Abuse-of-Trust Enhancement Applied to Sentence for Defrauding Government
Wednesday, August 12, 2009 at 10:19AM August 12, 2009
Bureau of National Affairs Criminal Law Reporter
Abuse-of-Trust Enhancement Applied to Sentence for Defrauding Government
Health care providers who defraud Medicaid or Medicare may have their federal sentences enhanced for abusing a “position of trust,” the U.S. Court of Appeals for the Eighth Circuit ruled Aug. 3. There is a division of authority among the federal circuits as to whether the enhancement may be applied when the only victim of a fraud is the government (United States v. Hayes, 8th Cir., No. 08-2245, 8/3/09).
Circuits Differ. U.S.S.G. 3B1.3 authorizes an offense-level increase for defendants who “abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense.”
Most courts have read the guideline as requiring a defendant to have occupied a position of trust with respect to the victim of the offense, which can be difficult to ascertain when, as in this case, the victim is the government. For example, the circuits are split on whether the enhancement may be applied to a sentence for tax evasion. See, e.g. United States v. May, 568 F.3d 597, 85 CrL 386 (6th Cir. 2009) (discussing division of authority).
When it comes to health care fraud, most federal circuits have decided that health care providers ripping off Medicare or Medicaid qualify to receive the enhanced punishment under Section 3B1.3 See, e.g., United States v. Bolden, 325 F.3d 471 (4th Cir. 2003). The Eleventh Circuit, however, has ruled that, as a matter of law, a Medicaid-funded health care provider is not in a position of trust with respect to Medicaid. United States v. Mills, 138 F.3d 1324 (11th Cir. 1998).
The Eighth Circuit opted not to go along with the Eleventh Circuit’s approach. In an opinion by Judge Bobby E. Shepherd, the court ruled that “an employee of a Medicaid-funded home health care provider…may occupy a position of trust.” Accordingly, the court turned to the question whether, as a matter of fact, the district court’s finding that the defendant occupied a position of trust was clearly erroneous.
The defendant in this case was convicted of fraud stemming from her participation in a family-run Missouri Medicaid in-home services companies. The fraud involved having employees submit blank time sheets that were completed to reflect services that were not provided or that were ineligible for program benefits. The defendant in this case was a supervisor in one of the companies where she handled time sheets and billing.
The Eighth Circuit, citing its recent decision in United States v. Septon, 557 F.3d 934, 84 CrL 686 (8th Cir. 2009), observed that, ordinarily, more than an arms-length commercial relationship is needed to call the enhancement into play. Instead, some “special trust” involving aspects of the concepts of “fiduciary” or “trustee” must have been violated by the defendant, the court said.
The district judge pointed to the many documents that the defendant had signed or otherwise approved that Medicaid relied upon in providing benefits. The judge observed that the defendant “set herself out as one who was in a position to execute those documents by singing off on them…and as a result of that and the other parts of the overall scheme in this matter, the jury found that this defendant was guilty of… the conspiracy to defraud Medicaid.”
The Eighth Circuit disagreed. “The district court’s superficial reasoning does not demonstrate that Hayes and Medicaid’s relationship was such that it went beyond the ordinary commercial relationship which is insufficient to invoke the abuse-of-trust enhancement,” the court said. Quoting from a Second Circuit opinion addressing the tax-evasion issue, the court remarked that “the abuse of trust enhancement is not ‘so far reaching that it might cause virtually anyone who is commanded by statute to make an accurate report to the government to be subject to a Section 3B1.3 enhancement.’”
William Shane Margulis, of Margulis, Grant & Margulis, St. Louis, represented the defendant. Thomas Christian Albus and Dorothy L. McMurtry, of the U.S. Attorney’s Office, St. Louis, represented the government.
Full text of this case available at http://pub.bna.com/cl/082245.pdf