United States Court of Appeals
For the First Circuit
Nos. 02-2064,
02-2065
UNITED STATES,
Appellee,
v.
DANA EUGENE MCGOVERN; MCGOVERN'S AMBULANCE SERVICE, INC.,
Defendants, Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. George Z. Singal, U.S. District Judge]
Before
Torruella, Circuit Judge,
Bownes, Senior Circuit Judge,
and Lynch, Circuit Judge.
Leonard I. Sharon and Sharon, Leary & Detroy on brief for
appellant.
F. Mark Terison, Senior Litigation Counsel, and Paula D.
Silsby, United States Attorney, on brief for appellee.
May 21, 2003
LYNCH, Circuit Judge. Dana McGovern, the owner and
operator of McGovern's Ambulance Service, Inc. (MAS), and his
company pled guilty to Medicare and Medicaid fraud, 18 U.S.C.
§ 1347 (2000), as well as obstruction of a federal audit, 18 U.S.C.
§ 1516, and money laundering, 18 U.S.C. § 1956(a)(1). He admitted
to more than $800,000 of fraud. McGovern's sentence was enhanced
for obstruction of justice, arising out of his earlier submission
of false information to federal auditors before that audit led to
the criminal investigation and prosecution. McGovern appeals the
enhancement, arguing that the attempted obstruction did not occur
"during the course of the investigation . . . of the instant
offense of conviction." U.S.S.G. § 3C1.1. We reject this argument
on the grounds that the Medicare and Medicaid audits had an
adequate link to the ensuing criminal proceedings and so were
during the course of the investigation of the offense of
conviction.
I.
Dana McGovern was the sole shareholder, Director and
President of MAS. MAS was based in Calais, Maine, had business
locations elsewhere in Maine, and owned a Canadian affiliate. MAS,
which was licensed by the Maine Emergency Medical Services Office
of the state's Department of Public Safety, provided transportation
by ambulance and wheelchair van for Medicare and Medicaid
beneficiaries.
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Medicaid is a health care program jointly funded by
federal and state sources that provides health insurance and
nursing home coverage to low income individuals. It is
administered by the Centers for Medicare and Medicaid Services
(CMS) and by state agencies such as the Maine Department of Human
Services. Medicare is a federally subsidized health insurance
program for the elderly and for persons with certain disabilities
that is administered by CMS and private contractors. See generally
Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & the
Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 74 n.24 (1st Cir.
2003) (contrasting Medicare and Medicaid programs). The Medicare
and Medicaid programs are both health care benefit programs as
defined in 18 U.S.C. § 24(b). See San Lazaro Ass'n v. Connell, 286
F.3d 1088, 1093 (9th Cir. 2002); United States v. Herman, 172 F.3d
205, 206 (2d Cir. 1999); United States v. Sriram, 147 F. Supp. 2d
914, 942 (N.D. Ill. 2001).
Medicaid and Medicare each have specific ambulance
regulations and billing instructions, which McGovern had in his
possession. Reimbursements can include a base rate, mileage for
basic or advanced life support services, and separate payments for
administration of oxygen and other incidentals. Providers can only
bill for "loaded mileage," which is when the beneficiary is in the
vehicle. Providers cannot charge for the distance traveled to a
pick-up point or from a drop-off point. Further, an ambulance
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cannot be used if the patient is healthy enough to use any other
method of transportation, such as a wheelchair van, regardless of
whether a van is actually available. In addition, an ambulance
cannot be used for routine transport to and from a doctor's office.
Each time it transported a patient, the MAS ambulance
crew was required by regulations to fill out a "run sheet," which
required the name of the patient, the place of departure, the
destination, and the names of the MAS employees in the ambulance.
Completed run sheets were placed in a locked box and retrieved by
or delivered to McGovern. McGovern used the run sheets as a basis
to bill Medicare and Medicaid for each ambulance run. He
personally handled the submission of the ambulance billings to
Medicare and Medicaid until early 1998. At that time, a part-time
employee, Ruth Campbell, was hired to enter the billing information
established by McGovern and then submit Medicare bills
electronically. Campbell was not authorized to make changes in the
pricing, and even after she was hired McGovern continued to input
and submit some of the bills himself.
Defendants defrauded Medicare and Medicaid from August
1996 to November 1999 by billing for unnecessary services and for
services they had not rendered. At McGovern's instruction, MAS
employees used ambulances to transport patients who were able to
take taxis and other alternative forms of transportation, and used
run sheets for ambulances when transporting beneficiaries by
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wheelchair van. MAS employees, as instructed, also falsified parts
of run sheets by, for example, inaccurately representing non-
reimburseable destinations (such as a doctor's office) as
reimburseable destinations (such as a hospital). McGovern prepared
and submitted bills to Medicare and Medicaid based on these
inaccurate run sheets, which had been falsified at his express
instructions.
McGovern also falsified run sheets himself. When
employees refused to misrepresent a destination, for example, he
wrote the name of a hospital over the name of the doctor's office,
which had been written by an employee. In addition, he told at
least one MAS employee to leave blank the mileage traveled,
presumably so he could fill in excess miles. MAS repeatedly
charged Medicare and Medicaid for excess mileage. Furthermore, the
box for administration of oxygen was checked on some run sheets
after the run sheets were completed and placed in the lockbox.
Finally, MAS repeatedly charged Medicare and Medicaid for advanced
life support services in situations where employees accurately
represented (on the run sheets they placed in the lockbox) that
they had provided only basic life support services.
Complaints led to administrative audits by the U.S.
Department of Health and Human Services in 1995 and 1998. In 1995,
Medicare investigated a complaint that MAS transported a
beneficiary 200 feet, but billed Medicare for 6 miles. By phone
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and letter, a Medicare fraud investigator explained to McGovern the
correct Medicare billing practices regarding loaded mileage. As a
result of this investigation, Medicare recouped $2,691.65 for
inappropriate mileage charges in 1994 and 1995, but did not then
instigate a criminal investigation.
In March 1998, Medicare received a complaint from a
Medicare beneficiary about MAS. MAS had transported nursing home
residents to shelters during a storm earlier that year.
Investigators found that MAS falsely billed Medicare for a trip to
the hospital (which, unlike a trip to a shelter, is reimburseable),
exaggerated the loaded mileage, falsely billed for advanced life
support services, and transported via ambulance a beneficiary whose
medical condition apparently permitted her to travel by other
means.
This finding led to progressively more expansive reviews
by Medicare and Medicaid. These audits uncovered numerous
suspicious claims. Medicaid, for example, discovered that MAS
wheelchair vans had routinely (and improperly) billed for
"unloaded" miles (when the patient was not in the vehicle). As a
result, Medicaid administratively collected from MAS $158,254.22 in
overpayments for wheelchair van reimbursements.
McGovern and MAS submitted false run sheets to
investigators conducting these administrative audits. On or about
September 25, 1998 and January 5, 1999, defendants submitted to the
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Medicare and Medicaid representatives a total of nineteen run
sheets containing false information about the services rendered to
beneficiary Judith Mahar between July 1997 and January 1998. The
run sheets falsely indicated that oxygen was given to Mahar and
that an ambulance, rather than a wheelchair van, was used to
transport her. The boxes for administration of oxygen were checked
after employees completed the run sheets and placed them in the
lockbox. McGovern also sent a letter to Medicare investigators
blaming excess or inappropriate charges on the "new
girl" (Campbell) whom he said was doing MAS's billing.
The findings of the administrative audits led to the
initiation of a federal criminal investigation. McGovern and MAS
were indicted on November 16, 2000. That indictment was superseded
by a 214-count indictment on May 15, 2001. Counts 210 and 211 of
the superseding indictment charged the defendant with obstruction
of a federal audit pursuant to 18 U.S.C. § 1516. They charged
defendant with submission to auditors of the nineteen falsified run
sheets pertaining to Mahar. The remaining counts alleged
violations of 18 U.S.C. § 1347 (health care fraud) and 18 U.S.C. §
1956(a)(1) (money laundering) and sought forfeiture of cash and
property pursuant to 18 U.S.C. § 982(a)(1), (7). The indictment
covered the same wrongdoing during the same period as the Medicare
and Medicaid audits. This is true of both the charges for
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obstruction of a federal audit and the underlying conduct that the
obstruction sought to hide.
Both McGovern and MAS entered guilty pleas on January 9,
2002. McGovern and MAS each pled guilty to 40 counts, including
both counts of obstructing a federal audit, 22 counts of fraud, 16
counts of money laundering, and 2 forfeiture counts. The remaining
counts, for fraud and money laundering, were later dismissed.
At the sentencing hearing on July 30, 2002, the principal
disputed issue was whether McGovern was subject to a two-level
upward enhancement for obstructing or impeding the administration
of justice pursuant to U.S.S.G. § 3C1.1, which states:
If (A) the defendant willfully obstructed or impeded, or
attempted to obstruct or impede, the administration of
justice during the course of the investigation,
prosecution, or sentencing of the instant offense of
conviction, and (B) the obstructive conduct related to
(i) the defendant's offense of conviction and any
relevant conduct; or (ii) a closely related offense,
increase the offense level by 2 levels.
The parties stipulated that the administrative audits which
McGovern obstructed (by submitting false run sheets) were not a
part of any criminal investigation. The district court held that
McGovern was subject to the two-level upward enhancement for
obstructing the administrative audits under either note 4 or note
8 to U.S.S.G. § 3C1.1.1 Note 4 says:
1
Note 8 provides:
If the defendant is convicted both of an obstruction
offense (e.g., 18 U.S.C. § 3146 (Penalty for failure to
appear); 18 U.S.C. § 1621 (Perjury generally)) and an
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The following is a non-exhaustive list of examples of the
types of conduct to which this adjustment applies:
. . . .
(c) producing or attempting to produce a false,
altered, or counterfeit document or record during
an official investigation or judicial proceeding.
The district court found that McGovern had a total
offense level of 23 and a criminal history category of I. The
applicable guideline range is 46 to 57 months and a fine of $10,000
to $100,000. Absent the upward enhancement for obstruction of
justice, the applicable guideline range would have been 37 to 46
months and a fine of $7,500 to $75,000. The court sentenced
McGovern to 49 months in prison and to 3 years of supervised
release. The court also ordered restitution of $729,875.19, for
which defendants were jointly and severally liable, and a mandatory
special assessment of $3,800. It waived a fine, on the grounds
that McGovern would not have the means to pay. The court found
that MAS had a total offense level of 24. It sentenced MAS to five
underlying offense (the offense with respect to which the
obstructive conduct occurred), the count for the
obstruction offense will be grouped with the count for
the underlying offense under subsection (c) of § 3D1.2
(Groups of Closely Related Counts). The offense level
for that group of closely related counts will be the
offense level for the underlying offense increased by the
2-level adjustment specified by this section, or the
offense level for the obstruction offense, whichever is
greater.
Since we affirm on the basis of U.S.S.G. § 3C1.1 note 4(c), we do
not reach note 8.
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years of probation, restitution of $729,875.19, and a mandatory
special assessment of $15,200.
Since the district court did not impose an upward
enhancement pursuant to U.S.S.G. § 3C1.1 on MAS, this appeal
concerns only McGovern himself.
II.
"We review the legal determination of the guideline's
meaning and scope de novo, but allow due deference to the district
court's factfinding, reviewing it only for clear error." United
States v. Duclos, 214 F.3d 27, 31 (1st Cir. 2000) (citations
omitted). An interpretation of a guideline in the notes and other
commentary is given controlling weight unless it is plainly
erroneous, unconstitutional, contrary to a federal statute, or
inconsistent with the guideline itself. Stinson v. United States,
508 U.S. 36, 45 (1993).
McGovern contests the district court's ruling that the
obstruction occurred "during the course of the investigation,
prosecution, or sentencing of the instant offense of conviction."
U.S.S.G. § 3C1.1. He argues that the administrative audits by
Medicare and Medicaid were not "official investigation[s]" pursuant
to note 4(c) because there was no pending criminal proceeding at
the time of the administrative audit and, absent a qualifying
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investigation, no enhancement could be made.2 McGovern notes that
the administrative audit was undertaken before the criminal
investigation, and that the government expressed its determination
at the sentencing hearing to avoid "even . . . the appearance that
the administrative proceedings are driven by the criminal
investigation."
The guideline itself contains no requirement of an
"official" investigation. And while note 4 does refer to an
"official investigation," it does so by way of example. There is
no requirement that the investigation be "official."
McGovern's real claim is that there is an insufficient
nexus to show that he "attempted to obstruct . . . the
administration of justice during the course of the investigation .
. . of the instant offense of conviction." U.S.S.G. § 3C1.1. He
seems to make both temporal- and identity-type arguments. He
contends that the conduct took place before there was any criminal
investigation and that Medicaid/Medicare audits are not
investigations of the offense of conviction. This court has
already rejected both types of arguments.
2
McGovern adequately preserved the issue for appeal by
objecting to the presentence report (PSR) on this precise ground
(that U.S.S.G. § 3C1.1 does not apply to obstruction of an
administrative audit because an audit is not an official
investigation) and then arguing the point at length during the
sentencing hearing. See United States v. Fox, 889 F.2d 357, 358-
59, 361 (1st Cir. 1989) (treating issue as adequately preserved
where defendant objected on this basis to the PSR).
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In United States v. Emery, 991 F.2d 907 (1st Cir. 1993),
we rejected the temporal argument, holding that the fact that there
was no pending federal criminal investigation at the time of the
obstruction did not disqualify a defendant from an enhancement
where there was a "close connection between the obstructive conduct
and the offense of conviction." Id. at 911; see United States v.
Mills, 194 F.3d 1108, 1115 (10th Cir. 1999) (U.S.S.G. § 3C1.1 nexus
requirement satisfied where prison guard destroyed compromising
evidence before any investigation was initiated); United States v.
Barry, 938 F.2d 1327, 1335 (D.C. Cir. 1991) ("[T]he enhancement
[§ 3C1.1] applies if the defendant attempted to obstruct justice in
respect to the investigation or prosecution of the offense of
conviction, even if the obstruction occurred before the police or
prosecutors began investigating or prosecuting the specific offense
of conviction."). Emery also holds that the investigation need not
even be federal, so long as some investigation is underway. 991
F.2d at 912.
In United States v. Pilgrim Market Corp., 944 F.2d 14
(1st Cir. 1991), we addressed the identity argument, holding that
obstruction of a U.S. Department of Agriculture investigation of
the sale of contaminated meat was an investigation for purposes of
the guideline where the subject matter of the administrative
investigation and the indictment was the same, and the obstructive
conduct was meant to hide evidence of criminal wrongdoing. Id. at
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20-21. It does not matter whether the underlying administrative
investigation was itself civil or criminal so long as the
investigation which has been obstructed has a sufficient connection
to the offense of conviction. See United States v. LaSalle Nat'l
Bank, 437 U.S. 298, 314 (1978) (a federal audit has an
"interrelated criminal/civil nature" since it has "the normally
inseparable goals of examining whether the basis exists for
criminal charges and for the assessment of civil penalties").
Purporting to rely on United States v. Magana-Guerrero,
80 F.3d 398 (9th Cir. 1996), McGovern argues that administrative
audits are not official investigations pursuant to note 4(c). This
reliance is misplaced. The main issue in the relevant part of
Magana-Guerrero is whether actual obstruction is a prerequisite for
an upward enhancement pursuant to note 4(h) (then 3(h)) of U.S.S.G.
§ 3C1.1. See 80 F.3d at 400-01. Here, there was actual
obstruction. McGovern's argument mixes apples and oranges. It is
already the rule of this circuit that there must be a common-sense
connection between the obstructed investigation and the offense of
conviction. Emery, 991 F.2d at 911.
The evidence supporting the enhancement was ample. The
decision of the district court to impose a two-level upward
enhancement pursuant to note 4(c) to U.S.S.G. § 3C1.1 was plainly
correct.
Affirmed.
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United States v. McGovern
Court: Court of Appeals for the First Circuit
Date filed: 2003-05-21
Citations: 329 F.3d 247
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