United States v. Luna

968 F.3d 922

UNITED STATES of America Plaintiff - Appellee

v.Carlos Patricio LUNA Defendant - Appellant

United States of America Plaintiff - Appellee

v.Preston Ellard Forthun Defendant - Appellant

United States of America Plaintiff - Appellee

v.Abdisalan Abdulahab Hussein Defendant - Appellant

No. 18-1814

No. 18-3302

No. 18-3304

United States Court of Appeals, Eighth Circuit.

Submitted: October 17, 2019

Filed: August 10, 2020

Rehearing and Rehearing En Banc Denied October 1, 2020

Counsel who presented argument on behalf of appellant Preston Forthun was Andrew S. Birrell of Minneapolis, MN. Also appearing on Forthun's brief was Ian S. Birrell of Minneapolis, MN.

Counsel who presented argument on behalf of appellant Abdisalan Hussein was Rabea Jamal Zayed of Minneapolis, MN.

Counsel who presented argument on behalf of appellant Carlos Luna was Charles L. Hawkins, of Minneapolis, MN.

Counsel who presented argument on behalf of the appellee USA was Michael L. Cheever, AUSA, of Minneapolis, MN.

Before LOKEN, SHEPHERD, and STRAS, Circuit Judges.

STRAS, Circuit Judge.

This case is about a recruitment-and-kickback scheme involving car-accident victims, a chiropractic clinic, and automobile insurers. Three members of the scheme were convicted of mail and wire fraud. In these consolidated appeals, the defendants’ convictions stand, but we send several sentencing issues back for another look.

I.

Before delving into the issues on appeal, we begin with a description of the fraud itself and the legal backdrop against which it operated.

A.

Minnesota has a unique no-fault automobile-insurance system. Among other things, the No-Fault Act requires every insurer to provide a minimum of $20,000 per person to cover "reasonable" and "necessary" medical expenses, regardless of who is at fault for an automobile accident.

Minn. Stat. § 65B.44, subd. 1(a), 1(a)(1), 2(a). What this means is that insurers pay the medical expenses of their own policyholder. Minn. Stat. § 65B.42(1).

From the perspective of health-care providers, there is much to like. Reimbursements often exceed those from other sources, and there is no limit on the number of times a policyholder can seek treatment for an injury. It is true that insurers have ways of uncovering whether medical treatment is unreasonable or medically unnecessary, such as by requiring a policyholder to provide further information under oath or undergo an independent medical examination. Minn. Stat. § 65B.56, subd. 1. But absent a red flag suggesting possible fraud, insurance companies typically pay their bills because they assume that they can trust what providers send them.

There are other safeguards in the statutory scheme, too. For example, one provision bans certain "[u]nethical practices," including, with limited exceptions, "initiat[ing] direct contact" with accident victims in order to "influenc[e them] to receive treatment." Minn. Stat. § 65B.54, subd. 6(a). The prohibition also extends to having others—known in the industry as runners—recruit on a health-care provider's behalf. A "runner" is someone who is offered compensation for "directly ... solicit[ing] prospective patients ... at the direction of, or in cooperation with, a health care provider when [they] know[ ] or ha[ve] reason to know" that the purpose is to seek reimbursement under an automobile-insurance policy. Minn. Stat. § 609.612, subd. 1(c), (2) ; see Minn. Stat. § 65B.54, subd. 6(a)–(c) (providing exceptions). Once a runner recruits someone, all subsequent health-care services are "noncompensable and unenforceable as a matter of law." Minn. Stat. § 609.612, subd. 2.

B.

The specific cases before us revolve around one clinic in particular: the Comprehensive Rehab Centers of Minnesota, which was co-owned by two chiropractors, Dr. Preston Forthun and Dr. Darryl Humenny. From at least 2010 onward, Carlos Luna, Abdisalan Hussein, and others recruited accident victims to the clinic's two Minneapolis locations. Recruiters often identified prospects through accident reports purchased by the clinic and facilitated attendance by providing other services, such as transportation to and from appointments. The clinic paid them for their efforts.

Patients were also paid after they attended a certain number of sessions. The doctors would pay recruiters (typically in cash), who would then pay kickbacks to patients. Less frequently, accident victims approached the doctors directly and were brought into the cash-for-treatment scheme without the involvement of recruiters. In both cases, the hope was that a patient would eventually attend 30 to 40 sessions and exhaust the entire $20,000 guaranteed by the No-Fault Act.

The treatment for most patients was the same, regardless of their specific type of injury. Typically, it would involve an x-ray at the first exam, a treatment plan of three sessions weekly for four weeks, and then a second exam. Repeat, re-exam, repeat was the practice—until the doctors treated the patient "as many times as possible."

C.

Eventually, law enforcement caught on. Operation Backcracker, as it came to be known, targeted multiple health-care providers across the Twin Cities and led to a number of indictments. See, e.g. , United States v. Kidd , 963 F.3d 742 (8th Cir. 2020). Among those indicted were Forthun, Luna, and Hussein, who were charged with mail and wire fraud; conspiracy to commit both crimes; and aiding and abetting the conspiracy. 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 1349 (conspiracy), 2 (aiding and abetting). Dr. Humenny served as a key government witness at the defendants’ joint trial.

The jury found the defendants guilty on all counts. Forthun received five years in prison. Guilty as co-conspirators and accomplices to mail and wire fraud, Hussein and Luna received 15-month and time-served sentences, respectively. All three appeal their convictions, and Forthun and Hussein challenge their sentences.

II.

The first issue is the sufficiency of the evidence. The analysis begins with the mail- and wire-fraud statutes, which as relevant here, require an individual to have "devised or intend[ed] to devise any scheme or artifice to defraud" using mail or wire communication "for the purpose of executing" the scheme. 18 U.S.C. §§ 1341, 1343. The defendants start with the argument that the government never proved that there was a "scheme to defraud." And even if there were one, Luna and Hussein claim that they did not play a role in it. We review the sufficiency of the evidence de novo, "viewing [the] evidence in the light most favorable to the government, resolving conflicts in the government's favor, and accepting all reasonable inferences that support the verdict." United States v. Washington , 318 F.3d 845, 852 (8th Cir. 2003).

A.

We begin with the scheme-to-defraud requirement. A scheme is a "deliberate plan of action" or "course of conduct." United States v. Whitehead , 176 F.3d 1030, 1037–38 (8th Cir. 1999) (approving this definition in a jury instruction); United States v. Clapp , 46 F.3d 795, 803 (8th Cir. 1995) (same). "To defraud" someone requires material, affirmative misrepresentations or active concealment of material information for the purpose of inducing action. United States v. Steffen , 687 F.3d 1104, 1111, 1115 (8th Cir. 2012) ; see Neder v. United States , 527 U.S. 1, 22–23, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (explaining that the fraud statutes incorporate the materiality element of common-law fraud); Restatement (Second) of Torts §§ 525, 550 (Am. Law Inst. 1977). Taken together, the government had to prove that: (1) there was a "deliberate plan of action" or "course of conduct" to hide or misrepresent information; (2) the hidden or misrepresented information was material; and (3) the purpose was to get someone else to act on it. It proved all three here.

First, there was plenty of evidence "of planning" by those involved. United States v. Goodman , 984 F.2d 235, 237 (8th Cir. 1993) (citation omitted). Forthun and Humenny created an elaborate web of lies to keep insurance companies in the dark about their use of recruiters and kickbacks. One example from trial is particularly illustrative. During a routine inspection, an insurance company representative asked whether the clinic used runners to attract business. Rather than answering honestly, Forthun replied that they did not "approach him." The jury could have concluded that this misrepresentation, like many others, was part of a larger "plan" or "course of conduct" aimed at misleading insurers.

Active concealment also played a significant role. Recruiters were paid in cash to avoid a "paper trail." If insurance companies questioned patients, recruiters coached them on what to say, including how to respond to requests for information under oath or attendance at independent medical examinations. From all appearances, the operation was a well-oiled machine.

Second, the information withheld had "a natural tendency to influence, or [was] capable of influencing" an insurer's decision to pay. Neder , 527 U.S. at 16, 119 S.Ct. 1827 (citation omitted). Multiple insurance representatives testified at trial. The consistent theme was that the use of recruiters and kickbacks creates multiple concerns for insurers. One is that accident victims might seek treatment, not because they actually need it, but based on pressure from recruiters or a desire to put money in their own pockets. Another is that health-care providers may inflate their fees to cover the extra expenses from compensating recruiters and paying kickbacks to patients. It creates a vicious cycle: it costs money to get patients in the door, even more to keep them there, and insurers are left footing the bill.

All of this information had a bearing on whether insurers had to pay. If recruiters like Luna and Hussein qualified as "runners," then insurers had no obligation to reimburse the clinic for any services provided. Minn. Stat. § 609.612, subd. 2 ; Kidd , 963 F.3d at 745–48. It goes without saying...