U.S. v. Triana

• Decision Date: 02 November 2006
• Docket Number: No. 05-3173.,05-3173.
• Citation: 468 F.3d 308
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Nicholas J. TRIANA, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 308

468 F.3d 308

UNITED STATES of America, Plaintiff-Appellee, v. Nicholas J. TRIANA, Jr., Defendant-Appellant.

No. 05-3173.

United States Court of Appeals, Sixth Circuit.

Submitted: July 19, 2006.

Decided and Filed: November 2, 2006.

COPYRIGHT MATERIAL OMITTED

ON BRIEF: G. Richard Strafer, Office of G. Richard Strafer, Miami, Florida, for Appellant. Bruce A. Khula, United States Attorney, Cleveland, Ohio, for Appellee.

Before: MARTIN and RYAN, Circuit Judges; MARBLEY, District Judge.^*

RYAN, J. (p. 326), delivered a separate opinion concurring except as to Part II.C.

OPINION

MARBLEY, District Judge.

On March 3, 2004, in a five-count indictment, a federal grand jury charged Nicholas J. Triana (hereinafter, "Triana" or "Defendant") with various fraudulent acts: (1) Count 1 charged Triana with conspiring, under 18 U.S.C. § 371, with unindicted co-conspirators—his sister, Jolynn Peck ("Peck"), and his attorney, Brian Salvagni ("Salvigni"), and "others"—to defraud the Medicare and Medicaid programs and the United States District Court for the Northern District of Ohio, including the United States Probation Office; (2) Count 2 alleged that Triana committed health care fraud by "fraudulently" trying to circumvent the exclusion provision of his settlement agreement in violation of 18 U.S.C. § 1347; (3) Count 3 alleged that Triana violated the federal false statement statute, 18 U.S.C. § 1001, by allegedly failing to "notify" and/or by "conceal[ing]" from his probation officers that he had a "de facto ownership, interest and control" of two companies—FootCare Consultants, Inc. ("Footcare"), a company providing podiatric services to patients in nursing homes around Ohio, and Podiatry Administration, LLC ("Podiatry Admin."), a business allegedly performing marketing and other administrative services for Footcare; (4) Count 4 charged Triana with one count of bank fraud under 18 U.S.C. § 1344, for causing Peck, to file a loan application for a second home containing materially incorrect information; and (5) Count 5 charged Triana with making a false statement in an application for an automobile loan in violation of 18 U.S.C. § 1014. Triana went to trial, and a jury convicted him on Counts 1 through 4.

Triana now raises three issues on appeal. First, he asserts that the district court abused its discretion in refusing to allow the jury to consider his proposed jury instruction raising an entrapment by estoppel theory of defense. Second, he argues that the district court erred as a matter of law in basing its "loss" calculation under U.S. S.G. § 2B1.1 on Footcare's approximately $1.7 million in gross receipts from Medicare, when the fraud did not cause any actual losses to the Medicare program. Third, Triana argues that he should be resentenced in the aftermath of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 747, 160 L.Ed.2d 621 (2005). For the reasons set forth below, although we AFFIRM both Triana's conviction and the district court's "loss" calculation, we VACATE Triana's sentence, and REMAND his case to the district court for resentencing in light of United States v. Booker and its progeny.

I. BACKGROUND

A. Triana I

Between 1987 and 1998, Defendant-Appellant, Triana, worked as a Doctor of Podiatric Medicine in Ohio, specializing in the treatment of elderly patients housed in nursing homes throughout the state. On September 28, 1998, Triana executed a plea agreement with the government under which he pled guilty to one count of health care fraud for inflated Medicare billing, in violation of 18 U.S.C. § 1347 (hereinafter referred to as "Triana I"). Under the terms of Triana's plea agreement, he agreed that he would not "personally, or through any entity he controls, i.e. through a direct or indirect ownership interest of five percent or more or an officer, agent, or managing employee (as defined in 42 U.S.C. § 1320a 5(b)) submit claims or cause claims to be submitted for program payment." Triana also reached a settlement with the United States Department of Health and Human Services ("HHS"), excluding him from participation in "Medicare, Medicaid and all other federal health care programs" for a period of eight years. According to the exclusion notice he received from HHS, Triana could receive "no program payment ... for any items and services ... including administrative and management services," and such restrictions on payment would occur whether he served as an employee, administrator, operator, or in any other capacity.

Pursuant to the above agreements, on January 29, 1999, the district court sentenced Triana to six months of imprisonment in Oriena House, a half-way house with work release privileges located in Akron, Ohio, to be followed by a two-year period of supervised release, pursuant to 18 U.S.C. § 3583. As a condition of Triana's sentence, he was required to "notify [his] probation officer any time he had an interest of five percent or more in any entity or practice which submits claims or causes claims to be submitted to ... Medicaid or Medicare reimbursement." In addition, Triana was required to pay a fine of $10,000.00 and restitution in the amount of $83,644.00 "to be paid at a minimum rate of 15% of defendant's gross monthly earnings." In addition, effective June 11, 1999, the State of Ohio Medical Board permanently revoked Triana's podiatry license.

B. Triana's Involvement in Footcare and Podiatry Admin.

Because of his exclusion from Medicare and Medicaid programs, Triana was unable to obtain a Medicare or Medicaid provider number for any entity that he owned or controlled. Nonetheless, with the help of Salvagni, his corporate attorney and friend, Triana was able to create two new companies, Footcare and Podiatry Admin., and use them in a scheme that would enable him to participate, benefit from, and control a podiatry practice that billed Medicare. Although both Footcare and Podiatry Admin. were, in actuality, operated by Triana, Triana placed Dr. Stephen Castor ("Castor") at the helm of Footcare, and made his own sister, Peck, the owner and sole shareholder of Podiatry Admin.

In October 1998, Triana contracted to sell Castor his former podiatry practice under the name Footcare for $50,000.00 consisting of a $500 down payment and a promissory note for the balance of $49,500. Castor, a former bellhop at the Cleveland Airport Marriott, was a recent graduate of podiatry school who had been working for Triana without pay since early 1998 in the hopes of establishing himself as a podiatrist and eventually opening a podiatry practice in Ohio. Though Salvagni testified that the agreement between Triana and Castor was a standard-form contract, Castor's testimony at trial made clear that Triana had arranged the deal to allow him to maintain control of the operation while having Castor serve as a figurehead. First, despite the terms of the agreement, no money changed hands. Castor never paid Triana the $500 down payment required by the agreement, and Triana told Castor that he would not have to pay Triana any money on the $49,500 promissory note. Castor's eventual default on the note would, therefore, permit Triana to reclaim his practice at the appropriate moment. Second, Triana significantly limited Castor's power to oversee the business. From 1998 onward, Footcare hired at least thirty new podiatrists and took on hundreds of new nursing home clients. Castor never once authorized a contract, and was at all times restricted from looking at Footcare's books. Third, Triana ensured that Castor's salary was limited to 30% of the net receipts from work he billed plus a 5% administrative fee. Thus, despite the fact that after Castor "purchased" the company, Footcare grew exponentially, eventually achieving gross income upwards of $650,000 in 2001, Castor's salary was consistently under $70,000 per year. By limiting Castor's income, Triana was able to funnel the rest of the money to his second company, Podiatry Admin., under the guise of "management costs."

Salvagni also assisted Triana in creating Podiatry Admin., an Ohio limited liability company. Podiatry Admin. received a high percentage of Footcare's monthly gross profits, ostensibly in return for providing Footcare with both management and administrative services. In order to hide his control of the company, however, Triana recruited his younger sister, Peck, to serve as the owner and sole shareholder of the company. Peck was a recently-divorced, financially strapped elementary school teacher in Florida, who had no background in either health care or medicine. At trial, Peck testified that both Triana and Salvagni had assured her that after signing the appropriate paperwork, she would be "relieved of all responsibilities" regarding Podiatry Admin., including ever having to visit the company headquarters in Ohio. In return for permitting Triana to use her name, Peck received a $500 monthly stipend from the Podiatry Admin. account.

Footcare's podiatrists, allegedly "unaffiliated" with Triana, derived significant income from Medicare billing. The income passing from Medicare to Footcare and Podiatry Admin., was funneled to Triana in a number of ways. Because Footcare and Podiatry Admin. both maintained office space in a building owned by Triana, Podiatry Admin. credited Triana for thousands of dollars in rental expenses. Triana's office building contained four separate and nearly identical suites, and although the two other renters testified that they paid roughly $6,000 per year in rent, Podiatry Admin.'s rent was inexplicably higher, totaling approximately $80,000 per year. Podiatry Admin. also charged Footcare considerable sums for "administration" and "management" costs; such costs usually amounted to at least 57% of Footcare's monthly earnings. At trial, however, Podiatry Admin.'s former President, Theresa Kripinsky ("Kripinsky"), testified that despite Podiatry Admin.'s high management fees, Podiatry Admin.'s services to...