United States v. Richard Behnan

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0101n.06
No. 13-1123
UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
UNITED STATES OF AMERICA, Feb 06, 2014
DEBORAH S. HUNT, Clerk
Plaintiff-Appellee,
v.
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
RICHARD ALAN BEHNAN,
EASTERN DISTRICT OF MICHIGAN
Defendant-Appellant.
BEFORE: CLAY and DONALD, Circuit Judges; MAYS, District Judge.*
CLAY, Circuit Judge. Defendant Richard Behnan appeals from the 55-month sentence
and $1,624,089.66 order of restitution that the district court imposed following Defendant’s
guilty plea to one count of conspiracy to commit healthcare fraud in violation of 18 U.S.C.
§§ 1347 and 1349. Specifically, Defendant contends that the district court erred in calculating
the amount of loss caused by Defendant’s crime, which affects Defendant’s Guidelines
sentencing range and the order of restitution. For the reasons set forth below, we AFFIRM.
BACKGROUND
I. DEFENDANT’S FRAUD AND THE GOVERNMENT’S INVESTIGATION
From 1985 to 2010, Defendant ran his own podiatry practice. Defendant had a somewhat
unique client base—he almost exclusively treated geriatric and mentally disabled patients. The
principal service he provided was trimming and polishing his patient’s toenails. Medicare does
*
The Honorable Samuel H. Mays, Jr., United States District Judge for the Western
District of Tennessee, sitting by designation.
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not compensate doctors for performing “routine foot care (including the cutting or removal of
corns or calluses, the trimming of nails, and other routine hygienic care).” 42 U.S.C.
§ 1395y(a)(13)(C). However, Medicare and other insurance companies do reimburse doctors for
removing ingrown toenails using a procedure known as a nail avulsion. The relevant insurance
billing code defines a nail avulsion as “the separation and removal of a border of or the entire
nail from the nail bed to the eponychium . . . performed using an injectable anesthesia except in
the instances in which a patient is devoid of sensation or there are extenuating circumstances in
which injectable anesthesia is not required or medically contraindicated.” (R.63, 11/28/2012
Order, at 561.) In layman’s terms, the doctor must remove a portion of an ingrown nail, from the
tip of the toe back to where the nail grows (the eponychium). Trimming or clipping the toenail
without going back to the eponychium constitutes routine foot care under the relevant billing
codes.
Defendant’s clientele was prone to ingrown toenails, given their sedentary lifestyle.
Even so, Defendant billed for nail avulsions at an astonishing rate—over 37,000 times between
2000 and 2010. This figure accounted for approximately 80% of Defendant’s bills to insurance
providers. Other podiatrists in Michigan billed this procedure only 10–20% of the time.
Medicare paid the vast majority of Defendant’s bills for nail avulsions, to the tune of over $1.4
million. Blue Cross Blue Shield of Michigan (“Blue Cross”) paid the remainder, approximately
$200,000.
At some point in the mid-2000s, the government began investigating Defendant’s billing
practices, suspecting that Defendant was seeking compensation for nail avulsions he never
performed. As part of the investigation, two agents who did not need nail avulsions saw
Defendant and had their toenails trimmed. Even though he did not perform nail avulsions on the
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agents, Defendant billed Blue Cross for phantom procedures. The government’s investigation
also uncovered four instances where Defendant billed for nail avulsions despite the fact that he
was traveling in Europe at the time.
In June 2008, the government executed a search warrant at the home of Kelly Morel,
Defendant’s assistant in business and partner in crime. Morel had worked for Defendant since
the 1980s, initially assisting him in treating patients, and later moving on to handling billing and
cutting patients’ nails. Defendant paid Morel $600 per month for her billing work, plus 20% of
the take from insurance. When the government executed the search warrant, Morel gave a
statement to one of the agents about her and Defendant’s billing for nail avulsions. Morel told
the agent that
about 95% of avulsion codes billed are not being done correctly. I do work with
[Defendant] and most of the time an injection to numb the area for avulsions . . .
[is] not used. Sometimes a topical spray is used but not that often. . . . We
trimmed patients’ toenails and would bill for an avulsion. . . . [A] patient would
come in and I would trim their nails and clean out the edges of their nails and it
would always feel better but I know it should have been billed as routine foot
care.
(R. 85, Morel Statement, at 983–84.)
II. PROSECUTION, SENTENCING, AND LOSS CALCULATION
Two years after the government took Morel’s statement, she and Defendant were indicted
for conspiracy to commit healthcare fraud and numerous discrete acts of healthcare fraud. Morel
went to trial, but pleaded guilty to all counts halfway through. Defendant cut a deal with the
government and pleaded guilty only to the conspiracy count. In his plea agreement, Defendant
admitted to twelve instances when he billed for nail avulsions that he did not perform.1
Defendant received just under $900 for these bogus procedures. In addition, the government
1
The plea agreement defined a nail avulsion as “a surgical procedure used to treat
ingrown toenails wherein the nail, or portion of the nail, is removed or torn from the nail bed
below.” (R. 41, Plea Agreement, at 366.)
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asked the district court to hold Defendant accountable for the $1.6 million he had received from
Medicare and Blue Cross for nail avulsions during the course of the conspiracy. This loss figure
was relevant both to the calculation of Defendant’s Guidelines sentencing range, which is
affected by the amount of loss caused by a defendant’s fraud, and to the amount of restitution
Defendant would need to pay to the victims of his crime. Defendant disputed the government’s
loss calculation and the district court held three days of hearings to resolve this issue.
Morel testified on the first day of Defendant’s sentencing hearing. The government
introduced her 2008 statement that Defendant improperly billed approximately 95% of the nail
avulsion procedures he claimed to have performed. Morel reiterated this figure in her testimony.
She stated that only 5–10% of the procedures that Defendant billed as nail avulsions involved the
application of anesthetic and the removal of a nail from the nail plate (the flesh covered by the
nail). Defense counsel questioned whether Morel had a good sense of what constituted a nail
avulsion. She testified “that [she] was taught that they were to cut down the side and take the
curette2 back to the eponychium and bring them up,” but that from the expert testimony at her
trial, she now believed that any procedure performed without anesthesia could not be a nail
avulsion. (R. 61, Sentencing Tr. vol. I, at 525.)
The district court remembered the testimony for Morel’s trial slightly differently: “the
nail avulsion procedure could be performed without anesthesia. . . . [I]t depends on the patient
and the tolerance for pain.” (Id. at 537.) Defendant’s witness Dr. Mary Barna, a podiatrist,
confirmed the court’s position. Barna testified that a “nail avulsion is removing the nail plate
from the nail bed, in any portion.” (R. 64, Sentencing Tr. vol. II, at 653.) Barna herself
2
A curette is a “spoon-shaped instrument for removing material from the wall of a cavity
or other surface.” Dorland’s Illustrated Med. Dictionary 447 (32d ed. 2012).
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No. 13-1123
preferred not to use anesthesia before performing a nail avulsion, since administering the
anesthesia could cause more pain and complications than the nail avulsion itself.
In addition to Morel, the government presented evidence of a less-than-rigorous survey of
Defendant’s patients to support its theory of loss calculation. Charles Story, an FBI agent,
testified that an investigator had randomly selected fifty patients who had purportedly received
nail avulsions, according to Defendant’s billing history. Of the fifty, agents only managed to
speak to approximately twenty. Story personally interviewed eight of these patients, and none of
them reported receiving a nail avulsion. Paul Smith, an agent in the Department of Health and
Human Services, also testified about this sampling. He interviewed some of the selected patients
and none reported receiving nail avulsions. One patient reported having pain in her big toe, but
Smith did not determine if the pain was caused by an ingrown nail. Another patient told Smith
that Defendant had removed an ingrown portion of one of her nails, but had not removed the nail
“back to where the bottom of the nail meets the skin.” (Id. at 617.) The government did not
assert that the sampling and interviewing of these patients provided any statistical basis for
extrapolating a loss figure.
As a final piece of evidence, Defendant submitted an affidavit in which he estimated that
he inappropriately billed nail avulsions just 2–3% of the time. Defendant did not testify at the
sentencing hearing, so neither the district court nor the government had the opportunity to
scrutinize this evidence.
In the end, the district court credited Morel’s estimation that 95% of Defendant’s nail
avulsion billings were fraudulent and rejected the calculation in Defendant’s affidavit. The court
believed that Morel would have more incentive to give a lower loss figure than a higher one.
Ultimately,
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there is no evidence that’s been tendered that would suggest that the government
has gotten their numbers wrong and that we should disregard Miss Morel’s
testimony. . . . There is no reason to dispute the estimates that have been tendered
by the government. I do not find the evidence having been sufficiently—any
evidence, to contradict that other than [Defendant’s] affidavit and I don’t find the
testimony in the context of that affidavit accurate or truthful.
(R. 83, Sentencing Tr. vol. III, at 933–34.) The court therefore adopted the government’s loss
calculation of $1,624,089.66, which, updated through November 2011, came to $1,766,869.15.
This loss amount translated into a 16-point increase to Defendant’s base offense level of 6. See
U.S.S.G. § 2B1.1(a), (b)(1)(I). With four points added for Defendant’s role in the conspiracy,
and two removed for acceptance of responsibility, Defendant’s total offense level was 24. Since
Defendant’s Criminal History Category was I, Defendant’s Guidelines sentence range was 51–61
months. The court imposed a sentence of 55 months’ imprisonment, and ordered restitution
totaling $1,624,089.66, with $1.4 million going to Medicare and almost $200,000 going to Blue
Cross. Defendant timely appealed.
DISCUSSION
Defendant appeals the district court’s loss calculation as it affected his Guidelines
sentencing range and the amount of restitution the district court imposed. We address each claim
in turn.
I. GUIDELINES LOSS CALCULATION
We review a district court’s sentence for procedural and substantive reasonableness for
abuse of discretion. See Gall v. United States, 552 U.S. 38, 51 (2007). The review of procedural
reasonableness includes evaluating whether the district court properly calculated a defendant’s
Guidelines sentencing range. See id. “We review the district court’s calculation of the ‘amount
of loss’ for clear error, but consider the methodology behind it de novo.” United States v.
Washington, 715 F.3d 975, 984 (6th Cir. 2013).
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Under U.S.S.G. § 2B1.1(b)(1), a defendant’s Guidelines offense level increases based on
the amount of loss caused by his crime. The government bears the burden of proving the amount
of loss by a preponderance of the evidence. See United States v. Jones, 641 F.3d 706, 712 (6th
Cir. 2011). The Guidelines advise that the district court “need only make a reasonable estimate
of the loss. The sentencing judge is in a unique position to assess the evidence and estimate the
loss based upon that evidence. For this reason, the court’s loss determination is entitled to
appropriate deference.” U.S.S.G. § 2B1.1 application note 3(C). In other words, the district
court “does not have to establish the value of the loss with precision; it simply needs to publish
the resolution of contested factual matters that formed the basis of the calculation.” United
States v. Poulsen, 655 F.3d 492, 513 (6th Cir. 2011) (quotation marks omitted).
The district court’s loss calculation rested almost entirely on Morel’s testimony that 95%
of Defendant’s billings for nail avulsions were fraudulent. The court explicitly found Morel
credible, since each cent she added to Defendant’s loss amount applied equally to her own
Guidelines calculation. “This conclusion is basically unassailable on appeal.” United States v.
Greco, 734 F.3d 441, 446 (6th Cir. 2013) (quotation marks omitted). But Defendant does not
challenge the court’s credibility determination per se—he asserts that Morel’s sincere statements
lacked a proper foundation. Morel’s 95% estimate applied to over 37,000 procedures that
Defendant billed over the course of a decade. Defendant argues that Morel could not have seen
or recollected this vast number of procedures over such a long amount of time. The Guidelines,
however, do not call for mathematical exactitude—they allow a district court to make a
“reasonable estimate of the loss.” U.S.S.G. § 2B1.1 application note 3(C). Morel worked
closely with Defendant throughout the conspiracy, handling his billing and assisting him when
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he worked on patients. She more than anyone was competent to testify to how Defendant’s bills
matched up with the procedures he performed.
Defendant also claims that Morel cannot make a reasonable estimate since she has no
idea what a nail avulsion is. At the sentencing hearing, Morel testified that Defendant only used
anesthesia in 5–10% of procedures that he billed as nail avulsions. Morel further testified that
she believed that anesthesia was required for the removal of an ingrown toenail to constitute a
nail avulsion. The testimony of Dr. Barna (and the court’s own recollection of the testimony at
Morel’s trial) established that nail avulsions do not always require anesthesia. But Morel’s 95%
estimate remained consistent before and after her trial—when she heard the testimony that made
her question the definition of a nail avulsion. When Morel first gave this estimate in 2008, she
stated that “[t]he 11730 [the nail avulsion billing code] we did not do correctly. We trimmed
patients’ toenails and would bill for an avulsion.” (Morel Statement at 984.) With or without
anesthesia, simple nail trimming is not a nail avulsion.
Morel’s estimate was also bolstered by the other evidence the government submitted.
The undercover agents who were treated by Defendant did not receive nail avulsions, nor did the
few patients the government interviewed. Defendant billed Medicare and Blue Cross for nail
avulsions nonetheless. This independent data compares favorably to Morel’s 95% estimate. The
government’s investigation would not likely support a rigorous statistical analysis of Defendant’s
37,000 billings for nail avulsions. But “[t]here is no rule that a district court must rely upon
statistical analysis in a situation such as this to determine the amount of loss pursuant to section
2B1.1.” Jones, 641 F.3d at 712. The district court was entitled to rely on the government’s data
as support for Morel’s 95% estimate. See Greco, 734 F.3d at 446–47; United States v. Goosby,
523 F.3d 632, 639–40 (6th Cir. 2008).
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A district court faces an imposing task when asked to calculate the amount of loss for a
decade-long fraudulent scheme such as Defendant’s. But the district court ultimately need only
make a reasonable estimate of the loss. We will not disturb that finding unless the court’s
“evaluation of the loss was not only inaccurate, but outside the realm of permissible
calculations.” United States v. Gray, 521 F.3d 514, 543 (6th Cir. 2008) (quotation marks
omitted). The district court was entitled to rely on Morel’s honest estimate. In fact, the district
court could have simply relied on the “aggregate dollar amount of fraudulent bills submitted to”
Medicare, which “shall constitute prima facie evidence of the amount of the intended loss, i.e., is
evidence sufficient to establish the amount of the intended loss, if not rebutted.” U.S.S.G.
§ 2B1.1 application note 3(F)(viii). We cannot say that the loss amount the court reached after
three days of hearings was clear error. See United States v. Sufi, 455 F. App’x 672, 676–77 (6th
Cir. 2012).
Finally, Defendant argues that the district court erred when it failed to account for the
amount Defendant could have received had he billed his procedures legitimately. The only
evidence Defendant produced to support this position was his own affidavit. Defendant refused
to testify, and therefore this evidence was not subjected to cross-examination. The district court
could have relied on this evidence, see United States v. Graham-Wright, 715 F.3d 598, 601 (6th
Cir. 2013), but its choice not to does not rise to the level of clear error. Defendant bore the
burden of proving the amount of any offset to his loss amount by a preponderance of the
evidence. See Washington, 715 F.3d at 984–85; see also United States v. Mahmud, --- F. App’x
----, 2013 WL 5925992, at *5 (6th Cir. Nov. 6, 2013). The district court did not err in finding
that Defendant had not met this burden.
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II. RESTITUTION CALCULATION
Defendant next asserts that the district court’s calculation of the amount of restitution was
error. The Mandatory Victims Restitution Act of 1996, 18 U.S.C. § 3663A, applies to
convictions for conspiracy to commit healthcare fraud. See United States v. Hunt, 521 F.3d 636,
639, 648 (6th Cir. 2008). As with loss under the Guidelines, the government bears the burden of
proving “the amount of the loss sustained by a victim as a result of the offense,” 18 U.S.C.
§ 3664(e), by a preponderance of the evidence. See United States v. White, 492 F.3d 380, 418
(6th Cir. 2007). This Court “review[s] the amount of restitution the district court ordered for
abuse of discretion.” United States v. Bogart, 576 F.3d 565, 573 (6th Cir. 2009).
Defendant argues that the district court’s order of restitution was error “for precisely the
same reasons that the government’s proofs fell short when it came to establishing an amount of
loss” for Guidelines purposes. (Appellant’s Br. at 18.) Since we affirm the district court’s loss
calculation as it affected Defendant’s Guidelines sentencing range, we further hold that the
district court did not abuse its discretion in using the same reasoning to calculate the amount of
Defendant’s restitution.
CONCLUSION
For the reasons set forth above, we hold that the district court did not err in calculating
the amount of Defendant’s loss under U.S.S.G. § 2B1.1, nor did the court abuse its discretion in
calculating the amount Defendant was ordered to pay in restitution. We therefore AFFIRM the
district court in full.
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