United States v. Fischer

Citation: Not availableDocket: 96-3587

Court: Court of Appeals for the Eleventh Circuit; March 3, 1999; Federal Appellate Court

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Jeffrey Allan Fischer was convicted on thirteen counts, including conspiracy, fraud, mail fraud, wire fraud, and money laundering, primarily under various statutes including 18 U.S.C. 371, 666, 1341, 1343, and 1957. He appealed his convictions, arguing that the government failed to demonstrate that the affected agency received over $10,000 in federal benefits in a given year, which is a prerequisite for certain charges under 18 U.S.C. 666. The convictions included one count of fraud involving an organization receiving federal funds, one count of providing a kickback, one count of mail fraud, two counts of wire fraud, one count of conspiracy, and seven counts of money laundering. 

The case stems from a 1993 loan of $1.2 million arranged by Fischer, as president of QMC, from the West Volusia Hospital Authority (WVHA). Fischer negotiated the loan, pledging QMC's accounts receivable and a $1 million letter of credit from a foreign bank as security. However, the accounts receivable were already pledged to another creditor, and the legitimacy of the letter of credit was questionable. Additionally, concerns regarding the authority of WVHA to issue the loan arose both prior to and after the loan was executed. Despite these issues, the loan was finalized, and the funds were used by QMC for debt repayment and salary increases for its owner-employees. Fischer also facilitated a loan of at least $100,000 from QMC to a company associated with the representative from the foreign bank. The Court of Appeals affirmed Fischer's convictions and sentence.

Fischer lost approximately $400,000 of loan proceeds through options trading on behalf of QMC. In February 1994, WVHA's annual audit report revealed a $1.2 million loan to QMC, which was the first notification to WVHA's board and finance committee. The board subsequently requested repayment of the loan, due on July 1, 1994. QMC failed to repay the loan by the deadline, leading Fischer to arrange for FADB to issue a $1.2 million draft for repayment. However, FADB refused to honor the draft when presented by WVHA's bank, leaving WVHA unable to collect the debt.

In June 1993, Caddick requested a $10,000 loan from QMC, which later paid this amount to Caddick's mother, Stella Greenfield, labeled as 'consulting fees,' despite no services being rendered. Greenfield forwarded the payment to Caddick. A QMC bookkeeper later sought an invoice for this payment, receiving one dated August 1, 1993, with Fischer's handwritten note indicating it was for a 'loan origination fee.' Following QMC's default on the $1.2 million loan, Caddick attempted to create a cover-up by proposing a backdated contract for services to QMC's vice-president, who refused to sign.

To establish Fischer's violation of 18 U.S.C. 666(a)(1) and (a)(2), the Government needed to prove that WVHA received over $10,000 in federal assistance annually. Evidence presented showed that WVHA, as a county agency operating two hospitals, collected between $10 million and $15 million from the federal government in 1993, primarily through the Medicare program. The finance director explained that Medicare pays a fixed amount for services, regardless of hospital charges, indicating that increased service prices do not affect Medicare reimbursements.

Statutory interpretation and evidence sufficiency are the primary issues addressed. Both statutory interpretation and sufficiency of the evidence are reviewed de novo, with evidence viewed favorably to the Government, allowing for reasonable inferences. Under 18 U.S.C. § 666, a conviction requires that the affected organization receives over $10,000 in benefits from a federal assistance program within a year. In this case, the West Virginia Health Authority (WVHA) received between $10 million and $15 million in Medicare funds, qualifying as benefits under federal assistance. Sufficient evidence was presented to meet the requirements of § 666(b).

In United States v. Copeland, the Court previously examined what constitutes ‘benefits’ under § 666(b). Defendants Copeland and Winders argued their convictions for accepting and giving bribes, respectively, should be overturned due to the Government's failure to prove that Lockheed, a prime contractor for the Department of Defense, received benefits under § 666(b). The Court determined that benefits must be linked to federal assistance. It found that Lockheed’s relationship with the government was purely commercial and did not involve federal assistance, thus the funds received did not qualify as benefits under § 666(b). Consequently, the Court vacated the defendants' convictions due to the lack of evidence meeting the statutory requirement.

The evidence presented in the case establishes that the West Virginia Hospital Association (WVHA) received significant federal funding, specifically between ten and fifteen million dollars from the Medicare program in 1993, which qualifies as 'benefits' under 18 U.S.C. § 666(b). This statute encompasses various forms of federal assistance, including grants and subsidies, thus satisfying the legal requirements for Fischer's convictions. Although the plain language of § 666(b) supports this conclusion, the legislative history further clarifies that the statute is intended to be broadly construed to protect federal funds from fraud and bribery.

Fischer’s argument, which draws on the United States v. LaHue decision, asserts that WVHA does not receive 'benefits' because Medicare funds are ultimately directed to patients rather than providers. The LaHue court noted that while providers receive payments traceable to federal programs, these are contingent upon patient payments or assignments, thus characterizing patients as the 'target recipients' of Medicare benefits. This narrow interpretation is countered by the broader context and purpose of § 666(b), affirming that WVHA's receipt of Medicare funds qualifies as ‘benefits’ under the statute.

The LaHue case addressed the interpretation of "benefits" under 666(b) of the Medicare program, focusing on whether funds received after reaching "target recipients" qualify as benefits. The court found the language of 666(b) ambiguous and examined its legislative history, concluding that once funds reach the target recipient, they no longer qualify as benefits under the statute. However, the current case involving WVHA presented unclear evidence regarding whether the organization received funds directly from Medicare or as an assignee. The finance director's testimony indicated that WVHA received between ten to fifteen million dollars from Medicare, but it was uncertain if these were direct payments or assignments. Despite the potential for direct receipt of funds, the court emphasized that 666(b) does not differentiate between direct and assigned benefits, nor does it require that the recipient be the target recipient. The focus is instead on the source of the benefits, which must come from a federal assistance program, not from a commercial transaction. Consequently, Fischer's convictions and sentence were affirmed.