United States v. Larry Everett Smith ( 2023 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 23a0339n.06
No. 22-5559
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Jul 24, 2023
) DEBORAH S. HUNT, Clerk
UNITED STATES OF AMERICA,
)
Plaintiff-Appellee, )
ON APPEAL FROM THE
)
v. UNITED STATES DISTRICT
)
COURT FOR THE EASTERN
)
LARRY EVERETT SMITH, DISTRICT OF TENNESSEE
)
Defendant-Appellant. )
OPINION
)
)
Before: MOORE, ROGERS, and GRIFFIN, Circuit Judges.
GRIFFIN, Circuit Judge.
For his role in a sprawling telemedicine scam, defendant Larry Smith pleaded guilty to
conspiring to commit healthcare fraud. The district court sentenced him to 42 months’
imprisonment, which he now appeals. Because his sentence is both procedurally and substantively
reasonable, we affirm.
I.
Along with over a dozen co-defendants, Smith participated in a nationwide conspiracy in
which marketers identified individuals with private health insurance and sent them prescriptions
they did not request, written by doctors with whom they had no prior relationship. The conspirators
profited by submitting insurance claims on the patients’ behalf for the medicine at a high mark-up
while concealing that no co-pays were collected.
No. 22-5559, United States v. Smith
Smith managed several pharmacies that profited via this scheme. He pleaded guilty to one
count of conspiracy to commit healthcare fraud in violation of 18 U.S.C. §§ 1347, 1349, pursuant
to a plea agreement. Under Federal Rule of Criminal Procedure 11(c)(1)(B), the parties
recommended that the district court use a base offense level of six, but because Smith had caused
over $24 million in losses (a twenty-level enhancement, U.S.S.G. § 2B1.1(b)(1)(K)) and the
offense involved sophisticated means (a two-level enhancement, U.S.S.G. § 2B1.1(b)(10)), they
anticipated a total offense level of 28. The government agreed that it would not oppose a two- or
three-level reduction for Smith’s acceptance of responsibility under U.S.S.G. § 3E1.1, and it
“agree[d] not to seek the application of any other enhancements to [Smith]’s sentence.” Smith
waived much of his right to file a direct appeal of his conviction or sentence, reserving only the
right to “appeal a sentence imposed above the sentencing guideline range determined by the Court
or above any mandatory minimum sentence deemed applicable by the Court, whichever is greater.”
The presentence investigation report determined that Smith’s total offense level was 33
and his criminal history category was I, resulting in a Guidelines range of 135 to 168 months’
imprisonment. The statutory maximum, however, capped the range at 120 months. That
calculation applied several enhancements upon which the parties did not agree, including two
levels for the use of mass marketing and the number of victims (U.S.S.G. § 2B1.1(b)(2)(A)), two
levels for the amount of government loss (U.S.S.G. § 2B1.1(b)(7)), and four levels for Smith’s
leadership role (U.S.S.G. § 3B1.1(a)).
Smith objected to each of those enhancements. The district court sustained all his
objections, which returned him to the parties’ agreed-upon total offense level of 28. After the
three-level reduction for acceptance of responsibility, his total offense level became 25, with a
corresponding Guidelines range of 57 to 71 months’ imprisonment.
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The government moved for a seven-level downward departure. The district court granted
the motion in part, departing six levels down, which resulted in a total offense level of 19 and a
corresponding Guidelines range of 30 to 37 months’ imprisonment. After reviewing the applicable
18 U.S.C. § 3553(a) factors at length and considering Smith’s motion for a downward departure
and variance, the district court imposed a 42-month sentence. Smith timely appealed.
II.
We must begin with the government’s contention that Smith cannot bring this appeal, given
the appeal waiver in his plea agreement. “It is well settled that a defendant ‘may waive any right,
even a constitutional right, by means of a plea agreement,’” so long as that agreement is made
knowingly and voluntarily. United States v. Toth, 668 F.3d 374, 377 (6th Cir. 2012) (quoting
United States v. Calderon, 388 F.3d 197, 199 (6th Cir. 2004)). When, as here, a defendant does
not challenge the validity of the appeal waiver, we review de novo whether the claims presented
on appeal fall within the scope of the waiver. Id. at 378.
It is unsettled whether granting a downward-departure motion results in a below-
Guidelines sentence or creates a new Guidelines range. Compare United States v. Grams, 566
F.3d 683, 686–87 (6th Cir. 2009) (per curiam) (explaining that a “‘departure’ refers to the
imposition of a sentence outside the [Guidelines] range”) with, e.g., United States v. Gould,
30 F.4th 538, 542 (6th Cir. 2022) (referring to the “resulting Guidelines range” after a downward
departure). That is an issue to resolve in another case. For this appeal, we assume that the
applicable Guidelines range was the post-downward-departure range of 30 to 37 months, placing
Smith’s 42-month sentence outside the scope of his appeal waiver. See United States v. Fowler,
956 F.3d 431, 436 (6th Cir. 2020) (holding that ambiguity in a plea agreement must be construed
against the government). Indeed, it appears that at sentencing, the government understood it to be
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so when it requested “a sentence within the Guideline range the court has now determined,”
referring to this range. But for the reasons set forth below, Smith’s procedural and substantive
challenges to his sentence are without merit.
III.
A.
Before we reach the merits, we address Smith’s claim that his plea agreement prohibits the
government from presenting any argument to us. He contends that the government’s promise “not
to seek the application of any . . . enhancements” is ambiguous and should be read to require the
government to “stand mute” on appeal. On de novo review, United States v. Estrada-Gonzalez,
32 F.4th 607, 612 (6th Cir. 2022), we disagree.
To interpret language in a plea agreement, we consider how a “reasonable person” would
understand it. Id. (citation omitted). Here, the language is clear. The government may not seek
application of any Guideline “enhancement” beyond those already contemplated by the parties
(i.e., those in § 2B1.1). Enhancement has a specific meaning: a sentencing adjustment based on
Chapter Two of the Sentencing Guidelines. See U.S.S.G. § 1B1.1 comment. n.4(B). The parties’
narrow agreement thus prohibits the government from, say, advocating on appeal for the
application of another subsection of § 2B1.1 to enhance Smith’s sentence. But this is not a case
in which the government agreed not to “suggest an upward variance in any way.” Estrada-
Gonzalez, 32 F.4th at 612. On appeal, the government does not seek application of any specific
enhancements, so its argument defending the sentence imposed does not run afoul of the plea
agreement.
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No. 22-5559, United States v. Smith
B.
Procedural reasonableness requires the district court to “properly calculate the guidelines
range, treat that range as advisory, consider the sentencing factors in 18 U.S.C. § 3553(a), refrain
from considering impermissible factors, select the sentence based on facts that are not clearly
erroneous, and adequately explain why it chose the sentence.” United States v. Rayyan, 885 F.3d
436, 440 (6th Cir. 2018). We usually review a challenge to the procedural reasonableness of a
sentence for an abuse of discretion. Gall v. United States, 552 U.S. 38, 41 (2007). But here, Smith
objected generally to the procedural reasonableness of his sentence without citing any specific
errors in the district court’s analysis, so we review only for plain error. See United States v.
Simmons, 587 F.3d 348, 357–58 (6th Cir. 2009); United States v. Bostic, 371 F.3d 865, 872–73
(6th Cir. 2004). This requires Smith to show “(1) error (2) that was obvious or clear, (3) that
affected [his] substantial rights and (4) that affected the fairness, integrity, or public reputation of
the judicial proceedings.” United States v. Vonner, 516 F.3d 382, 386 (6th Cir. 2008) (en banc)
(internal quotation marks omitted).
Smith’s briefing, while not a model of clarity, appears to raise three procedural-
reasonableness claims: that the district court relied on improper facts, relied on improper factors,
and failed to address all his arguments for a lesser sentence. We address each in turn.
Smith challenges three facts relied on by the district court as clearly erroneous. First, he
complains that the court wrongly assumed that people fell victim to the scam because they were
looking for “some new cure for their pain.” But this statement was supported by the presentence
report, which the court was entitled to rely on at sentencing. Fed. R. Crim. P. 32(i)(3)(A); United
States v. Geerken, 506 F.3d 461, 467 (6th Cir. 2007). The presentence report outlined various
deceptive and misleading advertisements used to “misinform[] patients that the [fraudulent
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No. 22-5559, United States v. Smith
medications] were effective at treating various ailments.” It was entirely reasonable for the district
court to surmise that some victims of Smith’s scheme fell prey to the scheme as a result of these
advertisements because they were seeking a cure for their ailments. See United States v. Parrish,
915 F.3d 1043, 1048 (6th Cir. 2019) (“[T]he district court is free to make reasonable inferences
from facts in the record when fashioning a sentence.”).
Next, Smith objects to the district court’s assumption that he did not provide reasonable
responses to complaints from victims. True, the court suspected that customers did not “get a
reasonable response” from Smith to their complaints, but it admitted that it did not actually “know
what kind of response the customers who called in with complaints got.” Given this limitation,
we see no error.
He also takes issue with the district court’s conclusion that the victims were given “false
hope” by the scheme. But again, this statement was supported by Smith’s own admissions, as
memorialized in his plea agreement, that he obtained vitamins and “repackaged [them] as
prescription drugs.” It was reasonable for the district court to assume that vitamins would not have
the same clinical effects as real prescription drugs, misleading the duped consumers into a false
sense of hope. See Parrish, 915 F.3d at 1048.
Smith’s next claim of error alleges that the district court considered impermissible factors
when it sustained his objections to the mass-marketing and leadership enhancements but varied
upward on the same facts. The district court did so because it believed that the unenhanced
Guideline range did not account for these aspects of Smith’s conduct. Smith acknowledges that
there is no “bright-line rule” that district courts cannot rely on factors that the Guidelines already
accounted for when imposing a variance. United States v. Tristan-Madrigal, 601 F.3d 629, 636 n.1
(6th Cir. 2010). And courts may certainly vary upward based on conduct that is not adequately
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“reflected in the guideline calculation.” See United States v. Denny, 653 F.3d 415, 420 (6th Cir.
2011) (affirming an upward variance based on the district court’s judgment that the seriousness of
the offense was not sufficiently reflected in the Guidelines calculation). Here, the Guidelines did
not account for either Smith’s leadership role or the use of mass marketing, given that the district
court sustained Smith’s objections to those enhancements. Because the district court explained
why it felt that the Guidelines range was insufficient to satisfy the § 3553(a) factors when
considering these two aspects of Smith’s conduct, we find no plain error in the court’s
consideration of this conduct when justifying the five-month upward variance.
Finally, Smith argues that the district court did not “adequately consider each of his
nonfrivolous grounds to depart or vary downward.” But he does not identify which arguments the
district court neglected. We see no error, particularly given that the district court must “consider”
each argument at sentencing but need not “address each argument head-on.” United States v.
Taylor, 696 F.3d 628, 634 (6th Cir. 2012) (internal quotation marks omitted). The district court
stated it had read everything, including Smith’s sentencing memorandum and the documents he
submitted in support, and the court engaged with each of Smith’s arguments at the sentencing
hearing. Moreover, the court discussed several of Smith’s specific arguments for leniency,
including his personal history, character, charitable works, medical conditions, and family
responsibilities—ultimately concluding that his “good works and family standing” were mitigating
factors. The court did not plainly err.
C.
Smith also contends that his sentence is substantively unreasonable—that is, it is “too long”
given his circumstances. Rayyan, 885 F.3d at 442. A claim of substantive reasonableness is “that
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the court placed too much weight on some of the § 3553(a) factors and too little on others[.]” Id.
We review a claim of substantive reasonableness for an abuse of discretion. Id.
First, Smith argues that he acted less culpably than his co-defendants, but that distinction
was not reflected in his sentence. The record belies this claim. The district court acknowledged
both the differences and the similarities between Smith’s conduct and that of his co-defendants.
For example, the court noted that all co-defendants operated under one fraudulent scheme, but that
Smith was “in charge of all of” the responsibilities for his spoke of the conspiracy’s wheel, rather
than playing a more compartmentalized role like some co-defendants, and that he distributed non-
prescription vitamins intentionally mislabeled as prescription medicine (something the other spoke
of the wheel did not participate in). The district court reasonably considered these distinctions
when imposing Smith’s sentence; that it did not do so in precisely the way Smith prefers does not
render the sentence imposed unreasonable.
Relatedly, Smith complains that he received the second-highest sentence of all the
defendants in this conspiracy. This does not render his sentence unreasonable, because
§ 3553(a)(6) is concerned not with disparities between co-defendants, but “national disparities
between defendants with similar criminal histories convicted of similar criminal conduct.” United
States v. Conatser, 514 F.3d 508, 521 (6th Cir. 2008). Nor was the district court required to follow
the national trends and statistics Smith cited, for “the Guidelines, not statistical reports, are our
barometer for promoting nationwide sentencing uniformity.” United States v. Hymes, 19 F.4th
928, 936 (6th Cir. 2021) (internal quotation marks omitted).
Finally, Smith argues that the district court did not give him sufficient credit for accepting
responsibility and for substantially assisting the government. This is plainly not borne out by the
record. Smith received a three-level reduction for accepting responsibility and a six-level
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downward departure for substantial assistance. To the extent that Smith challenges the district
court’s decision to grant only a six-, rather than a seven-level, downward departure, we lack
jurisdiction to review that argument. United States v. Curry, 536 F.3d 571, 573 (6th Cir. 2008).
In sum, the district court considered the relevant factors and crafted a sentence sufficient,
but not greater than necessary, to comply with the purposes of § 3553(a). We will not deem
Smith’s sentence unreasonable just because he thinks the district court should have balanced the
§ 3553(a) factors differently. See United States v. Adkins, 729 F.3d 559, 572 (6th Cir. 2013).
IV.
For these reasons, we affirm the sentence imposed by the district court.
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