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United States v. Martinez

United States Court of Appeals, Fifth Circuit

April 16, 2019

UNITED STATES OF AMERICA, Plaintiff - Appellee

          Appeals from the United States District Court for the Southern District of Texas

          Before DENNIS, OWEN, and SOUTHWICK, Circuit Judges.

          LESLIE H. SOUTHWICK, Circuit Judge

         All the defendants were convicted of conspiracy to commit health care fraud and several substantive counts of health care fraud. Individual defendants were convicted of different additional offenses. Defendants appeal, challenging the sufficiency of the evidence, the jury instructions, the exclusion of certain evidence, and one of the sentences. We AFFIRM.


         This case involves a scheme to defraud Medicare orchestrated by two men: Zaven "Mike" Pogosyan and Edvard Shakhbazyan. From 2008 to 2010, Pogosyan opened three purported medical clinics in the Houston, Texas area: the Jefferson Clinic, the Pease Clinic, and the Silver Star Clinic.[1] Pogosyan hired defendants Dr. Nguyen, Dr. Martinez, and Dr. Simmons to serve as "Medical Directors" for these clinics. The hiring of a physician for each clinic was essential to the scheme because a clinic cannot become a Medicare provider without an application submitted by a physician or a non-physician practitioner. See 42 C.F.R. § 424.510. Medicare will only issue the requisite provider number and remit funds to a bank account in the same name as that physician. Id.

         The Jefferson clinic opened first. In September 2008, Pogosyan placed an advertisement on Craigslist for a Medical Director position. Dr. Nguyen answered the listing and was hired at a salary of $10, 000 per month. At the direction of Pogosyan, Dr. Nguyen signed a Medicare enrollment application and opened a checking account in his own name for the receipt of Medicare payments. Dr. Nguyen then provided Pogosyan with signed blank checks, functionally giving Pogosyan control over the account.

         Shakhbazyan and Pogosyan hired and trained Seryan Mirzakhanyan to administer diagnostic tests.[2] Defendant Anna Bagoumian was hired in April 2009 to work as a receptionist and to perform these same tests. None of these people were licensed medical professionals or had any medical training. After Bagoumian was hired, Mirzakhanyan became responsible for billing Medicare, a task that was previously handled by Pogosyan.

         Shakhbazyan and Pogosyan used marketers to locate and recruit "patients" with the promise of cash payments. One of these marketers was Frank "Bones" Montgomery.[3] Montgomery coached patients on what symptoms to describe to the doctor. Montgomery was paid $150 in cash by Pogosyan, Mirzakhanyan, or Bagoumian for each patient he delivered to the clinic. The marketers would generally keep $50 and give $100 to the patient.

         These kickback exchanges were often concealed. Montgomery, for example, would typically retrieve an envelope with the cash from behind the medicine cabinet in a bathroom next to Dr. Nguyen's office. On occasion, Pogosyan or Bagoumian handed him the envelope directly. Patients were instructed to not mention the payments to the doctor, and Montgomery always drove to a secondary location before paying them.

         At the Jefferson clinic, Dr. Nguyen saw patients - most of whom had been brought to the clinic by marketers - and typically ordered an extensive battery of diagnostic tests. For a significant number of patients, the clinic submitted claims to Medicare for one or more of the following procedures: anorectal manometry, anal electromyography ("anal EMG"), and rectal sensation tests (collectively, "rectal tests").[4]

         These three procedures are highly specialized and in most clinics are rarely performed.[5] All three tests are used for assessing a patient that is suffering from either incontinence or constipation. For obvious reasons, these tests tend to be both uncomfortable and presumably memorable for the patient.

         Despite the frequency of the billing to Medicare, no rectal tests were ever performed on a patient. The Jefferson clinic possessed medical equipment associated with these tests, but it was seemingly only used by Pogosyan or Bagoumian to fabricate test results that were placed in patient files.

         After the clinic submitted claims to Medicare, payment would be remitted to the account opened by Dr. Nguyen. Pogosyan created a "management company" called Uni Office Manage, Incorporated, and instructed Mirzakhanyan to open bank accounts in its name. After Medicare paid claims, Pogosyan used the blank checks provided by Dr. Nguyen to transfer most of the money into the Uni Office accounts.[6]

         Pogosyan and Shakhbazyan also instructed Mirzakhanyan to withdraw cash from the Uni Office account twice per week in amounts between $5, 000-$9, 000.[7] Bagoumian would also occasionally cash checks and return the money to Pogosyan and Shakhbazyan. The cash was used for the kickback scheme and for Shakhbazyan and Pogosyan's regular trips to Las Vegas.

         The Jefferson clinic abruptly closed in June 2009. Pogosyan, Shakhbazyan, Mirzakhanyan, and Bagoumian shredded the entirety of the Jefferson clinic's records in a single afternoon. Pogosyan then immediately opened a new clinic on Pease Street in Houston. Dr. Nguyen and Bagoumian moved to this new clinic, but Mirzakhanyan did not.

         Dr. Nguyen continued to see patients at the Pease clinic, but did not enroll with Medicare as the provider. Instead, Pogosyan placed another advertisement on Craigslist, which led to the hiring of Dr. Martinez in July 2009. At the time, Dr. Martinez lived in Dallas and was finishing the second year of his residency. After interviewing, he agreed to travel to Houston once per month to review patient files in exchange for a monthly salary of $7, 000. Like Dr. Nguyen, Dr. Martinez signed a Medicare enrollment form, opened a bank account, and turned over the checkbook to Pogosyan.

         In November 2009, Pogosyan posted a second job listing for a "Medical Director" to review patient files once a month. This time Dr. Simmons responded to the posting on Craigslist. For a salary of $8, 000 per month, he performed the same role as Martinez, periodically reviewing patient files from the Pease clinic. Like Dr. Nguyen and Dr. Martinez, he signed a Medicare enrollment form, opened a bank account, and signed blank checks for Pogosyan's use.

         Other than the addition of Dr. Martinez and Dr. Simmons as "reviewing" doctors, the Pease clinic largely operated in the same manner as the Jefferson clinic. Bagoumian and Pogosyan employed marketers to pay patients to visit the clinic. Dr. Nguyen saw patients and claims were submitted for, among other things, rectal tests that were not actually performed.[8] Checks were written from Dr. Martinez's and Dr. Simmons' accounts to transfer most of the Medicare payments to the accounts of supposed "management companies" controlled by Pogosyan.[9]

         The Pease clinic closed in March 2010, but Pogosyan had already opened a third clinic with Dr. Nguyen in January 2010. This time, Dr. Nguyen and Pogosyan applied for a provider number in the name of Silver Star Medical Group, a professional association they had created. For the second time, Dr. Nguyen signed a Medicare enrollment application, opened a bank account, and provided the checkbook to Pogosyan.

         At Silver Star, Dr. Nguyen saw patients, including some patients he had previously seen at Pease. As before, patients were paid and claims were submitted to Medicare that included rectal tests that were never performed.[10]

         The scheme ended in April 2010 after the FBI executed search warrants on the Pease and Silver Star clinics. Overall, the evidence at trial showed that 39, 608 claims totaling $7, 638, 245 had been submitted to Medicare for services from Dr. Nguyen, Dr. Martinez, and Dr. Simmons, for which it paid $3, 349, 851.[11]

         A grand jury returned a 52-count indictment against the defendants. All four defendants were charged with conspiracy to commit health care fraud in violation of 18 U.S.C. § 1349. Bagoumian was also charged with conspiracy to pay kickbacks in violation of 18 U.S.C. § 371.

         The indictment also charged 42 substantive counts of health care fraud. On each substantive count, the defendants were charged and convicted under both 18 U.S.C. Section 1347 and 18 U.S.C. Section 2, as principals and as aiders and abettors.[12] However, not every count applied to every defendant. Dr. Nguyen and Bagoumian were both initially charged with all 42 counts, but the government ultimately dismissed nine counts with respect to Bagoumian.[13]Dr. Martinez and Dr. Simmons were only charged with those substantive counts for claims submitted under their respective provider numbers.[14]Finally, the doctors were each charged with multiple counts of engaging in monetary transactions of property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.[15]

         The defendants were convicted as charged following a nine-day jury trial. The district court sentenced them as follows:

• Bagoumian - 51 months imprisonment, 3 years of supervised release, $2, 675, 628.06 in restitution, $3, 500.00 in special assessments;
• Dr. Nguyen - 87 months imprisonment, 3 years of supervised release, $3, 357, 752.62 in restitution, $4, 700.00 in special assessments;
• Dr. Martinez - 28 months imprisonment, 3 years of supervised release, $1, 109, 203.31 in restitution, $1, 600.00 in special assessments;
• Dr. Simmons - 15 months imprisonment, 3 years of supervised release, $171, 833.82 in restitution, $1, 200.00 in special assessments.

         The defendants timely appealed.


         The defendants challenge the sufficiency of the evidence for their convictions, the jury instructions, and the exclusion of certain "reverse 404(b)" evidence. Bagoumian raises additional challenges to her sentence. We discuss the challenges in that order.

         I. Sufficiency of the Evidence

         We review the denial of a motion for judgment as a matter of law de novo. United States v. Ganji, 880 F.3d 760, 767 (5th Cir. 2018). To evaluate whether the evidence is sufficient to support a jury conviction, we "examine[] whether a rational jury, viewing the evidence in the light most favorable to the prosecution, could have found the essential elements of the offense to be satisfied beyond a reasonable doubt." Armstrong, 550 F.3d at 388. "We do not evaluate whether the jury's verdict was correct, but rather, whether the jury's decision was rational." United States v. Miles, 360 F.3d 472, 477 (5th Cir. 2004). The "verdict may not rest on mere suspicion, speculation, or conjecture, or on an overly attenuated piling of inference on inference." United States v. Pettigrew, 77 F.3d 1500, 1521 (5th Cir. 1996).

         Though the government cannot obtain a conviction by piling "inference upon inference," the defendants cannot obtain an acquittal simply by ignoring inferences that can logically be drawn from the totality of the evidence. Id. at 1521, 1519. When evaluating the sufficiency of the evidence "[n]either the jury nor this [c]ourt is obligated to examine each circumstance in isolation." United States v. Duncan, 919 F.2d 981, 990 (5th Cir. 1990).

         Below, we discuss each count as relevant to each defendant and review the evidence. We begin with the count for conspiracy to violate the Anti-Kickback statute, which is unique to Bagoumian. We then proceed to the counts for conspiracy to commit health care fraud and health care fraud, which apply to all the defendants. Finally, we address the counts against the doctors for engaging in monetary transactions of property derived from specified unlawful activity.

         A. 18 U.S.C. § 371 - Anti-Kickback Conspiracy

         Bagoumian was convicted of conspiracy to violate the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b). That Act "criminalizes the payment of any funds or benefits designed to encourage an individual to refer another party to a Medicare provider for services to be paid for by the Medicare program." Miles, 360 F.3d at 479. A conspiracy requires "(1) an agreement between two or more persons to pursue an unlawful objective; (2) the defendant's knowledge of the unlawful objective and voluntary agreement to join the conspiracy; and (3) an overt act by one or more of the members of the conspiracy in furtherance of the objective of the conspiracy." United States v. Njoku, 737 F.3d 55, 64 (5th Cir. 2013) (quoting United States v. Mauskar, 557 F.3d 219, 229 (5th Cir. 2009)). As to mens rea, a defendant must have had the "specific intent to do something the law forbids." Id. (citation omitted).

         Bagoumian alleges the evidence does not support that she had the specific intent to do anything unlawful. The evidence from which jurors could make findings includes that 15 of the 19 patients who testified stated they were paid to visit the clinics, and 12 of them testified the only reason they visited the clinics was to get paid. Bagoumian lived with three of the co-conspirators who pled guilty: Mirzakhanyan, Shakhbazyan and Pogosyan. Frank "Bones" Montgomery, the marketer recruiting "patients," testified that Bagoumian paid him cash for patients directly, indirectly by placing cash behind the bathroom cabinet, and she was often present when Montgomery was paid by Pogosyan.

         Bagoumian contends there was no evidence that she knew the payments were illegal or that Montgomery used the money to pay patients. To the contrary, the testimony about her use of the bathroom cabinet to place cash payments was relevant evidence Bagoumian knew of their illegality because the "unusualness of this transaction supports a reasonable inference of a design to conceal." United States v. Willey, 57 F.3d 1374, 1387 (5th Cir. 1995). The jury could have easily credited Montgomery's testimony that, on at least one occasion, Bagoumian directed him to recruit additional patients because she was "running short."

         Weighing the circumstantial evidence that she lived with the organizers of the conspiracy, that she placed cash in a bathroom to pay recruiters, and that the recruiter Montgomery admitted to being paid for each patient he procured through Bagoumian's secreted envelopes of cash, and that witnesses who had been the ostensible patients testified they were paid to go to the clinics, jurors could properly find that Bagoumian knowingly participated in the kickback conspiracy. See Gibson, 875 F.3d at 188-89.

         B. 18 U.S.C. § 1349 - Conspiracy to Commit Health Care Fraud

         All four defendants were convicted of conspiracy to commit health care fraud. Proof of such a conspiracy requires evidence "that (1) two or more persons made an agreement to commit health care fraud; (2) that the defendant knew the unlawful purpose of the agreement; and (3) that the defendant joined in the agreement willfully, that is, with the intent to further the unlawful purpose." United States v. Grant, 683 F.3d 639, 643 (5th Cir. 2012). No formality to the agreement needs to exist, and it can even be unspoken. Id. On the other hand, any "'similarity of conduct among various persons and the fact that they have associated with or are related to each other' is insufficient to prove an agreement." Ganji, 880 F.3d at 767-68 (quoting United States v. White, 569 F.2d 263, 268 (5th Cir. 1978)). Nonetheless, an "agreement may be inferred from concert of action, voluntary participation may be inferred from a collection of circumstances, and knowledge may be inferred from surrounding circumstances." Grant, 683 F.3d at 643 (quoting United States v. Stephens, 571 F.3d 401, 404 (5th Cir. 2009)).

          The evidence in this case bears a striking resemblance to the evidence we considered in a 2016 decision in which we affirmed convictions for health fraud committed by a doctor and others in Houston. See United States v. Barson, 845 F.3d 159 (5th Cir. 2016). While sufficiency challenges are inherently case-specific, Barson nonetheless provides a useful benchmark for our analysis. For that reason, we first review our reasoning in that case. We held there was "ample circumstantial evidence to establish . . . knowledge of the ongoing health care fraud" because it showed that Doctor Barson

signed documents in blank allowing the clinic to bill under his Medicare identification number and opened a bank account in his name to receive Medicare reimbursements[, ] . . . signed a number of blank checks to permit [Edgar] Shakbazyan to draw on the account[, ] . . . allowed the bank statements to be sent to the clinic and never reviewed them[, ] . . . received a significant sum, $7, 000 per month, for reviewing patients' charts every other Saturday[, ] . . . [and] admitted to an FBI investigator that despite his suspicions and bad feelings about the clinic, he reported his suspicions to no one.

Id. at 164.

There also was sufficient evidence to convict the co-defendant, who
held himself out as a "doctor" at the clinic and falsely claimed . . . that he was a physician's assistant, the clinic's on-site medical staff member[, ] . . . saw almost all of the patients and turned a blind eye to the fact that most of the so-called patients had no need for medical care and that many received no medical care[, ] . . . saw large numbers of patients lining up outside the clinic daily after being delivered to the clinic by the same white van[, ] . . . had access to the clinic's mail including the bank statements and Medicare remittances[, ] . . . was paid $20, 000 for his work, a large sum for an unlicensed individual to pose as a physician's assistant[, ] . . . [and] lied to investigators about the payments he received.

Id. at 164-65.

         This present appeal, though, does present some issues absent from Barson that we will discuss where needed. We now review the evidence.

         1. Evidence as to Dr. Nguyen

         Since Dr. Nguyen does not dispute that many of the claims submitted to Medicare were fraudulent, he challenges only the knowledge element of his conspiracy conviction. Like the doctor-defendant in Barson, Dr. Nguyen "signed documents in blank allowing the clinic to bill under his Medicare identification number[, ] . . . opened a bank account in his name to receive Medicare reimbursements[, ] . . . [and] signed a number of blank checks to permit" Pogosyan "to draw on the account." Id. at 164.

         An expert, Dr. Michael Snyder, testified about the three rectal test procedures: anorectal manometry, anal electromyography, and rectal sensation tests. Dr. Snyder indicated that these tests are relatively uncommon, and that it would be "somewhat inappropriate" for a family practice clinic to perform the tests rather than a specialist. Dr. Snyder reviewed 277 patient files containing rectal test orders, most of which were signed by Dr. Nguyen, and testified that he concluded none were actually performed. Hundreds of actual patient files with rectal test orders signed by Dr. Nguyen were introduced into evidence.

         Like the physician-assistant defendant in Barson, Dr. Nguyen worked on a daily basis at the clinic, where he "saw almost all of the patients and turned a blind eye to the fact that most of the so-called patients had no need for medical care and that many received no medical care." Id. Many patients Dr. Nguyen ostensibly evaluated testified at trial that they never saw a doctor. Mirzakhanyan testified that Dr. Nguyen was only at the Jefferson clinic for approximately three hours each day, yet Dr. Nguyen supposedly "treated" up to 10-15 patients daily, and the Jefferson clinic submitted 11, 276 claims to Medicare for 683 beneficiaries in just seven months, an average of 16.5 claims per patient.

         When Dr. Nguyen actually saw patients, there was video evidence that he spent just a few minutes with them before billing Medicare for 45-minute examinations and dozens of "tests" that he had ordered. This was undisputed by Dr. Nguyen's own testimony. Some patients were treated by Dr. Nguyen at multiple clinics in a short period of time and Medicare was billed for identical procedures.

         Finally, an inference of knowledge was supported by Dr. Nguyen's "proximity to the fraudulent activities" at all three clinics, which gave him a unique vantage point for observing the suspicious nature of the operation. United States v. Willett, 751 F.3d 335, 340 (5th Cir. 2014).

         There was ample circumstantial evidence of Dr. Nguyen's knowing participation in the conspiracy.

         2. Evidence as ...

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