U.S. v. Klein

• Decision Date: 18 September 2008
• Docket Number: No. 07-20599.,07-20599.
• Citation: 543 F.3d 206
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ira KLEIN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

543 F.3d 206

UNITED STATES of America, Plaintiff-Appellee, v. Ira KLEIN, Defendant-Appellant.

No. 07-20599.

United States Court of Appeals, Fifth Circuit.

September 18, 2008.

John Richard Berry (argued), and James Lee Turner, Asst. U.S. Attys., Houston, TX, for U.S.

Marjorie A. Meyers, Fed. Pub. Def., Molly E. Odom, Philip G. Gallagher (argued), Houston, TX, for Klein.

Appeal from the United States District Court for the Southern District of Texas.

Before SMITH, WIENER, and HAYNES, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Ira Klein, a physician, treated a number of patients who had contracted Hepatitis C. A jury convicted him of eighteen counts of mail fraud in violation of 18 U.S.C. § 1341 and twenty-six counts of health care fraud in violation of 18 U.S.C. § 1347 for submitting false claims for many of those Hepatitis C treatments. The jury also returned a special verdict finding that Klein had received $10 million in gross proceeds from the fraud underlying his convictions. Klein was sentenced to 135 months' imprisonment, the bottom of his guideline range, which had been enhanced based on the amount of the loss, the number of victims, the violation of a position of trust, and obstruction of justice. The court ordered restitution. We affirm the convictions but vacate the sentence and remand for resentencing.

I.

The typical Hepatitis C treatment was a forty-eight-week regimen that required three shots of interferon per week and daily ingestion of Ribavirin. The treatments had various side effects that often required administration of various other drugs. Regular blood samples were also taken to monitor the patients' progress.

The patients typically visited Klein's office each Monday, and he or one of his assistants would administer the first of the three interferon shots. During this visit, blood was usually drawn, and the patient was given a week's worth of Ribavirin capsules and two pre-loaded syringes so the patient could self-administer the other two shots during the week. Klein frequently did not collect co-payments for these weekly visits but would submit insurance claims for the office visit, the lab work, the medications, and the administration of the medications.

Two days later, Klein would submit insurance claims for the medication and the administration of the medication that the patients self-administered. Two days after that, he again would submit claims for the self-administered third shot. If the patient received additional medicine to treat side-effects, Klein would file claims for those medications.

When billing for the medications he distributed, Klein did not claim the wholesale price of the drug. A particularly egregious example involved his purchase from the manufacturer of kits that packaged interferon and Ribavirin together. These kits were intended to allow patients easily to self-administer the drugs at home. Instead of claiming the wholesale price of the kit, Klein broke the kits down, distributed the components, and charged the insurance companies for the separate prices of the components. For example, in at least one instance Klein purchased the kit for approximately $780 but billed the insurance companies $3,840 for providing the medications and administering the injections.

In addition to claims for self-administered medications and for above-wholesale drug prices, Klein "up-coded" for certain procedures. For example, he would submit claims for routine venipunctures coded as though the procedure required a physician's skills, instead of using the code for routine venipuncture. He also used the code appropriate for a detailed examination when the actual exam was a brief check-up. There was also evidence that he filed the same claim for the same patient with multiple "primary" insurers.

The government presented the testimony of Don McWhorter, an investigator with the Texas Department of Insurance, to establish the amount of Klein's fraud. McWhorter concluded that Klein had fraudulently billed $16,124,833.06 and received $10,210,777.04 from the insurance companies. McWhorter based his testimony on patient interviews and an extensive review of Klein's patient records and insurance billing records and the insurance companies' records.

McWhorter calculated the amount of Klein's intended fraud by totaling the amount billed for patients on days for which there were no progress notes in the patient's file. In other words, McWhorter took the absence of a progress note as evidence that the patient did not visit Klein's office and therefore received no treatment, rendering Klein's claim to the insurance company fraudulent. McWhorter did not offset the total intended fraud by the value of the medications self-administered on those days.

The district court sentenced Klein based on a total offense level of 33 and a criminal history category of I. The Presentence Report ("PSR") began with a base offense level of 7, then increased the offense level by twenty based on the amount of the intended loss, $17,504,840.97.¹ The PSR added two levels because there were more than ten victims (the nineteen insurance companies) and two levels for violating a position of trust in relation to the insurance companies. The PSR did not add two levels for obstruction of justice, so the total offense level was 31, with a range of 108 to 135 months' imprisonment.

Following argument from the parties, the court adopted the PSR but found that Klein had obstructed justice and therefore added the two-level enhancement. With a new offense level of 33, Klein's range was 135 to 168 months. The court sentenced him to the bottom of the range.

The obstruction enhancement resulted from a series of events: After being indicted, Klein was released on bond. During this time, his wife said she intended to divorce him. Believing she had traveled to their home in Florida, Klein flew there and, not finding her at home, set the house on fire. He was trapped in the garage, had to be rescued, and was subsequently arrested and charged with arson. The court revoked his bond, and he was put into a federal detention center.

While there, Klein spoke with several inmates about the possibility of hiring someone to kill his wife and, if necessary, her parents and a friend. He also discussed having the prosecutor (the "AUSA") and the FBI agent on his case murdered. After Klein spoke with two inmates, they reported the conversations to the FBI. An undercover agent then posed as the cousin of one of the inmates and as someone who could arrange the murders. In two recorded conversations, Klein indicated a desire to go ahead with the murder of his wife (and parents and friend, if necessary) to prevent her from testifying at a deposition in their divorce proceedings. He expressly told the undercover FBI agent not to touch the AUSA or the FBI agent until he directed them to do so. Apparently, to avoid suspicion, Klein did not want them harmed too close in time to his wife's death. At some point, he wired $250,000 to an account set up to finance the assassinations.

The PSR did not include the enhancement for obstruction of justice, because the probation officer believed that the threats against Klein's wife were not attempts to obstruct justice in light of the fact that she was not noticed as a potential witness in Klein's criminal trial at that time. With respect to the AUSA and the FBI agent, the probation officer concluded Klein had merely discussed killing them but had not taken affirmative steps toward their murder; the affirmative steps Klein did take were directed toward his wife's death, which was not related to his indictment.

Finally, the court ordered Klein to pay $11,590,784.95 in restitution. The court based this amount on McWhorter's calculation and additional claims by the Sheet Metal Workers Local 54 Health and Welfare Fund and SHBF.

II.

Klein contends that the court erred by refusing two of his proposed jury instructions. First, the court denied an instruction defining a "scheme to defraud" as one that is "reasonably calculated to deceive persons of ordinary prudence and comprehension." Second, the court declined an instruction that named as a specific element of health care fraud that the victims, the health insurance companies, must have affected interstate commerce.

We review alleged error in jury instructions for an abuse of discretion, reversing only when the charge as a whole leaves us with substantial and ineradicable doubt whether the jury has been properly guided in its deliberations. A district court abuses its discretion in omitting a requested jury instruction only if the requested language (1) is substantively correct; (2) is not substantially covered in the charge given to the jury; and (3) concerns an important point in the trial so that the failure to give it seriously impairs the defendant's ability to present effectively a particular defense.

United States v. Lucas, 516 F.3d 316, 324 (5th Cir.2008) (internal quotations and citations omitted), petition for cert. filed, 76 U.S.L.W. 3655 (June 2, 2008) (No. 07-1512).

A.

According to Klein, the failure to instruct the jury that a "scheme to defraud" must be "reasonably calculated to deceive persons of ordinary prudence and comprehension" impaired his defense that he acted in good faith and was not attempting to deceive the insurers, but instead that he informed them of how and where he treated his patients. Essentially, Klein's claim is that, though his insurance claims may have been false, they were not calculated to deceive.

The court's instructions detailed the elements of mail and health care fraud: Mail fraud requires, inter alia, that the defendant "knowingly created a scheme to defraud" and "acted with a specific intent to defraud"; health care fraud requires, inter alia, that the defendant executed a scheme to defraud and "acted knowingly and willfully, that is, with intent to violate a known legal duty." The court included...