Appeals from the United States District Court for the Southern District of Texas
Before STEWART, Chief Judge, and KING and PRADO, Circuit Judges.
CARL E. STEWART, Chief Judge
The panel issued the original opinion in this case on December 3, 2013. United States v. St. Junius, 735 F.3d 247 (5th Cir. 2013). We GRANT the petition for rehearing, withdraw our previous opinion, and substitute the following.
This is an appeal by Defendants-Appellants Lia Samira St. Junius ("St. Junius"), Devon Michel Spicer ("Spicer"), and Martha Ramos ("Ramos") who were convicted of various crimes related to their involvement in a health care fraud conspiracy. Defendants-Appellants appeal their convictions and sentences. For the reasons provided herein, we AFFIRM St. Junius and Ramos's convictions and sentences. We also AFFIRM Spicer's convictions. Due to a Sentencing Guidelines error conceded by the Government, we VACATE Spicer's terms of supervised release and REMAND for re-sentencing.
A. The Mobility Store
James Reese established Arbor Oaks Medical Equipment, Inc. ("Arbor Oaks"), a durable medical equipment supplier ("DME"), around 2001. The Federal Bureau of Investigation ("FBI") began investigating Arbor Oaks to determine whether the company engaged in health care fraud by billing Medicare for products beneficiaries did not need or receive. Arbor Oaks was subsequently suspended from the Medicare program. Around 2003, Reese established a company called The Mobility Store ("TMS") which also served as a DME provider. Though Reese created TMS, the company was registered as a sole proprietorship under St. Junius's name. Reese is St. Junius's stepfather and has been married to St. Junius's mother since St. Junius was seven years old.
In order to receive Medicare funds, DME suppliers must apply for a Medicare provider number. The National Supplier Clearinghouse ("NSC") processes applications and enrolls approved DME suppliers into the Medicare program. The contents of the application explain the civil and criminal penalties for furnishing false information to gain enrollment into the Medicare program. The application also requires the applicant to provide information concerning any adverse legal history under the DME's current or former names. An adverse legal history, including criminal convictions or prior suspensions under any Medicare billing number, could result in a DME being excluded from the Medicare program. On May 15, 2004, TMS submitted a Medicare initial enrollment application with St. Junius's signature affixed as owner/operator. Reese had an extensive criminal record and previously operated a company (Arbor Oaks) that was suspended from the Medicare program. These facts made it unlikely that a company bearing Reese's name as owner/operator would successfully obtain a Medicare provider number.
Consequently, Reese asked St. Junius to sign the enrollment application and indicate that she owned TMS. By signing this document, St. Junius certified that she read the contents of the application; that the information therein was true, correct, and complete; and that her signature legally and financially bound TMS to the laws, regulations, and Medicare program instructions applicable to DME suppliers, including the Anti-Kickback Statute.St. Junius certified that she understood the criminal, civil, and administrative penalties for falsifying information in the application. TMS's application indicated that St. Junius was a 5% or greater owner of TMS and a managing employee who had no adverse legal actions imposed against her. No other individuals were reported as having an ownership or managerial role at TMS.Medicare eventually assigned TMS a provider number. Despite St. Junius being listed as the owner/operator of TMS, Reese received the majority of TMS's income and managed the company's operations. Essentially, Reese was the true owner and operator of the company.
B. The Reese Group
Reese also owned and operated a marketing company called The Reese Group ("TRG"). TRG hired marketers to solicit Medicare beneficiaries to order TMS products. TRG and TMS ostensibly operated as the same entity, sharing employees and the same office space in Houston, Texas. Reese was TRG's director and Brenda Lopez ("Lopez") was its office manager.
C. St. Junius
According to former TMS officer manager Brenda Lopez, St. Junius knew that Reese's name was not included in the documentation provided to Medicare. At trial, Lopez testified that during the course of her employment, she witnessed St. Junius sign letters, checks, and other documents as the owner of TMS. Lopez never signed St. Junius's name on any document, nor did she witness any other TMS or TRG employee do so. Lopez further testified that TMS, through St. Junius, falsely represented to Medicare that its Houston address was used solely as a warehouse, when in fact it was TMS's primary office.
Between May 2005 and October 2007, a NSC representative conducted site inspections of TMS and had frequent correspondence with St. Junius regarding TMS's violations of the "21 Medicare Supplier Standards." As a result of TMS's continuous failure to comply with Medicare standards, NSC revoked TMS's supplier number in October 2007.
D. Ramos and Spicer
Ramos and Spicer recruited Medicare patients for TRG. They signed independent contractor agreements stating that in exchange for their "marketing services, " TRG would pay them a 10% commission on the price of items purchased for patients they referred.
While Ramos was an independent contractor for TRG, she also worked full-time as a "community liaison" for The Four Group Home Care ("Four Group"). Four Group provides home care services to Medicare patients. Ramos supplied TRG with patient information she obtained during the course of her duties as a community liaison for Four Group. TRG often made cash payments to Ramos for 10% of the amount Medicare paid for items ordered on behalf of patients she recruited. She also received checks drawn on TMS's account that were signed by either St. Junius or Reese.
At the time Spicer recruited Medicare patients for TRG, he was affiliated with Elite Care Medical Clinic ("Elite Care"). Elite Care is a comprehensive health care provider. Spicer supplied TRG with patient information obtained from Elite Care and TRG paid him commissions from Medicare payments on claims TMS submitted on these patients' behalf. At trial, a Government investigator testified that approximately 408 of Elite Care's patients corresponded to claims billed by TMS. Medicare and TMS records reflect that in 2005, Medicare paid TMS over $710, 000.00 on claims for patients referred by Spicer. Spicer received $71, 081.00 in commissions in 2005.
E. Criminal Investigation
In 2007, authorities executed a search warrant at the Houston TMS/TRG office and seized 89 boxes of records. Among these records, agents found blank prescription forms; blank prescription pads; completed prescription order forms without a physician's certification or signature; and numerous data sheets indicating that TMS submitted claims to Medicare without a prescription order. An investigator testified at trial that she obtained Medicare's records of TMS's claims and compared them with a random selection of 100 TMS patient files. For sixty-three of the patients, the investigator did not find proof of delivery of the item(s) billed to Medicare. Many of TMS's files contained prescription forms that were unsigned by a doctor, diagnosis codes that did not match what was billed to Medicare, and items that were billed but did not match anything TMS had purchased from a DME manufacturer. A large number of the products TMS purchased had either no approved Healthcare Common Procedures Coding System ("HCPCS") code or a different code than what TMS billed to Medicare.Additionally, TMS routinely billed for a product that had a higher price than the product that TMS actually purchased. TMS also billed Medicare for products patients did not request, need, or receive.
Between 2005 and 2008, TMS billed Medicare for $19, 481, 164.00. During the same period, Medicare paid TMS $5, 182, 499.84 for products TMS did not purchase and Medicaid paid TMS $8, 931, 248.00 on related claims.
On February 10, 2011, a federal grand jury returned a 47-count superseding indictment charging Defendants-Appellants, and others,  with health care fraud conspiracy in violation of 18 U.S.C. § 371 (count 1). The superseding indictment also charged St. Junius with committing health care fraud in violation of 18 U.S.C. § 1347 (counts 2–16) and money laundering conspiracy in violation of 18 U.S.C. § 1956(h) (count 33), and it charged Ramos and Spicer with receiving kickbacks in violation of 42 U.S.C. § 1320a-7b(b)(1)(A) (Ramos: counts 17, 19–22; Spicer: counts 18, 23–24).
A jury trial began on April 11, 2011 and concluded on April 27, 2011. The jury returned its verdict on April 29, 2011, finding St. Junius guilty of health care fraud conspiracy (count 1), health care fraud (counts 10–16) and money laundering conspiracy (count 33). St. Junius was acquitted on counts 2–9 (health care fraud). The district court sentenced St. Junius to a term of 135 months' imprisonment (60 months on count 1, 120 months on counts 10–16, and 135 months on count 33, to run concurrently). St. Junius was also sentenced to three years of supervised released, a $900 special assessment, and ordered to pay $8, 651, 805.76 restitution.
Ramos and Spicer were convicted of all Anti-Kickback charges and acquitted of the conspiracy to commit health care fraud charge. The district court sentenced Ramos to five concurrent terms of 60 months' imprisonment followed by concurrent three year terms of supervised release. The court also ordered Ramos to pay $53, 987.04 restitution, imposed a $4, 691.00 fine, and a $500.00 special assessment. The district court sentenced Spicer to three concurrent terms of 60 months' imprisonment followed by concurrent three year terms of supervised release. The court also ordered Spicer to pay $794, 434.08 restitution, imposed a $71, 121.00 fine, and a $300.00 special assessment.
Defendants-Appellants challenge their convictions and sentences on multiple fronts. We address each party's claims in turn.
A. St. Junius
1. Rebuttal Witness' Testimony
At trial, St. Junius called co-defendant Reese as a defense witness. On direct examination, Reese testified that he helped St. Junius open TMS with plans that she would own the store and eventually run it. After St. Junius's counsel concluded his examination, counsel for defendant Ramos questioned Reese. Counsel for Ramos asked Reese about his discussions with Medicare regarding whether it was proper to pay marketers commissions for Medicare patient referrals. Reese stated that Medicare told him paying commissions was "okay, " and he conveyed the same information to his marketers. Reese provided the same response when Spicer's attorney questioned him about Medicare's instructions on commissions.
On cross-examination, the Government asked Reese whether anyone from Medicare visited him while he was operating Arbor Oaks. Reese answered: "I've never talked to Medicare about Arbor Oaks." The prosecutor asked Reese to clarify his statement and Reese reiterated that he could not recall speaking to Medicare when he was operating Arbor Oaks. Reese also denied telling any of his Arbor Oaks employees that he met with Medicare. Also on cross-examination, the prosecutor asked Reese whether St. Junius helped out at Arbor Oaks from time to time. Reese stated that he did not think so but could not recall for sure.
At the conclusion of Reese's testimony, the defense rested. The Government called a rebuttal witness, Lucean Kuykendall, for the purpose of impeaching Reese based upon his testimony about his conversations with Medicare during his time at Arbor Oaks, and about whether St. Junius ever visited Arbor Oaks. Kuykendall began her testimony by stating that she worked for Arbor Oaks in 2002 or 2003. At the mention of Arbor Oaks, St. Junius's attorney immediately objected to Kuykendall's testimony on the basis of relevancy. The government responded that the defense called Reese and elicited information about Arbor Oaks. The court overruled the objection. Kuykendall then testified to three key points of fact: 1) While Kuykendall worked for Arbor Oaks, Reese told her that he met with a Medicare official; 2) after meeting with the Medicare official, Reese told Kuykendall that Arbor Oaks could no longer pay marketers commissions for referring Medicare patients; and 3) although St. Junius did not work for Arbor Oaks, she visited Arbor Oaks on occasion.
At trial, St. Junius objected to Kuykendall's testimony on the grounds that: 1) whether St. Junius visited Arbor Oaks was irrelevant; and 2) Reese's conversations about a meeting with Medicare constituted inadmissible hearsay. The district court overruled the objections. We review the district court's ruling on those grounds for abuse of discretion, subject to a harmless error analysis. United States v. Jackson, 636 F.3d 687, 692 (5th Cir. 2011). "A trial court abuses its discretion when its ...