U.S. v. Braxtonbrown-Smith, 00-3030.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Citation278 F.3d 1348
Docket NumberNo. 00-3030.,00-3030.
PartiesUNITED STATES of America, Appellee, v. Denise BRAXTONBROWN-SMITH, Appellant.
Decision Date12 February 2002

Appeal from the United States District Court for the District of Columbia (No. 99cr00154-01).

Lisa B. Wright, Assistant Federal Public Defender, argued the cause for appellant. With her on the brief was A. J. Kramer, Federal Public Defender. Neil H. Jaffee, Assistant Federal Public Defender, entered an appearance.

David B. Goodhand, Assistant U.S. Attorney, argued the cause for appellee. With him on the brief were Roscoe C. Howard, Jr., U.S. Attorney, John R. Fisher, Roy W. McLeese III and Mark H. Dubester, Assistant U.S. Attorneys.

Before: SENTELLE and ROGERS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

Denise Braxtonbrown-Smith appeals her conviction and sentence on numerous fraud and money laundering charges. Her principal contention is that the government failed to prove, by tracing or otherwise, that any of the funds used in the alleged money laundering transactions represented the proceeds of unlawful activity. In turn, she contends, this failure to trace necessarily tainted other counts of the judgment of conviction. In addition to several claims of instructional error, she contends that the district court erred in calculating her offense level, in delegating authority over the terms of her restitution payments to the Probation Office, and in ordering her to pay past due income taxes. We affirm the judgment of conviction except we remand for correction of her sentence and clarification of the restitution order.

I.

Viewing the evidence, as we must, in the light most favorable to the government, see United States v. Harrison, 204 F.3d 236, 239 (D.C.Cir.2000) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979)), the evidence showed that Braxtonbrown-Smith used Medicaid reimbursements paid to her company, Psychological Development Associates ("PDA"), for personal purposes, did not pay taxes on that money, and attempted to obtain loans through the submission of false documents. In early 1994, PDA began a day-treatment program for mentally retarded adults called Better Treatment Centers ("BTC") that enabled it to obtain a provider number for billing Medicaid for services provided to its Medicaid eligible clients. PDA began receiving its first clients in February 1994 for its day-treatment program, who were assigned to the centers by the Mental Retardation and Developmentally Disabled Administration ("MRDDA") of the D.C. Department of Human Services, at an approved rate of $175.44 per client, per day. Prior to this time, PDA had been in desperate financial shape, missing payrolls on occasion throughout 1994 and failing to pay its debts. Its financial condition changed by the end of 1994 by which time Medicaid had reimbursed PDA for over $400,000. The BTC program accounted for nearly all of the income that PDA was receiving and by 1995, Braxtonbrown-Smith and Kenneth A. Strachan, the PDA controller, were able to skim funds from PDA for personal purposes. For example, numerous checks were drawn on the PDA operating account at NationsBank, ranging from $6000 to $8000, for Braxtonbrown-Smith's personal benefit.

In May 1995, PDA obtained a second Medicaid provider number for services it was to provide through a "free-standing" mental health clinic. Braxtonbrown-Smith's efforts over the next two years to set up the clinic in accord with Medicaid rules for staffing never proved fruitful. Notwithstanding the fact that PDA had failed to set up and operate the clinic, Braxtonbrown-Smith, through PDA's controller Kenneth Strachan, used the provider number to bill Medicaid for services that PDA never actually provided. This billing scheme continued for several years, surviving Strachan's dismissal in October 1996 and continuing under Braxtonbrown-Smith's direction until 1998.

By early 1996, Braxtonbrown-Smith's personal financial needs were becoming more pronounced, as she had contracted to purchase a $400,000 house and needed to show cash in her personal account to support a down payment. She also needed funds for her wedding, honeymoon, improvements on the new house, and to support an expensive lifestyle. She would later generate and submit false income tax statements for this time period to Provident Mortgage Corporation in order to obtain a mortgage, and to Mellon Bank in order to obtain a line of credit. By the Spring of 1996, the false billings escalated. For example, in April 1996 in response to Braxtonbrown-Smith's growing personal financial needs, Strachan began submitting false claims to Medicaid representing that BTC clients were receiving psychotherapy from a psychiatrist every day, despite the fact that the clinic was not yet operational and many of BTC's clients were non-communicative and could not speak. Although alerted to billing irregularities by Arnett Smith, an employee of PDA and a former MRDDA employee, Braxtonbrown-Smith took no steps to stop the submission of false bills to Medicaid.

Braxtonbrown-Smith and Strachan together diverted over $400,000 of funds from PDA accounts for their personal use. All told, PDA's false claims totaled $1,693,708, representing approximately 30% of PDA's total Medicaid billings. Additionally, Braxtonbrown-Smith drew down her line of credit with Mellon Bank to the point that when PDA went out of business in the summer of 1998, she owed Mellon approximately $440,000.

In 1999 Braxtonbrown-Smith was indicted for conspiracy, 18 U.S.C. § 371 (Count 1); mail fraud, 18 U.S.C. § 1341 (Counts 2 & 3); tax evasion, 26 U.S.C. § 7201 (Counts 4-6); money laundering, 18 U.S.C. §§ 1956(a)(1)(A)(ii) & 1956(a)(1)(B)(i) (Counts 7-12); bank fraud, 18 U.S.C. § 1344 (Counts 13 & 14); and wire fraud, 18 U.S.C. § 1343 (Count 15). At trial, Braxtonbrown-Smith's evidence was confined to six character witnesses who testified regarding her reputation for truthfulness and honesty in the community. The jury convicted her on all counts except one count of mail fraud. The district court sentenced Braxtonbrown-Smith to 60 months imprisonment for conspiracy, mail fraud, tax evasion, and wire fraud, and to 87 months on the remaining counts, the sentence on each count to run concurrently. The court imposed five years of supervised release on all counts, to run concurrently as well. The district court also ordered that she make restitution payments including $2,132,484.70 (the total of her fraudulent Medicaid billings and her Mellon Bank line of credit spending), to be paid from 50% of her prison earnings and upon her release from custody at a monthly rate of "no less than $250 as directed by the probation office." The court further ordered her to arrange with the Internal Revenue Service to pay all past and present taxes, interest and penalties, and to provide proof of her filing of returns to the Probation Office.

II.

On appeal, Braxtonbrown-Smith contends that instead of proving that any of the funds used in the alleged money laundering transactions represented the proceeds of unlawful activity, the government relied on a judicially-created presumption that any withdrawal of funds from a commingled account involves unlawful proceeds, even when the amount of legitimately earned money in the account exceeds the amount withdrawn. Because the presumption relieved the government of its burden of proof under the plain language of 18 U.S.C. § 1956(a)(1)(A), she contends that the money laundering counts must be dismissed for insufficient evidence. Failing that, she contends the jury was erroneously instructed on the unconstitutional commingling presumption, and those counts must be remanded for a new trial. Likewise, she contends that she must be granted a new trial on the conspiracy count because the jury was instructed on three alternative conspiracy objects, including money laundering, and it is impossible to determine from the general conspiracy verdict that it is not tainted by the allegedly improper money laundering instruction. In addition, she contends that she is entitled to a new trial on the conspiracy and money laundering counts because the district court's supplemental instruction on the interstate commerce element included a mandatory presumption. Finally, as to her sentence, she seeks correction of her sentences under the United States Sentencing Guidelines ("Guidelines") and contends that the restitution order impermissibly delegated the court's authority to the probation office with respect to the terms of the restitution payment and impermissibly required that she make restitution to the Internal Revenue Service by making payment of past and present federal taxes a condition of her supervised release.

A.

Section 1956 provides, in relevant part,

(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity —

(A)(i) with the intent to promote the carrying on of specified unlawful activity; or (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986;

. . .

shall be [subject to fine and imprisonment].

18 U.S.C. § 1956(a)(1) (2000).

Braxtonbrown-Smith focuses on the phrase "property involved" and the word "represents" in contending that the government failed to meet its burden to prove that each of her withdrawals from the PDA account at NationsBank for her personal use included funds that were diverted from Medicaid reimbursements to PDA. In other words, Braxtonbrown-Smith contends that the plain language of § 1956(a)(1) requires the government to demonstrate...

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