United States v. Castro

1

UNITED STATES OF AMERICA, Plaintiff, v. DANIEL CASTRO, M.D., Defendant.

No. 1:22-cr-16

United States District Court, W.D. Michigan, Southern Division

April 3, 2024

OPINION

HALA Y. JARBOU, CHIEF UNITED STATES DISTRICT JUDGE

The Government charged Defendant Daniel Castro, M.D., with 34 counts of health care fraud in violation of 18 U.S.C. § 1347, and 8 counts of making false statements in relation to health care matters in violation of 18 U.S.C. § 1035. Castro signed a plea agreement and then entered a guilty plea on one count of making a false statement in relation to health care matters. Before the Court is Castro's renewed motion to withdraw his plea (ECF No. 198). For the reasons herein, the Court will deny the motion.

I. BACKGROUND

A. Charges

In the indictment (ECF No. 1), the Government alleges that Castro engaged in various schemes to defraud health care benefit programs. Counts 1 to 12 allege that he performed functional endoscopic sinus surgeries (“FESS”) that were not medically necessary. Counts 13 to 22 allege that he routinely “upcoded” his procedures, billing for higher-paying FESS procedures that he did not actually perform. Counts 23 to 26 allege that he billed for FESS procedures involving frontal sinuses when the patients were individuals who did not have frontal sinuses. Counts 27 to 34 allege that he fraudulently billed gland removal and lymph node procedures as a higher-paying, complex neck procedure for cancer. Counts 35 to 42 allege that Castro made materially false statements about his patients' conditions or about the procedures he performed in connection with the delivery of services and billing for those services.

B. Withdrawal of Counsel

Castro initially retained attorneys Matthew Borgula and Mikayla Hamilton to represent him. He terminated that relationship in September 2022, causing his attorneys to seek leave to withdraw. The following month, the Court permitted Castro's newly retained counsel, Ronald Chapman, II, and John Cardello, to take over his representation.

C. Plea Agreement

On March 19, 2023, Castro signed a plea agreement (ECF No. 122) wherein he agreed to plead guilty to one count of making a false statement to a health care insurer, in exchange for the dismissal of the other counts. As the factual basis for his plea, the plea agreement stipulated that Castro had selected a “Current Procedural Terminology Code (CPT Code)” for a procedure he performed on September 20, 2016, but the code did not match the procedure he actually performed. (Plea Agreement ¶ 8.) Although he had performed a simple “excisional node biopsy,” he selected the CPT Code for a more complex and higher-paying procedure. (Id.) This conduct resulted in the submission of a false insurance claim to the health insurer, who paid the claim. (Id.) According to the plea agreement, Castro knowingly used this false statement “in connection with the delivery of or payment for health care services.” (Id.)

In at least three different sections, the plea agreement noted that conduct alleged in other counts of the indictment would be relevant for Castro's sentence, even though he was not pleading guilty to those counts. For example, the agreement stated:

Defendant further agrees that the health care fraud schemes alleged in Counts 1 to 34 of the Indictment constitute relevant conduct to his offense of conviction under USSG § 1B1.3 for purposes of sentencing and restitution. Defendant understands that the Government will provide factual information to the Probation Officer regarding the conduct underlying counts 1 to 34 that will be included in the Presentence Report and that he cannot object to those facts for purposes of his sentencing, including sentencing loss; however, Defendant may request that the Probation Officer supplement that factual information with additional facts about counts 1 to 34.

(Id. ¶ 8.) Elsewhere, it provided that the restitution Castro would have to pay “is not restricted to the amounts alleged in the Indictment to which [he] is pleading guilty.... [T]he restitution amount is at least $250,000.00, but . . . the final restitution amount will be determined by the Court at sentencing.” (Id. ¶ 4.) Later, it stated that, for purposes of calculating the Sentencing Guidelines, the loss attributable to Defendant's conduct exceeded $250,000.00, and “the health care fraud schemes alleged in the Indictment that Defendant agrees constitute relevant conduct for sentencing purposes.” (Id. ¶ 14(a).)

Castro signed the agreement, affirming that he entered into it “freely, knowingly, and voluntarily[.]” (Id. ¶ 22.) He also affirmed that he had read and “carefully discussed every part of” the agreement with his attorney, that he understood it, that he had not been threatened or forced to enter into the agreement, and that he was “satisfied with the representation of [his] attorney in this matter.” (Id., PageID.895.)

D. Castro Emails Former Employer

About two days after signing the plea agreement, Castro sent an email to his former employer, Bronson Healthcare, urging it to compensate him for the “financial penalty” that he would incur as a result of his conviction. (3/21/2023 Email, ECF No. 127-1, PageID.908.) He stated that, “due to financial hardship, with [his] attorney's advice, [he] had to reach a settlement agreement” with the Government. (Id.) Regarding the September 2016 procedure mentioned in the plea agreement, Castro acknowledged removing lymph nodes, but he appeared to minimize his responsibility for submitting a false statement, stating, “Unfortunately, I clicked the wrong CPT code on EPIC[.]” (Id.)

Regarding the financial consequences of his conviction, he noted that his financial penalty “will be determined by the judge during sentencing,” but it was estimated to be “between $250,000 - $500,000[.]” (Id.) He urged Bronson to pay this penalty and his defense costs, arguing that Bronson should “recognize[] [its] responsibility” for his situation, which resulted from “the lack of oversight and the perpetuation of baseless allegations by certain Bronson Healthcare employees.” (Id.)

On March 29, 2023, the Government informed the Court about this email, arguing that it demonstrated Castro had not accepted acceptance of responsibility. (See Govt's Notice Regarding Developments ¶ 3, ECF No. 127.) The Government indicated that it would oppose Castro's request for a reduction in his offense level for acceptance of responsibility.

E. Plea Hearing

The Court held a plea hearing on April 3, 2023. At the hearing, the Court asked Castro's attorney, Chapman, whether Castro intended to plead guilty in light of the email he sent to his former employer. Chapman represented that Castro had “panicked” after signing the plea agreement and “wrote a very ill-advised e-mail,” but that Castro still intended to plead guilty. (Plea Hr'g Tr. 3, ECF No. 133.) Chapman also represented that Castro was aware that the Government intended to argue that he does not qualify for a reduction of his offense level for acceptance of responsibility. (Id. at 4.)

The Court asked the parties whether there had been any agreement on the amount of restitution Castro would be expected to pay, and Chapman represented that they intended to reach an agreement on that issue, but the Government had not yet had the opportunity to review all the patient files that it would use for its calculation. (Id. at 5.) The Government reiterated that Counts 1 through 34 of the indictment would be considered relevant conduct for purposes of determining restitution, and that its only agreement with Defendant at that time about restitution was that the “floor” would be $250,000; it would attempt to work with Defendant over the next few months “to agree to how much additional financial harm was caused during February of '15 and May of '17 when this scheme that he's admitted to occurred[.]” (Id. at 8.)

Castro was then placed under oath. Castro affirmed that he “had the chance to discuss [the plea agreement] thoroughly” with his attorney and that he “had enough time to discuss thoroughly with [his attorney] what [his] situation is, what [his] choices are, and [his] decision to plead guilty[.]” (Id. at 13.) Castro affirmed that his attorney was able to answer Castro's questions “to [Castro's] satisfaction” and that Castro was “satisfied overall with the advice and the representation” he had received. (Id.) Castro also affirmed that he understood the rights he was waiving by entering his plea as well as the penalties for the offense to which he would be pleading guilty, and that he made his choice to plead guilty “freely and voluntarily,” without threats or force from others. (Id. at 16-20.)

The Government then highlighted portions of the plea agreement, including Castro's agreement to cooperate with the Government, Castro's agreement to repay Medicare and Medicaid, and Castro's surrender of his medical license. (Id. at 22-24.) In particular, as to Castro's obligation to pay restitution, the Government noted that Castro agreed that his obligation would be at least $250,000, but the final amount-to be determined by the Court at his sentencing- would likely be higher. (Id. at 22.) The Government also noted that Castro had agreed that his conduct in the counts 1 through 34 of the indictment would be considered “relevant conduct” at sentencing and that he would not contest the factual basis for those counts. (Id. at 24.)

After the Government's presentation, Castro affirmed under oath that he had read the entire agreement, he understood all its terms, there was nothing in the agreement he did not understand or had questions about, and nothing the Government had said about it surprised him. (Id. 26-27.) He also affirmed his understanding that other...