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United States v. Palin

United States District Court, W.D. Virginia, Abingdon Division

August 2, 2016

BETH PALIN, ET AL., Defendants.

          Janine M. Myatt, Special Assistant United States Attorney, and Zachary T. Lee, Assistant United States Attorney, Abingdon, Virginia, for United States;

          Michael J. Khouri, Khouri Law Firm, Irvine, California, for Defendant Beth Palin;

          Nancy C. Dickenson, Assistant Federal Public Defender, Abingdon, Virginia, for Defendant Joseph D. Webb.


          James P. Jones United States District Judge

         The remaining defendants in this criminal case, Beth Palin and Joseph D. Webb, have separately filed motions for judgment of acquittal, or for a new trial in the alternative, challenging their convictions of healthcare fraud and conspiracy to commit healthcare fraud. For the following reasons, I will deny the motions.


         The facts of this case are set forth in detail in my earlier opinion stating my findings following a bench trial (Op., Apr. 7, 2016, ECF No. 297) and I will not repeat them here. Palin owned both Mtn. Empire Medical Care LLC (“MEMC”), an addiction medicine clinic, and Bristol Laboratories, LLC (“Bristol Labs”), the lab that processed the urine drug screens ordered for patients of MEMC and patients of a deceased coconspirator, Charles K. Wagner, M.D. Webb, Palin’s husband, was not an owner of the clinic but held himself out as one and was heavily involved in the operation of both MEMC and Bristol Labs. The government alleged and proved, in a nonjury trial, that Palin and Webb devised a scheme to defraud Medicare, two state Medicaid programs, and various private insurers by conducting and billing for urine drug screens that they knew were not medically necessary.

         Palin seeks acquittal or a new trial on two grounds: (1) that the Supreme Court’s recent decision in Universal Health Services, Inc. v. United States, 136 S.Ct. 1989 (2016), altered the applicable law, and (2) that there was insufficient evidence to support her conviction. Webb’s post-trial motion asserts that the evidence was insufficient to support his conviction. The motions have been fully briefed and are ripe for decision. I will dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not significantly aide the decisional process.


         “[T]here is only one ground for a motion for judgment of acquittal. This is that the evidence is insufficient to sustain a conviction of one or more of the offenses charged in the indictment or information.” United States v. Hoover-Hankerson, 406 F.Supp.2d 76, 81-82 (D.D.C. 2005) (citation omitted), aff’d, 511 F.3d 164 (D.C. Cir. 2007). “A defendant challenging the sufficiency of the evidence faces ‘a heavy burden.’” United States v. Thorne, 614 F. App’x 646, 647 (4th Cir. 2015) (unpublished) (quoting United States v. McLean, 715 F.3d 129, 137 (4th Cir. 2013)).

         On review of a motion for acquittal under Rule 29, the court “must sustain the verdict if there is substantial evidence” to uphold the verdict. Burks v. United States, 437 U.S. 1, 17 (1978). In the context of a criminal conviction, the Fourth Circuit has defined substantial evidence as “that evidence which ‘a reasonable finder of fact could accept as adequate and sufficient to support a conclusion of a defendant’s guilt beyond a reasonable doubt.’” United States v. Newsome, 322 F.3d 328, 333 (4th Cir. 2003) (quoting United States v. Burgos, 94 F.3d 849, 862-63 (4th Cir. 1996) (en banc)). The court must consider “circumstantial as well as direct evidence.” United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir. 1982).

         Federal Rule of Criminal Procedure 33(a) provides, “Upon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires. If the case was tried without a jury, the court may take additional testimony and enter a new judgment.” “The issue of whether to grant a new trial is firmly committed to the discretion of the trial court.” United States v. Head, Nos. 94-5858, 94-5859, 94-5906, 94-5907, 1996 WL 60445, at *2 (4th Cir. Feb. 12, 1996) (unpublished).

         Because this case was decided by the court after a bench trial, I have already thoroughly reviewed the evidence and concluded that it was sufficient to convict the defendants. Palin argues that there was insufficient evidence of fraud because “the Government failed to provide evidence to the trier of fact of any material lie, misrepresentation, or misleading act or omission.” (Def. Beth Palin’s Mot. for J. of Acquittal or, In the Alternative, New Trial 15, ECF No. 338.) I disagree with this assessment of the evidence. Palin committed fraud when she developed a scheme by which her subordinates and agents, who were not medical professionals, would order and bill for medically unnecessary urine drug screens that were not used in patient treatment. By submitting claims for payment, Palin misrepresented that the tests had been ordered for individual patients by physicians based on medical necessity, as the insurers required, when in fact the orders were usually completed by non-physician staff members automatically, at Palin’s direction, without any individually determined medical need for the tests. The various healthcare benefit programs prohibited Bristol Labs from submitting claims for medically unnecessary services and would not have paid for the urine drug screens had they known the tests were medically unnecessary. That is sufficient evidence to support a conviction of health care fraud. The evidence further showed that Palin entered into an agreement with Webb and Wagner and took acts in furtherance of that agreement, supporting her conviction of conspiracy to commit health care fraud.

         Webb contends that he is entitled to judgment of acquittal because “the government did not prove that Medicare was a health care benefit program affecting commerce as defined in the statute because there was not adequate testimony about commerce.” (Renewed Mot. for J. of Acquittal or In the Alternative Mot. for New Trial 1-2, ECF No. 339.) For purposes of the health care fraud statute, a “health care benefit 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 service for which payment may be made under the plan or contract.” 18 U.S.C. § 24(b). “Courts have interpreted ‘affecting commerce’ to mean affecting interstate commerce.” United States v. Natale, 719 F.3d 719, 732 n.5 (7th Cir. 2013). Courts of appeal that have considered challenges like Webb’s have found sufficient evidence of interstate commerce where the record showed that: (1) defrauded insurance companies were based out of state and did business throughout the United States, United States v. Gelin, 712 F.3d 612, 620 (1st Cir. 2013); (2) the federal government funded 60% of a defrauded state Medicaid program, United States v. Kpohanu, 377 F. App’x 519, 523 (6th Cir. 2010) (unpublished); and (3) “the fraud was to Medicaid, a federally funded program that affects commerce, ” United States v. Girod, 646 F.3d 304, 316 (5th Cir. 2011). Indeed, the Fifth Circuit has stated,

[I]t cannot seriously be contended that Medicare and Medicaid do not affect commerce. The provision of medical services affects interstate commerce because both physicians and hospitals serve nonresident patients and receive reimbursement through Medicare payments, and the regulated activity in this case substantially affects commerce and is linked to interstate commerce.

United States v. Ogba, 526 F.3d 214, 238 (5th Cir. 2008) (internal quotation marks, footnotes, and ...

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