U.S. v. Smith

Decision Date17 November 1975
Docket NumberNo. 74-2343,74-2343
Citation523 F.2d 771
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Oakley G. SMITH, Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Paul A. Louis, William A. Meadows, Jr., Philip T. Weinstein, Miami, Fla., for defendant-appellant.

Ronald Rose, Gary L. Betz, Sp. Attys., Dept. of Justice, Miami, Fla., Thaddeus B. Hodgdon, Crim. Div., App. Section, Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before BELL, DYER and SIMPSON, Circuit Judges.

SIMPSON, Circuit Judge:

Oakley G. Smith was charged in a nine count indictment with having violated three federal statutes, one count relating to each offense for each of three successive years. Counts One through Three alleged appellant had, in violation of Title 18, U.S.C. Section 1001, made false statements as to a material matter within the jurisdiction of the United States Department of Health, Education and Welfare; Counts Four through Six charged him with making and subscribing to false income tax returns for an exempt organization, Palm Springs General Hospital, in violation of Title 26, U.S.C. Section 7206; and Counts Seven through Nine charged him with willfully attempting to evade personal income tax, contrary to the provisions of Title 26, U.S.C. Section 7201. 1 Appellant was found guilty, following a jury trial, on Count Three, willfully making false statements in a matter within the jurisdiction of H.E.W. in the fiscal year 1971. 2 He was found not guilty on the other eight counts. Post-trial motions for judgment of acquittal (renewing motions made at the close of the government's case and again at the close of the evidence), for new trial and in an arrest of judgment were denied; judgment of conviction and sentence 3 followed. Smith appeals from the judgment and sentence.

Appellant urges reversal of his conviction on several grounds: (1) that the trial judge erred in not granting defendant's motions for acquittal because the evidence was insufficient to support the verdict; (2) that Count Three of the indictment should have been dismissed as being vague and indefinite, and that the proof was at variance with the false statement alleged; (3) that the appellant was denied due process by the prosecution's charging him with a felony in that the conduct for which he is charged is more specifically proscribed by a misdemeanor statute; (4) that the grand jury which returned the indictment was unconstitutionally composed; (5) that the jury's verdict was inconsistent, and (6) that the appellant was the target of discriminatory prosecution. Our examination of the record in light of the points raised by appellant convinces us that for the reasons cited herein they are without substance. We affirm.

The primary contentions pressed upon us by the appellant are questions relating to the sufficiency of the evidence. Section 1001 requires the "knowing and willful" misrepresentation of a material fact within the jurisdiction of any department or agency of the United States. "Knowingly" as used in Section 1001 requires only that the defendant acted "with knowledge". United States v. Mekjian, 5 Cir. 1975, 505 F.2d 1320, 1324; McBride v. United States, 5 Cir. 1955, 225 F.2d 249. "Willfully" means the defendant acted "deliberately and with knowledge". United States v. Mekjian, supra; United States v. Parten, 5 Cir. 1972, 462 F.2d 430; McBride v. United States, supra. Appellant contends the evidence in this case is insufficient to support the jury's finding of the requisite Mens rea. This requires a detailed recitation of the facts of the case, as shown by the evidence.

I. SUFFICIENCY OF THE EVIDENCE

We examine the sufficiency of the evidence in the light most favorable to the government in substantiation of the charge. Glasser v. United States, 1942, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680, 704; United States v. Warner, 5 Cir. 1971, 441 F.2d 821, 825; Jones v. United States, 5 Cir. 1968, 391 F.2d 273, 274. "All reasonable inferences and credibility choices as will support the jury's verdict of guilty must be made". United States v. Black, 5 Cir. 1974, 497 F.2d 1039, 1041. Our responsibility in a case based upon circumstantial evidence is to determine whether reasonable minds could conclude that the evidence presented at trial is inconsistent with the hypothesis of the accused's innocence. United States v. Black, supra; United States v. Amato, 5 Cir. 1974, 495 F.2d 545; United States v. Edwards, 5 Cir. 1974, 488 F.2d 1154; United States v. Fontenot, 5 Cir. 1973, 483 F.2d 315, 321; United States v. Warner, supra. It is for the jury to determine the guilt or innocence of a defendant; an appellate court should not interfere unless it concludes that the jury must necessarily have had a reasonable doubt. United States v. Black, supra; United States v. Fontenot, supra; United States v. Warner, supra. These principles guide us in our consideration of the facts as established by the evidence.

The appellant, Oakley G. Smith, was president and chairman of the Board of Trustees of Palm Springs General Hospital at Hialeah, Florida (PSGH, or the hospital). PSGH was a non-profit tax-exempt institution, which participates as a "provider" hospital in the Medicare program. Medicare is a program of the United States Department of Health, Education and Welfare (HEW), more specifically, the Social Security Administration. 4 Blue Cross had a contract to administer the program for HEW. 5 In order to be reimbursed by HEW for health care rendered to medicare patients, PSGH must file cost reports with Blue Cross annually, listing all expenses incurred in rendering patient care for that year. The amount due the hospital annually from HEW is determined by multiplying these total health care expenses by the percentage of Medicare patient days to total patient days for that year. Appellant, as chief hospital administrator, was responsible for the filing of PSGH cost reports with Blue Cross, and did so annually. These cost reports, Forms 1563, 1562 and 1992 for fiscal year 1971 are the claimed false statements as to material fact forming the basis for Count Three of the indictment.

Testimony established that Smith knew the general method by which the Medicare reimbursement program worked, and had in fact been instrumental in bringing the program to the hospital. Smith made it a practice to retain complete financial control of the hospital. The jury had testimony before it which indicated that Smith knew that any distortion in the hospital's books would cause a corresponding distortion of the Medicare reports. The critical question of proof in this case is therefore the extent of Smith's knowledge that improper costs were included in the hospital's books as reported to Medicare.

The prosecution, at trial, focused its proof on three highly irregular transactions, each of which was reflected in the hospital's total costs as reported to Blue Cross. Two of these expenses are argued by appellant to have been the result of a "mistake" on the part of Smith or that of hospital employees. The other expense is characterized by Smith as reflecting a legitimate hospital expense. We hold here that the jury had evidence before it justifying a finding that each transaction was not a legitimate patient care expense, or mistake, but was instead the result of an intentional act on Smith's part. 6

In October 1968, appellant began the remodeling of his home on Miami Beach. He hired an employee of the hospital to be foreman of the work and to order supplies through the hospital. 7 Arango, a government witness, the comptroller of the hospital, testified that early in 1969 he noticed invoices coming to the hospital with Smith's Miami Beach home shown as the delivery address of the goods. When he inquired as to these invoices Smith told him to pay them, but to "segregate" those expenses from other hospital costs. Arango did not separate out the Smith remodeling invoices, and they were charged to the hospital accounts as ordinary expenses. Checks to pay these, and all hospital expenses, together with the respective invoices, 8 were taken to Smith to sign, in accordance with appellant's practice of signing all the general account checks of the hospital, in order to keep tight control over the various expenses. At the top right corner of the checks was a "stub" portion indicating the account to which expenses were charged by number, and sometimes by name also. Smith signed checks which paid for his home remodeling, as well as those for all other hospital expenses.

The establishment of an open end loan from the hospital to Smith is argued as an explanation for the erroneous expensing of appellant's personal costs to the hospital accounts. There was apparently mention of a loan as early as Arango's confrontation of Smith with the invoices in the incident described above. The minutes of two of the Board of Trustees' meetings contained authorization for a loan to Smith. The government, however, presented evidence which showed the minutes to be unreliable. 9 The hospital had at various times made loans to hospital employees, loans which were properly reflected in the books and not charged to the general hospital accounts reported to Blue Cross. The account books of the hospital did not reflect a loan to Smith until September of 1972, by which time the auditor for Blue Cross had discovered that the remodeling costs of Smith's home had been carried on the hospital books as reimbursable expenses, and raised this issue with Arango. Two witnesses, one an accountant with PSGH who handled accounts receivable, the other an accountant who assisted an independent CPA with auditing the hospital's books, both employed between the time the loan was originally said to have been made and September 1972, testified they were not aware of any loan.

The home remodeling costs of appella...

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