U.S. v. Fischer, s. 96-3587

Citation168 F.3d 1273
Decision Date04 March 1999
Docket Number97-2877 and 98-2091,Nos. 96-3587,s. 96-3587
Parties, 12 Fla. L. Weekly Fed. C 551 UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey Allan FISCHER, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Mark L. Horwitz, Orlando, FL, for Defendant-Appellant.

Charles R. Wilson, U.S. Atty., Tamra Phipps, Susan Humes Raab, David P. Rhodes, Asst. U.S. Attys., Tampa, FL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before ANDERSON and HULL, Circuit Judges, and HANCOCK *, Senior District Judge.

HULL, Circuit Judge:

A jury convicted appellant Jeffrey Allan Fischer on thirteen counts, including violations of 18 U.S.C. §§ 371 (conspiracy), 666 (fraud and bribery involving an organization receiving federal funds), 1341 (mail fraud), 1343 (wire fraud), and 1957 (money laundering). 1 1 Fischer appeals his convictions and sixty-five-month sentence.

Fischer contends, inter alia, that his convictions on two counts under § 666 and on a related conspiracy count should be reversed because the Government did not prove the statutory prerequisite that the agency affected by Fischer's wrongdoing "receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance." 18 U.S.C. § 666(b). 2 After review, we affirm Fischer's convictions and sentence.

I. BACKGROUND
A. $1.2 Million Loan

At trial, the evidence established that in 1993 Fischer, as president and part-owner of QMC, arranged for West Volusia Hospital Authority ("WVHA") to loan $1.2 million to QMC. Fischer negotiated this loan with WVHA's chief financial officer, Robert Caddick. On June 30, 1993, Fischer and Caddick executed the loan agreements between QMC and WVHA.

As security for the $1.2 million loan, Fischer pledged QMC's accounts receivable and a $1 million letter of credit QMC had obtained for this purpose through a foreign bank, First Asia Development Bank ("FADB"). However, QMC's accounts receivable already were pledged to another QMC creditor. In addition, the $1 million letter of credit did not appear to be legitimate, and even if it were, its terms severely limited WVHA's ability to collect the $1 million. 3

Furthermore, questions were raised about WVHA's authority to loan money to QMC. The questions arose both before WVHA loaned the $1.2 million to QMC, and later, when WVHA's board of directors discovered the loan had been made. WVHA, a local government agency funded by a bond issue, was authorized to invest its excess funds in only instruments backed by the federal government. 4

Nonetheless, WVHA made the $1.2 million loan to QMC on July 2, 1993. QMC used the $1.2 million to repay creditors and to raise the salaries of QMC's five owner-employees, including Fischer. In addition, Fischer had QMC lend at least $100,000 to a company owned by the FADB representative who had assisted QMC with the $1 million letter of credit. Fischer also had QMC open options-trading accounts using these loan proceeds. In a short time, Fischer lost about $400,000 of the loan proceeds through his options- trading on QMC's behalf. 5

In February 1994, WVHA's auditors disclosed the $1.2 million loan to QMC in the annual audit report. Through this report, WVHA's board of directors and the chairman of WVHA's finance committee first learned about the $1.2 million loan. Shortly thereafter the board asked that the loan be called. The due date for the loan was July 1, 1994.

On July 1, 1994, QMC did not have the funds to repay the loan. Later that month, Fischer persuaded FADB to send QMC a $1.2 million draft to repay WVHA. QMC endorsed this draft and presented it to WVHA, which in turn presented the draft to its bank. However, FADB refused to honor the draft when presented by WHVA's bank. Thus, WVHA was unable to collect the $1.2 million owed by QMC.

B. $10,000 Kickback to Caddick

The evidence indicated that, in June 1993, Caddick requested a $10,000 loan from QMC at the end of one of Fischer and Caddick's initial meetings about the possibility of the $1.2 million loan. After QMC received the $1.2 million loan from WVHA, QMC paid $10,000 by check to Caddick's mother, Stella Greenfield, in August 1993. This $10,000 check, paid with Fischer's approval, was marked "consulting fees"--even though Greenfield never performed any services for QMC. Greenfield sent the proceeds of the $10,000 check to Caddick, pursuant to Caddick's instructions.

In January 1994, a QMC bookkeeper sought an invoice to correspond with the earlier $10,000 check to Greenfield. The bookkeeper received an invoice dated August 1, 1993. A notation appeared on the invoice in Fischer's handwriting, indicating that the payment was for a "loan origination fee."

Another attempt to cover up QMC's $10,000 payment to Caddick apparently was made after QMC defaulted on the $1.2 million loan from WVHA and that default became the subject of an investigation and widespread publicity. In this cover-up attempt, Caddick allegedly approached QMC's vice-president, Charles Kramer, with a "contract" for programming services Caddick purportedly had performed for QMC. Caddick allegedly asked Kramer to sign and backdate the "contract" to create a retroactive justification for the $10,000 payment. However, Kramer refused.

C. WVHA's Receipt of Federal Benefits

To establish that Fischer had violated 18 U.S.C. §§ 666(a)(1) and (a)(2), the Government was required to prove that WVHA was an agency receiving, in any one year period, "benefits in excess of $10,000" under a federal assistance program. 18 U.S.C. § 666(b). 6 At trial, the Government introduced evidence that WVHA was a county agency responsible for operating two county hospitals. The Government also introduced testimony from WVHA's director of finance that "most health care organizations collect a majority of their funds from programs that are funded by the federal government." Asked to give an example of how much money WVHA specifically collected in 1993 from the federal government under the Medicare program alone, WVHA's director of finance testified that WVHA had collected between ten and fifteen million Medicare dollars in 1993.

Later on, WVHA's director of finance explained further that different government programs pay differently. WVHA's director of finance then testified:

A specific example is that we get paid, hospitals get paid a fixed amount from the federal government on in-patient Medicare patients, patient[s] who are greater than the age of 65. So raising the prices for services that are primarily used for individuals in that group has no impact. There's no increase in revenue.

Thus, according to the testimony of WVHA's director of finance, even if the hospital charges the patient an increased amount for services, the hospital is paid only a fixed amount from Medicare for those services.

II. DISCUSSION 7
A. Scope of § 666(b)

The statutory prerequisite for a conviction under 18 U.S.C. § 666 is that the organization or agency affected by the fraud, unauthorized conversion, bribery, or other prohibited act "receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance." 18 U.S.C. § 666(b). In the present case, the primary issue is whether WVHA received "benefits" under a federal assistance program for purposes of § 666(b). After review, we find that WVHA's receipt of between ten and fifteen million dollars in Medicare funds qualified as receipt of "benefits" under a federal assistance program and that the Government presented sufficient evidence to satisfy the requirements of 18 U.S.C. § 666(b).

This Court previously addressed the scope of § 666(b) in United States v. Copeland, 143 F.3d 1439 (11th Cir.1998). At issue in Copeland was whether Lockheed, a prime contractor for the United States Department of Defense, qualified as an organization receiving "benefits" for purposes of § 666(b). Id. at 1441. Defendant Copeland, a manager at one of Lockheed's plants, had been convicted of violating 18 U.S.C. § 666 by accepting bribes from individuals including co-defendant Winders. Id. at 1440. In turn, defendant Winders had been convicted of violating 18 U.S.C. § 666 by giving bribes to co-defendant Copeland. Id. On appeal, the defendants argued that their convictions under § 666 should be reversed because the Government had failed to prove that Lockheed met the requirements of § 666(b). Id.

In reviewing the defendants' claims in Copeland, this Court examined the statutory language and construed § 666(b) as requiring that the "benefits" an organization or agency receives from the federal government be linked to some form of federal assistance. Id. at 1441. Specifically, this Court recognized that organizations engaging in contractual relationships with the federal government would fall within the scope of the statute, if those "contractual relationships constitut[ed] some form of 'Federal assistance.' " Id. This Court also determined that "organizations engaged in purely commercial transactions with the government" were excluded from the scope of § 666(b) because those organizations were not in relationships involving some form of federal assistance. Id.

Based on the evidence at trial, this Court in Copeland concluded that Lockheed's relationship with the government did not come within the scope of § 666(b) because Lockheed's transactions as a defense contractor were "purely commercial." Id. at 1442. Nothing in the record indicated that Lockheed had received "benefits" under a federal program involving a contract or any other form of federal assistance. Id. The record did contain evidence that Lockheed received funds from the government through its defense contracts, but those funds were not "benef...

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