United States v. Soileau

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 01-31171

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

JOSEPH L. SOILEAU,

Defendant-Appellant.

Appeal from the United States District Court
For the Western District of Louisiana
October 11, 2002

Before JOLLY, DeMOSS, and PARKER, Circuit Judges.

DeMOSS, Circuit Judge:

Joseph Soileau was charged by bill of information with wire

fraud, a violation of 18 U.S.C. §§ 1343 and 2. The bill alleged

that Soileau defrauded Medicare by billing for services provided by

satellite clinics which were not Medicare certified. Soileau pled

guilty to one count of the charge and was sentenced to 60 months

imprisonment, three years supervised release, $1,438,236 in

restitution, a $10,000 fine, and a $100 special assessment.
Soileau now appeals the district court’s decision to apply a four-

level enhancement to his offense level pursuant to U.S.S.G.

§ 2F1.1(b)(8)(B).

BACKGROUND

Joseph L. Soileau was the sole owner and shareholder of Lake

Charles Hospital Management (“LCHM”) and also the chief executive

officer of South Cameron Memorial Hospital (“SCMH”) from November

of 1996 through June of 1999. Under Soileau’s direction, LCHM

supervised and managed SCMH and 34 satellite clinics. In August of

1998, Soileau used SCMH’s Medicare provider number and began

billing Medicare for the services provided by the satellite

clinics, despite the fact that these clinics were not Medicare

certified. Though Soileau knew this, he continued to bill Medicare

anyway. After SCMH received payment from Medicare, Soileau’s

business, LCHM, would submit invoices to SCMH requesting payment

for out-patient services provided by the satellite clinics. LCHM

received $1,438,236 from SCMH for these out-patient services via

wire transfers.

Soileau was charged with, and pled guilty to, wire fraud in

violation of 18 U.S.C. § 1343. During the sentencing, the district

court increased Soileau’s offense level by four levels pursuant to

U.S.S.G. § 2F1.1(b)(8)(B). That guideline allows for an

enhancement from the base level if the offense “affected a

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financial institution and the defendant derived more than

$1,000,000 in gross receipts from the offense . . . .” U.S.S.G.

§ 2F1.1(b)(8)(B) (2000). In applying this enhancement, the

district court construed application note 19 to § 2F1.1 to find

that Medicare, although not listed, was a “financial institution”

for the purposes of § 2F1.1. The district court also found that

Soileau had personally derived more than $1,000,000 in gross

receipts from the offense. Soileau objected to both the inclusion

of Medicare as a “financial institution” and to the finding that he

had personally derived more than $1,000,000 in gross receipts. The

district court overruled both objections and found the four-level

enhancement appropriate.

On appeal, Soileau argues that Medicare is not a “financial

institution” covered under § 2F1.1(b)(8)(B). The government argues

that, although not specifically listed in the application note

defining the term “financial institution” and despite the fact that

there appear to be no cases in which this guideline enhancement has

been applied to encompass offenses affecting Medicare, the

definition is broad, includes things similar to Medicare and,

therefore, can be utilized in this case.

DISCUSSION

Did the district court err in concluding that Medicare is a
“financial institution” for the purposes of U.S.S.G. §
2F1.1(b)(8)(B)?

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 This Court is faced with determining the meaning of “financial

institution” under a provision of the Sentencing Guidelines, which

is a question of law. Therefore, we review the issue de novo.

United States v. Izydore, 167 F.3d 213, 223 (5th Cir. 1999). As

Soileau was sentenced on September 17, 2001, the effective

guideline is U.S.S.G. § 2F1.1(b)(8)(B)(2000).1 United States v.

Norris, 159 F.3d 926, 928 n.1 (5th Cir. 1998) (utilizing the

guideline in effect on the date of a defendant’s sentencing). In

this case the guideline does not list Medicare as a “financial

institution,” and therefore it is necessary to understand what

Congress directed the Commission to do and what the Commission then

did when it promulgated U.S.S.G. § 2F1.1(b)(8)(B). United States

v. Lightbourn, 115 F.3d 291, 292-93 (5th Cir. 1997) (noting that if

the Commission was misreading a Congressional directive rather than

exercising independent judgment it acted “beyond the scope of [its]

authority.”). To make this determination we must investigate the

historical background of U.S.S.G. § 2F1.1(b)(8)(B).

In the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989 (“FIRREA”), Congress directed the

Sentencing Commission to provide “for a substantial period of

incarceration for a violation of, or a conspiracy to violate,

section 215, 656, 657, 1005, 1006, 1007, 1014, 1341, 1343, or 1344

1
This section has been deleted and consolidated with § 2B1.1.
See U.S.S.G. § 2B1.1 (2001).

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of title 18, Unites States Code, that substantially jeopardizes the

safety and soundness of a federally insured financial institution.”

Pub. L. No. 101-73 § 961(m), 103 Stat. 501. Under the FIRREA

directive, the Commission created what was in 2000 known as §

2F1.1(b)(8)(A) and gave the term “financial institution” a very

broad definition. See U.S.S.G. § 2F1.1, comment. (n.19) (2000)

(defining “financial institution [as] any institution described in

18 U.S.C. §§ 20, 656, 657, 1005-1007, and 1014; any state or

foreign bank, trust company, credit union, insurance company,

investment company, mutual fund, savings (building and loan)

association, union or employee pension fund; any health, medical or

hospital insurance association; brokers and dealers registered, or

required to be registered, with the Securities and Exchange

Commission; futures commodity merchants and commodity pool

operators registered, or required to be registered, with the

Commodity Futures Trading Commission; and any similar entity,

whether or not insured by the federal government”). The Commission

noted in the background note to § 2F1.1 that, “Subsection (b)(8)(A)

implements, in a broader form, the instruction to the Commission in

section 961(m) of Public Law 101-73,” apparently attempting to

indicate that the Commission was adopting a much broader definition

than encompassed by the Congressional directive. U.S.S.G.

§ 2F.1.1, comment. (backg’d.) (2000) (emphasis added).

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 The following year, Congress gave the Commission another

directive to amend the guidelines to “increase[] penalties in major

bank crime cases.” Pub. L. 101-647 § 2507(a), 104 Stat. 4862. In

this law, known as the Crime Control Act of 1990, the Sentencing

Commission was directed to:

[P]rovide that a defendant convicted of violating,
or conspiring to violate, section 215, 656, 657,
1005, 1006, 1007, 1014, 1032, or 1344 of title 18,
United States Code, or section 1341 or 1343
affecting a financial institution (as defined in
section 20 of title 18, United States Code), shall
be assigned not less than offense level 24 under
chapter 2 of the sentencing guidelines if the
defendant derives more than $1,000,000 in gross
receipts from the offense.

Id. (emphasis added).

In response to § 2507, the Commission promulgated what was

U.S.S.G. § 2F1.1(b)(8)(B) at the time Soileau was sentenced. In

subsection (b)(8)(B) the Commission did not, however, adopt the

definition of “financial institution” in 18 U.S.C. § 20, as

directed by Congress, but rather retained the same definition of

“financial institution” it had adopted the previous year when

carrying out the FIRREA directive. See U.S.S.G. § 2F1.1, comment.

(n.19) (2000). The definition in application note 19 is much

broader than the definition in 18 U.S.C. § 20.2 The background

2
Section 20 states, “the term ‘financial institution’
means--

(1) an insured depository institution (as defined in section
3(c)(2) of the Federal Deposit Insurance Act);

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note states, “Subsection (b)(8)(B) implements the instruction to

the Commission in section 2507 of Public Law 101-647.” U.S.S.G.

§ 2F.1.1, comment. (backg’d.) (2000). In this background note, the

words “in a broader form” are noticeably missing. See U.S.S.G.

§ 2F.1.1, comment. (backg’d.) (2000).

The Sentencing Commission has been delegated legislative

discretion in formulating guidelines. United States v. LaBonte,

520 U.S. 751, 757 (1997); Mistretta v. United States, 488 U.S. 361,

377 (1989); see also 28 U.S.C. § 994(a) (delegating duties to the

Sentencing Commission). Furthermore, a guideline’s commentary “is

authoritative unless it violates the Constitution or a federal

(2) a credit union with accounts insured by the National Credit
Union Share Insurance Fund;

(3) a Federal home loan bank or a member, as defined in section
2 of the Federal Home Loan Bank Act (12 U.S.C. 1422), of the
Federal home loan bank system;

(4) a System institution of the Farm Credit System, as defined in
section 5.35(3) of the Farm Credit Act of 1971;

(5) a small business investment company, as defined in section
103 of the Small Business Investment Act of 1958 (15 U.S.C. 662);

(6) a depository institution holding company (as defined in
section 3(w)(1) of the Federal Deposit Insurance Act;

(7) a Federal Reserve bank or a member bank of the Federal
Reserve System;

(8) an organization operating under section 25 or section 25(a)
of the Federal Reserve Act; or

(9) a branch or agency of a foreign bank (as such terms are
defined in paragraphs (1) and (3) of section 1(b) of the
International Banking Act of 1978).

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statute, or is inconsistent with, or a plainly erroneous reading

of, that guideline.” Stinson v. United States, 508 U.S. 36, 38

(1993). In this case, however, it appears the Sentencing

Commission was never directed to included Medicare as a “financial

institution” to which § 2F1.1(b)(8)(B) applies and has not

exercised its discretion to do so.

When presented with an issue similar to the one in this case,

the Seventh Circuit held that when the Sentencing Commission

defined “financial institution” in U.S.S.G. § 2F1.1(b)(8)(B) by

adopting the same broad definition used for subsection (b)(8)(A),

but only referencing the specific congressional directive defining

“financial institution” more narrowly, the Commission was not

exercising “independent legislative judgment” but rather “merely

misreading” a congressional directive.3 United States v. Tomasino,

206 F.3d 739, 741 (7th Cir. 2000). In Tomasino, the Seventh

Circuit upheld a district court’s refusal to enhance a mail fraud

sentence under U.S.S.G. § 2F1.1(b)(8)(B) by concluding that

“pension funds,” although specifically listed in the definition of

“financial institution” by the Commission in the application note,

were not included in the definition of institutions for which

Congress directed the Commission to increase penalties for when

affected by crimes. Id. at 741-42. Furthermore, the court noted

3
The Seventh Circuit decision addresses § 2F1.1(b)(7)(B)
because § 2F1.1(b)(8)(B) was actually § 2F1.1(b)(7)(B) for the
sentence at issue in that case. See U.S.S.G. § 2F1.1(b)(7) (1998).

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there is nothing to indicate the Commission was exercising its

discretion to include pension funds in the list of “financial

institutions” to which § 2F1.1(b)(8)(B) should apply. Id. at 742.

Similarly, in the present case the list of “financial

institutions” Congress directed, by referencing section 20 of title

18, to be encompassed by the guideline is not as broad as the

Sentencing Commission’s definition in application note 19 and does

not include, either explicitly or implicitly, the Medicare Program.

See 18 U.S.C. § 20. Nor is Medicare listed anywhere in the

sections cross referenced in the congressional directive.4 See

Pub. L. 101-647 § 2507(a), 104 Stat. 4862. Likewise, nowhere in

the entire United States Code is there a definition of “financial

institution” that includes the Medicare program. In this case,

however, unlike Tomasino, even the definition in application note

19 to the guideline, though extremely broad, does not include the

Medicare program in the list of “financial institutions” covered

under U.S.S.G. § 2F1.1(b)(8)(B)(2000) nor do any of the sections of

the United States Code cross referenced in application note 19

mention Medicare.5 See U.S.S.G. § 2F1.1, comment. (n.19) (2000).

Although the government has argued that application note 19

includes entities similar to Medicare, such as private insurance

4
See 18 U.S.C. §§ 215, 656, 657, 1005, 1006, 1007, 1014,
1032, 1341, 1343 and 1344.
5
See 18 U.S.C. §§ 215, 656, 657, 1005, 1006, 1007, 1014,
1032, 1341, 1343 and 1344.

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associations, this argument, even if logical, is useless because 18

U.S.C. § 20 includes nothing remotely similar to Medicare and

Medicare cannot be considered a bank as referenced in the Crime

Control Act of 1990. See 18 U.S.C. § 20 and Pub. L. 101-647

§ 2507(a), 104 Stat. 4862. Furthermore, application note 19 does

not include anything similar to Medicare in that no other

government entitlement programs such as Medicare are included in

the definition of “financial institution.” See U.S.S.G. § 2F1.1,

comment. (n.19) (2000). The fact that Soileau pled guilty to one

count under 18 U.S.C. § 1343 is not determinative because his

offense did not “affect[] a financial institution (as defined in

section 20 of title 18, United States Code).” Pub. L. 101-647

§ 2507(a), 104 Stat. 4862.

In summary, Congress has never defined the term “financial

institution” to include the Medicare Program nor directed the

Sentencing Commission to do so and it appears the Commission has

never exercised its authority in order to include Medicare in the

definition of “financial institution.” Therefore, in the present

case Soileau’s sentence cannot be enhanced on the basis of

§ 2F1.1(b)(8)(B)(2000) because Medicare is not a “financial

institution” as defined in U.S.S.G. § 2F1.1, comment. (n.19)

(2000).

Because we have determined that Medicare is not a “financial

institution,” and, therefore, U.S.S.G. § 2F1.1(b)(8)(B) (2000)

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cannot be used to enhance Soileau’s sentence, it is unnecessary to

make a determination on the second issue of whether Soileau

personally derived more than $1,000,000 in gross receipts from the

offense.

CONCLUSION

Having carefully reviewed the record of this case, the

parties’ respective briefing and arguments, and for the reasons set

forth above we conclude that the district court did err in finding

that Medicare is a “financial institution” and enhancing Soileau’s

sentence pursuant to U.S.S.G. § 2F1.1(b)(8)(B). Accordingly, we

VACATE Soileau’s sentence and REMAND for resentencing consistent

with this opinion.

VACATED AND REMANDED.

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