F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUN 13 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
No. 99-3274
v.
DENNIS McCLATCHEY,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 98-CR-20030)
Tanya J. Treadway, Assistant United States Attorney, (Jackie N. Williams, United
States Attorney, Topeka, Kansas, and William H. Bowne, Criminal Division,
Fraud Section, Department of Justice, Washington, D. C., with her on the briefs)
for Appellant.
Charles W. German, of Rouse, Hendricks, German, May P.C., Kansas City,
Missouri, (Scott M. Brinkman with him on the brief) for Appellee.
Before BALDOCK, McWILLIAMS, and MURPHY, Circuit Judges.
MURPHY, Circuit Judge.
I. INTRODUCTION
After a jury convicted Dennis McClatchey of one count of conspiracy and
one count of violating the Medicare Antikickback Act (the “Act”), the district
court granted McClatchey’s motion for acquittal on both charges. The district
court concluded there was insufficient evidence from which a reasonable jury
could find McClatchey had a specific intent to violate the Act. Additionally, the
district court ruled in the alternative that McClatchey would be entitled to a new
trial based on prejudicial variances between the indictment and the case presented
to the jury. The government appeals both the judgment of acquittal and the
alternative grant of a new trial. Exercising jurisdiction 1 pursuant to 28 U.S.C. §
1291 and 18 U.S.C. § 3731, this court reverses both rulings. We also reject
McClatchey’s two further arguments for affirming the district court’s grant of a
1
McClatchey contends this court lacks jurisdiction to decide this appeal
because the government’s notice of appeal specified the document being appealed
from as the district court’s memorandum and order of July 21, 1999, whereas the
jurisdictional statement in the government’s brief seeks review of the final
judgment entered on July 22, 1999. McClatchey argues this insufficient notice
violates Federal Rule of Appellate Procedure 3, thus depriving this court of
jurisdiction. This court reads the government’s jurisdictional statement
differently, however, interpreting it as seeking review of the very July 21 order
referenced in its notice of appeal. Moreover, McClatchey concedes that he was
not misled as to the issues being appealed. In Bohn v. Park City Group, Inc., this
court noted that we liberally construe Rule 3 requirements and held that because
the appellee “had clear notice of the issue being appealed and [thus would] not be
prejudiced” by the alleged Rule 3 deficiency, the court had jurisdiction. 94 F.3d
1457, 1460 (10th Cir. 1996). Pursuant to Bohn, therefore, this court has
jurisdiction over the government’s appeal.
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new trial–that the district court improperly instructed the jury it could convict
McClatchey if remuneration was paid “at least in part” to induce patient referrals
and that the court erred in receiving certain evidence.
II. BACKGROUND
In 1984, Doctors Robert and Ronald LaHue served as the principals in Blue
Valley Medical Group (“BVMG”), a specialized medical practice which provided
care to patients in nursing homes and other residential care facilities. That year,
the LaHues approached defendant Ronald Keel, an operations Vice President at
Baptist Medical Center (“Baptist”), and proposed moving their patients from the
hospitals they were currently using to Baptist in exchange for Baptist’s purchase
of BVMG. Keel brought this proposal to the attention of defendant Dan
Anderson, the Chief Executive Officer of Baptist, and then to the rest of Baptist’s
administrative staff, which included McClatchey, Baptist’s Chief Operating
Officer. Gerard Probst, Baptist’s Chief Financial Officer, testified that he
discussed with McClatchey the notion that a relationship with the LaHues would
result in the LaHues’ “bringing their patients to Baptist” and that McClatchey
“support[ed] the idea” of establishing such a relationship.
Although Baptist decided not to purchase BVMG, in January of 1985,
Baptist entered into a one-year agreement (the “1985 contract”) with the LaHues
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to pay each doctor $75,000 per year to act as Co-Directors of Gerontology
Services at Baptist. According to Probst’s testimony, the negotiation over the
1985 contract occurred in a “backwards” manner, with the parties first
establishing a fee and only then agreeing to services which the LaHues would
provide. The LaHues then began referring their nursing home patients who
required hospital care to Baptist.
In the summer of 1985, at the request of the LaHues, Anderson assigned
Baptist employee Tom Eckard the job of serving as a liaison between BVMG and
Baptist. Although Eckard’s official title was Director of Geriatric Services for
Baptist, Eckard worked at BVMG and effectively acted as BVMG’s manager.
Moreover, Baptist rather than BVMG always paid Eckard’s salary. Eckard served
in this capacity for approximately eight years, and he testified at trial that his
primary responsibility was “to keep the relationship [between Baptist and BVMG]
positive.” Eckard also testified that during the first year of Baptist’s contractual
relationship with the LaHues, he observed the LaHues provide “minimal to no[]”
services to Baptist.
In June of 1986, Baptist entered into a new one-year agreement (the “1986
contract”) with the LaHues, again paying each doctor $75,000 per year to provide
various services to Baptist. Although the 1986 contract technically expired after
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one year, Baptist continued to pay the LaHues their $75,000 per year fee beyond
the summer of 1987. 2
In March of 1991, Baptist merged with Health Midwest. As a result,
Baptist’s new legal counsel reviewed its contracts with doctors and doctors’
groups, including the 1986 contract with the LaHues. That summer, defendant
Mark Thompson, one of the attorneys performing this due diligence review, began
discussing with McClatchey and other Baptist executives a way of drafting a new
contract with the LaHues to bring the contractual relationship within safe harbor
regulations which recently had been promulgated by the Health and Human
Services Office of Inspector General. From the summer of 1991 until April of
1993, when a new contract was finally executed (the “1993 contract”),
McClatchey oversaw the negotiations between Baptist and the LaHues. Although
Keel initially served as Baptist’s direct contact person with the LaHues in the
negotiation process, McClatchey placed Kevin McGrath in that role in late 1991.
From December 1991 through April 1993, Thompson produced no less than
eleven drafts of an agreement. According to McGrath, he and McClatchey would
instruct Thompson as to what services he should include in the contract. The first
five drafts each included a provision which required the LaHues to perform a
2
Baptist paid the LaHues $75,000 per year from 1985 through 1993, with
the exception that the LaHues only received $68,750 each in 1990.
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minimum number of hours of services for Baptist. After the LaHues informed
McClatchey, McGrath, and Thompson that they would not accept a minimum hour
requirement, that provision was dropped from all further drafts, including the
1993 contract ultimately executed.
Additionally, in late 1991 or early 1992, McClatchey and McGrath learned
that the LaHues had not been performing some of the services specified in the
1986 contract and that certain staff members at Baptist were not interested in
having the LaHues perform such services. As a consequence, McClatchey,
McGrath, and Thompson discussed the concern that the LaHues were not
performing sufficient services to justify the fees which Baptist was paying them.
On November 5, 1992, an FBI Agent and Medicaid Fraud Investigator visited
Baptist and spoke with McClatchey and Anderson about the hospital’s
relationship with BVMG. As a result, Baptist retained a Baltimore law firm to
represent it in the federal investigation and any resulting proceedings. At some
point, McClatchey, McGrath, and Anderson talked about terminating Baptist’s
relationship with BVMG and the LaHues, but they ultimately decided to
renegotiate the contract instead.
In October of 1993, McClatchey left his position at Baptist to become the
Senior Vice President for Corporate Relations at Health Midwest. On November
26, 1993, Robert LaHue wrote a letter to Anderson terminating the 1993 contract
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because LaHue anticipated selling BVMG to another company. In response,
Health Midwest executives, including McClatchey, began discussing a strategy to
replace the patients which they expected to lose with the termination of the LaHue
relationship. When the BVMG sale did not materialize, however, Baptist once
again began negotiating a new contract with BVMG and the LaHues. Two
temporary agreements sustained the payments to the LaHues through June of
1994.
In 1998, a grand jury returned a superseding indictment against seven
individual defendants–Anderson, Keel, McClatchey, the LaHues, Thompson, and
attorney Ruth Lehr. The indictment charged McClatchey with one count of
conspiracy to offer or pay remuneration to the LaHues in exchange for Medicare
and Medicaid patient referrals, in violation of 18 U.S.C. § 2 and 42 U.S.C. §
1320a-7b(b)(2)(A), (B), and one substantive count of offering or paying
remuneration to the LaHues to induce such referrals, in violation of 42 U.S.C. §
1320a-7b(b)(2)(A), (B).
At the close of the government’s case, the district court granted
Thompson’s and Lehr’s (the “attorney defendants”) motions for acquittal. The
district court further ruled at that time that the government had failed to present
sufficient evidence to demonstrate, as the indictment alleged, that any defendant
but the LaHues were involved in a conspiracy that extended to six other hospitals
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in addition to Baptist. The district court thus limited the jury’s consideration of
all evidence concerning these six other hospitals to only the charges against the
LaHues.
The jury returned a guilty verdict on both charges against McClatchey.
After the verdict, however, the district court granted McClatchey’s motion for
judgment of acquittal on both counts, concluding that no reasonable jury could
find McClatchey deliberately intended to violate the Act based on the evidence
presented at trial. Pursuant to Federal Rule of Criminal Procedure 29(d), the
district court ruled alternatively that should its acquittal decision be overturned,
McClatchey would be entitled to a new trial due to prejudicial variances between
the case presented at trial and the indictment against him. See Fed. R. Crim. P.
29(d) (“If a motion for judgment of acquittal after a verdict of guilty . . . is
granted, the court shall also determine whether any motion for a new trial should
be granted if the judgment of acquittal is thereafter vacated or reversed . . . .”).
III. DISCUSSION
A. The District Court’s Grant of a Judgment of Acquittal
This court gives no deference to a district court’s decision to set aside a
jury’s guilty verdict and grant a defendant’s post-verdict motion for judgment of
acquittal. See United States v. Santistevan, 39 F.3d 250, 255 (10th Cir. 1994).
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We review that motion de novo, viewing the evidence in a light most favorable to
the government to determine whether a reasonable jury could have found the
defendant guilty beyond a reasonable doubt. See id.
In the instant case, the district court granted McClatchey’s post-verdict
motion on the basis that the evidence presented failed to support a reasonable
finding that McClatchey possessed the requisite criminal intent to be convicted on
either count. The parties agree that to convict McClatchey of both the conspiracy
charge and the substantive charge of violating the Act, the government needed to
prove beyond a reasonable doubt that McClatchey knowingly and willfully joined
a conspiracy with the specific intent to violate the Act. 3 A defendant violates the
Act when he
knowingly and willfully offers or pays any remuneration . . . to any
person to induce such person . . . to refer an individual to a person
for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part under a
Federal health care program . . . .
42 U.S.C. § 1320a-7b(b)(2)(A). In instructing the jury, the district court defined
willfulness as follows:
3
Although the conspiracy charge submitted to the jury also allowed it to
convict McClatchey if it unanimously found he knowingly and willfully entered
into an agreement with the purpose of defrauding the government, the only issue
which the parties present to this court is whether McClatchey knowingly and
willfully entered into an agreement with the purpose of offering or paying
remuneration to induce Medicare patient referrals.
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An act is done willfully if it is done voluntarily and purposely and
with the specific intent to do something the law forbids, that is, with
the bad purpose either to disobey or disregard the law. A person acts
willfully if he or she acts unjustifiably and wrongly while knowing
that his or her actions are unjustifiable and wrong. Thus, in order to
act willfully as I have defined that term, a person must specifically
intend to do something the law forbids, purposely intending to
violate the law.
Neither party quarrels with this instruction. This court will therefore affirm the
district court’s grant of acquittal only if the evidence presented would not permit
any reasonable jury to find beyond a reasonable doubt that McClatchey
knowingly, voluntarily, and purposefully entered into an agreement with the
specific intent to offer or pay remuneration to induce the LaHues to refer
Medicaid patients to Baptist. 4
Although the district court correctly concluded that no reasonable jury
could find beyond a reasonable doubt that McClatchey specifically intended to
violate the Act based on the evidence of his involvement, or non-involvement, in
the 1985 contract, the 1986 contract, and the loan of Eckard to BVMG, this court
disagrees with the district court’s assessment of the evidence concerning
McClatchey’s negotiation of the 1993 contract. The district court concluded that
McClatchey repeatedly acted to insure that the 1993 contract was a legal one.
4
McClatchey concedes that if the evidence is sufficient to support the jury’s
verdict on the conspiracy charge, he would also be criminally liable for the
substantive count of violating the Act pursuant to Pinkerton v. United States, 328
U.S. 640, 647-48 (1946).
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Although it may be true that the 1993 contract appears to encompass a legal
arrangement, the evidence supports a reasonable inference that McClatchey would
never have supportted negotiating and entering into that contract absent his intent
to induce the LaHues to continue referring their patients to Baptist.
Specifically, the evidence presented at trial reveals three important aspects
of McClatchey’s knowledge which inform on his intent. First, well before
entering into the 1993 contract, McClatchey knew the LaHues had not performed
substantial services required under the prior contracts. The LaHues themselves
reported that fact to McClatchey and McGrath in late 1991 or early 1992, and
McGrath’s subsequent investigation revealed the LaHues were only reporting two
hours per week of work at Baptist. Second, McClatchey knew that certain Baptist
staff members were not even interested in having the LaHues perform some of
these services. McGrath reported to McClatchey that the medical director of the
Family Care Residency Program did not want the LaHues teaching residents and
that the director of Social Services did not want the LaHues to make nursing
home referrals to Baptist patients because her practice had always been to provide
families the names of three doctors who could make such referrals. Third,
McClatchey understood how important the LaHues’ patient referrals were to
Baptist’s financial health. Eckard even testified that McClatchey placed
“substantial emphasis” on Eckard’s ability to maximize admissions and profitable
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outpatient visits to Baptist from BVMG business. Based on this knowledge, a
reasonable jury could infer that McClatchey’s very reason for negotiating a new
contract with the LaHues, rather than terminating the relationship, was to induce
them to continue their profitable referrals.
McClatchey makes two arguments against the reasonableness of such an
inference. He first contends that his surprise at learning of the failure to provide
services and his directive to McGrath and legal counsel to investigate and remedy
that situation belies an inference of criminal intent. This argument, however,
ignores the further evidence that McClatchey knew the hospital staff did not even
want or need some of the services specified in the contract; based on that
additional evidence, a jury could reasonably infer McClatchey did not really care
whether the contractual services were needed or performed, but merely that the
LaHues continued to refer their patients to Baptist. Given this evidence, a jury
could also infer that McClatchey directed McGrath and legal counsel to address
the service issue merely to insure that the final contract appeared on its face to
constitute a legal arrangement. This possible explanation is supported by the
inclusion in the 1993 contract of a provision requiring the LaHues to provide
resident instruction, despite McClatchey’s knowledge that the head of the
residency program did not desire such services.
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McClatchey also argues that his actions throughout the negotiation process
cannot give rise to an inference of his criminal intent because they were entirely
directed and controlled by legal counsel. McGrath testified, however, that he and
McClatchey told the lawyers what services to include in the contracts, not visa
versa. Thus, the jury could reasonably attribute to McClatchey and McGrath both
the decision to remove a minimum hour provision from the contract after the
LaHues objected to such a requirement and the inculpatory inference of intent that
can be drawn therefrom. Moreover, it was not the attorneys but McClatchey,
Anderson, and McGrath who made the important decision to negotiate a new
contract rather than ending Baptist’s relationship with BVMG. Finally,
McClatchey did not always heed the attorneys’ advice. For example, although
Baltimore attorney Craig Holden stressed the importance of reassigning Tom
Eckard to a new job within the hospital and even informed BVMG’s attorney that
this reassignment would occur by February 1, 1993, McClatchey personally
delayed that move until March 1, 1993. The evidence, therefore, permitted the
jury to reasonably reject McClatchey’s good faith reliance on counsel defense and
instead find he harbored the specific intent to violate the Act.
The evidence concerning McClatchey’s involvement in negotiating the
1993 agreement thus gives rise to a reasonable inference that he knowingly,
voluntarily, and purposefully entered into an agreement with the specific intent to
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induce the LaHues to refer their Medicaid patients to Baptist. The district court
therefore erred in granting McClatchey’s post-verdict motion for a judgment of
acquittal.
B. The District Court’s Grant of a New Trial
The government also challenges the district court’s alternative ruling that
McClatchey is entitled to a new trial because the case presented to the jury
prejudicially varied from the charges set out in the indictment. McClatchey
asserts two further alternative bases for this court to affirm the district court’s
grant of a new trial: the district court erroneously instructed the jury it could
convict McClatchey if remuneration was paid “at least in part” to induce patient
referrals; and the district court erred in receiving certain evidence under the co-
conspirator non-hearsay rule. This court concludes that the district court’s
decision to grant McClatchey a new trial was erroneous and rejects his alternative
arguments for affirming the ruling.
1. Variance
Whether a variance between an indictment and the case presented at trial is
sufficiently prejudicial to warrant a new trial is a question of law. See United
States v. Morris, 700 F.2d 427, 430 (1st Cir. 1983). This court therefore reviews
de novo the district court’s decision to grant a new trial on the basis of a
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prejudicial variance. See Weese v. Schukman, 98 F.3d 542, 549 (10th Cir. 1996).
“Variance arises when the evidence adduced at trial establishes facts different
from those alleged in an indictment.” Dunn v. United States, 442 U.S. 100, 105
(1979). Similarly, a shift in the government’s theory from the one set out in the
indictment to that presented at trial may also constitute a prejudicial variance.
See United Stats v. Meyers, 95 F.3d 1475, 1485 (10th Cir. 1996). A new trial is
only necessary, however, if the variance substantially prejudiced the defendant’s
right to a fair trial. See United States v. Ailsworth, 138 F.23 843, 849 (10th Cir.
1998).
a. The Acquittal of the Attorney Defendants
McClatchey contends the district court correctly concluded a prejudicial
variance arose when the district court granted the attorney defendants’ motions
for judgment of acquittal. He argues that while the indictment alleged
McClatchey and the attorney defendants worked in knowing cooperation to craft
“sham” contracts that would make Baptist’s relationship with the LaHues appear
legal, the acquittal of the attorney defendants allowed the jury to convict
McClatchey on one of two entirely different theories–either that McClatchey
failed to disclose certain information to the attorney defendants or that he failed
to heed their advice. It is this shift in the theory of McClatchey’s involvement in
the purported conspiracy which he contends constitutes a prejudicial variance.
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Even if the theory on which the jury convicted McClatchey did vary from
that set out in the indictment, 5 this court fails to see how McClatchey was
substantially prejudiced by such a change. McClatchey argues he was prejudiced
by this purported variance because allowing the jury to convict him on one of
these two allegedly new theories of his involvement eviscerated his good faith
reliance on counsel defense. As Instruction 39 demonstrates, however, by raising
a good faith reliance defense, McClatchey himself necessarily required the jury to
consider whether he made full disclosure to the attorneys and whether he followed
their advice. See Ailsworth, 138 F.3d at 850 (“It’s presumed that [the jury]
followed those instructions.” (quotation omitted)). Instruction 39 states,
If a defendant, before taking any action, sought the advice of an
attorney whom he considered competent, in good faith and for the
purpose of securing advice on the lawfulness of his possible future
conduct, and made a full and accurate report to his attorney of all
5
It is highly questionable whether this purported theoretical variance even
occurred. As McClatchey concedes, after the attorney defendants were dismissed
from the case, the government nonetheless continued to argue that the attorneys
culpably cooperated with McClatchey and others to draft the “sham” contracts–the
precise theory of McClatchey’s involvement alleged in the indictment. Moreover,
the jury was never told why the attorney defendants were dismissed from the case,
and thus, it may well have convicted him on this same theory.
Although McClatchey now complains that the government should not have
been allowed to argue that the attorney defendants acted with less than lawful
intentions, he did not object to the government’s argument at trial. Furthermore,
McClatchey’s contention that the government impermissibly presented to the jury
the theory set out in the indictment is strangely at odds with his complaint on
appeal that the theory presented to the jury differed from the one alleged in the
indictment.
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material facts which he knew and acted strictly in accordance with
the material advice of his attorneys who had been given a full report,
then the defendant would not be knowingly and willfully doing
wrong in doing something the law forbids . . . .
(emphasis added). This court fails to understand how shifting the jury’s attention
to two allegedly new theories of McClatchey’s involvement, which were already
part and parcel to his own defense theory, in any way eviscerated that defense.
McClatchey presumably understood when he decided to raise a good faith reliance
defense that full disclosure and following the attorneys’ advice are elements of
that defense; thus, the purported variance in prosecution theories should not have
surprised or prejudiced McClatchey.
Moreover, the district court granted the attorney defendants’ motions for
judgment of acquittal at the close of the government’s case, before McClatchey
presented his defense and well before he took the stand. McClatchey therefore
had ample time to alter his evidentiary and testimonial strategy to diminish any
prejudice which might have resulted from the district court’s decision. Cf.
Lincoln v. Sunn, 807 F.2d 805, 813 (9th Cir. 1987). Additionally, McClatchey’s
failure to either move for a new trial or request a continuance when the district
court granted the attorney defendants’ motions “militates against any argument
that he was surprised by or not prepared to defend against the [allegedly new
prosecution] theory.” United States v. Weiss, 752 F.2d 777, 790 (2d Cir. 1985).
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Relatedly, McClatchey argues the alleged variance was substantially
prejudicial because by indicting the attorney defendants, despite the lack of
evidence against them, the government tainted the attorney defendants’ actions in
the minds of the jury, a taint which harmed McClatchey’s good faith reliance
defense. This argument is also without merit, however, because McClatchey’s
good faith reliance defense in no way depended on the legality of the attorney
defendants’ actions. As Instruction 39 indicates, even if the attorney defendants
were acting with criminal intent, so long as McClatchey sought their advice in
good faith, made full disclosure to them, and acted strictly in accordance with
their instructions, he would have been entitled to an acquittal.
Finally, McClatchey argues the district court’s acquittal of the attorney
defendants prejudiced him because the jury likely interpreted this ruling along
with the continued prosecution of McClatchey as a signal that the court believed
McClatchey was guilty. The jury, however, was not informed that the district
court had acquitted the attorney defendants. Instead, the district court merely told
the jurors that “the charges against [the attorney defendants] . . . have been
removed from your consideration and are no longer before you for decision.” The
district court further instructed the jury, “Do not concern yourself with these
developments and do not speculate about them.” As noted earlier, this court
presumes that the jury followed the district court’s instructions and therefore did
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not speculate as to the reason why the charges against the attorney defendants had
been removed from its consideration. See Ailsworth, 138 F.3d at 850. The
acquittal of the attorney defendants, therefore, did not substantially prejudice
McClatchey.
In sum, even if the district court’s acquittal of the attorney defendants
created a variance between the allegations in the indictment and the case
presented at trial, this court is unconvinced that such a variance substantially
prejudiced McClatchey. The district court thus improperly granted McClatchey’s
motion for a new trial on this basis.
b. The Other Hospitals Evidence
The indictment alleged that all seven indicted conspirators engaged in one
broad conspiracy to allow the LaHues to enter into illegal arrangements with
Baptist and six other hospitals. At the close of the government’s case, however,
the district court ruled that the evidence failed to prove McClatchey, Anderson, or
Keel were at all part of a conspiracy involving the six other hospitals. The
district court thus limited all evidence relating to these six other hospitals to the
charges against the LaHues. In granting McClatchey’s motion for a new trial, the
district court concluded that its narrowing of the conspiracy charge against
McClatchey constituted a variance and that the “spillover from the other hospitals
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evidence” prejudiced him. The district court stated, however, that “[w]ere this
factor standing alone, the court would not grant Mr. McClatchey a new trial.”
Again, this court concludes that any variance caused by the narrowing of
the conspiracy charge did not substantially prejudice McClatchey. In United
States v. Powell, this court stated,
A defendant’s substantial rights are affected if the jury determines a
defendant’s guilt by relying on evidence adduced against
coconspirators who were involved in separate conspiracies. Relevant
factors include: 1) whether the proliferation of separate conspiracies
in the case affected the jury’s ability to segregate each defendant's
individual actions and participation; 2) whether the variance caused
confusion among the jurors as to the limited use of certain evidence;
and 3) the strength of the evidence underlying the conviction.
982 F.2d 1422, 1431-32 (10th Cir. 1992) (citation omitted). First, the jury’s
acquittal of Ronald LaHue on the charge of soliciting and receiving bribes from
two of the other hospitals and its acquittal of Keel on all charges based on the
statute of limitations strongly indicates that it was perfectly capable of
segregating and separately evaluating each defendant’s individual actions and
participation. Second, the district court repeatedly instructed the jury both during
and at the end of the trial not to consider the other hospitals evidence against
anyone but the LaHues, thus insuring the jury’s understanding of the limited use
of that evidence. Third, though this court concedes that the case against
McClatchey was relatively close, as discussed above the government did present
sufficient evidence apart from the other hospitals evidence to prove McClatchey’s
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guilt beyond a reasonable doubt. See supra Section III.A. Finally, this court has
held that “there is no fatal variance where a defendant is convicted upon evidence
which tends to show a narrower scheme than that contained in the indictment,
provided that the narrower scheme is fully included within the indictment.”
Ailsworth, 138 F.3d at 849 (quotation omitted). The narrowing of the conspiracy
charge against McClatchey, therefore, did not constitute a fatal variance
warranting a new trial.
2. The Jury Instruction
In Instruction 32, the district court charged the jury as follows:
In order to sustain its burden of proof against the hospital
executives for the crime of violating the Anti-Kickback statute, the
government must prove beyond a reasonable doubt that the defendant
under consideration offered or paid remuneration with the specific
criminal intent “to induce” referrals. To offer or pay remuneration to
induce referrals means to offer or pay remuneration with the intent to
gain influence over the reason or judgment of a person making
referral decisions. The intent to gain such influence must, at least in
part, have been the reason the remuneration was offered or paid.
On the other hand, defendants Anderson, Keel, and
McClatchey cannot be convicted merely because they hoped or
expected or believed that referrals may ensue from remuneration that
was designed wholly for other purposes. Likewise, mere oral
encouragement to refer patients or the mere creation of an attractive
place to which patients can be referred does not violate the law.
There must be an offer or payment of remuneration to induce, as I
have just defined it.
(emphasis added). McClatchey contends this instruction was incorrect and
warrants a new trial, because a defendant should not be convicted under the Act
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when his offer or payment of remuneration was motivated merely in part to
induce referrals, but rather the motivation to induce referrals must be the
defendant’s primary purpose. 6 “We review the district court’s decision to give a
particular jury instruction for abuse of discretion and consider the instructions as
a whole de novo to determine whether they accurately informed the jury of the
governing law.” United States v. Cerrato-Reyes, 176 F.3d 1253, 1262 (10th Cir.
1999).
Whether the “at least in part” or “one purpose” standard applied in the
instant case constitutes a correct interpretation of the Act is an issue of first
impression in this Circuit. McClatchey urges this court to reject the test set out in
Instruction 32 as too broad, because “[e]very business relationship between a
hospital and a physician is based ‘at least in part’ on the hospital’s expectation
that the physician will choose to refer patients.” This argument, however, ignores
the actual instruction given in the instant case, in which the district court
specifically informed the jury that “McClatchey cannot be convicted merely
because [he] hoped or expected or believed that referrals may ensue from
remuneration that was designed wholly for other purposes.” According to this
In his brief, McClatchey moves this court to allow him to provide
6
additional briefing on this issue and the next should we reach them. This court is
convinced that McClatchey had a fair opportunity to fully brief these arguments
and thus denies that motion. See Fed. R. App. P. 28(c) (“Unless the court
permits, no further briefs [beyond the reply brief] may be filed.”).
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instruction, therefore, a hospital or individual may lawfully enter into a business
relationship with a doctor and even hope for or expect referrals from that doctor,
so long as the hospital is motivated to enter into the relationship for legal reasons
entirely distinct from its collateral hope for referrals. 7
The only three Circuits to have decided this issue have all adopted the “one
purpose” test. 8 See United States v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998);
United States v. Kats, 871 F.2d 105, 108 (9th Cir. 1989); United States v. Greber,
760 F.2d 68, 71-72 (3d Cir. 1985). In Greber, a doctor who owned a diagnostic
laboratory was convicted of violating the Act because he paid “interpretation
7
This court recognizes that it may be difficult for a jury to distinguish
between a motivating factor and a collateral hope or expectation. Making such
difficult factual determinations, however, is the very role which our system of
justice assigns to the finder of fact. Cf. United States Postal Serv. Bd. of
Governors v. Aikens, 460 U.S. 711, 716-17 (1983) (“The state of a man’s mind is
as much a fact as the state of his digestion. It is true that it is very difficult to
prove what the state of a man’s mind at a particular time is, but if it can be
ascertained it is as much a fact as anything else.” (quotation omitted)).
8
McClatchey incorrectly contends that the First and Eighth Circuits have
“tacitly approved” the “primary purpose” test. In United States v. Bay State
Ambulance & Hosp. Rental Service, Inc., the First Circuit explicitly declined to
decide whether the “primary purpose” or “one purpose” test is appropriate,
because the defendants had been convicted under the more stringent “primary
purpose” standard. See 874 F.2d 20, 30 (1st Cir. 1989). In resolving a separate
issue, however, the Bay State Ambulance court did rely upon the reasoning
employed by the Third Circuit in adopting the “one purpose” test in United States
v. Greber, 760 F.2d 68 (3d Cir. 1985). See Bay State Ambulance, 874 F.2d at 30.
The Bay State Ambulance court even stated it was “impressed with the . . .
reasoning” of Greber. Id. In United States v. Jain, whether the Act encompasses
the “primary purpose” or “one purpose” standard was simply not an issue on
appeal to the Eighth Circuit. See 93 F.3d 436 (8th Cir. 1996).
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fees” to other physicians to induce them to refer Medicare patients to use his
laboratory’s services. See id. at 69-70. Defendant Greber asserted that these
interpretation fees compensated the physicians both for providing initial
consultation services and for explaining the test results to the patients. See id. at
70. On appeal, Greber argued that a jury instruction much like Instruction 32 was
erroneous, because the Act requires the government to prove that the only purpose
for the interpretation fees was to induce referrals and that compensation for
services actually rendered could not constitute a violation of the Act. See id. at
71. Carefully examining the language and purpose of the Act, the Third Circuit
rejected Greber’s proposed interpretation and instead held that “if one purpose of
the payment was to induce referrals, the [Act] has been violated.” Id. at 69
(emphasis added); see generally id. at 70-72. Specifically, the Greber court noted
that when Congress amended the Act in 1977 to deter “the growing problem of
fraud and abuse in the system,” it added a proscription against the payment of
“remuneration,” which contemplates the rendering of a service, whereas the
predecessor statute merely prohibited payment of “kickbacks,” for which no
service is rendered. Id. at 70-71, 71-72. The Greber court thus concluded that
the “one purpose” test is consistent with the legislative intent behind the amended
Act. See id. at 72.
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This court agrees with the sound reasoning in Greber and thus holds that a
person who offers or pays remuneration to another person violates the Act so long
as one purpose of the offer or payment is to induce Medicare or Medicaid patient
referrals. Because the district court accurately informed the jury of the applicable
law, McClatchey is not entitled to a new trial based on the jury instructions.
3. Co-Conspirator Non-Hearsay Evidence
McClatchey also argues he is entitled to a new trial because the district
court erroneously admitted evidence under the co-conspirator non-hearsay rule. 9
See Fed. R. Evid. 801(d)(2)(E). McClatchey, however, fails to identify the
specific statements which he now contends were wrongly admitted or even meet
this court’s modest requirement that he provide citations to the record where these
statements might be found. See Tenth Cir. R. 28.2(C)(2), (3)(a). Due to these
failures, this court cannot even attempt to assess the merits of his argument. The
issue of the admissibility of this evidence is therefore waived on appeal. See
Shaw v. AAA Engineering & Drafting, Inc., Nos. 97-6265, -6266, 2000 WL
640249, at *16 n.25 (10th Cir. May 18, 2000) (concluding challenge to evidence
was waived on appeal because the appellant did not specify the precise evidence
which it claimed was wrongly admitted).
For the same reason stated in note 6, supra, this court denies McClatchey’s
9
motion to provide further briefing on this issue.
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IV. CONCLUSION
This court concludes that the government presented sufficient evidence
from which a reasonable jury could infer McClatchey knowingly, voluntarily, and
purposefully entered into an agreement with the specific intent to violate the Act.
This court also disagrees with the district court’s ruling that prejudicial variances
between the indictment and the case presented at trial warrant a new trial. Nor do
the jury instructions provide the basis for granting McClatchey a new trial. We
therefore REVERSE the judgment of acquittal and the alternative order for a new
trial entered by the District Court for the District of Kansas and REMAND to that
court with instructions to reinstate the verdict rendered by the jury.
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United States v. McClatchey
Court: Court of Appeals for the Tenth Circuit
Date filed: 2000-06-13
Citations: 217 F.3d 823
Copy CitationsCombined Opinion