United States v. Jeffrey St. John

Case: 14-10406 Document: 00513187204 Page: 1 Date Filed: 09/09/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-10406 United States Court of Appeals
Fifth Circuit
FILED
UNITED STATES OF AMERICA, September 9, 2015
Lyle W. Cayce
Plaintiff - Appellee Clerk
v.
JEFFREY DALE ST. JOHN; LAWRENCE DALE ST. JOHN,
Defendants - Appellants
Appeals from the United States District Court
for the Northern District of Texas
USDC No. 3:12-CR-310
Before DAVIS, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
Lawrence Dale St. John (“Dale St. John”) and his son Jeffrey St. John
(collectively, “Defendants”) were convicted by a jury of conspiracy to commit
healthcare fraud in violation of 18 U.S.C. § 1349 and thirteen substantive
counts of health care fraud in violation of 18 U.S.C. §§ 1347 & 2. Both were
sentenced to prison terms and ordered to pay restitution.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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The Defendants raise different issues on appeal. Jeffrey St. John
appeals the district court’s denial of his motion for judgment of acquittal and
the district court’s jury instructions. Both Defendants appeal their sentences,
arguing that the district court incorrectly held that the Defendants
subjectively intended losses attributable to Medicare claims filed by third-
parties. Dale St. John also contends that those Medicare claims were not
“relevant conduct” under U.S. SENTENCING GUIDELINES MANUAL (“U.S.S.G.”)
§ 1B1.3 and that the district court erred in calculating the amount of losses
attributable to the third-parties’ Medicare claims. Lastly, Dale St. John also
appeals the restitution order. We AFFIRM the district court’s judgment in all
respects.
I. Background
Medicare is a federally-funded healthcare program primarily for people
over age 65. This case implicates two types of Medicare providers: (1) home-
health agencies (“HHAs”), which provide home health care for Medicare
beneficiaries with limited mobility; and (2) physician housecall companies,
which provide primary care, certify patients as requiring home health care
(“homebound”), and engage in care plan oversight (“CPO”). Both types of
providers are reimbursed by Medicare for their services.
Dale St. John founded A Medical, a physician housecall company, in
2009. He employed both a physician, Dr. Nicholas Padron, and the appellant,
Jeffrey St. John. 1 Traditionally, physician housecall companies craft care
plans to help homebound patients regain mobility. To receive reimbursement
for these services, the companies must spend at least thirty minutes per month
on CPO. CPO may be performed by a nurse or physician’s assistant under the
1 Dr. Padron was charged as a co-conspirator in this scheme but ultimately pleaded
guilty and testified against the St. Johns at trial.
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“direct supervision of the doctor that actually signed the plan.” The
Government alleged that A Medical manipulated the system by fraudulently
billing Medicare for alleged CPO that did not satisfy these requirements. For
instance, Jeffrey St. John instructed an employee to bill for CPO although no
such work occurred, while Dale St. John encouraged an employee to bill for at
least $30,000 in CPO per week, irrespective of whether it reflected the true
amount of CPO performed.
A steady stream of patients was integral to A Medical’s scheme. Without
patients, A Medical would not be able to submit claims to Medicare.
Traditionally, physician housecall companies certify a patient as homebound
by submitting a “485 form” to Medicare and then referring those patients to an
HHA for care. Here, the process worked in reverse. HHAs brought patients to
A Medical for certification. By certifying a patient as homebound, A Medical
ensured that it maintained a steady stream of patients, while the HHAs also
obtained patients on whose behalf they could bill Medicare. Dale St. John
conceded that A Medical’s volume of patients, and therefore its ability to bill
Medicare, was dependent on receiving referrals from HHAs. According to the
Government, this created an incentive for impropriety—HHAs referred
patients to A Medical in exchange for A Medical’s near-certain certification of
those patients as homebound. Although Dr. Padron, as A Medical’s physician,
signed the 485 forms certifying patients as homebound under threat of
criminal or civil penalty, he testified that he signed “almost everything,” or
“99%” of the 485 forms Dale St. John put in front of him. According to the
Presentence Report (“PSR”), many of those patients were not, in fact,
homebound. Furthermore, Dr. Padron admitted that he did not supervise A
Medical’s nurses and physician assistants as required by law.
At sentencing, the district court adopted the PSR’s recommendation that
the Defendants be held culpable for losses stemming from the fraudulent CPO
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claims as well as losses from fraudulent cognitive testing and nursing,
fraudulent certification of patients as homebound, and all of the bills submitted
by HHAs to Medicare for patients A Medical certified as homebound. The
district court also adopted the PSR’s loss calculations. It found the St. Johns’
intended loss on claims submitted by A Medical to Medicare to be
$1,463,716.14 and the actual loss to be $653,794.18. It also included the bills
submitted by the HHAs to Medicare in the loss analysis, which resulted in an
intended loss of $9,733,195.20 for services provided to patients of A Medical,
and an actual loss of $8,957,445.87 that Medicare paid on these claims. The
PSR calculated the total intended loss to be $11,196,911.34 and the actual loss
to be $9,611,240.05.
The PSR recommended a base offense level of 29 for both appellants,
calculated as follows: (1) Six levels because the statutory maximum term of
imprisonment was 10 years, U.S.S.G. § 2B1.1(a)(2); (2) twenty levels because
the intended loss of $11,196,911.34 was greater than $7 million but not greater
than $20 million, U.S.S.G. § 2B1.1(b)(1)(K); and (3) three levels because the
appellants were accountable for a loss of greater than $7 million but not
greater than $20 million by a government healthcare program, U.S.S.G. §
2B1.1(b)(7)(A) & B(ii). The district court accepted the PSR’s relevant
recommendations and also ordered Dale St. John to pay restitution of more
than $9.6 million, and Jeffrey St. John to pay restitution of more than $8.6
million. The Defendants timely appealed.
II. Discussion
A. Motion for judgment of acquittal
Jeffrey St. John appeals the district court’s denial of his motion for
judgment of acquittal. Because he raised this issue below, we review the
district court’s denial of the motion de novo. United States v. Girod, 646 F.3d
304, 313 (5th Cir. 2011).
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Conspiracy to commit healthcare fraud consists of three elements: “(1)
two or more persons made an agreement to commit health care fraud;
(2) . . . the defendant knew the unlawful purpose of the agreement; and (3) . . .
the defendant joined in the agreement willfully, that is, with the intent to
further the unlawful purpose.” United States v. Grant, 683 F.3d 639, 643 (5th
Cir. 2012). Jeffrey St. John argues that his involvement in A Medical’s scheme
does not satisfy conspiracy’s plurality requirement because the intracorporate
conspiracy doctrine provides “that the acts of the agent are the acts of the
corporation” and that a “corporation cannot conspire with itself.” Hilliard v.
Ferguson, 30 F.3d 649, 653 (5th Cir. 1994) (quoting Nelson Radio & Supply Co.
v. Motorola, Inc., 200 F.2d 911, 914 (5th Cir. 1952)). He maintains that his
conviction for conspiring with his co-workers, Dale St. John and Dr. Padron,
violates this precept.
While our court has applied the intracorporate conspiracy doctrine in
antitrust and civil rights cases, we have not expanded its application to the
criminal context. We decline to do so here. As we have previously observed:
The original purposes of the rule attributing agents’ acts to a
corporation were to enable corporations to act, permitting the
pooling of resources to achieve social benefits and, in the case of
tortious acts, to require a corporation to bear the costs of its
business enterprise. But extension of the rule to preclude the
possibility of intracorporate [criminal] conspiracy does not serve
either of these goals.
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 603 (Former 5th Cir. Nov.
1981). We went on to state that “a corporation can be convicted of criminal
charges of conspiracy based solely on conspiracy with its own employees”
because “the action by an incorporated collection of individuals creates the
‘group danger’ at which conspiracy liability is aimed.” Id.; see also United
States v. Wise, 370 U.S. 405, 417 (1962) (Harlan, J., concurring) (“[T]he fiction
of corporate entity, operative to protect officers from contract liability, had
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never been applied as a shield against criminal prosecutions . . . .”). Jeffrey St.
John gives us no reason or basis to depart from this precept. Thus, we decline
to extend the doctrine to criminal cases, and we AFFIRM the district court’s
denial of Jeffrey St. John’s motion for judgment of acquittal. 2
B. Jeffrey St. John’s proposed jury instruction
Next, we consider Jeffrey St. John’s argument that the district court
abused its discretion by refusing to adopt his proposed jury instruction on the
meaning of the word “willfully.” See United States v. Davis, 132 F.3d 1092,
1094 (5th Cir. 1998) (“We review a district court’s refusal to give a requested
jury instruction only for an abuse of discretion.”).
To prove health care fraud, the Government had to show that (1)
[Jeffrey St. John] knowingly and willfully executed, or attempted
to execute, a scheme or artifice (a) to defraud any health care
benefit program or (b) to obtain by false or fraudulent pretenses,
representations, or promises any money or property owned by or
under the custody or control of a health care benefit program; and
(2) the scheme or artifice was in connection with the delivery of or
payment for health care benefits, items, or services.
United States v. Whitfield, 485 F. App’x 667, 669–70 (5th Cir. 2012) (citing 18
U.S.C. § 1347(a)). The district court instructed the jury that “willfully . . .
2 We also reject Jeffrey St. John’s argument that the rule of lenity counsels in favor of
applying the intracorporate conspiracy doctrine. The rule of lenity implements the “due-
process principle that no individual [should] be forced to speculate, at peril of indictment,
whether his conduct is prohibited. The rule of lenity . . . applies only when, after consulting
traditional canons of statutory construction, [a court is] left with an ambiguous statute.”
United States v. Rivera, 265 F.3d 310, 312 (5th Cir. 2001) (citations omitted) (second and
third alterations in original). “When Congress uses well-settled terminology of criminal law,
its words are presumed to have their ordinary meaning and definition.” Salinas v. United
States, 522 U.S. 52, 63 (1997). As it is well-accepted that the intracorporate conspiracy
doctrine does not apply in the criminal context, we decline to interpret the health care fraud
statute to state otherwise without statutory language to the contrary. See United States v.
Hughes Aircraft Co., 20 F.3d 974, 979 (9th Cir. 1994) (declining to expand the intracorporate
conspiracy doctrine to shield criminal conspiracy); United States v. Stevens, 909 F.2d 431,
432 (11th Cir. 1990) (same); United States v. Peters, 732 F.2d 1004, 1008 (1st Cir. 1984)
(same), United States v. S & Vee Cartage Co., 704 F.2d 914, 920 (6th Cir. 1983) (same).
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means that the act was committed voluntarily and purposely, with the specific
intent to do something the law forbids; that is to say, with bad purpose either
to disobey or disregard the law.” Jeffrey St. John disagreed with the
instruction, arguing that the court should have applied the heightened
standard of willfulness required in criminal tax cases. See Cheek v. United
States, 498 U.S. 192, 201 (1991) (“[T]he standard for the statutory willfulness
requirement is the ‘voluntary, intentional violation of a known legal duty.’”);
see also Ratzlaf v. United States, 510 U.S. 135, 138 (1994) (applying the
heightened standard to violations of a cash transaction reporting scheme).
Jeffrey St. John’s requested instruction would require the Government to
prove that he had actual knowledge of the underlying Medicare provision he
was alleged to have violated and that he acted with specific intent to violate
that provision.
To prevail, Jeffrey St. John must demonstrate that the “requested
instructions were (1) correct statements of the law, (2) not substantially
covered in the charge as a whole, and (3) of such importance that the failure to
instruct the jury on the issue seriously impaired the defendant’s ability to
present a given defense.” Davis, 132 F.3d at 1094 (citation omitted).
It is well established that “ignorance of the law generally is no defense
to a criminal charge.” Ratzlaf, 510 U.S. at 149. However, the Supreme Court
has recognized a limited exception to this principle under certain complex
statutory schemes, such as the tax code, reasoning that highly technical
statutes may “ensar[e] individuals engaged in apparently innocent conduct.”
Bryan v. United States, 524 U.S. 184, 194 (1998). In those circumstances, the
Court has held that a defendant acted “willfully” if the defendant was both
aware of the underlying legal duty and intentionally violated that legal
requirement. See Ratzlaf, 510 U.S. at 146–48.
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While Jeffrey St. John draws parallels between the tax code and
Medicare in their respective complexities, his argument is undermined by the
plain language of 18 U.S.C. § 1347. See Ratzlaf, 510 U.S. at 146 (“Had
Congress wished to dispense with the requirement [that the Defendant be
aware his conduct was unlawful], it could have furnished the appropriate
instruction.”). The statute criminalizing healthcare fraud, the offense of
conviction, states that “a person need not have actual knowledge of this section
or specific intent to commit a violation of this section.” 18 U.S.C. § 1347(b); see
Whitfield, 485 F. App’x at 670 (requiring the government to prove only that the
defendant had knowledge of the Medicare fraud and the intent to further the
fraud). In the face of this language, we conclude that Cheek’s rationale does
not apply here such that the district court did not abuse its discretion by
rejecting Jeffrey St. John’s proposed instruction.
C. Intended loss amount
Both Defendants argue the district court erred in calculating the
intended loss caused by the St. Johns. The base offense level for fraud offenses
is calculated, in part, pursuant to the table at Section 2B1.1 of the Sentencing
Guidelines. See U.S.S.G. § 2B1.1(b)(1). The greater the loss, the larger the
enhancement in offense level recommended by the Guidelines. See id. In
calculating the Defendants’ sentence, “loss is the greater of actual loss or
intended loss,” § 2B1.1 cmt. 3(A), where actual loss “means the reasonably
foreseeable pecuniary harm that resulted from the offense,” and 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 . . . .” § 2B1.1 cmt. 3(A)(i), (ii).
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The PSR calculated the St. Johns’ intended loss to be $11,196,911.34,
warranting a 20 base offense level increase. 3 See U.S.S.G. § 2B1.1(b)(1)(K).
The PSR also calculated the actual loss to be $9,611,240.05, but it adopted the
larger number for the purpose of sentencing. See § 2B1.1 cmt. 3(A). The
district court accepted the PSR’s loss calculations and sentenced the St. Johns
accordingly.
Dale St. John raises several objections to the “intended loss” calculation. 4
Jeffrey St. John raises one. However, they both fail to brief any objection to the
“actual loss” calculation in their initial briefing. 5 To the extent they intended
to appeal the actual loss determination, they failed to adequately brief it, so it
is abandoned. United States v. Charles, 469 F.3d 402, 408 (5th Cir. 2006).
As a result, we conclude that any error in the district court’s intended
loss calculation was harmless. “Loss” for the purpose of sentencing is the
greater of actual or intended loss. See U.S.S.G. § 2B1.1 cmt. 3(A). Both the
Defendants’ actual and intended loss warrant a 20 base offense level increase.
Even if the district court erred in calculating the Defendants’ intended loss,
the Defendants have not properly contested the district court’s “actual loss”
determination. An error that does not affect the Defendants’ offense level is
harmless. See United States v. Solis, 299 F.3d 420, 462 (5th Cir. 2002)
(“Moreover, because the relevant conduct finding challenged here did not affect
3To reach this conclusion, the PSR added the total value of claims A Medical
submitted to Medicare, $1,463,716.14, to the total value of claims submitted by HHAs to
Medicare on behalf of patients certified as homebound by A Medical, $9,733,195.20.
4 Jeffrey St. John addresses only whether he subjectively intended the loss, while
Dale St. John also makes various arguments premised upon the notion that the district court
included amounts in the intended loss that exceed the scope of the offenses proven.
5 Dale St. John discusses actual loss only as part of his restitution challenge, and did
not substantively address these issues until his reply brief, which is not sufficient. See
Pegram v. Honeywell, Inc., 361 F.3d 272, 281 (5th Cir. 2004). Jeffrey St. John does not take
issue with the actual loss calculation at all.
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[the defendant’s] combined adjusted offense level, any error was harmless.”);
United States v. Chon, 713 F.3d 812, 822 (5th Cir. 2013) (similar); United
States v. Salinas, 310 F. App’x 632, 633–34 (5th Cir. 2009) (similar).
Even if we were to construe their briefs more liberally, Jeffrey St. John’s
arguments were relevant only to intended loss, and we conclude, therefore,
that any error as to his offense level is harmless. Dale St. John made two
arguments under an issue attacking only the “intended loss” calculation that
are arguably relevant to both actual and intended loss: that the loss sum
included sums that were not “relevant conduct” and that the district court
should have reduced the amount of any loss by the value of legitimate services
provided. Even if we were to construe these arguments to attack the actual
loss calculation (which are murky at best, given the framing of the issue), we
conclude that Dale St. John is not entitled to relief. We conclude that the HHA
amounts were properly included as “relevant conduct” as part of the same
“common scheme” as the offense of conviction. See United States v. Ocana, 204
F.3d 585, 589 (5th Cir. 2000).
We also conclude that the district court did not err in assessing the entire
amount of actual loss despite Dale St. John’s argument (asserted for the first
time on appeal) that the district court should have subtracted the value of any
legitimate services under United States v. Klein, 543 F.3d 206, 214 (5th Cir.
2008). We conclude that this case is governed by the rule discussed in United
States v. Hebron, 684 F.3d 554, 563 (5th Cir. 2012), that where the fraud is so
pervasive that separating legitimate from fraudulent conduct “is not
reasonably practicable, the burden shifts to the defendant” to prove any
legitimate amounts. In this case, the fraud is so pervasive that the district
court did not plainly err in failing to subtract any amounts from the actual loss
calculation in the absence of evidence from the defendant as to specific
legitimate services.
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D. Restitution
The district court awarded restitution pursuant to the Mandatory
Victims Restitution Act (“MVRA”). See 18 U.S.C. § 3663. “The MVRA limits
restitution to the actual loss directly and proximately caused by the
defendant’s offense of conviction.” United States v. Sharma, 703 F.3d 318, 323
(5th Cir. 2012); see also 18 U.S.C. § 3663A(a)(1), (a)(2). In addition to the losses
to Medicare from A Medical’s fraudulent billing for CPO, the district court
ordered Dale St. John to pay restitution for each HHA reimbursement claim
as well as other, non-CPO fraudulent claims submitted by A Medical. Dale St.
John contests the restitution award on appeal, arguing that the indictment did
not allege that the HHAs’ Medicare reimbursement claims and the non-CPO
fraudulent billing was part of A Medical’s scheme to defraud Medicare.
According to Dale St. John, the district court’s restitution order violates the
well-established principle that “[a]n award of restitution cannot compensate a
victim for losses caused by conduct not charged in the indictment . . . or for
losses caused by conduct that falls outside the temporal scope of the acts of
conviction.” Sharma, 703 F.3d at 323.
Again, we address whether Dale St. John preserved error before the
district court. While we traditionally review “the quantum of an award of
restitution for abuse of discretion,” see id. at 322, where the defendant fails to
preserve his objection to the restitution order, we review the defendant’s
objection for plain error, see United States v. Inman, 411 F.3d 591, 595 (5th
Cir. 2005). Dale St. John argues that his broad statements to the district court
that he is not accountable for the HHAs’ Medicare reimbursement claims were
sufficient to preserve his objection to the restitution order. We disagree. “To
preserve error, an objection must be sufficiently specific to alert the district
court to the nature of the alleged error and to provide an opportunity for
correction.” United States v. Torres-Perez, 777 F.3d 764, 767 (5th Cir. 2015)
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(citation omitted). It is an open question in this circuit as to whether an
objection to the district court’s Guidelines determination is sufficient to
preserve an objection to a restitution order where “the arguments are
essentially the same.” United States v. Wright, 496 F.3d 371, 381 (5th Cir.
2007). Dale St. John’s vague objection to the district court’s Guidelines
determination neither informed the court that he intended to object to the
district court’s restitution order nor informed the district court of the legal
basis for his objection. As such, we review the validity of the restitution order
for plain error. See United States v. Maturin, 488 F.3d 657, 659–60 (5th Cir.
2007). However, we note that “a sentence which exceeds the statutory
maximum is an illegal sentence and therefore constitutes plain error.” United
States v. Sias, 227 F.3d 244, 246 (5th Cir. 2000).
“The general rule is that a district court can award restitution to victims
of the offense, but the restitution award can encompass only those losses that
resulted directly from the offense for which the defendant was convicted.”
Maturin, 488 F.3d at 660–61. Dale St. John argues that he can only be ordered
to pay restitution for conduct which was explicitly referenced in the
indictment. In United States v. Adams, we held that “the underlying scheme
to defraud is defined, in large part, by the actions alleged in the charging
document.” 363 F.3d 363, 366 (5th Cir. 2004). Dale St. John maintains that
the indictment only referenced A Medical’s CPO scheme, but neglected any
mention of the HHAs’ billing practices and other, non-CPO-related billing by
A Medical. Therefore, he argues the district court’s restitution order plainly
erred.
Dale St. John’s argument oversimplifies both our case law and the
indictment in this case. While Adams noted that the indictment in large part
defines the scope of a scheme to defraud, we have held that “where a fraudulent
scheme is an element of the conviction, the court may award restitution for
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‘actions pursuant to that scheme.’” United States v. Cothran, 302 F.3d 279,
289 (5th Cir. 2002) (citation omitted). We have further explained that because
“health care fraud[] requires proof of a scheme as an element, [the] conviction
can support a broad restitution award.” United States v. Essien, 530 F. App’x
291, 302 (5th Cir. 2013).
The HHAs’ Medicare reimbursement claims were a necessary component
of A Medical’s scheme to defraud Medicare. As the indictment states, “[t]he
primary purpose of A Medical was to certify and recertify Medicare
beneficiaries for home health services” because once A Medical “established a
new patient . . . [A Medical] would submit billing for fraudulent claims for
CPO.” While the indictment does not explicitly mention the HHAs, it does
allege that A Medical’s primary function was certifying patients as
homebound—a function A Medical performed for HHAs. Further, the
indictment alleged that certifying patients as homebound would make them
eligible for “home health services.” The HHAs’ Medicare reimbursement claim
was for “home health services.” Thus, the indictment references the exact
conduct which Dale St. John argues that the indictment omitted.
Furthermore, the indictment makes clear that those certifications were a
necessary component of A Medical’s ability to execute its scheme to “submit
billing for fraudulent claims for CPO.”
The district court also ordered restitution for non-CPO-related
fraudulent billing by A Medical. These non-CPO-related services included
billing for certifications and re-certifications of patients for home health
services, physician home visits, testing, and other services. As explained
above, the indictment acknowledged that certifying patients as homebound
was an integral component of A Medical’s scheme to obtain patients to bill for
CPO. As such, A Medical’s billing for services attendant to certifying patients
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as homebound was “pursuant to its scheme” to bill for CPO fraud and thus it
was not plain error to incorporate these sums in the restitution award. 6
Finally, Dale St. John filed a Rule 28(j) letter arguing that the restitution
order included losses that occurred outside the temporal scope of the
indictment. It is well established that “[a]n award of restitution cannot
compensate a victim . . . for losses caused by conduct that falls outside the
temporal scope of the acts of conviction.” Sharma, 703 F.3d at 323. Because
Dale St. John did not raise this issue before the district court, plain error
review would normally apply. See United States v. Lozano, 791 F.3d 535, 537,
539 (5th Cir. 2015). However, this court will not consider an issue raised for
the first time in a Rule 28(j) letter. See United States v. Sanchez-Villalobos,
412 F.3d 572, 577 (5th Cir. 2005), abrogated on other grounds by Carachuri-
Rosendo v. Holder, 560 U.S. 563 (2010). In light of this waiver, we will not
review this issue. Even assuming the district court committed plain error, we
would not exercise our discretion to correct the error. 7
Accordingly, we AFFIRM the district court’s judgment in all respects.
6 We also reject Dale St. John’s argument that the restitution losses assessed by the
district court were not proximately caused by the defendant’s conduct. See 18 U.S.C.
§ 3663(a)(2). It was an entirely foreseeable consequence of A Medical’s decision to certify
patients as eligible for homebound-related services that HHAs would submit Medicare
reimbursement claims for services provided to those patients.
7 If we were to review the issue for plain error and, assuming arguendo that this error
satisfied the other three prongs of plain error review, we would conclude that the delay in
raising this issue supports our decision not to exercise our discretion to notice the error under
the “fourth prong” of plain error review. United States v. Escalante-Reyes, 689 F.3d 415, 425
(5th Cir. 2012) (en banc) (explaining that the fourth prong is not “automatic if the other three
prongs are met”).
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