and (2) a
50
Case: 12-12767 Date Filed: 07/26/2013 Page: 51 of 84
violation of § 1320a-7b(b)(2), which prohibits offering or paying kickbacks. Jeff
Vernon asserts that the jury instructions failed to cure this duplicity. As a result,
Jeff Vernon argues, the jury may have issued a non-unanimous verdict because
some jurors may have convicted him of soliciting or receiving kickbacks, in
violation of § 1320a-7b(b)(1), while other jurors may have convicted him of the
separate crime of offering or paying kickbacks, in violation of § 1320a-7b(b)(2).
As an initial matter, Jeff Vernon failed to preserve his arguments in the
district court, both regarding the indictment and the jury instructions, thereby
warranting review only for plain error. See United States v. Barrington, 648 F.3d
1178, 1190 & n.6 (11th Cir. 2011) (reviewing for plain error unpreserved
challenges to a duplicitous indictment and jury instructions).10
The district court set a deadline of September 26, 2011, by which the parties
had to file all pretrial motions under Federal Rule of Criminal Procedure 12(b),
including motions alleging defects in the indictment. Yet Jeff Vernon first alleged
that the indictment was duplicitous on December 12, 2011, long after the court-
ordered deadline, when he joined Chris Vernon’s motion to dismiss the indictment.
10
Under plain error review, we ask whether there was “(1) ‘error,’ (2) that is ‘plain,’ and
(3) that ‘affect[s] substantial rights.’” Johnson v. United States, 520 U.S. 461, 466–67, 117 S.
Ct. 1544, 1549 (1997) (alteration in original) (quoting United States v. Olano, 507 U.S. 725, 732,
113 S. Ct. 1770, 1776 (1993)). If these three conditions are met, “an appellate court may then
exercise its discretion to notice a forfeited error, but only if (4) the error ‘seriously affects the
fairness, integrity, or public reputation of judicial proceedings.’” Id. at 467, 117 S. Ct. at 1549
(alteration and some internal quotation marks omitted) (quoting Olano, 507 U.S. at 732, 113 S.
Ct. at 1776).
51
Case: 12-12767 Date Filed: 07/26/2013 Page: 52 of 84
In response to this motion to dismiss, the government argued that Chris and Jeff
Vernon’s duplicity allegation “should be struck as untimely” and that,
alternatively, the allegation was meritless. The district court summarily denied the
Vernons’ motion to dismiss the indictment “for reasons stated in the Government’s
response.”
Because the district court rejected Jeff Vernon’s duplicity argument at least
in part on grounds of untimeliness, Jeff Vernon has waived that argument in the
district court. See Fed. R. Crim. P. 12(e) (stating that a party waives a defective-
indictment defense or objection “not raised by the deadline the court sets,” unless
the court grants relief from the waiver for good cause). Furthermore, Jeff Vernon
never objected to the jury instructions on grounds that they failed to cure the
allegedly duplicitous indictment or somehow compounded the error.
Given the plain-error standard of review, Jeff Vernon’s challenges to the
indictment and jury instructions readily fail. Even if we assume that the indictment
was somehow duplicitous, Jeff Vernon has shown no prejudice flowing from this
alleged defect. To reiterate, the essence of Jeff Vernon’s argument is that the
duplicitous indictment caused a non-unanimous jury verdict because some jurors
may have convicted him of soliciting and receiving kickbacks under § 1320a-
7b(b)(1), rather than offering or paying kickbacks under § 1320a-7b(b)(2), or may
have improperly combined elements of both offenses. But the record shows
52
Case: 12-12767 Date Filed: 07/26/2013 Page: 53 of 84
absolutely no danger of a non-unanimous jury verdict on the substantive anti-
kickback counts.
First, although each of the six substantive counts combined the elements of
§ 1320a-7b(b)(1) and (b)(2), the indictment as a whole made clear that Jeff Vernon
was charged only with subsection (b)(2), that is, offering or paying kickbacks.
Each of the six challenged substantive counts expressly incorporated the “Manner
and Means” and “Overt Acts” of the conspiracies alleged in counts nine and
fourteen. In the “Manner and Means” sections of the conspiracy counts, the
indictment alleged that Jeff and Chris Vernon “increased their profits by inducing”
Lori Brill or Leroy Waters “to refer [Lori Brill’s and Waters’s] patients to
Medfusion. This inducement was accomplished by knowingly and willfully
paying kickbacks to [Lori Brill and Waters] in the form of commission payments.”
Moreover, in the “Overt Acts” section, the indictment alleged that Lori Brill and
Waters, not Jeff or Chris Vernon, received commission checks from Medfusion.
Thus, the indictment made clear that Jeff and Chris Vernon were paying the
kickbacks and Lori Brill and Waters were receiving them.
To the extent the indictment left any possible doubt in the minds of the jury
as to the allegations against Jeff Vernon, the evidence presented at trial quashed
any doubts. As discussed elsewhere in this opinion, the trial evidence showed
exactly what was alleged in the indictment, namely, that Jeff and Chris Vernon
53
Case: 12-12767 Date Filed: 07/26/2013 Page: 54 of 84
paid kickbacks through Medfusion to obtain patient referrals. There was no
evidence whatsoever that either Jeff or Chris Vernon received kickbacks. In fact,
any such evidence would have made little sense in the context of this fraud
scheme, where the Vernons controlled Medfusion which was paid by Medicaid or
other insurance companies, not by Lori Brill or Waters. See United States v. Park,
421 U.S. 658, 674, 95 S. Ct. 1903, 1913 (1975) (“[I]n reviewing jury instructions,
our task is also to view the charge itself as part of the whole trial.”).
Furthermore, the district court made clear to the jury that the six substantive
counts charged Jeff Vernon with violating subsection (b)(2), that is, offering or
paying kickbacks. Specifically, in summarizing the charges in counts ten through
twelve, the district court explained:
And then counts 10 through 12 relate only to Lori Brill, and Jeff
Vernon, Chris Vernon, and allege that from December ’07 to
September ’09 that they violated the statute by Medfusion paying
commissions to HMS as follows: 10, 11, and 12.
The district court provided a similar explanation of counts fifteen through
seventeen, stating:
Counts 15 through 17 relate only to Jeff Vernon and alleges [sic] that
in or about December ’07 and continuing through September ‘9 [sic]
that he violated the statute by Medfusion paying commissions to
Leroy Waters, as follows. Look at the top of page 18, and that’s how
those counts are delineated, 15, 16, and 17.
In light of the foregoing, there is no possibility that the alleged defects in the
indictment or the jury instructions confused the jury or caused the jury to convict
54
Case: 12-12767 Date Filed: 07/26/2013 Page: 55 of 84
Jeff Vernon of anything other than offering or paying kickbacks, in violation of
subsection (b)(2). See United States v. Gibson, 708 F.3d 1256, 1275 (11th Cir.
2013) (“We will not reverse a defendant’s conviction based on a challenge to the
jury charge unless we are left with a substantial and ineradicable doubt as to
whether the jury was properly guided in its deliberations.” (internal quotation
marks omitted)). Thus, Jeff Vernon has not shown any plain error in this regard.
B. Alleged Misstatements of the Law in the Jury Instructions
For the first time on appeal, Jeff Vernon also argues that the jury instructions
on both the substantive counts and the conspiracy count misstated the law. We
review these jury instruction issues for plain error also.
To recall, the district court’s instructions on the six substantive counts
against Jeff Vernon provided:
Now, a defendant can be found guilty of [violating the Anti-Kickback
statute] only if all of the following facts are proved beyond a
reasonable doubt: One, that the defendant knowingly and willfully
offered, paid, solicited, or received remuneration; the remuneration
was offered, paid, solicited, or received at least in part to induce or in
exchange for the referral of a patient insured by a federal health care
program; and, the patient’s services were covered in whole or in part
by a federal health care program.
This jury instruction differs somewhat from the applicable statutory
provision, which prohibits the payment of kickbacks “to refer an individual to a
person for the furnishing or arranging for the furnishing of any item or service for
55
Case: 12-12767 Date Filed: 07/26/2013 Page: 56 of 84
which payment may be made in whole or in part under a Federal health care
program.” 42 U.S.C. § 1320a-7b(b)(2)(A).
Jeff Vernon contends that the jury instruction misstated the law because it
allowed the jury to convict him without finding the required nexus between the
improper referrals and Medicaid coverage: that is, without finding that Jeff Vernon
and Medfusion paid kickbacks for the referral of patients whose factor medication
prescriptions were covered by Medicaid. Jeff Vernon argues that the jury
instructions allowed conviction so long as the referred patients received Medicaid
benefits for some health care services, even services unrelated to the illegal
referrals. This argument fails.
First, the challenged instruction did not mislead the jury as to the required
nexus between the patient referrals and Medicaid. The last clause of the
instruction required the jury to find that the “the patient’s services were covered in
whole or in part by a federal health care program,” i.e., Medicaid. Although the
term “the patient services” was not mentioned elsewhere in the instruction, the jury
easily could infer that “the patient services” were those provided by the payer of
kickbacks, i.e., Jeff Vernon and Medfusion, to the referred patients.
Second, any doubt left by the instruction was cured when the jury took with
it a copy of the indictment during deliberations. The indictment set forth the
required nexus between federal health care benefits and the services provided to
56
Case: 12-12767 Date Filed: 07/26/2013 Page: 57 of 84
referred patients. Moreover, the evidence presented at trial proved
overwhelmingly that some of the factor medication Medfusion provided to
HMS/Lori Brill’s and Waters’s patients was covered by Alabama Medicaid. And
Jeff does not dispute this fact on appeal. Thus, we will not reverse Jeff Vernon’s
conviction on this ground. See Johnson, 520 U.S. at 470, 117 S. Ct. at 1550
(holding that the omission of an element from a jury instruction did not warrant
reversal under plain error review because there was overwhelming evidence on that
element); see also Neder v. United States, 527 U.S. 1, 7–20, 119 S. Ct. 1827,
1833–39 (1999) (applying harmless error and affirming district court’s conclusion
that failure to instruct on the “materiality” element of the tax fraud offense was
harmless beyond a reasonable doubt where “the omitted element was uncontested
and supported by overwhelming evidence”).
Jeff Vernon next challenges the district court’s instruction on count
fourteen, the conspiracy to make unlawful referral payments to Waters. The
instructions on this count required the jury to find, in relevant part, that Jeff
Vernon conspired “to knowingly and willfully offer, pay, solicit, and
receive” kickbacks. Jeff Vernon contends that this instruction misstated the
law because it did not require the jury to unanimously agree as to whether
Jeff Vernon conspired to “solicit[] or receive[]” a kickback in violation of
subsection (b)(1), or “offer[] or pay[]” a kickback in violation of subsection
57
Case: 12-12767 Date Filed: 07/26/2013 Page: 58 of 84
(b)(2). He argues that the district court erred by not instructing the jury that
it had to agree as to which of two separate offenses he conspired to commit.
When an indictment alleges a conspiracy with multiple object offenses, the
jury must unanimously agree on a specific object offense. United States v.
Bradley, 644 F.3d 1213, 1300 n.147 (11th Cir. 2011). Once again, however, we
need not decide whether subsections (b)(1) and (b)(2) create separate offenses
because, as discussed above, the indictment and the trial evidence clearly showed
that Jeff Vernon’s role in the count fourteen conspiracy offense involved the
specific object of offering or paying kickbacks to Waters, not soliciting or
receiving kickbacks. Thus, it is highly unlikely that any jurors actually convicted
Jeff Vernon of conspiring to solicit or receive kickbacks himself.
In sum, Jeff Vernon has not established plain error or any prejudice to his
substantial rights as a result of any jury charge.
C. Alleged Constructive Amendment of the Indictment
Jeff Vernon also argues that the district court’s jury instructions
constructively amended the indictment as to count fourteen and as to counts fifteen
through seventeen. Because Jeff Vernon did not raise his constructive-amendment
argument before the district court, we review this issue only for plain error. See
United States v. Dortch, 696 F.3d 1104, 1112 (11th Cir. 2012).
58
Case: 12-12767 Date Filed: 07/26/2013 Page: 59 of 84
A constructive amendment of an indictment occurs when “the jury
instructions so modify the elements of the offense charged that the defendant may
have been convicted on a ground not alleged by the grand jury’s indictment.”
United States v. Peel, 837 F.2d 975, 979 (11th Cir. 1988) (internal quotation marks
and alteration omitted). “In evaluating whether the indictment was constructively
amended, we review the district court’s jury instructions . . . ‘in context’ to
determine whether an expansion of the indictment occurred either literally or in
effect.” United States v. Castro, 89 F.3d 1443, 1450 (11th Cir. 1996). A
constructive amendment does not occur simply because a “jury instruction did not
exactly match the form of the indictment” so long as “the substance of the
indictment remained intact.” United States v. Moore, 525 F.3d 1033, 1046 (11th
Cir. 2008).
Jeff Vernon first argues that the district court’s instruction on the count
fourteen conspiracy offense constructively amended the indictment. We begin by
setting forth count fourteen, entitled “18 U.S.C. § 371[,] Conspiracy to Violate
Anti-Kickback Statutes”:
From in or about January 2007, to and continuing through in or about
September 2009, in the Southern District of Alabama, Southern
Division, and elsewhere, the defendants,
LEROY WATERS,
JEFF VERNON, and
CHRIS VERNON
59
Case: 12-12767 Date Filed: 07/26/2013 Page: 60 of 84
did willfully, knowingly, and unlawfully combine, conspire,
confederate, and agree together with each other and other persons,
both known and unknown to the Grand Jury, to commit certain
offenses against the United States, to-wit:
to knowingly and willfully offer, pay, solicit, and receive
any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash
or in kind in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole
or in part under a Federal health care program, and in
return for purchasing, leasing, ordering and arranging for
or recommending purchasing, leasing, and ordering any
good, facility, service, or item for which payment may be
made in whole or in part under a Federal health care
program. In violation of Title 42, United States Code,
Section 1320a-7b(b).
Objective of the Conspiracy
. . . . The objective of the conspiracy was to increase the profits
earned by LEROY WATERS, JEFF VERNON, and CHRIS
VERNON.
Manner and Means
. . . . JEFF VERNON and CHRIS VERNON increased their
profits by inducing LEROY WATERS to refer his patients to
Medfusion. This inducement was accomplished by knowingly and
willfully paying kickbacks to LEROY WATERS in the form of
commission payments. LEROY WATERS increased his profits by
knowingly and willfully receiving these kickback payments in
exchange for referring his patients to Medfusion. Some of the patients
LEROY WATERS referred to Medfusion were insured through
federal healthcare programs.
. . . . The agreement between these three parties was that
LEROY WATERS would receive a commission equal to fifty percent
60
Case: 12-12767 Date Filed: 07/26/2013 Page: 61 of 84
of the profits generated by filling the Factor medication prescriptions
of the patients he referred to Medfusion.
Overt Acts
. . . . On or about April 6, 2007, LEROY WATERS received a
commission check, numbered 002888, from Medfusion in the amount
of $36,179.43.
. . . . On or about July 2, 2008, LEROY WATERS received a
commission check, numbered 011237, from Medfusion in the amount
of $6,000.00.
. . . . On or about September 17, 2008, LEROY WATERS
received a commission check, numbered 013396, from Medfusion in
the amount of $2,976.00.
In violation of Title 18, United States Code, Section 371.
Although count fourteen charged that the defendants agreed that “LEROY
WATERS would receive a commission,” and charged that the overt acts were
instances where Waters “received a commission check,” the district court told the
jury that “[i]n [the] conspiracy alleged in count[] . . . 14, the overt acts alleged are
the payments of the commissions.” Similarly, when, in the context of the
substantive counts, fifteen through seventeen, the district court described to the
jury the specific commission payments set forth as overt acts in count fourteen, the
district court stated that Jeff Vernon “violated the statute by Medfusion paying
commissions to Leroy Waters.”
Jeff Vernon argues that, whereas the indictment would have allowed the jury
to convict him if it determined that Waters received commission payments from
61
Case: 12-12767 Date Filed: 07/26/2013 Page: 62 of 84
any source, the district court instructed the jury that it could convict only if it
determined that Medfusion made payments to Waters. This argument is meritless.
First, the “Overt Acts” section of the indictment expressly stated that Waters
received commission checks “from Medfusion.” Thus, the district court correctly
instructed the jury that it could convict only if Medfusion made payments to
Waters. Any failure on the part of the district court to “exactly match the form of
the indictment” did not give rise to a constructive amendment. See Moore, 525
F.3d at 1046.
Moreover, if anything, the district court’s charge narrowed the range of
conduct on which Jeff Vernon could be convicted. A constructive amendment
occurs when “the essential elements of the offense . . . are altered to broaden the
possible bases for conviction beyond what is contained in the indictment.” United
States v. Keller, 916 F.2d 628, 634 (11th Cir. 1990) (emphasis added). As the
Tenth Circuit has explained, “there is no fatal variance where a defendant is
convicted upon evidence which tends to show a narrower scheme than that
contained in the indictment, provided that the narrower scheme is fully included
within the indictment.” United States v. McClatchey, 217 F.3d 823, 833–34 (10th
Cir. 2000) (internal quotation marks omitted).
Jeff Vernon also argues that the district court constructively amended the six
substantive counts. Those counts alleged that Jeff Vernon “did knowingly and
62
Case: 12-12767 Date Filed: 07/26/2013 Page: 63 of 84
willfully offer [or] pay . . . any remuneration . . . in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
[federally insured health care] item or service.” The district court instructed the
jury that, to convict, it needed to find that: “the remuneration was offered, paid,
solicited, or received at least in part to induce or in exchange for the referral of a
patient insured by a federal health care program.”
Jeff Vernon contends that the district court constructively amended the
indictment by replacing the “in return for referring” phrase with “to induce or in
exchange for the referral.” He apparently argues that the jury instruction language
was broader than the indictment’s language, and that the jury instructions
encompassed even payments that did not ultimately result in referrals. Again, Jeff
Vernon’s argument is meritless.
As mentioned above, the six substantive counts expressly referenced the
“Manner and Means” sections of the conspiracy counts, which alleged that Jeff and
Chris Vernon “increased their profits by inducing” Lori Brill or Leroy Waters to
refer patients to Medfusion. The indictment also referenced subsection (b) of the
Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b), which includes the phrase “to
induce. ” See 42 U.S.C. § 1320a-7b(b). The district court did not, therefore, err by
including the statutory language in the instruction. See United States v. Seher, 562
F.3d 1344, 1357 (11th Cir. 2009) (“[T]he Fifth Amendment is satisfied if the
63
Case: 12-12767 Date Filed: 07/26/2013 Page: 64 of 84
indictment makes a specific statutory reference to an essential element of the
offense and contains some other indication from which we can infer that the grand
jury found that element to be present.”).
For all these reasons, Jeff Vernon failed to establish any constructive
amendment of the indictment, much less a plainly erroneous one.
D. Denial of Rule 29 Motions for a Judgment of Acquittal
Jeff Vernon next appeals the district court’s denial of his Rule 29 motions
for a judgment of acquittal. We review de novo the district court’s denial of a Rule
29 motion. United States v. Westry, 524 F.3d 1198, 1210 (11th Cir. 2008).
However, in doing so, we view “the evidence in the light most favorable to the
government” and we draw “all reasonable inferences and credibility choices in
favor of the jury’s verdict.” United States v. Tampas, 493 F.3d 1291, 1297–98
(11th Cir. 2007) (internal quotation marks omitted). “If a reasonable jury could
have found [Jeff Vernon] guilty beyond a reasonable doubt, then we cannot
overturn the jury’s determination.” United States v. McGuire, 706 F.3d 1333,
1336 (11th Cir. 2013) (internal quotation marks omitted).
Jeff Vernon contends that the government presented insufficient evidence to
convict him under subsection (b)(2)(A) of the Anti-Kickback statute, which
criminalizes the offering or paying of kickbacks “to refer an individual to a person
for the furnishing or arranging for the furnishing of any item or service for which
64
Case: 12-12767 Date Filed: 07/26/2013 Page: 65 of 84
payment may be made in whole or in part under a Federal health care program.”
42 U.S.C. § 1320a-7b(b)(2)(A).
Like Chris Vernon, Jeff Vernon argues that the government presented no
evidence of “referrals,” as only physicians can make “referrals,” and HMS/Lori
Brill and Waters made only “recommendations.” We reject that argument for the
reasons we gave in our discussion of Chris Vernon’s appeal. HMS/Lori Brill and
Waters were able to and indeed did make referrals within the meaning of the
statute.
Jeff Vernon also contends that he did not make payments for referrals of
individuals, and that, at most, the evidence showed that Lori Brill and Waters
recommended the purchasing or ordering of factor medication from Medfusion.
However, there was ample evidence that Lori Brill and Waters referred individuals
to Medfusion.
Medfusion did not pay Lori Brill or Waters to recommend isolated purchases
of a product; rather, it paid Lori Brill and Waters to refer individuals for the
providing of a host of health care services. The agreement between Medfusion and
Alabama Medicaid required Medfusion to provide its Medicaid-insured clients
with more than just medication. The agreement also required Medfusion to
provide its patients with, inter alia: (1) monthly contact with a caregiver; (2)
65
Case: 12-12767 Date Filed: 07/26/2013 Page: 66 of 84
assistance in developing a medical treatment plan; and (3) tracking of the amount
of medication the patient used each month.
Relatedly, Jeff Vernon maintains that the evidence showed that Lori Brill
and Waters referred patients to Medfusion to purchase factor medication, not to
obtain services. But as stated above, there was evidence that Medfusion agreed to
provide patients with various health care services. Moreover, a reasonable jury
could have concluded that the filling of prescriptions was a “service,” as
contemplated by the statute.
In sum, there was sufficient evidence for a reasonable jury to find that Jeff
Vernon violated subsection (b)(2)(A).
Next, Jeff Vernon argues that the district court should have granted his Rule
29 motions because there was insufficient evidence for a reasonable jury to find
beyond a reasonable doubt that he acted willfully. 11 Jeff Vernon’s argument fails.
There was ample evidence that Jeff Vernon acted “with the specific intent to do
something the law forbids.” See Starks, 157 F.3d at 838 (internal quotation marks
omitted).
11
We do not repeat here the standard for willfulness set forth in our discussion of Chris
Vernon’s appeal. This standard applies as to the substantive Anti-Kickback statute violations in
counts ten through twelve and fifteen through seventeen, and the conspiracy in count fourteen.
The parties do not dispute that the district court appropriately instructed the jury as to this
standard.
66
Case: 12-12767 Date Filed: 07/26/2013 Page: 67 of 84
A reasonable jury could have based a finding of willfulness on evidence that
Jeff Vernon (1) knew the requirements of the Anti-Kickback statute, and (2) knew
the unlawful nature of Medfusion’s relationships with HMS/Lori Brill and with
Waters—that Medfusion was paying these third parties commissions solely in
exchange for referrals.
First, there was ample evidence that Jeff Vernon knew the Anti-Kickback
statute’s requirements. Those requirements were set forth in Medfusion’s own
Corporate Compliance Plan. The plan charged the CEO, Jeff Vernon, with
overseeing Medfusion’s compliance with federal law. Moreover, a reasonable jury
could have inferred that Jeff Vernon’s position as CEO of Medfusion required that
he familiarize himself with significant statutes regulating the pharmaceutical
industry, including the Anti-Kickback statute. See United States v. Bradley, 644
F.3d 1213, 1243 (11th Cir. 2011) (stating that a reasonable jury could have inferred
that defendant, as CEO of pharmaceutical company “had reason to know how
Medicaid reimbursed the pharmacies he supplied”), cert. denied, 132 S. Ct. 2375
(2012).
Furthermore, evidence showed that Jeff Vernon knew of Medfusion’s
payments to HMS/Lori Brill. Jeff Vernon signed the 2008 proposed Medfusion-
HMS/Lori Brill contract, which specifically set forth the manner by which
67
Case: 12-12767 Date Filed: 07/26/2013 Page: 68 of 84
Medfusion would compensate HMS/Lori Brill. Specifically, that contract provided
for “finder[’]s fee[s]” paid for the referral of patients.
Other evidence also established that Jeff Vernon knew that Medfusion’s
relationship with HMS/Lori Brill was unlawful. For example, on August 27, 2008,
Jeff Vernon sent an email to Medfusion’s attorney, Benefield, informing him that a
“Medicaid Inspector was in the office today reviewing [Lori Brill’s] son’s chart.”
Jeff Vernon’s email stated:
They have been watching Lori for years. It is no big deal on our side
because we have the appropriate prescriptions. However, he did ask
for how much money Lori has received in compensation for her
patients. I have no problem giving it to him, but I don’t want Lori
suing us because of it. Do you see a problem with me giving it to
him?
This email allowed a reasonable jury to conclude that Jeff Vernon: (1) knew
that Lori Brill was under investigation for federal health care fraud; (2)
nevertheless, decided to hire her; and (3) considered refusing to participate in an
investigation of Lori Brill’s actions. A reasonable jury could have based a finding
of willfulness on these facts. Although this email came after the June 23, 2008,
check to HMS, it supported the inference that Jeff Vernon knew each of these facts
well before he sent the email in August 2008.
Additional evidence of willfulness concerning kickbacks to Lori Brill came
from Jeff Vernon’s 2009 exchange with outside lawyers regarding failed efforts to
revise Medfusion’s relationship with HMS/Lori Brill so that it came under an Anti-
68
Case: 12-12767 Date Filed: 07/26/2013 Page: 69 of 84
Kickback statute safe harbor provision. While we need not recount that exchange
a second time, we note that this evidence was highly probative of Jeff Vernon’s
willful state of mind, given his leading role in the discussions.
Jeff Vernon also knew about Medfusion’s payments to Waters, and knew
that such payments were unlawful. Evidence showed that (1) Jeff Vernon hired
Waters to be a “sales representative,” tasked with providing services to Medfusion
clients, and personally negotiated with Waters regarding compensation; (2) before
he hired Waters, Jeff Vernon insisted that he receive a list of Waters’s hemophiliac
clients and how much factor medication each client received each month; (3)
Medfusion paid Waters approximately $1,400,000 over three years; (4) this
amount reflected a pay rate significantly higher than the rate at which Medfusion
paid other “sales representatives”; (5) Medfusion executives did not routinely give
Waters specific work assignments or keep track of his activities; (6) contrary to
what his contracts required, Waters performed very little work for Medfusion and
spent most of his time engaged in non-work activities; and (7) Medfusion received
significant profits from filling factor medication prescriptions for Waters’s
Medicaid clients.
From this evidence, a reasonable jury could have inferred that Jeff Vernon,
as Medfusion’s CEO, actually hired and compensated Waters for Waters’s
referring his Medicaid clients to Medfusion. However, Jeff Vernon attempted to
69
Case: 12-12767 Date Filed: 07/26/2013 Page: 70 of 84
conceal this true nature of the Medfusion-Waters relationship by calling Waters a
“sales representative.” Particularly telling is the fact that Jeff Vernon did not
“hire” Waters until after he received a list of Waters’s Medicaid clients. A
reasonable jury could have inferred that Jeff Vernon wanted to make sure that
Waters was able to refer a sufficient number of Medicaid clients to make the
potential relationship lucrative. Had Jeff Vernon only wanted Waters to be a sales
representative, it would have mattered little whether the clients he recruited were
covered by Medicaid or private insurance.
A reasonable jury thus could have concluded that Jeff Vernon gave Waters a
sham job title because he was concerned that the Medfusion-Waters relationship
was unlawful. Consequently, a reasonable jury could have found that Jeff Vernon
acted with a “bad purpose . . . to disobey or disregard the law.” See Starks, 157
F.3d at 838 (internal quotation marks omitted).
From this overwhelming evidence, a reasonable jury could have concluded
that Jeff Vernon knew that Medfusion was participating in exactly the types of
kickback schemes the statute was designed to prevent and thus acted willfully.
Jeff Vernon argues that there was insufficient evidence of willfulness
because the evidence established his good faith reliance on the advice of counsel.
Essentially, Jeff Vernon argues that no reasonable jury could have rejected his
70
Case: 12-12767 Date Filed: 07/26/2013 Page: 71 of 84
good faith reliance on advice of counsel affirmative defense. We reject this
argument too.
Good faith reliance on counsel’s advice can “negate[] the mens rea element
of willfulness.” United States v. Petrie, 302 F.3d 1280, 1287 n.6 (11th Cir. 2002).
The elements of this affirmative defense are: “(1)[the defendant] fully disclosed to
his attorney all material facts that are relevant to the advice for which he consulted
the attorney; and (2) thereafter, he relied in good faith on the advice given by his
attorney.” United States v. Hill, 643 F.3d 807, 851 (11th Cir. 2011). Because
good faith reliance is an affirmative defense, a defendant bears the burden of proof
on the issue. See United States v. Eisenstein, 731 F.2d 1540, 1543–44 (11th Cir.
1984).
The district court instructed the jury on this affirmative defense, stating:
“[e]vidence that the defendant in good faith followed the advice of counsel would
be inconsistent with . . . an unlawful intent.”
The ultimate issue of whether a defendant relied in good faith on advice of
counsel and therefore did not act willfully is a question of fact to be resolved by
the jury. “Whether the defendant fully disclosed the relevant facts, failed to
disclose all relevant facts, or concealed information from his advisor, and relied in
good faith on his advisor are matters for the jury—and not the court—to determine,
under proper instruction.” United States v. Kottwitz, 614 F.3d 1241, 1272 (11th
71
Case: 12-12767 Date Filed: 07/26/2013 Page: 72 of 84
Cir.), opinion withdrawn and reissued in relevant part, 627 F.3d 1383 (11th Cir.
2010). This Court’s role is to view the evidence in the light most favorable to the
government, keeping in mind that “credibility choices lie within the province of the
jury.” United States v. Johnson, 713 F.2d 654, 661 (11th Cir. 1983) (internal
quotation marks and alterations omitted).
At trial, Jeff Vernon attempted to establish good faith reliance by pointing to
attorney Benefield’s testimony that he (Benefield) (1) drafted Medfusion’s
contracts with Waters and its unsigned contract with HMS/Lori Brill, and (2)
believed those contracts to be lawful. The jury considered this evidence and made
a factual determination as to whether Jeff Vernon actually relied in good faith on
his attorney’s advice when he paid unlawful kickbacks. The jury found that Jeff
Vernon did not so rely on his attorney’s advice, and this determination was not
unreasonable. There are specific reasons for why a reasonable jury might have
declined to find that Jeff Vernon established this affirmative defense.
First, a reasonable jury could have concluded that Jeff Vernon did not fully
disclose all material facts to Benefield. Benefield simply drafted the contracts to
provide for Medfusion paying commissions to marketers and deliverers of
Medfusion products. He did so at Jeff Vernon’s request. However, when Jeff
Vernon asked Benefield to draft the proposed Medfusion-HMS/Lori Brill contract,
he did not tell Benefield that: (1) Alabama Medicaid had been “watching Lori
72
Case: 12-12767 Date Filed: 07/26/2013 Page: 73 of 84
[Brill] for years”; (2) Medfusion had been paying HMS/Lori Brill huge sums of
money in exchange for little work other than the referral of HMS/Lori Brill’s
preexisting clients; and (3) Jeff Vernon did not expect the contract to change
Medfusion’s relationship with HMS/Lori Brill.
Likewise, when Jeff Vernon recruited Benefield to draft the Medfusion-
Waters contracts, Jeff Vernon did not tell Benefield that: (1) Medfusion did not
intend to require Waters to perform any work and did not intend to exercise any
oversight over how Waters spent his purported working hours; (2) Medfusion had
only hired Waters after Jeff Vernon obtained a list of Waters’s preexisting clients;
(3) Medfusion was providing Waters with various forms of compensation not set
forth in the contract, including a personal vehicle, an interest free loan, and the
ability to use a company credit card for apparently unlimited personal uses.
Second, there was evidence that Jeff Vernon did not rely in good faith on
any advice that he received from Benefield. Notably, Medfusion began paying
kickbacks to HMS/Lori Brill and to Waters well before Jeff Vernon consulted with
Benefield. This fact indicated that Jeff Vernon’s decision to continue paying
kickbacks after consulting with Benefield was not necessarily based on Benefield’s
advice.
As further evidence that Jeff Vernon did not rely on the legal advice he
received from his attorneys, Jeff Vernon continued paying kickbacks after an
73
Case: 12-12767 Date Filed: 07/26/2013 Page: 74 of 84
attorney who specialized in health care regulation, Pool, advised Jeff Vernon that
he could not fit Medfusion’s relationships with HMS/Lori Brill under an Anti-
Kickback statute safe harbor. Not only did Medfusion continue paying kickbacks
after receiving Pool’s advice, but Jeff Vernon also began to search for a way to put
the acknowledged “kickback risk . . . on Lori [Brill].” A reasonable jury could
have concluded that because Jeff Vernon did not change his conduct when his
attorneys’ advice changed, he did not rely on that legal advice in the first place.
Jeff Vernon also argues that, as to counts fourteen through seventeen, the
government’s evidence failed to establish that Waters was not a bona fide
employee, within the meaning of one of the Anti-Kickback statute’s safe harbor
provisions.
Subsection (b)(3)(B) of the Anti-Kickback statute provides that the illegal
remuneration provisions “shall not apply to . . . any amount paid by an employer to
an employee (who has a bona fide employment relationship with such employer)
for employment in the provision of covered items or services.” 42 U.S.C. § 1320a-
7b(b)(3)(B). The accompanying regulations provide that the statutory term
“employee” has the definition provided in 26 U.S.C. § 3121(d)(2). 42 C.F.R.
§ 1001.952(i). That statute provides, in relevant part, that an “employee” is “any
individual who, under the usual common law rules applicable in determining the
74
Case: 12-12767 Date Filed: 07/26/2013 Page: 75 of 84
employer-employee relationship, has the status of an employee.” 26 U.S.C.
§ 3121(d)(2).
Whether a worker is an “employee” is based on “the hiring party’s right to
control the manner and means [of the work],” which is determined by considering
the following factors:
the skill required; the source of the instrumentalities and tools; the
location of the work; the duration of the relationship between the
parties; whether the hiring party has the right to assign additional
projects to the hired party; the extent of the hired party’s discretion
over when and how long to work; the method of payment; the hired
party’s role in hiring and paying assistants; whether the work is part of
the regular business of the hiring party; whether the hiring party is in
business; the provision of employee benefits; and the tax treatment of
the hired party.
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24, 112 S. Ct. 1344, 1348
(1992) (internal quotation marks omitted). The district court instructed the jury as
to the bona fide employee defense and listed these factors.
As we explained previously, there was overwhelming evidence that Waters
was not a bona fide employee. Thus, the jury reasonably rejected this affirmative
defense.
E. Cumulative Error
In light of the overwhelming evidence of Jeff Vernon’s guilt, and because
none of the alleged errors affected his substantial rights, the alleged cumulative
effect of multiple errors did not deprive Jeff Vernon of his right to a fair trial.
75
Case: 12-12767 Date Filed: 07/26/2013 Page: 76 of 84
VI. NO. 12-13266, UNITED STATES V. BUTCH BRILL
As stated, the jury convicted Butch Brill of the conspiracy offense in count
one. After trial, the district court denied Butch Brill’s renewed Rule 29 motion for
a judgment of acquittal. Butch Brill appeals the district court’s denial of his Rule
29 motions on the ground that there was insufficient evidence to support his
conviction.12
A. Count One
Count one alleged that Lori Brill, Butch Brill, and Travis Goodwin
conspired to “increase the amount of money H.M.S. received as commission
payments for filling H.M.S. patients’ Factor medication prescriptions,” in violation
of 18 U.S.C. § 1347(a) and 18 U.S.C. § 1349.
B. Evidence Regarding Butch Brill
It is undisputed that, during the relevant period, Butch Brill was Lori Brill’s
estranged husband. Butch Brill also worked for his wife’s various business
ventures, including HMS and the thrift store that Lori Brill operated. Butch Brill’s
half-brother, Alex Brill, testified that Butch Brill claimed to be “president” of Lori
Brill’s “hemophilia business.” Alex Brill also testified that Butch Brill described
his HMS duties as delivering factor medication to clients, and taking one client to
“water parks and different places.”
12
We apply the same standard of review for insufficiency of the evidence as we described
in our discussions of the other appeals.
76
Case: 12-12767 Date Filed: 07/26/2013 Page: 77 of 84
Butch Brill participated in at least some of the overt acts alleged in count
one of the indictment. Specifically, the indictment alleged that the conspirators
fraudulently enrolled Travis Goodwin in Alabama Medicaid, despite the fact that
Goodwin was a Florida resident. At trial, Goodwin testified that he first met Lori
Brill in 2004. At that time, he lived in Panama City, Florida. Lori Brill offered to
provide health care services to Goodwin, including obtaining medication for him
and taking him to doctors’ appointments. Goodwin accepted the offer.
Accordingly, Lori Brill began providing these services. Goodwin testified
that, at that time, he was insured by Florida Medicaid. Lori Brill arranged for him
to see Florida doctors. However, at some point before 2008, Lori Brill began
taking Goodwin to see Alabama doctors because Goodwin was dissatisfied with
his Florida doctors. In order to maintain full Medicaid coverage, Lori Brill advised
Goodwin that he needed to move to Alabama and enroll in Alabama Medicaid.
Goodwin testified that, in 2008, he and his wife moved into a house in
Theodore, Alabama owned by Lori Brill. Lori Brill’s son, David Skowronski, also
lived in this house. According to Goodwin, approximately one week after he
arrived in Alabama, Butch Brill “took [him] down to the Medicaid office and . . .
got [his insurance] switched over” to Alabama Medicaid.
However, Goodwin did not remain in Theodore, Alabama. After living
there “for like about a month straight,” he “left and went looking for work in
77
Case: 12-12767 Date Filed: 07/26/2013 Page: 78 of 84
Florida and various places.” His wife moved away from Theodore in less than a
month. For the following eight months, Goodwin traveled the country performing
work for an electrical company. In June 2009, he permanently returned to Florida.
Despite living in places other than Alabama, throughout 2008 and 2009,
Goodwin saw Alabama doctors and was insured by Alabama Medicaid. During
this period, Butch Brill assisted Goodwin in obtaining factor medication pursuant
to his Alabama Medicaid coverage. Specifically, Butch Brill’s fax machine was
used: (1) on July 13, 2009, to send a request to Medfusion that factor medication
be delivered to Goodwin at his “Teakwood Court Southport, Florida” address; (2)
on July 28, 2009, to send a similar request to Medfusion; (3) on August 10, 2009,
to send factor medication tracking logs to an Alabama doctor; and (4) on August
10, 2009, to send another request for medication and supplies to Medfusion.
There was additional evidence that Butch Brill joined the conspiracy and
personally profited from it. The government called as a witness Robert Freeman, a
salesman at a Chevrolet dealership. Freeman testified that, in June 2009, Butch
Brill came to his dealership interested in buying a 2008 Chevrolet Silverado 1500
pickup truck. However, Freeman was unable to arrange financing for Butch Brill
to purchase the truck. Butch Brill left the dealership and told Freeman that “he’d
be back to pay cash,” indicating that he would obtain the cash from “his son’s
experimental change in medications.” A few weeks later, Butch Brill returned to
78
Case: 12-12767 Date Filed: 07/26/2013 Page: 79 of 84
the dealership, accompanied by Lori Brill to purchase the truck. Butch Brill paid
$2,000 in cash, and Lori Brill gave a cashier’s check for $19,950.
Alex Brill, Butch Brill’s half-brother, testified about where Butch Brill got
this money for the truck. One night during the summer of 2009, Alex Brill was
present during a conversation among Butch Brill, Lori Brill, David Skowronski,
and others. During that conversation, Butch Brill bemoaned his inability to obtain
financing to purchase the truck. Skowronski responded that “he knew a way of
getting . . . some money for a truck.” Skowronski suggested that they obtain
money by “[o]rdering factor,” the medication that Skowronski, a hemophiliac
received. Lori Brill “figured it probably would work.” Butch Brill also “figured it
might work.”
Dr. Shailesh J. Patel, Skowronski’s hematologist, testified that, on June 19,
2009, Lori Brill requested that Dr. Patel change Skowronski’s factor medication
prescription to a different brand, although Skowronski’s existing brand had not
caused him any problems. Patel complied with this request. The government’s
evidence indicated that this new brand was more expensive than Skowronski’s
previous brand.
Approximately two weeks later, Alex Brill observed a shipment of factor
medication arrive at Butch Brill’s residence. Thereafter, he saw a similar shipment
arrive at Lori Brill’s residence. On July 13, 2009, two checks, one from
79
Case: 12-12767 Date Filed: 07/26/2013 Page: 80 of 84
Medfusion, and one from another pharmacy, were deposited into HMS’s bank
account. Lori Brill then withdrew $19,950 from HMS’s bank account and
obtained a cashier’s check. Bank records showed that this check was given to Pete
Moore Chevrolet. Shortly thereafter, Butch Brill showed Alex Brill the new truck
he purchased.
C. Elements of the Conspiracy Offense
Butch Brill’s conspiracy offense involved committing health care fraud. The
health care fraud statute, 18 U.S.C. § 1347, provides that:
(a) Whoever knowingly and willfully 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,
in connection with the delivery of or payment for health care benefits,
items, or services, shall be fined . . . or imprisoned not more than 10
years, or both.
18 U.S.C. § 1347(a). “[I]n a health care fraud case, the defendant must be shown
to have known that the claims submitted were, in fact, false.” United States v.
Medina, 485 F.3d 1291, 1297 (11th Cir. 2007).
For a defendant to be found guilty of conspiracy, the government “must
prove beyond a reasonable doubt (1) that a conspiracy existed; (2) that the
80
Case: 12-12767 Date Filed: 07/26/2013 Page: 81 of 84
defendant knew of it; and (3) that the defendant, with knowledge, voluntarily
joined it.” United States v. Molina, 443 F.3d 824, 828 (11th Cir. 2006) (internal
quotation marks omitted). “Because the crime of conspiracy is predominantly
mental in composition, it is frequently necessary to resort to circumstantial
evidence to prove its elements.” United States v. Toler, 144 F.3d 1423, 1426 (11th
Cir. 1998) (internal quotation marks and citation omitted). Moreover, “a defendant
can be convicted [of conspiracy] even if his or her participation in the scheme is
‘slight’ by comparison to the actions of other co-conspirators.” Id. at 1428.
As for the existence of the conspiracy element, “[t]he very nature of
conspiracy frequently requires that the existence of an agreement be proved by
inferences from the conduct of the alleged participants or from circumstantial
evidence of a scheme.” Molina, 443 F.3d at 828 (internal quotation marks
omitted).
As for the knowledge element, “the government need not prove that the
defendant knew all of the details or participated in every aspect of the conspiracy.”
United States v. Miranda, 425 F.3d 953, 959 (11th Cir. 2005) (internal quotation
marks and alterations omitted). Instead, the government’s burden is only to prove
“that the defendant knew the essential nature of the conspiracy.” Id. (internal
quotation marks and alteration omitted). We will affirm a conspiracy conviction
“when the circumstances surrounding a person’s presence at the scene of
81
Case: 12-12767 Date Filed: 07/26/2013 Page: 82 of 84
conspiratorial activity are so obvious that knowledge of its character can fairly be
attributed to him.” Molina, 443 F.3d at 828 (internal quotation marks omitted).
As for the voluntary joining element, the government can meet this burden
“through proof of surrounding circumstances such as acts committed by the
defendant which furthered the purpose of the conspiracy.” United States v.
Parrado, 911 F.2d 1567, 1570 (11th Cir. 1990) (internal quotation marks omitted).
D. Evidence that Butch Brill Knowingly and Voluntarily Joined a
Conspiracy
In this case, the essence of the healthcare fraud conspiracy charged in count
one was to increase Lori Brill’s/HMS’s commissions from specialty pharmacies,
including Medfusion, by fraudulently enabling those pharmacies to obtain
Medicaid reimbursements for factor medication. Butch Brill does not dispute that
this conspiracy existed and that Lori Brill participated in it. And there was
sufficient evidence for a reasonable jury to have found that Butch Brill knew of the
conspiracy’s purpose and that he voluntarily joined the conspiracy.
As for the evidence that Butch Brill knew of the conspiracy’s purpose, Alex
Brill testified that Butch Brill was present when Skowronski proposed changing his
factor medication prescription in order to fraudulently obtain Medicaid
reimbursements for specialty pharmacies, thereby increasing commission
payments to HMS/Lori Brill. Additionally, the evidence showed that Butch Brill
82
Case: 12-12767 Date Filed: 07/26/2013 Page: 83 of 84
was very involved in his wife’s various hemophiliac-related businesses, even
describing himself as “president” at one point.
As for the evidence that Butch Brill knowingly and voluntarily joined the
conspiracy, Alex Brill testified that Butch Brill verbally agreed to Skowronski’s
plan to order factor medication and thus receive money for Butch Brill to purchase
a new truck. Moreover, evidence that Butch Brill did purchase a new truck after
Skowronski changed his factor medication prescription further supported a
conclusion that Butch Brill voluntarily joined the conspiracy. Butch Brill also
actively participated in the scheme to register Goodwin in Alabama Medicaid,
despite Goodwin being a Florida resident.
In light of the foregoing, a jury reasonably could have concluded that Butch
Brill knew of the nature and purpose of a conspiracy involving his estranged wife,
Lori Brill. A reasonable jury could also have concluded that Butch Brill
voluntarily joined that conspiracy, took actions in furtherance of that conspiracy,
and personally profited from that conspiracy’s proceeds. Therefore, a reasonable
jury could have found beyond a reasonable doubt that Butch Brill was guilty of the
conspiracy offense. Butch Brill’s appeal based on insufficiency of the evidence
lacks merit.
VII. CONCLUSION
83
Case: 12-12767 Date Filed: 07/26/2013 Page: 84 of 84
In sum, we affirm the district court as to all issues raised in Jeff Vernon’s
and Butch Brill’s appeals. We vacate the district court’s grant of a judgment of
acquittal to Chris Vernon, and we reverse the alternative award of a new trial. We
remand so that the district court can enter judgment on the jury’s verdict on counts
ten, eleven, and twelve and proceed to the sentencing phase of Chris Vernon’s
three convictions.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
84