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United States v. Bertram

United States District Court, E.D. Kentucky, Central Division, Frankfort

February 21, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
ROBERT L. BERTRAM, M.D., et al., Defendants.

          OPINION

          Gregory F. Van Tatenhove United States District Judge.

         After many days of trial, these five defendants were convicted of seventeen counts of healthcare fraud. The jury, though, acquitted the five on 83 other counts. Now, at sentencing, the United States Probation Office and the Government urge that the defendants be held accountable for all of their conduct as encompassed by all 100 counts. That seems wrong. But the law allows just such a result, and the question before this Court at sentencing was whether that should be the result in this case. It should not. This Opinion further explains the reasons why.

         While non-lawyers are often confused on this point, a “not guilty” verdict is viewed in the law as very different from a determination that an actor did not commit a crime. We ask jurors to make a judgment about the strength of evidence and return a verdict only when it is particularly strong. Sometimes, there is more evidence than not that a crime has been committed, but that is not enough for a conviction. It can be enough, though, for determining a sentence.

         This contradiction has been the subject of much debate by judges and academics. In 1997, the Supreme Court of the United States determined that the sentencing judge in District Court could consider acquitted conduct, so long as the Government proves such conduct by a preponderance of the evidence. United States v. Watt, 519, U.S. 148, 157 (1997). The Supreme Court modified this principle three years later, requiring proof beyond a reasonable doubt for conduct that would increase the penalty beyond the statutory maximum of the crime of which the defendant either pleaded guilty to or was convicted by a jury. Apprendi v. New Jersey, 530 U.S. 466, 490 (2000). The Supreme Court discussed the Sixth Amendment concerns with allowing a judge to determine a fact that increased the punishment beyond the statutory maximum. Id. at 488.

         But after these decisions, the Supreme Court found the provisions of the Federal Sentencing Act that required mandatory application of the Sentencing Guidelines to be unconstitutional as a violation of the Sixth Amendment. United States v. Booker, 543 U.S. 220 (2005). And though the Guidelines are no longer mandatory, the Supreme Court has upheld the constitutionality of the presumptive reasonableness the Circuit Courts of Appeals give to sentences falling within the correctly calculated Guideline range. Rita v. United States, 551 U.S. 338 (2007). Circuit Courts of Appeals have consistently held the advisory nature of the Guidelines permits a District Court to consider acquitted conduct if the judge finds those facts by a preponderance of the evidence, even when that conduct increases the sentence recommended under the Guidelines. See, e.g., United States v. Ramirez-Negrón, 751 F.3d 42 (1st Cir. 2014); Portalatin v. Graham, 642 F.3d 69 (2d Cir. 2010); United States v. Grier, 475 F.3d 556 (3d Cir. 2007); United States v. Ventura, 864 F.3d 301 (4th Cir. 2017); United States v. O'Brien, 560 U.S. 218 (5th Cir. 2010); United States v. White, 551 F.3d 381, (6th Cir. 2008); United States v. White, 472 F.3d 458 (7th Cir. 2006); United States v. Papakee, 573 F.3d 569 (8th Cir. 2009); United States v. Mercado, 474 F.3d 654 (9th Cir. 2007); United States v. Bass, 661 F.3d 1299 (10th Cir. 2011); United States v. Faust, 456 F.3d 1342 (11th Cir. 2006); United States v. Settles, 530 F.3d 920 (D.C. Cir. 2008).

         However, the Supreme Court has rejected opportunities to grant certiorari for cases such as this one, when the consideration of acquitted conduct ultimately presents a Guideline range that mirrors what would have been calculated had the defendants been found guilty on all charges. See Jones v. United States, 135 S.Ct. 8 (2014). Additionally, many jurists have raised issues with sentencing acquitted conduct based only on a preponderance of the evidence. Justice Scalia disagreed with the remedial determination in Booker, “believing instead that the proper remedy was to maintain the mandatory character of the Guidelines and simply to require, for that small category of cases in which a fact was legally essential to the sentence imposed, that the fact be proved to a jury beyond a reasonable doubt or admitted by the defendant.” Rita, 551 U.S. at 368 (Scalia, J., concurring).

         In the Sixth Circuit, Judge Merritt disagreed with allowing district courts to use acquitted conduct, saying the use of such “to punish is wrong as a matter of statutory and constitutional interpretation and violates both our common law heritage and common sense.” White, 551 F.3d at 387 (Merritt, J., dissenting). Various Circuit Judges have expressed similar sentiments. See, e.g. United States v. Bell, 808 F.3d 926, 929 (Millett, J., concurring) (“allowing a judge to dramatically increase a defendant's sentence based on jury-acquitted conduct is at war with the fundamental purpose of the Sixth Amendment's jury-trial guarantee”); United States v. Casper, 536 F.3d 409, 418 (5th Cir. 2008) (Dennis, J., concurring) (“I am greatly troubled that a district court can use conduct acquitted by a jury for a sentence enhancement that significantly increases a sentence beyond that the defendant would have obtained had he been convicted by the jury for that same conduct”) United States v. Canania, 532 F.3d 767, 776 (Bright, J., concurring) (“A judge violates a defendant's Sixth Amendment rights by making findings of fact that either ignore or countermand those made by the jury and then relies on these factual findings to enhance the defendant's sentence”); Mercado, 474 F.3d at 664 (Fletcher, J., dissenting) (“By allowing judges to consider conduct rejected by the jury, the court allows the jury's role to be circumvented by the prosecutor and usurped by the judge-two of the primary entities against whom the jury is supposed to protect the defendant”); Faust, 456 F.3d at 1352 (Barkett, J., concurring) (“When a sentencing judge finds facts that could, in themselves, constitute entirely free-standing offenses under the applicable law-that is when an enhancement factor could have been named in the indictment as a complete criminal charge-the Due Process Clause of the Fifth Amendment requires that those facts be proved beyond a reasonable doubt”). Yet the law remains the same: district courts are still permitted to consider conduct acquitted by a jury and appellate courts continue to remind district judges of their discretion. See, e.g., White, 551 F.3d at 386 (“To say that district court judges may enhance a defendant's sentence based on acquitted conduct, however, is not to say they must do so”).

         I

         The facts of this case have been recited several times over the course of litigation, but a brief summary is helpful here. [See, e.g., R. 1; R. 82; R. 178.] In November 2015, the United States indicted these five men, Dr. Robert Bertram, Jr., Mr. Wes Bottom, Dr. Robin Peavler, Mr. Brian Walters, and Dr. Bryan Wood, for ninety-nine counts of health care fraud and one count of conspiracy to commit health care fraud. [R. 1.] Dr. Peavler and Dr. Wood co-owned SelfRefind, a chain of substance abuse treatment clinics headquartered in Danville, Kentucky. As part of the prescribed treatment for substance abuse, physicians at SelfRefind tested for the presence or absence of illicit substances in a patient by conducting a urine drug test. SelfRefind conducted initial qualitative drug screens, which could then be submitted to another lab for a quanititative confirmation test if the doctor believed this was necessary. Dr. Peavler and Dr. Wood later joined Dr. Bertram, Mr. Bottom, and Mr. Walters as co-owners of PremierTox, Inc. in Russell Springs, Kentucky. PremierTox was a clinical laboratory that conducted quantitative confirmation urine drug tests for places like SelfRefind.

         The Indictment alleged that Dr. Peavler and Dr. Wood referred all urine samples from SelfRefind to PremierTox for testing, even if the initial drug screen did not indicate a need for quantitative confirmation tests. Furthermore, the Indictment alleged that PremierTox accepted these samples even though PremierTox did not yet have the proper equipment to test them. Thus, the urine samples from SelfRefind were frozen at PremierTox and tested later. PremierTox prioritized the testing of fresh urine samples, but continued testing frozen samples and billing insurance providers for the tests on frozen samples, even if many months had passed since the initial collection.

         Of the ninety-nine counts of health care fraud charged in the indictment, thirty-six involved claims submitted to Medicaid and/or Medicare, fifteen stemmed from claims submitted to Bluegrass Family Health, and forty-eight resulted from claims submitted to Anthem BlueCross BlueShield. After two and a half weeks of trial, the jury acquitted all five defendants of the conspiracy charge and of eighty-two of the ninety-nine counts of health care fraud. The jury only convicted Dr. Bertram, Mr. Bottom, Dr. Peavler, Mr. Walters, and Dr. Wood of seventeen counts of knowingly and willingly executing a scheme to defraud a health care benefit program in violation of 18 U.S.C. § 1347. All seventeen counts of conviction were derived from the forty-eight total counts relating to Anthem.

         Prior to sentencing, the United States Probation Office completed pre-sentence reports for all five defendants, which included a recommend calculation of the United States Sentencing Guidelines. For a violation of 18 U.S.C. § 1347, the Guidelines sets a base offense level of 6. U.S.S.G. § 2B1.1(a)(2). This base offense level is then adjusted for intended or actual economic loss, the sophistication of the conduct, the defendant's individual role in the offense, as well as potential acceptance of responsibility or obstruction of justice, among other things. Here, the Probation Office calculated the intended loss for all five Defendants to be $2, 421, 292.26, resulting in a sixteen-level increase under U.S.S.G. § 2B1.1(b)(1)(I); added a two-level increase because the offense involved sophisticated means, under U.S.S.G. § 2B1.1(b)(10)(C); and added a two-level increase because the Defendants abused a position of public or private trust as health care professionals, under U.S.S.G. § 3B1.3. These adjustments resulted in an offense level of twenty-six for each Defendant. Additionally, the Probation Office added four levels to the offense levels of Dr. Bertram and Dr. Wood for their participation as organizers or leaders in the criminal activity pursuant to U.S.S.G. § 3B1.1(a), and the Probation Office added three levels to the offense levels of Dr. Peavler and Mr. Walters for their participation as managers or supervisors in the criminal activity pursuant to U.S.S.G. § 3B1.1(b). Dr. Wood also received a two-level increase for failing to provide financial documentation under U.S.S.G. § 3C1.1. After this, Dr. Bertram had a total offense level of 30, Mr. Bottom had a total offense level of 26, Dr. Peavler had a total offense level of 29, Mr. Walters had a total offense level of 29, and Dr. Wood had a total offense level of 32. All five Defendants had a criminal history category of I. Pursuant to the guidelines, Mr. Bottom faced 63-78 months imprisonment, Dr. Peavler and Mr. Walters each faced 87-108 months imprisonment, Dr. Bertram faced 97-121 months imprisonment, and Dr. Wood faced 121-151 months imprisonment.

         All five Defendants objected to each of these adjustments, arguing their total offense level for each Defendant should be 6, making each Defendant eligible for probation. At sentencing, the Court upheld the two-level increase for use of sophisticated means under § 3B1.1(b)(10)(C), the three- and four-level enhancements for the Defendants' various roles in the offense under § 3B1.1(a) and (b), and the two-level increase for abuse of position of public or private trust under § 3B1.3. However, for the reasons below, the Court sustained the Defendants' objections to the sixteen-level increase for an intended loss of $2, 421, 292.26.[1]

         In calculating the intended loss, the Probation Office used the aggregate dollar amount of all bills allegedly submitted to health care benefit programs for all ninety-nine counts of fraud listed on the indictment. The Government urged this Court to use that calculation. However, the Defendants objected to this, stating that the loss calculation should be based only on the seventeen counts for which they were convicted by a jury. The Presentence Report calculated the actual loss for these seventeen counts a $3, 378.37.[2] For a loss of less than $6, 500, the Guidelines recommend no increase, which would have resulted in a total offense level of 14 for Dr. Bertram and Dr. Wood, a total offense level of 13 for Dr. Peavler and Mr. Walters, and a total offense level of 10 for Mr. Bottom. Dr. Bertram and Dr. Wood would then face 15-21 months imprisonment instead of 97-121 months; Dr. Peavler and Mr. Walters would face 12-18 months ...


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