United States v. Sadler

• Decision Date: 24 April 2014
• Docket Number: Nos. 12–4450,12–4458.,s. 12–4450
• Citation: 750 F.3d 585
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Lester SADLER (12–4450) and Nancy Sadler (12–4458), Defendants–Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

750 F.3d 585

UNITED STATES of America, Plaintiff–Appellee,

v.Lester SADLER (12–4450) and Nancy Sadler (12–4458), Defendants–Appellants.

Nos. 12–4450, 12–4458.

United States Court of Appeals, Sixth Circuit.

Argued: March 13, 2014.

Decided and Filed: April 24, 2014.

ARGUED:Robert Dietrick, Duane Morris LLP, Washington, D.C., for Appellant in 12–4450. William G. Brown, The Pickrell Law Group, P.C., Nashville, Tennessee, for Appellant in 12–4458. Timothy S. Mangan, United States Attorney's Office, Cincinnati, Ohio, for Appellee. ON BRIEF:Robert Dietrick, Duane Morris LLP, Washington, D.C., for Appellant in 12–4450. William G. Brown, The Pickrell Law Group, P.C., Nashville, Tennessee, for Appellant in 12–4458. Dale Ann Goldberg, United States Attorney's Office, Cincinnati, Ohio, for Appellee.

Before DAUGHTREY, SUTTON and DONALD, Circuit Judges.

OPINION

SUTTON, Circuit Judge.

A jury convicted Lester and Nancy Sadler, husband and wife, of various crimes associated with the operation of several pain-management clinics in central and southern Ohio. They each appeal their convictions, and Nancy challenges her sentence as well. We affirm on all grounds save one: Nancy's conviction for wire fraud.

I.

In 2001, Nancy and Lester opened a pain-management clinic, “First Care,” in Garrison, Kentucky. Nancy was the owner, but employees at the clinic considered both Nancy and Lester to be “in charge.” R. 205 at 8–9. The clinic closed after the Drug Enforcement Agency investigated it and confiscated the license of the clinic's doctor for overprescribing narcotics.

In 2002, they moved the clinic to Waverly, Ohio. In 2004, the Sadlers renamed the clinic “Ohio Medical and Pain Management.” Sometime after February 2008, Ohio Medical opened a second office in Columbus, Ohio. Unlike at the previous clinics, Lester (not Nancy) was Ohio Medical's owner and statutory agent.

The evidence introduced at trial showed that these were not conventional pain clinics. At the Waverly clinic, patients would arrive well before it opened, filling the clinic's parking lot and the lots of nearby businesses. While waiting for the clinic to open, the patients used drugs and traded prescription forms for cash in the parking lots. The patients often traveled long distances (and in large groups) to come to the Sadlers' shops, sometimes as much as 316 miles in a roundtrip, even though most of the patients lived much closer to other clinics.

Matters did not improve once the patients entered the Sadlers' clinics. After paying their $150 appointment fee (cash only), they met an “assessor” who would review the patients' health-facts “day sheet” and hand the patients an already completed prescription form. Clinic staff sometimes filled out these day sheets and prescription forms weeks in advance, pulling the content from the patients' last day sheet and prescription and altering them slightly to make sure they didn't look the same. Patients then stepped into an office, where they met the doctor for a minute or two. After that, they left the clinic (some “almost skipping,” reported one witness, R. 325 at 81) with a signed prescription for a fresh supply of hydrocodone, oxycodone or other pain medications in hand. As many as 100 people per day completed this “five minute[ ]” process of assessment and prescription, R. 317 at 69, a tall order, the evidence showed, for a clinic committed to practicing medicine responsibly.

The clinics also treated phantom patients. Each month, Nancy would announce to the clinic staff that “it was time to do the charts,” meaning it was time to update the medical treatment files for a long list of people who had never set foot in the clinics. R. 326 at 35. The Sadlers used the names of family members for these charts. Lester's dad had a chart, as did two of the Sadlers' children, Kyle and Levi, though none of them ever needed the clinics' services. Staff members would then write prescriptions for these non-existent patients, the doctor would sign the prescriptions, and clinic staff would fill the prescriptions at a local pharmacy. The pain pills found their way to David Michael Journey, a relative of the Sadlers and an occasional clinic employee, who sold the pills on the street at a significant profit.

The Sadlers' real and make-believe patients generated a remarkable number of pill prescriptions. Dr. Brenda Banks, a doctor hired by the Sadlers to work at Ohio Medical, was the state's number one prescriber of hydrocodone in 2006 and 2007. And by a wide margin: In 2006, she prescribed 147,000 dosage units of the drug, almost 107,000 more units than Ohio's next most prolific prescriber. In 2007, Dr. Banks prescribed 62,400 dosage units, while the second-place prescriber doled out 19,650.

Nor did the clinics limit themselves to pain prescriptions. The clinics also ordered hydrocodone and other drugs directly from pharmaceutical companies. None of the clinics, however, ever obtained a license to dispense controlled substances. See R. 316 at 10, 25–26 (The clinics never obtained “a terminal distributor license.”) To get around that problem, Nancy would order the drugs by using the clinic doctor's DEA registration number, Lester would pay for the drugs, and the drugs would arrive at the clinic. Two witnesses described where the pills went next. One said that she saw Nancy take a handful of pills to Dr. Banks, who apparently was addicted to consuming as well as distributing painkillers. Another said that he sold some of these pills to addicts outside of the clinic and split the proceeds with Nancy.

A grand jury charged Lester and Nancy with several crimes, including conspiring to distribute controlled substances illegally, maintaining a premises for distributing the substances, and distributing drugs to phantom patients. It also charged Nancy with wire fraud and money laundering. After a fourteen-day trial, the jury found Lester and Nancy guilty of the conspiracy and maintaining-a-premises charges, Nancy guilty of wire fraud and money laundering, and the couple not guilty of the individual distribution charges. The district court sentenced Lester to 151 months and Nancy to 210 months.

II.

The Sadlers argue that the government produced insufficient evidence to convict them on several charges. When reviewing sufficiency-of-the-evidence claims, it (almost) goes without saying that we “view [the evidence] ... in the light most favorable to the government,” United States v. Arnold, 486 F.3d 177, 180 (6th Cir.2007) (en banc) (internal quotation marks omitted), asking whether “any rational trier of fact could have found the elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).

Wire fraud. Nancy challenges the sufficiency of the evidence supporting her wire fraud conviction. The statute prohibits individuals from using interstate communications to carry out “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1343. While on a first reading one might think the statute contains two distinct crimes—a “scheme to defraud” or a “scheme ... for obtaining money or property”—that is not the case. See Cleveland v. United States, 531 U.S. 12, 25–26, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000); McNally v. United States, 483 U.S. 350, 357–59, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). The statute instead punishes one kind of scheme—schemes intended “to deprive [people] of their money or property.” Cleveland, 531 U.S. at 19, 121 S.Ct. 365 (internal quotation marks omitted). In this instance, that meant the government had to prove Nancy knowingly used an interstate wire communication to further a scheme to defraud the distributors of their money or property. See United States v. Faulkenberry, 614 F.3d 573, 581 (6th Cir.2010).

To these ends, the government showed that Nancy lied to pharmaceutical distributors when she ordered pills for the clinic by using a fake name on her drug orders and by falsely telling the distributors that the drugs were being used to serve “indigent” patients. R. 320 at 96–97. The government also proved that she used faxes, phone calls and other interstate wire communications to facilitate her purchases. Through it all, however, the government never showed that Nancy intended to deprive anyone of property. All that the evidence shows is that Nancy paid full price for all the drugs she purchased and did so on time. How, then, did Nancy deprive the distributors of property?

The government's opening bid offers this answer: Nancy deprived the distributors of their pills. Well, yes, in one sense: The pills were gone after the transaction. But paying the going rate for a product does not square with the conventional understanding of “deprive.” Cleveland, 531 U.S. at 19, 121 S.Ct. 365; Webster's Third New International Dictionary 606 (2002). Stealing the pills would be one thing; paying full price for them is another. Case law reinforces that the conventional meaning of “deprive” applies in the fraud context. To be guilty of fraud, an offender's “purpose must be to injure,” Horman v. United States, 116 F. 350, 352 (6th Cir.1902), a common-law root of the federal fraud statutes, see Neder v. United States, 527 U.S. 1, 21–25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999); Restatement (Second) of Torts § 531 (“One who makes a fraudulent misrepresentation is subject to liability ... for pecuniary losses suffered.”). Nancy may have had many unflattering motives in mind in buying the pills, but unfairly depriving the distributors of their property was not one of them. As to the wire-fraud count, she ordered pills and paid the distributors' asking price, nothing more.

As an alternative, the government offers another potential deprivation: Nancy's lies convinced the distributors to sell controlled substances that they would not have sold had they known the truth. Nancy in other...