United States v. Audrey Phythian

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 07-2771
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United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Audrey Joan Phythian, also known as *
Audrey Joan Goossen, *
*
Appellant. *
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Submitted: April 14, 2008
Filed: June 23, 2008
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Before WOLLMAN, BEAM, and RILEY, Circuit Judges.
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RILEY, Circuit Judge.
After a jury trial, Audrey Joan Phythian (Phythian) was convicted on all counts
of a nine count indictment—three counts of theft or embezzlement in connection with
healthcare, three counts of money laundering, and three counts related to her receipt
of social security disability benefits. The district court1 sentenced Phythian to
concurrent 52-month sentences on each count. Phythian appeals her conviction
1
The Honorable Joan N. Ericksen, United States District Judge for the District
of Minnesota.
asserting there was insufficient evidence to support her conviction on any of the
counts. Finding sufficient evidence to support each count and no error, we affirm.
I. BACKGROUND
During the 1980s, Phythian operated a medical billing business. In August,
1985, Phythian was excluded from participation in the Medicare and Medicaid health
insurance program because of a prior criminal conviction related to defrauding the
Medicaid program. Her debarment prohibited Phythian from submitting claims to the
Medicare or Medicaid programs on behalf of healthcare providers.2
In approximately 2000, Phythian and her husband, Milt Goossen (Goossen),
purchased a medical billing business doing business as Progressive Health Care
Management (PHCM). Goossen was registered as the business’s manager; however,
Goossen never had any involvement with PHCM in any capacity, and Goossen failed
to disclose this fact in an April 2005 report to the Social Security Administration
(SSA). In fact, Phythian oversaw PHCM’s day to day operations, opened and
maintained PHCM’s business bank account with Preferred Bank and was listed, along
with Goossen, as an owner of this account. Goossen was incapable of managing a
bank account, so Phythian effectively controlled this account.3
Phythian employed her son, Jeff Gusciora (Gusciora) to do menial tasks for
PHCM including making deliveries to and pickups from PHCM’s clients. Gusciora
described himself as a “gopher” running errands. Gusciora also made bank deposits
2
The exclusion was for ten years. After ten years, Phythian was eligible for
reinstatement, but she never sought reinstatement. As such, Phythian is still excluded
from submitting claims.
3
Goossen also applied for social security disability benefits. On Goossen’s
behalf, Phythian completed a benefit application report dated April 22, 2005, stating
Goossen was unable to use a check book or handle a savings account because “I forget
and double pay, [and] lose the check books and account books.”
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for PHCM. Phythian would prepare envelopes with checks and deposit slips for
Gusciora with instructions on the envelopes specifying the accounts into which
Gusciora was to deposit the checks. Gusciora characterized his computer work as
“idiot work.”
Phythian, through PHCM, contracted with healthcare providers to process and
submit health insurance claims on behalf of the healthcare providers. Among the
healthcare providers contracting with PHCM for this service were Mark Wheaton
(Wheaton), Peter J. Dorsen (Dorsen), and Steven D. Moe (Moe). Wheaton and
Dorsen were authorized Medicare providers providing healthcare services to Medicare
and Medicaid beneficiaries. The healthcare providers would give PHCM information
about the medical services and benefits provided to patients, as well as the patients’
identifying information, descriptions of the services provided to the patients and the
dates of service. PHCM then submitted claims for reimbursement on behalf of the
providers to health insurance programs including Medicare, Medicaid and private
payors. The health insurance programs would then pay the submitted claims with
checks made payable to the healthcare providers, which were delivered either to the
providers or to PHCM. When checks were sent to PHCM, PHCM was responsible for
either delivering the checks to the provider or depositing the checks directly into the
provider’s bank account. Phythian and PHCM were not authorized to deposit the
reimbursement checks into PHCM’s bank account.
Without the knowledge or authorization of the healthcare providers, certain
funds of the healthcare providers were embezzled and deposited into PHCM’s bank
account. Phythian then wrote checks, drawn on the PHCM account, to Goossen
totaling over $100,000. Phythian deposited the checks written to Goossen into a
Wells Fargo bank account jointly owned by Phythian and Goossen. Next, Phythian
cashed checks drawn on the Wells Fargo account at casinos or made ATM
withdrawals from the Wells Fargo account and gambled with the money, all without
Goossen’s knowledge.
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In addition to the PHCM business, Phythian and Goossen also owned and
operated AM Antiques from February 2001 through July 2004. AM Antiques sold
antiques in an antiques mall, continuing operations until the antiques mall ceased
operations in July 2004.
In April 2000, Phythian applied for social security disability insurance (SSDI),
claiming she was unable to work beginning in April 1999. Her application for
benefits was denied. Phythian reapplied for SSDI in August 2003, claiming a
disability onset date of September 30, 2000—the date Phythian asserts she was no
longer able to work. The SSA approved Phythian’s application for SSDI benefits and
paid Phythian a lump sum of $17,050 for back benefits and monthly payments of
approximately $1,140 which continued until March 2006. From April 2000 until
March 2006, SSA periodically required Phythian to disclose whether she had been
working or currently was working. Phythian always denied working. In 2006, the
SSA reopened Phythian’s application to consider denying benefits. Phythian certified
she had not been working since July 1, 2003. On March 7, 2006, the SSA terminated
Phythian’s SSDI benefits, concluding she had been working.
On February 22, 2006, a federal grand jury returned a nine-count indictment
against Phythian charging her with embezzlement from healthcare providers in
violation of 18 U.S.C. §§ 669 and 24(b), money laundering in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i), and social security disability insurance fraud in violation of 42
U.S.C. § 408(a)(3) and (4). On February 9, 2007, after a three day trial, the jury
returned a verdict finding Phythian guilty on all counts. This appeal follows.
II. DISCUSSION
Phythian asserts there was insufficient evidence presented at her jury trial to
allow a reasonable jury to convict her of any of the nine counts of the indictment.
This court reviews the sufficiency of the evidence supporting a conviction de novo,
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“viewing evidence in the light most favorable to the government, resolving conflicts
in the government’s favor, and accepting all reasonable inferences that support the
verdict.” United States v. Washington, 318 F.3d 845, 852 (8th Cir. 2003) (citing
United States v. Grimaldo, 214 F.3d 967, 975 (8th Cir. 2000)). “[W]e reverse only
if no reasonable jury could have found the defendant guilty beyond a reasonable
doubt.” United States v. Pruneda, 518 F.3d 597, 605 (8th Cir. 2008).
A. Conversion of Funds—Embezzlement
Counts 1 though 3 of the indictment alleged Phythian embezzled funds from
Wheaton, Dorsen, and Moe in violation of 18 U.S.C. § 669. This statute applies to a
person who “knowingly and willfully embezzles, steals, or . . . converts to the use of
any person other than the rightful owner, or intentionally misapplies any of the
moneys, funds, . . . or other assets of a health care benefit program.” 18 U.S.C. § 669.
This statute only requires proof of embezzlement or conversion, and does not, as
asserted by Phythian, require proof of forgery.
The evidence adduced at trial established Phythian managed PHCM’s financial
affairs, controlling the receipt and deposit of checks. Phythian had reimbursement
checks made out to healthcare providers deposited into accounts controlled by PHCM.
This was done without any authority to do so. Goossen may have owned PHCM, but
Goossen testified he never managed PHCM, was not employed by PHCM, and
Phythian handled all PHCM’s financial matters. Although Phythian’s son, Gusciora,
physically made the deposits into the PHCM bank accounts, he did so having received
the checks from Phythian, which checks had already been falsely and fraudulently
endorsed, together with deposit slips in envelopes prepared by Phythian directing
Gusciora to deposit the checks into accounts specified by Phythian. Further, the
evidence demonstrated Phythian gambled away most of the funds after engaging in
numerous financial transactions, involving multiple bank accounts, which acted to
conceal the transactions from Phythian’s husband, Goossen. This evidence was more
than sufficient for a reasonable jury to find Phythian embezzled funds.
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B. Social Security—False Statements and Concealment of Facts
Counts 4 through 6 allege Phythian knowingly concealed her true physical
condition and capabilities from the SSA and made false statements to the SSA in
violation of 42 U.S.C. § 408(a)(3) and (4).
1. Count 4
Count 4 charged Phythian with concealing information from the SSA in
violation of § 408(a)(4). This statute applies to any person
having knowledge of the occurrence of any event affecting (1) his initial
or continued right to any payment under this subchapter, or (2) the initial
or continued right to any payment of any other individual in whose
behalf he has applied for or is receiving such payment, conceals or fails
to disclose such event with an intent fraudulently to secure payment
either in a greater amount than is due or when no payment is authorized.
42 U.S.C. § 408(a)(4).
The government must prove the following: (1) [Phythian] had
knowledge of an event affecting [her] right to receive or to continue to
receive payments; (2) [Phythian] knowingly concealed or failed to
disclose this event to the [SSA]; and (3) [Phythian] concealed or failed
to disclose this event with the intent to fraudulently secure payment of
Social Security disability benefits in an amount greater than was due
[her] or when no payment to [her] was authorized.
United States v. Baumgardner, 85 F.3d 1305, 1310-11 (8th Cir. 1996) (citing United
States v. Phillips, 600 F.2d 535, 536 (5th Cir. 1979)). At trial, both Phythian’s
husband and son testified Phythian managed PHCM and maintained the books for
both PHCM and AM Antiques. Further, Wheaton, Dorsen, and Moe all testified
Phythian worked at PHCM and was their principal point of contact. The SSA advised
Phythian on multiple occasions that she needed to report any work, even self
employment, but Phythian never reported working. As such, a reasonable jury easily
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could find Phythian concealed her work from the SSA intending to secure SSDI
payments fraudulently.
Phythian’s assertion the evidence did not support a finding she fraudulently
intended to secure payment is unavailing. “Intent frequently cannot be proven except
by circumstantial evidence; the determination [of intent] often depends on the
credibility of witnesses, as assessed by the factfinder.” United States v. Henderson,
416 F.3d 686, 692 (8th Cir. 2005) (citation omitted). The jury may infer Phythian’s
intent from her conduct—failing to report she was working while managing PHCM
and AM Antiques and serving as the primary point of contact for Wheaton, Dorsen,
and Moe. Reviewing the evidence in the light most favorable to the verdict, a
reasonable jury could readily find Phythian violated § 408a(4).
2. Counts 5 and 6
Counts 5 and 6 alleged Phythian violated 42 U.S.C. § 408(a)(3), which makes
it an offense “any time [to] make[] or cause[] to be made any false statement or
representation of a material fact for use in determining rights to payment [of SSDI
benefits].” Count 5 charged Phythian with falsely stating in 2003 she was not
working and was unable to work. Count 6 charged Phythian with falsely stating in
2006 she had not done any work since she became disabled, that she was not then
working, and that she was unable to work.
Phythian incorrectly asserts the government needed to prove she was ineligible
to receive SSDI. Rather, the government was only required to prove Phythian’s
statements were materially false. See 42 U.S.C. § 408(a)(3) (making it an offense to
make “any false statement or representation of a material fact.”). A statement is
material if it has “a natural tendency to influence or was capable of influencing the
government agency or official.” United States v. Baker, 200 F.3d 558, 561 (8th Cir.
2000) (citing United States v. Gaudin, 515 U.S. 506, 509 (1995)). Phythian’s
statements clearly had “a natural tendency to influence” the SSA in making its
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eligibility determination, as the ability to work is critical to the SSA’s determination.
Phythian’s statements to the SSA that she was not working, and failing to report she
was working, were false and material representations and omissions. As such,
sufficient evidence supports the jury’s verdict.
C. Concealment—Money Laundering
Counts 7 through 9 of the indictment charged Phythian with knowingly
depositing checks payable to another person in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i). There are four elements to this offense: (1) defendant conducted,
or attempted to conduct a financial transaction which in any way or degree affected
interstate commerce or foreign commerce; (2) the financial transaction involved
proceeds of illegal activity; (3) defendant knew the property represented proceeds of
some form of unlawful activity; and (4) defendant conducted or attempted to conduct
the financial transaction knowing the transaction was “designed in whole or in part []
to conceal or disguise the nature, the location, the source, the ownership or the control
of the proceeds of specified unlawful activity.” 18 U.S.C. § 1956(a)(1)(B)(i); see
United States v. Covey, 232 F.3d 641, 645-46 (8th Cir. 2000); United States v.
Esterman, 324 F.3d 565, 569 (7th Cir. 2003). Phythian asserts there was insufficient
evidence of any intent to conceal or disguise and the government is attempting to take
acts of embezzlement and overextend the conduct to support the money laundering
charges.
For proceeds to be laundered, there must first be wrongfully obtained proceeds.
See United States v. Shoff, 151 F.3d 889, 891 (8th Cir. 1998). Money laundering
“‘[p]roceeds’ are funds obtained from prior, separate criminal activity.” United States
v. Savage, 67 F.3d 1435, 1441 (9th Cir. 1995). Here, the prior criminal activity was
the embezzlement, which was complete once Phythian deposited health insurance
checks into PHCM’s Preferred Bank account without the knowledge or authorization
of the healthcare providers. The proceeds of these deposited checks were then
laundered through separate financial transactions such as writing checks to Goossen
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for deposit into Phythian’s and Goossen’s joint Wells Fargo account, all without
Goossen’s knowledge. Phythian would then cash checks drawn on the Wells Fargo
account at casinos or make ATM cash withdrawals from the Wells Fargo account at
casinos. There was sufficient evidence ill-gotten proceeds existed before the money
laundering actions.
Where a defendant commingles “illegal proceeds with the identity or the funds
of a legitimate and usually preexisting business . . . . [s]uch commingling effectively
conceals the nature, source, ownership, and/or control of the unlawful proceeds.”
Shoff, 151 F.3d at 891 (internal citations omitted). Where the jury heard evidence
Phythian deposited the embezzled funds into the PHCM account, then wrote checks
to Goossen totaling over $100,000, and next cashed these checks and gambled with
the money, all without Goossen’s knowledge, there was sufficient evidence for a
reasonable jury to convict Phythian of money laundering.
III. CONCLUSION
We affirm.
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