60 F.4th 932
5th Cir.2023Background
- Medicare Part B/C cover durable medical equipment (DME); suppliers must be Medicare-enrolled and may not pay or receive kickbacks under the Anti‑Kickback Statute (AKS).
- Leah and Michael Hagen owned Metro DME and Ortho Pain Solutions (OPS); they recertified compliance with AKS but later contracted with Chronos/Pantheon (Herb Kimble) for leads/orders.
- Kimble’s Philippines-based operation supplied completed telemedicine orders via call centers; payments for supposed marketing/BPO services were used to disguise payments for doctors’ orders (fixed brace prices, paired $280-based wires, prepaid invoices split into marketing and BPO fees).
- The Hagens’ companies billed Medicare and private insurers nearly $60 million and received ≈$27 million; a portion was wired overseas and diverted to personal accounts; many claims were denied and audits followed.
- A jury convicted both Hagens of conspiracy to defraud the United States and pay/receive health-care kickbacks (18 U.S.C. § 371; 42 U.S.C. § 1320a-7b) and conspiracy to commit money laundering (18 U.S.C. § 1956); each was sentenced to 151 months and joint restitution of $27,104,359.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exclusion of attorney Skora's testimony | Testimony was irrelevant and cumulative; no abuse of discretion to exclude | Skora would show Kimble represented operations as legitimate to counsel, supporting Hagens' lack of scienter | Exclusion affirmed: testimony was remote, cumulative, and any error harmless given other evidence of guilty knowledge |
| Refusal to give personal‑services safe‑harbor jury instruction (AKS) | No sufficient evidence that contracts met safe‑harbor (fair‑market‑value, not tied to referrals) | Contracts (esp. BPO) fit the personal‑services safe harbor; instruction required | Refusal affirmed: defendants failed to show §1001.952(d)(5) elements (fair market value; not determined by referral volume); any error harmless because marketing contracts were outside safe harbor |
| Two‑level sophisticated laundering enhancement (U.S.S.G. §2S1.1(b)(3)) | Enhancement appropriate: offshore transfers, paired/mislabeled prepaid invoices, layering to conceal kickbacks | Enhancement clear‑error/double‑counts underlying conduct or loss enhancement | Enhancement affirmed: bifurcated, mislabeled, prepaid wires and offshore accounts showed sufficiently complex concealment; not barred by Application Note 5(B) or double counting |
| Legality of MVRA restitution and proper standard (categorical vs. fact‑based) | Categorical approach required (look only to offense elements); convictions lack property‑fraud elements so MVRA inapplicable | MVRA allows fact‑based inquiry; Title 18 offenses that were committed by fraud may trigger MVRA restitution | Court rejects categorical approach; applies fact‑based analysis and affirms restitution as the convictions were committed by fraud and caused pecuniary loss |
Key Cases Cited
- United States v. Miles, 360 F.3d 472 (5th Cir.) (AKS and related precedent explaining kickback liability)
- United States v. Sanjar, 876 F.3d 725 (5th Cir.) (elements required to prove AKS violations and conspiracy)
- United States v. Ricard, 922 F.3d 639 (5th Cir.) (willfulness and mens rea principles applicable to AKS offenses)
- United States v. Charon, 442 F.3d 881 (5th Cir. 2006) (standard of review for sentencing factual findings)
- Taylor v. United States, 495 U.S. 575 (1990) (categorical approach discussion; contrasted with MVRA analysis)
- United States v. Razzouk, 984 F.3d 181 (2d Cir.) (rejecting categorical approach to MVRA §3663A(c)(1)(A)(ii))
- United States v. Ritchie, 858 F.3d 201 (4th Cir.) (same on MVRA interpretation)
- United States v. Collins, 854 F.3d 1324 (11th Cir.) (same on MVRA interpretation)
- United States v. Valdez, 726 F.3d 684 (5th Cir.) (contrast on what does and does not support sophisticated‑laundering enhancement)
- United States v. Nagelvoort, 856 F.3d 1117 (7th Cir.) (contract implementation can reveal referral‑based compensation relevant to safe‑harbor analysis)