United States v. Isaac Knight ( 2018 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 18a0595n.06
Nos. 17-3604/3612
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Nov 28, 2018
UNITED STATES OF AMERICA, )
DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee,
) ON APPEAL FROM THE
)
v. UNITED STATES DISTRICT
) COURT FOR THE
)
ISAAC R. KNIGHT and DELORES L. KNIGHT, NORTHERN DISTRICT OF
) OHIO
Defendants-Appellants. )
Before: COLE, Chief Judge; GRIFFIN and KETHLEDGE, Circuit Judges.
KETHLEDGE, Circuit Judge. Delores and Isaac Knight, mother and son, were convicted
of healthcare fraud and conspiracy to commit the same. They each challenge the sufficiency of
the evidence supporting their convictions. Delores also challenges the district court’s denial of her
motion to sever her trial from Isaac’s, and Isaac challenges his sentence. We affirm both
defendants’ convictions, but vacate Isaac’s sentence because the district court made a mistake of
fact when it applied a Guidelines enhancement for obstruction of justice.
I.
For about ten years, Delores Knight headed Just Like Familee (Familee), a business that
provided home-healthcare services in Ohio. Delores’s daughter, Theresa Adams, co-owned the
business and directed sales and marketing. Delores’s son, Isaac Knight, managed a branch office
in Mentor, Ohio.
Nos. 17-3604/3612, United States v. Knight
From 2007 to 2014, Familee engaged in healthcare fraud. Among other things, the
company falsely certified compliance with Medicare, Medicaid, and Veterans Affairs rules, billed
multiple agencies for the same service, and billed for services not provided (including for patients
who were already deceased). Eventually, the government’s auditors caught on. Various reviews
showed that 70 to 100 percent of Familee’s claims were improper—if not fraudulent. Medicare,
Medicaid, and Veterans Affairs then barred the company from billing for any more services. In
response, Delores, Theresa, and Isaac started a new company, Elegance Home Health, and Isaac
applied for accreditation to begin billing Medicare again.
Soon thereafter, a grand jury indicted Delores and Isaac (among others) for healthcare
fraud, conspiracy to commit healthcare fraud, and money laundering, in violation of 18 U.S.C. §§
1347, 1349, 1957. The grand jury also indicted Isaac for making a false statement on Elegance’s
application for Medicare accreditation, in violation of 18 U.S.C. § 1035, on the theory that Isaac
falsely marked the “No” checkbox in response to the question whether Medicare had ever taken
an adverse action against the applicant. Before trial, Delores moved to sever her trial from Isaac’s.
The district court denied the motion.
The district court thereafter conducted an eleven-day joint trial. The jury convicted Delores
on all counts, and convicted Isaac on all counts except the one that he had made a false statement
on Elegance’s application. The district court sentenced Delores to 120 months’ imprisonment and
Isaac to 87 months, and also ordered both defendants, jointly and severally, to pay restitution in
the amount of $8,168,107.24. These appeals followed.
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II.
A.
Delores and Isaac challenge the sufficiency of the evidence supporting their convictions
for healthcare fraud and conspiracy to commit the same. When reviewing a guilty verdict, “the
relevant question is whether, after viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the essential elements of the crime beyond
a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original).
No one disputes that the government proved fraud. Indeed, Delores admits that “[t]here is
no question” that Familee “engaged in numerous criminal activities.” She and Isaac argue only
that the prosecution lacked sufficient evidence that they personally were involved in the frauds.
The government had ample evidence of Delores’s involvement. Familee’s nursing director
testified that Delores had asked her to make false statements on medical forms. The company’s
billing clerk testified that Delores had told her to lie on forms, and that Delores—who supervised
the medical records department—had known that the billed services were improperly documented.
A vendor who sold billing software to Familee testified that Delores had asked how to disable the
software’s double-billing safeguards. Several Familee employees testified that nothing “happened
at Just Like Familee” that Delores “didn’t oversee or have a role in.” This evidence allowed the
jury reasonably to conclude that Delores had committed fraud and conspired to do so. That
conclusion likewise disposes of Delores’s challenge to the evidence supporting her money-
laundering conviction, because (as she admits) that argument is derivative of her challenge to her
fraud convictions.
The government’s case against Isaac was similar. The company’s nursing director testified
that Isaac had told her to certify phony visits to patients, and that Isaac had been copied on other
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emails requesting fraudulent signatures and forged notes. A receptionist also testified that Isaac
had told her to ask various nurses fraudulently to sign forms, and that when those nurses had
refused, Isaac had told her to fax the unsigned forms to the nursing director for signature.
Documents also showed that Isaac had been involved in founding Elegance Home Health shortly
after Familee was barred from billing the agencies—which strengthened the inference that he was
in on the scheme. This evidence was enough for the jury to find that Isaac committed healthcare
fraud and conspired to do the same.
Isaac argues that the jury’s finding that he committed healthcare fraud conflicts with its
acquittal of him on the charge that he made false statements in Elegance’s application. But an
inconsistent verdict does not by itself warrant a retrial. See United States v. Lawrence, 555 F.3d
254, 262 (6th Cir. 2009). And in any event the jury’s findings were not inconsistent: if Isaac did
not lie on Elegance’s application, he still could have been a participant in Familee’s fraud. As
indeed the evidence showed he was. His argument is meritless.
B.
Delores argues that the district court should have granted her motion to sever her trial from
Isaac’s because, she says, evidence of Isaac’s fraud unduly prejudiced her case. We review the
district court’s denial for an abuse of discretion. United States v. Cody, 498 F.3d 582, 586 (6th
Cir. 2007). As relevant here, Delores must make a “strong showing of prejudice” and show that
joinder prevented the jury from “making a reliable judgment about guilt or innocence.” United
States v. Hang Le-Thy Tran, 433 F.3d 472, 478 (6th Cir. 2006).
The joinder had no such effect here. Co-conspirators are routinely tried jointly, and
Delores does not explain why this joinder was prejudicial to her. Moreover, the district court
properly instructed the jury to consider separately the evidence regarding each count and each
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defendant. And the jury acquitted Isaac on one count, which suggests that the jury was “able to
compartmentalize and distinguish the evidence concerning the different offenses charged.” See
Cody, 498 F.3d at 588 (internal quotation marks omitted). Delores’s challenge is meritless.
C.
Isaac argues that the district court erred in imposing a two-level obstruction-of-justice
enhancement to his sentence. See U.S.S.G. § 3C1.1. We review the district court’s factual findings
for clear error and its application of the enhancement de novo. See United States v. Baggett, 342
F.3d 536, 540-41 (6th Cir. 2003).
Section 3C1.1 provides for a two-level enhancement when the government proves by a
preponderance of the evidence that a defendant “willfully obstructed or impeded, or attempted to
obstruct or impede, the administration of justice.” U.S.S.G. § 3C1.1; see United States v. Dunham,
295 F.3d 605, 609 (6th Cir. 2002). The notes to § 3C1.1 list “committing, suborning, or attempting
to suborn perjury” as examples of obstructing justice. U.S.S.G. § 3C1.1 cmt. n. 4(b). If the district
court applies the enhancement on the ground that the defendant solicited perjury, the court must
make a specific factual finding to that effect. See United States v. Lawrence, 308 F.3d 623, 632
(6th Cir. 2002).
Here, the district court found that Isaac had solicited false testimony from his girlfriend, to
the effect that he had been in Kentucky when a fraudulent fax was sent from his Ohio office. But
the government and Isaac now agree that Delores, not the girlfriend, gave that testimony. The
court’s stated basis for the enhancement was therefore clearly erroneous.
The government argues nonetheless that application of the enhancement was proper
because Delores gave the false testimony in response to questions from Isaac’s counsel. Whether
those facts provide an alternative basis for the enhancement, however, is for the district court to
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decide in the first instance. See United States v. Parrott, 148 F.3d 629, 635-36 (6th Cir. 1998).
We therefore vacate Isaac’s sentence.
D.
Finally, Isaac argues that the court attributed the wrong amount of financial loss to him
when it calculated his Guidelines range. We review the district court’s loss calculation for clear
error, but review its methodology de novo. See United States v. Meda, 812 F.3d 502, 519 (6th Cir.
2015).
The Guidelines increase a defendant’s offense level in proportion to the loss caused by the
defendant’s fraud. See U.S.S.G. § 2B1.1(b). To calculate the loss, the court “need only make a
reasonable estimate” of the loss, but must deduct the fair market value of any services rendered to
the victim before the fraud was detected. § 2B1.1 cmt. n. 3(C), (E).
Here, the district court calculated the government’s loss by relying on auditors’ estimates
of the percentage of Familee’s claims that had been fraudulent. Isaac does not challenge this
method; instead, he argues that the court should have reduced the loss by the value of any services
that Familee actually rendered to patients. But Isaac presented no evidence regarding the value of
services that Familee actually provided. For that reason, among others, his argument fails. See
United States v. Washington, 715 F.3d 975, 984-85 (6th Cir. 2013). For the same reason, we also
reject Isaac’s challenge to the amount of restitution ordered by the district court.
* * *
Delores’s conviction and sentence are affirmed. Isaac’s conviction is affirmed, but his
sentence is vacated and his case is remanded for resentencing.
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