United States v. Bolden

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 99-4814
GLENNIS L. BOLDEN,
Defendant-Appellant.

UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 99-4873
CLIFFORD E. BOLDEN,
Defendant-Appellant.

Appeals from the United States District Court
for the Western District of North Carolina, at Asheville.
Lacy H. Thornburg, District Judge.
(CR-97-329)
Argued: October 31, 2002
Decided: April 3, 2003
Before TRAXLER, KING, and GREGORY, Circuit Judges.
Affirmed in part, reversed in part, vacated in part, and remanded by
published opinion. Judge King wrote the opinion, in which Judge
Traxler and Judge Gregory joined.
2 UNITED STATES v. BOLDEN
COUNSEL
ARGUED: Jefferson McClure Gray, ARENT, FOX, KINTNER,
PLOTKIN & KAHN, P.L.L.C., Washington, D.C., for Appellants.
David Alan Brown, OFFICE OF THE UNITED STATES ATTOR-
NEY, Charlotte, North Carolina, for Appellee. ON BRIEF: A. James
Siemens, SIEMENS LAW OFFICE, P.A., Asheville, North Carolina,
for Appellant Clifford Bolden. Robert J. Conrad, Jr., United States
Attorney, Brian Lee Whisler, Assistant United States Attorney, Karen
Elise Eady, Assistant United States Attorney, Charlotte, North Caro-
lina, for Appellee.
OPINION
KING, Circuit Judge:
Glennis and Clifford Bolden appeal their multiple convictions and
separate sentences in the Western District of North Carolina, resulting
from charges arising out of a complex Medicaid fraud scheme. In
their appeals, the Boldens challenge their 1998 convictions for money
laundering and a related money laundering conspiracy, and Ms. Bol-
den challenges several of her convictions for the submission of false
claims to the Government. They also challenge their sentences in sev-
eral respects. As explained below, we affirm their convictions, but we
reverse in part and vacate and remand their sentences in part.
I.
A.
The Boldens were indicted in December of 1997 by a grand jury
in Asheville, North Carolina, and a superseding indictment was
returned in October of 1998.1 The indictment alleged that, from 1989
until 1995, the Boldens planned and perpetrated an elaborate fraud
scheme, improperly obtaining tens of thousands of dollars from North
1
In referring to the "indictment," we mean the 43-count superseding
indictment, on which the Boldens were tried, convicted, and sentenced.
UNITED STATES v. BOLDEN 3
Carolina’s Medicaid program ("Medicaid"). This fraud scheme was
carried out through their operation of Emerald Health Care-
Taylorsville ("Emerald Health"), a nursing facility owned by Henry
Lane, Ms. Bolden’s father.2 The fraud scheme had numerous compo-
nents, but the object of each was the same: the illegal extraction of
monies from Medicaid for the benefit of one or both of the Boldens.
In November of 1998, after a nine-day jury trial in Asheville, the
Boldens were convicted of multiple offenses. In particular, each was
convicted of conspiracy to commit mail and wire fraud (in contraven-
tion of 18 U.S.C. § 371); two counts of submitting false claims to the
Government (in violation of 18 U.S.C. § 287); six counts of filing
false income tax returns (in violation of 26 U.S.C. § 7206(1)); six
substantive counts of money laundering (in violation of 18 U.S.C.
§ 1956(a)(1)); and a separate count of money laundering conspiracy
(in contravention of 18 U.S.C. § 1956(h)). Ms. Bolden was also con-
victed on eighteen separate false claims charges.
On August 30, 1999, a probation officer submitted pre-sentence
reports (the "PSRs") to the district court on the Boldens. The parties
then submitted objections to the PSRs and, on October 7, 1999, the
court conducted sentencing hearings. Ms. Bolden received 140
months in prison, and Mr. Bolden was sentenced to a term of fifty-
seven months. In addition, Ms. Bolden was fined $1,700, and Mr.
Bolden was fined $800. The Boldens were each required to make
$146,719 in restitution to the Internal Revenue Service.3
Following sentencing, the Boldens filed timely notices of appeal,
and we possess jurisdiction pursuant to 28 U.S.C. § 1291.
2
Mr. Lane was also charged in the indictment. He entered into a
deferred prosecution agreement with the Government, however, and con-
sented to pay $1,000,000 in restitution and penalties to Medicaid.
3
Because Mr. Lane, as part of his deferred prosecution agreement, paid
$1,000,000 in restitution and penalties to Medicaid, the Government stip-
ulated, for purposes of the Boldens’ sentencing, that full restitution had
been made to Medicaid.
4 UNITED STATES v. BOLDEN
B.
In their appeals, the Boldens raise multiple challenges to their con-
victions and sentences. In seeking reversal of their convictions, they
assert the following (the "Conviction Issues"):
(1) that the evidence was insufficient to support their con-
victions on the money laundering counts;
(2) that their convictions for money laundering conspiracy
are flawed because:
a. the charge of money laundering conspiracy, in
Count Thirty-Seven of the indictment, was legally
deficient;
b. the court committed reversible error in its
instructions by constructively amending the money
laundering conspiracy charge; and
c. the evidence was insufficient to support their
convictions for money laundering conspiracy; and
(3) with respect to Ms. Bolden, that the evidence was
insufficient to sustain her convictions on the eighteen sepa-
rate false claims charges.
The Boldens also raise assertions of error with regard to their sen-
tences (the "Sentencing Issues"), specifically maintaining that:
(1) the court erred in grouping their fraud and money laun-
dering convictions;
(2) the court failed to make adequate factual findings on
the sentencing issues in dispute; and
(3) to the extent the court’s factual findings were ade-
quate, they were clearly erroneous.4
4
If the sentencing court’s factual findings are adequate, the Boldens
assert that the court clearly erred by (a) improperly calculating fraud
UNITED STATES v. BOLDEN 5
Before turning to their contentions, we review the factual underpin-
nings for the Boldens’ convictions and sentences.5
II.
Between 1989 and 1995, Ms. Bolden served as Emerald Health’s
Director of Operations and as Supervisor of its Ventilator Unit. As
Director of Operations, she approved Emerald Health’s payments to
vendors, authorized its capital purchases, transferred funds between
its bank accounts, and directed its efforts to obtain reimbursements
from Medicaid. In sum, she was responsible for most of the adminis-
trative and financial decisions of Emerald Health. Beginning in 1990,
and until his resignation in early 1993, Mr. Bolden worked as Emer-
ald Health’s Director of Maintenance. In that capacity, he ordered
supplies and supervised Emerald Health’s housekeeping and mainte-
nance staff.
A.
The Boldens utilized their relationships with Emerald Health to
manipulate North Carolina’s Medicaid reimbursement system.6 The
loss; (b) finding that Ms. Bolden occupied a position of trust; and (c)
finding that Emerald Health’s residents were vulnerable victims of Ms.
Bolden’s fraudulent activity.
5
The Boldens challenge the sufficiency of the evidence on several of
their convictions, as well as the sufficiency of the evidence underlying
the court’s sentencing rulings. On the Conviction Issues, we review the
facts in the light most favorable to the Government; with respect to the
Sentencing Issues, we review the facts in the light most favorable to the
district court’s determinations. United States v. Wilkinson, 137 F.3d 214,
217-18 (4th Cir. 1998) ("Because the Defendants challenge the suffi-
ciency of the evidence . . . we present the facts in the light most favorable
to the government."); United States v. Brown, 314 F.3d 1216, 1221 (10th
Cir. 2003) ("Evidence underlying a district court’s sentence is reviewed
by viewing the evidence, and inferences drawn therefrom, in the light
most favorable to the district court’s determination.").
6
Approximately 80% of Emerald Health’s residents were covered by
Medicaid.
6 UNITED STATES v. BOLDEN
North Carolina Division of Medical Assistance (the "DMA")7 admin-
isters Medicaid, a healthcare program for low-income individuals par-
tially funded by the federal government. Pursuant to its mandate,
Medicaid reimburses nursing facilities, such as Emerald Health, for
their treatment and care of Medicaid patients.
In making such reimbursements, Medicaid initially disburses "pro-
spective payments" to nursing facilities that treat and care for Medic-
aid patients. N.C. Admin. Code tit. 10, r. 26H.0101. The "prospective
payment rate" on which such payments are based is an estimate of the
costs a nursing facility likely incurred in treating a Medicaid patient
for one day. Medicaid has established three separate prospective pay-
ment rates, corresponding to the three levels of care provided by nurs-
ing facilities — intermediate nursing care, skilled nursing care, and
ventilator care.8 Id. r. 26H.0102. Each prospective payment rate con-
sists of two components, called "direct" and "indirect" components.
The direct component consists of those nursing facility costs attribut-
able specifically to patient care, such as nursing, food service, house-
keeping, and laundry. Id. The indirect component consists of nursing
facility costs related to property ownership, administration, and main-
tenance. Id. In order to receive its prospective payments, a nursing
facility periodically submits bills to Medicaid (the "Medicaid Bills").
The Medicaid Bills specify the number of days each Medicaid patient
resided in the nursing facility and the level of care each received.
After receiving and approving a nursing facility’s Medicaid Bills,
Medicaid makes the prospective payments.9
At the end of each fiscal year, in order to ensure that the prospec-
tive payments were proper, Medicaid requires each nursing facility to
file an annual cost report (the "Cost Report"). Id. r. 26H.0104. A Cost
7
In referring to Medicaid, we utilize the term to encompass the DMA.
8
At the time Emerald Health submitted the bills to Medicaid that are
involved in this case, the daily prospective payment rates were: for venti-
lator care, approximately $260; for skilled nursing care, approximately
$80; and for intermediate nursing care, approximately $60.
9
Nursing facilities in North Carolina actually submit their Medicaid
Bills electronically through Electronic Data Systems ("EDS"), a Medic-
aid contractor in Raleigh, North Carolina. EDS, acting on behalf of Med-
icaid, then makes payments to the nursing facilities by wire transfer.
UNITED STATES v. BOLDEN 7
Report details both the direct and indirect costs a nursing facility
actually incurred in treating and caring for Medicaid-eligible patients.
If a nursing facility’s actual direct costs are less than the direct cost
component of the prospective payments it has already received, the
facility is obliged to repay the difference to Medicaid. If, however, the
nursing facility’s actual direct costs exceed the direct cost component
of the prospective payments the facility has received, Medicaid issues
a "settlement payment" to the facility. Id. r. 26H.0102.
In contrast to direct costs, Medicaid does not make settlement pay-
ments, or require repayment, for the indirect cost component of a
nursing facility’s prospective payments. Id. In other words, unlike
with direct costs, Medicaid does not make settlement payments to
nursing facilities that expended more in indirect costs than was pro-
vided for in their prospective payments. By the same token, to the
extent a nursing facility does not spend the portion of its prospective
payments dedicated to indirect costs, it is under no obligation to repay
Medicaid. Therefore, to the extent a nursing facility can characterize
its costs as direct costs, the greater its Medicaid reimbursement.
B.
In carrying out their fraud scheme, the Boldens manipulated Med-
icaid’s reimbursement system in several respects in order to inflate
the Medicaid payments received by Emerald Health. Of importance
here, the scheme included the following:
(1) Ms. Bolden, as Emerald Health’s agent, entered Emer-
ald Health into lease agreements which were used for fraud-
ulent purposes (the "Lease Transactions");
(2) the Boldens implemented a plan to circumvent Medic-
aid’s "related party" regulations (the "Related Party Trans-
actions");
(3) Ms. Bolden utilized Emerald Health to bill Medicaid
for patients no longer in the nursing facility, and she mis-
categorized the levels of care provided to various patients on
the Medicaid Bills, as well as on the Cost Reports (the
"False Patient Billing");
8 UNITED STATES v. BOLDEN
(4) Ms. Bolden used Emerald Health funds to purchase an
automobile for her personal use (the "Automobile Pur-
chase");
(5) Ms. Bolden misclassified employees’ salaries as direct
costs on the Cost Reports (the "False Salary Classifica-
tions"); and
(6) Ms. Bolden submitted improper expenses to Medicaid
for equipment purchased by Emerald Health from a medical
supplies company called Aequitron (the "Aequitron
Invoices").10
These separate aspects of the fraud scheme are further explained
below.
1. The Lease Transactions
Beginning in 1991, Ms. Bolden caused Emerald Health to enter
into certain lease transactions that were used for fraudulent purposes.
She perpetrated this aspect of the scheme with the assistance of
Buford "Sonny" Nelson.11 She and Nelson used Nelson Enterprises,
which was Nelson’s office supplies business, to arrange leases
between Emerald Health and several leasing companies for the pur-
pose of extracting monies from Medicaid.
In a typical lease transaction, Nelson would contact a leasing com-
pany (the "Lessor") and, on behalf of Nelson Enterprises, represent
that he had a customer, Emerald Health, that was interested in leasing
nursing facility equipment. Thereafter, the Lessor would enter into a
10
Although the Boldens personally obtained substantial sums of money
from the fraud scheme between 1989 and 1995, they failed to report
those monies on their income tax returns. As a result, they were each
convicted of six counts of filing false federal tax returns. Their tax con-
victions are not on appeal.
11
Although Nelson was involved in several aspects of the fraud
scheme, he was not charged in the indictment. He entered into a plea
agreement with the Government and was a key witness in the Boldens’
trial.
UNITED STATES v. BOLDEN 9
lease agreement with Emerald Health. Pursuant to the agreement, the
Lessor would agree to purchase the equipment from Nelson Enter-
prises and lease it to Emerald Health. In each transaction, the equip-
ment was to be delivered directly from Nelson Enterprises to Emerald
Health.
When they initiated the Lease Transactions, Ms. Bolden and Nel-
son had no intention of providing equipment for Emerald Health.
Instead, Nelson Enterprises would simply invoice the Lessors, indi-
cating that the leased equipment had been delivered to Emerald
Health. Before disbursing its payment to Nelson Enterprises, a Lessor
would contact Emerald Health to confirm receipt of the equipment.
Ms. Bolden would assure the Lessor that Emerald Health had
received and accepted the leased equipment. The Lessor would then
disburse its payment to Nelson Enterprises. Instead of delivering the
leased equipment to Emerald Health, however, Nelson would either
send it a portion of the equipment ordered or none at all. Nelson
would then divide the payment received from the Lessor between
himself and Ms. Bolden. Thereafter, pursuant to the terms of the lease
agreement, Emerald Health was obligated to make lease payments to
the Lessor.
For example, in July of 1993, Nelson brokered a lease between
Emerald Health and a company called North Star Leasing ("North
Star"). Prior to arranging the North Star lease, Ms. Bolden borrowed
$11,800 from Nelson for the down payment on a vehicle for Mr. Bol-
den. Nelson then brokered the North Star lease, in the sum of
$23,500, for the purpose of financing Emerald Health’s purchase of
bathtub equipment from Nelson Enterprises. After receiving an
invoice from Nelson Enterprises and confirming with Ms. Bolden that
the bathtub equipment had been delivered to Emerald Health, North
Star disbursed a $23,500 payment to Nelson Enterprises. Nelson kept
$11,800 as repayment of his earlier loan to Ms. Bolden, paid himself
$2,700 as a broker’s fee, and gave Ms. Bolden the remaining $9,000.
This transaction obligated Emerald Health to make monthly payments
of approximately $1,000 to North Star for three years for bathtub
equipment it never received.
Between 1991 and 1993, Ms. Bolden and Nelson involved Emerald
Health in seven Lease Transactions. In the end, Nelson Enterprises
10 UNITED STATES v. BOLDEN
received over $200,000 from seven Lessors. Only $23,000 of that
sum was applied to actual equipment delivered to Emerald Health.
The remaining $177,000 was divided between Nelson and Ms. Bol-
den. Nelson received approximately $33,000 and Ms. Bolden
received approximately $144,000, $11,800 of which was used to pur-
chase the automobile for Mr. Bolden.12
Ms. Bolden classified Emerald Health’s lease payments as indirect
costs on its 1991 and 1992 Cost Reports. On the 1993 and 1994 Cost
Reports, however, over $33,500 in payments on the Lease Transac-
tions were misclassified as direct costs, thereby increasing Emerald
Health’s Medicaid receipts for 1993 and 1994.
2. The Related Party Transactions
As part of the scheme, the Boldens circumvented Medicaid’s regu-
lations on related party transactions. In submitting Cost Reports to
Medicaid, a nursing facility must disclose whether any of its costs
resulted from transactions with "related parties," i.e., individuals or
businesses having immediate family relationships with the facility.
N.C. Admin. Code tit. 10, r. 26H.0104. For related party transactions,
Medicaid reimburses a nursing facility for only the related party’s
actual costs for goods or services provided to the facility.
In 1993, Mr. Bolden resigned from Emerald Health, due to dis-
agreements with his father-in-law, and established a nursing supplies
business called Carolina Supply Company ("Carolina Supply"). That
same year Nelson Enterprises failed, and Ms. Bolden decided to
extract extra monies from Medicaid by having Emerald Health pur-
chase supplies from Carolina Supply at inflated prices. Due to Medic-
12
Ms. Bolden also misappropriated cash from Emerald Health with the
assistance of Nelson, activity the Government characterized as a "kick-
back" operation. For example, in August of 1993, Nelson Enterprises
submitted an invoice to Emerald Health in the sum of $2,332, purport-
edly for the purchase by Emerald Health of a copying machine. Although
Emerald Health paid the invoice, it did not receive the copier. Instead,
when Nelson Enterprises received payment from Emerald Health, Nelson
gave $2,000 to Ms. Bolden and kept $332 for himself. Ms. Bolden listed
this "copier purchase" as a direct cost on the 1993 Cost Report.
UNITED STATES v. BOLDEN 11
aid’s limitations on related party transactions, she concealed Emerald
Health’s purchases from Carolina Supply by having Nelson create a
sham "business" to act as an intermediary between Carolina Supply
and Emerald Health.
Nelson then established a bank account for the sham business,
which was called Industrial Consumer Products ("Industrial"). Caro-
lina Supply would bill Industrial for various supplies it purportedly
shipped to Emerald Health, and Industrial would in turn bill Emerald
Health, at inflated prices, for those same supplies. Although the sup-
plies were rarely delivered as ordered, Emerald Health would pay the
Industrial bills, and Industrial would in turn pay the Carolina Supply
bills. Nelson characterized his role in the Related Party Transactions
as "just selling paper."
Emerald Health sometimes paid Industrial’s invoices even though
no supplies were delivered to Emerald Health. In other instances, Nel-
son submitted Industrial invoices which Emerald Health did not pay,
and for which no supplies were delivered (the "Fictitious Invoices").
The Fictitious Invoices were used solely to increase Emerald Health’s
Medicaid reimbursements.
When supplies were delivered, Emerald Health was usually
charged 40% to 70% more than Carolina Supply’s actual costs. For
example, in 1993, Carolina Supply purchased washcloths, bath tow-
els, bibs, and fitted sheets at an approximate cost of $5,700. In Sep-
tember of 1993, Industrial charged Emerald Health approximately
$15,500 for those items, which Emerald Health paid. Industrial, on
November 19, 1993, issued a $13,000 check to Carolina Supply for
those same items. Nelson thus profited by about $2,500, while Caro-
lina Supply made more than $7,000.
In carrying out the Related Party Transactions, Industrial submitted
a total of eight invoices to Emerald Health.13 Two such invoices, total-
13
In March of 1994, Ms. Bolden had Nelson backdate three Industrial
invoices to reflect non-existent sales transactions between Industrial and
Emerald Health in August of 1993 (the "Backdated Invoices"). The
Backdated Invoices were then included on the 1993 Cost Report, thereby
increasing Emerald Health’s net receipts from Medicaid for that year.
12 UNITED STATES v. BOLDEN
ling about $7,000, were never paid. Between September of 1993 and
March of 1994, Emerald Health paid Industrial approximately
$54,300 on the remaining six invoices, and Industrial made corre-
sponding payments to Carolina Supply, the related party, of almost
$47,000. The cost of the supplies actually delivered to Emerald
Health was about $31,000. Ms. Bolden classified the eight invoices
as direct costs on the 1993 and 1994 Cost Reports, failing to reveal
that they were Related Party Transactions.
3. The False Patient Billing
As part of the fraud scheme, Ms. Bolden also caused Emerald
Health to systematically charge Medicaid for patients who were no
longer in its nursing facility due to their hospitalization, discharge, or
death. For example, Emerald Health billed Medicaid for its care of
patient Beulah Wallace from April 1, 1994, until April 27, 1994. Ms.
Wallace, however, died on April 3, 1994. Emerald Health similarly
billed Medicaid for its care of patient Ardna Church from June 1,
1994, until September 22, 1994, but Ms. Church had been discharged
from the facility on June 16, 1994. As a result of the False Patient
Billing, Ms. Bolden was convicted on eighteen false claims charges,
and Medicaid was overcharged by more than $63,000.14
4. The Automobile Purchase
In September of 1993, Nelson assisted Ms. Bolden in concealing
the use of Emerald Health funds to purchase an automobile for her
personal use. In this aspect of the fraud scheme, Ms. Bolden first
issued an Emerald Health check for approximately $18,000, payable
to NationsBank. Nelson, purporting to act on behalf of Emerald
Health, took the check to NationsBank in Statesville, North Carolina,
where he purchased a cashier’s check in that sum, payable to Nelson
Enterprises. Nelson next drove to nearby Newton, and, using the
cashier’s check, purchased a $17,000 cashier’s check from Southern
14
In addition to billing Medicaid for patients not in its nursing facility,
Emerald Health falsified its Medicaid Bills for patients it actually treated.
It charged Medicaid at the more costly ventilator care rate for Medicaid
patients, even though such patients actually received less costly interme-
diate or skilled nursing care. See supra note 8.
UNITED STATES v. BOLDEN 13
National Bank, payable to State Employees Credit Union. Nelson
retained $1,000 as his "fee" and used the $17,000 cashier’s check to
purchase a vehicle for Ms. Bolden. These transactions served to con-
ceal Ms. Bolden’s use of Emerald Health’s funds to purchase her per-
sonal automobile. The $18,000 Emerald Health check to NationsBank
was reflected as an indirect cost on the 1993 Cost Report.
5. The False Salary Classifications
As part of the fraud scheme, Ms. Bolden misclassified several
employees’ salaries as direct costs on the 1993 and 1994 Cost
Reports. Specifically, she improperly classified her own salary, as
well as those of an Emerald Health administrative assistant, two of its
accounting clerks, a physician assistant, and a maintenance employee,
as direct rather than indirect costs.15 For example, Ms. Bolden desig-
nated Lori Gann as a "medical records clerk," rather than an account-
ing clerk, in order to misclassify Gann’s salary as a direct cost on the
1993 and 1994 Cost Reports. By misclassifying these salaries, Ms.
Bolden overstated Emerald Health’s direct costs on the 1993 and
1994 Cost Reports by over $190,000.
6. The Aequitron Invoices
On several occasions, Ms. Bolden caused Emerald Health’s finan-
cial records to overstate expenses by making duplicative accounting
entries, thereby double and triple-expensing certain purchases from a
medical supplies company called Aequitron. In one instance, Emerald
Health received invoices from Aequitron for medical supplies it had
purchased, for approximately $2,000. Ms. Bolden misclassified these
purchases as direct costs on Emerald Health’s accounting ledger and
on the 1993 Cost Report. She then obtained duplicate invoices from
Aequitron and expensed them a second time, again misclassifying the
15
The evidence at trial was that the salaries of the accounting clerks
and the physician assistant were improperly reflected as direct costs on
the 1993 and 1994 Cost Reports. Ms. Bolden’s salary, as well as that of
the administrative assistant and the maintenance employee, relate to the
sentencing proceedings only, and were included in Ms. Bolden’s fraud
loss calculation.
14 UNITED STATES v. BOLDEN
duplicates as direct costs on Emerald Health’s accounting ledger and
on the 1993 Cost Report.
On another occasion, Emerald Health purchased ventilator equip-
ment from Aequitron, which invoiced the equipment for approxi-
mately $64,000. Upon receiving the ventilator equipment, Ms. Bolden
had a Lessor pay Aequitron for it, and Emerald Health then leased the
equipment from the Lessor. Ms. Bolden recorded the $64,000
Aequitron invoice on Emerald Health’s accounting ledger to reflect
that Emerald Health had engaged in three such transactions. She then
reported the three "purchases" of ventilator equipment as direct costs
on the 1994 Cost Report.16
C.
In sum, the Boldens manipulated Medicaid’s reimbursement sys-
tem in several respects in order to inflate the Medicaid payments
received by Emerald Health. Ms. Bolden caused Emerald Health to
misrepresent the number of Medicaid patients it treated and cared for,
to conceal the Related Party Transactions on the 1993 and 1994 Cost
Reports, and to abuse the Medicaid reimbursement process by classi-
fying its indirect costs as direct costs on those Cost Reports. By
improperly classifying indirect costs as direct costs, Ms. Bolden suc-
ceeded in eliminating the repayments Emerald Health would have
been obliged to make to Medicaid for 1993 and 1994.
During fiscal years 1990, 1991, and 1992, Emerald Health’s actual
direct costs were substantially less than the direct cost component of
the prospective payments it received from Medicaid. As a result,
Emerald Health was required to repay Medicaid the sums of
$138,687, $102,501, and $318,695 for those years. By contrast, in fis-
cal years 1993 and 1994, it received settlement payments from Med-
icaid, amounting to $529 in 1993 and $163 in 1994.
With this background in mind, we turn to the issues raised by the
Boldens in this case.
16
The triple-expensing of the $64,000 Aequitron invoice was not in
evidence at trial. It was used only as relevant conduct for purposes of
Ms. Bolden’s sentencing.
UNITED STATES v. BOLDEN 15
III. THE CONVICTION ISSUES
As explained above, the Boldens, in their separate appeals, chal-
lenge their money laundering and related conspiracy convictions. In
addition, Ms. Bolden asserts that there was insufficient evidence to
convict her on the eighteen separate false claims counts. We begin our
analysis of their contentions on the Conviction Issues by examining
the applicable standards of review.
A. The Standards of Review
First, in reviewing the sufficiency of evidence, a verdict must be
upheld if there is substantial evidence, taking the view most favorable
to the Government, to support it. Glasser v. United States, 315 U.S.
60, 80 (1942); see also United States v. Bennafield, 287 F.3d 320, 324
(4th Cir. 2002). Second, we review de novo a challenge to the validity
of an indictment. United States v. Loayza, 107 F.3d 257, 260 (4th Cir.
1997). Finally, we review for abuse of discretion a district court’s rul-
ings on jury instructions. United States v. Bostian, 59 F.3d 474, 480
(4th Cir. 1995). In reviewing the adequacy of instructions, we "accord
the district court much discretion and will not reverse provided that
the instructions, taken as a whole, adequately state the controlling
law." Teague v. Baker, 35 F.3d 978, 985 (4th Cir. 1994).
B. The Money Laundering Convictions
The Boldens first challenge the sufficiency of the evidence sup-
porting their convictions for money laundering. Each of their six
money laundering convictions, pursuant to 18 U.S.C. § 1956(a)(1),
arose out of the Related Party Transactions.17 Three of those convic-
17
Pursuant to § 1956(a)(1) of Title 18, criminal penalties are provided
for:
Whoever, knowing that the property involved in a financial
transaction represents the proceeds of some form of unlawful
activity, conducts or attempts to conduct such a financial transac-
tion which in fact involves the proceeds of specified unlawful
activity—
(A)(i) with the intent to promote the carrying on of speci-
fied unlawful activity; or
16 UNITED STATES v. BOLDEN
tions resulted from checks written by Emerald Health to Industrial,
and the other three involved checks written by Industrial to Carolina
Supply (collectively, the "Industrial Check Transactions").18 As
explained below, sufficient evidence supports the money laundering
convictions.
1. The Money Laundering Issues
In the common understanding, money laundering occurs when
money derived from criminal activity is placed into a legitimate busi-
ness in an effort to cleanse the money of criminal taint. The money
laundering statute, however, as codified at 18 U.S.C. § 1956(a)(1),
proscribes a much broader range of conduct, specifically prohibiting
four distinct types of money laundering activity. In order to contra-
vene § 1956(a)(1), a defendant must, first of all, know that the prop-
erty involved in a "financial transaction" represents the "proceeds" of
(ii) with intent to engage in conduct constituting a viola-
tion of section 7201 or 7206 of the Internal Revenue Code
of 1986; or
(B) knowing that the transaction is designed in whole or in
part—
(i) to conceal or disguise the nature, the location, the
source, the ownership, or the control of the proceeds of
specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under
State or Federal law.
18 U.S.C. § 1956(a)(1).
18
Each of the six money laundering counts (Counts Thirty-Eight
through Forty-Three), after describing the financial transaction, further
alleged, in its penultimate paragraph, the following:
The defendants engaged in the financial transaction with the
intent to promote the carrying on of the specified unlawful activ-
ity, that is with the intent to further the mail and wire fraud
scheme and artifices, . . . and knowingly [sic] that the financial
transaction was designed, in whole or in part, to conceal and dis-
guise the nature, location, source, ownership, and control of the
proceeds of said specified unlawful activity.
UNITED STATES v. BOLDEN 17
some "specified unlawful activity." If this "proceeds" element is satis-
fied, a money laundering violation occurs when a defendant conducts
or attempts to conduct a financial transaction:
(1) intending to promote the carrying on of specified
unlawful activity ("promotion money laundering"); or
(2) intending to engage in conduct contravening §§ 7201
or 7206 of the Internal Revenue Code; or
(3) knowing that the financial transaction is designed to
conceal the nature of the proceeds of specified unlawful
activity ("concealment money laundering"); or
(4) knowing that the transaction is designed to avoid a
state or federal transaction reporting requirement.
The money laundering counts charged the Boldens with involve-
ment in both promotion money laundering and concealment money
laundering.19 The instructions advised the jury that, in order to convict
on those charges, it was obliged to find the Boldens involved in both
promotion money laundering and concealment money laundering.20
Accordingly, by its guilty verdict on the six money laundering counts,
19
A single count of an indictment may permissibly allege either one or
more of the types of money laundering contained in § 1956(a)(1). See
e.g., United States v. Booth, 309 F.3d 566, 572 (9th Cir. 2002) ("When
a statute specifies two or more ways in which an offense may be commit-
ted, all may be alleged in the conjunctive in one count.").
20
Although the instructions required the jury to find, in order to con-
vict, that the Boldens had engaged in both promotion money laundering
and concealment money laundering, such instructions were unnecessarily
favorable to them. When an indictment alleges both promotion and con-
cealment money laundering, a conviction can be premised on proof of
either. See United States v. LeDonne, 21 F.3d 1418, 1427 (7th Cir. 1994)
("[W]here a statute defines two or more ways in which an offense may
be committed, all may be alleged in the conjunctive in one count in order
to adequately apprise the defendant of the government’s intention to
charge him under either prong of the statute."); United States v. Street,
66 F.3d 969, 974 (8th Cir. 1995) (same).
18 UNITED STATES v. BOLDEN
the jury found that they had each engaged in both types of money
laundering.
The Boldens maintain that their money laundering convictions
must be vacated for two reasons. First, they contend that the financial
transactions on which their money laundering convictions are based,
i.e., the Industrial Check Transactions, did not involve the "proceeds"
of the mail and wire fraud that constituted the "specified unlawful
activity" alleged in the indictment. Second, they assert that the Indus-
trial Check Transactions failed to satisfy the statutory requirements of
either promotion money laundering or concealment money launder-
ing. For the reasons explained below, we reject each of these conten-
tions.
2. The "Proceeds" Element
The Boldens first contend that the evidence failed to prove that the
money laundering offenses involved the proceeds of the specified
unlawful activity spelled out in the indictment. In particular, it
charged their involvement in a mail and wire fraud scheme — an
offense which qualifies as a "specified unlawful activity" under the
relevant money laundering statute. The Boldens assert, however, that
the mail and wire fraud activity consisted only of the submission of
the 1993 and 1994 Cost Reports, and that it was not until the submis-
sion of those Reports that their fraud scheme generated proceeds.
According to the Boldens, the Industrial Check Transactions — the
financial transactions underlying the money laundering convictions
— could not have involved the proceeds of the specified unlawful
activity because they occurred prior to the submission of the 1993
and 1994 Cost Reports.
Contrary to the Boldens’ contention, the money laundering statute
does not require the underlying criminal activity be completed prior
to the money laundering transactions. See United States v. Butler, 211
F.3d 826, 829 (4th Cir. 2000) ("Funds are criminally derived if they
are derived from an already completed offense, or a completed phase
of an ongoing offense." (internal quotation omitted) (emphasis
added)). Thus, the key inquiry is not whether the specified unlawful
activity was completed prior to the alleged money laundering transac-
tion. Instead, we must determine whether the specified unlawful
UNITED STATES v. BOLDEN 19
activity generated proceeds prior to the money laundering, and
whether the money laundering actually involved those criminally-
derived proceeds.
We begin our analysis by noting that certain criminal activities can
produce proceeds long before their completion. A mail fraud scheme,
such as the Medicaid fraud scheme of the Boldens, is the prototype
of an activity that can generate proceeds before the mailings take
place. See United States v. Mankarious, 151 F.3d 694, 705 (7th Cir.
1998) ("A mail fraud scheme . . . can create proceeds long before the
mailing ever takes place."). Indeed, as the Tenth Circuit recognized
in United States v. Massey, 48 F.3d 1560, 1566 (10th Cir. 1995), a
"‘scheme to defraud’ has a wider meaning than an individual act of
fraud." A mail or wire fraud scheme often encompasses a range of
activities that occur prior to, and culminate in, mail and wire submis-
sions. Accordingly, in order to sustain the Boldens’ money laundering
convictions, there must simply have been sufficient evidence for the
jury to "have inferred that the [proceeds] came from a fraudulent
scheme and that the use of the mails furthered that scheme." Mankar-
ious, 151 F.3d at 703.
The Boldens’ scheme to defraud Medicaid cast a wide net, and it
was not limited to the submission of the Cost Reports. The scheme
included, inter alia, the False Patient Billing; the Lease Transactions;
the creation and use of a sham company, Industrial; the submission
of the Industrial invoices to Emerald Health; the receipt of the pro-
spective payments; and the inclusion of the Related Party Transac-
tions as direct costs on the 1993 and 1994 Cost Reports. The Cost
Reports were simply used to justify the prospective payments that
Emerald Health had already received. Accordingly, the mail and wire
submissions were merely the culminating acts in a scheme that had
begun long before. And although their fraud scheme may not have
been consummated until the submission of the Cost Reports, the Bol-
dens had completed a substantial part of the scheme prior to the
Industrial Check Transactions.
For our purposes, the relevant fact is that the fraud scheme pro-
duced proceeds through the prospective payments prior to the finan-
cial transactions — the Industrial Check Transactions — on which the
money laundering convictions were based. The 1993 and 1994 Cost
20 UNITED STATES v. BOLDEN
Reports merely justified Emerald Health’s receipt of those prospec-
tive payments. See United States v. Allen, 76 F.3d 1348, 1361 (5th
Cir. 1996) (concluding that fraud scheme "produces proceeds at the
latest when the scheme succeeds in disgorging the funds from the vic-
tim and placing them into the control of the perpetrators"); United
States v. Morelli, 169 F.3d 798, 800 (3d Cir. 1999) (concluding for
purposes of money laundering statute "that the money became the
proceeds of fraud as soon as it entered the hands of members of the
scheme"). The prospective payments constituted the proceeds used by
the Boldens in the Industrial Check Transactions. Accordingly, the
contention that the money laundering offenses were not conducted
with the "proceeds" of the fraud scheme must fail.
3. The "Promotion" and "Concealment" Issues
Similarly unavailing is the contention that the Industrial Check
Transactions failed to constitute either promotion money laundering
or concealment money laundering. According to the Boldens, the
Industrial Check Transactions were only used to carry on the legiti-
mate business of Carolina Supply, and they thus did not qualify as
promotion or concealment money laundering. Indeed, several courts
have vacated money laundering convictions where the financial trans-
actions were utilized for legitimate purposes. See e.g., United States
v. Olaniyi-Oke, 199 F.3d 767, 770 (5th Cir. 1999) (concluding there
was no evidence that computers purchased in financial transaction
charged as money laundering were to be used for "anything other than
fully legal personal use"); United States v. Calderon, 169 F.3d 718,
721-22 (11th Cir. 1999) (determining there was no evidence "that
Appellant’s conduct furthered the alleged underlying narcotics traf-
ficking"). For the reasons explained below, we reject this contention.
a. Promotion Money Laundering
Under the evidence, the Industrial Check Transactions were
designed to avoid disclosing the Related Party Transactions to Medic-
aid, allowing the Boldens to evade Medicaid’s regulatory require-
ments and charge Medicaid inflated costs. Further, Emerald Health’s
payments to Industrial compensated Nelson for his part in the scheme,
encouraging his continued participation therein. Finally, Carolina
Supply used the money it received from Industrial to purchase and
UNITED STATES v. BOLDEN 21
deliver part of the supplies Industrial billed to Emerald Health. These
partial deliveries provided an aura of legitimacy to Emerald Health’s
payments to Industrial, allowing the Boldens to further conceal their
scheme. Thus, the circumstances underlying the Industrial Check
Transactions are sufficient to justify the finding that the Boldens com-
mitted promotion money laundering.
In other decisions, we have ruled similarly. For example, in United
States v. Wilkinson, 137 F.3d 214 (4th Cir. 1998), we found the evi-
dence sufficient to sustain convictions for promotion money launder-
ing. There, the defendants had obtained loans from an insurance
company by misrepresenting that the funds would be used to finance
accounts receivable for physicians. The funds were instead employed
to promote risky non-medical businesses. In their scheme, the defen-
dants created a sham business for the purpose of handling the loans.
The insurance company wired loan proceeds to the sham business,
which transferred those proceeds to the non-medical businesses. We
found the transactions to constitute promotion money laundering, in
contravention of § 1956(a)(1)(A)(i), because, as Judge Hamilton
explained, "the transfer of money from [the sham business] to the
non-medical businesses was integral to the success of the overall
scheme." Id. at 221. In this case, Industrial was a sham business, used
solely to deceive Medicaid on the Related Party Transactions, and it
was thus "integral to the success" of the scheme.
b. Concealment Money Laundering
The evidence also established that the Industrial Check Transac-
tions constituted concealment money laundering, pursuant to
§ 1956(a)(1)(B)(i). On this point, the Boldens maintain that, while the
Industrial Check Transactions were designed to avoid the require-
ments of the Medicaid regulations, they were not designed to conceal
the fact that Emerald Health had obtained prospective payments from
Medicaid. On this basis, they assert that their convictions for conceal-
ment money laundering are invalid.
Viewed in the proper light, however, the Industrial Check Transac-
tions concealed the fact that the payments Medicaid made to Emerald
Health were being used in the Related Party Transactions. As related
above, supra Part II.B.2, the Boldens and Nelson created Industrial to
22 UNITED STATES v. BOLDEN
hide the fact that Emerald Health was ordering supplies from Carolina
Supply, a related party. The Industrial Check Transactions concealed
this arrangement and enabled Medicaid to be billed at inflated prices
for the supplies ordered from Carolina Supply. Those transactions
also concealed the fact that the money flowing into Carolina Supply,
and ultimately to the Boldens, was derived from Medicaid funds.
The creation and use of sham businesses is highly relevant to the
proof of concealment money laundering. The Fifth Circuit, in United
States v. Willey, 57 F.3d 1374, 1385 (5th Cir. 1995), observed that the
use of "a third party, for example, a business entity or a relative, to
purchase goods on one’s behalf or from which one will benefit usu-
ally constitutes sufficient proof of a design to conceal." And in United
States v. Ladum, 141 F.3d 1328, 1333 (9th Cir. 1998), the Ninth Cir-
cuit, in an analogous situation, concluded that a defendant who con-
cealed his ownership in a business from a bankruptcy trustee, through
the use of "nominees who held themselves out as owners of the
stores," had committed concealment money laundering. The court
reasoned that the use of nominees "prevented the bankruptcy trustee
from knowing that [the defendant] was the legitimate owner of the
stores." Id. at 1340. Likewise, the Boldens’ use of Industrial con-
cealed the fact that Emerald Health was billing Medicaid (at inflated
prices) for the Related Party Transactions. In sum, the evidence suffi-
ciently proves the allegations of concealment money laundering.
C. The Conspiracy Issues
The Boldens also challenge, on three separate bases, their convic-
tions for money laundering conspiracy, as charged in Count Thirty-
Seven of the indictment. They contend, first, that Count Thirty-Seven
was fatally defective; second, that the jury instructions on money
laundering conspiracy amended the indictment; and third, that the evi-
dence was insufficient to support their convictions of money launder-
ing conspiracy.
1.
In analyzing the sufficiency of Count Thirty-Seven, we look first
to the requirements of an indictment. A valid indictment must: (1)
allege the essential facts constituting the offense; (2) allege each ele-
UNITED STATES v. BOLDEN 23
ment of the offense, so that fair notice is provided; and (3) be suffi-
ciently distinctive that a verdict will bar a second prosecution for the
same offense. United States v. Smith, 44 F.3d 1259, 1263 (4th Cir.
1995) (citing Hamling v. United States, 418 U.S. 87, 117 (1974)); see
also Fed. R. Crim. P. 7(c)(1) ("The indictment . . . shall be a plain,
concise, and definite written statement of the essential facts constitut-
ing the offense charged."). As a basic proposition, an indictment is
sufficient "‘if it alleges an offense in the words of the statute.’" United
States v. Brandon, 298 F.3d 307, 310 (4th Cir. 2002) (quoting United
States v. Wicks, 187 F.3d 426, 427 (4th Cir. 1999)).
The Boldens contend that Count Thirty-Seven, which alleged a vio-
lation of 18 U.S.C. § 1956(h),21 was defective in three respects: (1) it
failed to allege any overt acts; (2) it failed to identify the specified
unlawful activity that produced the proceeds they conspired to laun-
der; and (3) it failed to specify the offense defined in § 1956(a)(1) or
§ 1957 that the Boldens conspired to commit.22 We examine each of
these three contentions in turn.
21
Section 1956(h), the money laundering conspiracy statute, provides
that "[a]ny person who conspires to commit any offense defined in this
section or section 1957 shall be subject to the same penalties as those
prescribed for the offense the commission of which was the object of the
conspiracy." 18 U.S.C. § 1956(h).
22
Count Thirty-Seven of the indictment alleged the money laundering
conspiracy as follows:
The Grand Jury incorporates and realleges by reference all
allegations set forth in the foregoing Introductory Paragraphs
above and all overt acts alleged in Count One.
From in or about January, 1989 through in or about December,
1995, within the Western District of North Carolina, and else-
where,
GLENNIS L. BOLDEN
and
CLIFFORD E. BOLDEN
did knowingly, willfully, and unlawful [sic] . . . conspire . . .
with one another, to commit money laundering offenses . . . in
violation of Title 18, United States Code, Sections 1956(a)(1)
and 1957.
All in violation of Title 18, United States Code, Section
1956(h).
24 UNITED STATES v. BOLDEN
a.
The first of these specifications, that Count Thirty-Seven is defec-
tive for failing to allege overt acts, is baseless. The Boldens were
charged with and convicted of money laundering conspiracy, pursuant
to 18 U.S.C. § 1956(h), and § 1956(h) does not require an overt act
to be either alleged or proven. As we observed in United States v.
Godwin, 272 F.3d 659, 669 (4th Cir. 2001), "a conspiracy under 18
U.S.C. § 1956(h), as opposed to a conspiracy under 18 U.S.C. § 371,
does not explicitly require proof of an overt act." In addressing a simi-
lar challenge to the drug conspiracy statute, the Supreme Court, in
United States v. Shabani, 513 U.S. 10, 15 (1994), held that an overt
act is not an element of 21 U.S.C. § 846. As the Court observed, Con-
gress explicitly required the commission of an overt act as an element
of the conspiracy defined in 18 U.S.C. § 371, and the Court concluded
that Congress must be presumed to have acted deliberately in failing
to include similar language in § 846. Id. at 14. The drug and money
laundering conspiracy statutes — § 846 and § 1956(h) — are drawn
in similar terms, and neither requires an overt act. See United States
v. Tam, 240 F.3d 797, 802 (9th Cir. 2001) ("The language of 18
U.S.C. § 1956(h) is nearly identical to the language of 21 U.S.C.
§ 846, which the Supreme Court held . . . does not require proof of
an overt act."); see also United States v. Abrego, 141 F.3d 142, 164
(5th Cir. 1998) ("Section 846 has language virtually identical to the
language of § 1956(h)."). Thus, because an overt act is not an element
of a § 1956(h) offense, there was no need for the grand jury to make
such an allegation in Count Thirty-Seven.
b.
The Boldens next assert that Count Thirty-Seven failed to identify
the "specified unlawful activity" that produced the proceeds they con-
spired to launder. We have observed that "[t]he core of money laun-
dering . . . is the laundering transaction itself," and that "details about
the nature of the unlawful activity underlying the character of the pro-
ceeds need not be alleged." Smith, 44 F.3d at 1265. In any event,
Count Thirty-Seven spelled out the unlawful activity that produced
the proceeds the Boldens conspired to launder.
Count Thirty-Seven incorporated and realleged the overt acts
alleged in Count One, which charged the Boldens with violating the
UNITED STATES v. BOLDEN 25
general conspiracy statute (18 U.S.C. § 371). Those overt acts
included allegations that the Boldens established Industrial to "avoid
the federal rules governing related party transactions," that Industri-
al’s invoices were included on the Cost Reports, and that, "as a result,
Carolina Supply and [Industrial] generated profits from Medicaid
reimbursement to the facility." Count One also alleged that Ms. Bol-
den "caused the submission of electronic billings to the Medicaid pro-
gram which resulted in the interstate wiring of claims and payments
between Raleigh, North Carolina and Dallas, Texas." In this context,
the Boldens had ample notice of the details of the specified unlawful
activity (mail and wire fraud) that generated the proceeds they con-
spired to launder, and any contention to the contrary must be rejected.
c.
Finally, the Boldens contend that Count Thirty-Seven is fatally
flawed because it failed to specify a specific statutory object of the
conspiracy, that is, which one of five offenses — the four defined in
§ 1956(a)(1) or § 1957’s single offense — they conspired to commit.23
Count Thirty-Seven was not required to allege the specific type of
money laundering the Boldens conspired to commit; it was simply
alleging a multiple-object conspiracy. Courts have uniformly upheld
multiple-object conspiracies, and they have consistently concluded
that a guilty verdict must be sustained if the evidence shows that the
conspiracy furthered any one of the objects alleged. Griffin v. United
States, 502 U.S. 46 (1991); United States v. Hudgins, 120 F.3d 483,
487 (4th Cir. 1997). For example, the Third Circuit upheld a convic-
tion where the indictment alleged a conspiracy with three statutory
objects — including violations of § 1956(a)(1) and § 1956(a)(2). See
United States v. Carr, 25 F.3d 1194, 1201-02 (3d Cir. 1994). The
court observed that the convictions could be sustained if the defen-
dants "knowingly and intentionally committed acts furthering any of
23
The five statutory objects referred to in Count Thirty-Seven include
the four types of money laundering offenses contained in § 1956(a)(1),
see supra Part III.B.1, plus the money laundering offense contained in
§ 1957. Under § 1957, it is unlawful to engage in a monetary transaction
of more than $10,000 with property derived from a specified unlawful
activity.
26 UNITED STATES v. BOLDEN
the three objects of the conspiracy." Id. at 1202. Pursuant to the fore-
going, this contention must also be rejected.
2.
The Boldens next contend that the trial court constructively
amended Count Thirty-Seven by impermissibly broadening the iden-
tity of the members of the conspiracy. That charge alleged that the
Boldens "did knowingly [conspire] with one another, to commit
money laundering offenses." As such, it omitted an allegation com-
monly made in such charges, that the defendants conspired "with oth-
ers known and unknown to the Grand Jury."24 The Boldens contend
that, because such an allegation was not made in Count Thirty-Seven,
the jury was obliged to find that the Boldens had conspired with each
other, and the court erred in failing to properly instruct the jury on
this point.25
A defendant may only be tried on charges alleged in an indictment,
and only "the grand jury may broaden or alter the charges in the
indictment." United States v. Randall, 171 F.3d 195, 203 (4th Cir.
1999) (internal quotation and citation omitted). An indictment is con-
structively amended "when the essential elements of the offense . . .
24
At oral argument, the Assistant United States Attorney acknowl-
edged that the failure to allege "others known and unknown" in the
indictment was a drafting error.
25
The instruction which the Boldens challenge stated in pertinent part:
In order for you to find either Defendant — either of the Defen-
dants or both guilty of the charge [of money laundering conspir-
acy], the Government must prove each of the following essential
elements beyond a reasonable doubt as to the Defendant under
consideration: one, two or more persons in some way or manner,
positively or tacitly, came to a mutual understanding to try to
accomplish a common and unlawful plan.
(emphasis added). In contrast, the Boldens’ proposed instruction pro-
vided that, in order to convict, the jury had to find "that defendants Glen-
nis Bolden and [Clifford] Bolden made an agreement to commit money
laundering offenses." Although the available record does not show
whether the Boldens objected to the instruction given, we assume that a
proper objection was made and that this contention has not been waived.
UNITED STATES v. BOLDEN 27
are altered to broaden the possible bases for conviction beyond what
is contained in the indictment." United States v. Keller, 916 F.2d 628,
634 (11th Cir. 1990); see also United States v. Floresca, 38 F.3d 706,
710 (4th Cir. 1994) ("A constructive amendment to an indictment
occurs when either the government, [the court], or both, broadens the
possible bases for conviction beyond those presented by the grand
jury."). Where an indictment has been constructively amended, we
have found reversible error, and we "conclusively presume that the
defendant has been prejudiced by the constructive amendment."
Floresca, 38 F.3d at 711.
In support of their constructive amendment claim, the Boldens rely
almost exclusively on the Eleventh Circuit’s decision in Keller, 916
F.2d 628, where two defendants were indicted for conspiracy, and the
indictment failed to allege that there were unnamed coconspirators.
An initial instruction permitted the jury to convict Keller if the jury
found he had conspired with anyone, while the indictment, like our
Count Thirty-Seven, alleged that he had conspired only with his code-
fendant. The court gave a supplemental instruction, using a hypotheti-
cal conspiracy example, emphasizing that Keller could be convicted
if the jury found he entered into an unlawful agreement with anyone.
The jury then convicted Keller and acquitted his codefendant. The
Eleventh Circuit ruled that, where an indictment alleges "that only
two individuals conspired, . . . an essential element of the offense is
the identity of the individuals who agreed." Id. at 634. The court
observed that, "[w]hile the initial instruction standing alone may not
have been enough to constitute an amendment, the trial court exacer-
bated the problem with its supplemental instructions in response to
the jury’s question." Id. at 636.
Contrary to the Boldens’ contention, the instruction did not fatally
amend Count Thirty-Seven. Even if a coconspirator’s identity is an
essential element of the conspiracy charge (but see United States v.
Am. Waste Fibers Co., Inc., 809 F.2d 1044, 1046 (4th Cir. 1987)), the
jury, by convicting the Boldens of the money laundering conspiracy
alleged, necessarily found that they had conspired with each other, as
Count Thirty-Seven alleged, and as the instruction permitted.26
26
Even if the jury found that there were additional coconspirators, such
as Nelson and Lane, it also found, as the instruction permitted, that the
Boldens conspired with each other.
28 UNITED STATES v. BOLDEN
3.
Finally, the Boldens contend that the evidence was insufficient to
support their convictions for money laundering conspiracy. On this
issue, they first assert that the Industrial Check Transactions cannot
be part of a money laundering conspiracy because they did not
involve the "proceeds" of the specified unlawful activity. Indepen-
dently, the Boldens contend that, even if the Industrial Check Trans-
actions involved those proceeds, the transactions were not for the
purpose of promoting or concealing the specified unlawful activity.
As explained in Part III.B, supra, these contentions are without merit.
The Boldens also maintain that the overt acts in Count One, incorpo-
rated and realleged in Count Thirty-Seven, do not involve money
laundering conduct and that the evidence was therefore insufficient to
convict. On the contrary, as we explained in Part III.C.1.a, supra, an
indictment for money laundering conspiracy need not allege an overt
act. In these circumstances, this contention must also be rejected.
D. The False Claims Evidence
Ms. Bolden challenges eighteen of her twenty convictions for vio-
lating the false claims statute (Counts Three through Eleven, Thirteen
through Nineteen, Twenty-One, and Twenty-Four).27 She contends
that the evidence was insufficient on the essential element of her
"knowledge" that the claims submitted to Medicaid were false. Her
convictions resulted from eighteen separate Medicaid Bills, between
December 1993 and April 1995, for Emerald Health’s supposed care
of patients who had died, had been hospitalized, or had been dis-
charged.
The false claims statute, codified at § 287 of Title 18, criminalizes
the submission of a false claim to the United States, or any depart-
ment or agency thereof, if the defendant knows that such claim is
27
Ms. Bolden was convicted on 20 counts of filing false claims. Two
of those counts related to her submission of false Cost Reports to Medic-
aid, while the other 18 counts were connected to her submission of Med-
icaid Bills for patient services not rendered. Ms. Bolden only appeals her
convictions on the latter 18 counts. When we refer to her false claims
convictions, we are referring to those on appeal.
UNITED STATES v. BOLDEN 29
28
"false, fictitious, or fraudulent." Thus, we must uphold such a con-
viction if the evidence shows the submission of a false claim and if
the defendant "acted with knowledge that the claim was false . . . and
with a consciousness that he was either doing something which was
wrong, or which violated the law." United States v. Maher, 582 F.2d
842, 847 (4th Cir. 1978) (internal citations omitted); see also United
States v. Blecker, 657 F.2d 629, 634 (4th Cir. 1981) (upholding false
claim conviction even though there was "evidence that the govern-
ment got its money’s worth").
Although the jury was required to find, in order to convict Ms. Bol-
den, that she had knowingly submitted the eighteen false claims to
Medicaid, it was entitled to do so on the basis of circumstantial evi-
dence. Indeed, "[t]he question of one’s intent is not measured by a
psychic reading of [the defendant’s] mind but by the surrounding
facts and circumstances; i.e., circumstantial evidence." United States
v. Larson, 581 F.2d 664, 667 (7th Cir. 1978). On the evidence pre-
sented, the jury could conclude that Ms. Bolden "knowingly" submit-
ted the eighteen false claims to Medicaid. She controlled Emerald
Health’s Medicaid Bills, and Emerald Health was strapped for funds.
Ms. Bolden was aware that Emerald Health’s patient census was
incorrect, and she nonetheless instructed Emerald Health’s employees
to submit the Medicaid Bills.29 According to Ms. Cox, the accounts
28
The false claims statute, 18 U.S.C. § 287, provides in pertinent part
that:
Whoever makes or presents to any person or officer in the civil,
military, or naval service of the United States, or to any depart-
ment or agency thereof, any claim upon or against the United
States, or any department or agency thereof, knowing such claim
to be false, fictitious, or fraudulent, shall be imprisoned not more
than five years and shall be subject to a fine in the amount pro-
vided in this title.
18 U.S.C. § 287 (emphasis added). Importantly, the submission of a false
claim to a state agency to obtain federal funds that were provided to the
state falls within the parameters of § 287. See United States v. Littlefield,
840 F.2d 143, 151 (1st Cir. 1988) (submission of false claims to state
agency violated § 287 because federal monies were used to fund state
program).
29
In order to bill Medicaid, Emerald Health maintained a daily "patient
census," which identified patients residing in the nursing facility and
specified the levels of care they were receiving.
30 UNITED STATES v. BOLDEN
receivable clerk, "many times [Emerald Health] would get behind on
the census" and "most of the time [they] would go ahead and . . . sub-
mit a bill to Medicaid." Ms. Cox informed Ms. Bolden that Emerald
Health’s patient census was inaccurate, yet Ms. Bolden instructed her
to go ahead and bill Medicaid because it was necessary "to get money
into the facility," and Emerald Health could, in any event, "send in a
recoupment if [it] billed something in error." Even if Ms. Bolden had
contemplated correcting these Medicaid Bills, such an effort would
not have been a valid defense to the charges. Under § 287, the Gov-
ernment was obliged to establish only her knowing submission of the
false claims. The jury was entitled to conclude, on the evidence of
Ms. Cox and the related circumstances, that Ms. Bolden knowingly
submitted false claims to Medicaid. See United States v. Adamson,
700 F.2d 953, 962 (5th Cir. 1983) ("Where sufficiency is at issue, a
finding that an accused acted recklessly may be enough to sustain a
jury verdict, because a jury may properly infer the requisite intent."
(emphasis in original)); United States v. Cincotta, 689 F.2d 238, 242
(1st Cir. 1982) (concluding that evidence of defendant’s pervasive
involvement in operations of corporation involved in transactions in
question was sufficient "for a reasonable juror to infer that [defen-
dant] knew of . . . the conspiracy").
Ms. Bolden also contends that her submission of false claims to
Medicaid were simply mistakes, due to poor bookkeeping and
accounting practices. She presented this explanation to the jury as a
defense, however, and it was rejected. Viewed in the proper light,
there was sufficient evidence for the jury to convict Ms. Bolden on
each of the false claim charges.
IV. THE SENTENCING ISSUES
Having resolved the issues related to the Boldens’ convictions, we
turn to their sentences. In that respect, they first contend that the court
erred in grouping their fraud and money laundering offenses. They
then assert that the sentencing court failed to comply with Rule
32(c)(1) of the Federal Rules of Criminal Procedure. Finally, they
maintain that, if the court made adequate findings under Rule
32(c)(1), it erred in its calculation of fraud losses, and in its applica-
tion of adjustments to Ms. Bolden for offenses involving "abuse of
position of trust" and "vulnerable victim[s]."
UNITED STATES v. BOLDEN 31
A. The Standards of Review
In assessing challenges to a sentencing court’s application of the
Guidelines, we review factual determinations for clear error and legal
issues de novo. United States v. Singh, 54 F.3d 1182, 1190 (4th Cir.
1995). The grouping of multiple convictions, pursuant to U.S.S.G.
§ 3D1.2, "involves a legal interpretation of guidelines terminology,
[and] we review [grouping issues] de novo." United States v. Toler,
901 F.2d 399, 402 (4th Cir. 1990). A sentencing court’s factual find-
ings in its application of the Guidelines, made under Rule 32(c)(1),
are reviewed for clear error. United States v. Souther, 221 F.3d 626,
632 (4th Cir. 2000). When a sentencing court has failed to resolve a
disputed fact on which it relied at sentencing, we remand for resen-
tencing. United States v. Morgan, 942 F.2d 243, 245 (4th Cir. 1991).
A finding of fraud loss is a factual issue, which we review for clear
error. United States v. Godwin, 272 F.3d 659, 671 (4th Cir. 2001).
Finally, whether a defendant occupies a position of trust is a factual
determination reviewable for clear error. United States v. Glymph, 96
F.3d 722, 727 (4th Cir. 1996).
B. The Grouping Issue
The Boldens contend that the sentencing court erroneously grouped
their fraud and money laundering convictions. Pursuant to U.S.S.G.
§ 3D1.2(d) of the Guidelines, all "counts involving substantially the
same harm shall be grouped together into a single group." In constru-
ing § 3D1.2(d), we have concluded that fraud and money laundering
offenses should only be grouped when they are "‘closely related.’"
United States v. Walker, 112 F.3d 163, 167 (4th Cir. 1997) (quoting
United States v. Porter, 909 F.2d 789, 792-93 (4th Cir. 1990)).
According to the Boldens, their fraud and money laundering offenses
are not so closely related as to warrant grouping. We disagree.
In Porter, we first considered whether fraud and money laundering
may be so closely related as to warrant being "grouped together." 909
F.2d 789. Porter had obtained the proceeds of an illegal gambling
operation and laundered those proceeds by purchasing a home. We
declined to group his offenses because the money laundering was not
"in any way integrated" with the fraud scheme, i.e., the gambling
operation. Id. at 793. The only connection between the gambling
32 UNITED STATES v. BOLDEN
operation and his money laundering activity was that Porter had laun-
dered the proceeds of the scheme. We concluded that, in such a situa-
tion, the fraud and money laundering offenses were not so "closely
related" as to justify grouping. Id. We observed, however, that the
grouping of such offenses would be appropriate where an enterprise
generated monies through illegal activities and "simultaneously laun-
dered those monies as part of the same continuing transaction or com-
mon scheme." Id. In Walker, we approved the grouping of fraud and
promotion money laundering offenses because the money laundering
activities were an essential aspect of the fraud scheme. 112 F.3d at
167. Walker, an insurance salesman, had diverted funds from his cus-
tomers to his personal use and made fictitious interest payments to his
customers with the proceeds. In so doing, he both concealed and pro-
moted the fraud scheme. In making the fictitious interest payments,
he used the proceeds of his fraud scheme to avoid suspicion that
fraudulent activity was afoot and to encourage customers to continue
paying their premiums. Id.The Walker principles are applicable here. The Boldens were found
to have engaged in both promotion and concealment money launder-
ing, and the Industrial Check Transactions not only concealed the
Related Party Transactions from Medicaid, they promoted those
transactions as an essential component of the fraud scheme. By
obtaining funds from the Industrial Check Transactions, the Boldens
were able to provide Emerald Health with a portion of the supplies
reflected on the Industrial invoices. These actions gave an aura of
legitimacy to their criminal endeavor and enabled their scheme to
continue. As such, the money laundering and the Related Party Trans-
actions were not only closely related, they were inextricably inter-
twined. In every aspect of the fraud scheme, the Boldens’ goal was
the same: the improper extraction of monies from Medicaid. Their
money laundering activities were essential to achieving that goal, and
their money laundering and fraud activities were part of a continuous,
common scheme to defraud Medicaid. Thus, the fraud and money
laundering offenses are "closely related" and, in the context of the
Guidelines, were properly "grouped together" by the sentencing court.30
30
Ms. Bolden also contends that grouping is inappropriate here because
the sum of money laundered (approximately $50,000) was small in com-
UNITED STATES v. BOLDEN 33
See United States v. Emerson, 128 F.3d 557, 566 (7th Cir. 1997)
(approving grouping when defendant had "embarked upon his money
laundering scheme with the intent of promoting his mail fraud swin-
dle"); United States v. Landerman, 167 F.3d 895 (5th Cir. 1999)
(upholding grouping when money laundering was used to promote
and enhance fraud scheme). In these circumstances, the contention
that the court erred on the grouping issue must be rejected.
C. The Rule 32 Issues
The Boldens next contend that their sentences should be vacated
because the court failed to comply with Rule 32(c)(1).31 Specifically,
they assert that the court failed to make adequate factual findings on
the issues in dispute. In a sentencing hearing, the court, under Rule
32(c)(1), is to "rule on any unresolved objections to the [PSR]." On
controverted matters, the court is to make either "a finding on the alle-
gation or a determination that no finding is necessary." Pursuant to
Rule 32(b)(6)(D), the sentencing court may, once objections are
resolved, "accept the [PSR] as its findings of fact."
A sentencing court’s findings on controverted matters ensure a
record "as to how the district court ruled on any alleged inaccuracy
parison to the losses attributable to the overall fraud scheme (approxi-
mately $700,000). This contention, however, is also without merit. See
Walker, 112 F.3d at 166 (permitting grouping of fraud and money laun-
dering offenses even though Walker had laundered only $5,000 of
$850,000 that his scheme had produced).
31
Rule 32(c)(1) of the Federal Rules of Criminal Procedure provides,
in relevant part:
(1) Sentencing Hearing. At the sentencing hearing, the court
must afford counsel . . . an opportunity to comment on the proba-
tion officer’s determinations and on other matters relating to the
appropriate sentence, and must rule on any unresolved objections
to the [PSR] . . . . For each matter controverted, the court must
make either a finding on the allegation or a determination that no
finding is necessary because the controverted matter will not be
taken into account in, or will not affect, sentencing.
Fed. R. Crim. P. 32(c)(1).
34 UNITED STATES v. BOLDEN
in the PSR [and] allow[s] effective appellate review of the sentence
imposed." United States v. Walker, 29 F.3d 908, 911 (4th Cir. 1994).
We have concluded, however, that the "court need not articulate
[findings] as to disputed factual allegations with minute specificity."
United States v. Perrera, 842 F.2d 73, 76 (4th Cir. 1988). In fact, the
court may simply adopt the findings contained in a PSR, provided that
it makes clear "which disputed issues were resolved by its adoption."
Walker, 29 F.3d at 911 (citing United States v. Morgan, 942 F.2d 243,
245 (4th Cir. 1991)). In the Boldens’ sentencing hearings, the court
satisfied Rule 32 on nearly all factual disputes. Two of those matters,
however, warrant further scrutiny from the Rule 32(c)(1) standpoint:
(1) Mr. Bolden’s fraud loss calculation and (2) Ms. Bolden’s "vulner-
able victim" adjustment.
1.
At Mr. Bolden’s sentencing hearing on Oct. 7, 1999, the court first
ruled on several of his objections. It then stated: "[Mr. Bolden’s]
remaining objections are overruled; and the Court determines that the
[PSR] is fully supported by the evidence and the government’s filing
is correct and adopted by the Court." Although the adoption of Mr.
Bolden’s PSR is sufficient to permit review of his sentence in most
respects, it is insufficient on whether the Lease Transactions were
properly included in his fraud loss calculation. Neither the PSR nor
the "government’s filing," i.e., the Government’s Sentencing Memo-
randum, contained factual assertions sufficient to justify inclusion of
the Lease Transactions in that calculation.32 Mr. Bolden unsuccess-
32
Mr. Bolden also asserts that the sentencing court erred in including
the Fictitious Invoices and the Backdated Invoices in his fraud loss cal-
culation. These assertions are meritless. Mr. Bolden was aware of the
conduct involved in the Related Party Transactions. In fact, as his PSR
noted, he established the amounts and products that Nelson included on
the Industrial invoices to Emerald Health. In so doing, he knew that
Emerald Health would be charged for products it would not receive. He
also knew that his wife controlled the timing of the invoices, and that she
was responsible for manipulating the Medicaid reimbursement system.
Thus, the sentencing court properly found that he participated in Emerald
Health’s submission of the Fictitious Invoices and the Backdated
Invoices to Medicaid, and it did not err in including those invoices in his
fraud loss calculation.
UNITED STATES v. BOLDEN 35
fully sought to exclude approximately $82,000 (attributable to the
Lease Transactions) from his fraud loss calculation. He contends that
the court failed to find that he directly participated in the Lease Trans-
actions or that those transactions were in furtherance of jointly
undertaken criminal activity.
In calculating fraud loss, a sentencing court must first apply the
principles of "relevant conduct." See U.S.S.G. § 1B1.3. Pursuant
thereto, specific offense characteristics, such as the fraud loss prop-
erly attributable to a defendant, must be determined on the basis of
(1) the acts and omissions committed, aided, abetted, counseled, com-
manded, induced, procured, or willfully caused by a defendant; and
(2) in the case of a jointly undertaken criminal activity, all reasonably
foreseeable acts and omissions of others in furtherance of the jointly
undertaken criminal activity. U.S.S.G. § 1B1.3(a)(1)(A)–(B).
The fact that Mr. Bolden was convicted of conspiracy to commit
mail and wire fraud, which included the Lease Transactions, does not
necessarily mandate a finding that the losses from those transactions
constitute relevant conduct attributable to him. Notwithstanding the
verdict, the court was obliged to make individualized findings on
fraud loss. As the Court of Appeals for the District of Columbia has
observed:
A jury verdict convicting the defendants of participation in
a single conspiracy does not obviate the need for . . . indi-
vidualized findings by the sentencing court. Such a verdict
speaks to the scope of the defendant’s agreement only in
very general terms: It does not address the question of which
specific actions demonstrated at trial were in furtherance of
that single conspiracy or were foreseeable to the conspira-
tors.
United States v. Childress, 58 F.3d 693, 722 (D.C. Cir. 1995). And
as Judge Wilkins has aptly put it: "One participant in a multi-
participant . . . conspiracy may be held accountable, for sentencing
purposes, for a greater or lesser [amount] than other coparticipants."
United States v. Gilliam, 987 F.2d 1009, 1013 (4th Cir. 1993) (dis-
cussing commentary to U.S.S.G. § 1B1.3(a)(1)).
36 UNITED STATES v. BOLDEN
a.
Mr. Bolden’s PSR fails to support a finding that he directly partici-
pated in all seven Lease Transactions. The only connection made in
the PSR between Mr. Bolden and the Lease Transactions is a single
1993 lease. According to the PSR, the "actual purpose" of this lease
"was to finance the purchase of a ‘blue’ $53,000 car for Clifford Bol-
den." This fact, standing alone, fails to warrant a finding that all the
losses from the Lease Transactions are attributable to Mr. Bolden. In
its Sentencing Memorandum, the Government asserted that Mr. Bol-
den was also directly connected to a second lease. It asserted that he
had attended a seminar in New York with respect to this second lease,
and that he co-signed an Emerald Health check making a payment on
it. While the court adopted the Sentencing Memorandum, the asser-
tions made therein also fail to support the finding that Mr. Bolden is
accountable for all the losses arising from the seven Lease Transac-
tions.
b.
In further support of the fraud loss calculation on Mr. Bolden, the
Government contends that the losses arising from the Lease Transac-
tions were appropriately includable under the second prong of
§ 1B1.3(a)(1), i.e., that they were reasonably foreseeable and "in fur-
therance of the jointly undertaken criminal activity." The commentary
to § 1B1.3 provides guidance on this point, observing that the scope
of a defendant’s criminal activity "is not necessarily the same as the
scope of the entire conspiracy, and hence relevant conduct is not nec-
essarily the same for every participant." U.S.S.G. § 1B1.3, cmt. n. 2.
As such, a sentencing court, in applying § 1B1.3, must first determine
the scope of the criminal activity a defendant "agreed to jointly under-
take (i.e., the scope of the specific conduct and objectives embraced
by the defendant’s agreement)." Id. (emphasis added).
The commentary to § 1B1.3 also provides that, "[i]n determining
the scope of the criminal activity that the particular defendant agreed
to jointly undertake, . . . the court may consider any explicit agree-
ment or implicit agreement fairly inferred from the conduct of the
defendant and others." Id. The commentary points out, however, that
"the fact that the defendant is aware of the scope of the overall opera-
UNITED STATES v. BOLDEN 37
tion is not enough to hold him accountable for the activities of the
whole operation." United States v. Studley, 47 F.3d 569, 575 (2d Cir.
1995). Instead, a sentencing court must assess and determine the "role
the defendant agreed to play in the operation." Id.In light of the commentary to § 1B1.3, several circuits require a
sentencing court to "make particularized findings with respect to both
the scope of the defendant’s agreement and the foreseeability of his
co-conspirators’ conduct before holding the defendant accountable for
the scope of the entire conspiracy." United States v. Campbell, 279
F.3d 392, 400 (6th Cir. 2002) (emphasis in original); see also Studley,
47 F.3d at 574 (concluding that sentencing court must make particu-
larized findings as to "scope of the criminal activity agreed upon by
the defendant" and "whether the activity was foreseeable to the defen-
dant"); United States v. Bush, 28 F.3d 1084, 1087 (11th Cir. 1994)
(requiring individualized findings concerning scope of criminal activ-
ity undertaken by defendant and whether activity was reasonably
foreseeable to defendant); United States v. Evbuomwan, 992 F.2d 70,
72-74 (5th Cir. 1993) (same). We agree with our sister circuits that
a sentencing court, in order to hold a defendant accountable for the
conduct of his coconspirators, should make particularized findings
with respect to both prongs of § 1B1.3(a)(1)(B). As to Mr. Bolden,
however, neither the PSR nor the Sentencing Memorandum — nor
the court — made findings on (1) the scope of the criminal activity
he agreed to jointly undertake, or (2) whether all the Lease Transac-
tions were reasonably foreseeable.33 As such, his fraud loss findings
are inadequate.34
33
There was substantial evidence connecting Mr. Bolden to certain
aspects of the fraud scheme, particularly the Related Party Transactions.
His connection to the Lease Transactions, however, may be tenuous. For
example, Nelson testified that he never spoke with Mr. Bolden regarding
the Lease Transactions and that, to his knowledge, Mr. Bolden had no
involvement in them.
34
Because the findings on inclusion of the Lease Transactions in Mr.
Bolden’s fraud loss are inadequate, we do not reach the merits of his
challenge on this issue.
38 UNITED STATES v. BOLDEN
2.
Ms. Bolden contends that the sentencing court failed to make ade-
quate factual findings on her sentencing adjustment based on "vulner-
able victim," pursuant to U.S.S.G. § 3A1.1. In ruling on Ms. Bolden’s
objection on this point, the court stated that "[t]he defendant’s objec-
tion to the vulnerable victim two-level enhancement is overruled."
After sustaining her objections to adjustments for "sophisticated con-
cealment" and "role in the offense," the court found "that the [PSR]
was correct in all other respects and [was] fully supported by the sup-
porting affidavits filed by the government."
Ms. Bolden asserts that the PSR’s recommendation of the vulnera-
ble victim adjustment "rested on a legally erroneous interpretation of
the terms ‘victim’ and ‘vulnerable,’ . . . and that the PSR failed to
apply the ‘targeting’ requirement," as necessitated by the 1994 Guide-
lines. In recommending the vulnerable victim adjustment, the PSR
relied on the 1994 Guidelines, which provide for such an adjustment
"[i]f the defendant knew or should have known that a victim of the
offense was unusually vulnerable due to age, physical or mental con-
dition, or that a victim was otherwise particularly susceptible to the
criminal conduct." U.S.S.G. § 3A1.1. The PSR, in recommending the
adjustment, stated that "[t]he investigation revealed information from
various sources that residents received inadequate care, due in part to
the lack of adequate staff at the long term care nursing home facility."
In order to apply the vulnerable victim adjustment, a sentencing
court must identify the victims of the offense, based not only on the
offense of conviction, but on all relevant conduct. United States v.
Blake, 81 F.3d 498, 503-04 (4th Cir. 1996) ("We therefore reject [the
defendant’s] argument that, for the purpose of § 3A1.1, ‘a victim of
the offense’ is only an individual considered a victim of the specific
offense of conviction."). Accordingly, the residents of Emerald Health
would be "victims" of the fraud scheme if Ms. Bolden failed to pro-
vide them with adequate care as a result of the scheme.
Under the 1994 Guidelines, we utilize a two-part test for assessing
the applicability of the vulnerable victim adjustment. First, the victim
must be "unusually vulnerable," United States v. Holmes, 60 F.3d
1134, 1135 (4th Cir. 1995), and second, "the victim must also have
UNITED STATES v. BOLDEN 39
been targeted by the defendant because of the victim’s unusual vulnera-
bility."35 Id.; see also U.S.S.G. § 3A1.1, cmt. n.1 (1994) ("This adjust-
ment applies . . . where an unusually vulnerable victim is made a
target of criminal activity by the defendant."). It is insufficient for a
sentencing court to find only that a victim is elderly or physically
infirm, it must also determine that "the victim’s vulnerability or sus-
ceptibility facilitated the defendant’s crime in some manner." United
States v. Monostra, 125 F.3d 183, 190 (3d Cir. 1997). While it is
indisputable that the residents of Emerald Health were elderly, and
many of them likely suffered from both mental and physical ailments,
neither the sentencing court nor the PSR found the vulnerability of
Emerald Health’s residents to have facilitated Ms. Bolden’s offenses.
The court also did not find that Emerald Health’s residents were tar-
geted because of their unusual vulnerability. United States v. Gary, 18
F.3d 1123, 1128 (4th Cir. 1994) (ruling that, before applying vulnera-
ble victim adjustment, a sentencing court first must find that defen-
dant "initially chose[ ] his victim because of her particular
vulnerability"). In these circumstances, we vacate this aspect of Ms.
Bolden’s sentence.36
35
In 1995, the Sentencing Commission adopted Amendment 521, ren-
dering it unnecessary for a sentencing court to find that a defendant had
specifically targeted his victim. In adopting Ms. Bolden’s PSR, however,
the court applied the 1994 Guidelines, which, under our precedent,
require the sentencing court to find that the defendant targeted his victim.
See Holmes, 60 F.3d at 1135. On appeal, the Government contends that
targeting is not required under the 1994 Guidelines because the 1995
amendment simply "clarified" that, even under the 1994 Guidelines,
U.S.S.G. § 3A1.1 did not require targeting. In this Circuit, this "clarifica-
tion" is more appropriately an "alteration" because our precedent under
the 1994 Guidelines required the Government to demonstrate targeting.
Consequently, the targeting requirement of the 1994 Guidelines must be
applied to Ms. Bolden in order to avoid Ex Post Facto issues. See United
States v. Stover, 93 F.3d 1379, 1386 (8th Cir. 1996).
36
Because the sentencing court made inadequate factual findings on the
application of the "vulnerable victim" adjustment to Ms. Bolden’s
offense level, we do not reach the merits of her challenge on this issue.
40 UNITED STATES v. BOLDEN
D. The Fraud Loss Calculation (Ms. Bolden)
Ms. Bolden next contends that the court clearly erred in calculating
her fraud loss. Pursuant to § 2F1.1(b)(1) of the 1994 Guidelines, a
sentencing court is obliged to increase, on a graduated basis, the
offense level of a defendant convicted of fraud, depending on the
amount of loss resulting from the fraud scheme. Ms. Bolden chal-
lenges the inclusion in her fraud loss of: (1) her salary and that of a
physician assistant, (2) the Aequitron Invoices, and (3) costs included
on the Cost Reports for which supporting invoices could not be found.
1.
Ms. Bolden first maintains that the court erred in including her sal-
ary and the salary of a physician assistant, Frank Dickerson, in her
fraud loss calculation. She contends that Dickerson’s salary was a
proper "direct cost" of Emerald Health and, in the alternative, that
there is no evidence connecting her to the improper classification of
his salary or showing that the misclassification was deliberate.37 At
trial, a Medicaid investigator and a Medicaid auditor each testified
that only those salaries directly related to patient care are proper
direct costs on the Cost Reports. Thus, administrative salaries, such
as Ms. Bolden’s, are reportable on the Cost Reports only as indirect
costs. Additionally, the compensation of physicians and physician
assistants are separately reimbursed by Medicaid and are not includ-
able on the Cost Reports. According to the Medicaid auditor, a physi-
cian assistant, such as Dickerson, should have "bill[ed] the Medicaid
program directly." As such, the court did not err in deciding that
Dickerson’s salary was an improper direct cost on the 1993 and 1994
Cost Reports.
There was also an ample basis for the court’s findings that Ms.
Bolden was responsible for the misclassification of Dickerson’s salary
and that the misclassification was deliberate. First, she was responsi-
ble for the management of Emerald Health, including classification of
37
As pointed out earlier, supra Part II.A, unlike with "indirect costs,"
where each facility receives a flat rate per Medicaid patient, Medicaid
reimburses nursing facilities for the actual amount spent on "direct
costs," i.e., patient-related expenses.
UNITED STATES v. BOLDEN 41
its expenses and preparation of the Cost Reports. Emerald Health also
listed Dickerson on those Reports as its Director of Nursing, rather
than as a physician assistant, to conceal the misclassification of his
salary as a direct cost. Finally, there was evidence that Ms. Bolden
was responsible for the misclassification of other employees’ salaries,
thus permitting the sentencing court to infer that she was responsible
for the improper classification of Dickerson’s salary.38 In these cir-
cumstances, the court did not err by including Dickerson’s misclassi-
fied salary in Ms. Bolden’s fraud loss calculation.
Ms. Bolden also challenges the inclusion of her own salary in her
fraud loss calculation. She contends that, although she performed
administrative duties as Emerald Health’s Director of Operations, she
also served as Supervisor of its Ventilator Unit. Moreover, because
the salary of this Supervisor is properly a direct cost, she asserts that
her full salary was not includable in her fraud loss calculation. In sup-
port of this contention, Ms. Bolden relies on the testimony of Emerald
Health’s former Medicaid auditor, who testified that the job descrip-
tion of the Supervisor "would support an argument" that the portion
of her salary for that position was properly a direct cost. However,
Ms. Bolden offered no evidence that her actual duties in the Ventila-
tor Unit involved any direct patient care. Indeed, according to the
Medicaid investigator, absent a study to ascertain how much time Ms.
Bolden dedicated to administrative work compared to how much she
spent on direct patient care, it was improper to classify any portion
of her salary as a direct cost.
Significantly, the reclassification of Ms. Bolden’s salary occurred
38
For example, Ms. Bolden was responsible for the mis-classification
of the salary of Lori Gann, who held an administrative position in the
business office, as a direct cost on the 1993 and 1994 Cost Reports. In
March of 1994, while preparing the 1993 Cost Report, Ms. Bolden
reclassified Gann as a medical records clerk, although her duties at
Emerald Health remained unchanged. Unlike an administrative position,
the salary of a medical records clerk is properly included as a direct cost.
Ms. Bolden then gave Gann two name tags — one for the business office
and one that identified her as a medical records clerk — and told Gann
to "wear the Medical Records name tag whenever State employees [are]
in the facility."
42 UNITED STATES v. BOLDEN
in March of 1994, when she was preparing the 1993 Cost Report and
attempting to find ways to avoid another large repayment to Medicaid.39
In these circumstances, it was entirely proper to include Ms. Bolden’s
entire salary in her fraud loss calculation.
2.
Ms. Bolden also maintains that the sentencing court miscalculated
her fraud loss by including nearly $200,000 attributable to Emerald
Health’s transactions with Aequitron. This sum resulted from the
triple-expensing of a $64,000 Aequitron invoice originally issued for
a ventilator equipment purchase. The court included the triple-
expensing in Ms. Bolden’s fraud loss calculation, and she contends it
did so erroneously.40
Ms. Bolden asserts that the triple-expensing of the Aequitron
invoice was simply an accounting error. She also maintains that, even
if it was fraudulent, there is no direct evidence tying her to it. In the
absence of direct evidence, however, there was ample circumstantial
evidence justifying the court’s finding that it was a fraudulent act
rather than a mistake. Importantly, there was evidence tying Ms. Bol-
den to the duplication of other Aequitron invoices. In addition, she
knew how the Medicaid cost reporting system operated, she con-
trolled Emerald Health’s finances, she possessed the authority to clas-
sify expenses, and she was motivated to avoid another significant
Emerald Health repayment to Medicaid. As such, the court did not err
in including the triple-expensed Aequitron invoice in Ms. Bolden’s
fraud loss calculation.
39
From 1990 through 1992, Emerald Health’s actual direct patient-
related costs were substantially less than the prospective direct cost pay-
ments it received from Medicaid. Accordingly, Emerald Health was
required to reimburse Medicaid the respective sums of $138,687,
$102,501, and $318,695, for those years.
40
The $64,000 Aequitron purchase was actually entered six times on
Emerald Health’s accounting ledger. Three of those entries, however,
were subsequently corrected, leaving three entries on the ledger and on
the 1994 Cost Report.
UNITED STATES v. BOLDEN 43
3.
Ms. Bolden’s final contention on her fraud loss calculation relates
to the inclusion of approximately $170,000 in costs billed to Medicaid
by Emerald Health for which vendors’ invoices could not be located
(the "Missing Invoice Costs"). She asserts that the Government failed
to establish by a preponderance of the evidence that the Missing
Invoice Costs were fraudulent. See United States v. Harris, 882 F.2d
902, 907 (4th Cir. 1989). As explained below, the sentencing court
erred in its inclusion of the Missing Invoice Costs in Ms. Bolden’s
fraud loss calculation.
During the investigation of Emerald Health, the Medicaid investi-
gator conducted an extensive audit, comparing the costs specified on
the Cost Reports with those listed on Emerald Health’s cash disburse-
ment journal, its bank records, and its invoices from service and sup-
ply companies. Even though the cash disbursement journal and the
bank records were supportive of the Cost Reports, the investigator
concluded that the Missing Invoice Costs were fraudulent because he
could not find supporting invoices for them. The Missing Invoice
Costs were accordingly included in the PSR’s fraud loss calculation
for Ms. Bolden.
Prior to the sentencing hearing, Ms. Bolden objected to the inclu-
sion of the Missing Invoice Costs in her fraud loss calculation, assert-
ing that they were treated as fictitious even though Emerald Health’s
cash disbursement journal and bank records reflected those costs as
having been paid to more than twenty vendors. The Government
made no effort to contact the vendors to verify its position on the
Missing Invoice Costs, and Ms. Bolden filed affidavits from several
of the vendors, indicating that at least part of those costs were valid.
She also produced an affidavit of a former Emerald Health employee,
indicating that he had ordered supplies from certain of the vendors
during 1993 and 1994. At trial, the Medicaid investigator acknowl-
edged that the bank records in connection with the Missing Invoice
Costs appeared to be accurate. Finally, Ms. Bolden contended that,
although the invoices relating to the Missing Invoice Costs had been
misplaced, they were legitimate. Indeed, several Emerald Health
employees testified at trial that Emerald Health’s business operations
were disorganized and subject to poor bookkeeping.
44 UNITED STATES v. BOLDEN
In response, the Government did not dispute Ms. Bolden’s affida-
vits, and it acknowledged in its Sentencing Memorandum that "the
evidence connecting [Ms. Bolden] to the fraudulent overstatement of
[the Missing Invoice Costs] is less than compelling." It failed to pro-
duce any testimony that the Missing Invoice Costs were fraudulent,
and its primary position was that Ms. Bolden had the motive and (as
Emerald Health’s Director of Operations) the opportunity to fabricate
those costs. At the sentencing hearing, the Government asserted that
the issue on the Missing Invoice Costs was for "the Court to decide
based on the facts and circumstances." It chose not to make any fur-
ther argument on the issue, and the court overruled Ms. Bolden’s
objection.
In sum, the Government’s evidence on the Missing Invoice Costs
consisted of the opinion of a single witness, who admitted that the
documentation underlying those costs appeared to be legitimate. It
failed to produce further evidence, and it admitted that its evidence
on this issue was "less than compelling." Ms. Bolden, on the other
hand, came forward with an explanation of why the Missing Invoice
Costs were legitimate, and she produced affidavits corroborating, to
some extent, her position. In these circumstances, we conclude that
the court erred in including those costs in Ms. Bolden’s fraud loss.
E. Abuse of Position of Trust (Ms. Bolden)
Finally, Ms. Bolden contends that the sentencing court erred in
applying the "abuse of position of trust" adjustment (the "Trust adjust-
ment") to her sentence. She asserts that, although she may have occu-
pied a position of trust with Emerald Health, she held no such
position with respect to Medicaid, and the court erred in applying the
Trust adjustment to her. Pursuant to U.S.S.G. § 3B1.3, an adjustment
in the base offense level is authorized "[i]f the defendant abused a
position of public or private trust . . . in a manner that significantly
facilitated the commission or concealment of the offense." U.S.S.G.
§ 3B1.3. The commentary to § 3B1.3 explains that a position of trust
is "characterized by professional or managerial discretion," and points
out that the Trust adjustment applies where "the position of trust . . .
contributed in some significant way to facilitating the commission or
concealment of the offense." U.S.S.G. § 3B1.3, cmt. n. 1.
UNITED STATES v. BOLDEN 45
We have observed that "‘the question of whether an individual
occupies a position of trust should be addressed from the perspective
of the victim.’" United States v. Moore, 29 F.3d 175, 179-80 (4th Cir.
1994) (quoting United States v. Queen, 4 F.3d 925, 929 (10th Cir.
1993)). In order to apply the Trust adjustment to Ms. Bolden, the sen-
tencing court was obliged to first identify the victims of her fraudu-
lent activities. And in this case, the victims were Medicaid and the
American taxpayers. See United States v. Adam, 70 F.3d 776, 782
(4th Cir. 1995) (concluding that victims of Medicaid fraud were "the
American taxpayers"). As such, the court could apply the Trust
adjustment to Ms. Bolden only if she occupied a position of trust as
to Medicaid.
The PSR addressed Ms. Bolden’s position of trust only as to Emer-
ald Health. In its Sentencing Memorandum, however, and at the sen-
tencing hearing, the Government maintained that she occupied a
fiduciary relationship as to Medicaid, which she abused in committing
and concealing the fraud scheme. It took the position that, because of
Ms. Bolden’s relationship to Medicaid, the Trust adjustment should
be applied to her. The court overruled Ms. Bolden’s objection to the
Trust adjustment, and it adopted the remaining portions of her PSR.
Thus, the court implicitly adopted the Government’s position that Ms.
Bolden occupied a trust relationship as to Medicaid.
Ms. Bolden maintains that the court erred in finding that she occu-
pied a position of trust as to Medicaid, asserting that Medicaid con-
ferred no discretionary authority on her. As Director of Operations of
Emerald Health, however, she possessed substantial discretionary
authority. Medicaid entrusted Ms. Bolden with thousands of dollars
in prospective payments to Emerald Health, that were to be used for
the benefit of its Medicaid beneficiaries. And her abuse of that author-
ity contributed significantly to the commission and concealment of
the fraud scheme.
We have upheld application of the Trust adjustment in situations
where physicians have defrauded Medicaid. See Adam, 70 F.3d at
782. In Adam, the adjustment was found appropriate for a physician
involved in Medicaid fraud because such activity "is terribly difficult
to detect because physicians exercise enormous discretion." Id.; see
also United States v. Hoogenboom, 209 F.3d 665, 671 (7th Cir. 2000)
46 UNITED STATES v. BOLDEN
("Medical service providers occupy positions of trust with respect to
private or public insurers (such as Medicare) within the meaning of
guideline § 3B1.3."). Compellingly, the Second Circuit, in United
States v. Wright, 160 F.3d 905, 910-11 (2d Cir. 1998), has upheld
application of the Trust adjustment in similar circumstances. In
Wright, the defendants had embezzled funds from a Medicaid-funded
residence facility. The court observed that public funds were entrusted
to the facility, for the benefit of its patients, and the defendants,
through their positions at the facility, had embezzled the funds "with-
out fear of timely detection by . . . the government, who entrusted
them with the funds." Id. at 911. The court concluded that application
of the Trust adjustment was appropriate in such a situation, when
"viewed from the standpoint of the governmental agencies that
entrusted the funds to [the facility’s] management to use them prop-
erly for the well-being of the intended beneficiaries."41 Id. As in
Wright, Ms. Bolden, through her position at Emerald Health, was
entrusted by Medicaid with its funds, and she abused the trust placed
in her. Thus, the court did not err in finding that Ms. Bolden occupied
a position of trust with respect to Medicaid, and we affirm its applica-
tion of the Trust adjustment.
V.
Pursuant to the foregoing, we affirm the convictions of the Bol-
dens, we affirm the grouping of their fraud and money laundering
offenses, and we affirm the application of the Trust adjustment to Ms.
Bolden. We reverse the inclusion of the Missing Invoice Costs in Ms.
Bolden’s fraud loss calculation. Finally, we vacate and remand on the
41
In support of her position that the Trust adjustment was inappropri-
ately applied, Ms. Bolden relies on the Eleventh Circuit’s decision in
United States v. Mills, 138 F.3d 928, 941 (11th Cir. 1998). The court
there concluded that "a Medicare-funded care provider, as a matter of
law, does not occupy a position of trust vis-a-vis Medicare." It based this
ruling on its conclusion that Medicare-funded care providers owe con-
tractual, rather than fiduciary, duties toward Medicare. Because of the
discretion Medicaid confers upon care providers, we agree with the Sec-
ond Circuit, however, that such providers owe a fiduciary duty to Medic-
aid. See Wright, 160 F.3d at 911. Indeed, we see it as paramount that
Medicaid be able to "trust" its service providers.
UNITED STATES v. BOLDEN 47
fraud loss calculation of Mr. Bolden and on application of the vulner-
able victim adjustment to Ms. Bolden.42
AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, AND REMANDED
42
The Boldens have requested that, in the event we remand, their case
be reassigned to a different judge. There is no evidence to suggest that
this able district judge would have "substantial difficulty in putting out
of his . . . mind" any previously expressed views, nor do we find reas-
signment to be necessary to "preserve the appearance of justice." See
United States v. Guglielmi, 929 F.2d 1001, 1007 (4th Cir. 1991) (quoting
United States v. Robin, 553 F.2d 8, 10 (2d Cir. 1977)). In fact, because
of the nature of this case, assignment to a different judge "would entail
waste and duplication." Id.