Health Law Daily Sentencing enhancements proper in Medicare-fraud scheme involving a sham charity
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Tuesday, April 28, 2020

Sentencing enhancements proper in Medicare-fraud scheme involving a sham charity

By Elena Eyber, J.D.

An appeals court upheld a lower court decision to apply sentencing enhancements in a Medicare-fraud scheme using a sham charity to persuade seniors to undergo genetic tests.

The district court properly enhanced Sentencing Guidelines range for the schemer’s leadership role, the scheme’s charitable guise, and its focus on vulnerable older victims. The schemer ran a Medicare-fraud scheme, using a supposedly charitable organization to persuade seniors to undergo genetic tests that they did not need. The doctors on the scheme’s payroll blindly approved the tests, which were sent to labs in exchange for Medicare kickbacks. The schemer pleaded guilty to conspiracy but contested his Sentencing Guidelines enhancements for his leadership role, the scheme’s charitable pretense, and its focus on vulnerable older victims. The appeals court affirmed the district court’s decision holding that the district court properly applied all three enhancements (U.S. v. Rehfuss, April 22, 2020, Bibas, S).

District court enhancements. At sentencing, the district court applied three Guidelines enhancements: 1) two-level enhancement for targeting vulnerable victims; 2) two-level enhancement for exploiting a charity’s guise for personal gain; and 3) four-level enhancement for his leadership role in the offense. Then the district court calculated the schemer’s Guidelines range at 51 to 63 months’ imprisonment. After weighing his pleas for leniency, it sentenced him to 50 months in prison. The schemer appealed the enhancements.

Vulnerable victims. The appellate court held that the district court properly enhanced the schemer’s Guidelines range because his scheme targeted older, low-income victims and intimidated them into undergoing genetic tests. The Guidelines authorize a two-level enhancement if the defendant knew or should have known that a victim of the offense was a vulnerable victim. The schemer argued that the district court made no individualized determination that any victim was particularly vulnerable. The appellate court held that the district court did generalize that the schemer’s elderly victims were susceptible to fraud, but this generalization was not forbidden and did not constitute an error.

Charitable guise. The appellate court held that the district court correctly applied a two-level enhancement because the schemer misrepresented that he was acting on behalf of a charitable organization when he really intended to divert the benefits for his personal gain. The schemer used the charity’s name and supposedly charitable mission to persuade senior centers to let him conduct genetic tests. The schemer claimed that the enhancement did not apply because he never diverted charitable donations, but profited only from the labs’ kickbacks. The court held that the enhancement applied because the schemer committed fraud by misrepresenting that he was conducting an activity wholly on behalf of a charitable organization.

Leadership role. The appellate court held that the district court did not err in applying an enhancement for the schemer’s leadership role. A four-level enhancement applies if the defendant was an organizer or leader, and the crime involved at least five participants. His leadership role was evident by him writing the script and giving the presentations at senior centers as the front man, negotiating with the labs for bigger kickbacks, and recruiting and controlling other participants. The schemer’s argument that he could not have been a leader because he had to take instructions from the directors of the labs did not mean that the schemer never exercised control over others beneath him.

The case is No. 19-2166.

Attorneys: Mark E. Coyne, Office of U. S. Attorney, for the United States. Aidan P. O'Connor (Pashman Stein Walder Hayden PC) for Seth Rehfuss.

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