United States v. Vernon

• Decision Date: 26 July 2013
• Docket Number: 12–13266 and 12–13311.,Nos. 12–12767,s. 12–12767
• Parties: UNITED STATES of America, Plaintiff–Appellant, v. Chris VERNON, Defendant–Appellee. United States of America, Plaintiff–Appellee, v. Butch Brill, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Jeff Vernon, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

723 F.3d 1234

UNITED STATES of America, Plaintiff–Appellant,

v.Chris VERNON, Defendant–Appellee.

United States of America, Plaintiff–Appellee,

v.Butch Brill, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Jeff Vernon, Defendant–Appellant.

Nos. 12–12767, 12–13266 and 12–13311.

United States Court of Appeals, Eleventh Circuit.

July 26, 2013.

Christopher B. Brinson, Kenyen Ray Brown, Donna Barrow Dobbins, Charles A. Baer, Christopher John Bodnar, Gregory A. Bordenkircher, Deidre L. Colson, Adam W. Overstreet, U.S. Attys., Mobile, AL, Sangita K. Rao, U.S. Dept. of Justice, Vijay Shanker, U.S. Dept. of Justice, Crim. Div., Washington, DC, for Plaintiff–Appellant.

Ivan B. Cooper, Jackson Roger Sharman, III, Tenley E. Armstrong, Jeffrey Paul Doss, Lightfoot, Franklin & White, LLC, Birmingham, AL, Dennis J. Knizley, Mobile, AL, for Defendant–Appellee in No. 12–12767.

Neil L. Hanley (Court–Appointed), Hanley Law Firm, Mobile, AL, for Defendant–Appellant in No. 12–13266.

James R. Sturdivant, Robert R. Baugh, Sara Elizabeth Lee Liles, Sirote & Permutt, PC, Birmingham, AL, John T. Brennan, Jr., David W. O'Brien, Crowell & Moring, LLP, Washington, DC, for Defendant–Appellant in No. 12–13311.

Appeals from the United States District Court for the Southern District of Alabama.

Before HULL and PRYOR, Circuit Judges, and SCHLESINGER,^* District Judge.

HULL, Circuit Judge:

These three consolidated appeals arise from a single prosecution involving health care fraud and violations of the Anti–Kickback laws regulating Alabama Medicaid, which is funded in part by the United States government. Defendant Jeff Vernon appeals his convictions on numerous grounds, including the district court's denial of his motion for a judgment of acquittal under Federal Rule of Criminal Procedure 29. Defendant Butch Brill also appeals the district court's denial of his Rule 29 motion. The government appeals the district court's order setting aside the jury's guilty verdicts as to Chris Vernon and granting his Rule 29 motion.

This prosecution involves “factor” medication, which is a special, expensive medication used to treat hemophilia, a blood clotting disease. Defendants Chris Vernon and Jeff Vernon were executives of MedfusionRx, LLC (“Medfusion”), which is a specialty pharmacy that fills prescriptions for factor medication. Their dispensing factor medication, especially to Medicaid recipients, was a profitable, and indeed, lucrative business due to the high Medicaid reimbursement rate. In order to gain more factor medication business, Medfusion made sizable payments to individuals and businesses if they would refer their hemophiliac clients to Medfusion for prescription filling. Specifically, Medfusion paid 45 to 50 percent of its profits on filling factor medication prescriptions to the individual or business that referred that client to Medfusion for prescription filling. Those kickback payments for referrals form the basis of the charges against Chris Vernon and Jeff Vernon.

Meanwhile, Butch Brill worked for a business that received those kickback payments. Butch Brill was convicted of conspiring with others, including his estranged wife Lori Brill, to increase the kickback payments he received by committing health care fraud. Specifically, the conspirators falsified records in order to justify the ordering of more factor medication than was necessary.

After review of the extensive trial record and with the benefit of oral argument, we affirm the convictions of Jeff Vernon and Butch Brill. As to Chris Vernon, we vacate the district court's Rule 29 acquittal of him on counts ten, eleven, and twelve, we reverse the alternative award of a new trial, and remand for reinstatement of the jury's guilty verdicts and sentencing on those counts.

I. PROCEDURAL HISTORY

A. Second Superseding Indictment

A federal grand jury in the Southern District of Alabama returned a second superseding indictment (“indictment”) against eight defendants: Butch Brill, Chris Vernon, Jeff Vernon, Lori Brill, Travis Goodwin, Tony Goins, Eric Mosley, and Leroy Waters.

Two defendants, Travis Goodwin and Leroy Waters, pled guilty and testified at trial. Six defendants went to trial. This appeal concerns the convictions of three defendants: Butch Brill, Chris Vernon, and Jeff Vernon.

Count one of the indictment charged defendants Butch Brill, Lori Brill, and Travis Goodwin with conspiracy to falsify factor medication records, in violation of the health care fraud statutes, 18 U.S.C. §§ 1347(a), 1349. Counts two and three charged them with substantive counts of health care fraud, in violation of 18 U.S.C. § 1347 and aiding and abetting health care fraud, in violation of 18 U.S.C. §§ 2, 1347.

Count nine charged defendants Chris Vernon, Jeff Vernon, and Lori Brill with conspiracy to pay money to Lori Brill to induce her to refer Medicaid clients to the Vernons' company, Medfusion, and to increase Medfusion's profits, in violation of the Anti–Kickback statute, 42 U.S.C. § 1320a–7b(b); 18 U.S.C. § 371. Counts ten, eleven, and twelve charged them with substantive violations of the Anti–Kickback statute, 42 U.S.C. § 1320a–7b(b).

Count fourteen charged defendants Chris Vernon, Jeff Vernon, and Leroy Waters with conspiracy to pay money to Leroy Waters to induce him to refer Medicaidclients to Medfusion and to increase Medfusion's profits, in violation of the Anti–Kickback statute, 42 U.S.C. § 1320a–7b(b); 18 U.S.C. § 371. Counts fifteen, sixteen, and seventeen charged them with substantive violations of the Anti–Kickback statute.¹

B. Rule 29 Motions

The joint jury trial of the six defendants began on January 30, 2012. After the government rested its case, the defendant-appellants here—Butch Brill, Chris Vernon, and Jeff Vernon—each moved for a judgment of acquittal under Rule 29(a).

The district court: (1) denied Butch Brill's Rule 29(a) motion as to counts one and three and took it under advisement as to count two; (2) granted Chris Vernon's Rule 29(a) motion as to counts fourteen through seventeen and reserved ruling as to the other counts; and (3) reserved ruling on Jeff Vernon's Rule 29(a) motion.

On February 8, 2012, Butch Brill and Jeff Vernon each called one witness and rested. Chris Vernon did not present evidence. At the close of the evidence, all three defendants renewed their Rule 29(a) motions for acquittal, which the district court took under advisement.

C. Jury Verdict

On February 13, 2012, the jury found defendant Butch Brill: (1) guilty of count one, the health care fraud conspiracy; and (2) not guilty of counts two and three, the substantive health care fraud violations.

The jury found defendants Chris Vernon and Jeff Vernon: (1) not guilty of count nine, the conspiracy to make unlawful referral payments to HMS/Lori Brill; and (2) guilty of counts ten, eleven, and twelve, the substantive Anti–Kickback statute violations involving referral payments to co-defendant Lori Brill.²

The jury also found defendant Jeff Vernon: (1) guilty of count fourteen, the conspiracy to make unlawful referral payments to Waters; and (2) guilty of counts fifteen, sixteen, and seventeen, the substantive Anti–Kickback statute violations involving referral payments to co-defendant Waters.

After the verdict, the district court denied all pending Rule 29(a) motions.

D. Post–Trial Motions

Post-trial, each defendant filed a Rule 29(c) motion for acquittal. Chris Vernon and Jeff Vernon also filed Rule 33 motions for a new trial.

After a hearing, the district court granted Chris Vernon's Rule 29 motion for a judgment of acquittal on counts ten, eleven, and twelve, which were his only convictions. Alternatively, the district court granted Chris Vernon's motion for a new trial on those counts. The district court denied Jeff Vernon's and Butch Brill's post-trial motions.

E. Sentences

The district court sentenced Butch Brill to fifteen months' imprisonment, followed by three years' supervised release, with no fine. A few days later, the district court sentenced Jeff Vernon to three years' probation, with a $1,750,000 fine due immediately. The district court required that Jeff Vernon serve 180 days of his sentence at a residential re-entry center, which he has since completed.

Although Butch Brill and Jeff Vernon appeal their convictions, they do not challenge their sentences. The government, however, appeals the district court's Rule 29 acquittal of Chris Vernon on counts ten, eleven, and twelve.

Because all three appeals involve Rule 29 motions and the sufficiency of the evidence, we recount in detail the evidence at trial. And given that the evidence regarding Chris Vernon and Jeff Vernon is closely intertwined, we first discuss the evidence about their making kickback payments to co-defendants Lori Brill and Leroy Waters for referrals of factor medication clients and then the merits of their two appeals. Afterwards, we outline the evidence regarding Butch Brill and discuss his appeal.

II. TRIAL EVIDENCE

A. MedfusionRx, LLC

Throughout all events in this case, Medfusion was a specialty pharmacy based in Birmingham, Alabama. Specialty pharmacies dispense critical, rare, and expensive medications, and they also provide certain health care services to their clients, including infusion and educational services. As a specialty pharmacy, Medfusion filled prescriptions for medications used to treat long-term, serious diseases, including hemophilia.

Medfusion was a successful business. It is undisputed that between 2005 and 2010, Medfusion grew from $12 million in sales to over $200 million. Medfusion supplied drugs in 45 states and had physical locations in 4 states.

Defendants Jeff Vernon and Chris Vernon were both officers of Medfusion, and at least Jeff Vernon was a co-owner. Specifically, by 2008 and during 2009 (the time period covered by the indictment), Jeff Vernon was Medfusion's chief executive officer (“CEO”) and Chris Vernon was its chief financial officer (“CFO”). Jeff had...