U.S. v. Lauersen, Docket No. 01-1526L.

• Decision Date: 15 September 2003
• Docket Number: Docket No. 01-1526L.,Docket No. 01-1600XAP.
• Citation: 348 F.3d 329
• Parties: UNITED STATES of America, Appellee-Cross-Appellant, v. Niels LAUERSEN, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 329

348 F.3d 329

UNITED STATES of America, Appellee-Cross-Appellant, v. Niels LAUERSEN, Defendant-Appellant-Cross-Appellee.

Docket No. 01-1526L.

Docket No. 01-1600XAP.

United States Court of Appeals, Second Circuit.

Argued: June 16, 2003.

Decided: September 15, 2003.

As Amended: November 25, 2003.

COPYRIGHT MATERIAL OMITTED

Alan M. Dershowitz, Cambridge, Mass. (Nathan Z. Dershowitz, Daniela Klare Elliott, Dershowitz, Eiger & Adelson, P.C., New York, N.Y.; Paul Schectman, Stillman & Friedman, P.C., New York, N.Y., on the brief), for Defendant-Appellant-Cross-Appellee.

Christine H. Chung, Asst. U.S. Atty., New York, N.Y. (James B. Comey, U.S. Atty., James G. Cavoli, Asst. U.S. Atty., New York, N.Y., on the brief), for Appellee-Cross-Appellant.

Before: NEWMAN, WINTER, and B.D. PARKER, Circuit Judges.

JON O. NEWMAN, Circuit Judge.

This appeal primarily concerns issues of judicial disqualification and sentencing. The disqualification issue arises because the trial judge owns stock in an insurance company that was among the victims of the defendant's fraud offense. The sentencing issue arises because an enhancement, claimed by the Government on its cross-appeal to apply, somewhat overlaps with another applicable enhancement, and that overlap might justify a downward departure. Niels Lauersen appeals from the October 17, 2001, judgment of the District Court for the Southern District of New York (William H. Pauley III, District Judge), and the Government cross-appeals. We conclude that disqualification was not required. With respect to the sentence, we conclude that the enhancement sought by the Government for affecting a financial institution and deriving more than $1,000,000 in gross receipts from the offense, see U.S.S.G. § 2F1.1(b)(8)(B) (2000), should have been applied, but that the application of this enhancement will create a basis for consideration of a downward departure. We therefore affirm the conviction and remand for resentencing.

Background

In August 2000, a twenty-two count indictment¹ was filed in the Southern District of New York against Niels Lauersen and Magda Binion.² The indictment charged Lauersen with mail fraud, 18 U.S.C. § 1341, health care fraud, 18 U.S.C. § 1347, making false statements relating to health care matters, 18 U.S.C. § 1035(a), conspiracy, 18 U.S.C. § 371, and witness tampering, 18 U.S.C. § 1512(b). Trial commenced on November 13, 2000, and ended January 9, 2001.

The trial evidence. The evidence established that between 1987 and 1995, Lauersen, a prominent New York City obstetrician/gynecologist, fraudulently obtained reimbursement from insurance companies for hundreds of fertility treatments he performed on patients whose insurance did not cover such treatments. Lauersen obtained reimbursement by misrepresenting to insurance companies the nature of the procedures he performed. Lauersen conspired with two anesthesiologists who assisted him, Magda Binion and Neil Ratner, to make sure that insurance claim forms they submitted would also misrepresent the nature of the fertility treatments.

Louise Weidel, an employee of Lauersen's, prepared embryology reports between 1995 and 1997 concerning fertility treatments that Lauersen performed. A comparison of these reports with insurance claims and operation reports prepared by Lauersen between 1995 and 1997 revealed 221 surgeries that Weidel recorded as fertility treatments but that Lauersen billed as some other procedure. Weidel testified that she was aware that Lauersen was misrepresenting the nature of fertility procedures in operation reports and insurance claims, and that Lauersen did so only when fertility treatments were not covered by a patient's insurance plan.

Lisette Gonzalez, a secretary who worked in Lauersen's office, testified that Lauersen routinely supported his false insurance claims by ordering her to prepare correspondence and back-dated "office notes" that would give the appearance that patients had suffered gynecological emergencies around the time that Lauersen had actually performed fertility procedures on them. Gonzalez identified letters she had typed at Lauersen's request describing such "emergencies" and his treatment of them; Weidel's records confirmed that the patients named in these letters had in fact received fertility treatments.

Nine of Lauersen's former patients testified. The patients were shown the insurance claim forms filed by Lauersen on their behalf. In each instance, the claim form represented that on certain dates Lauersen had performed covered, non-fertility treatments on the patient; the patient testified that the procedures performed by Lauersen on those dates were in fact fertility procedures. In each instance, the patient's testimony was corroborated by Weidel's embryology reports. Two patients testified that they were aware that Lauersen misrepresented to their insurance companies the nature of the procedures he had performed on them. Two of the patients testified that after they received grand jury subpoenas, Lauersen instructed them to lie to the grand jury about the pre-treatment symptoms they had experienced and the nature of the treatment they had received; both patients refused to comply.

The facts concerning other items of evidence and the disqualification challenge are set forth below in the discussion of the recusal and evidentiary issues.

The jury found Lauersen guilty on all counts that named him.

Sentencing. Applying the November 1, 2000, Sentencing Guidelines Manual, the Presentence Report ("PSR") calculated that Lauersen should be sentenced at an offense level of 33, which included upward adjustments of thirteen levels, pursuant to U.S.S.G. § 2F1.1(b)(1)(N), for an intended loss of $4.9 million; two levels, pursuant to U.S.S.G. § 3B1.3, because Lauersen abused the trust of the victim insurance companies; and four levels, pursuant to U.S.S.G. § 2F1.1(b)(8)(B), because Lauersen's offense "affected a financial institution" and he received more than $1 million in gross receipts. At an offense level of 33, with a Criminal History Category of I, Lauersen's Guidelines range would have been 135 to 168 months' imprisonment. The PSR also recommended restitution in the amount of $3,274,606.

On October 15, 2001, Lauersen was sentenced. The Defendant objected to the proposed offense level adjustments for intended loss, abuse of trust, and "affecting a financial institution," and to the proposed amount of restitution. The District Court reduced the Probation Department's proposed loss and restitution figures slightly, finding an intended loss of $4,890,578 and ordering restitution in the amount of $3,240,597. The intended loss figure accepted by the Court remained within the range of the thirteen-level adjustment recommended in the PSR. The Court found that a two-level adjustment for abuse of trust was appropriate. The Court decided not to apply the recommended four-level enhancement for offense conduct affecting a financial institution because the Court ruled that insurance companies are not "financial institutions" for the purpose of U.S.S.G. § 2F1.1(b)(8)(B). Because the Court declined to apply this last adjustment, Lauersen's total offense level was calculated to be 29, which produced a sentencing range of 87 to 108 months. The Court sentenced Lauersen principally to 87 months' imprisonment.

Discussion

I. Recusal

The facts. The circumstances concerning the recusal issue are as follows. On June 6, prior to sentencing, Judge Pauley stated that he had determined that he "own[ed] a financial interest in at least one of the entities that is eligible for restitution" and that "as a matter of prudence, this Court may be required to disqualify itself" under 28 U.S.C. § 455(a). At a conference on June 12, Judge Pauley explained that, upon reviewing the PSR, he learned for the first time that the Equitable Insurance Company ("Equitable") was one of the companies Lauersen had defrauded and was thus eligible for restitution. Judge Pauley disclosed that he and his wife owned 400 shares in AXA Financial ("AXA"), the company to which Equitable had distributed its shares after demutualizing in 1992. Judge Pauley also disclosed that his wife held an annuity worth between $50,000 and $100,000 with Prudential Insurance Company, which had been acquired by an entity entitled to restitution, and that his wife had owned shares of AT & T, a company entitled to restitution, but had divested herself of those shares in 1999.

Judge Pauley stated that his wife's annuity and prior shareholding did not constitute grounds for disqualification,³ but that the AXA shares created an appearance of impropriety requiring disqualification under section 455(a). He directed the parties to "consider the matter and submit any motions for disqualification," and further announced that he intended to disqualify himself unless all parties waived objection to his continued participation. See Code of Conduct for United States Judges, Canon 3D (authorizing remittal of disqualification where impartiality might reasonably be questioned), reprinted in II Guide to Judiciary Policies and Procedures: Codes of Conduct for Judges and Judicial Employees I-7 (2003) ("Guide to Codes of Conduct"). He announced that he would use the remittal procedure recommended by the Judicial Conference of the United States, which states that party responses are "not shown to the judge" in the event of a non-unanimous result.⁴ The Judge instructed the parties to submit to the Clerk of the Court letters indicating whether each would object or waive objection to his continued participation.

The parties submitted their responses to the Clerk of the Court, and the result was not unanimous. At a hearing on July 10, 2001, the Government requested permission to brief its argument that Judge Pauley's connection with the AXA shares did not require disqualification; the defense objected on the ground that the waiver process had been...