United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 12, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
)))))))))))))))))))))))))) Clerk
No. 05-10045
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
CHARLES WILLIAM HAMES;
JAMES MICHAEL DAVIS; and
ROBBIE LESA HAMES,
Defendants-Appellants.
______________________
No. 05-10375
Summary Calendar
______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
JAMES MICHAEL DAVIS,
Defendant-Appellee.
Appeals from the United States District Court
for the Northern District of Texas
USDC No. 3:01-CR-323-2-P
Before JONES, Chief Judge, and WIENER and PRADO, Circuit Judges.
PER CURIAM:*
Appellants Charles Williams Hames (“Pete Hames”), Robbie Lesa
Hames (“Lesa Hames”), and James Michael Davis were convicted of
conspiracy to commit healthcare fraud, mail fraud, making false
statements, and other charges listed in a seventeen-count
superseding indictment arising from a healthcare fraud scheme. Pete
and Lesa Hames (collectively, “the Hameses”) claim that the district
court erred by excluding the impeachment testimony offered by one of
their witnesses. All of the Appellants contend that evidence is
insufficient to support their convictions and that their sentences
violate United States v. Booker, 543 U.S. 220 (2005). For the
following reasons, we AFFIRM Appellants’s convictions, VACATE their
sentences and REMAND for resentencing.
I. BACKGROUND
Pete Hames and his wife, Lesa Hames, an attorney, owned and
operated Alternate Nursing Care (“ANC”), a Medicare-funded home
healthcare agency. Medicare reimbursed ANC for the cost of care for
Medicare patients through Palmetto Government Benefits
Administrators (“Palmetto”), a subsidiary of South Carolina Blue
Cross/Blue Shield, which contracted with the Health Care Financing
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
2
Administration (“HCFA”)1 to administer the Medicare program in Texas.
Medicare reimburses only certain expenses, does not reimburse the
costs associated with “related parties” or shell corporations, and
does not allow providers to make a profit. At trial, the Government
argued that, in 1996, the Hameses discovered that their reportable
expenses were $600,000 less than what they had already received
through estimated advances. The Government contended that instead
of repaying this amount, with the help of Davis, a family friend and
full-time maintenance worker at an apartment complex, they padded
their expenses to keep the money.
At trial, the Government presented evidence suggesting that
Davis assisted Lesa Hames to claim $120,000 in consulting services
by signing a false, backdated contract purporting to show that Davis
was earning $20,000 per month for healthcare consulting work.
The Government also argued that Davis assisted Lesa Hames by
acting as the straw owner of Accelerated Home Health Personnel
(“Accelerated”), a fake employee leasing company that Lesa Hames
created. According to the Government, although Accelerated did not
exist until March 1996, Davis signed backdated documents created in
1996 to make it appear that the company entered into employee
leasing contracts with ANC in mid-1995 and early 1996. After Lesa
opened Accelerated, she transferred almost all of ANC’s employees to
the company and leased them back to ANC at an inflated rate. The
1
HCFA is now the Centers for Medicare and Medicaid
Services.
3
Government suggests that ANC did not pay Accelerated the claimed
employee leasing expenses. In addition, ANC did not actually pay
Accelerated’s employees more money. Instead, it continued to pay
them the same amount as before the leasing agreement was executed.2
The Hameses, through their corporation RALA, also purchased a
dilapidated office building in Irving (“Irving building”) for
$140,000 and began costly renovations to it. Shortly thereafter,
the Hameses transferred RALA and its only asset, the Irving
building, to Davis in exchange for a promissory note for $1.2
million. At trial, the Government presented evidence that Davis
later represented to the Bank of the West that he had made $700,000
in payments on this $1.2 million note to secure a $500,000 loan when
the money actually came from the Hameses. In connection with this
scheme, Davis signed blank checks, backdated documents, and various
lease agreements used to pad the Hameses’ expenses for Medicare
reporting purposes.
According to the Government, some of the Hameses’ other
fraudulent acts were simpler. For instance, Lesa Hames claimed as
Medicare expenses the renovation of their home and the Irving
building. In addition, while she used the Irving building for some
2
The Government claimed that, notwithstanding the fact that
Davis was Accelerated’s owner, his sole task was to sign
paychecks. He did not hire, fire, or otherwise manage the leased
employees. In addition, evidence reflects that, even after
Accelerated and ANC discontinued their purported lessor-lessee
relationship, Davis routed ANC’s Medicare funds from Accelerated
to the Hameses’ personal accounts.
4
non-Medicare related purposes, Lesa Hames claimed as a Medicare
expense the entire amount of rent on the Irving building.
The Government argued that Davis and the Hameses operated these
schemes until 1998, when Palmetto’s auditors discovered and
disallowed the fraudulent expenses. Larry Seals, the Palmetto
investigator, determined that between 1996 and 1998, Medicare
overpaid Appellants $2.2 million. Davis and his wife received over
$500,000 of that amount.
At trial, the Government called twenty-three witnesses in its
case-in-chief, including David Hames, Pete Hames’s brother who also
served as the accountant for the Hameses’ companies. He testified
that many of the Hameses’ expenses were falsified in order to avoid
reimbursing Medicare for being overpaid. During David Hames’s
cross-examination, the defense did not question him about any prior
inconsistent statements. A week later, near the end of the
defense’s case-in-chief, Lesa Hames sought to introduce the
testimony of Max Wayman, a defense investigator who interviewed
David Hames before he began cooperating with the government
investigation into ANC. Wayman was expected to testify that David
Hames told him Appellants had not committed any crimes and that he
believed the reported expenses were all legitimate. The Government
objected to Wayman’s testimony because the defense had not
questioned David Hames about any prior inconsistent statements
before attempting to proffer extrinsic evidence about them. The
trial court sustained the objection.
5
On December 15, 2004, pursuant to the jury’s guilty verdicts on
all counts charged in the indictment, the district court sentenced
Lesa Hames to 102 months imprisonment and Pete Hames and Davis to 70
months imprisonment each. The court also ordered Lesa Hames and
Davis to serve three years of supervised release. Finally, the
court ordered Appellants to pay, jointly and severally, $2,885,020
in restitution.
This appeal followed. Davis also filed a motion for release
pending appeal in which he argued that there was a substantial
question whether the evidence was sufficient to prove that he
knowingly committed fraud. The district court granted release, and
the Government’s appeal of this issue has been consolidated with
this case.
II. DISCUSSION
A. The Trial Court Did Not Err by Excluding Wayman’s
Testimony
First, the Hameses contend that the trial court erred by
excluding Wayman’s testimony because the advisory committee’s notes
on the Federal Rules of Evidence suggest that the traditional
requirement of providing the witness an opportunity to explain the
contradictions before the admission of extrinsic evidence has been
abolished.3
3
The advisory committee’s notes relax “the traditional
insistence that the attendance of the witness be directed to the
statement on cross-examination . . . in favor of simply providing
the witness an opportunity to explain . . ., with no
6
We review a district court’s ruling on exclusion of evidence
for abuse of discretion. United States v. Ragsdale, 426 F.3d 765,
774 (5th Cir. 2005). “A trial court abuses its discretion when its
ruling is based on an erroneous view of the law or a clearly
erroneous assessment of the evidence.” Id. (quoting Bocanegra v.
Vicmar Servs., Inc., 320 F.3d 581, 584 (5th Cir. 2003)). If the
district court abused its discretion in excluding the testimony, we
will review that error for harmlessness. Id.
When the Hameses proposed to offer the testimony of Max Wayman
to impeach David Hames with his prior inconsistent statements, the
district court excluded Wayman’s testimony under FED. R. EVID. 613(b).
That rule provides:
Extrinsic evidence of a prior
inconsistent statement by a
witness is not admissible
unless the witness is afforded
an opportunity to explain or
deny the same and the opposite
party is afforded an
opportunity to interrogate the
witness thereon, or the
interests of justice otherwise
require.
The Hameses point to the advisory committee’s notes on the
Federal Rules of Evidence and United States v. Bibbs, 564 F.2d 1165
(5th Cir. 1977), to support their argument that the trial court
erred by excluding Wayman’s testimony. In light of the Hameses’
specification of any particular time or sequence,” FED. R. EVID.
613(b) advisory committee’s note.
7
obfuscation of the issue in Bibbs, our standard of review, and the
amount of discretion afforded to the trial court, their reliance on
Bibbs and the committee’s notes is misguided. In Bibbs, the
district court admitted extrinsic evidence of inconsistent
statements made by a witness after she had testified, even though
the proponent had not cross-examined her on the yet-to-be-made
statements while she was still on the stand. Id. This Court
affirmed, noting that the trial judge has wide discretion; and, even
if the case had fallen under Rule 613(b), that rule does not
“require that impeachment foundation precede the impeaching witness’
testimony.” Id. at 1169 (emphasis added). Bibbs does not stand for
the proposition that a district court abuses its discretion when it
in fact requires a foundation before admitting extrinsic evidence of
the impeachment. In Bibbs, we merely cited the Rule 613(b) in
suggesting that it would not be reversible error for a court to
allow the impeaching witness’ testimony to precede the impeachment
foundation. To hold otherwise would severely limit the trial
courts’ broad discretion in controlling the manner and presentation
of evidence at trial.4 See FED. R. EVID. 611. Thus, we conclude
4
Other circuits have concluded that, although trial courts
have the option to allow extrinsic evidence without a prior
foundation, it is not an abuse of discretion to refuse to admit
it without that foundation. See United States v. Surdow, No. 04-
2459CR, 2005 WL 332805 (2d Cir. Feb. 9, 2005) (unpublished)
(“[A]n impeaching party that does not itself intend to confront a
witness with the particulars of a purportedly inconsistent
statement will, at the very least, ‘inform[ ] the court and
opposing counsel, at the time the witness testifies, of the
8
that the trial court did not abuse its discretion by excluding
Wayman’s testimony.5
B. Evidence is Sufficient to Sustain the Hameses’ Convictions
For Making False Statements
The Hameses also argue that, because they made false statements
only to Palmetto, a private contractor, and Larry Seals, an auditor
for Palmetto, they cannot be convicted under 18 U.S.C. §§ 1001 and
1516. Specifically, they contend that their convictions cannot
stand because the statutes require that falsehoods be made directly
to a government agency or to an agent of the executive branch. The
intention to introduce’ impeaching extrinsic evidence . . .
.(emphasis deleted)(quoting Weinstein’s Federal Evidence §
613.05[5] at 613-28)); United States v. Schnapp, 322 F.3d 567,
572 (8th Cir. 2003) (finding no abuse of discretion when judge
did not exercise his option to permit extrinsic evidence before
confrontation of the original witness); United States v. Sutton,
41 F.3d 1257, 1260 (8th Cir. 1994) (finding no abuse of
discretion to exclude extrinsic evidence testimony because the
relaxation of the timing rule “is not mandatory, but is optional
at the trial judge’s discretion”).
5
The government maintains that David Hames likely would have
admitted that he made the prior inconsistent statement to Wayman.
At the time Wayman interviewed David Hames, he was not yet
cooperating with the government; indeed, he admitted on the stand
that he had lied to a federal auditor about the very same subject
matter. If David Hames would have admitted making the
inconsistent statement to Wayman, the Hameses’ purported
extrinsic evidence of Wayman’s testimony would have been
inadmissible. See United States v. Greer, 806 F.2d 556, 559 (5th
Cir. 1986) (tape of prior inconsistent statement was inadmissible
when the witness admitted he made the statement); United States
v. Roger, 465 F.2d 996, 997-98 (5th Cir. 1972) (same); cf. United
States v. Avants, 367 F.3d 433, 447-48 (5th Cir. 2004)(“In order
for a prior inconsistent statement to be admissible for
impeachment purposes, there must be a preliminary finding that
statements are inconsistent.”).
9
Government argues that, although Palmetto is a private company,
because it acts as Medicare’s agent, the evidence is sufficient to
affirm the Hameses’ convictions under §§ 1001 and 1516.
We review the sufficiency of the Government’s evidence to
determine whether a rational trier of fact could have found
Appellants guilty of their charged offenses beyond a reasonable
doubt. United States v. Gray, 105 F.3d 956, 965 (5th Cir. 1997).
“The evidence is viewed ‘in the light most favorable to the verdict,
accepting all credibility choices and reasonable inferences made by
the jury.’” Id. (quoting United States v. Blount, 98 F.3d 1489,
1494 (5th Cir. 1996)). “The jury is free to choose among reasonable
constructions of the evidence and the evidence need not exclude
every reasonable hypothesis of innocence or be wholly inconsistent
with every conclusion except that of guilt.” United States v.
Ferguson, 211 F.3d 878, 883 (5th Cir. 2000).
Section 1001 permits for punishment of: “[W]hoever, in any
matter within the jurisdiction of the executive, legislative, or
judicial branch of the Government of the United States, knowingly
and willfully——... (2) makes any materially false, fictitious, or
fraudulent statement or representation.” 18 U.S.C. § 1001. The
Supreme Court has ruled that jurisdiction must be defined in a
nontechnical manner and “covers all matters confided to the
authority of an agency or department.” United States v. Rodgers,
466 U.S. 475, 479 (1984). Accordingly, this Court has consistently
10
held that false statements need not be made directly to the
government to fall “within the jurisdiction of” the government.
See, e.g., United States v. Montemayor, 712 F.2d 104, 106-09 (5th
Cir. 1983) (finding that false statements to procure Texas birth
certificates fell within the jurisdiction of § 1001 because “these
false statements, although not made directly to the federal agency
itself, may factually be held to be a matter within the jurisdiction
of the federal agency”); United States v. Uni Oil, 646 F.2d 946,
954-55 (5th Cir. 1981) (noting that “it is well settled that a false
statement need not be made directly to a federal agency in order to
sustain a § 1001 conviction” and finding no deficiencies in an
indictment charging false statements that were made to refiners who
ultimately used those statements to submit calculations as required
by an executive agency).
The HCFA administers Medicare for the government. In so doing,
HCFA contracts with local companies to perform audits and distribute
funds. Pursuant to HCFA’s contract, Palmetto administers the
Medicare program in Texas. Palmetto’s contractual responsibilities
include receiving, adjudicating and paying Medicare claims with
government money. Accordingly, because Palmetto acts as Medicare’s
agent, a rational trier of fact could have found the Hameses guilty
of 18 U.S.C. § 1001 beyond a reasonable doubt.
Similarly, a rational trier of fact could have found Lesa Hames
guilty beyond a reasonable doubt of 18 U.S.C. § 1516, which
11
criminalizes the deception of a Federal auditor. The statute
expressly defines “Federal auditor” as “any person employed on a .
. . contractual basis to perform an audit or a quality assurance
inspect for or on behalf of the United States.” 18 U.S.C. § 1516
(emphasis added). Relying on United States v. Plasser American
Corporation, 57 F. Supp. 2d 140 (E. Dist. Pa. 1999), however, Lesa
Hames argues that only auditors paid directly by the United States,
as opposed to auditors paid by an outside company who are then
reimbursed by the United States, qualify under the statute. Her
reliance on Plasser is misplaced. Plasser held that an auditor
acting on behalf of federally funded Amtrak is not a Federal auditor
for purposes of § 1516. Here, Palmetto is both federally funded and
performing an audit at the direct behest of, and certainly on behalf
of, the United States. Thus, the evidence presented at trial is
sufficient to support Lesa Hames’s conviction under 18 U.S.C. §
1516.
C. Evidence is Sufficient to Sustain the Jury’s Verdict on
Davis’s Intent to Defraud
Davis argues he lacked an intent to defraud, and that
consequently, the jury’s verdict against him must be overturned for
lack of sufficient evidence. “The requisite intent to defraud is
established if the defendant acted knowingly and with the specific
intent to deceive, ordinarily for the purpose of causing some
financial loss to another or bringing about some financial gain to
himself.” United States v. Doke, 171 F.3d 240, 243 (5th Cir. 1999).
12
Specific intent can be proven through circumstantial evidence and
inferences. United States v. Ismoila, 100 F.3d 380, 387 (5th Cir.
1996) (“[P]roof of [] intent can arise ‘by inference from all of the
facts and circumstances surrounding the transactions.’” (quoting
United States v. Keller, 14 F.3d 1051, 1056 (5th Cir. 1994))); see
also United States v. Bieganowski, 313 F.3d 264, 277 (5th Cir.
2002)(noting that “[c]ircumstances altogether inconclusive, if
separately considered, may, by their number and joint operation,
especially when corroborated by moral coincidences, be sufficient to
constitute conclusive proof [of intent]” (quoting United States v.
Lechuga, 888 F.2d 1472 (5th Cir. 1989))).
The jury simply did not believe that Davis lacked the intent to
defraud. A reasonable construction of the evidence is such that a
rational trier of fact could conclude that Davis at some point
formed an intent to defraud. See Bieganowski, 313 F.3d at 289-90
(sufficient evidence for jury to infer deliberate indifference to
fraud when defendant was aware of billing mistakes but simply
directed a consultant to fix them); United States v. Pennington, 20
F.3d 593, 599 (sufficient evidence for jury to disbelieve
defendants’ story because of their circuitous route and disheveled
appearance at the time of the crime). The record is replete with
evidence that Davis had the intent to defraud. The record reflects
that Davis signed numerous false, backdated contracts to help the
Hameses pad their expenses for Medicare reporting purposes. In
13
addition, the jury could have believed that Davis routed ANC’s
Medicare funds to the Hameses’ personal accounts and represented to
the Bank of West that he had made $700,000 in payments on a $1.2
million note for the Irving building to secure a $500,000 loan. As
a result, Davis and his wife received nearly $500,000 from all of
these activities.
Given the evidence and the fact that this court does “not
lightly overturn a determination by the trier of fact that the
accused possessed the requisite intent,” we affirm the jury’s
verdict against Davis. See United States v. Robichaux, 995 F.3d
565, 570 (5th Cir. 1993) (quoting United States v. Aubrey, 878 F.2d
825, 827 (5th Cir. 1989)).
D. Evidence is Sufficient to Sustain the Jury’s Verdict on
the Materiality of Davis’s Misrepresentations
Davis also claims that his conviction for bank fraud must be
reversed because the evidence was insufficient for a jury to find
that his misrepresentations to the Bank of the West were material.
Davis represented to the bank that he had purchased a building for
$1.2 million and made $700,000 in payments on it, even though the
original purchase price was only $140,000 and the Hameses supplied
the money. He validated these representations through falsified
documents.
A statement is material if it “has a natural tendency to
influence, or was capable of influencing the decision of” the
lending institution. United States v. Heath, 970 F.2d 1397, 1403
14
(5th Cir. 1992)(quoting Kungys v. United States, 485 U.S. 759, 770
(1988)).
Bill Wood, a Bank of the West employee testified that the fact
that Davis stated that he paid $700,000 on the $1.2 million note
influenced the decision to approve Davis’s loan. This alone is
sufficient for a jury to conclude that Davis’s misrepresentations
were material, viewing the evidence in the light most favorable to
the verdict.
E. Appellants’ Sentences Violate Booker
Appellants were sentenced pre-Booker. They argue that their
sentences violate the Sixth Amendment because they were based in
part on facts that were neither admitted by them nor found beyond a
reasonable doubt by the jury. Additionally, they argue that the
district court erred by sentencing them pursuant to a mandatory
application of the United States Sentencing Guidelines. See United
States v. Booker, 543 U.S. 220 (2005). The Government concedes that
Appellants all preserved their Booker objections at the district
court by citing Blakely v. Washington, 542 U.S. 296 (2004). It
further concedes that it cannot demonstrate that the Booker error
was harmless. See United States v, Akpan, 407 F.3d 360, 377 (5th
Cir. 2005). Accordingly, the cases must be remanded for
resentencing in accordance with Booker.
Appellants also argue that ex post facto and due process
concerns preclude the district court from applying Justice Breyer’s
15
remedial opinion in Booker on remand. Those arguments are
foreclosed by United States v. Scroggins, 411 F.3d 572, 575-77 (5th
Cir. 2005). See also United States v. Cruz, 418 F.3d 481, 484 n.2
(5th Cir. 2005) (not considering ex post facto/due process
challenges because the case was remanded for resentencing, but
noting that those challenges were foreclosed).
III. CONCLUSION
For the foregoing reasons, we AFFIRM Appellants’s convictions,
VACATE their sentences, and REMAND for resentencing. Having
affirmed Davis’s conviction, we refer the Government’s appeal of
the motion for his release pending appeal to the district court for
consideration in light of this opinion.
16