United States v. Yelaun

United States Court of Appeals
For the First Circuit

No. 07-1651

UNITED STATES OF AMERICA,

Appellee,

v.

SEVERIN YELAUN,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M Gorton, U.S. District Judge]

Before

Torruella and Boudin, and Dyk,*
Circuit Judges.

Dana A. Curhan for appellant.
Mark T. Quinlivan, Assistant United States Attorney, with
whom Michael J. Sullivan, United States Attorney, was on brief
for appellee.

August 27, 2008

*
Of the Federal Circuit, sitting by designation.
 BOUDIN, Circuit Judge. Severin Yelaun appeals from his

conviction in the federal district court for various federal fraud

related offenses committed during a scheme to collect insurance

payments for medical tests. He also contests his sentence. The

events that gave rise to the charges, drawing the facts primarily

from the government's evidence at Yelaun's trial, are as follows.

In 1998 Yelaun and Igor Moyseyev started a clinic in

Massachusetts -- Broadway Physical Therapy and Rehabilitation, Inc.

("Broadway") -- to provide physical therapy and diagnostic services

primarily to auto accident victims. Moyseyev provided the funding,

while Yelaun recruited physicians and supervised most of the day-

to-day operations including billing matters; an affiliate, Global

Tech Diagnostics ("Global Tech"), was incorporated to handle

administrative matters including billing insurers for Broadway's

services.

Two of the tests used by Broadway are important to this

case. One, the electromyogram ("EMG"), measures nerve and muscle

function and, as it involves insertion of needles into the patient

and real time interpretation, requires that a physician be present.

The second, called a nerve conduction velocity test ("NCV"), also

measures nerve and muscle function but employs electrodes rather

than needles. For insurance purposes it requires a prescription or

request from a doctor, as does an EMG, but unlike the EMG does not

require the doctor's presence at the test.

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 Although Broadway did some legitimate testing, it also

billed auto insurers for numerous EMG and NCV tests that were not

in fact performed. The EMG tests were commonly painful; the NCV

tests involved shocks that could be painful. At Yelaun's trial a

number of the patients for whom insurance reimbursement had been

sought by Global Tech for such tests testified that they had gone

to Broadway for therapy but had no recollection of the needle

insertion or electric shocks that were the respective hallmarks of

the two tests.

A doctor affiliated with Broadway, Dr. Ranendra

Chatterjee, testified that his signature stamp had been used

without authorization to stamp prescriptions for the tests and test

reports; he said that he had never used the stamp for tests he had

conducted or reviewed. Dr. David Tamaren, who worked part-time at

Broadway, did not testify but prescriptions he wrote for EMG and

NCV tests were introduced. The government argued from internal

evidence that the prescriptions were written after the fact or were

otherwise fraudulent.

In mid-1999, Dr. Chatterjee discovered the misuse of his

stamp and confronted Yelaun, who (Dr. Chatterjee said) admitted

that the stamp had been used "quite a few times" without the

doctor's authorization. Dr. Chatterjee complained to Moyseyev and

soon thereafter Moyseyev severed his ties with Yelaun. In November

1999, Yelaun with a new partner formed a new pair of companies --

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Orthopedic Physical Therapy & Rehabilitation Center as the provider

and Lynn Diagnostics Management for billing -- at a new location.

Dr. John Montoni, a chiropractor who had worked at Broadway and

followed Yelaun to the Lynn clinic, testified at trial that he had

written prescriptions for EMG and NCV tests that had never been

performed. The same pattern of billing insurers for tests never

performed was thus repeated at least until some time in 2001 or

2002.

In January 2005, Yelaun, Moyseyev, Dr. Montoni, and Dr.

Tamaren were indicted on numerous counts including mail fraud, 18

U.S.C. § 1341 (2000), wire fraud, id. § 1343, health care fraud,

id. § 1347, conspiracy to commit an offense against or defraud the

United States, id. § 371, money laundering, id. § 1956(a)(1)(A)(i)

and money laundering conspiracy, id. § 1956(h). Yelaun's co-

defendants accepted plea bargains but Yelaun went to trial and was

convicted on twenty-six counts of mail fraud and one count each of

health care fraud, conspiracy to commit an offense against the

United States, and money laundering conspiracy.

Following his sentencing -- which yielded a sentence of

fifty-one months in prison, a term of supervised release, and

restitution of $88,800.84 -- Yelaun filed the present appeal. He

does not contest the sufficiency of the evidence but challenges the

admission of evidence against him, asserts a fatal variance as to

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one count of the indictment and contests his sentence. The

standard of review for his claims varies with the issue.

Yelaun first says that certain trial testimony by Dr.

Montoni was admitted in error. Dr. Montoni testified that on a

specific occasion Yelaun approached him with a box of patient

charts and asked him to sign prescriptions for EMG and NCV tests

for those patients. The tests had already been performed, and Dr.

Montoni therefore signed the forms without assessing whether the

patients needed the tests or not. Yelaun objects only to the

doctor's further testimony that he signed the prescriptions as

Yelaun requested because he felt intimidated by Yelaun.

Specifically, over objection Dr. Montoni was allowed to

explain that his reason for signing the prescriptions for tests

that he had not authorized was that Yelaun frightened him because,

on a prior occasion, Yelaun had showed anger when Dr. Montoni had

resisted doing what Yelaun wanted. Yelaun says that the testimony

was irrelevant except for the forbidden inference of bad character,

see Fed. R. Evid. 404(a), and was in any case highly prejudicial

and therefore inadmissible, Fed. R. Evid. 403. We will assume

arguendo that the objections were all properly preserved.

With limited exceptions, evidence to show the defendant's

bad character is normally inadmissible in a criminal trial; but the

very same facts illustrating bad character can be admitted, with a

limiting instruction if sought, to show something else that is

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relevant to the case. Fed. R. Evid. 404(b). In this instance, the

government had ample legitimate reason to explain why at Yelaun's

behest Dr. Montoni signed prescriptions for tests that he had not

determined to be medically necessary.

Absent some explanation as to why Dr. Montoni willingly

participated in a fraud at Yelaun's request, a jury might well

infer that Dr. Montoni was not credible but had made up the story

to secure his plea bargain. Inevitably, defense counsel was going

to seek to impeach the doctor based on his own plea bargain with

the government -- and also with Dr. Montoni's initial statements to

police that he could not remember signing the EMG and NCV

prescriptions. Both the admitted fraud and the initial denials

underscored doubts about his credibility.

The explanation given by Dr. Montoni -- that he was

afraid of Yelaun based on Yelaun's prior exhibitions of temper --

tended to make Dr. Montoni's main testimony about Yelaun's demand

more plausible, countering any inference that Dr. Montoni's

signatures had been supplied on his own and without Yelaun's

involvement. The context also tended to counter any potential

inference that Dr. Montoni -- who had in some instances properly

prescribed such tests for patients -- was simply confused or

mistaken about the episode in question.

Case law supports the relevance and admissibility of such

contextual testimony. United States v. Bartelho, 129 F.3d 663, 676

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(1st Cir. 1997), cert. denied, 525 U.S. 905 (1998) (allowing

defendant's girlfriend to testify that she was intimidated by him

to explain why she initially lied to the police and committed

perjury); cf. United States v. Balsam, 203 F.3d 72, 85 (1st Cir.),

cert. denied, 531 U.S. 852 (2000) (defendant's former girlfriend

allowed to testify that she feared him to explain her reluctance to

testify). In any event, the evidence was logically relevant for a

reason other than bad character, which is Rule 404(b)'s ultimate

test.

Of course, relevant evidence can be excluded under Rule

403 if it is substantially more prejudicial than "probative" (i.e.,

tending to prove a fact in issue), but this is a fact-specific

balancing judgment by the trial judge reviewed only for abuse of

discretion. United States v. Rodriguez-Estrada, 877 F.2d 153, 155-

56 (1st Cir. 1989). In this case, the fact that Yelaun had a bad

temper and that Dr. Montoni feared him was relevant and at best

minimally prejudicial: the crime charged, after all, was fraud, not

assault, and bad temper does not normally suggest a propensity to

commit fraud.

Yelaun's more interesting claim of error is that there

was a variance between the indictment's count 43, which charged him

with conspiracy to commit money laundering, and the proof at trial.

Count 43, on which Yelaun was convicted, charged that from in or

about January 1999 through in or after 2002, Yelaun and Moyseyev:

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 did knowingly and unlawfully conspire with
each other and with others known and unknown
to the Grand Jury, knowingly to conduct and
attempt to conduct financial transactions
affecting interstate and foreign commerce,
that is, to engage in financial transactions
involving United States currency and bank
checks, which in fact involved the proceeds of
specified unlawful activity, that is, Mail
Fraud in violation of Title 18, United States
Code, Section[] 1341, Wire Fraud in violation
of Title 18, United States Code, Section 1343,
and Health Care Fraud in violation of Title
18, United States Code, Section 1347, with
intent to promote the carrying on of said
specified unlawful activity, and knowing that
the transactions were designed in whole and in
part to conceal and disguise the nature,
location, source, ownership, and control of
the proceeds of that specified unlawful
activity, and knowing, while conducting and
attempting to conduct such financial
transactions, that the property involved in
the financial transactions represented the
proceeds of some form of unlawful activity, in
violation of 18 U.S.C. §1956(a)(1)(A)(i) and
(B)(i).

The substantive money laundering counts (counts 44 to 58)

identified checks that Global Tech gave Symco Medical Billing, an

outside collection agency hired by Global Tech and Lynn to handle

some billing and collections, and two checks to Global Tech's

accountant. At trial, the government dismissed the substantive

money laundering counts. To prove count 43, the government

introduced Global Tech checks given to Broadway employees and to

Yelaun for legitimate purposes (e.g., as salary checks).

Yelaun's objection, at trial and on appeal, is that the

use of the employee checks was a "variance" from the indictment

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because count 43 had (although not expressly so) relied only upon

the checks paid to Symco and the Global Tech accountant identified

in withdrawn counts 43-58, which charged specific acts of money

laundering. Yelaun does not dispute that the employee checks were

a rational means of showing both the laundering of the funds and

their use to promote the enterprise, just as charged in the

indictment. The objection is to the alleged variance.

A variance occurs when the crime charged remains

unaltered, but the evidence adduced at trial proves different facts

than those alleged in the indictment. United States v. Mueffelman,

470 F.3d 33, 38 (1st Cir. 2006). A variance does not warrant

reversal unless it is prejudicial, e.g., by undermining the

defendant's right "to 'have sufficient knowledge of the charge

against him . . . to prepare an effective defense and avoid

surprise at trial, and to prevent a second prosecution for the same

offense.'" United States v. DeCicco, 439 F.3d 36, 47 n.4 (1st Cir.

2006) (quoting United States v. Tormos-Vega, 959 F.2d 1103, 1115

(1st Cir.), cert. denied, 506 U.S. 866 (1992)).

Here, there was no variance at all, prejudicial or

otherwise. Count 43 did not identify any checks or other

transactions as the basis for that count. The defense could have

sought a bill of particulars to identify specific transactions,

United States v. Barbato, 471 F.2d 918, 921 (1st Cir. 1973), but it

did not. At best, the defense could merely have assumed -- wrongly

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as it turned out -- that the government would rely on transactions

mentioned in the substantive money laundering counts to prove the

conspiracy. Using different transactions did not "vary" any proof

promised by count 43 because the count identified no specific

transactions.

Relatedly, Yelaun says that he was unfairly surprised by

the use of the employee checks because the government misled him by

telling him it was going to rely on the checks listed in the

substantive money laundering counts to prove count 43. No support

for this claim is supplied; in fact, the government produced the

checks to employees in pretrial discovery, listed them as exhibits

to be introduced, and argued in its opening that it would be

relying on the checks to employees to prove count 43.

Further, when Yelaun objected to the offer of the

employee checks, government counsel at sidebar said that the

prosecution had explicitly told Yelaun's counsel that the

government intended to rely on the employee checks to prove count

43; nothing indicates that defense counsel disputed this assertion.

If the defense wanted a formal inquiry into the matter of

representations, or a delay in the trial to counter the supposed

surprise evidence, the time to ask was at the trial. United States

v. Wright, 573 F.2d 681, 685 (1st Cir.), cert. denied, 436 U.S. 949

(1978); United States v. Antonelli, 439 F.2d 1068, 1070 (1st Cir.

1971). No such request was made.

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 Finally, Yelaun challenges two sentencing enhancements

adopted by the trial judge in calculating the guideline range for

Yelaun's sentence. Using the 2002 version of the guidelines, the

judge adopted an adjusted offense level of twenty-four which, with

Yelaun's criminal history level I, yielded a guideline range of

fifty-one to sixty-three months. Yelaun's fifty-one month sentence

was at the bottom of the range. A mistake in calculating the range

could conceivably have affected the sentence, but there was no

mistake.

In finding an offense level of level twenty-four, the

district judge identified a base offense level of six for fraud,

U.S.S.G. § 2B1.1(a), and then added a ten level enhancement for

causing an amount of loss between $120,000 and $200,000, U.S.S.G.

§ 2B1.1(b)(1)(F), a two level enhancement for a scheme involving

more than ten but less than fifty victims, U.S.S.G. §

2B1.1(b)(2)(A)(i), a four level enhancement based on Yelaun's role

as an organizer or leader of a criminal activity that involved five

or more participants or was otherwise extensive, U.S.S.G. §

3B1.1(a), and a two level enhancement for obstruction of justice,

see U.S.S.G. § 3C1.1.

Yelaun first challenges the amount-of-loss calculation on

two different grounds -- one legal and one factual. His legal

objection, which we review de novo, is that the judge rather than

a jury found the facts establishing the amount of loss under the

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guidelines and that this violates the Sixth Amendment. But United

States v. Booker, 543 U.S. 220 (2005), resolved this concern by

making the guidelines advisory. See United States v. Ziskind, 491

F.3d 10, 17 (1st Cir. 2007), cert. denied, 128 S. Ct. 1305 (2008).

It is only where the findings at issue (here, the loss findings)

raise the statutory maximum sentence or constitute an element of

the crime that a jury finding is necessary. Booker, 543 U.S. at

230-37, 244; United States v. Bermudez, 407 F.3d 536, 545 (1st

Cir.), cert. denied, 546 U.S. 921 (2005). Neither is true in this

instance.

Yelaun's factual challenge to the computation is that the

evidence failed to show a loss of at least $120,000. The district

judge calculated the loss as $179,534.74, which reflected all EMG

and NCV tests billed by Global Tech or Lynn Diagnostics with test

reports were signed by Dr. Montoni or stamped with Dr. Chatterjee's

signature stamp. Conceding that the EMG losses were proven, Yelaun

says that there was insufficient evidence that the NCV tests were

not performed. Review is for clear error. United States v.

Phaneuf, 91 F.3d 255, 261 (1st Cir. 1996).

Dr. Chatterjee testified that he never authorized the use

of, nor in fact used, his signature stamp to sign any NCV reports,

so any NCV reports bearing his signature stamp were based on

fraudulent documents. Dr. Montoni was not authorized to perform

NCV tests and testified that he had never performed any such tests,

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and that he did not know whether the tests in the reports he signed

had been performed. Thus, insurance claims based on test reports

bearing his signature were supported by fraudulent documents. This

would be enough standing alone to support the loss finding, but

there is more.

Dr. Montoni testified that several of the tests bearing

his signature were identical for different patients, a virtual

impossibility if the tests were legitimate. Dr. Chatterjee

similarly testified that some patients' reports bearing his

signature stamps were identical and that Global Tech had billed for

up to fifteen tests signed by him in a day, which he testified he

had not performed. All this, with the patient testimony as well,

provided more than enough evidence to support the loss calculation

adopted by the district judge.

Yelaun also disputes the four level enhancement for being

a leader or organizer of a conspiracy that involved five or more

participants or was otherwise extensive. U.S.S.G. § 3B1.1. He

contests both prongs of the enhancement, arguing that he was not an

organizer or leader of the conspiracy and that the conspiracy did

not involve five or more participants and was not otherwise

extensive. As to the second prong, a finding that the conspiracy

was otherwise extensive was sufficient with or without five

participants.

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 Yelaun's argument as to his role as an organizer or

leader is, in essence, that he was a subordinate of Moyseyev, who

controlled Broadway and who ultimately fired Yelaun. In fact, the

testimony at trial showed that Yelaun played a major role at

Broadway in its day-to-day operations. He had greater knowledge of

the business than Moyseyev and was in charge of finding doctors,

scheduling, running the billing and training the administrative

staff. See U.S.S.G. § 3B1.1, cmt. 4 (setting forth criteria for

leader or organizer; more than one individual can so qualify).

As to Lynn Diagnostics, it appears that Yelaun's control

was at least as great as at Broadway. He recruited Drs. Tamaren

and Montoni for the new enterprise, ran the billing and seems to

have generally been running the day-to-day operations. The outside

billing company he worked with believed he owned Lynn. Even with

fewer specifics, it would be a fair inference that his importance

and role were at least as significant in the new and smaller

company as in its predecessor.

Yelaun says that in determining that the conspiracy was

extensive, the judge conflated the two different enterprises

successively operated by Yelaun; but each involved the services of

numerous employees and a fairly complex scheme, involving

falsifying medical reports and prescriptions and follow up billings

based on that false documentation. Cf. United States v. Twitty, 72

F.3d 228, 234 (1st Cir. 1995). Either scheme could be considered

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"otherwise extensive" in its own right. So the enhancement was

proper regardless of the number of employees.

Affirmed.

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