United States v. Tracy Brown , 871 F.3d 352 ( 2017 )

Case: 16-30933 Document: 00514155399 Page: 1 Date Filed: 09/13/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 16-30933
Fifth Circuit
FILED
September 13, 2017
UNITED STATES OF AMERICA, Lyle W. Cayce
Clerk
Plaintiff - Appellee
v.
TRACY RICHARDSON BROWN,
Defendant - Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana
Before DAVIS, GRAVES, and COSTA, Circuit Judges.
GREGG COSTA, Circuit Judge:
Tracy Brown was convicted of multiple health care fraud and kickback
offenses perpetrated through her medical equipment company. We must
decide whether the evidence introduced at trial was sufficient to sustain her
conviction; whether the jury was properly given a deliberate ignorance
instruction; whether an expert was properly allowed to testify; and whether a
leadership enhancement was properly included in her Guidelines calculation.
Because we find that the trial court did not err on any of these points, we
AFFIRM.
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No. 16-30933
I.
Brown was the co-owner of the medical equipment company Psalms 23.
Psalms 23 provided equipment for Medicare beneficiaries. In 2005, Brown
hired marketers to assist in finding patients for whom Psalms could provide
medical equipment. For legitimate equipment companies, patient referrals
often come directly from doctors who prescribe the equipment to patients. For
her marketers, Brown emphasized that they should refer patients who needed
motorized wheelchairs and scooters, as these were the most profitable pieces
of equipment. Instead of paying the marketers a set salary, Brown proposed a
commission system; marketers would be paid on a per-piece-of-equipment
basis. Federal law forbids commission payments for referrals, as they greatly
increase the incentive for fraud (that is, for recruiting patients who do not need
the equipment). See 42 U.S.C. § 1320a-7b(b)(1)(A). As a result of this setup—
and Brown’s encouragement to refer the most profitable equipment—many
patients were billed for the same equipment, which is highly unusual for a
legitimate supplier. Indeed, expensive power wheelchairs, wheelchair
accessories, and orthotics represented more than 95% of Psalms’ Medicare
billings. And sometimes Psalms billed Medicare for expensive versions of the
orthotics while purchasing much cheaper counterparts to give to the patients.
To detail just one example of this upcoding, Psalms routinely billed Medicare
$830 for a sophisticated back brace (HCPCS code L0631), but provided
beneficiaries with a different brace (HCPCS code L0625) that cost about $11.
By upcoding this one brace 334 times, Psalms billed Medicare more than a
quarter million dollars above what the brace given to beneficiaries cost.
For just about all the equipment that was ordered, only two doctors were
used to certify that the equipment was needed. Both doctors testified that they
never met with Brown, working instead through the marketers to refer
patients to Psalms. Many of these patients did not actually need the
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equipment the doctors prescribed. And that was if the doctors even wrote out
the prescription; one marketer stated that she filled out prescriptions and
progress reports for patients herself and only used the doctor as a rubber
stamp. Another doctor who evaluated patients and referred them to Brown,
asked that payments be made out to her mother to avoid “the appearance of
impropriety.”
In fall of 2007, Brown hired a consultant to show her the “right way” to
bill Medicare. The consultant identified a number of the fraud indicators
identified above and then some:
• Psalms did not have a physical therapist, which Medicare requires to
ensure that the orthotics fit the beneficiary.
• Psalms did not collect copays from beneficiaries, something Medicare
requires and that helps ensure that the equipment is needed.
• Psalms repeatedly ordered bilateral braces—one for each side of the
body—meaning the patient was immobilized, which did not “make
any sense” to the consultant.
• Medicare did not pay for full series of orthotics (knee brace, arm brace,
back brace, and heating pad) that Psalms was billing as “arthritis
kits.”
• Psalms never billed for manual wheelchairs, instead selling only the
more expensive power wheelchairs.
• At least one marketer (that the consultant was aware of) was being
paid on commission instead of a set salary.
• That using two doctors as the same source for just two types of
equipment was “a flag,” and it was also unusual for the referral from
the doctor to be on the Psalms letterhead instead of the doctor’s
prescription pad.
Although the consultant told Brown about these problems, Brown did not do
anything different going forward.
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The scheme collapsed in fall 2008 when Psalms was audited by a fraud
contractor that investigates companies for Medicare. After discovering that
Psalms was missing documentation for a number of its patients, the
investigator informed Brown that she needed to submit additional records to
Medicare. Brown failed to do so. The contractor ultimately made a criminal
referral and caused the suspension of Psalms’s Medicare payments. Around
that time, Brown’s attorney sent a letter to the investigator informing her that
a “self-audit” had determined that one of the marketers had forged patient
information on a prescription. The letter stated that Brown had discovered the
fraud in 2008, well before the investigation had started, but did not explain
why this had not been reported earlier.
Brown was ultimately charged with health care fraud, paying kickbacks
for Medicare referrals, and conspiring to commit those two offenses. At trial
she essentially conceded the kickback charges. In defending the fraud claims,
she claimed to have no knowledge that the claims being submitted were false.
Brown was convicted on all counts and now appeals.
II.
A.
We begin with the challenge to the deliberate ignorance instruction,
because the propriety of that instruction affects the level of knowledge needed
to sustain the fraud convictions. A deliberate ignorance instruction informs
the jury that “it may consider evidence of the defendant’s charade of ignorance
as circumstantial proof of guilty knowledge.” United States v. Nguyen, 493
F.3d 613, 618 (5th Cir. 2007). Such an instruction may be given even for
conspiracy charges. See id.; United States v. Barrera, 444 Fed. App’x 16, 22
(5th Cir. 2011); see also United States v. Alston-Graves, 435 F.3d 331, 337–42
(D.C. Cir. 2006) (reviewing and questioning the application of the deliberate
ignorance instruction to conspiracy cases). The instruction is proper “when the
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evidence shows that: (1) the defendant was subjectively aware of high
probability of the existence of illegal conduct, and (2) the defendant purposely
contrived to avoid learning of the illegal conduct.” United States v. Miller, 588
F.3d 897, 906 (5th Cir. 2009).
We have repeatedly cautioned that the instruction “should rarely be
given,” United States v. Kuhrt, 788 F.3d 403, 417 (5th Cir. 2015), but this is the
paradigmatic case. The thrust, if not the entirety of Brown’s defense, was that
even if Psalms was engaged in a massive scheme to defraud Medicare, she was
not aware of her underlings’ crime. But ample evidence showed that as an
owner and involved operator of the company, Brown was subjectively aware of
a high probability of fraudulent billing. She was paying commissions to the
marketers, which is not just a separate crime but probative that she knew
about the fraudulent claims. She was not asking beneficiaries for copays. She
pushed marketers to only find patients who needed expensive equipment.
Brown also knew her marketers were filling out prescriptions and progress
reports, even though they should have been completed by a physician. And the
company she owned was also making exorbitant profits due to the upcoding we
have discussed. See United States v. Willett, 751 F.3d 335, 341–42 (5th Cir.
2014) (noting that high profit margins can be circumstantial evidence of fraud
(citing United States v. Davis, 490 F.3d 541, 549 (6th Cir. 2007))).
But what really sinks Brown’s objection to the instruction is the
consultant’s visit in 2007. At that meeting, the consultant pointed out a
number of these problems with the business: Psalms repeatedly waived co-
pays, billed the same pieces of equipment for many of its patients; billed
multiple pieces of equipment to a single patient that could not use all the
equipment; and failed to follow the requirement that a therapist fit certain
equipment for its patients. Brown was further told that she would be held
responsible for Psalms’s practices if Medicare came calling. Despite these
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warnings, she allowed the recruiters, doctors, and employees who handled
billing—the people she is now saying are responsible for the fraud rather than
her—to continue operating as usual while she tried to remain above the details
of the criminal conduct.
A deliberate ignorance instruction is intended for this situation in which
Brown knew it was highly likely that something illegal was afoot, but tried
looking the other way while reaping the benefits of the likely criminal activity.
See United States v. Barson, 845 F.3d 159, 166 (5th Cir. 2016) (affirming
deliberate ignorance instruction when, in part, the defendant relied on his own
lack of knowledge of Medicare forms to argue that he suspected no
wrongdoing); see also United States v. Delgado, 668 F.3d 219, 227–28 (5th Cir.
2012). The trial court thus did not abuse its discretion in giving the
instruction.
B.
This conclusion also impacts our review of whether the evidence was
sufficient to support the verdict. Brown essentially challenges only the
knowledge element of the fraud conviction, and what we have just said means
the evidence need only support a jury finding that she was deliberately
ignorant of the ongoing fraud. Based on the evidence detailed above, the jury
was entitled to draw that conclusion. And our deference to the jury’s view of
the evidence is even stronger than it usually is because Brown failed to renew
her motion for a directed verdict after the close of the evidence. We thus can
overturn the jury’s verdict only for a “manifest miscarriage of justice.” United
States v. Davis, 690 F.3d 330, 336 (5th Cir. 2012). That occurs only if there is
no evidence pointing to guilt or because the evidence is so tenuous that a
conviction would be shocking. United States v. McDowell, 498 F.3d 308, 312
(5th Cir. 2007). Brown makes a number of arguments that might have
convinced a jury to rule the other way. She emphasizes that none of the
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marketers who testified said they discussed with her that the claims were
fraudulent, views her hiring of the consultant as an attempt to comply with
the law, and argues she was not directly involved in the billing. There need
not be direct evidence of guilt, however, and the jury’s decision to reach a
different conclusion based on the substantial circumstantial evidence the
government highlights does not come close to being a miscarriage of justice.
C.
As for the final alleged trial error, the district court did not abuse its
discretion in admitting Jonathon Bergey’s expert testimony. Rule 702 lists
criteria a trial court can use to determine whether a witness may give expert
testimony, but as the Supreme Court explained in Kumho Tire these factors
are neither exclusive nor dispositive. Kumho Tire Co. v. Carmichael, 526 U.S.
137, 152 (1999); see also Fed. R. Evid. 702. The ultimate inquiry is “relevance
and reliability.” Rushing v. Kansas City S. Ry. Co., 185 F.3d 496, 507 (5th Cir.
1999) (“As long as some reasonable indication of qualifications is adduced, the
court may admit the evidence without abdication of its gate-keeping
function.”). And trial judges have leeway in determining whether an expert’s
testimony is reliable. Kumho Tire, 526 U.S. at 152.
Bergey was offered as an expert in Medicare and the practices of medical
equipment providers. This is not the type of cutting-edge scientific evidence
for which the Daubert factors are often most vigorously contested. Bergey has
worked for a Medicare claims-processing contractor since 2003. In his many
roles with the company, he has had to learn—and teach others—the general
practices and policies of both Medicare and payments to medical equipment
companies. He also has written and edited manuals instructing suppliers on
how to properly bill Medicare and comply with its guidelines. The trial court
held that this experience qualified Bergey as an expert.
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That was not error. We have routinely affirmed district courts that
admit the testimony of experts based on the kind of experience Bergey has. See
Mike Hooks Dredging Co. v Marquette Transp. Gulf-Inland, LLC, 716 F.3d 886,
894 (5th Cir. 2014) (affirming expert based on his experience in maritime
navigation); United States v. West, 58 F.3d 133, 140 (5th Cir. 1995) (admitting
IRS agent as expert witness on tax evasion based on her work experience and
accounting education); Huval v. Offshore Pipelines, Inc., 86 F.3d 454, 458 (5th
Cir. 1996) (“Given [expert’]s broad, general experience in the insurance
industry, we cannot say that the district court abused its discretion in
qualifying him as an expert witness.”).
III.
Brown’s only challenge to her sentence (80 months on the fraud counts;
60 months on the kickback counts) is to dispute the application of an
enhancement that found she was “an organizer or leader of a criminal activity
that involved five or more participants.” U.S.S.G. § 3B1.1(a). Of course, as the
owner and operator of Psalms, she was a leader of the company. And she
brought into the company a number of the marketers who engaged in the
fraudulent activity. See United States v. Brown, 727 F.3d 329, 341 (5th Cir.
2013); United States v. Liu, 960 F.2d 449, 456 (5th Cir. 1992) (both applying
the enhancement when the defendant recruited others into the conspiracy).
Brown’s argument against the enhancement is just recycling the
argument she made to challenge her fraud convictions: that she did not know
about the fraud. But given that the jury found she was a knowing participant
in the conspiracy to defraud Medicare, it readily follows that she was a leader
of that criminal enterprise. The district court did not clearly err in applying
the enhancement.
The judgment and sentence are AFFIRMED.
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