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)?
3
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).
5
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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