United States v. Rick A. Kuhlman , 711 F.3d 1321 ( 2013 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-15959
________________________
D.C. Docket No. 1:11-cr-00075-MHS-1
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
versus
RICK A. KUHLMAN,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(March 8, 2013)
Before HULL, WILSON and ANDERSON, Circuit Judges.
WILSON, Circuit Judge:
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Dr. Rick Kuhlman pleaded guilty to perpetrating a five-year, $3 million
health care fraud scheme. He was sentenced to probation for the “time served”
while out on pre-trial release awaiting his sentence. Although the United States
Sentencing Guidelines set forth a sentencing range of 57 to 71 months of
imprisonment, Kuhlman was able to avoid a custodial sentence by simply paying
the money back and performing community service, including speaking to medical
and nursing students about the perils of health care fraud. Because we agree with
the government that Kuhlman’s sentence is unreasonable, we vacate the sentence
and remand this case back to the district court so that a meaningful sentence may
be imposed.
I. BACKGROUND
A. The Fraudulent Billing Scheme
Kuhlman is a doctor of chiropractic medicine. He owns and operates five
clinics in the Atlanta, Georgia metropolitan area, and one clinic in Nashville,
Tennessee. Beginning in January 2005, Kuhlman embarked on what would be a
five-year scheme, falsely billing health insurance companies for services he knew
were not rendered to his patients.
Normally after treating a patient, Kuhlman would request payment for the
medical services rendered by submitting a claim form directly to the patient’s
health insurance company. The form, known as a “Health Care Financing
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Administration Form 1500” (HCFA 1500), identifies the treatment provided to the
patient. Kuhlman was also required to record, on the same form, the appropriate
“Physician’s Current Procedural Terminology” (CPT Codes). The American
Medical Association publishes CPT Codes as a uniform numerical classification of
the most common treatments performed by physicians and other medical services
providers, including chiropractors. This was the proper procedure.
But Kuhlman did not follow the proper procedure. Instead, Kuhlman
recorded CPT Codes for services he knew were not and would not be rendered to
patients on the recorded dates. He then submitted the false HCFA 1500 forms to
an insurance company for payment. Thereafter, Kuhlman would receive payment
for the treatment he never gave.
During his five-year scheme, at least two insurance companies notified
Kuhlman that his billing practices did not conform to the proper procedure. In
2006, Kuhlman paid Blue Cross Blue Shield $500,000 to settle a string of
contested claims. A few years later, Kuhlman’s billing practices were flagged by
Aetna; Kuhlman again settled, this time paying $70,000 to resolve the disputed
claims. Aetna approached Kuhlman once more in 2009, and at that time, Aetna
determined that Kuhlman’s claims would be subject to pre-payment review.
Kuhlman, however, continued to submit false claims until an FBI agent
approached him in August 2010. It was only after the FBI became involved that
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Kuhlman ceased his improper billing practices. In total, Kuhlman pocketed
$2,944,883 as a result of his fraudulent billing scheme.
B. Procedural History
On February 23, 2011, Kuhlman was charged in a criminal information with
one count of health care fraud in violation of 18 U.S.C. §§ 1347 and 2. A few
weeks later, on March 1, 2011, he pleaded guilty pursuant to a plea agreement. At
the plea hearing, Kuhlman admitted that he did not steal out of need—he was not
in financial trouble and he did not have “creditors breathing down [his] neck
asking for money.” Instead, he “was just pushing the envelope and billing for
[CPT] codes that [his] doctors weren’t doing and once it started and [he] saw that
the insurance companies were going to pay for it [he] just didn’t fix it and [he]
should have.” The court stated: “In other words, you weren’t pressed to do it; you
saw an opportunity to make money. . . . I am just trying to figure out why
somebody like you would get involved in this type of activity when you weren’t
pressed for money and the creditors weren’t pushing you and you weren’t building
a house and gotten behind.” Sentencing was then set for May 23, 2011.
In preparation for sentencing, the probation office drafted a Presentence
Investigation Report, which calculated a base offense level of six, pursuant to
U.S.S.G. § 2B1.1. Kuhlman qualified for an 18-level enhancement pursuant to
U.S.S.G. § 2B1.1(b)(1)(J) because the loss amount was more than $2,500,000. In
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addition, because Kuhlman derived more than $1,000,000 in gross receipts from
one or more financial institutions—Aetna, Blue Cross Blue Shield, and United
Healthcare—the offense level was increased two levels pursuant to U.S.S.G.
§ 2B1.1(b)(14)(A). Since Kuhlman abused his position of trust with the insurance
companies by billing them for services that were not rendered, the offense level
was increased by two levels pursuant to U.S.S.G. § 3B1.3. Kuhlman, however,
was entitled to a two-level reduction for acceptance of responsibility under
U.S.S.G. § 3E1.1(a) and an additional one-level reduction under U.S.S.G.
§ 3E1.1(b) for assisting in the investigation by timely notifying authorities of his
intention to plead guilty.
After these adjustments, Kuhlman’s total offense level amounted to 25, with
a criminal history category of one and zero criminal history points. Based on these
numbers, the Sentencing Guidelines advised a range of 57 to 71 months’
imprisonment. As part of the plea agreement, however, the government ultimately
recommended a sentence of 36 months’ imprisonment, which was effectively a
five-level downward variance. See U.S.S.G. § 5A.
On May 23, 2011, the parties appeared ready for sentencing. A few days
before sentencing, Kuhlman paid $2,944,883 in full restitution. Impressed, the
district judge remarked that Kuhlman was the first defendant that the judge could
recall who made such a large restitution payment prior to sentencing.
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The district court then proceeded to discuss the rising costs of incarceration,
citing a recent Georgia state commission formed to explore alternatives to prison
for nonviolent criminals. The court alluded to the fact that Kuhlman needed some
extra time to “pay off his fine and support his family.” In addition, if given extra
time before sentencing, Kuhlman could, “and should, perform public service.” The
court then sua sponte continued the sentencing hearing for six months. In the eyes
of the court, the continuance would provide “a more complete picture of
[Kuhlman] and how he handle[d] this postponement time before sentencing.”
Next, the court repeated its concerns over the rising costs of prison and
suggested that a continuance would save “the court . . . at least $10,000 by not
incarcerating [Kuhlman] during this period.” The court also noted that it had
ordered a similar continuance for a “budding rock star,” which had yielded positive
results. During that six month continuance, the “budding rock star” made
“hundreds of visits to young people” and had a positive impact on the community.
The district court continued, “[t]he case was finally concluded to the satisfaction of
all parties who were initially skeptical as to whether the defendant was being
sufficiently punished for his wrongdoing.” Kuhlman, the district court believed,
could benefit from a similar opportunity.
The government objected, concerned that a continuance would allow
Kuhlman to go right back to work and right back to his old routine of filing false
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claims with insurance companies. Kuhlman, for obvious reasons, did not object to
the continuance.
Over the next several months, Kuhlman heeded the district judge’s advice.
Between May 23, 2011, and the time of Kuhlman’s continued sentencing hearing
on November 15, 2011, Kuhlman logged 391 hours of community service. 1 He
visited various medical, nursing, and chiropractic schools and gave presentations
on health care insurance fraud. He also provided 18 days of free chiropractic
services at homeless shelters across Atlanta and painted a gym at an elementary
school. And, as previously stated, Kuhlman had paid back the full amount he
stole—$2,944,883—prior to the initial May 23, 2011 sentencing hearing.
At the second sentencing hearing on November 15, 2011, the district court
lauded Kuhlman’s work during his six-month continuance. In light of Kuhlman’s
full restitution payment, his community service, and the rising costs of
incarceration, the district court sentenced Kuhlman to probation for the “time
served” while awaiting his sentence. In doing so, the district court varied
downward 20 levels.
II. STANDARD OF REVIEW
1
To log 391 hours of community service during his six-month continuance, Kuhlman
would have had to complete roughly two hours of service per day, including Saturdays and
Sundays.
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We review the reasonableness of a sentence under an abuse of discretion
standard. Gall v. United States, 552 U.S. 38, 41, 128 S. Ct. 586, 591 (2007).
“That familiar standard allows a range of choice for the district court, so long as
that choice does not constitute a clear error of judgment.” United States v. Irey,
612 F.3d 1160, 1189 (11th Cir. 2010) (en banc) (internal quotation marks omitted).
We have explained that, under the abuse of discretion standard of review, “there
will be occasions in which we affirm the district court even though we would have
gone the other way.” Id. (internal quotation marks omitted). The burden of
establishing unreasonableness lies with the party challenging the sentence. United
States v. Talley, 431 F.3d 784, 788 (11th Cir. 2005) (per curiam). Here, the
government appeals Kuhlman’s sentence; thus, the government carries the burden
of demonstrating that Kuhlman’s sentence is unreasonable.
III. DISCUSSION
A. Reasonableness of Sentence
When reviewing the reasonableness of a sentence, our task is two-fold. We
will first
ensure that the district court committed no significant procedural
error, such as failing to calculate (or improperly calculating) the
Guidelines range, treating the Guidelines as mandatory, failing to
consider the § 3553(a) factors, selecting a sentence based on clearly
erroneous facts, or failing to adequately explain the chosen sentence—
including an explanation for any deviation from the Guidelines range.
Gall, 552 U.S. at 51, 128 S. Ct. at 597.
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In explaining the sentence, the district court should set forth enough
information to satisfy the reviewing court of the fact that it has considered the
parties’ arguments and has a reasoned basis for making its decision, see United
States v. Rita, 551 U.S. 338, 356, 127 S. Ct. 2456, 2468 (2007), but “nothing . . .
requires the district court to state on the record that it has explicitly considered
each of the § 3553(a) factors or to discuss each of the § 3553(a) factors.” United
States v. Scott, 426 F.3d 1324, 1329 (11th Cir. 2005). If the district court varies
from the Guidelines range, it must offer a justification sufficient to support the
degree of the variance. See Irey, 612 F.3d at 1187.
After we determine that the district court’s sentencing decision is
procedurally sound, we next review the substantive reasonableness of the sentence
for abuse of discretion. Gall, 552 U.S. at 51, 128 S. Ct. at 597. We have held that
[a] district court abuses its discretion when it (1) fails to afford
consideration to relevant factors that were due significant weight,
(2) gives significant weight to an improper or irrelevant factor, or
(3) commits a clear error of judgment in considering the proper
factors. As for the third way that discretion can be abused, a district
court commits a clear error of judgment when it considers the proper
factors but balances them unreasonably.
Irey, 612 F.3d at 1189 (citations and internal quotation marks omitted).
A district court’s unjustified reliance on a single factor “may be a symptom
of an unreasonable sentence.” United States v. Pugh, 515 F.3d 1179, 1191 (11th
Cir. 2008). However, significant reliance on a single factor does not necessarily
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render a sentence unreasonable. Id. at 1192; see Gall, 552 U.S. at 57, 128 S. Ct. at
600 (holding that a district court did not commit reversible error simply because it
“attached great weight” to one factor). We have held that “[t]he weight to be
accorded any given § 3553(a) factor is a matter committed to the sound discretion
of the district court, and we will not substitute our judgment in weighing the
relevant factors.” United States v. Amedeo, 487 F.3d 823, 832 (11th Cir. 2007)
(alterations and internal quotation marks omitted).
When reviewing a sentence for reasonableness, we also evaluate whether the
sentence imposed by the district court fails to achieve the purposes of sentencing
under 18 U.S.C. § 3553(a). Talley, 431 F.3d at 788. “In order to determine
whether that has occurred, we are required to make the sentencing calculus
ourselves and to review each step the district court took in making it.” Irey, 612
F.3d at 1189 (alteration and internal quotation marks omitted). In reviewing the
reasonableness of a sentence, we consider the totality of the facts and
circumstances. Pugh, 515 F.3d at 1190.
Pursuant to § 3553(a), the sentencing court must impose a sentence
sufficient, but not greater than necessary, to reflect the seriousness of the offense,
promote respect for the law, provide just punishment for the offense, deter criminal
conduct, protect the public from future crimes of the defendant, and provide the
defendant with needed educational or vocational training or medical care. 18
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U.S.C. § 3553(a)(2). The sentencing court must also consider the following factors
in determining a particular sentence: the nature and circumstances of the offense
and the history and characteristics of the defendant, the kinds of sentences
available, the Guidelines range, the pertinent policy statements of the Sentencing
Commission, the need to avoid unwarranted sentencing disparities, and the need to
provide restitution to victims. 18 U.S.C. § 3553(a)(1), (3)–(7). In reviewing the
court’s application of these factors, we will vacate a sentence
if, but only if, we are left with the definite and firm conviction that the
district court committed a clear error of judgment in weighing the
§ 3553(a) factors by arriving at a sentence that lies outside the range
of reasonable sentences dictated by the facts of the case.
Irey, 612 F.3d at 1190 (internal quotation marks omitted).
B. Kuhlman’s Sentence
The government argues that Kuhlman’s sentence is procedurally and
substantively unreasonable. As a preliminary matter, we note that the district court
fulfilled its procedural obligations when sentencing Kuhlman to probation for time
served. Neither party disputes that Kuhlman’s advisory Guidelines range was
calculated accurately at 57 to 71 months. Rather, the government argues that it
was procedurally unreasonable for the district court to disregard the importance of
general deterrence, and to conclude that a 20-level variance was justified under the
Guidelines.
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When sentencing a defendant, the district court is not required to “state on
the record that it has explicitly considered each of the § 3553(a) factors or to
discuss each of the § 3553(a) factors.” Scott, 426 F.3d at 1329. Here, the district
court cited several § 3553(a) factors as the basis for varying Kuhlman’s sentence
below the Guidelines range. As such, Kuhlman’s sentence is procedurally
reasonable.
We cannot conclude, however, that Kuhlman’s sentence is substantively
reasonable. He stole nearly $3 million and “did not receive so much as a slap on
the wrist—it was more like a soft pat.” United States v. Crisp, 454 F.3d 1285, 1291
(11th Cir. 2006). To arrive at a sentence of probation for “time served” while out
on pre-trial release, the district court varied downward by 57 months from the
bottom of the advisory Guidelines range. Such a sentence fails to achieve an
important goal of sentencing in a white-collar crime prosecution: the need for
general deterrence. The Guidelines specifically state that a sentence should
provide “adequate deterrence to criminal conduct.” 18 U.S.C. § 3553(a)(2)(B).
We are hard-pressed to see how a non-custodial sentence serves the goal of general
deterrence.
Insurance companies must rely on the honesty and integrity of medical
practitioners in making diagnoses and billing for their services. And as the
government indicated at oral argument, deterrence is an important factor in the
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sentencing calculus because health care fraud is so rampant that the government
lacks the resources to reach it all. Thus, when the government obtains a conviction
in a health care fraud prosecution, one of the primary objectives of the sentence is
to send a message to other health care providers that billing fraud is a serious crime
that carries with it a correspondingly serious punishment.
In awarding Kuhlman probation for the time he served while out on pre-trial
release, the district court disregarded the importance of delivering such a message.
In fact, Kuhlman’s sentence sends the opposite message—it encourages rather than
discourages health care providers from engaging in the commission of health care
fraud because they might conclude that the only penalties they will face if they are
caught are disgorgement and community service. We do not mean to imply that
probation can never be an option available to a court in fashioning a reasonable
sentence in a white-collar crime case. But not here. That is especially so
considering the totality of the circumstances, including Kuhlman’s prior history,
the nature of the offense, and the extent that the sentence varies from the advisory
Guidelines.
In United States v. Livesay, we vacated as “patently unreasonable” a
sentence of five years’ probation for a participant in a billion-dollar fraud scheme,
holding that only a “meaningful period of incarceration” would fulfill the goals of
sentencing under § 3553(a). 587 F.3d 1274, 1278–79 (11th Cir. 2009). We also
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specifically addressed the need for adequate deterrence, stating that “it is difficult
to imagine a would-be white-collar criminal being deterred from stealing millions
of dollars from his company by the threat of a purely probationary sentence,
regardless of how much probation that person received.” Id. at 1279. The same
rationale applies in this case: “The threat of spending time on probation simply
does not, and cannot, provide the same level of deterrence as can the threat of
incarceration in a federal penitentiary for a meaningful period of time.” Id.We also find the reasoning in United States v. Martin analogous to the case
before us. 455 F.3d 1227 (11th Cir. 2006). In Martin, we vacated a seven-day
sentence for another participant in a billion-dollar securities fraud, criticizing the
sentence as “shockingly short” and “wildly disproportionate” to the seriousness of
the offense, even though the defendant’s cooperation with the government was
“extraordinary.” Id. at 1238–39. We also noted that “the Congress that adopted
the § 3553 sentencing factors emphasized the critical deterrent value of
imprisoning serious white[-]collar criminals, even where those criminals might
themselves be unlikely to commit another offense.” Id. at 1240. We stated that
“[b]ecause economic and fraud-based crimes are more rational, cool and calculated
than sudden crimes of passion or opportunity, these crimes are prime candidates
for general deterrence.” Id. (internal quotation marks omitted). Our basis for this
determination was that “[d]efendants in white[-] collar crimes often calculate the
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financial gain and risk of loss, and white[-]collar crime therefore can be affected
and reduced with serious punishment.” Id.
Our decision in United States v. Crisp sings a similar tune. 454 F.3d at
1287, 1290. There, we vacated as “outside the range of reasonableness” a sentence
of five hours’ imprisonment for bank fraud, even though the defendant had
provided substantial assistance that was crucial to the prosecution of his co-
defendant. Id. Specifically, we determined that the district court’s “single-
minded[]” goal of restitution as the basis for imposing such a short sentence—
grounded in the reasoning that the defendant would be more able to pay restitution
if he were free—was an “unreasonable approach [that] produced an unreasonable
sentence.” Id. at 1291–92.
In an effort to differentiate his case from Livesay, Martin, and Crisp,
Kuhlman argues that each of those cases involved more money or more egregious
fraud. We need not dwell, however, on the dollar amount of those schemes,
because the criminal motive in each case was the same as the motive here—greed.
Kuhlman knowingly and methodically stole millions of dollars from
insurance companies over a period of several years. The district court’s sentence
does not reflect the seriousness and extent of the crime, nor does it promote respect
for the law, provide just punishment, or adequately deter other similarly inclined
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health care providers. We therefore find the sentence to be substantively
unreasonable, and an abuse of the district court’s discretion.
The Sentencing Guidelines authorize no special sentencing discounts on
account of economic or social status. And we are not the first circuit to recognize
that sentences like Kuhlman’s are typically unavailable to defendants of lesser
means who are convicted of economic crimes. In a recent decision, the Sixth
Circuit flatly rejected a district court’s reliance on the defendant’s “chosen
profession and status in the community,” holding that such factors were “decidedly
inappropriate to form the basis of such a large downward variance.” United States
v. Peppel,— F.3d —, 2013 WL 561352, at *11 (6th Cir. Feb. 15, 2013) (vacating
seven-day sentence for CEO who participated in an $18 million fraud scheme,
which carried a Guidelines range of 97 to 121 months of imprisonment). So too
here. Like the Seventh Circuit, we encourage our district court colleagues to keep
in mind that
[b]usiness criminals are not to be treated more leniently than members
of the “criminal class” just by virtue of being regularly employed or
otherwise productively engaged in lawful economic activity. It is
natural for judges, drawn as they (as we) are from the middle or
upper-middle class, to sympathize with criminals drawn from the
same class. But in this instance we must fight our nature. Criminals
who have the education and training that enables people to make a
decent living without resorting to crime are more rather than less
culpable than their desperately poor and deprived brethren in crime.
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United States v. Stefonek, 179 F.3d 1030, 1038 (7th Cir. 1999) (internal citation
omitted).
Accordingly, we vacate Kuhlman’s sentence and remand for resentencing so
that the district court may be permitted to impose a reasonable sentence.
VACATED and REMANDED.
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