874 F.2d 20 (1st Cir. 1989), 88-1866, United States v. Bay State Ambulance and Hosp. Rental Service, Inc.

Docket Nº:88-1866, 88-1867.
Citation:874 F.2d 20
Party Name:UNITED STATES of America, Appellee, v. BAY STATE AMBULANCE AND HOSPITAL RENTAL SERVICE, INC. and Michael G. Kotzen, Defendants, Appellants. UNITED STATES of America, Appellee, v. John L. FELCI, Defendant, Appellant.
Case Date:May 02, 1989
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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874 F.2d 20 (1st Cir. 1989)

UNITED STATES of America, Appellee,

v.

BAY STATE AMBULANCE AND HOSPITAL RENTAL SERVICE, INC. and

Michael G. Kotzen, Defendants, Appellants.

UNITED STATES of America, Appellee,

v.

John L. FELCI, Defendant, Appellant.

Nos. 88-1866, 88-1867.

United States Court of Appeals, First Circuit

May 2, 1989

Heard Feb. 8, 1989.

As Amended May 9, 1989.

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[Copyrighted Material Omitted]

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Nancy Gertner, with whom Gail S. Strassfeld, Sharon Beckman, Silverglate, Gertner, Fine & Good and Philip Cormier, Boston, Mass., were on brief for defendants, appellants, Bay State Ambulance and Hosp. Rental Service, Inc. and Michael G. Kotzen.

Margaret A. Burnham, Boston, Mass., with whom Martin C. Gideonse was on brief for defendant, appellant, John L. Felci.

Peter A. Mullin, Asst. U.S. Atty., with whom Frank L. McNamara, Jr., U.S. Atty., Boston, Mass., was on brief for the U.S.

Before BOWNES and TORRUELLA, Circuit Judges, and COFFIN, Senior Circuit Judge.

BOWNES, Circuit Judge.

This case arises out of the award of a contract for ambulance service to defendant, Bay State Ambulance and Hospital Rental Service, Inc. (Bay State), by the City of Quincy in 1984. The United States indicted Bay State, its president, Michael G. Kotzen, and John L. Felci, an official at the Quincy City Hospital (QCH), of conspiring to commit Medicare fraud (Count 1). 42 U.S.C. Sec. 1395nn. 1 The defendants were also charged with illegally paying Felci in the form of a Buick (Count 2), a Mazda (Count 4) and seven checks (Counts 3 and 5-10) in violation of the same statute. 2 The jury found the defendants guilty of Counts 1 (the conspiracy), 2 (the Buick) and 4 (the Mazda). The jury was hung on Count 3 and returned a verdict of not guilty on Counts 5 through 10. The defendants appeal on numerous grounds. 3 For the reasons set forth below, we affirm their convictions.

I. FACTS

"Our review of the facts is made in the light most favorable to the government and drawing all reasonable inferences in its favor."

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United States v. Foley, 871 F.2d 235, 236 (1st Cir.1989). Because it is relevant to certain issues, we also give the defendants' version of certain events.

(a) Bay State Is Awarded The Contract

Quincy City Hospital is a city-owned hospital which is managed by the Hospital Corporation of America (HCA). With the exception of a handful of top administrators, who are employees of HCA, all QCH employees are city employees; Felci was a city employee at all relevant times. Bay State is an ambulance company which provides mainly front-line service 4 to a number of Massachusetts communities. Kotzen is the president and sole shareholder of Bay State. He is also the president and sole shareholder of two other corporations: Bay State Ambulance Sales, Inc. and B & N Realty, Inc. Bay State Ambulance Sales, Inc. (Sales Corp.) is in the business of buying and selling ambulances and other vehicles; Kotzen is a licensed car dealer. B & N Realty is a real estate corporation which holds most of the property owned by Bay State. Neither Sales Corp. nor B & N Realty has any employees, payroll or separate headquarters. But, all three companies have separate checking accounts and books.

In 1980, the City of Quincy decided to remove responsibility for ambulance service from the police department and put it in the private sector. Competitive bids were submitted in 1980, but no contract was awarded. After another round of bids in 1981, Bay State was awarded a zero-subsidy contract. 5 Brewster Ambulance Service had also bid for this and the 1980 contract.

The term for the 1981 contract was for three years with separate renewable contracts for each year. The contract was first administered by the Quincy City Purchasing Department; by 1983, the Quincy City Hospital Purchasing Department had been put in charge of administering the contract. At all times, however, Felci, as QCH's director of training, was responsible for the daily oversight of the contract.

In January, 1982, after receiving permission from the then Chief Executive Officer (CEO) of QCH, Michael Kitchen, Felci and Kotzen attended a conference in Kansas City on emergency medical care. All of Felci's expenses were paid by Bay State. In late 1982, a new QCH CEO, James Lowenhagen, concluded that Felci's conference attendance at Bay State's expense raised an appearance of impropriety and ordered, therefore, that Felci was no longer to have any decision-making power with respect to subsequent contracts on which Bay State might bid. Lowenhagen memorialized this order in a letter to Felci. Felci informed Kotzen of this development.

In late 1983, in response to a letter from Brewster Ambulance, QCH started the process for rebidding the ambulance contract due to expire June 30, 1984. Although QCH's CEO, Mark Mundy, 6 had the final decision-making authority as to whom the contract would be awarded, a committee was appointed to write the specifications, review the bids and make a recommendation. Agrippino Roccuzzo, QCH's Director of Material Management, recommended a list of people for the panel, which included Felci. Mundy approved the list. When Felci discovered he was on the bid committee, he talked to Roccuzzo about the Lowenhagen letter. Felci assured Roccuzzo that there was no need for concern other than the trip to Kansas City. Based on this assurance, Felci was kept on the committee. Felci failed to tell Roccuzzo that he had been hired by Kotzen as a consultant

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to Bay State and had been given a 1983 Buick Electra a few months earlier from Bay State Ambulance Sales, Inc., a corporation owned by Kotzen.

Because of Felci's intimate knowledge of the 1981 contract and its subsequent administration, Roccuzzo depended heavily on Felci in preparing information for the committee members. When the committee members were asked for suggestions for improving the bid specifications, only Felci submitted any (except for one financial change by the accounting department member). Felci's suggestions included: a requirement that the company have five years of front-line service; upgrading at least one ambulance to 24 hours a day Advanced Life Saving (ALS) 7 by October 1, 1984; 8 and cross-referenced computer generated statistics necessary to make ALS effective. All of Felci's suggestions were adopted.

Only two companies submitted bids for the contract: Bay State and Brewster Ambulance Service. Felci and Roccuzzo prepared synopses of the two companies' bids in a comparative format. Because of Felci's superior knowledge and experience, he played a significant role in drafting these documents. The Bay State synopsis is written in very approving terms. The Brewster synopsis raises a number of questions about their proposal. The summary sentence states: "While Brewster has, to a satisfactory degree, met all the bid specifications; they are basically the same company which bid on the proposal to deliver the City of Quincy with Emergency Medical Services three (3) years ago." The synopses were sent to the bid committee members.

In order to assess better the merits of both companies' bids, the bid committee gave each company time to make an oral presentation and to answer questions posed by the committee members. The presentations were held on the morning of April 23, 1984, with Brewster going first, followed immediately by Bay State. Immediately prior to Brewster's presentation, George Brewster, the company's manager, gave Roccuzzo a letter complaining that the contract specifications were too restrictive, that Bay State's rates were higher than Brewster's, 9 and that Bay State's reports were not presented in a professional manner.

Roccuzzo directed Felci to investigate and respond to each of the allegations contained in the Brewster complaint letter. Felci did so. The response, though written as the "REVIEW COMMITTEE'S RESPONSES" and signed by Roccuzzo, is in fact Felci's product. In the response, Felci stated that the specifications were not unduly restrictive and that Bay State's reports were fine. With respect to rate differences, Felci stated that "George Linah" (his name is spelled "Lynah") was contacted. Lynah worked for Blue Cross/Blue Shield of Massachusetts, and had responsibility for determining reasonable rates for ambulance companies under the Medicare program. 10 Lynah denied talking with anyone from QCH about rate differences. Although Felci's response was not circulated to the bid committee, it was used to placate a city councilman who inquired of the bid process after being contacted by Brewster.

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At this same time, Felci contacted Arthur Dove, a Bay State employee, and asked him to contact a political associate concerning the councilman's inquiries. Felci was concerned because there might be "a problem" with this councilman.

During both presentations, Felci was present but said little. One of the people who presented information during Bay State's presentation was William Gonsalves, a computer programmer. 11 Although Felci and Gonsalves were at that time jointly engaged in developing a computer program to meet the statistical requirements of the contract specifications, neither Felci nor Gonsalves informed the committee members of this fact.

Following Bay State's presentation, Felci gave John Mansfield, Bay State's executive director, a sealed envelope and told him not to open it until he was back at the office. When Mansfield opened it, he discovered a copy of the Brewster complaint letter. When Mansfield asked Kotzen about this, Kotzen told him to cooperate in any way Felci requested.

Following the oral presentations, Roccuzzo, with Felci's help, prepared a summary of the questions asked and the responses given....

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