United States v. Fischer

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 96-3587, 97-2877, and 98-2091 03/04/99
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 95-239-CR-ORL-22
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JEFFREY ALLAN FISCHER,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(March 4, 1999)
Before ANDERSON and HULL, Circuit Judges, and HANCOCK*, Senior District Judge.
HULL, Circuit Judge:
A jury convicted appellant Jeffrey Allan Fischer on thirteen counts, including violations
of 18 U.S.C. §§ 371 (conspiracy), 666 (fraud and bribery involving an organization receiving
*
Honorable James H. Hancock, Senior U.S. District Judge for the Northern District of
Alabama, sitting by designation.
federal funds), 1341 (mail fraud), 1343 (wire fraud), and 1957 (money laundering).1 Fischer
appeals his convictions and sixty-five-month sentence.
Fischer contends, inter alia, that his convictions on two counts under § 666 and on a
related conspiracy count should be reversed because the Government did not prove the statutory
prerequisite that the agency affected by Fischer’s wrongdoing “receives, in any one year period,
benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan,
guarantee, insurance, or other form of Federal assistance.” 18 U.S.C. § 666(b).2 After review,
we affirm Fischer’s convictions and sentence.
I. BACKGROUND
A. $1.2 Million Loan
At trial, the evidence established that in 1993 Fischer, as president and part-owner of
QMC, arranged for West Volusia Hospital Authority (“WVHA”) to loan $1.2 million to QMC.
Fischer negotiated this loan with WVHA’s chief financial officer, Robert Caddick. On June 30,
1993, Fischer and Caddick executed the loan agreements between QMC and WVHA.
1
The jury convicted Fischer of one count of fraud involving an organization receiving
federal funds, in violation of 18 U.S.C. § 666(a)(1)(A) (Count I); one count of giving a kickback
to an agent of an organization receiving federal funds, in violation of 18 U.S.C. § 666(a)(2)
(Count II); one count of mail fraud, in violation of 18 U.S.C. § 1341 (Count III); two counts of
wire fraud, in violation of 18 U.S.C. § 1343 (Counts IV-V); one count of conspiracy to commit
fraud involving an organization receiving federal funds, to give and accept a kickback involving
an organization receiving federal funds, and to commit wire fraud, in violation of 18 U.S.C. §
371 (Count VI); and seven counts of money laundering, in violation of 18 U.S.C. § 1957 (Counts
VII-XIII).
2
Fischer also challenges (1) the sufficiency of the evidence regarding his intent to
defraud and to bribe, (2) the particularity of the indictment, (3) the admission of evidence
relating to his prior fraud convictions, (4) certain statements by the prosecutor during opening
statement and closing argument, (5) the district court’s decision not to hold an evidentiary
hearing in reference to a Brady violation alleged in Fischer’s motions for a new trial, and (6) the
district court’s finding that Fischer had the ability to pay restitution. After careful consideration
of each of these claims, we affirm the judgment of the district court. See 11th Cir. R. 36-1.
2
As security for the $1.2 million loan, Fischer pledged QMC’s accounts receivable and a
$1 million letter of credit QMC had obtained for this purpose through a foreign bank, First Asia
Development Bank (“FADB”). However, QMC’s accounts receivable already were pledged to
another QMC creditor. In addition, the $1 million letter of credit did not appear to be legitimate,
and even if it were, its terms severely limited WVHA’s ability to collect the $1 million.3
Furthermore, questions were raised about WVHA’s authority to loan money to QMC.
The questions arose both before WVHA loaned the $1.2 million to QMC, and later, when
WVHA’s board of directors discovered the loan had been made. WVHA, a local government
agency funded by a bond issue, was authorized to invest its excess funds in only instruments
backed by the federal government.4
Nonetheless, WVHA made the $1.2 million loan to QMC on July 2, 1993.
QMC used the $1.2 million to repay creditors and to raise the salaries of QMC’s
five owner-employees, including Fischer. In addition, Fischer had QMC lend at
least $100,000 to a company owned by the FADB representative who had assisted
QMC with the $1 million letter of credit. Fischer also had QMC open options-
3
After reviewing the $1 million letter of credit, the account representative at WVHA’s
bank expressed concerns to Caddick and to Fischer about the legitimacy of the letter of credit
and about WVHA’s ability to collect on the letter of credit, if necessary. The account
representative’s concerns were based on the facts that she had never heard of FADB and that the
letter of credit had not been signed, would expire even before the WVHA-QMC loan matured,
and required QMC’s approval before WVHA could collect on it.
4
As a result of a proposal presented by Caddick in April 1993, WVHA’s finance
committee did expand Caddick’s investment authority. At trial, however, evidence indicated
that investment in loans to private entities, such as QMC, still would not have been authorized.
3
trading accounts using these loan proceeds. In a short time, Fischer lost about
$400,000 of the loan proceeds through his options-trading on QMC’s behalf.5
In February 1994, WVHA’s auditors disclosed the $1.2 million loan to QMC
in the annual audit report. Through this report, WVHA’s board of directors and
the chairman of WVHA’s finance committee first learned about the $1.2 million
loan. Shortly thereafter the board asked that the loan be called. The due date for
the loan was July 1, 1994.
On July 1, 1994, QMC did not have the funds to repay the loan. Later that
month, Fischer persuaded FADB to send QMC a $1.2 million draft to repay
WVHA. QMC endorsed this draft and presented it to WVHA, which in turn
presented the draft to its bank. However, FADB refused to honor the draft when
presented by WHVA’s bank. Thus, WVHA was unable to collect the $1.2 million
owed by QMC.
B. $10,000 Kickback to Caddick
The evidence indicated that, in June 1993, Caddick requested a $10,000 loan
from QMC at the end of one of Fischer and Caddick’s initial meetings about the
possibility of the $1.2 million loan. After QMC received the $1.2 million loan
5
To show that Fischer had a pattern of fraudulently obtaining money and then using that
money to speculate in the securities market, the Government introduced evidence that Fischer,
while a broker for E.F. Hutton, had embezzled two million dollars of his clients’ money. Fischer
thereafter lost the two million dollars in failed investments. As a result of these actions, Fischer
was convicted on three counts of mail fraud on April 12, 1985.
4
from WVHA, QMC paid $10,000 by check to Caddick’s mother, Stella Greenfield,
in August 1993. This $10,000 check, paid with Fischer’s approval, was marked
“consulting fees”--even though Greenfield never performed any services for QMC.
Greenfield sent the proceeds of the $10,000 check to Caddick, pursuant to
Caddick’s instructions.
In January 1994, a QMC bookkeeper sought an invoice to correspond with
the earlier $10,000 check to Greenfield. The bookkeeper received an invoice dated
August 1, 1993. A notation appeared on the invoice in Fischer’s handwriting,
indicating that the payment was for a “loan origination fee.”
Another attempt to cover up QMC’s $10,000 payment to Caddick apparently
was made after QMC defaulted on the $1.2 million loan from WVHA and that
default became the subject of an investigation and widespread publicity. In this
cover-up attempt, Caddick allegedly approached QMC’s vice-president, Charles
Kramer, with a “contract” for programming services Caddick purportedly had
performed for QMC. Caddick allegedly asked Kramer to sign and backdate the
“contract” to create a retroactive justification for the $10,000 payment. However,
Kramer refused.
C. WVHA’s Receipt of Federal Benefits
To establish that Fischer had violated 18 U.S.C. §§ 666(a)(1) and (a)(2), the
Government was required to prove that WVHA was an agency receiving, in any
5
one year period, “benefits in excess of $10,000” under a federal assistance
program. 18 U.S.C. § 666(b).6 At trial, the Government introduced evidence that
WVHA was a county agency responsible for operating two county hospitals. The
Government also introduced testimony from WVHA’s director of finance that
“most health care organizations collect a majority of their funds from programs
that are funded by the federal government.” Asked to give an example of how
much money WVHA specifically collected in 1993 from the federal government
6
In relevant part, 18 U.S.C. § 666 provides as follows:
(a) Whoever, if the circumstance described in subsection (b) of this
section exists–
(1) being an agent of an organization, or of a State, local, or Indian
tribal government, or any agency thereof–
(A) embezzles, steals, obtains by fraud, or otherwise without
authority knowingly converts to the use of any person other than
the rightful owner or intentionally misapplies, property that–
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of
such organization, government, or agency; or
....
(2) corruptly gives, offers, or agrees to give anything of value to
any person, with intent to influence or reward an agent of an
organization or of a State, local, or Indian tribal government, or
any agency thereof, in connection with any business, transaction,
or series of transactions of such organization, government, or
agency involving anything of value of $5,000 or more;
shall be fined under this title, imprisoned not more than 10 years, or both.
(b) The circumstance referred to in subsection (a) of this section is that the
organization, government, or agency receives, in any one year period,
benefits in excess of $10,000 under a Federal program involving a grant,
contract, subsidy, loan, guarantee, insurance, or other form of Federal
assistance.
18 U.S.C. § 666(a)-(b).
6
under the Medicare program alone, WVHA’s director of finance testified that
WVHA had collected between ten and fifteen million Medicare dollars in 1993.
Later on, WVHA’s director of finance explained further that different
government programs pay differently. WVHA’s director of finance then testified:
A specific example is that we get paid, hospitals get paid a fixed
amount from the federal government on in-patient Medicare patients,
patient[s] who are greater than the age of 65. So raising the prices for
services that are primarily used for individuals in that group has no
impact. There’s no increase in revenue.
Thus, according to the testimony of WVHA’s director of finance, even if the
hospital charges the patient an increased amount for services, the hospital is paid
only a fixed amount from Medicare for those services.
II. DISCUSSION7
A. Scope of § 666(b)
The statutory prerequisite for a conviction under 18 U.S.C. § 666 is that the
organization or agency affected by the fraud, unauthorized conversion, bribery, or
other prohibited act “receives, in any one year period, benefits in excess of $10,000
under a Federal program involving a grant, contract, subsidy, loan, guarantee,
insurance, or other form of Federal assistance.” 18 U.S.C. § 666(b). In the present
7
The issues we discuss here involve statutory interpretation and sufficiency of the
evidence. We review de novo issues of statutory interpretation. United States v. MacAllister,
160 F.3d 1304, 1306 (11th Cir. 1998). We also review de novo sufficiency of the evidence,
viewing the evidence in the light most favorable to the Government and drawing all reasonable
inferences and credibility choices in favor of the jury’s verdict. United States v. Trujillo, 146
F.3d 838, 845 (11th Cir. 1998).
7
case, the primary issue is whether WVHA received “benefits” under a federal
assistance program for purposes of § 666(b). After review, we find that WVHA’s
receipt of between ten and fifteen million dollars in Medicare funds qualified as
receipt of “benefits” under a federal assistance program and that the Government
presented sufficient evidence to satisfy the requirements of 18 U.S.C. § 666(b).
This Court previously addressed the scope of § 666(b) in United States v.
Copeland, 143 F.3d 1439 (11th Cir. 1998). At issue in Copeland was whether
Lockheed, a prime contractor for the United States Department of Defense,
qualified as an organization receiving “benefits” for purposes of § 666(b). Id. at
1441. Defendant Copeland, a manager at one of Lockheed’s plants, had been
convicted of violating 18 U.S.C. § 666 by accepting bribes from individuals
including co-defendant Winders. Id. at 1440. In turn, defendant Winders had been
convicted of violating 18 U.S.C. § 666 by giving bribes to co-defendant Copeland.
Id. On appeal, the defendants argued that their convictions under § 666 should be
reversed because the Government had failed to prove that Lockheed met the
requirements of § 666(b). Id.
In reviewing the defendants’ claims in Copeland, this Court examined the
statutory language and construed § 666(b) as requiring that the “benefits” an
organization or agency receives from the federal government be linked to some
form of federal assistance. Id. at 1441. Specifically, this Court recognized that
8
organizations engaging in contractual relationships with the federal government
would fall within the scope of the statute, if those “contractual relationships
constitut[ed] some form of ‘Federal assistance.’” Id. This Court also determined
that “organizations engaged in purely commercial transactions with the
government” were excluded from the scope of § 666(b) because those
organizations were not in relationships involving some form of federal assistance.
Id.
Based on the evidence at trial, this Court in Copeland concluded that
Lockheed’s relationship with the government did not come within the scope of §
666(b) because Lockheed’s transactions as a defense contractor were “purely
commercial.” Id. at 1442. Nothing in the record indicated that Lockheed had
received “benefits” under a federal program involving a contract or any other form
of federal assistance. Id. The record did contain evidence that Lockheed received
funds from the government through its defense contracts, but those funds were not
“benefits” within the meaning of § 666(b) because those funds were not received
under a federal program involving federal assistance. Id. Instead, those funds
were received as a result of “purely commercial transactions with the government.”
Id. Because this statutory prerequisite of receiving “benefits” under a program of
federal assistance was not met, this Court vacated Copeland’s and Winders’s
convictions under § 666. Id.
9
B. Sufficiency of the Government’s Evidence Under § 666(b)
The evidence in the present case contrasts sharply with that in Copeland.
Whereas Lockheed received federal dollars through purely commercial
transactions, WVHA, as an agency responsible for the administration of two
hospitals, actually received payments from the federal government under several
federal assistance programs. For example, evidence introduced at the trial in this
case clearly established that, in 1993, WVHA received between ten and fifteen
million dollars under the federal Medicare assistance program. In fact, WVHA’s
finance director’s testimony indicated that the ten to fifteen million dollars WVHA
collected under the Medicare program in 1993 was paid directly to WVHA for
providing health care services to covered individuals.
Section 666(b) provides that the “benefits” an organization receives under a
federal program can be in the form of “a grant, contract, subsidy, loan, guarantee,
insurance, or other form of Federal assistance.” 18 U.S.C. § 666(b) (emphasis
added). Because WVHA received payments under a federal assistance program,
WVHA received a type of “benefits” expressly covered by § 666(b). Thus, the
statutory prerequisite for Fischer’s convictions under § 666 was satisfied.
Having reached this result based entirely on the plain language of § 666(b),
we normally would not examine the legislative history of the statute. See United
States v. Copeland, 143 F.3d 1439, 1441 (11th Cir. 1998). However, as this Court
10
observed in Copeland, some circuits have found § 666(b) to be ambiguous on its
face. Id. As a result, it is worth noting that the legislative history of § 666(b) also
supports our conclusion. The statute’s legislative history indicates that the
language of § 666(b) is to “be construed broadly, consistent with the purpose of
this section to protect the integrity of the vast sums of money distributed through
Federal programs from theft, fraud, and undue influence by bribery.” S. Rep. No.
225, 98th Cong., 2d Sess. 369-70 (1984), reprinted in 1984 U.S.C.C.A.N. 3182,
3510-11. In this case, our determination that WVHA is an agency receiving
“benefits” within the meaning of § 666(b) serves the statute’s purpose of protecting
from fraud, theft, and undue influence by bribery the money distributed to health
care providers, and WVHA in particular, through the federal Medicare program
and other similar federal assistance programs.8
C. “Target Recipient” Analysis Not Required
8
Although the legislative history may seem to indicate otherwise, we observe that this
Court already has held that the government is not required to prove a direct link between the
federal assistance and the fraudulent conduct in issue. United States v. Paradies, 98 F.3d 1266,
1288-89 (11th Cir. 1996) (recognizing that a “connection to federal funds” is not required for a
conviction under § 666). Instead, § 666(b) only requires the government to prove that WVHA is
an agency that receives “benefits in excess of $10,000” under a federal assistance program, as
we have already determined that the government has done. See 18 U.S.C. § 666; United States
v. Copeland, 143 F.3d 1439, 1441 (11th Cir. 1998). Thus, here the government was not required
to prove a direct link between the Medicare funds received by WVHA and either Fischer’s
fraudulently obtaining and converting the $1.2 million loan from WVHA or Fischer’s bribing an
agent of WVHA in connection with the $1.2 million loan.
11
Fischer’s main argument that the Medicare funds received by WVHA are
not “benefits” for purposes of § 666(b) relies on a narrow construction of
“benefits” that does not consider the context in which the term appears. Fischer
primarily bases his argument on a district court decision in United States v. LaHue,
998 F. Supp. 1182 (D. Kan. 1998). In LaHue, the court concluded that a group of
physicians who received Medicare funds and, more specifically, funds under
Medicare Part B,9 as payment for their services had not received “benefits” for
purposes of 18 U.S.C. § 666(b). Id. at 1186-87, 1192.
After reviewing the framework of the Medicare statute, the LaHue court
concluded that Medicare patients, and not Medicare providers, are the “target
recipients” of Medicare “benefits”. Id. at 1185-86. In particular, the court
observed that, under Part B of the Medicare program, patients may either pay their
health care providers and then seek reimbursement from Medicare or may assign
their “benefits” to their providers, allowing the providers to collect funds from
Medicare. Id. at 1185. The LaHue court acknowledged that, under this
framework, Medicare Part B providers “ultimately receive funds traceable to a
federal program,” but the court emphasized that these providers “do so only
through patient payments or assignments.” Id. at 1187. Thus, according to LaHue,
the physicians’ group involved in the case received funds under Part B of Medicare
9
The Medicare program is divided into two parts, Part A and Part B. See 42 U.S.C. §
1395, et seq.
12
after those “benefits” had reached the “target recipients” of the program. Id. at
1187-88.
Finding the language of § 666(b) ambiguous as to whether these payments
and assignments of funds that are traceable to Medicare Part B, but received “after”
the funds have reached the “target recipients,” qualify as “benefits” for purposes of
§ 666(b), the LaHue court examined the statute’s legislative history. Id. at 1188-
89. The LaHue court interpreted this legislative history, along with the few cases
that have examined and applied § 666(b), as consistent with the court’s conclusion
that once the funds from a federal program reach the “target recipient,” they cease
to be “benefits” under a federal assistance program for purposes of § 666(b). Id. at
1187-90.
We decline to adopt LaHue’s “target recipient” analysis. We first note that,
in this case, the testimony of WVHA’s finance director indicated that in 1993
WVHA received ten to fifteen million dollars from the Medicare program. The
finance director’s testimony did not clearly establish whether WVHA received
funds directly from the Medicare program or received funds as an assignee under
Part B or even Part A of the federal program. Thus, there is a possibility in this
case that WVHA received funds directly from the Medicare program without
having been assigned the right to receive those funds by a patient. However, even
if WVHA received funds as an assignee, the plain language of § 666(b) does not
13
distinguish between an organization, government, or agency that receives
“benefits” directly under a federal program and an organization, government, or
agency that receives “benefits” as an assignee under a federal program.
Moreover, the language of § 666(b) also does not require that “the
organization, government, or agency receiv[ing] . . . benefits” be the “target
recipient” of the federal program at issue. Instead, the language focuses on the
source of the “benefits”, requiring that the “benefits” have been received “under a
Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or
other form of Federal assistance.” 18 U.S.C. § 666(b) (emphasis supplied). Thus,
in context, the use of the term “benefits” serves to emphasize not that the recipient
must be a “target recipient”, but rather that the funds must have been received by
the organization, government, or agency as part of an “assistance” program, rather
than a purely commercial transaction–the federal government’s purchase of goods
from a contractor, for example. See United States v. Copeland, 143 F.3d 1439(11th Cir. 1998).
III. CONCLUSION
For all of the foregoing reasons, Fischer’s convictions and sentence are
AFFIRMED.
14