Filed: Nov. 09, 2020
Latest Update: Nov. 10, 2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-10963 August 12, 2020
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee
v.
TERRY LYNN ANDERSON; ROCKY FREELAND ANDERSON,
Defendants - Appellants
Appeals from the United States District Court
for the Northern District of Texas
Before DENNIS, SOUTHWICK, and HO, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
Following a 10-day jury trial, the defendants were convicted of multiple
counts of health care fraud and multiple counts of aggravated identity theft
based on their submission of fraudulent insurance claims. On appeal, the
defendants argue there was insufficient evidence to sustain conviction. We
AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
Terry Anderson owned an optical and hearing aid business, Anderson
Optical and Hearing Aid Center (“AOHAC”), in Tarrant County, Texas, which
employed his son Rocky Anderson. AOHAC provided both eyewear and
No. 19-10963
hearing aids to individuals from its Arlington and Bedford locations. This case
concerns hearing aids.
In Texas, three types of health care professionals may perform certain
hearing tests and dispense hearing aids: physicians, audiologists, and fitters
and dispensers. Generally, a physician who is an ear, nose, and throat
specialist must have an undergraduate degree and a medical degree, and
complete a residency program, while an audiologist must have both an
undergraduate and a graduate degree. A fitter and dispenser must have a high
school diploma and pass a licensing examination administered by the Texas
Department of Licensing and Regulation. TEX. OCC. CODE §§ 402.202–203.
Consistent with the varying education requirements, the roles of these
professionals differ. Physicians and audiologists are licensed to conduct
examinations, make medical diagnoses, and dispense hearing aids, while
fitters and dispensers are licensed to “measure[] . . . human hearing . . . to
make selections, adaptions, or sales of hearing instruments.” TEX. OCC. CODE
§ 402.001(4).
Both Terry and Rocky Anderson are licensed hearing aid fitters and
dispensers. We use their first names when necessary to distinguish and use
the Andersons when it is not. Terry worked at the AOHAC Arlington location,
Rocky at the AOHAC Bedford location.
In 2012 and 2013, Blue Cross Blue Shield of Texas (“BCBS”) received
over 2000 claims from AOHAC, an in-network provider for BCBS, for hearing
aids ordered for American Airlines employees and family members of
employees. Although the parties offer competing reasons for this number of
claims, they do not dispute that this was a drastic increase from previous years.
This surge in claims caught the attention of American. Following an internal
investigation, American instructed BCBS, the contracted third-party
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administrator of American’s self-funded employee health insurance plan, to
stop paying claims for hearing aids from AOHAC.
BCBS contacted the Federal Bureau of Investigation regarding the
claims it received from AOHAC in 2012 and 2013. Following a criminal
investigation, Terry and Rocky were indicted in federal court in the Northern
District of Texas for one count of conspiracy to commit health care fraud in
violation of 18 U.S.C. § 1349, ten counts of health care fraud and aiding and
abetting in violation of 18 U.S.C. §§ 1347 and 2, and four counts of aggravated
identity theft and aiding and abetting in violation of 18 U.S.C. §§ 1028A and
2. The indictment alleged that the two men “conspired to defraud, and did
defraud” BCBS and that “BCBS was a ‘health care benefit program’ as defined
by 18 U.S.C. § 24(b), that affected commerce, and as that term is used in 18
U.S.C. § 1347.” The aggravated identity theft charges were based on the
wrongful use of another person’s identification during the commission of the
health care fraud offenses. A jury trial on the charges took place from February
20 to March 8, 2018.
During trial, it was established that American offered health insurance
to its employees under the airline’s self-funded health insurance plan (“Plan”).
American drafted the benefits and offered, provided, and paid for the benefits.
Benefits were paid out of American’s coffers. BCBS’s role was to be the Plan
administrator, which required processing paperwork, making available its
network of providers like AOHAC, and paying claims in accordance with
American’s benefits. American reimbursed BCBS weekly for paid claims and
paid BCBS a monthly administrative fee.
At the close of the Government’s case-in-chief, both Andersons moved for
judgments of acquittal under Federal Rule of Criminal Procedure 29, arguing
there was insufficient evidence to prove conspiracy to commit health care
fraud, health care fraud, and aggravated identity theft. The district court
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requested briefing from the Government and carried the motions for acquittal
with the case. At the close of all the evidence, the Andersons renewed their
motions, which the district court again carried with the case. The jury found
Terry guilty on all counts and found Rocky guilty on all counts except two
substantive counts of health care fraud.
Following their respective guilty verdicts, the Andersons renewed their
motions for judgments of acquittal on the basis that the evidence was
insufficient. The district court granted an acquittal of conspiracy to commit
health care fraud and of one substantive count of health care fraud. In denying
acquittal as to the remaining counts of conviction, the district court concluded
that although American provided the benefits and services under the Plan,
BCBS qualified as a health care benefit program because it acted as American’s
agent regarding the Plan. The district court held that the evidence was
sufficient to convict both Andersons of health care fraud because the insurance
claims submitted by AOHAC included an implicit misrepresentation of
“medical necessity” and that the evidence was also sufficient to sustain a
conviction for aggravated identity theft. Terry was convicted of nine counts of
health care fraud and aiding and abetting, and four counts of aggravated
identity theft and aiding and abetting. Rocky was convicted of seven counts of
health care fraud and aiding and abetting, and four counts of aggravated
identity theft and aiding and abetting.
The district court sentenced Terry to 96 months of imprisonment
followed by 3 years of supervised release and ordered $13,688,214.34 in
restitution to BCBS pursuant to the Mandatory Victims Restitution Act of
1996, which Terry was ordered to pay jointly and severally with Rocky. The
district court sentenced Rocky to 84 months of imprisonment followed by 3
years of supervised release and ordered $8,443,054.29 in restitution, to be paid
jointly and severally with Terry, to BCBS.
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DISCUSSION
The only appellate issues concern the sufficiency of evidence. Our review
of the denial of a motion for a judgment of acquittal challenging the sufficiency
of the evidence is de novo. United States v. Ganji, 880 F.3d 760, 767 (5th Cir.
2018). We will affirm a jury verdict “unless, viewing the evidence and
reasonable inferences in light most favorable to the verdict, no rational jury
could have found the essential elements of the offense to be satisfied beyond a
reasonable doubt.”
Id. (quotation marks omitted). We first review the evidence
as to health care fraud, then that on aggravated identity theft.
I. Health care fraud
To support a conviction under 18 U.S.C. § 1347, the Government must
prove that the defendant “knowingly and willfully executed ‘a scheme or
artifice — (1) to defraud any health care benefit program; or (2) to obtain, by
means of false or fraudulent pretenses, representations, or promises,’ any
health care benefit program’s money in connection with the delivery of or
payment for health care services.” Ganji, 880 F.3d at 777 (quoting 18 U.S.C.
§ 1347(a)). On appeal, both defendants argue the Government failed to prove
essential elements of the offense of health care fraud, namely, that BCBS is a
health care benefit program under these facts and that any fraud occurred.
A. Health care benefit program
An essential element of health care fraud is that the fraud was
perpetrated on a health care benefit program. See § 1347(a)(2). Such a
program is “any public or private plan or contract, affecting commerce, under
which any medical benefit, item, or service is provided to any individual, and
includes any individual or entity who is providing a medical benefit, item, or
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No. 19-10963
service for which payment may be made under the plan or contract.” 18 U.S.C.
§ 24(b).
In their motions for acquittal, the Andersons argued that BCBS, as the
third-party administrator of American’s Plan, did not meet the statutory
definition of a health care benefit program. The district court held that there
was sufficient evidence for a rational juror to conclude that BCBS was a health
care benefit program because “BCBS was the agent of [American], such that
any conduct on BCBS’s part was attributable to” American. We will discuss
two out-of-circuit opinions that the district court relied on for its conclusion.
A Pennsylvania district court opinion dealt with a defendant who was
indicted for defrauding the principal, i.e., Medicare, not a third-party
administrator. United States v. McGill, No. 12-112-01, 2016 WL 8716240, at
*1–2 (E.D. Pa. May 13, 2016). The district court reasoned that the third-party
administrator could be viewed as an agent of Medicare and any actions the
administrator took could be attributable to Medicare.
Id. at *6–7. Thus, there
was sufficient evidence to show that, by submitting claims to the third-party
administrator, the defendant had defrauded Medicare.
Id. McGill is not
particularly helpful because the facts there would be equivalent to this case
only if the indictment here concerned defrauding American rather than BCBS.
The other case relied on by the district court is an unpublished Fourth
Circuit opinion. United States v. Makarita, 576 F. App’x 252 (4th Cir. 2014).
The defendant was charged with health care fraud for submitting fraudulent
claims for dental services to the third-party administrator of an employer’s
self-funded insurance plan. Id. at 254. The administrator would pay the claim,
and the employer would reimburse the administrator.
Id. at 257–58. That
court held that the administrator was the agent for the health care plan
provider, which meant any fraud on the administrator was fraud on the health
care benefit program.
Id. at 264. We find it unnecessary to embrace what
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appears to be a novel approach of applying agency principles in deciding what
is a health care benefit program under Section 1347.
Setting aside the caselaw on which the district court relied, we start with
the statutory definition of “health care benefit program,” which is “any public
or private plan or contract, affecting commerce, under which any medical
benefit, item, or service is provided to any individual, and includes any
individual or entity who is providing a medical benefit, item, or service for
which payment may be made under the plan or contract.” § 24(b).
The Andersons argue that BCBS cannot be a health care benefit program
because the plan under which medical benefits were provided was not an
American Plan, and BCBS did not provide any medical benefit or service. So
restrictive a reading of the statute is inconsistent with our caselaw. For
example, we once interpreted Section 24(b) as including automobile insurance
companies. United States v. Collins, 774 F.3d 256, 260 (5th Cir. 2014). There,
the defendants were convicted of counts of conspiracy to commit health care
fraud.
Id. at 259. On appeal a defendant argued that the automobile insurance
companies he defrauded did not meet the definition of “health care benefit
program.” We disagreed. “To the extent automobile insurers pay for medical
treatment, they are health care benefit programs under the statute.”
Id. at
260. The specifics of that application of the statute are not terribly important
for us, but its direction to apply a broad meaning to “health care benefit
program” is relevant guidance.
The definition in Section 24(b) of a “health care benefit program” begins
with categorizing the term broadly as a “public or private plan or contract,
affecting commerce.” § 24(b). The “program,” thus, is the plan or contract
under which medical benefits to an individual are provided. The definition
continues by saying the program includes an “entity who is providing a medical
benefit, item, or service.” Id. American entered a contract to allow BCBS to
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No. 19-10963
administer American’s Plan. Under the terms of that contract, BCBS agreed
to process claims, make available its network of providers, and pay claims in
accordance with American’s benefits. American agreed to reimburse BCBS
weekly for the claims BCBS paid and to pay BCBS a monthly administrative
fee for its services.
Under the plain text of the statute, an administrator’s payment to a
health care provider who has furnished services or equipment to an individual
is the provider of a “medical benefit, item, or service.” BCBS under this Plan
was a health care benefit program as defined by Section 24(b). That is so even
if American was also such a program.
B. Sufficiency of the evidence
The Andersons insist the evidence was insufficient to sustain their
convictions of health care fraud because of the absence of any evidence that
they made any explicit or implicit fraudulent representations, that they had
the intent to defraud, or that their alleged false representations were
material.1 We look at each claimed shortfall.
1. Implied representation of medical necessity
According to the district court, by submitting the insurance claims forms
(“CMS1500 forms”), the Andersons implicitly represented the hearing aids
they were dispensing were medically necessary. The Andersons argue that
implicit health care fraud is not cognizable. They provided no caselaw, and we
found none, to support their argument. There is law as to fraud committed for
a different purpose, mainly against a bank, which may be proven with implicit
misrepresentations. United States v. Briggs, 965 F.2d 10, 12 (5th Cir. 1992).
1 Although both defendants were convicted of health care fraud and aiding and
abetting, they waived challenges to their aiding and abetting convictions by failing to brief
the issue in an adequate manner. See United States v. Martinez, 263 F.3d 436, 438 (5th Cir.
2001).
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No. 19-10963
We conclude that an implicit misrepresentation theory of health care fraud is
valid.
We next consider the evidence to determine whether “any rational trier
of fact could have found the essential elements of the crime beyond a
reasonable doubt.” United States v. Kuhrt, 788 F.3d 403, 413 (5th Cir. 2015).
“Our review is limited to whether the jury’s verdict was reasonable, not
whether we believe it to be correct.”
Id. (quotation marks omitted).
Nonetheless, we acknowledge as we start our summary that there is not much
evidence on the question of whether submission of CMS1500 forms implied
that hearing aids were medically necessary.
The language in American’s pre-2014 Plan was not clear as to whether a
determination of medical necessity was required for hearing aids. The
CMS1500 form did not ask a provider whether a service or item was medically
necessary. Nonetheless, three BCBS employees and one American employee
testified that BCBS would not pay a claim unless the service or item provided
was medically necessary. One of the witnesses was the BCBS employee who
managed the processing of claims for American in 2011, 2012, and 2013. She
testified that any type of claim to be paid on an insurance policy must be
medically necessary. The American Plan, as she understood it, required
hearing exams and hearing aids to be medically necessary. The BCBS medical
director in Texas for managed care testified that she was not aware of any
item, service, prescription drug, or anything else for which BCBS provides a
benefit that was not required to be medically necessary, including hearing aids.
The director of special investigations for BCBS testified that BCBS does not
pay for claims unless they are medically necessary. Similarly, the senior
manager of benefit strategy for American testified that if a medical service or
supply is not medically necessary, then it is not covered by American’s Plan,
including hearing aids.
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The parties presented competing testimony as to whether the Andersons,
as licensed hearing aid fitters and dispensers, could make a determination of
medical necessity at all. Although there was testimony that no objective test
existed to determine medical necessity, there was also testimony that BCBS
listed a standard group of tests on its website for providers to use in their
“initial work-up of a patient with hearing impairment.” These standard tests
remain a source of disagreement because, as pointed out during trial, fitters
and dispensers are not authorized to conduct all the tests on this list. Further,
the district court decided not to instruct the jury regarding medical necessity.
In so deciding, the district court stated that the issue of whether medical
necessity was required was “clear as mud.”
Because we resolve conflicting evidence in favor of the jury’s verdict, see
United States v. Moreno-Gonzalez, 662 F.3d 369, 372 (5th Cir. 2011), we
conclude that the jurors were not irrational in finding that the submission of
CMS1500 forms implied medical necessity. To hold the Andersons criminally
liable for these implicit representations, though, the Government must provide
evidence that they executed a fraudulent scheme to defraud BCBS with
knowledge that the relevant hearing aids were not medically necessary. See
§ 1347. That is the next evidentiary issue.
2. Intent to defraud
The Andersons argue they lacked the specific intent to defraud BCBS
because they had no knowledge of the requirement that all claims submitted
to BCBS must be medically necessary. The district court provided the jury
with an instruction regarding the requisite criminal intent to defraud. The
court explained that a defendant “acts with the ‘requisite intent to defraud’ if
the defendant acted knowingly and with the specific intent to deceive.” The
district court further instructed the jury that an honestly held opinion or belief
cannot constitute fraudulent intent even if that opinion or belief is mistaken.
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The court explained that “evidence of a mistake in judgment, an error in
management, or carelessness cannot establish fraudulent intent. But an
honest belief does not constitute good faith if the defendant intended to deceive
others by making representations the defendant knew to be false or
fraudulent.”
The jury was presented with competing evidence regarding the
Andersons’ knowledge of this medical necessity requirement. It does not
matter whether the defendants personally filled out or submitted the forms for
the claims. Culpable participation in healthcare fraud can exist regardless of
whether someone else prepared or submitted the fraudulent documentation.
United States v. Umawa Oke Imo, 739 F.3d 226, 235 (5th Cir. 2014). The
evidence at trial was that the office managers for the Arlington and Bedford
locations would fill out and submit the CMS1500 forms only after one of the
Andersons instructed them to do so.
Although Terry testified that no one at BCBS ever communicated with
him on how to fill out CMS1500 forms or discussed with him the “sort of tests”
he would conduct before dispensing hearing aids, the jury was presented with
evidence from which it could infer fraudulent intent. For example, the jury
could have credited the testimony of the Government’s expert witness who
testified that it is generally known by those recommending hearing aids that
medical necessity must be shown to submit an insurance claim. The jury also
could have credited the testimony of two licensed fitters and dispensers who
each testified that fitting an individual for hearing aids involves more than
just a pure tone test, which was often the only test conducted by the Andersons
on the American employees. In fact, both fitters and dispensers testified that
a pure tone test was commonly used to screen an individual’s hearing and not
to fully test that person’s hearing.
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No. 19-10963
Undisputed at trial was the fact that it takes anywhere from 30 minutes
to an hour to conduct a full hearing test. Conflicting evidence existed in this
case regarding the amount of time the Andersons spent testing individuals for
hearing aids. Terry testified that both he and Rocky spent at least 25 to 30
minutes, “if not slightly more,” testing the hearing of each individual during
airport visits. Other evidence was that Rocky was not adequately testing
individuals for hearing aids and at times spending “ten minutes or less”
testing. Jurors could have placed weight on an exchange between Terry and
the prosecutor regarding a specific day in 2012 where AOHAC submitted 102
claims to BCBS. It was during this colloquy that the prosecutor established
that for AOHAC to submit 102 claims in one day, Terry and Rocky would had
to have tested approximately 170 individuals. Based on Terry’s testimony that
he and Rocky worked 14-hour days testing individuals at the airport, the
prosecutor calculated that, on this particular day in 2012, the Andersons would
have had to spend under 10 minutes testing each individual in order to test
170 American employees.
Moreover, even assuming that a pure tone test alone is sufficient to test
whether hearing aids were medically necessary, the jury heard evidence that
undermined the reliability of the Andersons’ airport tests. Multiple witnesses
testified that pure tone tests must be conducted in a sound-proof environment,
and failure to do so could result in an invalid test. At minimum, the evidence
was that if testing is conducted outside of a sound-proof environment, then an
ambient-noise test should be conducted to measure background noise. During
their airport visits, though, the Andersons neither tested in a sound-proof
environment nor conducted an ambient noise test.
Last, the jury was presented with considerable evidence that the
Andersons falsified client records. On multiple occasions, for example, certain
test scores were recorded for clients even though the tests used to produce such
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scores were never conducted. There was evidence of multiple occasions in
which BCBS was billed for hearing aids for individuals who were never tested
at all. The billing documents were signed by either Terry or Rocky.
Accordingly, the jury could have reasonably inferred that the Andersons acted
with the requisite criminal intent based on the prosecution’s presentation of
falsified client files. See United States v. Sanjar, 876 F.3d 725, 746 (5th Cir.
2017) (concluding that falsification of medical charts amounted to strong
indicia of fraud).
The Andersons compare their case to one in which we reversed
convictions for health care fraud and aiding and abetting, holding there was
insufficient proof of knowledge. Ganji, 880 F.3d at 777–78. We found
insufficient evidence to support a defendant’s conviction for health care fraud
because the evidence supported an inference that a patient was not actually
homebound but did not support “a second inference that [the defendant] knew
the patient was not homebound.”
Id. In Ganji, the defendant doctor rarely
personally visited the patients she certified for home care.
Id. at 771. Both
Andersons here at least purported to be the ones actually testing American
employees for whom they recommended hearing aids.
We accept the credibility choices and inferences made by the jury. The
evidence was sufficient to find that the Andersons acted with the specific intent
to defraud BCBS. See Umawa Oke Imo, 739 F.3d at 235.
3. Materiality
Last, the Andersons argue there was insufficient evidence to support
their convictions because any implicit misrepresentation of medical necessity
was immaterial to BCBS’s decision to pay AOHAC’s claims. This argument
fails because the jury heard and must have accepted testimony that BCBS
would not pay for a service or item that was not medically necessary. See id.
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No. 19-10963
II. Aggravated identity theft
Both Andersons were convicted of four counts of aggravated identity
theft. To sustain a conviction of aggravated identity theft, the Government
must prove defendants “(1) knowingly used (2) the means of identification of
another person (3) without lawful authority (4) during and in relation to a
felony enumerated in 18 U.S.C. § 1028A(c).” United States v. Mahmood, 820
F.3d 177, 187 (5th Cir. 2016).
The Andersons first argue there is insufficient evidence to sustain their
convictions of aggravated identity theft because there was insufficient evidence
of health care fraud, the underlying felony. We have already held otherwise.
Next, the Andersons argue the evidence at trial was insufficient to
connect either one of them to the clients named in counts 12 through 15. The
Government identifies what it says is that evidence. Christine Rea, the client
in count 12, testified that she thought Terry conducted her hearing test, and
Rocky’s signature appears in her client file, signing off on a test that he did not
conduct. Trever Wasiqi, named in count 13, did not testify at trial. Wasiqi’s
parents, however, testified that Trever’s hearing was never tested at AOHAC.
Nonetheless, a CMS1500 form was submitted by AOHAC to BCBS for hearing
aids for Wasiqi, and BCBS paid the claim. The CMS1500 form that was
submitted by AOHAC for Wasiqi’s hearing aids was signed by Terry and
included the address of the Bedford location, where Rocky worked. Belete
Chekol, the patient named in count 14, testified that he signed up for a hearing
test while at work. According to Chekol, he gave two men, a father and son,
his insurance card and they made a copy of it. At trial, Chekol indicated the
Andersons were the two men he spoke with regarding a hearing test. Although
Chekol did not have his hearing tested that day and was never contacted to
schedule a test, BCBS was billed for hearing aids that Chekol never received.
In Chekol’s client file, Rocky’s handwritten initials are on a document
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No. 19-10963
apparently signing off on a hearing test that Rocky never conducted. Last,
Govardhan Ramachandran, named in count 15, testified that he had his
hearing tested during a health fair at the airport. The AOHAC Bedford office
calendar indicated that Rocky was conducting hearing tests at the airport on
the day Ramachandran was tested, and Ramachandran testified that a white
male in his thirties conducted his hearing test. Rocky fits this description.
Although a purchase agreement listed Terry as the dispenser of
Ramachandran’s hearing aids, Ramachandran testified that he never picked
up the hearing aids in question because he did not need them.
There is direct or circumstantial evidence linking both Andersons to the
clients identified above. It would not be irrational for a jury to find the
evidence was sufficient to convict the Andersons for aggravated identity theft.
AFFIRMED.
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