United States v. Umawa Imo

Case: 11-20791 Document: 00512491278 Page: 1 Date Filed: 01/07/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 11-20791 January 7, 2014
Lyle W. Cayce
UNITED STATES OF AMERICA, Clerk
Plaintiff-Appellee,
v.
UMAWA OKE IMO; CHRISTINA JOY CLARDY; KENNETH IBEZIM
ANOKAM,
Defendants-Appellants.
Appeals from the United States District Court
for the Southern District of Texas
Before STEWART, Chief Judge, and DeMOSS and CLEMENT, Circuit Judges.
CARL E. STEWART, Chief Judge:
This appeal arises from the conviction of Defendants-Appellants Umawa
Oke Imo, Christina Joy Clardy, and Kenneth Ibezim Anokam for their
involvement in a health care fraud scheme. Defendants-Appellants challenge
the district court’s refusal to give a requested limiting instruction during trial
and the final jury charge. Clardy contends that there is insufficient evidence
to support her conviction for health care fraud, conspiracy to commit health
care fraud, and mail fraud. Clardy also raises three evidentiary challenges. In
addition, Clardy and Anokam challenge the district court’s application of a
sentencing enhancement based on their intended loss, and Anokam argues
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that the district court erroneously imposed a sentencing enhancement for mass
marketing. 1 We AFFIRM Defendants-Appellants’ convictions and sentences.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 2
A. Factual Background
1. City Nursing Services of Texas (“CNS”)
Imo owned CNS, an alleged physical therapy clinic in Houston, Texas.
In May 2006, he submitted an application to Medicare on behalf of CNS; both
Imo and Clardy signed the certification statement on the application as the
administrator and medical director, respectively. Additionally, they signed the
Medicare participating physician or supplier agreement, which ensured that
payments for any filed claims would go to CNS rather than the patient.
Subsequently, Medicare approved CNS’s application and provided it
with a billing number. Medicare also sent CNS a confirmation letter,
indicating that Clardy was approved and providing an individual number for
billing. Claims could therefore be billed under Clardy’s number beginning on
July 19, 2006. In addition, Imo submitted an application to Medicaid for CNS,
identifying Imo as the owner and Clardy as the doctor. CNS was approved and
given the information needed to begin filing claims with Medicaid. From
approximately March 2, 2006 to June 26, 2009, CNS billed Medicare and
Medicaid for approximately $30 million. However, CNS was never registered
1 Although Imo and Clardy reserved the right to adopt the arguments raised by the
other Defendants-Appellants, they have not done so. However, Anokam sought to adopt the
arguments raised by Imo and Clardy. The only argument raised by another Defendant-
Appellant but not Anokam is Clardy’s sufficiency of the evidence challenge. Because that
argument is fact-specific, Anokam may not adopt that argument, and we therefore do not
consider it. See United States v. Stephens, 571 F.3d 401, 404 n.2 (5th Cir. 2009).
(“[S]ufficiency of the evidence challenges are fact-specific, so we will not allow the appellants
to adopt those arguments.” (internal quotation marks and citation omitted)).
2 We limit our discussion of the facts in this section to a general overview. Additional
facts are provided when necessary throughout this opinion.
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to provide physical therapy services and did not have any licensed physical
therapists.
Clardy, an anesthesiologist, worked at CNS along with her twin sister,
Dr. Catherina Clardy (“Dr. Catherina”). Clardy contracted with CNS to work
fifteen hours a week in return for a monthly salary of $5,000; 3 this contract
was also submitted in CNS’s application to Medicare. According to her contract
with CNS, Clardy’s duties included supervising the physical therapy services
provided and maintaining the medical records associated with those. In fact,
Clardy sent CNS a letter stating that physical therapy and occupational
therapy services could only be billed to Medicare when she directly supervised
the therapy and the services were pursuant to a treatment plan she
established. Clardy, however, was not licensed to provide physical therapy
services. A report by Health Integrity, a government contractor responsible
for investigating, inter alia, fraud for Medicare and Medicaid, demonstrated
that claims submitted under Clardy’s billing number were primarily for
physical therapy services. Indeed, based on the submitted bills, Clardy
supposedly supervised more than 380 patients during the course of a single
day; each patient purportedly received three hours of physical therapy.
2. Overview of the Scheme
Beginning in November 2006, Imo brought patients to CNS to be treated
by Latricia Smith, a physical therapy aide. CNS only accepted patients with
Medicare or Medicaid. Once CNS began to expand, additional employees were
hired to recruit patients to CNS. CNS paid these employees for each patient
they brought to the clinic. CNS also paid patients whenever they visited the
3 Clardy testified that she signed another contract with Imo in which she agreed to
work ten hours per week in return for a monthly salary of $10,000.
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clinic for an initial assessment and any subsequent reassessment. Initially,
Imo was responsible for paying the patients who came to CNS as well as the
people who referred them. When he was unable to make the payments, he
would assign the duties to another employee.
During a patient’s first visit to CNS, an employee would collect basic
medical information from the patient. Before patients received treatment,
CNS had them sign treatment forms, although the forms were intended to
serve as a record of the treatment each patient received during his or her visit
to CNS. Indeed, CNS often had patients sign multiple blank treatment forms
when they visited the clinic. CNS employees, including Imo, would then fill in
these blank treatment forms as if the patient received certain services,
regardless of whether the patient actually received any treatment. As more
patients began to come to CNS, patients would either not undergo any physical
therapy or receive treatment from employees not licensed to provide such
services.
Initially, Imo handled the billing for CNS; however, as time progressed,
Pam Ise and other employees became responsible for billing. Ise instructed
employees to bill for certain services regardless of what therapy the patient
actually received. In fact, CNS billed Medicare and Medicaid for deceased
patients. At one point, CNS billed Medicare for 382 patients in one day. Some
patients began to complain to CNS concerning their bills.
Beginning in 2008, Anokam began working at CNS. Witnesses testified
that Anokam was in charge of the clinic when Imo was not present, assisted in
falsifying data on the forms submitted to Medicare and Medicaid, handled
problems that arose, and paid people who came to the clinic complaining that
CNS had overcharged them.
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In August 2008, Clardy notified Medicare that she wished to terminate
the reassignment of her benefits to CNS. Because of a mistake in her
termination application, however, the reassignment was not immediately
terminated. Clardy waited almost two months before rectifying the problem;
once Medicare received a correct termination application, CNS could no longer
bill under Clardy’s number. In the notification, Clardy expressed concern
about potential legal liability. When Clardy and Dr. Catherina left CNS, they
were replaced by two other doctors—Dr. Theresa Rice and Dr. Thaddeus
Hume. In March 2009, CNS and the doctors associated with the clinic were
placed on prepay review—that is, all claims submitted had to have
corroborating documentation before the claims would be paid. Notably, none
of CNS’s claims were paid once the clinic was placed on prepay review.
b. Procedural History
Defendants-Appellants were indicted for conspiracy to commit health
care fraud in violation of 18 U.S.C. § 1349 (count one), health care fraud in
violation of 18 U.S.C. §§ 1347 and 2 (counts two through forty), 4 and mail fraud
in violation of 18 U.S.C. § 1341 (counts forty-one through forty-three). Imo was
indicted for money laundering in violation of 18 U.S.C. § 1957 (counts forty-
four through forty-eight), and Anokam was indicted for structuring to avoid
reporting in violation of 31 U.S.C. § 5324(a)(3). 5 A jury found Imo, Clardy, and
Anokam guilty on multiple counts of health care fraud, conspiracy to commit
health care fraud, mail fraud, money laundering, and structuring to avoid
reporting requirements. Subsequently, Imo was sentenced to 327 months’
4 Clardy was indicted only on counts two through twenty-eight, not twenty-nine
through forty.
5 Counts forty-nine through fifty-one applied to another defendant not a party to this
appeal.
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imprisonment and ordered to pay $30,216,592.15 in restitution as well as a
$4,800 special assessment. Imo objected to the loss calculation and the mass
marketing enhancement applied by the district court, but the court overruled
the objections. The court also approved a two-level enhancement for willful
obstruction or the attempt to obstruct justice.
The court sentenced Clardy to a total of 135 months’ imprisonment with
three years of supervised release. In addition, Clardy was ordered to pay
$15,626,084.01 in restitution and a $1,800 special assessment. Clardy raised
a number of objections, including that she was not the medical director for
CNS, the 22-level enhancement for intended loss was improper, and the two-
level enhancement for mass marketing was not applicable. The district court
overruled each of her objections. Clardy also moved for an acquittal or a new
trial, which the court denied.
Anokam was sentenced to a total of 151 months’ imprisonment. He
challenged the amount of loss he was held accountable for, the two-level
enhancement for his managerial role in the health care fraud scheme, and the
enhancement for mass marketing. He was ordered to pay $19,047,546.88 for
restitution and a $2,900 special assessment. Defendants-Appellants timely
appealed.
II. DISCUSSION
A. Limiting Instruction
For the most part, Defendants-Appellants raise similar, if not identical,
arguments on this issue. They contend that, because there was no limiting
instruction, there was a risk the jury improperly found violations of Medicare
and Medicaid regulations as sufficient proof of their criminal guilt. Moreover,
they argue that the court failed to provide the jury with instructions limiting
the evidence of Medicare and Medicaid violations to intent, knowledge, and
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motive. In addition, Clardy argues that Federal Rule of Evidence (“FRE”) 105
mandated that a limiting instruction be given. 6 Defendants-Appellants’
arguments are unavailing.
1. Standard of Review
We review a court’s failure to give a limiting instruction for an abuse of
discretion. See United States v. Davis, 609 F.3d 663, 689 (5th Cir. 2010).
Reversal is proper “only if the requested instruction (1) was a substantially
correct statement of the law, (2) was not substantially covered in the charge as
a whole, and (3) concerned an important point in the trial such that the failure
to instruct the jury on the issue seriously impaired the defendant’s ability to
present a given defense.” United States v. Peterson, 244 F.3d 385, 394 (5th Cir.
2001) (citation omitted). District courts are entitled to “substantial latitude in
formulating a jury charge.” Davis, 609 F.3d at 689 (internal quotation marks
and citation omitted).
2. Applicable Law
In United States v. Christo, we held that the district court committed
reversible error when it permitted the government to produce substantial
evidence concerning violations of a civil statute that was irrelevant to the
charged crimes. 614 F.2d 486, 492 (5th Cir. 1980). Essentially, the
“conviction[] result[ed] from the government’s attempt to bootstrap . . . a civil
regulatory violation[] into an equal amount of misapplication felonies . . . .” Id.
The trial court further compounded the error by “focusing the jury’s attention
to the” civil violations. Id. We have interpreted “Christo as being principally
6As an initial matter, we note that, contrary to the Government’s argument otherwise,
each of Defendants-Appellants requested a limiting instruction at trial.
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concerned with bootstrapping of civil violations into criminal liability.” United
States v. Brechtel, 997 F.2d 1108, 1115 (5th Cir. 1993) (per curiam).
However, we have “permitted use of civil violation evidence in criminal
prosecutions for more limited purposes.” Id. (collecting cases). In United
States v. Jones, 664 F.3d 966, 980 (5th Cir. 2011), the prosecution introduced
testimony regarding the connection between the alleged crimes, Medicare
regulations, and the corresponding state requirements. The defendant asked
for a limiting instruction, instructing the jury on keeping any state
requirement distinct from the federal crimes at issue in the case. Id. We held
that the district court did not err when it denied the request. Id. at 981.
Rather, after considering the jury instructions “as a whole,” we found that the
jury instructions given “sufficiently articulated to the jury that they were only
to consider the federal crimes charged and not any of the state rules and
regulations that were discussed.” Id. In particular, we relied on the district
court’s statement that the prosecution had to prove the crime alleged in the
indictment beyond a reasonable doubt, not any other conduct. Id.
Moreover, we have approved the use of regulatory violations to provide
clarity in regards to the criminal violations alleged when the prosecution also
adequately proved the charged crime. United States v. Brown, 553 F.3d 768,
791–92 (5th Cir. 2008). For example, in United States v. Arthur, we recognized
that the evidence of Medicare violations assisted the jury in understanding the
health care fraud scheme and also demonstrated the defendant’s intent. 432
F. App’x 414, 423 (5th Cir. 2011) (per curiam) (unpublished). Ultimately, we
found that the district court did not commit plain error when it did not give a
limiting instruction because 1) the evidence served a permissible purpose; 2)
the Government’s case did not rely solely on regulatory violations; 3) the
Government did not argue that Medicare violations were sufficient proof of the
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charged crime; and 4) the district court did not discuss the Medicare violations
in the jury instructions. Id. We have relied on limiting instructions, inter alia,
to demonstrate that no harm occurred. See, e.g., Brechtel, 997 F.2d at 1115.
Under FRE 105, if evidence is admissible for one purpose but not
another, “the court, on timely request, must restrict the evidence to its proper
scope and instruct the jury accordingly.” When a court admits such evidence,
“it cannot refuse a requested limiting instruction.” Lubbock Feed Lots, Inc. v.
Iowa Beef Processors, Inc., 630 F.2d 250, 266 (5th Cir. 1980). However, the
instruction “need not be given in the particular form or manner that is sought
by the parties, so long as the general instructions sufficiently serve the limiting
purposes of Rule 105.” Id. In United States v. Jensen, we affirmed the district
court’s refusal to use the defendant’s requested limiting instruction and jury
instruction because they were covered in the instructions provided by the
district court and the court’s refusal did not impact the defendant’s ability to
present his defense. 41 F.3d 946, 953–54 (5th Cir. 1994).
3. Discussion
Although it would have been preferable for the district court to provide
a cautionary instruction to the jury on the permissible purpose of the Medicare
and Medicaid violations, see Brechtel, 997 F.2d at 1115, the district court did
not abuse its discretion in refusing to give the requested limiting instruction.
Aside from the amount of time the prosecution spent demonstrating various
regulatory violations, Defendants-Appellants fail to point to any instance
during the trial when the prosecution or court utilized the regulations in an
impermissible manner. Rather, the district court instructed the jury on the
crimes charged and warned the jury that it was not to judge Defendants-
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Appellants on conduct other than that alleged in the indictments. 7
Defendants-Appellants were free to argue before the jury that the violations
were not a sufficient indication of criminal guilt. Indeed, the jury acquitted
Clardy of some of the charges although her conduct constituted violations of
Medicare and Medicaid regulations. Accordingly, the district court did not
abuse its discretion. See Jones, 664 F.3d at 981.
Reversal is further not warranted because, based on the record on
appeal, Defendants-Appellants’ requested jury instructions were
“substantially covered in the charge as a whole” and their ability to present a
defense was not “seriously impaired.” See Peterson, 244 F.3d at 394; Jones,
664 F.3d at 981. While the instructions discussed Medicare and Medicaid, the
discussion was limited to the information necessary to properly charge the jury
on its duty. Moreover, the district court did not violate FRE 105 because, as
stated above, Defendants-Appellants’ concerns were covered by the
instructions given by the district court. See Jensen, 41 F.3d at 953–54.
B. Sufficiency of the Evidence
Clardy contends that, while the government successfully demonstrated
that she was naïve, careless, and negligent, the evidence does not show that
she either knowingly or intentionally violated any criminal laws. We disagree.
1. Standard of Review
Sufficiency of the evidence challenges are reviewed de novo. United
States v. Grant, 683 F.3d 639, 642 (5th Cir. 2012). When reviewing the
sufficiency of the evidence, a court must determine whether “any rational trier
of fact could have found the essential elements of the crime beyond a
7 In fact, the jury charge contained a detailed description of the elements of the
charges against Defendants-Appellants.
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reasonable doubt.” United States v. Moreno-Gonzalez, 662 F.3d 369, 372 (5th
Cir. 2011) (internal quotation marks and citation omitted). Evidence is to be
viewed “in the light most favorable to the verdict.” Id. (internal quotation
marks and citation omitted). Moreover, courts are to “accept[] all credibility
choices and reasonable inferences made by the trier of fact which tend to
support the verdict.” Id. (internal quotation marks and citation omitted).
The evidence presented need not “exclude every reasonable hypothesis
of innocence or be wholly inconsistent with every conclusion except that of
guilt.” Id. (internal quotation marks and citation omitted). Furthermore, “any
conflict in the evidence must be resolved in favor of the jury’s verdict.” Id.
(citation omitted). Nevertheless, we do “not lightly overturn a determination
by the trier of fact that the accused possessed the requisite intent.” United
States v. Patel, 485 F. App’x 702, 709 (5th Cir. 2012) (unpublished) (quoting
United States v. Robichaux, 995 F.2d 565, 570 (5th Cir. 1993) (internal
quotation marks omitted)).
2. Applicable Law
a. Conspiracy to Commit Health Care Fraud
To establish a conspiracy to commit healthcare fraud, the government
must prove: “the existence of an agreement between two or more people to
pursue the offense of fraud; the defendant knew of the agreement; and the
defendant voluntarily participated in the conspiracy.” United States v.
Delgado, 668 F.3d 219, 226 (5th Cir. 2012) (citations omitted). The
conspirators may have a silent and informal agreement. Grant, 683 F.3d at
643. Indeed, the “voluntary participation may be inferred from a collection of
circumstances, and knowledge may be inferred from surrounding
circumstances.” Id. (internal quotation marks and citation omitted). A
defendant need not have actually submitted the fraudulent documentation to
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Medicaid in order to be guilty of health care fraud or conspiracy to commit
health care fraud. United States v. Girod, 646 F.3d 304, 313 (5th Cir. 2011).
Moreover, the Government may use either direct or circumstantial evidence to
prove each element. Delgado, 668 F.3d at 226. However, there is insufficient
evidence of a conspiracy if the Government has only “pile[d] inference upon
inference upon which to base a conspiracy charge.” Grant, 683 F.3d at 642
(internal quotation marks and citation omitted).
b. Health Care Fraud
Under 18 U.S.C. § 1347,
Whoever knowingly and willfully executes, or attempts to execute,
a scheme or artifice—
(1) to defraud any health care benefit program; or
(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property owned
by, or under the custody or control of, any health care benefit
program,
in connection with the delivery of or payment for health care
benefits, items, or services [commits health care fraud].
18 U.S.C. § 1347.
The Government does not have to prove that the defendant had actual
knowledge of or specifically intended to violate the applicable health care fraud
statutes. United States v. Whitfield, 485 F. App’x 667, 670 (5th Cir. 2012)
(unpublished).
c. Mail Fraud
To prove that a party has committed mail fraud under 18 U.S.C. § 1341,
the Government must demonstrate “(1) the defendant devised or intended to
devise a scheme to defraud, (2) the mails were used for the purpose of
executing, or attempting to execute, the scheme, and (3) the falsehoods
employed in the scheme were material.” United States v. Read, 710 F.3d 219,
227 (5th Cir. 2012) (internal quotation marks and citation omitted). The
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defendant must have known that “the scheme involved false representations.”
Id. (internal quotation marks and citation omitted). “The first element
includes a defendant’s scheme or artifice . . . for obtaining money or property
by means of false or fraudulent pretenses, representations, or promises. . . .”
United States v. Ratcliff, 488 F.3d 639, 644 (5th Cir. 2007) (internal quotation
marks and citations omitted). Moreover, a defendant violates § 1341 each time
the mail is used in the scheme. United States v. Akpan, 407 F.3d 360, 370 (5th
Cir. 2005).
A defendant “acts with the intent to defraud when he acts knowingly
with the specific intent to deceive for the purpose of causing pecuniary loss to
another or bringing about some financial gain to himself.” Id. (internal
quotation marks and citation omitted). We have held that the second element
is satisfied when “one does an act with knowledge that the use of the mails will
follow in the ordinary course of business, or where such use can reasonably be
foreseen.” United States v. Ingles, 445 F.3d 830, 835 (5th Cir. 2006) (internal
quotation marks and citation omitted); see also Read, 710 F.3d at 227 (holding
that the second element was satisfied when Medicare mailed the defendant
checks for the fraudulent claims the defendant billed). In Akpan, we explained
that the Government does not have to prove that a defendant actually used the
mail or even “intended that the mails be used.” 407 F.3d at 370. Instead, the
Government has to establish “that the scheme depended for its success in some
way upon the information and documents which passed through the mail.” Id.
3. Discussion
a. Conspiracy to Commit Health Care Fraud
There was sufficient evidence supporting Clardy’s conviction for
conspiracy to commit health care fraud. In count 1, the government alleged
that Clardy engaged in a conspiracy to commit health care fraud. Specifically,
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it states that from approximately March 2, 2006 to June 26, 2009, she
“knowingly and willfully” conspired with Imo and others to defraud Medicare
and Medicaid in violation of §§ 1347, 1349.
Our review of the record persuades us that there is sufficient evidence to
support Clardy’s conviction on count 1. The jury could have inferred an
agreement between Clardy and Imo to defraud Medicare and Medicaid through
CNS. The Government presented evidence of a letter dated July 25, 2007 from
Clardy to Imo threatening legal action if he did not stop billing Medicare and
Medicaid through her billing number. 8 Nevertheless, after meeting with Imo,
Clardy began working at CNS and receiving payments from CNS. Even before
she began receiving compensation from CNS, she signed two employment
agreements with Imo, which were dated May 10, 2006. 9 Although Clardy
testified that Imo assured her the billing was a mistake and promised to rectify
the mistake, the jury was entitled to find otherwise. The jury also could have
found not credible her explanations that Ise showed her information indicating
that CNS was properly billing Medicare and Medicaid and that Imo forged her
signature on the documents sent to Medicare and Medicaid. Indeed, Clardy
admitted to signing one of the documents in CNS’s Medicare application but
stated that she was unaware that it was part of the application process.
While it is possible that Clardy’s account of the facts is true, the
Government’s version is also plausible and Clardy has failed to convince us
otherwise. The above evidence suggests that she was aware of the agreement
and voluntarily participated. Accepting the jury’s credibility determinations,
8 Evidence was presented that, from January 2007 to July 25, 2007, CNS billed
approximately $8,000,000 by using Clardy’s billing information. After the letter was sent,
CNS billed approximately $22,000,000 using Clardy’s billing number.
9 One contract stated that she would receive $5,000 in salary while the other said
$10,000.
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there is sufficient evidence to support Clardy’s conviction for conspiracy to
commit health care fraud under count 1.
b. Health Care Fraud
The Government also provided sufficient evidence to support Clardy’s
health care fraud convictions under counts 5–8, 14–18, 20–21, 23–24, and 26–
27 of the second superseding indictment. In these counts, the Government
alleges that, beginning on approximately March 2, 2006 and ending on June
26, 2009, Clardy “knowingly and willfully” defrauded Medicare and Medicaid
by submitting fraudulent claims for physical therapy services that were either
not provided or provided by unlicensed employees. Based on the evidence
noted above, the jury could reasonably have found that Clardy “knowingly and
willfully” defrauded Medicare and Medicaid by submitting false claims. Clardy
stresses that she was unaware of the scheme being run through CNS; however,
the jury heard sufficient evidence upon which it could find this assertion
unavailing. 10 Notably, the testimony of both patients and employees indicates
that the vast majority of the patients did not receive physical therapy services.
Furthermore, those employees providing physical therapy services were not
qualified to do so; the jury reasonably could have determined that it was highly
unlikely that Clardy was unaware of what was going on, regardless of her
claims to the contrary.
c. Mail Fraud
Lastly, there was sufficient evidence to support Clardy’s mail fraud
convictions under counts 41–43 of the second superseding indictment. Counts
41–43 state that, beginning around March 2, 2006 and ending around June 26,
10 We acknowledge that there was also evidence that CNS employees attempted to
ensure that the doctors at the clinic were unaware that patients were paid to come to the
clinic.
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2009, the health care fraud scheme Clardy allegedly was involved in caused
Medicare and Medicaid to send payments for fraudulent claims through the
United States Postal Service. As demonstrated above, there was sufficient
evidence that Clardy entered into a scheme to defraud Medicare. Clardy
argues that she was not in charge of the mail and never received any
notifications from CNS; however, that is irrelevant to her mail fraud charges.
Rather, to prove the second element, the Government only had to prove “that
the scheme depended for its success in some way upon the information and
documents which passed through the mail.” Akpan, 407 F.3d at 370. That
element is satisfied here because CNS received payment from Medicare and
Medicaid through the mail. There also was evidence that the scheme involved
material falsehoods. The Government presented evidence that the bills sent
to Medicare and Medicaid were fraudulent for a variety of reasons. Some
claims purported to have given physical therapy services when no services
were actually rendered; other claims asserted that physical therapy services
were given by properly qualified individuals when that was not the case; and
some claims were submitted for deceased patients. Accordingly, we hold that
there is sufficient evidence supporting Clardy’s conviction for conspiracy to
commit health care fraud, health care fraud, and mail fraud.
C. Evidentiary Challenges
At trial, the prosecution cross-examined Clardy on the following: (1)
blank prescription forms she signed while working at two pain management
clinics; (2) the fact that the clinics required patients to pay cash; and (3) a letter
from an anonymous party that was found in her safe, which warned her that
prescriptions bearing her name were being sold on the street. While she
admitted that she signed the blank prescription forms and had a cash-only
policy, she explained that she did not investigate the allegation in the letter
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because she received the letter only a few days or approximately a week before
the authorities came and seized the letter. 11 Clardy contends that the
introduction of the above specific acts violated FRE 401, 403, 404(b), and 405.
Her arguments are without merit.
1. Standard of Review
Evidentiary rulings are reviewed under an abuse of discretion standard,
“subject to [a] harmless-error analysis.” Girod, 646 F.3d at 318. The admission
of evidence is reversible error only when the defendant’s rights were
“substantially prejudiced” by the admission. Id. at 318–19 (internal quotation
marks and citation omitted).
2. Applicable Law
Evidence is relevant if “it has any tendency to make a fact more or less
probable than it would be without the evidence; and [] the fact is of consequence
in determining the action.” Fed. R. Evid. 401. FRE 403 excludes relevant
evidence “if its probative value is substantially outweighed by a danger of [,
inter alia,] unfair prejudice.” Fed. R. Evid. 403. However, a court can reduce
the danger of undue prejudice by giving a limiting instruction. United States
v. Sanders, 343 F.3d 511, 518 (5th Cir. 2003). FRE 404(b) prohibits the use of
evidence of an act to prove that a person acted in conformity with the character
trait that act demonstrates. Fed. R. Evid. 404(b)(1). During cross-
examination, a party may question a witness on specific acts “if they are
probative of the [witness’s] character for truthfulness or untruthfulness.” Fed.
R. Evid. 608(b)(1).
Once a defendant testifies, “his character for truthfulness [is] in issue.”
Sanders, 343 F.3d at 518. In Akpan, we cautioned that a defendant’s choice to
11 She was unclear as to the exact amount of time that transpired.
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testify “does not give the prosecution free rein.” 407 F.3d at 373 (internal
quotation marks and citation omitted). Rather, the prosecution may “cross-
examine the defendant with respect to instances of misconduct that are clearly
probative of truthfulness or untruthfulness, such as perjury, fraud, swindling,
forgery, bribery, and embezzlement.” Id. (internal quotation marks and
citation omitted).
3. Discussion
The district court did not abuse its discretion in permitting the
Government to cross-examine Clardy on the blank prescription forms she
signed, the cash-only policy at two pain management clinics, and the letter
from the anonymous party. Moreover, even if there was error, it was harmless
because Clardy was not “substantially prejudiced” by the admission of the
evidence. See Girod, 646 F.3d at 318.
As we have previously held, the prosecution is permitted to cross-
examine defendants on fraudulent acts because they are indicative of the
defendant’s character for truthfulness. See Sanders, 343 F.3d at 519; Akpan,
407 F.3d at 373–74. Here, evidence that Clardy signed blank prescription
forms at two pain management clinics, which only accepted cash from patients
is probative of her character for truthfulness. Because she testified, this
character trait was a proper inquiry by the Government. See Sanders, 343
F.3d at 518–19. This evidence further implicates Clardy’s character for
untruthfulness, especially considering Clardy’s response to the anonymous
letter she received. Admittedly, the evidence of the cash-only policy is not as
fraudulent as the other two acts; however, when viewed in the context in which
it was introduced—namely, while explaining Clardy’s conduct at the other two
pain management clinics—it is at least somewhat probative of her character
for truthfulness.
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Additionally, any prejudice Clardy may have incurred due to the
introduction of this evidence was reduced by the limiting instructions given by
the district court both after the testimony was introduced and in the jury
charge. See id. at 518. Moreover, there was sufficient evidence presented at
trial indicating that Clardy was guilty of the crimes charged. See supra Part
B.3. Thus, it is highly unlikely that the Government’s cross-examination on
this evidence was determinative of the outcome of this case.
None of the other evidentiary violations Clardy alleges are meritorious.
The evidence presented was relevant, considering that it dealt with her
character for truthfulness and her testimony and credibility were key features
of her defense. Moreover, FRE 404(b) is inapplicable to this issue. See United
States v. Morgan, 505 F.3d 332, 339 (5th Cir. 2007) (“[W]hether Rule 404(b) or
Rule 608(b) applies to the admissibility of other-act evidence depends on the
purpose for which the prosecutor introduced the other-acts evidence. Rule
404(b) applies when extrinsic evidence is offered as relevant to an issue in the
case, such as identity or intent. Rule 608(b) applies when extrinsic evidence is
offered to impeach a witness, to show the character of the witness for
untruthfulness.” (internal quotation marks and citations omitted)). Because
this evidence was introduced to discredit Clardy, FRE 608 controls, not 404(b).
Consequently, the district court did not err in permitting the Government to
cross-examine Clardy on these specific acts.
D. Sentencing Enhancement Pursuant to United States Sentencing
Guideline (“U.S.S.G.”) § 2B1.1(b)(1)(L)
The district court found that Clardy intended a loss of $21,691,203, the
amount of fraudulent claims CNS billed Medicaid and Medicare from August
2007 to August 2008, the time period Clardy is alleged to have been a part of
the conspiracy. Anokam’s intended loss amounted to $28,617,426, which was
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also based on the time he was alleged to have been involved in the conspiracy.
Clardy asserts that the district court erred in holding her liable for the entire
amount CNS fraudulently billed Medicare and Medicaid during August 2007
through August 2008. Anokam also challenges the district court’s intended
loss computation. Their arguments are unavailing.
1. Standard of Review
Sentencing decisions by a district court are reviewed for an abuse of
discretion. United States v. Harris, 597 F.3d 242, 250 (5th Cir. 2010). While
factual findings are reviewed under a clear error standard, “the district court’s
interpretation or application of the Sentencing Guidelines is reviewed de novo.”
Id. (internal quotation marks and citation omitted). The district court has not
clearly erred if its findings are “plausible in light of the record as a whole.” Id.
(internal quotation marks and citation omitted). “The district court receives
wide latitude to determine the amount of loss and should make a reasonable
estimate based on available information.” United States v. Jones, 475 F.3d
701, 705 (5th Cir. 2007).
2. Applicable Law
U.S.S.G. § 2B1.1(b)(1) increases the offense level for a particular crime
based on the amount of the loss that results from the fraud. Loss is considered
“the greater of actual loss or intended loss.” U.S.S.G. § 2B1.1(b)(1) cmt. 3(A).
Actual loss is defined as “the reasonably foreseeable pecuniary harm that
resulted from the offense.” Id. at 3(A)(i). Intended loss “means the pecuniary
harm that was intended to result from the offense; and [] includes intended
pecuniary harm that would have been impossible or unlikely to occur (e.g., as
in a government sting operation, or an insurance fraud in which the claim
exceeded the insured value).” Id. at 3(A)(ii). In United States v. Isiwele, we
“endorsed a fact-specific, case-by-case inquiry into the defendant’s intent in
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determining intended loss for sentencing purposes” in the health care fraud
context. 635 F.3d 196, 203 (5th Cir. 2011) (internal quotation marks omitted).
The Government has to prove a defendant’s intent by a preponderance
of the evidence. Id. While the amount billed to Medicare and Medicaid is
“prima facie evidence of the amount of loss [the defendant] intended to cause,”
it is not “conclusive evidence of [the] intended loss.” Id. (internal quotation
marks and citation omitted) (first alteration in original). Rather, “parties may
introduce additional evidence to suggest that the amount billed either
exaggerates or understates the billing party’s intent.” Id. (internal quotation
marks and citations omitted).
When reviewing a district court’s findings, we “exercise great deference
to a district court’s credibility findings.” United States v. Hearne, 397 F. App’x
948, 951 (5th Cir. 2010) (per curiam) (unpublished) (internal quotation marks
and citation omitted). In Hearne, the defendant contested the district court’s
intended loss calculation on the basis that the loss should be the amount he
was reimbursed for the false claims rather than the amount he billed. Id. at
950. The district court found that even assuming he knew that he would not
be fully reimbursed, he sent Medicare and Medicaid bills with the intention
that he would be paid. Id. at 951. We found there was sufficient evidence to
support the district court’s finding even though (1) some of the evidence
suggested the defendant was knowledgeable of Medicare’s billing policies and
(2) the defendant hired others to oversee the billing. Id.
3. Discussion
The district court did not err in its intended loss calculation. The
Government only had to prove the amount of the intended loss by a
preponderance of the evidence. See Isiwele, 635 F.3d at 203. Although there
was evidence contradicting the intended loss amount, the Government carried
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its burden as to both Clardy and Anokam. First, there was evidence that
Clardy signed the Medicare application for CNS with Imo and was hired by
CNS to oversee and conduct physical therapy services there. Although Clardy
claimed her signature was forged, the district court reasonably could have
found her testimony not credible. Second, Clardy worked for CNS after
sending CNS a letter demanding that it stop billing Medicare under her
number. She attempted to explain her reason for working after she sent the
letter; however, again, the district court was entitled to find that it was not
credible. Admittedly, there was evidence that Ise was responsible for billing.
Nevertheless, there was sufficient evidence upon which the district court could
find that Clardy intended to cause a loss of $21,691,203, the amount CNS billed
Medicare during the year she worked at CNS. See Hearne, 397 F. App’x at 951.
The Government also carried its burden in regards to Anokam.
Testimony was elicited at trial that he had a managerial role in CNS and
participated with the billing. Moreover, there was testimony that he created
false patient files, hired employees, paid patients and recruiters, and was one
of only a few employees at CNS who had access to the mail. While he contested
his involvement, the Government only had to prove the intended loss amount
by a preponderance of the evidence. See Isiwele, 635 F.3d at 203. Furthermore,
Anokam’s contention that the district court conflated his possible knowledge of
the scheme with intent is unavailing as there was sufficient evidence for the
court to have found that he did intend to cause that loss. 12
III. CONCLUSION
12 Anokam also challenges the district court’s imposition of a two-level enhancement
under U.S.S.G. § 2B1.1(b)(2)(A)(ii) for mass marketing. However, he acknowledges that this
issue is foreclosed by our decision in Isiwele, 635 F.3d 196. We therefore hold that the district
court did not err by imposing a two-level enhancement pursuant to U.S.S.G.
§ 2B1.1(b)(2)(A)(ii). See Isiwele, 635 F.3d at 203–05.
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For the foregoing reasons, we AFFIRM Defendants-Appellants’
convictions and sentences.
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