U.S. v. Wallace

• Decision Date: 01 July 2008
• Docket Number: No. 07-4053.,No. 07-4052.,07-4052.,07-4053.
• Citation: 531 F.3d 504
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Richard WALLACE and Downstate Transportation Services, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

531 F.3d 504

UNITED STATES of America, Plaintiff-Appellee, v. Richard WALLACE and Downstate Transportation Services, Inc., Defendants-Appellants.

No. 07-4052.

No. 07-4053.

United States Court of Appeals, Seventh Circuit.

Argued June 2, 2008.

Decided July 1, 2008.

William E. Coonan (argued), Office of the United States Attorney Civil Division, Fairview Heights, IL, for Plaintiff-Appellee.

Stephen B. Evans (argued), St. Louis, MO, for Defendant-Appellant.

Before EASTERBROOK, Chief Judge, and ROVNER and WOOD, Circuit Judges.

EASTERBROOK, Chief Judge.

Many people eligible for health benefits under the Medicaid program do not have access to automobiles, and many rural areas lack public-transit systems. So Medicaid will pay the cost of taxicabs to transport patients between their homes and medical providers. The program reimburses taxi services at the "community rate" for "loaded miles." 89 Ill. Admin. Code § 140.492. (Medicaid operates through state agencies, and Illinois supplies the rules that govern these events.) A "community rate" is the price set by the public agency with jurisdiction over taxi services, and "loaded miles" are miles traveled with the patient in the taxi. The forms on which taxi companies submit claims for reimbursement include boxes prominently labeled "loaded miles"; a handbook covering transportation services informs businesses that only loaded miles are compensable.

Richard Wallace and his business Downstate Transportation Services (collectively "Wallace") furnished taxi service to Medicaid recipients in 16 rural counties in southern Illinois. Wallace applied for payment on forms that called for truthful statements of "loaded miles." Evidence in this criminal prosecution established, however, that Wallace billed for many miles in which the taxi carried only the driver. For some trips Wallace calculated miles from the driver's base station to the patient's home, to the medical provider, back to the patient's home. For other trips Wallace calculated miles as if the trip started at his headquarters in Carterville, Illinois, and returned there. Wallace collected from Medicaid about $500,000 more than he was entitled to. A jury convicted him of 18 counts of mail fraud, 18 U.S.C. § 1341, and health-care fraud, 18 U.S.C. § 1347.

Wallace concedes that he billed for unloaded miles. He contends, however, that Carterville has a "community rate" of $1.25 a mile, from the taxi's dispatch point to the passenger's destination, plus a fee of $3.00, no matter how many (or how few) of those miles a passenger is in the taxi. In rural areas it may be sensible to calculate fares that way, because a driver is unlikely to pick up another fare on the way. Wallace says that he understood a "community rate" to cover the flag-pull (pickup) fee, the price per mile, and the miles to which that price would be applied. The jury did not agree, and the district court denied Wallace's motion for acquittal. 2007 U.S. Dist. LEXIS 49556 (S.D.Ill. July 10, 2007).

Like the district court, we find it impossible to see how Wallace could have been confused. The form requires operators to disclose how many "loaded miles" were provided. The handbook tells transportation firms that they may bill only for loaded miles, at a community rate—that is, the regulated price per mile (or, if there is no regulatory authority, at a rate specified by the Medicaid program itself). If Wallace believed that $1.25 a mile for all miles, loaded and unloaded, was a better deal for Medicaid than some higher price per mile for loaded miles alone, he was free to propose a variance from the program's normal rules. But he did not do that—not, at least, in any way that produced a favorable ruling. He says that his application to participate in the Medicaid program revealed his rate structure, but no responsible official approved it or told him to put all miles in the box labeled "loaded miles." Instead he lied repeatedly, saying in the reimbursement forms that he was charging $1.25 a mile for loaded miles. This deceit made it impossible for the people running the Medicaid program to decide whether Wallace was supplying transportation at a competitive price. He was charging at least $1.75 a loaded mile—how much more is in dispute; that depends on the ratio of loaded to unloaded miles. If other companies were willing to carry patients for $1.50 a loaded mile, Medicaid would have done better to use them. By stating that he was charging only $1.25 a loaded mile, Wallace made his price look lower than it actually was.

That's not Wallace's only problem. Evidence showed that he billed for some phantom miles. When drivers, who were stationed throughout the 16-county region, picked up passengers near their bases, Wallace sometimes billed as if the trip had started and ended in Carterville, which is farther away. Sometimes Wallace just tacked miles onto what the drivers actually logged. He contends that evidence about fictitious miles should have been excluded under Fed.R.Evid. 404(b), but this proof concerned the charged offense rather than "other" wrongs. The indictment alleged a scheme to bill for travel in addition to loaded miles. Whether these spurious "loaded miles" were unloaded miles, or miles never driven at all, does not matter.

As it happens, Wallace could not prevail even if we were to conclude that a "community rate" includes the rate base (that is, the miles to which the rate is applied) as well as the rate per mile. For Wallace...