412 F.3d 331 (2nd Cir. 2005), 03-1291, United States v. Canova

Docket Nº:03-1291(L), 03-1300(XAP).
Citation:412 F.3d 331
Party Name:UNITED STATES of America, Appellant, Cross-Appellee, v. John CANOVA, Defendant-Appellee, Cross-Appellant.
Case Date:June 21, 2005
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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412 F.3d 331 (2nd Cir. 2005)

UNITED STATES of America, Appellant, Cross-Appellee,


John CANOVA, Defendant-Appellee, Cross-Appellant.

Nos. 03-1291(L), 03-1300(XAP).

United States Court of Appeals, Second Circuit

June 21, 2005

Argued: Jan. 9, 2004.

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Eric J. Glover, Assistant United States Attorney, District of Connecticut, Hartford, Connecticut (John H. Durham, Deputy United States Attorney; Maria A. Kahn and William J. Nardini, Assistant United States Attorneys, on the brief), for Appellant, Cross-Appellee.

Paul Shechtman, Stillman & Friedman, P.C., New York, New York (Nathaniel Z. Marmur, on the brief), for Defendant-Appellee, Cross-Appellant.

Before: SACK and RAGGI, Circuit Judges. 1

RAGGI, Circuit Judge.

The United States appeals from so much of the April 7, 2003 final judgment of the United States District Court for the District of Connecticut (Alfred V. Covello, Judge ) as sentenced John Canova to a one-year term of probation after a jury trial at which defendant was found guilty of various substantive and conspiratorial crimes relating to his involvement in a multi-million-dollar Medicare fraud. The government asserts that the district court erred (1) in refusing to apply loss and obstruction enhancements to the calculation of Canova's Sentencing Guidelines, and (2) in granting a downward departure based on defendant's history of public service and good works. Canova defends the district court's sentencing rulings but cross-appeals from its denial of his motion for a new trial.

We reject Canova's argument that the district court abused its discretion in denying him a new trial, and, accordingly, affirm the judgment of conviction as it pertains to Canova's guilt. As for the government's sentencing challenge, its request

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for de novo review of the district court's departure decision pursuant to 18 U.S.C. § 3742(e) is now foreclosed by United States v. Booker, --- U.S. ----, ---- - ----, 125 S.Ct. 738, 764-66, 160 L.Ed.2d 621 (2005), which specifically excises § 3742(e) from federal sentencing law and instructs that sentences be reviewed on appeal only for "reasonableness." Because the reasonableness of a sentence, even under the discretionary regime recognized in Booker, depends in part on a district court's consideration of the Sentencing Guidelines, see 18 U.S.C. § 3553(a)(4)-(5), a significant error in the calculation or construction of the Guidelines may preclude affirmance. See United States v. Rubenstein, 403 F.3d 93, 98-99 (2d Cir.2005). We conclude that there was such an error in the district court's calculation of the loss amount relevant to the fraud guideline, but we find no error in the district court's rejection of a Guidelines enhancement for perjury nor in its exercise of Guidelines departure authority based on defendant's public service and good works. Accordingly, we remand the case with directions to vacate the sentence and to resentence consistent with this opinion and the Supreme Court's decision in Booker, and not inconsistent with United States v. Crosby, 397 F.3d 103 (2d Cir.2005).

I. Background

A. The Crimes of Conviction

1. The Charges

John Canova, who at the relevant time served as Vice President for Operations of Raytel Cardiac Services, Inc. ("Raytel"), was charged in a six-count indictment with (1) conspiring to defraud the United States from October 1999 through October 2001 by making false statements to Medicare agents in violation of 18 U.S.C. § 1001, and to influence, obstruct, or impede a Medicare audit in violation of 18 U.S.C. § 1516, see 18 U.S.C. § 371; (2) falsely representing in a December 6, 1999 letter to Medicare that Raytel was in compliance with Medicare specifications for testing pacemakers when he knew that it was not, see id. § 1001; (3) making a similar false representation in a January 27, 2000 letter to a Medicare auditor, see id.; (4) making various false representations with respect to Raytel's records and archive system in a March 28, 2000 letter to a Medicare auditor, see id.; (5) obstructing a Medicare audit on January 24, 2000, by directing Raytel's Connecticut employees falsely to represent that Raytel was in full compliance with government testing specifications, see id. § 1516; and (6) obstructing a criminal investigation by making false statements to federal agents on June 23, 2000, with respect to Raytel's pacemaker testing, see id. § 1518.

Count Six was dismissed prior to trial for reasons not relevant to this appeal. On the remaining charges, a jury found Canova guilty on Counts One, Two, Three, and Five, and not guilty on Count Four. In light of that verdict, and the district court's subsequent denial of a motion for a new trial, we view the evidence " 'in the light most favorable to the government, crediting any inferences that the jury might have drawn in its favor.' " United States v. Boyd, 222 F.3d 47, 49 (2d Cir.2000) (quoting United States v. Salameh, 152 F.3d 88, 107 n. 1 (2d Cir.1998) ( per curiam )); accord United States v. Rubenstein, 403 F.3d at 96.

2. The Conspiracy to Defraud Medicare

a. Raytel's Pacemaker Testing for Medicare

At times relevant to the indictment, Raytel performed transtelephonic pacemaker

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testing for Medicare patients at government expense. Transtelephonic monitoring allows a technician at a remote location to test the operation of a pacemaker by having a patient use a portable device to transmit telephonic signals that can then be converted into a conventional electrocardiogram ("ECG") report for review by a supervising cardiologist.

For Medicare to cover the expense of its transtelephonic testing, Raytel was obliged to comply with Section 50-1 of the Medicare Coverage Issues Manual, which required that a pacemaker be monitored in three functioning modes for thirty seconds each, with the results recorded on strips of magnetic tape (the "30-30-30 test"). See Medicare Program; National Coverage Decisions, 54 Fed.Reg. 34,555-03, 34,580 (Aug. 21, 1989). 2 At the first-step of the "30-30-30 test," a technician records on a magnetic strip the pacemaker's operation for thirty seconds in a free-running or "demand mode," during which the pacemaker supplies an electric charge to the heart only when it senses that the organ is falling behind the programmed heart rate. At the second step, a technician records a strip of the pacemaker's operation for thirty seconds in a "magnetic mode," during which the patient uses a magnet to close a switch inside the pacemaker, causing the device to fire an electric charge to the heart at regular intervals regardless of the patient's pulse. This exercise typically reveals whether the pacemaker's battery needs to be replaced and whether the heart is properly responding to the charge firing. At the third step, a technician records a strip of the pacemaker's operation for a final thirty seconds in the "demand-after-magnet mode," during which the magnet is removed and the pacemaker is allowed to return to free-running functioning. This segment of the test permits a technician to verify that a pacemaker's internal switch has reopened and that the patient has suffered no ill effects from the constant firing of the pacemaker during the magnetic-mode phase of the test.

Because a cardiologist would typically need to review only representative segments of the first two phases of the test, a technician would generally attach only strip excerpts to the report submitted to the doctor, providing the full test results upon specific request. Before 1995, when Raytel switched to computerized testing, its technicians were able to prepare strip excerpts from the first two test modes as the third was concluding. Because the computer only displayed information as it was being recorded, however, it took longer for technicians employing this technology to identify and prepare representative strips. This delay in processing assumed significance in the aggregate because of the number of tests each Raytel technician was expected to perform--rising in 1999 from thirty-two to thirty-five to forty tests per day. 3 This, in turn, led some Raytel technicians to depart from Medicare specifications and to record only an abbreviated strip--or no strip at all--of the last test

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phase. At trial, the government offered evidence indicating that, in the period December 1999 to March 2000, technicians at Raytel's Connecticut facility complied with Medicare's pacemaker testing specifications only 22 to 34.7 percent of the time.

b. Canova's Involvement in the Fraud Scheme

At trial, Canova did not seriously dispute Raytel's non-compliance with Medicare testing requirements. Rather, he challenged the government's ability to prove his knowing participation in any scheme to defraud the government in connection with these tests or to obstruct a Medicare audit.

To carry its burden on the issue of Canova's guilty knowledge, the government relied on both circumstantial and direct evidence. As background, it sought to demonstrate that it was Canova's heightened performance quotas that led Raytel technicians to abbreviate the 30-30-30 test. Ronald Vincent, a former manager of Raytel's Connecticut facility who pleaded guilty to obstruction pursuant to a plea agreement, testified:

John [Canova] would call ... and want to know why, what are we going to do to get to that target, depending on, you know, if we were fairly close, you know, it wouldn't be that bad, but if we were far behind on target, John would be pretty animated as to why we were not on target, and want to find out why we weren't on target, and what we were going to do to get close to being on target.

Trial Tr. at 604.

Various employees of the Connecticut facility, including Vincent, his predecessor Alexander Puziak, and technician Dawn Amaro, testified that, under pressure to...

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