UNITED STATES of America, Plaintiff-Appellee v. Anthony Francis VALDEZ, Defendant-Appellant
No. 12-50027
United States Court of Appeals, Fifth Circuit
Aug. 12, 2013
AFFIRMED.
Terri Raye Zimmermann, Esq., Megan Elizabeth Smith, Jack Benjamin Zimmermann, Esq., Zimmermann, Lavine, Zimmermann & Sampson, P.C., Houston, TX, for Defendant-Appellant.
Before HIGGINBOTHAM, OWEN, and GRAVES, Circuit Judges.
JAMES E. GRAVES, JR., Circuit Judge:
The defendant Anthony Valdez, a psychiatrist, challenges multiple aspects of his trial and sentence in this money laundering and health care fraud case. He argues that there is insufficient evidence to support his conviction for money laundering; that the district court erred in applying various enhancements to his sentence; that the jury should have been retained to decide issues relating to the forfeiture of his property; that the court erred in admitting evidence of medical malpractice; and that the cumulative effect of multiple errors requires reversal. We affirm the conviction and sentence, including the judgment of forfeiture.
I. Factual and Procedural Background
Anthony Valdez operated two pain management clinics under the name of International Institute of Pain Management, located in El Paso and San Antonio, Texas. The indictment alleged that Valdez provid
Valdez was tried by a jury and convicted of one count of conspiracy to commit health care fraud,
Trial testimony from patients and expert doctors supported the allegations that Valdez actually performed prolotherapy when he billed the Programs for facet joint or peripheral nerve injections. The evidence included testimony that during a Texas Department of Insurance medical review, Valdez told Dr. Suzanne Novak that he did prolotherapy, and during that same review told Dr. Howard Smith that he only performed prolotherapy but called it “reconstructive anesthetic blocks” in order to bill insurance carriers who would not cover prolotherapy. Trial evidence, including testimony from employees, patients, and doctors, including doctors who reviewed video of Valdez performing procedures, indicated that Valdez‘s medical practices were consistent with prolotherapy and inconsistent with facet joint or peripheral nerve injections, including that he injected too much solution to be performing facet joint injections, repeatedly injected patients which would not be advisable if the injections were facet joint or peripheral nerve injections, did not have a fluoroscope (a type of x-ray machine typically used for facet injections), did not have steroids that are typically injected in facet joint injections but did have solutions consistent with prolotherapy, used a patient encounter form that included a section for prolotherapy but not facet joint or peripheral nerve injections, and advertised prolotherapy but not facet joint or peripheral injections. The evidence also supported the allegations that Valdez trained his employees to perform prolotherapy but not facet joint or peripheral nerve injections, including testimony from Rose Chavez, office manager at the El Paso clinic, who stated that prolotherapy was performed at both clinics, but not facet joint or peripheral nerve injections. Chavez also testified that she spoke
With regard to money laundering, at trial the government presented Emmanuel Gomez, an FBI agent who analyzed Valdez‘s financial records. Agent Gomez testified about Valdez‘s receipt and spending of reimbursements from the Programs over the course of the five-year period. The evidence showed that the proceeds of the fraudulent billing scheme were directly deposited from the Programs into two of Valdez‘s bank accounts. Based on Agent Gomez‘s analysis of the financial records, Valdez wrote checks from these accounts to pay employee salaries and loans, to make investments, to purchase property, to make deposits into multiple investment accounts, and to purchase multiple vehicles classified as business transportation.
At sentencing, the district court adopted the pre-sentence investigation report (“PSR“), calculated a guidelines range of life, overruled all of Valdez‘s objections to the PSR, and imposed the following sentence:
Counts 1-7: 120 months,
Count 8: 60 months,
Counts 9-13: 60 months,
Count 14: 240 months,
Counts 15-16: 120 months,
The district court sentenced Valdez to the statutory maximum for all offenses, and ordered that the 60-month sentence for Count 8 run consecutive with the other sentences, for a total of 300 months of confinement.
The court also imposed three years of supervised release on all counts, ordered $13,356,645.44 restitution to federal and state insurance programs and private insurers, and ordered a mandatory assessment of $1600. The court also ordered forfeiture of Valdez‘s property, as requested by the government, including the contents of multiple bank accounts, real property, the proceeds from the sale of real property, four vehicles, and a money judgment of over nine million dollars.
II. Discussion
A. Money Laundering Conviction
Valdez argues that the evidence was insufficient to support his conviction on one count of money laundering under
Section 1956(a)(1) requires the government to prove the following elements: (1) Valdez conducted a financial transaction; (2) which he knew involved proceeds arising from a specified unlawful activity; (3) with the intent to promote or further those illegal actions (“the promotion prong“); or (4) with the knowledge that the transaction‘s design was to conceal or disguise the nature or source of the illegal proceeds (“the concealment prong“). See
1. Concealment Money Laundering
The concealment prong of
2. Promotion Money Laundering
To establish money laundering under the promotion prong of
The government established that Valdez made payments to employees who participated in the fraudulent scheme, whom Valdez had trained or instructed to perform procedures and fraudulently bill the Programs for procedures not performed or office visits that did not occur. The government relies on United States v. Warshak, a case in which the Sixth Circuit noted that “it is ... true that a number of cases support the proposition that payments to employees may constitute sufficient evidence of an intent to promote an unlawful activity.” 631 F.3d 266, 318 (6th Cir.2010) (citing United States v. Alerre, 430 F.3d 681, 693 (4th Cir.2005) (“[T]he promotion element [was] satisfied when a defendant paid his subordinate employee for being involved in an unlawful scheme, because such payments compensated the employee for his illegal activities and encouraged his continued participation.“)). Valdez argues that these payments to employees were simply payroll payments and thus legitimate business expenses, which cannot constitute promotion money laundering. See United States v. Miles, 360 F.3d 472, 477 (5th Cir.2004); Brown, 186 F.3d at 671. However, we need not go so far as to hold that normal payroll payments to employees of a business that is not wholly illegitimate constitute promotion of illegal activity. The record shows that many of the “payroll” payments Valdez made to employees were in fact very irregular, classified not as salary but as “loans,” undercutting Valdez‘s argument that they were normal business expenses rather than payments to secure loyalty or cooperation in the fraudulent scheme. Further, there is a clear nexus between the payments and the fraud. The record reflects that Valdez made the payments to subordinates responsible for carrying out essential elements of the fraud: performing prolotherapy injections and submitting fraudulent claims predicated on those injections. At trial, Rose Chavez testified that she was responsible for preparing the fraudulent claims to Medicare. Chavez also testified that Luis Cordova performed prolotherapy injections that she billed to Medicare. Additionally, two of Valdez‘s former patients testified that they received prolotherapy injections from Dr. Benson Chee, Irma Sanchez, Ricardo Rios, Luis Cordova, James Shea, and Alejandro Rios. All of these employees, in addition to several others, received payments, from Valdez, including irregular payments characterized not as payroll but as “loans.” The evidence also establishes that at least one of the employees who received the payments—office manager Rose Chavez—knew that Valdez‘s billing practices were fraudulent. Indeed, Chavez testified that she continued to knowingly submit fraudulent claims because she knew that by not saying anything, she would continue to get paid. Viewing this evidence in the light most favorable to the verdict, we conclude that a jury could draw the reasonable inference that these employees received payments to encourage their continued participation in the fraudulent scheme, and thus that the payments promoted the ongoing healthcare fraud. We therefore affirm Valdez‘s conviction of money laundering.
3. Unanimity Instruction
Valdez also argues that the district court erred by not giving the jury a specific unanimity charge regarding the money laundering count. Though a general unanimity charge was given, Valdez argues that the district court was required to instruct the jury that it had to unanimously agree that he was guilty of money laundering based on promotion, concealment, or both, and that a general verdict on that count is not sufficient. Valdez did not object to the instruction; thus, we review
B. Sentencing Enhancements
Valdez also argues that the district court miscalculated the applicable sentencing range under the 2010 U.S. Sentencing Guidelines Manual by erroneously applying multiple sentencing enhancements. The specific enhancements he challenges are: (1) the 2-level vulnerable victim enhancement,
We review sentences for reasonableness under an abuse of discretion standard. See United States v. Cisneros-Gutierrez, 517 F.3d 751, 764 (5th Cir.2008). First, we determine whether the district court committed any procedural error, such as improperly calculating the Guidelines range. Id. If there is no procedural error or the error is harmless, we may review the substantive reasonableness of the sentence. Id. Valdez argues only that the district court procedurally erred by miscalculating the applicable Guidelines range. Because Valdez objected to all the enhancements that he now challenges on appeal, we review the district court‘s interpretation and application of the Guidelines de novo, and review findings of fact for clear error. Cisneros-Gutierrez, 517 F.3d at 764 (quotation omitted). “There is no clear error if the district court‘s finding is plausible in light of the record as a whole.” Id.
1. Vulnerable Victim and Multiple Vulnerable Victims
The district court added two levels to Valdez‘s offense level based on
On appeal, Valdez does not argue that his patients were not “vulnerable,” but argues that the primary victim of the offense was the federal government and that no patients were victims at all because the government did not prove that any of them were harmed medically or financially.1
This court has “previously recognized that a physician‘s patients can be victimized by a fraudulent billing scheme directed at insurers or other health care providers.” United States v. Sidhu, 130 F.3d 644, 655 (5th Cir.1997). In applying this enhancement to similar cases involving health care fraud, we have drawn a distinction between fraud schemes that “benefitted” patients, see United States v. Gieger, 190 F.3d 661, 664 (5th Cir.1999) (finding that patients were not victims where scheme to submit false claims for ambulance services provided them with a free ride to the hospital), and cases “in which patients suffered harm or at least potential harm from the fraudulent scheme,” id.; see United States v. Burgos, 137 F.3d 841, 844 (5th Cir.1998) (finding that patients were victims where they “were often admitted to the hospital needlessly or their stays in the hospital were extended beyond what was necessary“); Sidhu, 130 F.3d at 655 (patients were victims where they “were often debilitated by pain or depression, and easily became addicted to the treatment proffered by [the defendant] to support his fraud“); United States v. Bachynsky, 949 F.2d 722, 735 (5th Cir.1991) (patients were victims where unnecessary treatment was frequently ineffective and in some cases harmful to the patients).
Although Valdez argues that his patients benefitted from his treatment, the district court‘s finding that at least some of his patients were victims of his relevant conduct is “plausible in light of the record as a whole.” Cisneros-Gutierrez, 517 F.3d at 764. At trial, Dr. Smith and Dr. Novak testified that Valdez risked causing numbness, weakness, pain and possibly permanent nerve damage to his patients. Both doctors referenced specific patients, including one who received approximately 357 injections, and one who received 500 injections in a three-year period. The pre-sentence investigation report showed that multiple patients reported that employees of Valdez‘s clinic told them they had to have the injections in order to have their prescriptions for pain medication filled. Valdez treated his Medicare- and Medicaid-dependent patients, who were seeking treatment for pain, “during the commission” of his fraudulent billing, when he required patients to receive the injections and then billed the Programs for those injections. See Salahmand, 651 F.3d at 27 (noting that defendant treated patients “during the commission” of identity theft offense when he was posing as a doctor). Valdez has not shown that the district court clearly erred in finding that Valdez‘s treatment exposed patients to risks of harm, and sometimes to medical treatment they did not want, and that pain management patients who needed medication were vulnerable to his conduct of requiring they receive the injections so he could fraudulently bill for them.2 We find that the
Lastly, the high number of injection procedures reflected in Valdez‘s patient files and billing records, and the evidence adduced at trial that indicated that Valdez did not perform facet joint injections or peripheral nerve injections but actually performed prolotherapy in many, possibly even all, instances in which he billed for injections, demonstrates that the district court‘s finding that a large number of pain management patients were vulnerable victims of Valdez‘s offenses is plausible in light of the record as a whole. The district court did not err in applying the additional 2-level “multiple vulnerable victims” enhancement.
2. Abuse of Trust
Valdez next challenges the application of a 2-level enhancement under
3. Mass-Marketing
Valdez next challenges the district court‘s imposition of a 2-level mass-marketing enhancement under
4. Sophisticated Means
Valdez next challenges the application of the 2-level “sophisticated means” enhancement under
Valdez argues that his transfers from his operating accounts to his investment accounts do not constitute sophisticated means. We agree. Valdez used no false names, fictitious entities, shell companies or complicated financial transactions, or any other particularly sophisticated means to hide or conceal the assets. We have affirmed the application of the sophisticated means enhancement in cases involving some method that made it more difficult for the offense to be detected, even if that method was not by itself particularly sophisticated. For example, in Clements, we upheld application of the enhancement where the defendant repeatedly converted received funds into multiple cashier‘s checks made out to himself, which he then deposited into his wife‘s separate bank account, because his actions “obscure[d] the link between the money and ... himself,” and “undeniably made it more difficult for the IRS to detect his evasion.” United States v. Clements, 73 F.3d 1330, 1340 (5th Cir.1996); see also United States v. Conner, 537 F.3d 480, 492 (5th Cir.2008) (traveling to 23 different states to obtain information about credit accounts and using a fictitious name and business to conduct fraudulent transactions involved sophisticated means); United States v. Wright, 496 F.3d 371, 379 (5th Cir.2007) (depositing a check into an account and then using money to purchase a cashier‘s check in another name involved sophisticated means); United States v. Charroux, 3 F.3d 827, 837 (5th Cir.1993) (participation in land flip scheme to purchase property for inflated price involved sophisticated means where defendants “structured elaborate transactions to hide their revenues“).
Here, however, the sole reason given for applying this enhancement is that Valdez took money directly deposited from Medicare into his operating account, which was in his name, and moved it into his investment accounts, which were also in his name. Even though this court reviews the factual finding that Valdez used sophisticated means for clear error, see Clements, 73 F.3d at 1340, there is no indication that this open and transparent direct deposit and movement of funds involved sophisticated means or could have made it more difficult for his offense of health care fraud to be detected. We hold that the district court erred in applying the 2-level
5. Loss Calculation
Valdez next challenges the district court‘s loss calculation. The amount of loss resulting from fraud is a specific offense characteristic that increases the base offense level under the Guidelines. See
Here, the district court calculated the amount of intended loss at over forty-four million dollars based on the gross amount of the fraudulent claims Valdez submitted to the Programs. Valdez argues that because he never expected full reimbursement, the loss intended by his actions was significantly less than this amount. The intended loss calculation raised his offense level by 22.
In health care fraud cases, this court has explained that “our case law requires the government [to] prove by a preponderance of the evidence that the defendant had the subjective intent to cause the loss that is used to calculate his offense level.” Isiwele, 635 F.3d at 203 (quoting United States v. Sanders, 343 F.3d 511, 527 (5th Cir.2003)). In the health care fraud context,
the amount fraudulently billed to Medicare/Medicaid is prima facie evidence of the amount of loss [the defendant] intended to cause, but the amount billed does not constitute conclusive evidence of intended loss; the 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); see also United States v. Singh, 390 F.3d 168, 193-94 (2d Cir.2004) (remanding for re-sentencing to give the defendant an opportunity to show that the total amount he expected to receive was less than the amount he actually billed to Medicare/Medicaid).
Here, Valdez objected to the loss calculation at sentencing and argued to the district court that the evidence showed that he did not subjectively intend to cause the loss of the full amount that he billed the Programs. He argued that for years he consistently billed a high amount, knowing that he would only be reimbursed for a fraction of what was billed. Valdez points to trial testimony by Rose Chavez, his office manager, who testified for the government. Her statements were introduced via an undercover recording with Chavez, who stated on the recording that: “Those are our rates, which are usually based on three times on [sic] what Medicare covers, that‘s pretty much standard practice.” Valdez argues that this evidence rebutted the finding that he subjectively intended to cause the loss of the full amount he billed the Programs. The district court did not reference this evidence in making the loss calculation.
Based on the clear guidance in Isiwele, we find that it was error for the district court to calculate the intended loss without considering the evidence in the record that rebutted the prima facie evidence of intended loss. However, we note that even if we assume there was error in the intended loss calculation, and use the amount Valdez actually received from the program to calculate loss—which comes to around thirteen million dollars—Valdez would still receive a 20-level enhancement. See
We have found that the district court erred in applying the 2-level sophisticated means enhancement, and in applying a 22-level increase based on loss calculation without considering the evidence that tended to show that Valdez did not have the subjective intent to cause the loss of the full amount that he billed the Programs. We now consider whether those errors were harmless. See United States v. Ibarra-Luna, 628 F.3d 712, 713-14 (5th Cir.2010) (holding that an error in the calculation of the applicable Guidelines range is subject to a harmless error analysis). “[T]he harmless error doctrine applies only if the proponent of the sentence convincingly demonstrates both (1) that the district court would have imposed the same sentence had it not made the error, and (2) that it would have done so for the same reasons it gave at the prior sentencing.” Id. at 714. To satisfy that high burden, there must be “evidence in the record that will convince us that the district court had a particular sentence in mind and would have imposed it, notwithstanding the error.” Id. at 718 (quoting United States v. Huskey, 137 F.3d 283, 289 (5th Cir.1998)).
Here, the court sentenced Valdez to 300 months. The original offense level was 43, which together with his criminal history category I, set forth a Guidelines range of life. However, even accounting for the district court‘s erroneous application of the sophisticated means enhancement and the loss calculation, the offense level would still be 41.3 The Guidelines range applicable to an offense level of 41, in criminal history category I, is 324-405 months. Thus, the 300 month sentence is within the adjusted Guidelines range. That the sentence would remain within the adjusted Guidelines range is insufficient to indicate harmlessness; “the crux of the harmless-error inquiry is whether the district court would have imposed the same sentence, not whether the district court could have imposed the same sentence.” United States v. Delgado-Martinez, 564 F.3d 750, 753 (5th Cir.2009). There are two additional factors present in this case which clearly indicate “(1) that the district court would have imposed the same sentence had it not made the error, and (2) that it would have done so for the same reasons it gave at the prior sentencing.” Ibarra-Luna, 628 F.3d at 714. First, the district court imposed consecutive sentences for factually related offenses. This court has recognized that “the imposition of consecutive sentences may, under some circumstances, demonstrate” that a Guidelines error was harmless. See United States v. Woods, 440 F.3d 255, 260 (5th Cir.2006); United States v. Garza, 429 F.3d 165, 170 (5th Cir.2005) (identifying
THE COURT: I‘ll inform you right now, Mr. Torres [defense counsel at sentencing], if you take up an appeal and the appeal comes back for re-sentencing, I will fashion a sentence that will meet the 300-month sentence that I‘ve given him. If I miscalculated the guideline range and it comes back because of that, there‘s still a lot to work with.
This unequivocal statement certainly constitutes “evidence in the record that will convince us that the district court had a particular sentence in mind and would have imposed it, notwithstanding the error.” Ibarra-Luna, 628 F.3d at 718. Though Valdez argues that this statement indicates that the judge was biased, it is merely a characterization of the discretion the district court had in fashioning this sentence. Where the sentence remains within the adjusted Guidelines range, this statement is clear evidence that the district court “would have imposed the same sentence” absent the guidelines calculation errors, not simply that it “could have....” Delgado-Martinez, 564 F.3d at 753.
We therefore hold that although the district court erred with respect to the sophisticated means and loss calculation enhancements, those errors were harmless, and affirm the sentence.
C. Forfeiture
Valdez next argues that it was error for the district court not to inquire whether either party requested that the jury make the forfeiture determination with regard to specific property, as provided by
Criminal forfeiture is a part of sentencing imposed after conviction; it is not a substantive element of the offense. See Libretti v. United States, 516 U.S. 29, 41 (1995). There is no constitutional right to a jury determination of forfeiture. Id. at 49. However,
D. Admission of Medical Malpractice Evidence
Valdez next argues that the district court erred in admitting testimony of physician witnesses who referred to Valdez‘s prolotherapy procedures as substandard or not medically necessary. He argues the testimony was not relevant pursuant to
The specific testimony challenged by Valdez includes: (1) two doctors’ testimony that the standard of medical care required using fluoroscopy in facet joint injections, and that Valdez did not use a fluoroscope in his practice; (2) one doctor‘s testimony that Valdez‘s practice of not obtaining consent forms before performing facet joint injections would violate the medical standard of care; (3) two doctors’ testimony that it would not be “medically reasonable” or “medically accepted” to give a patient the number of facet joint injections that Valdez administered or to give them as frequently as he did; (4) one
The district court gave the jury a limiting instruction regarding any testimony of medical malpractice. That instruction provided:
You have heard evidence of acts of the defendant which may be similar to those charged in the superseding indictment, but which were committed on other occasions. You also heard opinion testimony alleging medical malpractice by the defendant. You must not consider any of this evidence in deciding if the defendant committed the acts charged in the superseding indictment.
Valdez did not object to this instruction. This limiting instruction concerning medical malpractice testimony was added by the district court.
We hold that there was no error in admitting the testimony here, much less plain error. The opinion testimony concerning medical malpractice was elicited in response to Valdez‘s defense, which was that he was actually performing facet joint injections as defined by the Medicare guidelines. Because Valdez contended that all the procedures which the government argued were prolotherapy were actually facet joint injections, it was necessary for expert doctors for the government to explain the difference between facet joint injections and prolotherapy, including the testimony that if Valdez were actually performing facet joint injections as he contended, then they were not correctly performed. The medical testimony as a whole focused on a core factual dispute—whether Valdez was performing prolotherapy or facet joint injections—and the testimony that Valdez now complains about was largely ancillary to that purpose. The judge gave a limiting instruction on his own initiative. A limiting instruction minimizes the danger of undue prejudice. See, e.g., United States v. Cooks, 589 F.3d 173, 183 (5th Cir.2009). While some of the government‘s questioning went beyond the purpose of distinguishing prolotherapy from facet joint injections, such as the questioning about whether expired medications should be thrown out or questions about whether Valdez‘s practice was substandard in general, those questions were limited in the context of the medical testimony as a whole, and the danger of any potential resulting prejudice was reduced by the limiting instruction. For these reasons, Valdez has not proven that the introduction of this testimony was error.
E. Cumulative Error
Valdez next argues that cumulative errors during his trial necessitate reversal. See United States v. Delgado, 672 F.3d 320, 343-44 (5th Cir.2012) (describing the cumulative error doctrine). The only errors that we have found—erroneous application of two sentencing enhancements and the failure to inquire whether either party requested that the jury determine forfeiture—relate to sentencing and thus clearly do not require reversal of the convictions.
Valdez also argues that four times, government witnesses testified to a legal conclusion that improper billing was fraud, or that in the witness‘s opinion, Valdez had committed fraud.
III. Conclusion
For the foregoing reasons, we AFFIRM the conviction and sentence.5
JAMES E. GRAVES, JR.
UNITED STATES CIRCUIT JUDGE
Notes
For the money laundering group of offenses: Base offense level of 30,