U.S. v. McClatchey, 01-3327.

Citation316 F.3d 1122
Decision Date16 January 2003
Docket NumberNo. 01-3327.,01-3327.
PartiesUNITED STATES of America, Plaintiff-Appellant, v. Dennis McCLATCHEY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Thomas M. Gannon, Attorney, Department of Justice, Washington, DC (James E. Flory, United States Attorney, District of Kansas, Tanya J. Treadway, Assistant United States Attorney, Kansas City, Kansas; William H. Bowne, Trial Attorney, Department of Justice, Washington, DC, with him on the briefs), for Plaintiff-Appellant.

Charles W. German of Rouse Hendricks German May PC, Kansas City, MO, for Defendant-Appellee.

Before HENRY, Circuit Judge, BRORBY, Senior Circuit Judge, and HARTZ, Circuit Judge.

HARTZ, Circuit Judge.

A jury convicted Dennis McClatchey, a hospital executive, of one count of conspiracy and one count of violating the Medicare Antikickback Act, for his role in the hospital's payments to two doctors for referring patients to the hospital. The district court granted McClatchey's post-verdict motion for judgment of acquittal on both charges. We reversed the district court's judgment in United States v. McClatchey, 217 F.3d 823 (10th Cir.2000) (McClatchey I), and remanded with instructions to reinstate the jury's verdict against McClatchey.

This appeal concerns the sentence imposed on remand. The government appeals the sentence, contending that (1) the district court miscalculated McClatchey's offense level by using an excessively low figure for the net amount of unlawful referral payments attributable to McClatchey, and (2) the district court improperly departed downward from the prescribed offense level on the grounds of extraordinary family circumstances and aberrant behavior. We have jurisdiction under 18 U.S.C. § 3742(b). We affirm the district court's calculation of the offense level, reverse the downward departure, and remand for resentencing.

I. BACKGROUND

Facts relating to this case have previously been set forth in our first opinion, McClatchey I, 217 F.3d at 826-829, our related opinion in United States v. LaHue, 261 F.3d 993, 997-1001 (10th Cir.2001), cert. denied, 534 U.S. 1083, 122 S.Ct. 818, 819, 151 L.Ed.2d 701 (2002), and the district court's opinion in United States v. Anderson, 85 F.Supp.2d 1047, 1052-61 (D.Kan.1999). We summarize here those facts relevant to the present appeal.

The gist of the offense was that Baptist Medical Center (Baptist) paid doctors Robert and Ronald LaHue to refer patients to Baptist. Such referral fees violate the Medicare Antikickback Act's prohibition against "knowingly and willfully offer[ing] or pay[ing] any remuneration ... to any person to induce such person ... to refer an individual to a person for the furnishing ... of any item or service for which payment may be made ... under a Federal health care program ...." 42 U.S.C. § 1320a-7b(b)(2)(A).

During the pertinent period McClatchey served as Chief Operating Officer and Senior Vice President of Baptist, and then as a Senior Vice President at Health Midwest, which was Baptist's parent corporation at the time. The LaHues were the principals of a medical practice called Blue Valley Medical Group (BVMG), which provided care to patients in nursing homes and similar facilities.

In January 1985 Baptist entered into a one-year contract with the LaHues, paying the doctors a total of $150,000 to serve as "Co-Directors of Gerontology Services" at Baptist. Baptist's Chief Financial Officer testified that the negotiations for the 1985 contract had been "backwards," in that the parties first set the fee and only then agreed to the services which the LaHues would provide in return. After the contract was executed, the LaHues began referring large numbers of their patients to Baptist.

In June of 1986, after the 1985 contract had expired, Baptist entered into a second one-year agreement with the LaHues, providing that Baptist would pay the doctors a combined $150,000 to perform specified services. Then, despite expiration of the 1986 contract, Baptist continued to pay the LaHues $150,000 each year through 1993, with the exception of 1990, when each doctor received $68,750. The LaHues performed only "minimal" services for Baptist. Anderson, 85 F.Supp.2d at 1056, 1062, 1069.

In addition to paying cash to the LaHues, Baptist also provided an employee. In the summer of 1985, at the request of the LaHues, Baptist's Chief Executive Officer Dan Anderson "loaned" Tom Eckard to the LaHues to help them manage their practice. Despite Eckard's official title as Baptist's "Director of Geriatric Services," he worked at BVMG and in effect served as BVMG's manager. Based on his discussions with McClatchey and other Baptist officials, Eckard understood that his primary job responsibility was to maintain a positive relationship between BVMG and Baptist, "in order to assure that the flow of patients to the hospital would continue." Anderson, 85 F.Supp.2d at 1055. Baptist, not BVMG, paid Eckard's salary. This arrangement continued until March 1993.

In the summer of 1991, after Baptist merged into Health Midwest, the new attorney for Baptist discussed with McClatchey and other Baptist officials the need to draft a new contract with the LaHues, because the 1986 contract did not meet safe harbor regulations under the Medicare Antikickback Act. McClatchey oversaw the negotiations for a new contract. During the course of these negotiations, in late 1991 or early 1992, McClatchey "learned that the LaHues had not been performing some of the services specified in the 1986 contract and that certain staff members at Baptist were not interested in having the LaHues perform such services." McClatchey I, 217 F.3d at 828. Also during the negotiations, the LaHues informed McClatchey and others at Baptist that they would not accept a proposed contractual provision requiring them to perform a minimum number of hours of services for Baptist. The contract ultimately executed in April 1993 contained no minimum-hour provision. Under this contract Baptist again agreed to pay the LaHues $150,000.

Months before execution of the contract, on November 5, 1992, an FBI Agent and Medicaid Fraud Investigator questioned McClatchey and Baptist CEO Anderson about Baptist's relationship with BVMG, specifically seeking information about the fees paid to the LaHues and the Eckard arrangement. Shortly thereafter, Baptist retained attorneys specializing in civil and criminal health care fraud cases, who recommended that Eckard immediately be removed from Baptist's payroll and placed on BVMG's payroll. It was McClatchey's responsibility to fix the Eckard arrangement. When it became clear that BVMG would not pay for Eckard's services, McClatchey decided to bring Eckard back to Baptist, effective March 1, 1993.

In October 1993 McClatchey left Baptist to become Senior Vice President of Corporate Relations at its parent, Health Midwest. The next month the LaHues notified Baptist that they were terminating the 1993 contract, due to the anticipated sale of BVMG. Health Midwest executives, including McClatchey, began discussing a strategy to replace the BVMG patients they anticipated losing upon termination of the LaHue relationship. When the sale of BVMG fell through, Baptist and the LaHues continued their relationship under two temporary contracts. Baptist's relationship with the LaHues finally ended in January 1995.

McClatchey was indicted on July 15, 1998, for conspiring to violate the Medicare Antikickback Act, and for a substantive violation of the Act. The jury returned guilty verdicts on both charges. Following the verdict, the district court granted McClatchey's motion for acquittal.

We reversed. Although we agreed with the district court that "no reasonable jury could find beyond a reasonable doubt that McClatchey specifically intended to violate the Act based on the evidence of his involvement, or non-involvement, in the 1985 contract, the 1986 contract, and the loan of Eckard to BVMG," we disagreed "with the district court's assessment of the evidence concerning McClatchey's negotiation of the 1993 contract." McClatchey I, 217 F.3d at 829. Because the evidence presented at trial showed that McClatchey (1) knew as soon as late 1991 or early 1992 that the LaHues had not performed substantial services required under the prior contracts, (2) knew that some Baptist staff members did not want the LaHues to perform such services, and (3) understood the importance to Baptist of the LaHues' patient referrals, we concluded, "The evidence concerning McClatchey's involvement in negotiating the 1993 agreement thus gives rise to a reasonable inference that he knowingly, voluntarily, and purposefully entered into an agreement with the specific intent to induce the LaHues to refer their Medicaid patients to Baptist." Id. at 831. We therefore set aside the district court's judgment of acquittal and remanded with instructions to reinstate the jury's verdict against McClatchey.

On remand the district court calculated McClatchey's offense level as 13 under the United States Sentencing Guidelines (USSG). The court then granted him a 3-level downward departure on three grounds: (1) extraordinary family circumstances; (2) aberrant behavior; and (3) "most strongly" for a combination of family circumstances and aberrant behavior. Aplt.'s App. at 943. The district court sentenced McClatchey to three years' probation, with home detention of six months under electronic monitoring, and imposed a $30,000 fine and related costs. The government appeals the sentence, challenging the calculation of the offense level and the propriety of the downward departure.

II. ANALYSIS
A. Calculation of the Offense Level

In computing McClatchey's offense level under the version of the Sentencing Guidelines in effect at the time of his sentencing, the district court properly applied USSG § 2B4.1, entitled "Bribery in Procurement of Bank Loan and Other Commercial Bribery." The base...

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