U.S. v. Mills

Citation138 F.3d 928
Decision Date10 April 1998
Docket NumberNo. 96-8594,96-8594
PartiesMedicare & Medicaid Guide P 46,209, 49 Fed. R. Evid. Serv. 237, 11 Fla. L. Weekly Fed. C 1197 UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Margie B. MILLS, Defendant-Appellant, Robert Jack Mills, Defendant-Appellant, Cross-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

James K. Jenkins, W. Bruce Maloy, Maloy & Jenkins, Atlanta, GA, for R. Mills.

John J. Ossick, Jr., Kingsland, GA, Scott Srebnick, Miami, FL, for M. Mills.

Harry D. Dixon, U.S. Atty., Thomas A. Withers, Asst. U.S. Atty., Savannah, GA, Thomas M. Gannon, Appellate Section, Criminal Division, Dept. of Justice, Washington, DC, for United States.

Appeals from the United States District Court for the Southern District of Georgia.

Before HATCHETT, Chief Judge, and EDMONDSON and COX, Circuit Judges.

COX, Circuit Judge:

Robert J. ("Jack") Mills and his wife, Margie B. Mills, 1 appeal their convictions and sentences for false statements, mail fraud, Medicare fraud, and witness tampering. We affirm their convictions and vacate their sentences. The Government cross-appeals the district court's post-trial judgment of acquittal on several mail fraud counts against Jack. We reverse.

I. FACTS

The Millses were officers and majority shareholders of a Medicare services provider, ABC Home Health Services, Inc., which later became First American Health Care of Georgia, Inc. 2 Over several years they used their positions to cheat the Medicare program out of millions of dollars. A reasonable jury could have found the following facts true based on the evidence. Some detail is necessary because of the harmless-error and sufficiency-of-the-evidence issues that are presented.

A. Background

The Medicare home-health care system has three players. First, care providers such as First American care for patients in exchange for reimbursement of their reasonable patient care-related expenses. The second player, the fiscal intermediary, holds the purse strings to reimbursement funds under contract with the third player, the Health Care Financing Administration, a government agency. Fiscal intermediaries, like providers, are entitled only to return of their costs in exchange for their services. Aetna Life Insurance Company was First American's intermediary during most of the time period relevant here.

Providers generally receive biweekly payments in an amount based on quarterly figures of how many patients the provider has visited and how much each visit cost. At year end, providers submit an annual "cost report" for a true-up with the sum of these interim payments. If the total interim payments exceed the provider's actual allowable expenses as determined by the cost report, the provider owes the intermediary money. If, on the other hand, the provider's actual allowable expenses surpass the total periodic payments, the intermediary pays the provider. In practice, Aetna subjected First American's cost reports to a detailed audit, and this true-up for years as far back as 1990 was incomplete at the time of trial.

Jack brought a businessman's outlook to this cost-based system. He dreamt of making First American profitable, a goal impossible in the current program. Jack also enjoyed the perquisites, such as corporate airplanes and golf retreats, that First American's growth brought, and according to every witness but him, he ran First American as an autocratic founder. Jack naturally bridled at Aetna's audits and intrusion, believing that Aetna was "telling him how to run his business." (R.31 at 236.). He judged the auditors to be "more dangerous than a punk with a gun." (R.37 at 281.) 3 When Aetna obtained potentially damaging information from First American, which had to keep its books open for audit, Jack memoed employees that when he "f[ou]nd out which person or persons are involved in passing out First American confidential information, they better give their heart and soul to God because I will sure own every part that is left." (R.32 at 68.) At a leadership conference speech to First American employees, shown at trial on videotape, he boasted of "challenging" "the feds" and breaking the rules. (R.41 at 480.)

Not surprisingly, First American and Jack had a history of disputes with fiscal intermediary auditors. In the mid-1980s, disputes arose between Blue Cross and Blue Shield of Georgia, then First American's auditor, over Jack's use of airplanes to get around; Jack took the position that his family life warranted the substantial additional expense to Medicare. In 1988, First American fought its assignment to Aetna as its intermediary, going so far as to petition Congressmen. In 1989, Aetna threatened to withhold interim payments because First American had denied access to records. In 1990, Aetna reported First American to the Office of the Inspector General because of perceived irregularities and withheld interim payments because of a sudden and unexplained increase in costs. In 1991, Aetna disallowed salaries paid to former Georgia senator Bill English and Atlanta City Council member Ira Jackson because they related not to patient care, but to marketing and agency acquisition costs. Jack's attitude, these conflicts with Aetna, and chronic cash-flow problems perhaps led Jack and First American to develop sophisticated schemes to disguise questionably reimbursable expenses as reimbursable. The schemes involved five categories of expenses.

B. The Schemes
1. Personal Use of Medicare-Reimbursed Airplanes

First American owned, leased, or borrowed several airplanes, including a $2.8 million King Air jet, that its executives used for business travel. Aetna policies did not prohibit reimbursement of the corporate airplane costs. Aetna was skeptical, however, that corporate planes were a fiscally prudent way to fill First American's travel needs. In 1990, following the purchase of the King Air, Aetna agreed nonetheless to reimburse First American for its plane installment payments, provided that at least 90% of the plane's flight time was reimbursable, patient care-related travel. Aetna also consented to reimburse expenses such as maintenance and pilot salaries prorated to the percentage of time spent on business travel. In 1991, Aetna demanded and First American agreed to provide further documentation of the planes' use so that Aetna could measure the reimbursable use of the planes. That documentation included records of the purpose, passengers, length, and destination of every flight.

During and after these discussions with Aetna, Jack and Margie took First American planes on dozens of personal trips--twelve round trips alleged in the indictment, 72 total found by investigators--that included visiting their mothers, sunning in Cozumel, viewing prefab columns in Dallas that they wished to incorporate into their new mansion, and attending their high school reunions and sports events like Auburn University football games. 4 They also transported non-First American-related passengers, including their children, both Millses' mothers, then-Governor of Alabama Jim Folsom, Georgia Speaker of the House Tom Murphy, and University of Georgia football coach Vince Dooley.

The costs allocable to this personal use would not have been reimbursable, of course, under the arrangement with Aetna. If this use rose over 10% of total flying time, moreover, it threatened reimbursement for the King Air payments. First American, at Jack's direction and with the cooperation of the chief pilot, Jim McManus, therefore undertook to disguise and conceal personal use. They used several methods. First, passengers with no business purpose for traveling would not appear on passenger manifests--so-called "ghost passengers." Second, pilots would pull a circuit breaker to prevent the planes' hour meter from adding the flight time during personal flights to the planes' total flight time; thus, these "breaker" or "ghost" flights would not lower the percentage of patient care-related flight time. Many breaker flights left no trace in company records, although First American employees would schedule the flights on Post-Its, some of which were in evidence, inserted in the airplane schedule book. Other breaker flights were listed in the company flight log with false or omitted destinations. Yet another method for concealment had pilots pad their Medicare-reimbursable expense reports with extra meals to recover expenses incurred during these "breaker flights." First American rounded out the scheme in 1991 meetings with Aetna auditors about documentation; there, Jack and First American's counsel, Wayne Phears, denied knowing of "breaker flights" 5 and indeed berated Aetna for not trusting First American's records.

2. Kickbacks on Aviation Fuel Purchases

First American purchased most of its fuel and leased hangar and office space from Golden Isles Aviation, Inc., on St. Simons Island. For some time, Golden Isles had discounted the fuel sold to First American because of the volume purchased. When First American leased new hangar and office space, however, the companies struck a new deal. Golden Isles would continue to charge less for the fuel First American purchased according to a volume-based stepped percentage. But the difference between retail and First American's price would go into a rebate account with Golden Isles. Golden Isles initially applied the rebate account to renovation costs for First American's hangar, but later the rebates went to pay other maintenance expenses. Jim McManus would typically present invoices to Golden Isles to be paid out of the rebate account, or he would charge bills on a credit card paid by Golden Isles out of the rebate account. Checks from this account also reimbursed Jack for fuel he bought for some personal flights; thus, although it would appear that Medicare was not fueling the flights, through the rebate mechanism it was.

First American and Jack never disclosed this...

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