United States v. Schneider

• Citation: 112 F.Supp.3d 1197
• Decision Date: 22 June 2015
• Docket Number: 07–10234–02.,Criminal Action Nos. 07–10234–01
• Parties: UNITED STATES of America, Plaintiff, v. Stephen J. SCHNEIDER and Linda Schneider, Defendants.
• Court: U.S. District Court — District of Kansas

112 F.Supp.3d 1197

UNITED STATES of America, Plaintiff,

v.Stephen J. SCHNEIDER and Linda Schneider, Defendants.

Criminal Action Nos. 07–10234–01

07–10234–02.

United States District Court, D. Kansas.

Signed June 22, 2015.

Alan G. Metzger, Annette B. Gurney, Office of United States Attorney, Wichita, KS, Jabari B. Wamble, Jon P. Fleenor, Office of United States Attorney, Kansas City, KS, Tanya J. Treadway, Office of United States Attorney, Topeka, KS, for Plaintiff.

MEMORANDUM AND ORDER

MONTI L. BELOT, District Judge.

Before the court are defendants' submissions pursuant to 28 U.S.C. § 2255 and the government's responses: Docs. 759, 761, 764, 769, 770, 771, 772, 773.¹ Subsequent to receiving the briefs, the court ordered supplemental briefing on the implication of the Supreme Court's decision in Burrage v. United States, ––– U.S. ––––, 134 S.Ct. 881, 187 L.Ed.2d 715 (2014). (Doc. 774). Defendants requested counsel be appointed to assist them with the questions posed by the court and the court granted that request.² (Doc. 778). Defendants' counsel have now filed a joint supplemental brief on the issues raised by Burrage, the government responded, and defendants filed a joint reply. (Docs. 784, 785, 786).

I. Facts and Procedural History

Defendant Stephen Schneider ("Stephen") was a doctor of osteopathic medicine and his wife, defendant Linda Schneider ("Linda"), was a licensed practical nurse ("LPN"). In October 2002, they opened Schneider Medical Clinic ("SMC") in Haysville, Kansas, where they provided pain management treatment³ including the prescription of controlled substances. The prescriptions were usually written in combinations of dangerous and addictive drugs from Schedules II, III and IV.

SMC was a large facility and accommodated a large number of patients. It was open seven days a week, for long hours. Stephen was the only full-time doctor on staff. At times, SMC had a part-time doctor on staff but SMC usually utilized physician's assistants (PA) to see patients. Stephen provided the PAs with full, pre-signed prescription pads. The PAs did not have specialized training in pain management and they were given little discretion to alter Stephen's prescriptions.

Linda managed SMC and was in charge of all of the scheduling and billing. The patient charts were disorganized and strewn all over the office. It was often difficult to locate a patient chart and the charts would often be missing key documentation. Linda prioritized the patients who would be seen by the type of insurance they carried. Patients were scheduled every ten minutes and Linda would frequently knock on the exam room door in order to hurry the exam along. Patients waited for many hours in the lobby. On some days, according to the bills submitted to providers, Stephen would see up to 100 patients. Additionally, Linda stated that patients would wait in the parking lot at 5:00 a.m. because SMC would only take the first 30 people to walk in. Linda felt like they were selling concert tickets.

On May 3, 2010, the grand jury returned a third superseding indictment charging both defendants as follows: Count 1—conspiracy to unlawfully distribute drugs, commit health care fraud, engage in money laundering, and defraud the United States in violation of 18 U.S.C. § 371 ; Counts 2–6—unlawful drug dispensing and distribution and unlawful drug distribution resulting in death in violation of 21 U.S.C. § 841(a)(1) ; Counts 7–17—health care fraud and health care fraud resulting in death in violation of 18 U.S.C. § 1347 ; and Counts 18–34—money laundering in violation of 18 U.S.C. § 1957. (Doc. 414).

During Spring 2010, the case proceeded to trial. Stephen was represented by Lawrence Williamson. Linda was represented by Kevin Byers⁴ and Eugene Gorokhov. The evidentiary portion of the trial, including jury selection, lasted seven weeks. Approximately ninety witnesses testified, including many experts. Through lay testimony from patients and former employees, along with expert testimony, the government presented an extensive amount of evidence detailing the operations of SMC and, more specifically, defendants' conduct.

The evidence, viewed in the light most favorable to the government, overwhelmingly demonstrated that the Schneiders operated SMC as a revenue-generating facility, with little or no concern for the welfare of its "patients."⁵ Simply stated, SMC was operated as a "pill mill." The patient records showed that inadequate or no medical histories were taken, there was a lack of treatment plans, no visible effort to treat the cause of the patients' pain, failure to monitor patients' progress, a lack of documentation, escalating dosages of prescriptions and prescription practices which were likely to cause dependance. The patient records also contained numerous "red flags" which would support a finding that patients were addicted to the prescriptions, i.e., early refills, failed urine tests, claims of lost prescriptions, and reports of abuse. There was evidence that some patients were selling SMC-prescribed drugs in SMC's parking lot.

Dr. Theodore Parran, the government's expert on patient care, reviewed over 100 patient records and concluded that the Schneiders: "(1) ran a practice that attracted drug addicts; (2) took inadequate medical histories; and (3) indiscriminately prescribed controlled drugs in excessive and escalating amounts." United States v. Schneider, 704 F.3d 1287, 1291 (10th Cir.2013). Dr. Douglas Jorgensen, the government's expert on pain management and billing practices, reviewed fifty-four medical charts, numerous autopsy and toxicology reports, and information about billing and coding practices. Dr. Jorgensen summarily opined that the Schneiders filed fraudulent claims to insurance providers and the Schneiders' health care fraud resulted in patients' deaths. Dr. Graves Owen, an expert in pain management, testified that Stephen did not prescribe controlled substances for a legitimate medical purpose.

From February 2002 to February 2008, sixty-eight SMC patients died of drug overdoses. Stephen called overdosing patients "bad grapes." The average age of these patients was 41, with the youngest being 18 years old, and the oldest being 61. During the same time period, over 100 SMC patients were admitted to local hospitals for overdoses. Defendants received repeated calls from law enforcement, concerned family members about patients' drug addictions, concerned pharmacists, and calls from Emergency Room physicians about SMC's prescription practices. SMC's method of operation continued without change.

The government also introduced extensive evidence of defendants' fraudulent billing practices. Defendants billed for services allegedly performed by Stephen when he was out of town or not in the office. Defendants billed for services rendered by a PA as though a doctor had seen the patient. Defendants billed visits at a higher code than the level of service that was provided, i.e. utilizing the 99213 code when the visit was just for a med refill.

At the close of the government's evidence, defendants presented evidence through twenty-eight witnesses, including Stephen. Linda chose not to testify.⁶ Defendants' witnesses included patients, employees and experts. The defense case consumed eight trial days.

After the conclusion of the evidence, the jury deliberated for seven days. The jury found Stephen guilty of Counts 1–17 and two money laundering charges (Counts 26 and 28), and found Linda guilty of all charges save two money laundering charges (Counts 23 and 24). The court sentenced Stephen to 360 months' imprisonment on counts 1–5 and 7–9, to run concurrently. Linda was sentenced to 396 months' imprisonment on counts 1–5 and 7–9, to run concurrently.

Defendants timely appealed and the Tenth Circuit affirmed the convictions and sentences. Schneider, 704 F.3d 1287. Defendants' section 2255 motions raise two substantive issues: 1) whether the Supreme Court's recent decision in Burrage v. United States, ––– U.S. ––––, 134 S.Ct. 881, 187 L.Ed.2d 715 (2014), interpreting statutory language concerning a sentencing enhancement, requires the court to set aside defendants' convictions and/or sentences on certain counts; and 2) whether defendants' trial and appellate counsel were ineffective. The court will address these issues in turn.

II. Counts Concerning the "death ... results from" Sentencing Enhancement

The Third Superceding Indictment charged defendants with unlawful drug dispensing and distribution resulting in death in violation of 21 U.S.C. § 841(a)(1) in counts 2–5 and health care fraud resulting in death in violation of 18 U.S.C. § 1347 in counts 7–9. Penalties for violations of these charges vary, however. The penalty for a violation of section 841(a)(1) is enhanced to a mandatory minimum sentence of 20 years for a Schedule II controlled substance, and a maximum of 15 years for a Schedule III controlled substance, "if death or serious bodily injury results from the use of such substance." 18 U.S.C. § 841(b)(1)(C) & (b)(1)(E)(i).⁷

The jury was instructed in accordance with Tenth Circuit law on the elements of sections 371, 841 and 1347. (See Inst. Nos. 8, 15, 20, 21, 22, 23, 29). These instructions are not challenged by defendants. The jury was also instructed that if defendants were found guilty of unlawful dispensing and/or health care fraud, that it must also determine whether those crimes resulted in serious bodily injury or death⁸ :

Counts 2 through 4 charge that the illegal dispensing of specifically identified controlled substances resulted in the serious bodily injury or death of three named individuals. Count 5 charges that the illegal dispensing of controlled substances resulted in the serious bodily injury or death of 18 named individuals.

If you find Stephen Schneider guilty of illegally dispensing controlled substances, as charged in Counts 2, 3, or 4, or any of them, you will then have to unanimously determine beyond a reasonable doubt whether the

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