The Second Circuit affirmed a jury verdict finding a medical billing company owner guilty of health care fraud, conspiracy, wire fraud, and aggravated identity theft, but vacated his 144-month sentence, $63.38 million forfeiture judgment, and $336.99 million restitution award. The Court held the district court procedurally erred by lengthening the prison term based on the prospect of First Step Act earned-time credits and RDAP benefits, misapplied two Guidelines enhancements without adequate findings, and used flawed methodologies for forfeiture and restitution.
The case involved a years-long scheme where the defendant “upcoded” and “unbundled” claims, steered patients to ERs for pre-planned surgeries, and impersonated patients when insurers questioned bills. On appeal, the Court rejected the defendant’s motion for new trial claim regarding the jurors’ brief access to two call transcripts that weren’t admitted into evidence, holding that any exposure was harmless because the content duplicated admitted evidence (including the defendant’s own stipulation and witness testimony).
Regarding the defendant’s sentencing claims, the panel held it was error for the court to add years to defendant’s sentence to “offset” any potential reductions he’d received from First Step Act time credits. The Court further held that those credits cannot be used as a stand-alone factor to increase a sentence and were not tethered to any § 3553(a) finding here. Separately, under Tapia, the court may not lengthen imprisonment based on anticipated rehabilitation or program eligibility (such as RDAP).
The district court also erred in applying a four-level § 3B1.1(a) “organizer/leader” enhancement and a two-level § 3B1.3 “abuse of trust” enhancement without making specific factual findings in open court or identifying the requisite participants. The panel flagged that using § 3B1.3 here appeared to rest on misuse of patient identifiers—conduct already punished by the mandatory § 1028A count—raising impermissible double-counting issues unless the court could ground § 3B1.3 in an independent, victim-based fiduciary or quasi-fiduciary relationship.
On forfeiture, the panel reiterated that forfeiture is gain-based and limited to “gross proceeds traceable” to the offense. The $63 million forfeiture judgment matched the defendant’s total business revenue and swept in legitimate earnings despite the government’s admission that improper codes were only a subset of billing. Because the district court neither found the business “permeated with fraud” nor explained a lawful method to segregate tainted proceeds, the order was vacated with instructions to exclude legitimate revenue and to explain any estimation method.
On restitution under the MVRA, the Court vacated the $336.99 million award because the government’s spreadsheets counted all payments tied to impersonations (even ones made before the impersonation occurred) and treated every use of Modifier 59 as fraudulent, without distinguishing legitimate uses or measuring whether the fraud actually affected the payout. Restitution must reasonably approximate only losses directly and proximately caused by the conduct; on remand the court must separate legitimate from fraudulent claims and account for partial-causation scenarios.
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