United States v. Davis ( 2006 )


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  •                                                            United States Court of Appeals
    Fifth Circuit
    F I L E D
    IN THE UNITED STATES COURT OF APPEALS
    June 12, 2006
    FOR THE FIFTH CIRCUIT
    Charles R. Fulbruge III
    ))))))))))))))))))))))))))                    Clerk
    No. 05-10045
    ))))))))))))))))))))))))))
    UNITED STATES OF AMERICA,
    Plaintiff-Appellee,
    versus
    CHARLES WILLIAM HAMES;
    JAMES MICHAEL DAVIS; and
    ROBBIE LESA HAMES,
    Defendants-Appellants.
    ______________________
    No. 05-10375
    Summary Calendar
    ______________________
    UNITED STATES OF AMERICA,
    Plaintiff-Appellant,
    versus
    JAMES MICHAEL DAVIS,
    Defendant-Appellee.
    Appeals from the United States District Court
    for the Northern District of Texas
    USDC No. 3:01-CR-323-2-P
    Before JONES, Chief Judge, and WIENER and PRADO, Circuit Judges.
    PER CURIAM:*
    Appellants Charles Williams Hames (“Pete Hames”), Robbie Lesa
    Hames (“Lesa Hames”), and James Michael Davis were convicted of
    conspiracy to commit healthcare fraud, mail fraud, making false
    statements,    and   other     charges    listed    in   a   seventeen-count
    superseding indictment arising from a healthcare fraud scheme. Pete
    and Lesa Hames (collectively, “the Hameses”) claim that the district
    court erred by excluding the impeachment testimony offered by one of
    their witnesses.     All of the Appellants contend that evidence is
    insufficient to support their convictions and that their sentences
    violate United States v. Booker, 
    543 U.S. 220
     (2005).               For the
    following reasons, we AFFIRM Appellants’s convictions, VACATE their
    sentences and REMAND for resentencing.
    I.   BACKGROUND
    Pete Hames and his wife, Lesa Hames, an attorney, owned and
    operated Alternate Nursing Care (“ANC”), a Medicare-funded home
    healthcare agency.       Medicare reimbursed ANC for the cost of care for
    Medicare      patients      through      Palmetto    Government    Benefits
    Administrators (“Palmetto”), a subsidiary of South Carolina Blue
    Cross/Blue Shield, which contracted with the Health Care Financing
    *
    Pursuant to 5TH CIR. R. 47.5, the court has determined that
    this opinion should not be published and is not precedent except
    under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
    2
    Administration (“HCFA”)1 to administer the Medicare program in Texas.
    Medicare reimburses only certain expenses, does not reimburse the
    costs associated with “related parties” or shell corporations, and
    does not allow providers to make a profit.   At trial, the Government
    argued that, in 1996, the Hameses discovered that their reportable
    expenses were $600,000 less than what they had already received
    through estimated advances.   The Government contended that instead
    of repaying this amount, with the help of Davis, a family friend and
    full-time maintenance worker at an apartment complex,    they padded
    their expenses to keep the money.
    At trial, the Government presented evidence suggesting that
    Davis assisted Lesa Hames to claim $120,000 in consulting services
    by signing a false, backdated contract purporting to show that Davis
    was earning $20,000 per month for healthcare consulting work.
    The Government also argued that Davis assisted Lesa Hames by
    acting as the straw owner of Accelerated Home Health Personnel
    (“Accelerated”), a fake employee leasing company that Lesa Hames
    created.   According to the Government, although Accelerated did not
    exist until March 1996, Davis signed backdated documents created in
    1996 to make it appear that the company entered into employee
    leasing contracts with ANC in mid-1995 and early 1996.    After Lesa
    opened Accelerated, she transferred almost all of ANC’s employees to
    the company and leased them back to ANC at an inflated rate.     The
    1
    HCFA is now the Centers for Medicare and Medicaid
    Services.
    3
    Government suggests that ANC did not pay Accelerated the claimed
    employee leasing expenses. In addition, ANC did not actually pay
    Accelerated’s employees more money.             Instead, it continued to pay
    them the same amount as before the leasing agreement was executed.2
    The Hameses, through their corporation RALA, also purchased a
    dilapidated     office   building   in       Irving    (“Irving     building”)   for
    $140,000 and began costly renovations to it.                  Shortly thereafter,
    the   Hameses   transferred      RALA    and    its    only   asset,    the    Irving
    building, to Davis in exchange for a promissory note for $1.2
    million.    At trial, the Government presented evidence that Davis
    later represented to the Bank of the West that he had made $700,000
    in payments on this $1.2 million note to secure a $500,000 loan when
    the money actually came from the Hameses.               In connection with this
    scheme, Davis signed blank checks, backdated documents, and various
    lease agreements used to pad the Hameses’ expenses for Medicare
    reporting purposes.
    According    to    the   Government,      some    of    the   Hameses’   other
    fraudulent acts were simpler.           For instance, Lesa Hames claimed as
    Medicare expenses the renovation of their home and the Irving
    building.   In addition, while she used the Irving building for some
    2
    The Government claimed that, notwithstanding the fact that
    Davis was Accelerated’s owner, his sole task was to sign
    paychecks. He did not hire, fire, or otherwise manage the leased
    employees. In addition, evidence reflects that, even after
    Accelerated and ANC discontinued their purported lessor-lessee
    relationship, Davis routed ANC’s Medicare funds from Accelerated
    to the Hameses’ personal accounts.
    4
    non-Medicare related purposes, Lesa Hames claimed as a Medicare
    expense the entire amount of rent on the Irving building.
    The Government argued that Davis and the Hameses operated these
    schemes     until     1998,    when        Palmetto’s    auditors       discovered        and
    disallowed the fraudulent expenses.                     Larry Seals, the Palmetto
    investigator,       determined       that     between    1996    and    1998,       Medicare
    overpaid Appellants $2.2 million.                 Davis and his wife received over
    $500,000 of that amount.
    At trial, the Government called twenty-three witnesses in its
    case-in-chief, including David Hames, Pete Hames’s brother who also
    served as the accountant for the Hameses’ companies.                         He testified
    that many of the Hameses’ expenses were falsified in order to avoid
    reimbursing Medicare for being overpaid.                        During David Hames’s
    cross-examination, the defense did not question him about any prior
    inconsistent     statements.           A    week    later,   near      the    end    of   the
    defense’s     case-in-chief,         Lesa     Hames     sought     to    introduce        the
    testimony of Max Wayman, a defense investigator who interviewed
    David   Hames    before       he    began     cooperating       with    the    government
    investigation into ANC.             Wayman was expected to testify that David
    Hames told him Appellants had not committed any crimes and that he
    believed the reported expenses were all legitimate.                      The Government
    objected    to      Wayman’s       testimony       because   the    defense         had   not
    questioned David Hames about any prior inconsistent statements
    before attempting to proffer extrinsic evidence about them.                               The
    trial court sustained the objection.
    5
    On December 15, 2004, pursuant to the jury’s guilty verdicts on
    all counts charged in the indictment, the district court sentenced
    Lesa Hames to 102 months imprisonment and Pete Hames and Davis to 70
    months imprisonment each.      The court also ordered Lesa Hames and
    Davis to serve three years of supervised release.                Finally, the
    court ordered Appellants to pay, jointly and severally, $2,885,020
    in restitution.
    This appeal followed.    Davis also filed a motion for release
    pending appeal in which he argued that there was a substantial
    question whether the evidence was sufficient to prove that he
    knowingly committed fraud.     The district court granted release, and
    the Government’s appeal of this issue has been consolidated with
    this case.
    II.   DISCUSSION
    A.   The Trial   Court    Did       Not   Err   by   Excluding   Wayman’s
    Testimony
    First, the Hameses contend that the trial court erred by
    excluding Wayman’s testimony because the advisory committee’s notes
    on the Federal Rules of Evidence suggest that the traditional
    requirement of providing the witness an opportunity to explain the
    contradictions before the admission of extrinsic evidence has been
    abolished.3
    3
    The advisory committee’s notes relax “the traditional
    insistence that the attendance of the witness be directed to the
    statement on cross-examination . . . in favor of simply providing
    the witness an opportunity to explain . . ., with no
    6
    We review a district court’s ruling on exclusion of evidence
    for abuse of discretion.    United States v. Ragsdale, 
    426 F.3d 765
    ,
    774 (5th Cir. 2005).    “A trial court abuses its discretion when its
    ruling is based on an erroneous view of the law or a clearly
    erroneous assessment of the evidence.”     
    Id.
     (quoting Bocanegra v.
    Vicmar Servs., Inc., 
    320 F.3d 581
    , 584 (5th Cir. 2003)).        If the
    district court abused its discretion in excluding the testimony, we
    will review that error for harmlessness.    
    Id.
    When the Hameses proposed to offer the testimony of Max Wayman
    to impeach David Hames with his prior inconsistent statements, the
    district court excluded Wayman’s testimony under FED. R. EVID. 613(b).
    That rule provides:
    Extrinsic evidence of a prior
    inconsistent statement by a
    witness   is   not  admissible
    unless the witness is afforded
    an opportunity to explain or
    deny the same and the opposite
    party    is     afforded    an
    opportunity to interrogate the
    witness    thereon,   or   the
    interests of justice otherwise
    require.
    The Hameses point to the advisory committee’s notes on the
    Federal Rules of Evidence and United States v. Bibbs, 
    564 F.2d 1165
    (5th Cir. 1977), to support their argument that the trial court
    erred by excluding Wayman’s testimony.     In light of the Hameses’
    specification of any particular time or sequence,”      FED. R. EVID.
    613(b) advisory committee’s note.
    7
    obfuscation of the issue in Bibbs, our standard of review, and the
    amount of discretion afforded to the trial court, their reliance on
    Bibbs       and the committee’s notes is misguided.            In Bibbs, the
    district       court   admitted   extrinsic   evidence    of     inconsistent
    statements made by a witness after she had testified, even though
    the proponent had not cross-examined her on the yet-to-be-made
    statements while she was still on the stand.              
    Id.
         This Court
    affirmed, noting that the trial judge has wide discretion; and, even
    if the case had fallen under Rule 613(b), that rule does not
    “require that impeachment foundation precede the impeaching witness’
    testimony.”      
    Id. at 1169
     (emphasis added).   Bibbs does not stand for
    the proposition that a district court abuses its discretion when it
    in fact requires a foundation before admitting extrinsic evidence of
    the impeachment.        In Bibbs, we merely cited the Rule 613(b) in
    suggesting that it would not be reversible error for a court to
    allow the impeaching witness’ testimony to precede the impeachment
    foundation.       To hold otherwise would severely limit the trial
    courts’ broad discretion in controlling the manner and presentation
    of evidence       at trial.4   See FED. R. EVID. 611.    Thus, we conclude
    4
    Other circuits have concluded that, although trial courts
    have the option to allow extrinsic evidence without a prior
    foundation, it is not an abuse of discretion to refuse to admit
    it without that foundation. See United States v. Surdow, No. 04-
    2459CR, 
    2005 WL 332805
     (2d Cir. Feb. 9, 2005) (unpublished)
    (“[A]n impeaching party that does not itself intend to confront a
    witness with the particulars of a purportedly inconsistent
    statement will, at the very least, ‘inform[ ] the court and
    opposing counsel, at the time the witness testifies, of the
    8
    that the trial court did not abuse its discretion by excluding
    Wayman’s testimony.5
    B.       Evidence is Sufficient to Sustain the Hameses’ Convictions
    For Making False Statements
    The Hameses also argue that, because they made false statements
    only to Palmetto, a private contractor, and Larry Seals, an auditor
    for Palmetto, they cannot be convicted under 
    18 U.S.C. §§ 1001
     and
    1516.       Specifically, they contend that their convictions cannot
    stand because the statutes require that falsehoods be made directly
    to a government agency or to an agent of the executive branch.      The
    intention to introduce’ impeaching extrinsic evidence . . .
    .(emphasis deleted)(quoting Weinstein’s Federal Evidence §
    613.05[5] at 613-28)); United States v. Schnapp, 
    322 F.3d 567
    ,
    572 (8th Cir. 2003) (finding no abuse of discretion when judge
    did not exercise his option to permit extrinsic evidence before
    confrontation of the original witness); United States v. Sutton,
    
    41 F.3d 1257
    , 1260 (8th Cir. 1994) (finding no abuse of
    discretion to exclude extrinsic evidence testimony because the
    relaxation of the timing rule “is not mandatory, but is optional
    at the trial judge’s discretion”).
    5
    The government maintains that David Hames likely would have
    admitted that he made the prior inconsistent statement to Wayman.
    At the time Wayman interviewed David Hames, he was not yet
    cooperating with the government; indeed, he admitted on the stand
    that he had lied to a federal auditor about the very same subject
    matter. If David Hames would have admitted making the
    inconsistent statement to Wayman, the Hameses’ purported
    extrinsic evidence of Wayman’s testimony would have been
    inadmissible. See United States v. Greer, 
    806 F.2d 556
    , 559 (5th
    Cir. 1986) (tape of prior inconsistent statement was inadmissible
    when the witness admitted he made the statement); United States
    v. Roger, 
    465 F.2d 996
    , 997-98 (5th Cir. 1972) (same); cf. United
    States v. Avants, 
    367 F.3d 433
    , 447-48 (5th Cir. 2004)(“In order
    for a prior inconsistent statement to be admissible for
    impeachment purposes, there must be a preliminary finding that
    statements are inconsistent.”).
    9
    Government argues that, although Palmetto is a private company,
    because it acts as Medicare’s agent, the evidence is sufficient to
    affirm the Hameses’ convictions under §§ 1001 and 1516.
    We review the sufficiency of the Government’s evidence to
    determine   whether   a   rational   trier      of   fact   could   have   found
    Appellants guilty of their charged offenses beyond a reasonable
    doubt.   United States v. Gray, 
    105 F.3d 956
    , 965 (5th Cir. 1997).
    “The evidence is viewed ‘in the light most favorable to the verdict,
    accepting all credibility choices and reasonable inferences made by
    the jury.’”    
    Id.
     (quoting United States v. Blount, 
    98 F.3d 1489
    ,
    1494 (5th Cir. 1996)). “The jury is free to choose among reasonable
    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.
    Ferguson, 
    211 F.3d 878
    , 883 (5th Cir. 2000).
    Section 1001 permits for punishment of: “[W]hoever, in any
    matter within the jurisdiction of the executive, legislative, or
    judicial branch of the Government of the United States, knowingly
    and willfully——... (2) makes any materially false, fictitious, or
    fraudulent statement or representation.”             
    18 U.S.C. § 1001
    .      The
    Supreme Court has ruled that jurisdiction must be defined in a
    nontechnical   manner     and   “covers   all    matters    confided   to    the
    authority of an agency or department.”           United States v. Rodgers,
    
    466 U.S. 475
    , 479 (1984).       Accordingly, this Court has consistently
    10
    held   that   false   statements   need    not   be   made   directly   to   the
    government to fall “within the jurisdiction of” the government.
    See, e.g., United States v. Montemayor, 
    712 F.2d 104
    , 106-09 (5th
    Cir. 1983) (finding that false statements to procure Texas birth
    certificates fell within the jurisdiction of § 1001 because “these
    false statements, although not made directly to the federal agency
    itself, may factually be held to be a matter within the jurisdiction
    of the federal agency”); United States v. Uni Oil, 
    646 F.2d 946
    ,
    954-55 (5th Cir. 1981) (noting that “it is well settled that a false
    statement need not be made directly to a federal agency in order to
    sustain a § 1001 conviction” and finding no deficiencies in an
    indictment charging false statements that were made to refiners who
    ultimately used those statements to submit calculations as required
    by an executive agency).
    The HCFA administers Medicare for the government. In so doing,
    HCFA contracts with local companies to perform audits and distribute
    funds.     Pursuant to HCFA’s contract, Palmetto administers the
    Medicare program in Texas.     Palmetto’s contractual responsibilities
    include receiving, adjudicating and paying Medicare claims with
    government money.     Accordingly, because Palmetto acts as Medicare’s
    agent, a rational trier of fact could have found the Hameses guilty
    of 
    18 U.S.C. § 1001
     beyond a reasonable doubt.
    Similarly, a rational trier of fact could have found Lesa Hames
    guilty   beyond   a   reasonable   doubt    of   
    18 U.S.C. § 1516
    ,   which
    11
    criminalizes the deception of a Federal auditor.               The statute
    expressly defines “Federal auditor” as “any person employed on a .
    . . contractual basis to perform an audit or a quality assurance
    inspect for or on behalf of the United States.”           
    18 U.S.C. § 1516
    (emphasis added).     Relying on United States v. Plasser American
    Corporation, 
    57 F. Supp. 2d 140
     (E. Dist. Pa. 1999), however, Lesa
    Hames argues that only auditors paid directly by the United States,
    as opposed to auditors paid by an outside company who are then
    reimbursed by the United States, qualify under the statute.              Her
    reliance on Plasser is misplaced.          Plasser held that an auditor
    acting on behalf of federally funded Amtrak is not a Federal auditor
    for purposes of § 1516.    Here, Palmetto is both federally funded and
    performing an audit at the direct behest of, and certainly on behalf
    of, the United States.      Thus, the evidence presented at trial is
    sufficient to support Lesa Hames’s conviction under 
    18 U.S.C. § 1516
    .
    C.   Evidence is Sufficient to Sustain the Jury’s Verdict on
    Davis’s Intent to Defraud
    Davis   argues   he   lacked    an   intent   to   defraud,   and   that
    consequently, the jury’s verdict against him must be overturned for
    lack of sufficient evidence.        “The requisite intent to defraud is
    established if the defendant acted knowingly and with the specific
    intent to deceive, ordinarily for the purpose of causing some
    financial loss to another or bringing about some financial gain to
    himself.” United States v. Doke, 
    171 F.3d 240
    , 243 (5th Cir. 1999).
    12
    Specific intent can be proven through circumstantial evidence and
    inferences.    United States v. Ismoila, 
    100 F.3d 380
    , 387 (5th Cir.
    1996) (“[P]roof of [] intent can arise ‘by inference from all of the
    facts and circumstances surrounding the transactions.’” (quoting
    United States v. Keller, 
    14 F.3d 1051
    , 1056 (5th Cir. 1994))); see
    also United States v. Bieganowski, 
    313 F.3d 264
    , 277 (5th Cir.
    2002)(noting    that   “[c]ircumstances   altogether   inconclusive,    if
    separately considered, may, by their number and joint operation,
    especially when corroborated by moral coincidences, be sufficient to
    constitute conclusive proof [of intent]” (quoting United States v.
    Lechuga, 
    888 F.2d 1472
     (5th Cir. 1989))).
    The jury simply did not believe that Davis lacked the intent to
    defraud.    A reasonable construction of the evidence is such that a
    rational trier of fact could conclude that Davis at some point
    formed an intent to defraud.       See Bieganowski, 
    313 F.3d at 289-90
    (sufficient evidence for jury to infer deliberate indifference to
    fraud when defendant was aware of billing mistakes but simply
    directed a consultant to fix them); United States v. Pennington, 
    20 F.3d 593
    ,   599   (sufficient   evidence   for   jury   to   disbelieve
    defendants’ story because of their circuitous route and disheveled
    appearance at the time of the crime).         The record is replete with
    evidence that Davis had the intent to defraud.       The record reflects
    that Davis signed numerous false, backdated contracts to help the
    Hameses pad their expenses for Medicare reporting purposes. In
    13
    addition, the jury could have believed that Davis routed ANC’s
    Medicare funds to the Hameses’ personal accounts and represented to
    the Bank of West that he had made $700,000 in payments on a $1.2
    million note for the Irving building to secure a $500,000 loan.   As
    a result, Davis and his wife received nearly $500,000 from all of
    these activities.
    Given the evidence and the fact that this court does “not
    lightly overturn a determination by the trier of fact that the
    accused possessed the requisite intent,” we affirm the jury’s
    verdict against Davis.     See United States v. Robichaux, 
    995 F.3d 565
    , 570 (5th Cir. 1993) (quoting United States v. Aubrey, 
    878 F.2d 825
    , 827 (5th Cir. 1989)).
    D.   Evidence is Sufficient to Sustain the Jury’s Verdict on
    the Materiality of Davis’s Misrepresentations
    Davis also claims that his conviction for bank fraud must be
    reversed because the evidence was insufficient for a jury to find
    that his misrepresentations to the Bank of the West were material.
    Davis represented to the bank that he had purchased a building for
    $1.2 million and made $700,000 in payments on it, even though the
    original purchase price was only $140,000 and the Hameses supplied
    the money.   He validated these representations through falsified
    documents.
    A statement is material if it “has a natural tendency to
    influence, or was capable of influencing the decision of” the
    lending institution.     United States v. Heath, 
    970 F.2d 1397
    , 1403
    14
    (5th Cir. 1992)(quoting Kungys v. United States, 
    485 U.S. 759
    , 770
    (1988)).
    Bill Wood, a Bank of the West employee testified that the fact
    that Davis stated that he paid $700,000 on the $1.2 million note
    influenced the decision to approve Davis’s loan.           This alone is
    sufficient for a jury to conclude that Davis’s misrepresentations
    were material, viewing the evidence in the light most favorable to
    the verdict.
    E.   Appellants’ Sentences Violate Booker
    Appellants were sentenced pre-Booker.     They argue that their
    sentences violate the Sixth Amendment because they were based in
    part on facts that were neither admitted by them nor found beyond a
    reasonable doubt by the jury.     Additionally, they argue that the
    district court erred by sentencing them pursuant to a mandatory
    application of the United States Sentencing Guidelines.       See United
    States v. Booker, 
    543 U.S. 220
     (2005).    The Government concedes that
    Appellants all preserved their Booker objections at the district
    court by citing Blakely v. Washington, 
    542 U.S. 296
     (2004).            It
    further concedes that it cannot demonstrate that the Booker error
    was harmless.    See United States v, Akpan, 
    407 F.3d 360
    , 377 (5th
    Cir.    2005).    Accordingly,   the   cases   must   be   remanded   for
    resentencing in accordance with Booker.
    Appellants also argue that ex post facto and due process
    concerns preclude the district court from applying Justice Breyer’s
    15
    remedial   opinion     in   Booker    on     remand.      Those   arguments   are
    foreclosed by United States v. Scroggins, 
    411 F.3d 572
    , 575-77 (5th
    Cir. 2005).      See also United States v. Cruz, 
    418 F.3d 481
    , 484 n.2
    (5th    Cir.   2005)   (not    considering      ex     post   facto/due   process
    challenges because the case was remanded for resentencing, but
    noting that those challenges were foreclosed).
    III. CONCLUSION
    For the foregoing reasons, we AFFIRM Appellants’s convictions,
    VACATE   their    sentences,    and   REMAND     for    resentencing.     Having
    affirmed Davis’s       conviction, we      refer the Government’s appeal of
    the motion for his release pending appeal to the district court for
    consideration in light of this opinion.
    16