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No. 99-116: Fischer v. United States

No. 99-116

In the Supreme Court of the United States


JEFFREY ALLAN FISCHER, PETITIONER

v.

UNITED STATES OF AMERICA



ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT



BRIEF FOR THE UNITED STATES IN OPPOSITION



SETH P. WAXMAN
Solicitor General
Counsel of Record
JAMES K. ROBINSON
Assistant Attorney General
VICKI S. MARANI
Attorney
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217



QUESTION PRESENTED

Whether a hospital that receives annual payments of between $10 and $15million under the Medicare program is an "organization, government,or agency [that] receives * * * benefits in excess of $10,000 under a federalprogram involving * * * federal assistance" within the meaning of 18U.S.C. 666(b).



In the Supreme Court of the United States



No. 99-116

JEFFREY ALLAN FISCHER, PETITIONER

v.

UNITED STATES OF AMERICA



ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT



BRIEF FOR THE UNITED STATES IN OPPOSITION



OPINION BELOW
The opinion of the court of appeals (Pet. App. 1-15) is reported at 168F.3d 1273.

JURISDICTION
The judgment of the court of appeals was entered on March 4, 1999. A petitionfor rehearing was denied on April 28, 1999 (Pet. App. 16). The petitionfor a writ of certiorari was filed on July 15, 1999. The jurisdiction ofthis Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

Following a jury trial in the United States District Court for the MiddleDistrict of Florida, petitioner was convicted on one count of fraud involvingan organization receiving federal funds, in violation of 18 U.S.C. 666(a)(1)(A)and 2 (count 1); one count of giving a kickback to an agent of an organizationreceiving federal funds, in violation of 18 U.S.C. 666(a)(2) and 2 (count2); one count of mail fraud, in violation of 18 U.S.C. 1341 (count 3); twocounts of wire fraud, in violation of 18 U.S.C. 1343 (counts 4-5); one countof conspiracy to commit the above offenses, in violation of 18 U.S.C. 371(count 6); and seven counts of money laundering, in violation of 18 U.S.C.1957 (counts 7-13). He was sentenced to 65 months' imprisonment, to be followedby three years of supervised release. He was ordered to pay $1.2 millionin restitution. The court of appeals affirmed. Pet. App. 1-15.

1. Petitioner was president and a partial owner of QMC, a private companythat performed billing audits for health care providers. In 1993, he arrangedfor QMC to obtain a $1.2 million loan from West Volusia Hospital Authority(WVHA). WVHA is a county agency responsible for operating two hospitals.In 1993, it received between $10 and $15 million in payments under the Medicareprogram. Pet. App. 3, 7.

As security for the $1.2 million loan from WVHA, petitioner pledged QMC'saccounts receivable and a $1 million letter of credit that QMC had obtainedthrough a foreign bank, First Asia Development Bank. QMC's accounts receivable,however, had already been pledged to another QMC creditor, and the termsof the $1 million letter of credit severely limited WVHA's ability to collecton it. Petitioner negotiated the loan with WVHA's chief financial officer,Robert Caddick. Pet. App. 3.

Petitioner used the $1.2 million to repay credit- ors and to raise the salariesof QMC's five owner-employees, including petitioner. Petitioner also hadQMC lend at least $100,000 to a company owned by the First Asia DevelopmentBank representative who had assisted QMC with the $1 million letter of credit.In addition, petitioner used the loan proceeds by causing QMC to open options-tradingaccounts, which lost about $400,000. Pet. App. 4.

After the loan was made, QMC paid $10,000 to Caddick's mother, Stella Greenfield,by a check marked "consulting fees," even though Greenfield hadnever performed services for QMC. Greenfield later sent the check proceedsto Caddick. Petitioner noted on the check's invoice that the check was fora "loan origination fee." Pet. App. 5. Caddick later tried tocover up QMC's $10,000 payment to him by proposing to QMC's vice president,Charles Kramer, that he backdate a bogus "contract" for programmingservices that Caddick had allegedly performed for QMC. Id. at 6.

When QMC was unable to repay the loan on its due date, petitioner persuadedFirst Asia Development Bank to send QMC a $1.2 million draft, which QMCendorsed and presented to WVHA. First Asia, however, refused to honor thedraft when WVHA's bank presented it. Pet. App. 4-5. In December 1994, petitionerwas removed from his position as president of QMC. The next month, QMC filedfor bankruptcy. Pet. App. 6; Gov't C.A Br. 17.

2. The court of appeals affirmed petitioner's conviction. Pet. App. 1-15.1The court of appeals rejected petitioner's contention that the governmenthad failed to prove under 18 U.S.C. 666(b) that the organization affectedby the defendant's prohibited acts under Section 666(a) "receives,in any one year period, benefits in excess of $10,000 under a Federal programinvolving a grant, contract, subsidy, loan, guarantee, insurance, or otherform of Federal assistance."2 The court of appeals explained that,under the plain terms of Section 666(b), "the 'benefits' an organizationreceives under a federal program can be in the form of 'a grant, contract,subsidy, loan, guarantee, insurance, or other form of Federal assistance.'"Pet. App. 11 (quoting 18 U.S.C. 666(b)). The court of appeals further explainedthat, in 1993, WVHA received between $10 and $15 million under the Medicareprogram for providing health care services to covered individuals. Ibid.The court thus concluded that, "[b]ecause WVHA received payments undera federal assistance program, WVHA received a type of 'benefits' expresslycovered by § 666(b)." Ibid.

The court of appeals (Pet. App. 12-15) further rejected petitioner's relianceon United States v. LaHue, 998 F. Supp. 1182 (D. Kan. 1998).3 In LaHue,the district court concluded that Section 666(b) did not apply to a groupof physicians that received payments under Part B of the Medicare program,because the physicians' patients, rather than the physicians themselves,are the intended beneficiaries of the Medicare program and the physiciansreceived Medicare payments solely because the patient beneficiaries hadassigned their right to receive Medicare payments to the physicians. Pet.App. 12-14 (citing 998 F. Supp. at 1186-1192).

In "declin[ing] to adopt LaHue's 'target recipient' analysis,"the court of appeals observed that, because the record "did not clearlyestablish whether WVHA received funds directly from the Medicare programor received funds as an assignee under Part B or even Part A of the federalprogram[,] * * * there is a possibility in this case that WVHA receivedfunds directly from the Medicare program without having been assigned theright to receive those funds by a patient." Pet. App. 14. The courtfurther stated that, "even if WVHA received funds as an assignee, theplain language of § 666(b) does not distinguish between an organization,government, or agency that receives 'benefits' directly under a federalprogram and an organization, government, or agency that receives 'benefits'as an assignee under a federal program." Ibid. The court similarlyconcluded that the language of Section 666(b) does not require that thereceiving organization be the "target recipient" of the federalassistance program. Ibid.

ARGUMENT

1. Petitioner contends (Pet. 6-16) that the millions of dollars in Medicarepayments that WVHA received in 1993 are not "benefits * * * under afederal program involving * * * federal assistance" within the meaningof 18 U.S.C. 666(b), because WVHA is not the beneficiary of the Medicareprogram and does not administer Medicare funds. That contention is incorrect,and it does not warrant this Court's review.

Section 666(b) encompasses any "organization, government, or agency[that] receives, in any one year period, benefits in excess of $10,000 undera Federal program involving a grant, contract, subsidy, loan, guarantee,insurance, or other form of Federal assistance." 18 U.S.C. 666(b) (emphasisadded). That language is "expansive" and "unqualified."Salinas v. United States, 522 U.S. 52, 56 (1997). The plain text of Section666(b) does not require that the recipient of federal assistance be theintended or ultimate beneficiary of a federal program, or that the recipientadminister federal funds on behalf of the government. All that is requiredunder the provision is that the entity receive benefits under a federalassistance program in one year in an amount exceeding $10,000.

As the court of appeals explained, Section 666(b) "focuses on the sourceof the 'benefits', requiring that the 'benefits' have been received 'under'a Federal program involving a grant, contract, subsidy, loan, guarantee,insurance, or other form of Federal assistance." Pet. App. 14 (quoting18 U.S.C. 666(b)). The court of appeals therefore correctly concluded that,"in context, the use of the term 'benefits' serves to emphasize notthat the recipient must be a 'target recipient', but rather that the fundsmust have been received by the organization, government, or agency as partof an 'assistance' program, rather than a purely commercial transaction."Id. at 14-15; see also United States v. Zyskind, 118 F.3d 113, 116 (2d Cir.1997) ("Nothing in the language of § 666 suggests that its reachis limited to organizations that were the direct beneficiaries of federalfunds. The jurisdictional subsection, (b), uses the word 'receives,' ratherthan the phrase 'is a beneficiary of.'"). Because WVHA directly receivedbetween $10 and $15 million in payments under the Medicare program, a federalassistance program, the court of appeals correctly concluded that WVHA isan agency covered by Section 666(b).4

2. a. Petitioner argues (Pet. 6-12) that the decision below conflicts withUnited States v. LaHue, 170 F.3d 1026 (10th Cir. 1999), which held thatSection 666(b) does not apply to a group of physicians who received fundsthrough patient assignments of benefits under Part B of the Medicare program.See Pet. App. 18-32. The decision in LaHue does disagree with that aspectof the court of appeals' reasoning that concluded that "the plain languageof § 666(b) does not distinguish between an organization, government,or agency that receives 'benefits' directly under a federal program andan organization, government, or agency that receives 'benefits' as an assigneeunder a federal program." Pet. App. 14. But that issue does not warrantresolution by this Court at the present time.

As the court of appeals explained, the record does not reveal whether WVHAreceived Medicare payments directly from the Medicare program or as an assigneefrom hospital patients. Pet. App. 14. Thus it is not clear that the factualscenario at issue in LaHue- physicians receiving payments through patientassignments under Medicare Part B-is present in this case. WVHA is a hospital,and the Medicare program directly reimburses hospitals for their in-patientservices and related post-hospital services under Part A of Medicare. See42 U.S.C. 1395c to 1395i-4 and 42 C.F.R. 409.5; see also LaHue, 170 F.3dat 1027 n.3 (Pet. App. 22 n.3) ("[p]ayment by Medicare under Part Afor services rendered by a hospital * * * may only be made to the institution"),and 170 F.3d at 1031 n.7 (Pet. App. 32 n.7) ("Medicare Part A is adifferent scheme [from Part B] where all payments to the hospitals are direct,without the voluntary choice of the patient. We need not decide whetherthe scope of section 666 would extend to such a case.").

In any event, any inconsistency between the two decisions does not raisea question of sufficient importance to require this Court's intervention.No other court of appeals has considered the precise issue presented inthis case. Furthermore, the issue has limited practical significance. Fraudinvolving organizations that receive Medicare funds ordinarily may be prosecutedunder other federal criminal statutes, such as mail or wire fraud, 18 U.S.C.1341, 1343; the Medicare anti-kickback statute, 42 U.S.C. 1320a-7b; or thestatute prohibiting theft or embezzlement in connection with health care,18 U.S.C. 669 (Supp. III 1997). Indeed, the government in this case successfullyprosecuted petitioner under the mail and wire fraud statutes in additionto Section 666. Pet. App. 1-2 n.1. Likewise, the defendants in LaHue wereseparately prosecuted for the same conduct under the Medicare anti-kickbackstatute, 42 U.S.C. 1320a-7b, which prohibits certain payments for Medicarepatient referrals. See LaHue, 170 F.3d at 1027 n.2 (Pet. App. 21 n.2).

b. Petitioner also claims (Pet. 13-16) that the decision below "[i]s[a]rguably [i]n [c]onflict" (Pet. 13) with United States v. Zyskind,supra, and United States v. Wyncoop, 11 F.3d 119 (9th Cir. 1993). Neitherof those decisions, however, conflicts with the court of appeals' decisionin this case.

In Zyskind, 118 F.3d at 115, the Second Circuit rejected the defendant'scontention that Section 666(b) "does not apply with respect to organizationsthat are not direct beneficiaries of federal government benefits."Moreover, although the Second Circuit noted that Section 666(b) appliesto organizations that administer federal funds or distribute such fundsto their intended beneficiaries, id. at 116-117, the court did not suggestthat the statute was limited to only those organizations, or would not applyto Medicare providers which directly receive federal funds.

In Wyncoop, the Ninth Circuit held that Section 666(b) did not apply toa private college that "never received any federal funds under [student]loan programs," but "received only the indirect benefits associatedwith increased enrollment of students receiving private loans induced byfederal guarantees to the private lenders." 11 F.3d at 122. By contrast,WVHA in the present case directly received $10-$15 million in Medicare payments.Pet. App. 7.5

3. Petitioner also contends (Pet. 6) that the court of appeals' decisionis contrary to "the fundamentals of federalism," because the court'sinterpretation of Section 666(b) makes petitioner's theft and bribery involvinga local hospital a federal crime. That contention lacks merit.

The purpose of Section 666 is "to protect the integrity of the vastsums of money distributed through Federal programs from theft, fraud, andundue influence by bribery." S. Rep. No. 225, 98th Cong., 2d Sess.369-370 (1984). In holding that Section 666(a)(1)(B) does not require thegovernment to demonstrate that the prohibited bribe affects federal funds,this Court in Salinas, supra, concluded that the acceptance of bribes byofficials of a jail housing federal prisoners pursuant to an agreement withthe federal government "was a threat to the integrity and proper operationof the federal program" and does not "extend federal power beyondits proper bounds." Salinas, 522 U.S. at 61.

Similarly here, petitioner's conduct in obtaining a loan from a Medicareprovider by fraud and giving a kickback to one of the provider's agentsthreatened the integrity of the Medicare program. See also Pet. App. 11-12("our determination that WVHA is an agency receiving 'benefits' withinthe meaning of § 666(b) serves the statute's purpose of protectingfrom fraud, theft, and undue influence by bribery the money distributedto health care providers, and WVHA in particular, through the federal Medicareprogram and other similar federal assistance programs"). The courtof appeals' interpretation of Section 666(b) therefore does not "extendfederal power beyond its proper bounds." Salinas, 522 U.S. at 61; seealso Westfall v. United States, 274 U.S. 256, 258- 259 (1927) (Holmes, J.)(upholding constitutionality of statute criminalizing misapplication offunds of state banks belonging to Federal Reserve System).

CONCLUSION

The petition for a writ of certiorari should be denied.
Respectfully submitted.


SETH P. WAXMAN
Solicitor General
JAMES K. ROBINSON
Assistant Attorney General
VICKI S. MARANI
Attorney


SEPTEMBER 1999



1 The court of appeals rejected petitioner's challenges to the sufficiencyof the evidence, the particularity of the indictment, the admission of petitioner'sprior fraud convictions, the prosecutor's statements to the jury, the districtcourt's refusal to hold an evidentiary hearing regarding an alleged Bradyviolation, and the district court's finding that petitioner had the abilityto pay restitution. Pet. App. 2 n.2. Petitioner does not challenge thoserulings in this Court.

2 Section 666 (18 U.S.C.) provides, in pertinent part:
Theft or bribery concerning programs receiving federal funds.
(a) Whoever, if the circumstance described in subsection (b) of this sectionexists-
(1) being an agent of an organization, or of a State, local, or Indian tribalgovernment, or any agency thereof-
(A) embezzles, steals, obtains by fraud, or otherwise without authorityknowingly converts to the use of any person other than the rightful owneror intentionally misapplies, property that-
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such organization,government, or agency; or
(B) corruptly solicits or demands for the benefit of any person, or acceptsor agrees to accept, anything of value from any person, intending to beinfluenced or rewarded in connection with any business, transaction, orseries of transactions of such organization, government, or agency involvingany thing of value of $5,000 or more; or
(2) corruptly gives, offers, or agrees to give anything of value to anyperson, with intent to influence or reward an agent of an organization orof a state, local or Indian tribal government, or any agency thereof, inconnection with any business, transaction, or series of transactions ofsuch organization, government, or agency involving anything of value of$5,000 or more;
shall be fined under this title, imprisoned not more than 10 years, or both.
(b) The circumstance referred to in subsection (a) of this section is thatthe organization, government, or agency receives, in any one year period,benefits in excess of $10,000 under a Federal program involving a grant,contract, subsidy, loan, guarantee, insurance, or other form of Federalassistance.
(c) This section does not apply to bona fide salary, wages, fees, or othercompensation paid, or expenses paid or reimbursed, in the usual course ofbusiness.

3 After the court of appeals issued its decision in this case, the TenthCircuit affirmed the district court's decision in LaHue. United States v.LaHue, 170 F.3d 1026 (1999) (Pet. App. 18-32).

4 Petitioner suggests (Pet. 10-12) that, because hospitals are reimbursedunder the Medicare program for providing services to eligible patients,the payments to WVHA are excluded under 18 U.S.C. 666(c), which providesthat "[t]his section does not apply to bona fide salary, wages, fees,or other compensation paid, or expenses paid or reimbursed, in the usualcourse of business." Petitioner does not raise, however, any issueunder subsection (c) as a question presented, see Pet. i, and no such issuewas addressed by the court of appeals. In any event, even assuming thatsubsection (c) does more than exempt routine business payments to individualsfrom the types of improper actions or inducements prohibited by Section666(a)(1)(B) and (a)(2), subsection (c) would not help petitioner here.The complex statutory scheme of reimbursing hospitals under the Medicareprogram does not fall within the type of payments for individual servicesor expenses enumerated in Section 666(c). No court has held to the contrary.Cf. LaHue, 170 F.3d at 1029 n.5 (Pet. App. 26 n.5) (declining to addressthe applicability of subsection (c) to Medicare Part B payments to doctors).

5 Petitioner also errs in suggesting (Pet. 9-10) that the decision belowconflicts with United States v. Copeland, 143 F.3d 1439, 1441 (11th Cir.1998), which held that a defense contractor, Lockheed, was not covered bySection 666(b) because Lockheed was "engaged in purely commercial transactionswith the federal government." As the court of appeals explained, "[t]heevidence in the present case contrasts sharply with that in Copeland. WhereasLockheed received federal dollars through purely commercial transactions,WVHA * * * actually received payments from the federal government underseveral assistance programs." Pet. App. 11. In any event, any disagreementbetween the court of appeals' decision below and its decision in Copelandwould not warrant this Court's review. Wisniewski v. United States, 353U.S. 901, 901-902 (1957) (per curiam).