In Re: The Bankruptcy Estate of AGS, Inc. v. , 565 F. App'x 172 ( 2014 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1296
In Re: THE BANKRUPTCY ESTATE OF AGS, INC.,
Petitioner.
On Petition for Writ of Mandamus.
(1:12-cr-00113-IMK-JSK-1)
Submitted: April 2, 2014 Decided: April 4, 2014
Before TRAXLER, Chief Judge, and WILKINSON and MOTZ, Circuit
Judges.
Petition denied by unpublished per curiam opinion.
Patrick S. Cassidy, CASSIDY, MYERS, COGAN & VOEGELIN, LC,
Wheeling, West Virginia; Martin Patrick Sheehan, SHEEHAN &
NUGENT, PLLC, Wheeling, West Virginia, for Petitioner. Robert
G. McCoid, MCCAMIC, SACCO, PIZZUTI & MCCOID, PLLC, Wheeling,
West Virginia; Andrew R. Cogar, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Clarksburg, West
Virginia, for Respondents.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
The bankruptcy estate of AGS, Inc. has petitioned for a
writ of mandamus pursuant to 18 U.S.C. § 3771(d). It seeks to
require defendant Allen G. Saoud to pay it restitution following
his conviction on multiple counts of health care fraud and other
associated charges. See United States v. Saoud, Criminal Case
No. 1:12-CR-113 (pending N.D. W. Va.) (Keely, J.). Petitioner
contends that it was a victim under the Mandatory Victims’
Restitution Act, 18 U.S.C. § 3663A, and is entitled to a
restitution award of more than $1 million. For the reasons that
follow, we deny the petition. *
I.
Allen G. Saoud was convicted after a June 2013 jury trial
of thirteen counts of health care fraud and several other
offenses. According to the evidence presented at trial, the
defendant, who is a dermatologist, was excluded in 2005 from
participating in Medicare and Medicaid for a period of ten
years. He then hatched a plan to maintain ownership and control
of his dermatology practice, AGS Inc. (“AGS”) in violation of
the exclusion. To execute this fraudulent scheme, he founded a
new dermatology practice, to which he transferred all of his
*
We grant petitioner’s motion to proceed on the original
record with an abbreviated appendix.
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patients. He then fraudulently sold this practice to Dr. Fred
Scott for $1.8 million. He then sold AGS, which had lost its
value, for $1 million to nurse practitioner Georgia Daniel.
After these sales, he continued to control and profit from both
entities, partly by collecting Medicare and Medicaid
reimbursement funds. The defendant never told his staff of his
exclusion from Medicare and Medicaid during this time.
After the defendant was convicted, petitioner sought a
restitution award of more than $1 million to cover bankruptcy
claims by Highmark West Virginia, Inc. (“Highmark”), the West
Virginia State Tax Department, as well as petitioner’s
attorneys’ fees. The validity of these bankruptcy claims was not
discussed in the government’s case against the defendant at
trial. Highmark alleges that multiple AGS doctors had overbilled
it from 2000 to early 2006. The state of West Virginia claims
that AGS owed it tax payments from the tax years 2000 to 2004.
The district court declined to award petitioner its desired
restitution, and this petition followed.
II.
A.
Typically writs of mandamus are subject to a stringent
standard of review, requiring that “a petitioner must show that
he has a clear and indisputable right to the relief sought and
there are no other adequate means to attain the relief he
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desires.” In re U.S. for an Order Pursuant to 18 U.S.C. Section
2703(D), 707 F.3d 283, 289 (4th Cir. 2013) (internal quotation
marks omitted). Our sister circuits have disagreed about whether
this demanding standard applies to mandamus petitions filed
under § 3771 or if instead traditional appeal standards apply.
Compare, e.g., United States v. Fast, 709 F.3d 712, 718 (8th
Cir. 2013) and In re Antrobus, 519 F.3d 1123, 1124-25 (10th Cir.
2008) (applying the mandamus standard of review) with Kenna v.
U.S. Dist. Court for C.D.Cal., 435 F.3d 1011, 1017 (9th Cir.
2006) and In re W.R. Huff Asset Mgmt. Co., LLC, 409 F.3d 555,
563 (2d Cir. 2005) (applying the standards applicable to
ordinary appeal). We have left the issue open. See In re Brock,
262 F. App'x 510, 512 (4th Cir. 2008). We need not decide this
question here. It is sufficient simply to note that to issue a
writ of mandamus to a district court is not something to be
undertaken lightly.
B.
The petitioner claims that it is due restitution under the
Mandatory Victims’ Restitution Act (“MVRA”), 18 U.S.C. § 3663A.
The statute defines a “victim” as: “a person directly and
proximately harmed as a result of the commission of an offense
for which restitution may be ordered including . . . any person
directly harmed by the defendant's criminal conduct in the
course of [a] scheme, conspiracy, or pattern.” Id.
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§ 3663A(a)(2). We have noted that under the MVRA, “alleged
victims must be the victims of the offense of conviction.”
United States v. Freeman, 741 F.3d 426, 435 (4th Cir. 2014)
(emphasis in original). In order to determine whether there is
an adequate connection between the alleged victim’s losses and
the defendant’s specific conduct, “we look to the elements of
the offense of conviction and the specific conduct underlying
these elements.” Id. at 437. An examination of the trial record
makes clear that petitioner does not qualify as a victim for
purposes of the MVRA.
The elements of health care fraud require a person to
knowingly and willfully execute or attempt to execute a scheme
to (a) defraud a health care benefit program; or (b)
fraudulently obtain property or money owned or under the custody
or control of any health care benefit program. See 18 U.S.C.
§ 1347. The second superseding indictment (“indictment”)
specifically alleged in counts one through five -- all five of
which the defendant was convicted -- that the defendant
knowingly devised a scheme intended to defraud Medicare and
Medicaid and to fraudulently obtain the programs’ money and
property. See J.A. at 28. And elsewhere in the indictment, the
government alleged that the defendant used AGS as an instrument
in his scheme to illegally obtain Medicare and Medicaid funds.
See id. at 29-30. It is clear that the scheme was aimed at
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defrauding these federal programs. AGS was one of the means
through which the defendant perpetrated the fraud upon them. We
decline to also hold that AGS was one of the scheme’s victims.
Meanwhile, the damage suffered by AGS’s creditors from
defendant’s fraudulent activity can at best be described as
tangential to the scheme to defraud Medicare and Medicaid that
is the basis for restitution. As noted above, the statute and
our precedents require direct or proximate harm from the
offenses of conviction. To the extent that AGS’s creditors are
harmed because they must expend funds in an attempt to prevail
in the bankruptcy proceedings, that damage cannot be said to be
adequately related to the defendant’s health care fraud to
qualify under the MVRA. See United States v. Abdelbary, 13-4083,
2014 WL 929422 at *7 (4th Cir. Mar. 11, 2014) (noting that,
generally, legal fees paid to recover lost property are not
direct and proximate losses that can be recovered through
restitution). Instead, this harm is tangential to the
substantive counts of health care fraud from which the
restitution flows.
In addition, the vast majority of the loss claimed by the
creditors is antecedent to the fraud charged in the case.
Highmark’s claims for alleged overbilling by AGS doctors date
from 2000 to early 2006, while the state tax claims date from
the tax years 2000 to 2004. The health care fraud for which the
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defendant was charged and convicted, meanwhile, began in 2005.
Thus, if in fact the petitioner’s claims regarding false
billings and underpayment of taxes are valid, they stem almost
exclusively from AGS’s conduct before defendant engaged in his
fraudulent behavior. Finally, it is not clear that the
defendant’s conduct was detrimental to AGS; the government
posits that the fraud may in fact have provided AGS more assets
with which to pay its bills. See Freeman, 741 F.3d at 438
(requiring for restitution a showing that absent the fraud, the
same harm would not have befallen the victims).
III.
For the foregoing reasons, we find that the district court
did not err in denying restitution to the bankruptcy estate of
AGS and we deny the petition for a writ of mandamus.
PETITION DENIED
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