United States v. J. Harris Morgan, Jr. ( 2012 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-10026
Non-Argument Calendar
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D.C. Docket No. 1:08-cr-00006-WLS-TQL-1
UNITED STATES OF AMERICA,
lllllllllllllllllllllllllllllllllllllll lPlaintiff-Appellee,
versus
J. HARRIS MORGAN, JR.,
llllllllllllllllllllllllllllllllllllllll Defendant-Appellant.
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Appeal from the United States District Court
for the Middle District of Georgia
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(November 28, 2012)
Before MARCUS, MARTIN and FAY, Circuit Judges.
PER CURIAM:
J. Harris Morgan, Jr. appeals his convictions for 69 counts of health care
fraud, in violation of 18 U.S.C. § 1347. On appeal, he argues that: (1) there is
insufficient evidence to uphold his convictions; (2) the district court abused its
discretion by admitting evidence of uncharged false healthcare claims, in violation
of Federal Rule of Evidence 404(b); and (3) the court abused its discretion by
refusing to give the good faith jury instruction that Morgan requested. For the
reasons set forth below, we affirm Morgan’s convictions.
I.
Morgan, a pharmacist, owned Thrift Center Pharmacy (“Thrift”) and Option
Care. Thrift was a pharmacy provider with Georgia Medicaid. Morgan was
charged with 69 counts of health care fraud, in violation of § 1347. Specifically,
58 of those counts alleged that he had submitted, and instructed others to submit,
false claims regarding Synagis to Georgia Medicaid. The indictment alleged that
Morgan submitted claims for larger doses of Synagis than were actually dispensed,
false diagnoses to obtain approval to administer Synagis, and claims for Synagis
more often than it was actually being administered to the patients. The final 11
counts alleged that Morgan submitted false claims for Hepatitis C drugs, Nutropin
AQ, and “other drugs.” These counts alleged that Morgan submitted to Georgia
Medicaid: (1) false claims stating that larger doses of the drugs were administered
than had actually been dispensed to the patients; (2) claims stating that the drugs
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were administered at an earlier date than they actually were; and (3) claims for the
drugs more often than they were ordered by the patients’ physicians.
Morgan filed a pretrial motion for disclosure of evidence to be offered
under Rule 404(b). The court set a deadline by which the government was to
disclose any such evidence.
According to the trial testimony, Synagis was a medication given to
premature infants and young children to prevent them from contracting respiratory
syncytial virus (“RSV”). It was sold in 50 and 100 milligram vials. It was
administered monthly during the RSV season, which ran from September until
April during the time period at issue in this case. Pharmacists or physicians were
required to obtain prior approval from Medicaid before administering Synagis to a
Medicaid patient. When deciding whether to approve the use of Synagis,
Medicaid considered the patient’s age, diagnosis, risk factors for RSV, and other
diseases the patient had. If Medicaid denied approval to administer Synagis, the
pharmacist or physician had 72 hours to update the information and seek approval.
Joyce Sheppard testified that she was the billing clerk at Thrift. She did
most of the Medicaid Synagis billing. Morgan had not given her instructions on
how to submit Synagis claims, but he did tell her to bill it every 23 days. Billing
that frequently allowed Thrift to pay its bills and ensure that the patients’
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insurance would cover the medication. Sheppard was concerned that she would
submit too many Synagis bills, but she did not remember if she had ever told
Morgan that it was hard to keep up with the 23-day billing cycle.
Nancy Palmer, a registered nurse, testified that she had previously worked
as the nursing director at Option Care. Morgan was actively involved in managing
his businesses, and he did whatever work was needed, including working in the
pharmacy, taking doctor’s orders, and keeping up with administrative and billing
issues. He and Sheppard handled the Synagis billing. Morgan told Sheppard to
submit the Synagis claims every 23 days, to bill as early in the month as possible,
and to submit the claims even if she did not know how much Synagis the nurses
had actually administered. This system was “very chaotic,” but Morgan
maintained that it was necessary to ensure that he was able to pay the supplier for
the Synagis. Palmer also testified that she and her coworkers determined that
patients diagnosed with bronchopulmonary dysplasia (“BPD”) were automatically
approved to receive Synagis. Palmer learned that two employees were using a
diagnosis of BPD to obtain prior approval for Synagis even if the patient’s
physician had not indicated that the patient had BPD. Morgan told Palmer that all
of the patients had BPD and that they would continue to use that diagnosis.
Rhianna Williams, a licensed practical nurse, testified that she was the
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Synagis coordinator at Option Care. Morgan was at Thrift on a daily basis, he ran
the staff meetings where patients were discussed, and Williams had observed him
billing Synagis. Williams and Paige Shiver generally obtained prior approval for
Synagis. A few times when a patient was denied approval for Synagis, Morgan
told Williams and Shiver to say that the patient was diagnosed with BPD even
though the patient’s doctor had not made that diagnosis. After doing so, the
patients were approved to receive Synagis. When Williams and Shiver decided
that they would no longer provide false diagnoses, Morgan, on a few occasions,
obtained approval for patients. Both the government and Morgan’s attorney
reviewed patient files with Williams, and she testified that those files showed
claims submitted as soon as 4 days after the prior claim was submitted and as late
as 29 days after the prior claim was submitted. Additionally, Williams reviewed
four patients’ charts. Those patients had each received 8 doses of Synagis, but 9,
10, 11, and 12 claims were submitted to Medicaid for the patients respectively.
Shiver testified that she had previously worked as a pharmacy technician at
Thrift and Option Care. When she told Morgan that she would not provide false
diagnoses to Medicaid, he told her to leave the files with him because he would
take care of them. She testified that Total Parenteral Nutrition (“TPN”) was a
nutritional supplement administered to patients at their homes. Morgan objected
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that the government had not notified him of its intent to introduce evidence
regarding TPN as required by Rule 404(b). The government argued that TPN was
an “other drug” and that TPN claims were part of Morgan’s scheme to defraud
Medicaid as alleged in the final 11 counts in the indictment. The court overruled
the objection, finding that Rule 404(b) did not apply because the evidence fell
within the indictment’s general allegations. Shiver then testified that it was
inappropriate to submit a claim for TPN for a hospitalized patient, but she
nonetheless saw such claims submitted by Morgan. Morgan conducted clinical
staff meetings, at which the staff discussed which patients were hospitalized and
thus did not need medicine prepared. Shiver saw TPN over-billings submitted by
Morgan about twice a month.
Denise Colson, a state healthcare auditor, testified that Thrift had billed
Medicaid for 7,524 100-milligram vials of Synagis, but it had only purchased
5,256 100-milligram vials of the drug.
Cynthia Vassell, a registered nurse and a state healthcare auditor, testified
that she had reviewed Morgan’s patient files for patients receiving Hepatitis C
drugs. She identified instances where more Hepatitis C drugs were billed than the
patient would have needed based on the patient’s weight and other instances
where Medicaid was billed for more refills than would have been administered.
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For example, one patient would have received only 30 weeks worth of a drug
during a time period when Medicaid was billed for 80 weeks worth of the drug. In
another instance, the patient refused treatment, but Medicaid was billed for
medications that would not have been prepared for or administered to that patient
when he refused treatment.
Joe McGalliard, a pharmacist at Thrift and Option Care, identified two
labels for Hepatitis C drugs that bore his initials. He acknowledged that the labels
did not accurately reflect the doctors’ prescriptions, and the labels pertained to two
counts in the indictment.
Beth Anne Teague, a nurse and a state healthcare auditor, testified that she
had reviewed 227 of Thrift’s charts for patients receiving Synagis and other drugs.
The charts contained over 2,000 claims. More than half of those claims were
over-billed and less than 1% were under-billed. As to Count 70 specifically, the
patient’s prescription was for six vials of Nutropin AQ, with three refills. Thrift
had billed Medicaid first for 14 vials, then for 12 vials, then for 14 vials, and
finally for 7 vials of Nutropin AQ for this patient.
Following the close of the government’s case and again after he rested
without presenting evidence, Morgan moved for a judgment of acquittal. The
court reserved its decision until the jury had reached a verdict.
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At the charge conference, Morgan requested that the court instruct the jury
on his good faith theory of defense. The court denied the request, finding that
there was insufficient evidence in the record to warrant the instruction. The
court’s jury charge specified that, for Morgan to be found guilty, the jury had to
find that he had acted willfully and with an intent to defraud. An intent to defraud
meant acting “knowingly and with the specific intent to deceive someone.” An
action was taken knowingly if it “was done voluntarily and intentionally and not
because of mistake or accident.” An action was taken willfully if it was done
voluntarily and with the specific intent to disobey the law. The court further
charged that if Morgan “willfully directed or authorized” an employee or other
associate or willfully joined with an employee or associate to commit a crime, then
he was responsible for that individual’s conduct as though he had engaged in the
conduct himself. The jury found Morgan guilty of all 69 counts of healthcare
fraud. Morgan moved for a judgment of acquittal, or in the alternative, a new trial.
The court denied this motion.
II.
We review challenges to the sufficiency of the evidence de novo. United
States v. Williams, 527 F.3d 1235, 1244 (11th Cir. 2008). In reviewing the
sufficiency of the evidence, we view “the evidence in the light most favorable to
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the government,” resolving “any conflicts in favor of the government and
accept[ing] all reasonable inferences that tend to support the government’s case.”
Id. “[W]e will not disturb a guilty verdict unless, given the evidence in the record,
no trier of fact could have found guilt beyond a reasonable doubt.” United States
v. Silvestri, 409 F.3d 1311, 1327 (11th Cir. 2005) (quotation omitted). “A jury is
free to choose among the constructions of the evidence,” and the evidence need
not “exclude every reasonable hypothesis of innocence or be wholly inconsistent
with every conclusion except that of guilt.” United States v. McDowell, 250 F.3d
1354, 1365 (11th Cir. 2001) (quotation omitted).
To support a conviction for health care fraud under 18 U.S.C. § 1347, the
government must prove that the defendant: (1) knowingly and willfully executed,
or attempted to execute, a scheme to (2) defraud a health care program or to obtain
by false or fraudulent pretenses money or property under the custody or control of
a health care program, (3) “in connection with the delivery of or payment for
health care benefits, items, or services.” 18 U.S.C. § 1347. The government must
show that the defendant knew that the submitted claims were false. United States
v. Medina, 485 F.3d 1291, 1297 (11th Cir. 2007). The government may rely on
circumstantial evidence to establish the defendant’s intent. United States v. Suba,
132 F.3d 662, 675 (11th Cir. 1998).
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A defendant may be convicted as a principal if he: (1) commits the offense
himself; (2) “aids, abets, counsels, commands, induces or procures” the
commission of an offense; or (3) “willfully causes” an offense to be committed.
18 U.S.C. § 2. To succeed using an aiding and abetting theory, the government
must prove that the defendant: (1) “associated himself with the criminal venture”;
(2) wished to bring about the criminal offense; and (3) “sought by his actions to
make it succeed.” United States v. Broadwell, 870 F.2d 594, 608 (11th Cir. 1989).
The defendant does not need to have committed “the overt act that served to
accomplish the offense” to be convicted under an aiding and abetting theory. Id.Here, there was sufficient evidence for the jury to find Morgan guilty of
health care fraud. See Williams, 527 F.3d at 1244. On appeal, Morgan only
argues that there was insufficient evidence that he knowingly and willfully
executed a scheme to defraud Medicaid.
The testimony at trial showed that Morgan actively managed Thrift and
Option Care, that he was involved in the billing process, and that he submitted at
least some Synagis claims. The evidence further showed that he directed Williams
and Shiver to submit false diagnoses to Medicaid to obtain approval to administer
Synagis. When they would no longer provide false diagnoses, Morgan told them
that he would handle the Synagis prior approvals himself. The evidence also
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showed that Morgan told Sheppard to bill Synagis every 23 days even if she did
not know how much Synagis the nurse had actually administered and that the
claims were sometimes submitted even more frequently than that. Because
Synagis was only administered every 30 days, under Morgan’s system, Sheppard
would submit claims more often than the drug was actually administered. The jury
was free to disbelieve Morgan’s asserted reason for this system and instead
conclude that he told Sheppard to submit claims every 23 days knowing and
intending that it would lead to over-billing Medicaid. See id. Moreover, Colson
testified that Thrift billed Medicaid for more than 2,000 more 100-milligram vials
of Synagis than it had actually purchased.
As to the Hepatitis C counts, the evidence showed a pattern of over-billing
Medicaid, including one instance where Medicaid was billed for 80 weeks worth
of the drug when only 30 weeks worth of the drug would have been administered
to the patient—nearly a year’s worth of over-billing. Another patient had refused
treatment, but Medicaid was nonetheless billed for medications that would not
have been prepared for or administered to that patient. As to the Nutropin AQ
count, Teague testified that Thrift had billed Medicaid for 23 more vials of
Nutropin AQ than the patient’s prescription authorized. Finally, there was
evidence of the extensive scope of Thrift’s and Option Care’s over-billing: Teague
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testified that more than half of the 2,000 claims she reviewed were over-billed, but
less than 1% were under-billed.
Thus, the jury had before it evidence of Morgan’s instructions and actions
regarding submitting false diagnoses to Medicaid to obtain Synagis approval, the
reasonable inference that he intentionally set up the Synagis billing system to
result in over-billing, and evidence of the extensive scope of Thrift’s and Option
Care’s over-billing of Medicaid as to Synagis, Hepatitis C drugs, and Nutropin
AQ. Based on this evidence, the jury could reasonably infer that Morgan willfully
caused his employees to execute his scheme to defraud Medicaid through the
submission of false diagnoses, claims for more drugs than were actually
administered to patients, and claims for drugs when no drugs were administered at
all. See 18 U.S.C. §§ 2, 1347.
III.
We review evidentiary rulings for a clear abuse of discretion. United States
v. McLean, 138 F.3d 1398, 1403 (11th Cir. 1998). Federal Rule of Evidence
404(b) prohibits the admission of evidence of other crimes or acts “to prove the
character of a person in order to show action in conformity therewith.”
Fed.R.Evid. 404(b). Evidence of other crimes or acts may be admitted for other
reasons, however, such as to show the defendant’s intent, plan, knowledge, or
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absence of mistake. Id. Before introducing such evidence for one of these other
purposes, the government must notify the defendant, upon the defendant’s request,
“of the general nature of any such evidence it intends to introduce at trial.” Id.Evidence does not fall within Rule 404(b)’s confines “if it is (1) an uncharged
offense which arose out of the same transaction or series of transactions as the
charged offense, (2) necessary to complete the story of the crime, or (3)
inextricably intertwined with the evidence regarding the charged offense.” United
States v. Veltmann, 6 F.3d 1483, 1498 (11th Cir. 1993). If a court commits error
under Rule 404(b), we “determine whether the error was harmless.” United States
v. Bradley, 644 F.3d 1213, 1273 (11th Cir. 2011). “Admission of unnoticed Rule
404(b) evidence prejudices a defendant where the evidence had a substantial
influence on the outcome of the trial.” Id. at 1273-74.
In this case, the court erred in admitting the TPN evidence, but the error was
harmless. The government argued that the TPN evidence constituted uncharged
offenses because TPN was an “other drug” within the scope of the final 11 counts
of the indictment. However, those counts alleged that Morgan submitted claims
for a larger quantity of the drugs than prescribed and administered, submitted
claims before the drugs were administered, and submitted claims more frequently
than the drugs were prescribed. According to Shiver’s testimony, the TPN claims
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were improper because they were submitted while patients were hospitalized, not
because the claims themselves were inaccurate, submitted too early, or submitted
too often. This evidence thus did not constitute an uncharged offense within this
scheme, it was not necessary to explain the crime, and it was not “inextricably
intertwined” with the scheme to submit inaccurate claims to defraud Medicaid.
Veltmann, 6 F.3d at 1498. Therefore, the TPN evidence did not fall under Rule
404(b), and the court erred in admitting it due to the government’s lack of notice.
See Fed.R.Evid. 404(b).
However, any error was harmless because the TPN evidence did not
prejudice Morgan or substantially influence the verdicts. See Bradley, 644 F.3d at
1273-74. There was sufficient evidence of Morgan’s guilt even without the TPN
evidence, as discussed above. Only one witness briefly testified about the TPN
claims, while numerous witnesses gave extensive testimony about the over-billing
of Synagis, Hepatitis C drugs, and Nutropin AQ. Finally, because the TPN
evidence was presented in the government’s case in chief, Morgan could have
presented a defense case to attempt to rebut the evidence.
IV.
“We review a district court’s refusal to give a requested jury instruction for
abuse of discretion.” United States v. Martinelli, 454 F.3d 1300, 1309 (11th Cir.
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2006) (quotation omitted). The defendant bears a low burden to obtain an
instruction on his theory of defense: he is entitled to such an instruction if “there is
any foundation [for the instruction] in the evidence.” Id. at 1315 (quotation
omitted). A court abuses its discretion in refusing to give a requested instruction
where: (1) the instruction correctly stated the law, (2) the instruction’s “subject
matter was not substantially covered by other instructions,” and (3) the refusal
“seriously impaired the defendant’s ability to defend himself.” Id. at 1309(quotation omitted). In Martinelli, the court did not abuse its discretion when it
refused to give a good faith instruction because it emphasized in its jury charge
that the defendant had to act knowingly to be found guilty. Id. at 1315. Moreover,
the court had explained that to act knowingly meant to act “voluntarily and
intentionally and not because of accident or mistake.” Id. at 1316 (quotation
omitted). Based on the court’s jury charge, “the jury plainly had to rule out the
possibility that” the defendant acted in good faith to find him guilty. Id.The district court did not abuse its discretion in refusing to instruct the jury
on good faith. See id. at 1309. First, there was insufficient evidence of good faith
to warrant the instruction. See id. at 1315. The evidence showed that Morgan
instructed Williams and Shiver to submit false diagnoses to Medicaid and that he
implemented a billing system for Synagis that would naturally result in
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over-billing. However, even if Morgan had met this burden, the court did not
abuse its discretion because its jury instructions adequately covered the subject
matter of good faith. See id. at 1309. Like the court in Martinelli, the court in this
case instructed the jury that Morgan had to act knowingly, willfully, and with the
specific intent to defraud to be found guilty. See id. at 1315. Also like the court in
Martinelli, this court emphasized that Morgan had to act “voluntarily and
intentionally and not because of mistake or accident.” Under these instructions,
the jury had to find that Morgan did not act in good faith and that he instead
intended to disobey the law.
For the foregoing reasons, we affirm Morgan’s convictions.
AFFIRMED.
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