U.S. v. Jain

• Decision Date: 22 October 1996
• Docket Number: Nos. 95-2820,95-3036,s. 95-2820
• Citation: 93 F.3d 436
• Parties: , Medicare & Medicaid Guide P 44,539 UNITED STATES of America, Plaintiff--Appellee/Cross Appellant, v. Swaran Kumar JAIN; Center for Mental Health Services, Inc., Defendants--Appellants/Cross Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 436

93 F.3d 436

65 USLW 2150, Medicare & Medicaid Guide P 44,539

UNITED STATES of America, Plaintiff--Appellee/Cross Appellant, v. Swaran Kumar JAIN; Center for Mental Health Services, Inc. Defendants--Appellants/Cross Appellees.

Nos. 95-2820, 95-3036.

United States Court of Appeals Eighth Circuit.

Submitted April 11, 1996.

Decided Aug. 8, 1996.

Rehearings Denied Oct. 22, 1996.

Jean Paul Bradshaw, Kansas City, MO, argued (Charles J. Williams, on the brief), for appellants/cross-appellees.

Linda L. Parker, Kansas City, MO, argued (Steven L. Hill, Jr., United States Attorney, on the brief), for appellee/cross-appellant.

Before BOWMAN, BEAM, and LOKEN, Circuit Judges.

LOKEN, Circuit Judge.

Psychologist Swaran Kumar Jain and his corporation, the Center for Mental Health Services, Inc., appeal their convictions for violating the mail fraud and Medicare anti-kickback statutes by receiving payments from a psychiatric hospital for referring patients to that hospital. Defendants argue that the district court's jury instructions erroneously defined the term "willfully" in the anti-kickback statute, and that the government failed to prove mail fraud, that is, a scheme to deprive Dr. Jain's patients of their intangible right to his "honest services." The government cross-appeals, contending that the district court erred in determining the improper benefit conferred by the kickbacks for purposes of sentencing Dr. Jain under U.S.S.G. § 2B4.1(b)(1). We reverse the convictions for mail fraud but otherwise affirm.

I. Background.

We must view the evidence in the light most favorable to the jury's verdict. The government's key witnesses were two former administrators of North Hills Hospital ("North Hills"), an acute-care psychiatric hospital which opened in Kansas City, Missouri, in 1988. Dr. Jain was then a psychologist in private practice in Leavenworth, Kansas, operating an outpatient therapy clinic and supervising as many as fifteen affiliated psychologists and counselors. The first North Hills Administrator testified that his mid-1989 letter promising that North Hills would pay Dr. Jain $1,000 per month for "marketing" was in fact an agreement to pay money for patient referrals. This witness testified that Dr. Jain provided no documentation of any subsequent marketing services; instead, their conversations repeatedly linked the payments to Dr. Jain's substantial volume of patient referrals:

Q. Can you compare the nature of these conversations with Dr. Jain with your other experience with professionals over the years?

A. Well, it is not unusual for professional people to want to affiliate with hospitals.... It is unusual, though, very unusual for a professional person to make it so clear that they are willing to exchange patients for money.

Q. Have you ever had that happen before?

A. Not in such an open manner.

Q. Was there any question in your mind what Dr. Jain was offering in exchange for the hospital to pay money?

A. There was no question at all.

Q. And what was that?

A. Money in exchange for patients.

The next North Hills Administrator testified that Dr. Jain provided little if any tangible marketing support, demanded increased payments, threatened to refer his patients elsewhere if the payments were not increased, and at one time showed the Administrator a letter from a competing hospital offering to pay $2500 for each referral. The payments ceased in October 1990, when a new North Hills Administrator refused to continue the practice.

Dr. Jain testified for the defense. He insisted that North Hills' first Program Director, who did not testify, agreed that North Hills would pay Dr. Jain $100 an hour to provide mental health workshops and other promotional activities in the community. Thus, the letter from the first Administrator did not accurately reflect the understanding. According to Dr. Jain, North Hills persistently under-compensated him for time devoted to these marketing activities, which ultimately led him to terminate the fee arrangement. Dr. Jain directly contradicted the Administrators' testimony. He claimed there was no letter from a competing hospital offering $2500 per patient referral, and he adamantly denied ever requesting money for patient referrals. Indeed, he asserted on direct examination that such conduct would be "stupid," "illegal," "unethical," and "wrong." Nonetheless, the jury obviously believed that he did it.

Between July 1989 and October 1990, North Hills made nineteen payments totaling $40,500 to Dr. Jain, with the payments increasing in amount and frequency during 1990. He referred forty-nine patients to North Hills in 1989 and 1990. One was a Medicare beneficiary. Thirty were insured by the Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"), a Defense Department program that provides medical benefits to the spouses and unmarried children of living and deceased members of the military services. The rest were privately insured.

Though the government had strong evidence of a patient referral "kickback" scheme, it had no evidence of tangible harm to Dr. Jain's patients. The government conceded that each patient referred to North Hills was appropriately hospitalized. Several government witnesses testified that North Hills was likely the best acute-care psychiatric hospital in the region. One of Dr. Jain's colleagues, who had no knowledge of the North Hills fee arrangement, testified that he referred patients to North Hills because it was the closest psychiatric hospital to their practice in Leavenworth, because North Hills had a very good staff and program, and because Dr. Jain's clinic had good relations with the staff and easy access to the facility. This psychologist also testified that Dr. Jain "was very professional in his interactions with patients, very caring. He put the patient's well-being as his highest priority." These views were echoed by another government witness, a psychiatrist on the North Hills staff who was also unaware of the fee arrangement. In addition, no witness claimed that any patient received unnecessary care or excessive hospitalization. Thus, there was no proof that any government insurance program suffered a financial loss.

After the jury convicted defendants on all nineteen counts of the indictment, they filed post-trial motions to set aside those convictions. Count One charged a conspiracy to defraud the United States by soliciting kickbacks for referring Medicare and CHAMPUS patients to North Hills. The district court vacated this conviction on the authority of United States v. Porter, 591 F.2d 1048 (5th Cir.1979), and the government does not appeal. Count Three charged Dr. Jain with bribing North Hills officials. The district court vacated this conviction because defendants paid no bribes, and again the government does not appeal. However, the district court upheld the convictions under Count Two, which charged violations of the Medicare anti-kickback statute, 42 U.S.C. § 1320a-7b(b)(1)(A), and counts Four through Nineteen, which alleged a scheme to deprive Dr. Jain's patients of his honest services as a psychologist in violation of the mail fraud statutes, 18 U.S.C. §§ 1341, 1346. The district court sentenced Dr. Jain to five years probation, including six months of home detention, and a $10,000 fine. It imposed special assessments of $850 on Dr. Jain and $3400 on the corporate defendant. Defendants appeal the convictions; the government cross-appeals Dr. Jain's sentence.

II. The Medicare Anti-Kickback Convictions.

Defendants argue that the district court's instructions incorrectly defined the term "willfully" in the Medicare anti-kickback statute. ¹ We will uphold an instruction on the mens rea element of a federal crime if it "fairly and adequately" sets forth the statutory requirement. United States v. Otto, 64 F.3d 367, 370 (8th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 956, 133 L.Ed.2d 879 (1996).

The parties assert radically different positions on this issue of statutory construction. Based upon the traditional principle that ignorance of the law is no defense, the government urges us to apply the general rule that "willfully" in a criminal statute "refers to consciousness of the act but not to consciousness that the act is unlawful." Cheek v. United States, 498 U.S. 192, 209, 111 S.Ct. 604, 614, 112 L.Ed.2d 617 (1991) (Scalia, J., concurring). Defendants urge us to adopt the exception to that general rule that has long been applied in criminal tax cases--willfulness in a criminal tax statute means the "voluntary, intentional violation of a known legal duty." Cheek, 498 U.S. at 201, 111 S.Ct. at 610. Defendants rely most heavily upon Ratzlaf v. United States, 510 U.S. 135, 148, 114 S.Ct. 655, 663, 126 L.Ed.2d 615 (1994), which extended the standard applied in tax cases to criminal prosecutions for "willfully violating" the anti-structuring provisions of the Money Laundering Control Act of 1986, 31 U.S.C. § 5322(a) (1993).

The district court adopted a middle ground. The court declined to instruct the jury that Jain must have intentionally violated a known legal duty because the anti-kickback statute prohibits willful conduct--receiving remuneration for referring patients to a Medicare provider--rather than the willful violation of a statute, as in Ratzlaf. But the court also concluded that a mens rea instruction more rigorous than the traditional rule was appropriate because the literal language of this statute might otherwise encompass some types of innocent conduct. Accordingly, modifying language found in 2 Edward J. Devitt, Charles B. Blackmar & Kevin F. O'Malley, Federal Jury Practice and Instructions p 30.05 (4th ed.1990), the court instructed the jury that "the word 'willfully' means unjustifiably and wrongfully, known to be such by the defendant Swaran Jain." It also instructed that "good faith" was a defense to this charge, explaining that Dr. Jain acted in good faith if he ...