United States v. Beverly

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 06-4855

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

KENNETH D. BEVERLY,

Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Henry E. Hudson, District
Judge. (3:05-cr-00526-HEH)

Argued: May 14, 2008 Decided: July 21, 2008

Before WILLIAMS, Chief Judge, NIEMEYER, Circuit Judge, and
Alexander WILLIAMS, Jr., United States District Judge for the
District of Maryland, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Andrea E. Gambino, Chicago, Illinois, for Appellant. Paul
Torzilli, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Appellee. ON BRIEF: Chuck Rosenberg, United States Attorney,
Alexandria, Virginia, Gurney Wingate Grant, II, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

Kenneth Beverly appeals his conviction for thirty-six counts

of health care fraud under 18 U.S.C. § 1347 (2008), and the 151-

month sentence imposed by the district court. Specifically,

Beverly contends that his conviction should be reversed because

there was insufficient evidence to sustain his conviction. In the

alternative, Beverly seeks re-sentencing on the ground that the

district court erred in its calculation of the appropriate advisory

sentencing guidelines, arguing that the court (1) incorrectly

applied a four-level enhancement to his offense level pursuant to

U.S. Sentencing Guidelines (“U.S.S.G.”) § 3B1.1 (2008), (2) erred

in increasing his offense level for abuse of trust pursuant to

U.S.S.G. § 3B1.3, and (3) erred in its calculation of the loss

amount pursuant to U.S.S.G. § 2B1.1(b). In addition, Beverly

questions the reasonableness of his sentence on the ground that the

district court failed to adequately consider the factors of 18

U.S.C. § 3553(a)(2008). After careful consideration of the record,

and finding no error, we affirm Beverly’s conviction and sentence.

I.

The evidence at trial, viewed in the light most favorable to

the government, see United States v. Allen, 491 F.3d 178, 185 (4th

Cir. 2007), revealed the following facts. Kenneth Beverly was the

founder, owner, and operator of Rights of Passage Enhanced, Inc.

2
(“ROPE”), a program designed to help individuals with mental

illnesses develop new skills and function in their living

environment. In 2001, ROPE became a licensed provider of

Psychosocial Rehabilitative Services (“PSRS”) under Medicaid.1

The Department of Medical Assistance Services (“DMAS”),

Virginia’s State Medicaid Agency, oversees healthcare providers who

furnish services to recipients qualified to receive Medicaid

benefits and is charged with ensuring that Medicaid pays only for

services properly rendered to eligible individuals. DMAS

periodically audits PSRS providers by conducting unannounced, on-

site utilization reviews of the providers’ facilities. On October

15-21, 2002, DMAS conducted a utilization review of ROPE, during

which DMAS found that ROPE was billing DMAS and receiving payments

for dozens of recipients who were not eligible to receive PSRS.

Recipients were deemed ineligible due to not having any mental

health diagnosis or due to suffering from mental or physical

impairments to such a degree that would prevent them from

benefitting from PSRS. DMAS employees also observed recipients

coloring and watching television, instead of engaging in an

activity-based program.

The utilization review concluded with a customary exit

interview, conducted by DMAS employee Karen Lawson (“Lawson”) on

1
Medicaid, administered by the state governments, is a federal
health care program that was established to provide healthcare to
low income individuals.

3
October 21, 2002. Lawson informed Beverly of the ineligibility

problems DMAS had detected, particularly the lack of mental health

diagnoses, such as dementia, which would make recipients ineligible

for the PSRS program. Beverly acknowledged that some of the ROPE

clients were ineligible for PSRS. Despite being informed of the

ineligibility problems, and also admitting to having knowledge of

some of those problems, Beverly continued to bill Medicaid for

patients who were ineligible to receive services offered by PSRS.

The thirty-six counts of health care fraud, which correspond to

Beverly’s conviction, resulted from claims paid by DMAS after the

exit interview. Many of those recipients were found to be

ineligible for the same reasons discussed during the exit

interview; eight of the recipients were the same individuals whose

charts were audited during the utilization review.

In addition to the continued submissions of claims to Medicaid

for ineligible recipients, Beverly created service agreements

between ROPE and his daughter, Keni Vanzant, to whom he issued

checks from ROPE’s account and subsequently placed those funds into

a bank account nominally designated as jointly held by Beverly and

Vanzant, but controlled by Beverly. For the year 2001, checks

totaling $110,881.71 were issued to Vanzant from ROPE’s account.

Vanzant, however, never saw any of these checks, and, in fact, was

never a ROPE employee and never performed any of the services

described in the consulting agreement.

4
 The jury found Beverly guilty of thirty-six counts of health

care fraud, in violation of 18 U.S.C. § 1347. The jury also found

Beverly guilty of seven other counts, which are not at issue in

this appeal: Subornation of Perjury (Count 37), 18 U.S.C. § 1622;

Witness Tampering (Count 38), 18 U.S.C. § 1512; Material False

Statement (Counts 39-40), 18 U.S.C. § 1001; Tax Evasion (Count 41),

26 U.S.C. § 7201; Fraud and False Statements (Count 42), 26 U.S.C.

§ 7206; and Failure to File Tax Return, 26 U.S.C. § 7203 (Count

43). The district court sentenced Beverly to 151 months in prison.

This appeal followed.

II.

Beverly contends that there was insufficient evidence to

sustain his conviction. He argues that the evidence did not

establish a scheme to defraud Medicaid or that he made false or

fraudulent representations. In addition, Beverly claims that the

evidence did not establish that he possessed the requisite mens rea

to commit fraud – intent to defraud.

In evaluating a challenge to the sufficiency of evidence for

a conviction, we must determine whether, “construing the evidence

in the light most favorable to the government, any reasonable jury

could find the defendant guilty beyond a reasonable doubt.” Allen,

491 F.3d at 185. The government is given “the benefit of all

reasonable inferences from the facts proven to those sought to be

5
established.” Id. We must uphold the jury’s verdict “[i]f the

record reflects that the Government presented substantial evidence

from which a reasonable jury could convict.” United States v.

Godwin, 272 F.3d 659, 666 (4th Cir. 2001).

The health care fraud statute provides, in pertinent part:

Whoever knowingly and wilfully executes, or attempts to
execute, 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 of the money or property owned by, or under the
custody or control of, any health care benefit program .
. . .”

18 U.S.C. § 1347. When determining what is meant by a “scheme or

artifice to defraud,” we must look to the “common-law understanding

of fraud,” which includes “acts taken to conceal, create a false

impression, mislead, or otherwise deceive.” United States v.

Colton, 231 F.3d 890, 898 (4th Cir. 2000). Also important to the

analysis of common law fraud is whether the defendant “fraudulently

produc[ed] a false impression upon the mind of the other party; and

if the result is accomplished, it is unimportant whether the means

of accomplishing it are words or acts of the defendant, or his

concealment or suppression of material facts not equally within the

knowledge or reach of the plaintiff.” Id. at 899.

The evidence adduced at trial, when viewed in the light most

favorable to the Government, supports the jury’s verdict that

Beverly engaged in conduct satisfying the elements of the health

care fraud statute.

6
 A.

Beverly first argues that he did not engage in a “scheme to

defraud” Medicaid because he did not make any affirmative

misrepresentations or fraudulent concealments to DMAS. The

evidence presented at trial establishes otherwise. The testimony

of Karen Lawson, DMAS employee and court-certified expert in

Medicaid, demonstrated that ROPE billed Medicaid for patients who

were ineligible to receive PSRS services and failed to provide PSRS

to individuals documented to receive such services. Lawson

testified that proper documentation did not exist for many of the

patients, and in those instances where proper documentation did

exist, Lawson discovered that many of those patients did not meet

the criteria for PSRS. During the exit interview, Lawson informed

Beverly of these ineligibility problems, specifically noting that

several patients were physically and/or mentally impaired to such

a degree that would render them ineligible for PSRS (i.e., those

resulting from dementia, mental retardation, and physical

disabilities). Beverly even acknowledged that some of the patients

were ineligible for the PSRS program. Even more telling of

Beverly’s “scheme” is the fact that, following the exit-interview,

ROPE continued to bill Medicaid for PSRS on behalf of individuals

for whom no documented mental health evaluation was performed and

for individuals suffering from the same physical and mental

infirmities Lawson expressly discussed with Beverly.

7
 In addition, Lawson opined that each of the thirty-six ROPE

patients, who correspond to the thirty-six counts of health care

fraud, were not eligible for PSRS. The reasons provided for the

patients’ ineligibility correspond to ineligibility problems Lawson

discussed with Beverly during the exit interview. Based upon these

facts, it was not unreasonable for the jury to conclude that

Beverly engaged in a scheme to defraud Medicaid. Contrary to

Beverly’s contention that he did not make any misrepresentations or

fraudulent concealments to DMAS, the jury could reasonably infer

that his misrepresentations were contained in the claims submitted

to DMAS, in which ROPE continued to seek payment for persons

ineligible to receive PSRS, even after being informed of the

ineligibility problems. We, therefore, find that sufficient

evidence was presented at trial from which a jury could reasonably

infer that Beverly perpetuated a scheme to defraud Medicaid.

B.

Beverly next contends that the evidence did not establish that

he acted with a specific intent to defraud Medicaid. Intent to

defraud, "may be inferred from the totality of the circumstances

and need not be proven by direct evidence.” Godwin, 272 F.3d at

666. In particular, intent “can be inferred from efforts to

conceal the unlawful activity, from misrepresentations, from proof

of knowledge, and from profits.” United States v. Davis, 490 F.3d

541, 549 (6th Cir. 2007) (affirming health care fraud convictions).

8
 Beverly argues that the evidence did not establish that he

knowingly submitted or caused to be submitted any false information

to DMAS. This argument is devoid of merit given the evidence that

he continued to bill and receive payments from Medicaid even after

being informed, thus constituting knowledge, of the ineligibility

problems. In addition, Beverly orchestrated a consulting agreement

with Vanzant, through which he wrote checks totaling $110,881.71 in

2001. Essentially, Beverly was purportedly making payments to

Vanzant, who was unaware of such payments, for services never

performed by her, and channeled those funds into his personal bank

account. Even more troubling is that Beverly told Vanzant to lie

about her non-existent payments from ROPE.

In light of such evidence, the jury could reasonably infer

Beverly’s intent to defraud Medicaid. While Beverly posits that

the billing and record keeping could be characterized as careless

or negligent, we find that the mound of evidence before the jury

can be more appropriately characterized as intent to defraud.

In sum, the evidence presented at trial was sufficient to show

that Beverly concocted a scheme to defraud and possessed the

requisite intent to defraud Medicaid. We must, therefore, affirm

his conviction.

9
 III.

Having resolved the issues related to Beverly’s conviction, we

now turn to his sentence. Beverly raises multiple challenges with

respect to his sentence, specifically that the district court erred

by: (1) applying a four-level enhancement to his offense level

pursuant to U.S.S.G. § 3B1.1; (2) increasing his offense level for

abuse of trust pursuant to U.S.S.G. § 3B1.3; (3) calculating the

loss amount pursuant to U.S.S.G. § 2B1.1(b); and (4) failing to

consider the 3553(a) factors.

“In assessing a challenge to a sentencing court’s application

of the Guidelines, [this Court] review[s] the [district] court’s

factual findings for clear error and its legal conclusions de

novo.” United States v. Allen, 446 F.3d 522, 527 (4th Cir. 2006).

A.

Beverly first contends that the district court erred in

imposing a four-level enhancement, pursuant to U.S.S.G. § 3B1.1(a),

for his participation as an “organizer or leader” of an “otherwise

extensive” criminal activity. He argues that the evidence did not

establish that he organized or led one or more other participants.

We review the decision to apply a sentencing adjustment based on

the defendant’s role in the offense for clear error. United States

v. Sayles, 296 F.3d 219, 224 (4th Cir. 2002).

10
 Beverly’s Pre-Sentence Report proposed a four-level

enhancement for his role in the offense as “an organization or

leader of a criminal activity that involved five or more

participants or was otherwise extensive.” U.S.S.G. § 3B1.1(a). The

government, although conceding that Beverly’s criminal activity did

not involve five or more “participants,” asserted the four-level

enhancement was nevertheless appropriate because Beverly’s criminal

activity was “otherwise extensive.” The district court agreed.

To qualify for an adjustment under § 3B1.1(a), the defendant

must, at a minimum, have been the “organizer or leader” of “one or

more other participants.” U.S.S.G. § 3B1.1, cmt. (n.2). In

assessing whether an activity is “otherwise extensive,” we have

held that courts may consider “all persons involved during the

course of the entire offense, even the unknowing services of many

outsiders.” United States v. Ellis, 951 F.2d 580, 585 (4th Cir.

1991) (quoting U.S.S.G. § 3B1.1, cmt. (n.3)). The district court

must also consider “all relevant conduct as defined by U.S.S.G.

§ 1B1.3.”2 United States v. Perrin, 237 Fed. Appx. 899, 900 (4th

2
U.S.S.G. § 1B1.3 provides factors that determine the
guideline range, including:

(1)(A) all acts and omissions committed, aided, abetted,
counseled, commanded, induced, procured, or wilfully
caused by the defendant . . .
(3) all harm that resulted from the acts and omissions
specified in (a)(1) and (a)(2) above, and all harm that
was the object of such acts and omissions; and
(4) any other information specified in the applicable
guideline.

11
Cir. 2007); see also United States v. Fells, 920 F.2d 1179, 1183-84

(4th Cir. 1990)(holding that a district court should consider all

relevant conduct).

In determining whether criminal activity is “otherwise

extensive,” many reviewing courts have examined the “totality of

the circumstances, including not only the number of participants

but also the width, breadth, scope, complexity, and duration of the

scheme.” United States v. Dietz, 950 F.2d 50, 53 (1st Cir. 1991);

see also, United States v. Frost, 281 F.3d 654, 658 (7th Cir. 2002)

(finding that criminal activity was “otherwise extensive” where a

substantial portion of the defendants’ income was obtained by

fraud, and where the amount of loss was approximately $1.8

million); United States v. D'Andrea, 107 F.3d 949, 959 (1st Cir.

1997) (criminal activity was “otherwise extensive” where activity

involved fraud against financial institutions to obtain loans for

$8.1 million by submitting false financial information and

defendant used witting or unwitting services of others to obtain

loans); United States v. Sidhu, 130 F.3d 644, 655 (5th Cir. 1997)

(criminal activity was “otherwise extensive” where physician

submitted false claims for medical services, recruited numerous

office employees to provide billing and collection support for his

fraudulent practices, and where fraud could not have succeeded

without unwitting participation of his vulnerable patients and

unknowing assistance of employees); United States v. Massey, 48

12
F.3d 1560, 1572 (10th Cir. 1995) (fraudulent loan scheme was

“otherwise extensive” considering long duration and national scope

of the scheme, and the scheme operation had multiple locations and

involved many employees other than co-conspirators).

The record demonstrates that the district court considered the

individuals as well as the circumstances involved in this offense:

[Beverly] was the alter ego of a scheme to defraud the
Medicaid system that involved numerous employees. It
involved many, many clients, many of whom – most of whom
were not eligible to receive services. Extensive revenue
was derived from this [a loss of over $2.6 million]. He
had multiple locations. It was an operation much, much
larger than the average type of fraud scheme that this
court sees in connection with an operation of this type.

J.A. 553.

In addition, the evidence adduced at trial demonstrates that

at least one of Beverly’s employees, Vernita Webber (ROPE’s

bookkeeper), can be considered a “participant” under the

Guidelines. “Participant” is defined as “a person who is

criminally responsible for the commission of the offense, but need

not have been convicted.” U.S.S.G. § 3B1.1, cmt. (n.1). Webber

played an important financial role in ROPE’s operations. Despite

having knowledge that Vanzant never worked for or performed

services for ROPE, Webber, nevertheless, prepared and signed the

checks that falsely compensated Vanzant for so-called consulting

services provided to ROPE. Webber even admitted that she was

concerned that she would be charged with a crime. In addition to

13
Webber, Beverly used several other employees and individuals to

carry out his scheme: Aljanon Wills, ROPE’s day-to-day supervisor;

Marion Bennett, the outside contractor who performed billing

services for ROPE; and Vanzant, whom Beverly unwittingly used to

facilitate the transfer of ROPE funds to his personal bank account.

Based on this evidence, we find that the district court did

not err in finding that Beverly participated in criminal activity

that was “otherwise extensive.”

B.

Beverly next contends that the district court incorrectly

applied a two-level enhancement for abuse of trust under U.S.S.G.

§ 3B1.3. His argument is that the relationship between ROPE and

DMAS was commercial and not fiduciary; therefore, he is not subject

to the enhancement.

Whether a defendant occupied a position of trust is a “factual

determination reviewable for clear error.” United States v.

Bollin, 264 F.3d 391, 415 (4th Cir. 2001). We have also observed

that the determination of “whether a defendant held a position of

trust must be examined from the perspective of the victim.” United

States v. Godwin, 272 F.3d 659, 671 (4th Cir. 2001).

Pursuant to U.S.S.G. § 3B1.3, a two-level adjustment in the

base offense level is authorized “[i]f the defendant abused a

position of public or private trust . . . in a manner that

14
significantly facilitated the commission or concealment of the

offense.” U.S.S.G. § 3B1.3. The government notes that the victim

of Beverly’s health care fraud is Medicaid, and ultimately, the

American taxpayers. See United States v. Adam, 70 F.3d 776, 781-82

(4th Cir. 1995) (concluding that victims of Medicaid fraud were

“the American taxpayers”). Contrary to Beverly’s claim that his

relationship to DMAS was purely commercial, we have upheld

application of the abuse of trust enhancement in situations where

physicians or medical providers have defrauded Medicaid. See id.;

see also United States v. Bolden, 325 F.3d 471, 504-05 (4th Cir.

2003) (applying the two-level enhancement for abuse of trust to

nursing home operator who perpetuated scheme to defraud Medicaid).3

In Bolden, we pointed out that “[b]ecause of the discretion

Medicaid confers upon care providers . . . such providers owe a

fiduciary duty to Medicaid. Indeed, we see it as paramount that

Medicaid be able to ‘trust’ its service providers.” Id. at 505

n.41.

ROPE – founded, owned, and directed by Beverly – billed and

received payments from Medicaid for patients who were knowingly

deemed ineligible to receive PSRS services. Thus, he abused the

3
Reimbursed medical providers have also been held subject to
the abuse of trust enhancement by other circuits. See United States
v. Hoogenboom, 209 F.3d 665, 666, 671 (7th Cir. 2000) (enhancement
properly applied to psychologist who falsely billed Medicare);
United States v. Gieger, 190 F.3d 661, 663, 665 (5th Cir. 1999)
(enhancement properly applied to ambulance transportation service
provider who submitted fraudulent claims to Medicare).

15
public funds that were entrusted to ROPE for the benefit of

providing individuals with mental illnesses with PSRS services.

When viewed from the standpoint of the victims involved here,

Medicaid and the American taxpayers, we conclude that Beverly,

through his position at ROPE, abused the trust placed in him with

respect to proper billing and handling of Medicaid funds.

Therefore, just as we held in Bolden, we must rely on the

entrustment as evidence of the underlying trust relationship, see

Bolden, 325 F.3d at 504, and find that the district court committed

no error in applying the two-level enhancement.

C.

Beverly also challenges the district court’s calculation of

the amount of loss under U.S.S.G. § 2B1.1(b). He claims that the

district court erred in finding that he was responsible for over

$2.6 million in loss, when the loss amount charged and proved at

trial was only $161,000. In addition, he argues that the testimony

presented at the sentencing hearing was not reliable and did not

provide a sufficient basis for assessing an accurate loss figure.

We review the district court’s calculation of the amount of

loss under the clear error standard. United States v. Battle, 499

F.3d 315, 323 (4th Cir. 2007). To the extent that there was any

perceived inconsistency or unreliability, we have held that “[a]s

the sentencing judge, a district court judge is in the best

16
position to assess credibility, observe the demeanor of witnesses,

resolve conflicting evidence, and determine the weight of the

evidence.” United States v. Dyess, 478 F.3d 224, 245 (4th Cir.

2007). Morever, the sentencing guidelines provide, “[t]he court

need only make a reasonable estimate of the loss. The sentencing

judge is in a unique position to assess the evidence and estimate

the loss based upon that evidence. For this reason, the court’s

loss determination is entitled to appropriate deference.” U.S.S.G.

§ 2B1.1, cmt. n.3(C).

To support a loss amount of $2,603,573.39, the government

relied on sentencing testimony of Doug Johnson, lead Medicaid

investigator in this action, and Karen Lawson, DMAS employee and

court-certified expert in Medicaid. Johnson testified that in

addition to the amount for claims ROPE received on the thirty-six

individuals constituting the counts of conviction ($161,856.40), he

also calculated $966,855.01, which represented other claims for

patients whose ineligibility was apparent. The loss amount also

included funds from which ROPE billed DMAS for patients who were

eligible to receive PSRS but never provided PSRS services to those

patients. Johnson’s testimony was corroborated by Karen Lawson’s

sentencing testimony, who also noted that ROPE not only billed and

received payments for individuals who were ineligible for the

program, but that ROPE also billed DMAS, but never provided PSRS

services, for patients who were eligible to receive such services.

17
 Given this evidence, we find no error in the district court’s

factual determination of the loss amount.

IV.

Lastly, Beverly contends that the district court did not

adequately consider the factors provided in 18 U.S.C. § 3553(a) and

imposed an excessive sentence.

Beverly argues that the district court erred by merely

mentioning, but not discussing, the § 3553(a) factors before

imposing sentence. We review the court’s sentencing decision for

“reasonableness.” United States v. Pauley, 511 F.3d 468, 473 (4th

Cir. 2007). While the district court must consider the various

§ 3553(a) factors and explain its sentence, it need not explicitly

reference § 3553 or discuss every factor on the record,

particularly when the court imposes a sentence within the guideline

range. United States v. Johnson, 445 F.3d 339, 345 (4th Cir.

2006). We have held that “[a] sentence within the proper

Sentencing Guidelines range is presumptively reasonable.” Allen,

491 F.3d at 193.

We must first note that Beverly’s 151-month sentence is within

the Guideline range. His 120-month sentence on Counts 1-36

corresponds to the statutory maximum for health care fraud, and the

Guideline range for his total offense level of 32, is 121-151

months. Therefore, falling within the Guideline range, Beverly’s

sentence is presumptively reasonable. Allen, 491 F.3d at 193.

18
 Although the district court did not discuss each and every

element of § 3553(a), the court heard argument regarding the

§ 3553(a) factors, adequately calculated the range for sentence,

explained its decision to sentence Beverly at the high end of the

guideline range, and indicated that it considered the § 3553(a)

factors. We find that the district court adequately considered the

§ 3553(a) factors in stating its reasons for Beverly’s sentence.

Accordingly, we conclude that the sentence imposed by the district

court was reasonable.4

For the foregoing reasons, we affirm Beverly’s conviction and

sentence.

AFFIRMED

4
Lastly, Beverly contends that his sentence violates the
Eighth Amendment’s prohibition against cruel and unusual
punishment. The Eighth Amendment’s proportionality principle
“forbids only extreme sentences that are grossly disproportionate
to the crime.” Ewing v. California, 538 U.S. 11, 24 (2003). Having
found Beverly’s sentence to be reasonable, we cannot find that such
sentence constitutes cruel and unusual punishment.

19