217 F.3d 823 (10th Cir. 2000), 99-3274, United States v. McClatchey

• Citation: 217 F.3d 823
• Party Name: UNITED STATES OF AMERICA, Plaintiff-Appellant, v. DENNIS McCLATCHEY, Defendant-Appellee.
• Case Date: June 13, 2000
• Court: United States Courts of Appeals, U.S. Court of Appeals — Tenth Circuit

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217 F.3d 823 (10th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellant,

v.

DENNIS McCLATCHEY, Defendant-Appellee.

No. 99-3274

United States Court of Appeals, Tenth Circuit

June 13, 2000

Appeal from the United States District Court for the District of Kansas (D.C. No. 98-CR-20030)

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Tanya J. Treadway, Assistant United States Attorney, (Jackie N. Williams, United States Attorney, Topeka, Kansas, and William H. Bowne, Criminal Division, Fraud Section, Department of Justice, Washington, D. C., with her on the briefs) for Appellant.

Charles W. German, of Rouse, Hendricks, German, May P.C., Kansas City, Missouri, (Scott M. Brinkman with him on the brief) for Appellee.

Before BALDOCK, McWILLIAMS, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

After a jury convicted Dennis McClatchey of one count of conspiracy and one count of violating the Medicare Antikickback Act (the "Act"), the district court granted McClatchey's motion for acquittal on both charges. The district court concluded there was insufficient evidence from which a reasonable jury could find McClatchey had a specific intent to violate the Act. Additionally, the district court ruled in the alternative that McClatchey would be entitled to a new trial based on prejudicial variances between the indictment and the case presented to the jury. The government appeals both the judgment of acquittal and the alternative grant of a new trial. Exercising jurisdiction¹ pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3731, this court reverses both rulings. We also reject McClatchey's two further arguments for affirming the district court's grant of a new trialthat the district court improperly instructed the jury it could convict McClatchey if remuneration was paid "at least in part" to induce patient referrals and that the court erred in receiving certain evidence.

II. BACKGROUND

In 1984, Doctors Robert and Ronald LaHue served as the principals in Blue Valley Medical Group ("BVMG"), a specialized medical practice which provided care to

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patients in nursing homes and other residential care facilities. That year, the LaHues approached defendant Ronald Keel, an operations Vice President at Baptist Medical Center ("Baptist"), and proposed moving their patients from the hospitals they were currently using to Baptist in exchange for Baptist's purchase of BVMG. Keel brought this proposal to the attention of defendant Dan Anderson, the Chief Executive Officer of Baptist, and then to the rest of Baptist's administrative staff, which included McClatchey, Baptist's Chief Operating Officer. Gerard Probst, Baptist's Chief Financial Officer, testified that he discussed with McClatchey the notion that a relationship with the LaHues would result in the LaHues' "bringing their patients to Baptist" and that McClatchey "support[ed] the idea" of establishing such a relationship.

Although Baptist decided not to purchase BVMG, in January of 1985, Baptist entered into a one-year agreement (the "1985 contract") with the LaHues to pay each doctor $75,000 per year to act as Co-Directors of Gerontology Services at Baptist. According to Probst's testimony, the negotiation over the 1985 contract occurred in a "backwards" manner, with the parties first establishing a fee and only then agreeing to services which the LaHues would provide. The LaHues then began referring their nursing home patients who required hospital care to Baptist.

In the summer of 1985, at the request of the LaHues, Anderson assigned Baptist employee Tom Eckard the job of serving as a liaison between BVMG and Baptist. Although Eckard's official title was Director of Geriatric Services for Baptist, Eckard worked at BVMG and effectively acted as BVMG's manager. Moreover, Baptist rather than BVMG always paid Eckard's salary. Eckard served in this capacity for approximately eight years, and he testified at trial that his primary responsibility was "to keep the relationship [between Baptist and BVMG] positive." Eckard also testified that during the first year of Baptist's contractual relationship with the LaHues, he observed the LaHues provide "minimal to no[]" services to Baptist.

In June of 1986, Baptist entered into a new one-year agreement (the "1986 contract") with the LaHues, again paying each doctor $75,000 per year to provide various services to Baptist. Although the 1986 contract technically expired after one year, Baptist continued to pay the LaHues their $75,000 per year fee beyond the summer of 1987.²

In March of 1991, Baptist merged with Health Midwest. As a result, Baptist's new legal counsel reviewed its contracts with doctors and doctors' groups, including the 1986 contract with the LaHues. That summer, defendant Mark Thompson, one of the attorneys performing this due diligence review, began discussing with McClatchey and other Baptist executives a way of drafting a new contract with the LaHues to bring the contractual relationship within safe harbor regulations which recently had been promulgated by the Health and Human Services Office of Inspector General. From the summer of 1991 until April of 1993, when a new contract was finally executed (the "1993 contract"), McClatchey oversaw the negotiations between Baptist and the LaHues. Although Keel initially served as Baptist's direct contact person with the LaHues in the negotiation process, McClatchey placed Kevin McGrath in that role in late 1991.

From December 1991 through April 1993, Thompson produced no less than eleven drafts of an agreement. According to McGrath, he and McClatchey would instruct Thompson as to what services he should include in the contract. The first five drafts each included a provision which

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required the LaHues to perform a minimum number of hours of services for Baptist. After the LaHues informed McClatchey, McGrath, and Thompson that they would not accept a minimum hour requirement, that provision was dropped from all further drafts, including the 1993 contract ultimately executed.

Additionally, in late 1991 or early 1992, McClatchey and McGrath learned that the LaHues had not been performing some of the services specified in the 1986 contract and that certain staff members at Baptist were not interested in having the LaHues perform such services. As a consequence, McClatchey, McGrath, and Thompson discussed the concern that the LaHues were not performing sufficient services to justify the fees which Baptist was paying them. On November 5, 1992, an FBI Agent and Medicaid Fraud Investigator visited Baptist and spoke with McClatchey and Anderson about the hospital's relationship with BVMG. As a result, Baptist retained a Baltimore law firm to represent it in the federal investigation and any resulting proceedings. At some point, McClatchey, McGrath, and Anderson talked about terminating Baptist's relationship with BVMG and the LaHues, but they ultimately decided to renegotiate the contract instead.

In October of 1993, McClatchey left his position at Baptist to become the Senior Vice President for Corporate Relations at Health Midwest. On November 26, 1993, Robert LaHue wrote a letter to Anderson terminating the 1993 contract because LaHue anticipated selling BVMG to another company. In response, Health Midwest executives, including McClatchey, began discussing a strategy to replace the patients which they expected to lose with the termination of the LaHue relationship. When the BVMG sale did not materialize, however, Baptist once again began negotiating a new contract with BVMG and the LaHues. Two temporary agreements sustained the payments to the LaHues through June of 1994.

In 1998, a grand jury returned a superseding indictment against seven individual defendantsAnderson, Keel, McClatchey, the LaHues, Thompson, and attorney Ruth Lehr. The indictment charged McClatchey with one count of conspiracy to offer or pay remuneration to the LaHues in exchange for Medicare and Medicaid patient referrals, in violation of 18 U.S.C. § 2 and 42 U.S.C. § 1320a-7b(b)(2)(A), (B), and one substantive count of offering or paying remuneration to the LaHues to induce such referrals, in violation of 42 U.S.C. § 1320a-7b(b)(2)(A), (B).

At the close of the government's case, the district court granted Thompson's and Lehr's (the "attorney defendants") motions for acquittal. The district court further ruled at that time that the government had failed to present sufficient evidence to demonstrate, as the indictment alleged, that any defendant but the LaHues were involved in a conspiracy that extended to six other hospitals in addition to Baptist. The district court thus limited the jury's consideration of all evidence concerning these six other hospitals to only the charges against the LaHues.

The jury returned a guilty verdict on both charges against McClatchey. After the verdict, however, the district court granted McClatchey's motion for judgment of acquittal on both counts, concluding that no reasonable jury could find McClatchey deliberately intended to violate the Act based on the evidence presented at trial. Pursuant to Federal Rule of Criminal Procedure 29(d), the district court ruled alternatively that should its acquittal decision be overturned, McClatchey would be entitled to a new trial due to prejudicial variances between the case presented at trial and the indictment against him. See Fed. R. Crim. P. 29(d) ("If a motion for judgment of acquittal after a verdict of guilty . . . is granted, the court shall also determine whether any motion for a new trial should be granted if the judgment of acquittal is thereafter vacated or reversed . . . .").

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III. DISCUSSION

A. The District Court's Grant of a Judgment of Acquittal

This court gives no deference to a district court's decision to set aside a jury's guilty verdict and grant a...