United States v. Universal Rehab

Opinions of the United

1999 Decisions States Court of Appeals

for the Third Circuit

2-11-1999

USA v. Universal Rehab

Precedential or Non-Precedential:

Docket 97-1412

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Filed February 11, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-1412

UNITED STATES OF AMERICA,

Appellant

v.

UNIVERSAL REHABILITATION SERVICES

(PA), INC.,

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

D.C. Criminal Action No. 94-cr-00147-1

District Judge: Hon. Robert F. Kelly

Nos. 97-1413 & 97-1467

UNITED STATES OF AMERICA

v.

ATTILA HORVATH,

Appellant/Cross-Appellee

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

D.C. Criminal Action No. 94-cr-00147-2

District Judge: Hon. Robert F. Kelly

Nos. 97-1414 & 97-1468

UNITED STATES OF AMERICA

v.

RICHARD J. LUKESH,

Appellant/Cross-Appellee

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

D.C. Criminal Action No. 94-cr-00147-3

District Judge: Hon. Robert F. Kelly

Argued: May 22, 1998

Before: ROTH, MCKEE, and GARTH, Circuit Judges

(Opinion filed February 11, 1999)

Michael R. Stiles

United States Attorney

Walter S. Batty, Jr.

Assistant United States Attorney

Chief of Appeals

Valli F. Baldassano (Argued)

Suzanne B. Ercole (Argued)

Assistant United States Attorneys

Suite 1250

615 Chestnut Street

Philadelphia, PA 19106

Attorneys for Appellee/

and Cross-Appellant

2

Thomas Colas Carroll, Esquire

(Argued)

Carroll & Cedrone

The Curtis Center, Suite 750

Independence Square West

Philadelphia, PA 19106

Attorney for Appellants/

and Cross-Appellees

OPINION OF THE COURT

ROTH, Circuit Judge:

Defendants, Universal Rehabilitation Services, Inc.

(Universal), Attila Horvath, and Richard Lukesh, were

charged with mail fraud and false claims in a 39 count

indictment. The government alleged that they conducted a

Medicare fraud scheme over a three-year period. The jury

convicted the defendants only on a mail fraud count, Count

One, the earliest count of the indictment. The government

now argues that evidence of illegal activity, which occurred

after the date of the offense in Count One but still within

the three-year period of the originally charged scheme, can

be used to sustain the verdict of guilty on Count One.

In this appeal, we must determine to what extent post-

offense evidence can be considered to support the

conviction on Count One. We must also decide whether the

District Court properly admitted into evidence the guilty

pleas of two testifying mid-level managers after defendants

had represented to the court that they would not, on cross

examination, challenge the credibility of these witnesses or

otherwise make the pleas admissible.

I. Facts

The corporate defendant, Universal, provided

rehabilitative services, including speech therapy, to

Medicare patients in nursing homes. The patients served

were primarily the elderly. Universal submitted claims for

the patients it treated to Independence Blue Cross (IBC),

which administered Medicare coverage. IBC would then

submit claims to Medicare.

3

Medicare is authorized to reimburse speech therapy

treatments that are both medically reasonable and

necessary. Pursuant to 42 U.S.C. S 1395 et seq. and its

implementing regulations, manuals are published that

provide Medicare coverage guidelines. These include four

criteria to determine if the treatment is medically

reasonable and necessary, and therefore reimbursable: 1)

the therapy must be safe and effective for treatment of the

patient's condition; 2) the services provided to the patient

must be of a level of complexity that the services can only

be provided by a certified speech pathologist; 3) where

restorative treatment is ordered, there must be an

expectation that the services being provided to the patient

will bring about significant improvement in a reasonable

period of time; and 4) the frequency and duration of

services must be reasonable and necessary for the patient's

condition.

Universal therapists would evaluate patients in accord

with the physician's orders and prepare a plan of

treatment. The evaluation and plan of treatment must state

whether the treatment is in fact necessary. The evaluation

and plan is then approved (signed) by the doctor. As

treatment progresses, speech therapists create progress

notes. If treatment is to continue, Medicare requires that

the need for it be certified every 30 days by a medical

doctor. Medicare will continue to pay for speech therapy as

long as patients are making progress toward the goals

established in the plan of treatment. The doctor executes

the 30 day certification by signing a Medical Information

Form (MIF), which contains a summary, primarily from the

therapists' progress notes, of the previous 30 days of

treatment, as well as a recommended course of treatment

for next 30 days.

Universal submitted electronic Medicare bills to IBC.

Essentially, IBC would review Universal's reimbursement

claims. Universal and IBC often disagreed about the

interpretation of Medicare guidelines and the propriety of

the bills submitted. At some point, IBC began requesting

that Universal supply the following documentation to

support the electronic bills: a) the evaluation and plan of

treatment, b) the progress notes, and c) the MIFs.

4

Claims that were rejected would be "rewritten" by

Universal staff. Depending on the reason for rejection, the

"rewriting" to obtain reimbursement might be fraudulent.

For example, if information was missing from a form,

Universal personnel would "rewrite" the form to include the

missing information. Other "rewriting," however, was not as

innocuous. For example, a mid-level corporate employee

pled guilty to mail fraud for falsifying the performance

record of a patient on certain speech therapy tests to create

the "appearance" that the patient had made progress,

thereby rendering the services reimbursable. In fact, the

patient was not making progress and the services should

not have been reimbursable. Another type of "rewriting"

consisted of changing evaluations and MIFs after the doctor

had signed them. The doctor's signature would then be

taped and xeroxed onto the "rewritten" forms.

The government alleged that a mail fraud scheme

occurred from the summer of 1988 through September 21,

1991, during which 1) evaluations and plans of treatment

were rewritten to create the "appearance" of patients who

could properly receive reimbursable therapy; 2) MIFs

containing physician's certifications were falsified, that is,

altered after the doctor originally signed them and the

signature photocopied back on; and 3) progress notes were

altered to conform with the falsified evaluation and MIFs. A

grand jury indicted Attila Horvath, Vice President and

Director of Finance at Universal; Richard Lukesh, Director

of Operations at Universal; Universal, the corporation itself;

and three other Universal employees for mail fraud, in

violation of 18 U.S.C. S 1341 (Counts One through

Seventeen, charging 17 mailings in furtherance of the

fraud), and false claims, in violation of 18 U.S.C.S 287

(Counts Eighteen through Thirty-nine).

After a jury trial, Horvath, Lukesh and Universal were

convicted on Count One and acquitted on each of the other

38 counts, representing 16 other mailings and false claims

that arose from the practice of falsifying speech therapy

documents. Count One charged that, in furtherance of the

scheme, Blue Cross mailed a check, dated May 10, 1989, to

Universal. The check represented a claim for treatment

5

rendered to a patient, Mildred Hynds, from February 15 to

28, 1989.1

Before trial, defendants had moved in limine to prevent

the government from presenting evidence that government

witnesses Judy Blum Bonjo and Penny Martin, employees

of Universal, had pled guilty to mail fraud.2 Defendants

promised that they would not challenge these witnesses'

credibility on cross-examination. Defendants argued that

the guilty pleas were not relevant under Rule 401 of the

Federal Rules of Evidence and, if relevant, were more

prejudicial than probative under Rule 403. The District

Court denied the motion in limine. Defendants appeal this

evidentiary ruling.

After the verdict, defendants moved for a Fed. R. Crim. P.

Rule 29 judgment of acquittal, arguing that there was

insufficient evidence to support the jury's verdict. The court

denied the motion. Defendants appeal this ruling as well.3

The District Court had subject matter jurisdiction over

federal indictments, charging violations of the federal

criminal code. We have appellate jurisdiction over

defendants' direct appeal from a judgment of conviction. 28

U.S.C. S 1291.

II. Sufficiency of the Evidence

Immediately after the jury returned its verdict of

conviction on Count One, defendants moved for acquittal

under Rule 29, arguing that there was insufficient evidence

_________________________________________________________________

1. Counts Two, Three, and Four also involved the mailing of checks that

pertained to Mildred Hynds. Count Twenty-seven charged a false claim

arising out of a bill that was submitted for the treatment of Hynds.

2. Blum Bonjo testified that she had pled guilty to Count One of the

indictment before the jury. App. 2190. Martin was charged in a separate

indictment and testified that she had pled guilty to one count of mail

fraud.

3. The government also filed a cross-appeal, claiming that the District

Court erred at sentencing in refusing to consider the fraud loss from the

"virtually identical" conduct charged in the other 38 acquitted counts as

relevant conduct under Section 1B1.3 of the Sentencing Guidelines.

Because of our holding on defendants' appeal, we do not reach the

government's cross-appeal.

6

to sustain the verdict. The District Court denied the motion

as to all three defendants. United States v. Universal

Rehabilitation Services, Inc., Attila Horvath, and Richard

Lukesh, No. 94-147, E.D.Pa., slip op. 3-12, May 31, 1996.

We review de novo the district court's denial of a post-

verdict judgment of acquittal. United States v. Iafelice, 978

F.2d 92 (3d. Cir. 1992).

We apply the same legal standard as the District Court.

We must view the evidence in the light most favorable to

the jury verdict and presume that the jury properly

evaluated the credibility of the witnesses, found the facts,

and drew rational inferences. Id. at 94. In that light, we

"must affirm the convictions if a rational trier of fact could

have found defendant[s] guilty beyond a reasonable doubt,

and the verdict is supported by substantial evidence." U.S.

v. Coyle, 63 F.3d 1239, 1243 (3d Cir. 1995).

"The mail fraud statute, 18 U.S.C. S 1341, proscribes any

scheme or artifice to defraud in which the defendant

participated with the specific intent to defraud and in

which the mails were used `in furtherance of the fraudulent

scheme.' " Coyle, 63 F.3d at 1243."Proof of specific intent

. . . may be found from a material misstatement of fact

made with reckless disregard for the truth." United States

v. Hannigan, 27 F.3d 890, 892 n.1 (3d Cir. 1994). As such,

the government must prove that a scheme to defraud

existed, that each defendant participated in that scheme,

and that each participated with specific intent to defraud.

United States v. Pflaumer, 774 F.2d 1224, 1233 (3d Cir.

1985).

It follows from the above that an individual must join a

scheme while the scheme exists; that is, that the scheme

and a defendant's knowing participation in it must occur

over the same period of time. In this case, the government

alleged in the thirty-nine count indictment that a scheme

took place from the summer of 1988 through September

21, 1991. However, the jury convicted the defendants only

on Count One, the May 10, 1989, mailing. The jury

acquitted the defendants on the remaining 38 counts,

relating to mailings and false claims after May 10, 1989.

Thus, we must define the period of time which constitutes

the scheme for which the jury convicted the defendants.

7

Because of the acquittals on Counts Two through Thirty-

nine, the scheme could not have run through the entire

period which the government charged in the indictment.

Nevertheless, May 10, 1989, the date of the offense charged

in Count One, is not necessarily the evidentiary cut-off. We

must determine whether events that took place after May

10, 1989, up until September 1991, can be used to support

the jury verdict on the May 10 mailing.

The government argues that the scheme is not bound in

time by the May 10, 1989, mailing -- that the Hynds check,

the subject of Count One, was a mailing in furtherance of

a broad three year scheme. However, as we made clear in

United States v. Pflaumer, 774 F.2d 1224 (3d Cir. 1985), in

the context of a conspiracy to commit mail fraud in

violation of 18 U.S.C. S 371, the conspiracy at issue "was a

conspiracy to violate the mail fraud statute, which end[s]

with the last mailing." Id. at 1232. As such, willful

membership in the scheme must have existed on or before

May 10, 1989, the date of the mailing for the count of

conviction. There is no concept of retroactive joinder in mail

fraud schemes after the last culpable mailing. Moreover,

because the defendants were acquitted of the later-

occurring mail fraud counts, those mailings cannot be

considered to be "culpable mailings."

Furthermore, the fact that Pflaumer concerned conspiracy

to commit mail fraud, not just mail fraud, is a distinction

without a difference under the circumstances of this case.

A conspiracy to violate a substantive prohibition in a

federal statute ends when the unlawful object of the

conspiracy has been accomplished. Grunewald v. United

States, 353 U.S. 391, 406-15 (1957). In Pflaumer, the object

of the conspiracy was the use of the mails to effectuate a

scheme to defraud states of tax revenues. Although the

scheme to defraud the states may have continued past the

last mailing, the use of the mails to effectuate the scheme

ceased upon the last mailing. 774 F.2d at 1232.

As was the situation in Pflaumer, the object of the

scheme here was mail fraud, the mailing was in

furtherance of the scheme, and the mailing marks the end

of the scheme. To be sure, subsequent words and deeds

may bear on whether a person was participating and

8

participating willfully in a scheme. For example, a

statement by a defendant after the end of the scheme may

make clear that he was in fact willfully participating in, or

had knowledge of, the scheme before it ended. There must,

however, be substantial evidence of participation before the

mailing. United States v. Pearlstein, 576 F.2d 531, 537 (3d

Cir. 1978).

A. Evidence That a Crime Was Committed

The question then is whether there is sufficient evidence

of events prior to the May 10, 1989, mailing to sustain the

jury verdict? To sustain the jury verdict, in addition to

demonstrating that each defendant willfully joined the mail

fraud scheme, the government must produce sufficient

evidence that a mail fraud scheme existed. This means that

there must be sufficient evidence that the Hynds mailing

was in furtherance of a mail fraud scheme, i.e. , that the

services to Mildred Hynds for which defendants billed and

were paid $1,411 by IBC's check # 0249905, dated May 10,

1989, were unauthorized under Medicare coverage

guidelines and that defendants' misrepresentation of these

services was part of the scheme to defraud.

Defendants argue that there was no evidence that a

crime was in fact committed. They argue that the evidence

indicates that the treatment rendered to Hynds was

authorized by her physician as medically necessary and

appropriate. The record reveals a different story. Carol

Pomilio, a speech therapist at Universal, testified that

Medicare initially rejected the Hynds billing. In order to

obtain reimbursement, the February 15, 1989, evaluation

and plan of treatment, which the doctor had signed, was

destroyed and replaced by one with an altered evaluation

that did not accurately reflect Hynds' treatment plan. The

doctor's signature was then xeroxed onto the altered

document. As documentary support for this treatment plan,

Pomilio lowered the scoring percentages on the progress

notes. The fact that the treatment was originally ordered by

a doctor does not neutralize the fraud; i.e., that the billing

for the continued treatment, based on falsified progress

notes and a xeroxed doctor's signature, was fraudulent.

There is no doubt that, as defendants argue, the

rewriting of or resubmission of rewritten documents is not

9

per se fraudulent. In fact, Julia Blum Bonjo, another

Universal speech therapist, testified that a large part of her

job consisted of legitimate rewriting or redrafting of

documents. However, when the rewriting consisted of

misrepresentation of a patient's test results with the intent

of obtaining otherwise unauthorized reimbursement, there

is sufficient evidence to find an underlying scheme to

defraud, which is required as an element of the offense of

mail fraud.

The next question we must consider is whether there is

sufficient evidence that each of the defendants willfully

joined the scheme to commit mail fraud. United States v.

Pearlstein, 576 F.2d at 537. In this connection, the

government must prove that each defendant willfully joined

the scheme before May 10, 1989, the date of the last

mailing in furtherance of the scheme. It must show that

each defendant possessed the requisite intent to defraud.

Proof is required that "defendants must either have devised

the fraudulent scheme themselves, or have wilfully

participated in it with knowledge of its fraudulent intent."

Id. A defendant need not personally be involved with the

actual mailing to be liable so long as there was knowledge

that the use of mails would follow in the ordinary course of

business or that such use can reasonably be foreseen.

United States v. Sturm, 671 F.2d 749, 751 (3d Cir. 1982);

United States v. Funt, 896 F.2d 1288, 1294 (11th Cir. 1990).4

B. Evidence Linking Defendant Horvath to the Crime

We will first examine the evidence against defendant

Attila Horvath up to and through the May 10, 1989, mailing

of the count of conviction. The government must prove that

Horvath willfully joined the scheme before that date. The

District Court enumerated specific record references to

Horvath's knowledge and willful participation in the scheme

upon which the jury could have relied. However, once we

_________________________________________________________________

4. Defendants also contend in their appeals that there was insufficient

evidence of the use of the mails. We have reviewed the evidence of the

business practices and of specific reference to the correspondence in

question, and we will affirm the District Court on this point. See United

States v. Burks, 867 F.2d 795 (3d Cir. 1989); United States v. Hannigan,

27 F.3d 890 (3d Cir. 1994).

10

eliminate the post-May 1989 evidence, there is little of any

significance.

(1) There is the testimony of Wendy Gold, who was

Director of Speech Therapy before Penny Martin. Gold

testified that on April 28, 1989, she discussed with Horvath

and Lukesh the problem of over-utilization, i.e., treating

patients unnecessarily to increase production. Moreover,

Gold discussed with Horvath the fact that many of the

patients in the nursing homes with which Universal

contracted would not qualify for Medicare therapy. At this

meeting and in subsequent memos, dated May 8 and May

15, 1989, there was extensive discussion about ways to

increase productivity. There was, however, no evidence that

anyone suggested falsification in billing. Gold took the

position that asking therapists to do what Universal wanted

done in order to increase production would not be ethical.

Gold subsequently quit due to pressure to increase

production.

(2) Judy Blum Bonjo, Director of Utilization Review,

testified that her department was directed by Horvath in an

April 15, 1991, memo to bill the "risk patients" in order to

reduce documentation backlogs. This evidence is not

relevant, however, because it refers to an event more than

2 years after the Count One mailing. Additionally, Horvath

argues that the memo refers to billing prior to receipt of all

the paperwork, not to falsifying information.

Blum Bonjo also testified that Horvath directed her to bill

without physician signatures and without some requisite

documentation in place. This evidence is problematic

because there is no reference to its date. Horvath asserts,

and the Government does not controvert, that this

reference is to the same April 15, 1991, memo and for that

reason occurred after the Count One mailing.

(3) Penny Martin, Director of Speech Therapy after Gold,

testified that Horvath wanted patient documentation

billable no matter what had to be done. Martin explained

that Horvath ran weekly meetings and closely monitored

the results of speech therapy practices at Universal.

Furthermore, Martin explained that between 1989 and

1991 Blum Bonjo met with Lukesh on a daily basis and

11

with Horvath and Lukesh on a weekly basis. Once again,

Horvath asserts, and the Government does not controvert,

that Martin's testimony refers to her observations of what

Horvath told her in June 1990, one year after the Count

One mailing. In fact, Martin did not join Universal until

August 1989, several months after the Count One mailing.

Examined as a whole, the record is extremely sparse as

to Horvath's willful participation in the scheme before May

10, 1989. The only evidence that clearly concerns pre-

mailing events is the Gold testimony. This testimony,

however, only establishes pressure to bill, not pressure to

bill falsely. Although we hesitate to overturn a jury verdict,

we conclude in this instance that, after we exclude the

post-mailing evidence, upon which the jury likely relied,

there is little to support the jury's verdict. As such, we hold

that the District Court erred in denying Horvath's motion

for judgment of acquittal. We will remand the case to the

District Court to enter a judgment of acquittal for Horvath.

C. Evidence Linking Defendant Lukesh to Crime

Contrary to Horvath, the relevant evidence against

Lukesh is stronger.

1) Lukesh admitted he was aware that documents were

being rewritten in order to "augment" the billing record. A

memo, dated Oct. 28, 1988, directed therapists "to be

creative" in getting Medicare reimbursements. On cross-

examination, Lukesh testified that one such "creative way"

to get reimbursed was to rewrite the document to change

the patient profile. Defendants point out that no witness

ever testified to interpreting the term "creative" to imply

falsification. Nevertheless, the jury could infer Lukesh's

state of mind from his choice of words.

2) Lukesh authored a document in the spring of 1988

known as the "billing hold" which became an administrative

measure at Universal. This directive was designed to gather

information on what billing documents were being held up

and for what reason. It was provided to the speech

therapists, often with specific directions on how to alter

speech therapy documents. While it is possible that Lukesh

did not intend that the rewriting of documents, pursuant to

this directive, would be fraudulent (Lukesh testified that he

12

believed documents were merely being corrected or

augmented), the jury was certainly entitled to infer that

Lukesh had knowledge of the fraudulent billing practices.

3) Lukesh was present at an April, 1989, meeting where

Blue Cross alerted Universal that documents "were being

improperly altered and inappropriate patients were being

treated." Lukesh's contention as to the billing hold directive

described above, that he believed documents were merely

being corrected or augmented, is belied by this meeting

with Blue Cross. The information gathered by Lukesh at the

meeting, together with his authoring of the directive, lead to

the permissible inference that Lukesh knew, well before the

Count One mailing, that his employees were falsifying

documents.

4) Karen Lightman Pallies, a speech therapist from

January 1989 through September 1989, testified that she

was required to falsify her therapy documentation and that

Lukesh told the therapists at a pre-May 1989 meeting that

reports were being rejected by Blue Cross and the

therapists would have to keep rewriting these reports until

they were accepted. Pallies did admit that re-writing could

involve simply "documenting accurate historical facts" as

distinguished from "making something up."

5) Blum Bonjo and Martin testified that Lukesh was

aware that documents were being altered before being

submitted to Blue Cross for payment. The testimony by

Martin is problematic because she started working after the

Count One mailing. Furthermore, Lukesh asserts, and the

government does not controvert, that Blum Bonjo's

testimony refers to events around April 1990, after the

mailing.

6) Therapist Audrey Isaak told the jury that she attended

regular staff meetings between 1988 and 1991 and at one,

Lukesh told the staff that "our documentation need[s] to be

written in such a way that payment would be granted."

Clearly, the evidence against Lukesh is more substantial

than that against Horvath. Certainly Lukesh's authoring of

documents designed to effectuate a policy of resubmitting

bills and rewriting the documents underlying them, a policy

that led therapists to submit fraudulent documents,

13

provides evidence of intent on Lukesh's part. When this

evidence is coupled with the fact that Lukesh was informed

by Blue Cross of the fraudulent practices, there was

sufficient evidence that Lukesh willfully joined the scheme

to commit mail fraud.

D. Evidence Linking the Corporation to the Crime

Universal, the corporate defendant, argues as the basis

for its post-verdict judgment of acquittal motion that there

was not substantial evidence that it directed its employees

to falsify claims. "A corporation is criminally responsible for

the unlawful acts of its employees or other agents, provided

such unlawful acts are done on behalf of the corporation

and within the scope of the agent's employment or apparent

authority." United States v. American Radiator & Standard

Sanitary Corp., 433 F.2d 174, 205 (3d Cir. 1970).

Universal argues that there was never a corporate policy

of falsifying claims and that no individual was directed to

falsify claims on behalf of the company. Universal contends

that the individual defendants were acting on their own.

This argument has no merit. As the District Court

explained, without even considering the guilt of the high-

level officials Horvath and Lukesh, the evidence was

sufficient for the jury to have concluded that Carol Pomilio

was acting within the scope of her authority and in the

course of her employment with the intent to benefit

Universal when she knowingly misled Medicare by altering

Hynds' patient documentation. Additionally, numerous

witnesses testified that they were pressured to bill for

treatment to inappropriate patients and to rewrite patient

documentation in order to make claims reimbursable, i.e.,

to benefit the corporation. For these reasons, wefind

sufficient evidence to support the conviction of defendant

Universal.

III. Admissibility of the Guilty Plea of a Testifying Co-

Defendant

Julia Blum Bonjo, a speech therapist at Universal, pled

guilty to Count One, the mail fraud count on which the

other defendants were later convicted. Penny Martin also

pled guilty in a separate information to one count of mail

fraud. In exchange for the pleas, Blum Bonjo and Martin

14

agreed to testify as government witnesses. Before the trial,

defendants moved to bar testimony of the pleas. In their

motion, defendants argued that the plea agreements were

irrelevant, and, even if they were relevant, they were more

prejudicial than probative. Defendants represented that

they would not examine Blum Bonjo or Martin in any way

that would make this evidence admissible, i.e., they would

not challenge their credibility. Moreover, defense counsel

asserted that, even if the government was skeptical about

his representation that he would not challenge the

credibility of Blum Bonjo or Martin on cross examination,

the proper procedure was for the court to then permit the

government to prove the pleas on redirect.

The District Court denied defendants' motion. Relying on

United States v. Gaev, 24 F.3d 473 (3d Cir. 1994), the court

explained that, although a guilty plea cannot be used to

establish a co-conspirator's guilt, it can be introduced for

some valid purpose. After enumerating the proper purposes

for which the pleas could be admitted, the trial judge found

that the probative value of the evidence outweighed its

prejudicial effect and admitted it, denying defendants'

motion. The defendants assert that this ruling was

erroneous and that the error was not harmless, arguing

that "there is a high probability that the jury's conviction

on Count One -- in light of its acquittal verdicts on close to

40 other counts -- was influenced by the Bonjo plea to

Count One."5

The decision to admit or exclude the evidence is

committed to the sound discretion of the district court. In

re Merritt Logan Inc., 901 F.2d 349, 359 (3d Cir. 1990). We

use an abuse of discretion standard to review the District

Court's decision not to exclude evidence under Rule 403.

United States v. Gaev, 24 F.3d 473, 476 (3d Cir. 1994).

We note at the outset the well-settled proposition that

plea agreements of co-conspirators cannot be used as

evidence of a defendant's guilt. Gaev, 24 F.3d at 476. We

stated in United States v. Gambino, 926 F.2d 1355 (3d Cir.

1991) that:

_________________________________________________________________

5. In her testimony, Blum Bonjo stated that she had pled guilty to

"Count One."

15

[t]here are strong considerations against using a co-

conspirator's guilt as substantive evidence of another

defendant's guilt. "The foundation of [this] policy is the

right of every defendant to stand or fall with the proof

of the charge made against him, not against somebody

else . . . . The defendant ha[s] a right to have his guilt

or innocence determined by the evidence presented

against him, not by what has happened with regard to

a criminal prosecution against someone else.

926 F.2d at 1363 (quoting in part Bisaccia v. Attorney

General of New Jersey, 623 F.2d 307, 312 (3d Cir. 1980)).

However, we have recognized certain valid purposes for

which co-conspirators' guilty pleas can be admitted. See,

e.g., Gaev, 24 F.3d 476-77 (enumerating proper purposes).

The District Court here explained that a plea was

admissible for a number of valid purposes. First, the court

explained that a plea was admissible to assist the jury in

assessing the credibility of the testifying witness. As we

explained in Gambino, "by eliciting the witness' guilty plea

on direct examination, the government dampens attacks on

credibility, and forecloses any suggestion that it was

concealing evidence." 926 F.2d at 1363. But, defendants in

their pre-trial motion pledged not to challenge Blum Bonjo's

and Martin's credibility based on their plea agreements.

Thus, there was no reason to allow the government this

pre-emptive strike on direct examination. See United States

v. Thomas, 998 F.2d 1202, 1205 (3d Cir. 1993).

The District Court also justified its ruling on the motion

in limine after the trial by referring to defendants' cross-

examination of Blum Bonjo. The court explained that

defendants challenged critical aspects of Blum Bonjo's

participation in the activities that formed the basis for the

mail fraud charge. One cannot, however, use defense

counsel's behavior after denial of the motion as any

indication of what he would have done had his motion been

granted by the court.

The District Court also explained that the pleas were

admissible to make clear that defendants were not being

singled out for selective prosecution. Indeed in United

States v. Inadi, 790 F.2d 383 (3d Cir.), rev'd on other

16

grounds, 106 S.Ct. 1121 (1986), we allowed the admission

of a co-conspirator's guilty plea "in order to rebut defense

counsel's persistent attempts on cross-examination to raise

an inference that the co-conspirators had not been

prosecuted, and that [the defendant] had been singled out

for prosecution." Id. at 384, n.2. But that is not the case

here. Defense counsel in his motion in limine pledged not

to engage in questioning on cross examination that would

render the pleas admissible. Certainly, if the defense had

raised an inference of selective prosecution, this tactic

would have been covered by counsel's pledge. However,

selective prosecution never became an issue in this case. In

Thomas, where selective prosecution was also not an issue,

we explained that "there was no need to mention the guilty

pleas to deter any concern that Thomas was being singled

out for prosecution." 998 F.2d at 1205. Moreover, even if

the implication of selective prosection had become an issue,

it could have been dealt with by instructing the jury that

the issue of selective prosecution was not their concern. Id.

The trial court suggested a further reason to admit the

plea -- to explain the witnesses' firsthand knowledge of the

defendant's misdeeds. See United States v. Halbert, 640

F.2d 1000, 1005 (9th Cir. 1981). But a witness's guilty plea

doesn't establish her basis of knowledge. The witness's

testimony itself will establish that basis.

After the valid purposes for which the plea may be

admissible are proffered, the trial court must balance the

probative value of the testimony with its prejudicial effect.

The standard for the balancing is that of Federal Rule of

Evidence 403.6 That is, the prejudice that inures to the

defendant by the admission of a co-conspirator's guilty plea

may be overcome by its probative value. Furthermore, in

some circumstances, a limiting instruction against the use

of the plea as substantive evidence of defendant's guilt, as

_________________________________________________________________

6. Fed. R. Evid. 403 provides:

Although relevant, evidence may be excluded if its probative value

is

substantially outweighed by the danger of unfair prejudice,

confusion of the issues, or misleading the jury, or by

considerations

of undue delay, waste of time, or needless presentation of

cumulative evidence.

17

was given in this case, reduces that prejudice. United States

v. Werme, 939 F.2d 108, 114 (3d Cir. 1991). However, in

Gaev, we recognized that "there may be cases where the

inference of guilt from the co-conspirator's plea agreement

is sufficiently strong that even limiting instructions will not

effectively contain it." 24 F.3d at 478. This is one of those

cases.

Notwithstanding the limiting instruction here, the jury,

having heard evidence accusing defendants of 39 counts of

mail fraud and false claims, acquitted all 3 defendants on

38 of the counts. The only count of conviction was the one

to which the government's star witness, Blum Bonjo, a mid-

level employee, had pled guilty. In addition, the patient

involved in Count One, Mildred Hynds, was also involved in

four other counts on which defendants were acquitted. It

would appear then that whether a particular patient needed

treatment, at least in the Hynds case, was not a

determining factor in the jury verdict. Moreover, the

government has conceded in its cross-appeal that the

conduct charged in the other 38 counts was virtually

identical to the conduct charged in Count One. The

evidence cited by the government, in arguing that there is

sufficient evidence to support the convictions on Count

One, is for a large part the same evidence that the jury

heard and then found not to support conviction on 38 of

the counts. There is, therefore, the strong possibility that

Blum Bonjo's guilty plea to that count was considered by

the jury as direct evidence against the defendants.

Concerning the probative value of the pleas, as we have

described above, the proffered reasons for admitting the

evidence were weak. Therefore, notwithstanding the

discretion due a district court judge making an evidentiary

determination, we find that the probative value of the pleas

was substantially outweighed by the danger of unfair

prejudice. Despite the fact that we have found sufficient

evidence to support Lukesh and Universal's convictions, the

evidence on the count of conviction was very similar to the

evidence supporting the thirty-eight acquitted counts. In

view of the fact that the only distinguishing evidence on the

count of conviction is the consideration of the co-

conspirators' guilty pleas, we must conclude that the denial

18

of defendants' motion in limine and the subsequent

introduction at trial of evidence of Blum Bonjo's and

Martin's guilty pleas was reversible error. We will reverse

the judgment of conviction as regards Lukesh and Universal.7

CONCLUSION

For the reasons stated above, we will reverse the

conviction of Attila Horvath for the insufficiency of the

evidence against him and remand his case to the District

Court for entry of a judgment of acquittal. We will reverse

the convictions of defendants Lukesh and Universal and

remand their cases to the District Court for a new trial.

_________________________________________________________________

7. As regards Horvath, our holding that the post-verdict judgment of

acquittal should have been granted renders moot his appeal of the denial

of the motion in limine.

19

GARTH, Circuit Judge, dissenting:

The majority of the panel (my colleagues Judges Roth

and McKee) have reviewed the record and reversed the

conviction of the defendant Attila Horvath ("Horvath"), who

had been charged with mail fraud in conducting a Medicare

fraud scheme over a three-year period.1 In doing so, they

have directed Horvath's acquittal on Count One2 despite the

credible evidence found against him by the jury and despite

the District Court's application of the undeniably correct

standard, under United States v. Glasser, 315 U.S. 60

(1942), which requires affirmance of a conviction so long as

the verdict is supported by substantial evidence, with all

reasonable inferences viewed in a light most favorable to

the Government. That standard, to which this Court

adheres, requires an affirmance of the defendants'

convictions on this appeal.

A.

In light of the majority's rejection of the jury's verdict,

which is tested by the Glasser standard just adverted to,

and in light of an even more erroneous holding that

completely eviscerates the deference which we are required

to give to a District Court's discretionary ruling to admit

pleas of codefendants,3 I must respectfully dissent.

_________________________________________________________________

1. The damage from Medicare fraud has been extensive. See, e.g.,

Medicare Contractors Aren't Pursuing Fraud, Audit Shows, USA TODAY,

Dec. 2, 1998, at A1; Probers Allege Medicare Fraud by Columbia/HCA,

CHICAGO TRIBUNE, Feb. 11, 1998, at N3 (disclosing investigation of

nationwide Medicare fraud by large health care organization); Fraud and

Waste in Medicare, N.Y. TIMES, Aug. 1, 1997, at A30 (stating

government estimates approximately $23 billion per year lost to Medicare

fraud).

2. Count One charged that Horvath, Lukesh and Universal violated 18

U.S.C. section 1341, which proscribes use of the mails in furtherance of

a fraudulent scheme.

3. See General Elec. Co. v. Joiner, 522 U.S. 136 (1997) (recognizing, in

context of expert testimony, that trial courts have discretion to admit

such testimony, and rejecting standard that "fail[s] to give the trial

court

the deference that is the hallmark of abuse of discretion review"). A long

line of cases from this Court has respected the District Court's

discretion

20

B.

Indeed, I dissent not only from the majority's insistence

on refusing the admission of the guilty pleas of

codefendants Penny Martin and Judy Blum Bonjo on the

record presented here, but I strongly urge the full court to

grant en banc consideration to what can only be

characterized as an aberration in our jurisprudence-- an

aberration dictated in the first instance by the suspect

holding in United States v. Thomas, 998 F.2d 1202 (3d Cir.

1993). In Thomas, in the face of a compelling and reasoned

dissent by Judge Rosenn of this Court, our own precedents,

decisions from our sister Circuits,4 and fully documented

and detailed discretionary rulings by the District Court

Judge, the same distorted result as to the exclusion of a

plea agreement gave rise to the same miscarriage of justice

that we now see here.

Our court -- the full court -- should undertake to clarify

this significant aspect of our criminal jurisprudence by

vacating the instant majority opinion, by rehearing the

issue en banc, and by reaffirming the standard that Judge

Scirica of this Court found appropriate in Gaev . It should

re-align the Third Circuit on the correct and proper course,

which provides for the acceptance of guilty pleas at trial by

codefendants when the correct standard of a District

Court's discretion is applied to the facts and when the

proper purposes of credibility, selective prosecution and

establishing firsthand knowledge are found, as they were

unquestionably applied by the District Court and found

here. Such a course would comport with the jurisprudence

_________________________________________________________________

in admitting pleas of codefendants. See United States v. Gaev, 24 F.3d

473 (3d Cir.), cert. denied, 513 U.S. 1015 (1994); United States v.

Gambino, 926 F.2d 1355 (3d Cir.), cert. denied, 502 U.S. 956 (1991);

United States v. Newman, 490 F.2d 139 (3d Cir. 1974); United States v.

Gullo, 502 F.2d 759 (3d Cir. 1974). Indeed, this Court has held

repeatedly that admission of a plea, without more, is not ordinarily

reversible. See, e.g., United States v. Restaino, 369 F.2d 544 (3d Cir.

1966).

4. See, e.g., United States v. Tse, 135 F.3d 200 (1st Cir. 1998); United

States v. Casto, 889 F.2d 562 (5th Cir. 1989), cert. denied, 493 U.S.

1092 (1990); United States v. Louis, 814 F.2d 852 (2d Cir. 1987).

21

of our sister Circuits that have wisely, and in accord with

prevailing legal standards, accepted such evidence.

Based on the record before us, I believe (1) that the

evidence was sufficient to support Horvath's conviction, and

(2) that the District Court did not abuse its discretion in

admitting the codefendants' guilty pleas, and that the guilty

pleas were admitted for a proper purpose and did not

invalidate the convictions of all the defendants. Therefore,

I would hold the majority's disregard of the District Court's

rulings and its reversal of those convictions is unwarranted

and violates both the District Court's and this Court's

proper standards of review.

C.

Although not addressed in the majority opinion, see

Majority Op. at 6 n.3, I further conclude that pursuant to

the teaching of United States v. Watts, 519 U.S. 148 (1997),

the District Court grievously erred in not considering

acquitted and uncharged conduct pursuant to Section

2F1.1 of the Guidelines in calculating the Sentencing

Guidelines range of each of the defendants.

Accordingly, I dissent from the majority's decision to

remand Horvath's case to the District Court to enter a

judgment of acquittal, and to reverse the convictions of

Lukesh and Universal and remand for a new trial on Count

One.

I

As the majority opinion notes, see Majority Op. at 6,

Horvath, Lukesh and Universal appealed the denial by the

District Court of their post-conviction motion for a

judgment of acquittal, or in the alternative, a new trial.

These defendants had moved for relief on the basis of

insufficiency of the evidence and claimed that the

admission of the codefendants' guilty pleas were unduly

prejudicial.

Prior to that motion, however, these defendants had

made an in limine motion to exclude testimony concerning

the plea agreements entered into by the codefendants. The

22

District Court took the matter under advisement, accepted

submissions by the parties and heard argument as to the

applicable legal principles. The District Court, in its

discretion, denied the motion, concluding that

if [Bonjo and Martin] testify the jury is going to

certainly wonder whether or not they have been

charged. It's going to wonder perhaps what they have

been promised by the prosecutor if anything and what

they may be getting in return for their testimony.

I think in weighing all of those factors with the possible

prejudice that I am going to allow the Government to

bring out the fact of the guilty plea and the fact of the

guilty plea agreement.

The District Court considered the issue again after the

conclusion of the trial. In denying these defendants' post-

conviction motion, the District Court first noted that, in a

motion challenging the sufficiency of the evidence, the court

must view the evidence in the light most favorable to

the government. A claim of insufficiency places a very

heavy burden on the [defendants]. [The court] must

affirm the convictions if a rational trier of fact could

have found defendant[s] guilty beyond a reasonable

doubt, and the verdict is supported by substantial

evidence.

The mail fraud statute, 18 U.S.C. S 1341, proscribes

any "scheme or artifice to defraud" in which the

defendant participated with the specific intent to

defraud and in which the mails were used "in

furtherance of the fraudulent scheme." The scheme

"need not be fraudulent on its face but must involve

some sort of fraudulent misrepresentations or

omissions reasonably calculated to deceive persons of

ordinary prudence and comprehension." Proof of

specific intent is required, which "may be found from a

material misstatement of fact made with reckless

disregard for the truth." United States v. Coyle, 63 F.3d

1239, 1243 (3d Cir. 1995) (citations omitted). Thus, a

mail fraud conviction stands where the evidence

demonstrates a defendant's willful participation in a

scheme to defraud with knowledge of its fraudulent

23

nature. See United States v. Pearlstein, 576 F.2d 531,

537 (3d Cir. 1978).

In denying the motion, the District Court conducted a

careful review of the evidence indicating a crime had been

committed, and the evidence connecting each defendant to

the crime. After outlining the testimony and documentation

connecting Horvath and the other defendants to the crime

charged in Count One, the District Court summarized the

evidence as follows:

In the instant case, the individual defendants' guilty

knowledge could rationally be inferred beyond a

reasonable doubt from (1) the active parts Horvath and

Lukesh played in the daily operation of the speech

therapy practice, (2) [d]efendants' knowledge and

monitoring of Universal's billing problems -- the

number of patient cases being billed and met with

record requests, denials and increased scrutiny by

Blue Cross . . . (3) the testimony of key administrators,

Julia Blum Bonjo, Penny Martin and Wendy Gold,

recalling how Horvath and Lukesh wanted patient

documentation billable no matter what had to be done

to it, and (4) the directives given to speech therapists

by their supervisors, under tremendous pressure from

Lukesh and Horvath, to pick up patients, even though

inappropriate, to warrant skilled services, and to

rewrite patient documentation to make patient services

"billable" and reimbursable by Medicare.

The District Court found this evidence sufficient to support

the jury's finding that a crime had been committed and that

Horvath and Lukesh (and, through their actions, Universal)

had the intent required under the mail fraud statute.

Neither the appellants nor the majority have given any

reason to question that conclusion by the District Court or

the jury's verdict.

The District Court next addressed the issue of admission

of the plea agreements. It reiterated its concern over

selective prosecution, and noted as well that the testimony

from Bonjo and Martin would assist the jury in assessing

credibility. I believe that the majority has artfully finessed

the issue of admitting the codefendants' guilty pleas,

24

without ever providing reasons or presenting evidence that

the District Court had abused its discretion - indeed,

without ever even holding that the District Court Judge did

so. In so doing, the majority has not dealt fairly with the

jurisprudence dealing with this subject, and has ignored a

completely developed record. I thus turn first to the District

Court's rulings admitting the guilty pleas. I do so observing

that the admission of the guilty pleas at trial does not

impact upon the other, independently sufficient evidence

against the defendants.

II

The panel majority has reversed the Count One

convictions of Lukesh and Universal because of the putative

prejudicial effect that the introduction of Bonjo's and

Martin's guilty pleas had at trial. Although the majority

does not address this issue with respect to Horvath, it is

obvious that the admission of the guilty pleas did not affect

the other evidence presented to the jury to support

Horvath's conviction. As the defendants were acquitted of

thirty-eight (38) counts of the indictment but were

convicted of the very count to which Bonjo pleaded guilty,

defendants contend -- and the majority concurs-- that the

guilty pleas were not admitted for a proper purpose and

were so prejudicial that their admission constitutes

reversible error. Majority Op. at 17-19.

I strongly disagree. In my view, the pleas of both Bonjo

and Martin,5 after careful consideration and discussion in

accordance with our requirements set forth in Gaev, were

properly admitted. Even if not properly admitted, the

evidence adduced at trial, combined with the curative

instructions given by the District Court, rendered any error

harmless. Indeed, the majority admits as much when it

declares that the evidence against Lukesh and Universal is

sufficient to support the jury's verdict. Majority Op. at 13-

14.

_________________________________________________________________

5. Bonjo was charged in the same indictment as Horvath, Lukesh and

Universal. Martin, it appears from the record, was charged separately by

information and pled guilty to one count of mail fraud.

25

The District Court, at the time of both Bonjo's and

Martin's testimony, gave a curative instruction, advising the

jury that the purpose for admitting testimony concerning

their respective plea agreements was so that they could

"adequately assess the credibility" of the testimony. The

jury was also instructed that the jury was not to consider

the plea agreements as evidence of the guilt of Horvath,

Lukesh or Universal. The District Court, while charging the

jury at the end of the trial, instructed the jury again, as

follows:

Julia Blum Bonjo and Penny Martin entered into plea

agreements with the Government. Such plea

agreements are expressly approved as lawful and

proper by the United States Supreme Court and are

appropriate, are proper. Each witness' decision to plead

guilty is a personal decision about her own guilt. You

may not consider this evidence against the defendants

on trial nor may you draw any conclusions or inferences

of any kind about the guilt of the defendants on trial

from the fact that a prosecution witness pled guilty to

similar charges.

The testimony of such witnesses, as I indicated, should

be scrutinized with caution and give it the weight that

you think should be given under all of the

circumstances.

And I indicated to you during the trial that the fact

that [Bonjo and Martin] entered pleas of guilty could

not be considered by you in determining the guilt or

innocence of any of the people on trial here. The only

reason the plea and the plea agreement were brought

out was so that you would know all of the

circumstances surrounding the entry of the plea, you'd

know the terms under which the plea was entered and

you could judge for yourselves whether the witness in

the trial is testifying truthfully or whether the witness

has a motive to embellish testimony or vary from the

truth.

That is the only basis or the only reason why the plea

and the plea agreement were admitted.

26

(Emphasis added.) This Court reviews a District Court's

decision to admit evidence of plea agreements for abuse of

discretion, and we have been directed in no uncertain

terms to defer to that discretion. See Joiner, 522 U.S. at

136; Gaev, 24 F.3d at 476.

Although a co-conspirator's guilty plea cannot be used as

substantive evidence of a defendant's guilt, evidence of a

guilty plea or plea agreement may be introduced for other

permissible purposes. Judge Rosenn, in a cogent analysis

of this issue in United States v. Thomas, included as proper

purposes "(1) to bolster the credibility of the co-conspirators

as prosecution witnesses; (2) to quell the inference that the

co conspirators were not punished and that [the

defendants] w[ere] thus `singled-out' for punishment; and

(3) to establish the basis for the co-conspirators'firsthand

knowledge of the crime about which they testified. Each of

these is a proper purpose for admitting a guilty plea." 998

F.2d at 1208 (Rosenn, J., dissenting). See also Gaev, 24

F.3d at 476; Gambino, 926 F.2d at 1363; United States v.

Werme, 939 F.2d 109, 113 (3d Cir. 1991), cert. denied, 502

U.S. 1092 (1992); United States v. Inadi, 790 F.2d 383, 384

n.2 (3d Cir. 1986). To this list should be added the

overarching principle that trial judges have broad discretion

to admit testimony under Rule 403 that "discloses the

purpose, knowledge or design of a particular person."

Glasser, 315 U.S. at 80; cf. Joiner, 522 U.S. 136

(recognizing, in context of expert testimony, that trial courts

have discretion to admit such testimony, to which this

Court must defer). The mere admission of a plea is not

ordinarily reversible. See, e.g., Restaino, 369 F.2d 544.

Other Circuits have also held that admission of a plea by a

co-conspirator is appropriate for purposes other than to

persuade a jury of a defendant's guilt. See, e.g., Tse, 135

F.3d 200; Casto, 889 F.2d 562; Louis, 814 F.2d 852.

In Gaev, this Court summarized that the underlying

principle concerning the admissibility of a plea agreement

as follows: "If a co-conspirator who appears as a witness

has pleaded guilty, the trier of fact should know about the

plea agreement in order properly to evaluate the witness's

testimony, unless that would unduly prejudice the

defendant." 24 F.3d at 476 (emphasis added). Moreover, as

27

the credibility of the Government's witnesses normally is

critical to the successful prosecution of a case, this Court

has acknowledged that the strategic admission of a guilty

plea "dampens attacks on credibility, and forecloses any

suggestion that [the Government] was concealing evidence.

Such disclosure is appropriate." Gambino, 926 F.2d at

1363.

Here, the District Court permitted the introduction of the

guilty pleas because of credibility concerns that might arise

in the minds of the jurors as to Bonjo's and Martin's

testimony. In addition, the District Court determined that

the admission of the guilty pleas would allay the jurors'

concerns -- that might arise in the absence of such

admission -- that Horvath and Lukesh were subjected to

selective prosecution. In making these rulings, the District

Court, following this Court's direction in Gaev, balanced the

probative and prejudicial impact of the pleas. The District

Court found that, as in Gaev, credibility was an issue

because the witnesses' testimony was challenged, and that

the limiting instructions cured any prejudice. Even more so

than in Thomas, here the District Court found "specific

issues of credibility" that warranted admission of the pleas.

These determinations were well within the District

Court's discretion, and this Court must (and I emphasize

the word must) accord the proper deference such rulings on

admissibility by the District Court. Cf. Joiner, 522 U.S. 136

(finding discretionary decisions of trial court must be

upheld in absence of manifest error).

A fair reading of the record reveals that the District Court

admitted the pleas for a proper purpose, and the

Government's limited use of the guilty pleas at trial caused

no undue prejudice that would not have been corrected by

the District Court's curative instructions. This is not a case

in which the prosecution placed "undue emphasis" upon

the pleas, Restaino, 369 F.2d at 545, to convince the jury

of the defendants' guilt. Nor is this a case in which the

curative instruction failed to advise the jury not to consider

the admission of guilt by the witness against the

defendants. See Newman, 490 F.2d 139; Gullo, 502 F.2d

759. Here, another co-defendant (Vicki Meitus) was

acquitted of the charge alleged in Count One. This fact,

28

when combined with the curative instruction, more than

amply supports the conclusion that admission of the pleas

was not an abuse of discretion. See Restaino, 369 F.2d at

546.

Indeed, the majority at no point claims that the District

Court Judge abused his discretion -- nor could it in light

of the careful and detailed consideration that Judge Kelly

gave to the evidence in accordance with this Court's

direction in Gaev. See Appendix 1768-72; Memorandum of

May 31, 1996 at 16-20. Nor does the majority point to any

evidence in the record that could support a determination

that the District Court abused its discretion.

The only reason I can discern that the majority gives in

holding that the guilty pleas were not admitted for a proper

purpose was because Horvath, Lukesh and Universal

pledged not to raise the issue of the accomplices' guilty

pleas. Majority Op. at 16-17. Thus, the majority concludes

that there was no need preemptively to bolster the

credibility of the witnesses with the admission of their

guilty pleas because the defendants would not have

attacked Blum Bonjo and Martin on credibility grounds.

In so holding, however, the majority totally ignores prior

directions of this Court that guilty pleas can be admissible

even in the absence of an attack on a witness' credibility.

See Gambino, 926 F.2d at 1363 ("[E]ven in the absence of

this attack [on the Government witness' credibility], the

elicited testimony [i.e., the guilty plea] was proper here.")

See also Thomas, 998 F.2d at 1208 (Rosenn, J., dissenting).

As Gambino has not been overruled, it remains the rule in

this Circuit. The absence of an attack on a witness's

credibility is simply insufficient for a court to find that a

judge abused his discretion in admitting the plea; here, the

District Court cited Gambino in its post-trial ruling for

precisely this proposition. To hold otherwise, as the

majority does, not only presents a conflict with Gambino,6

but it would for all time foreclose the government's

admission of evidence of a guilty plea on direct examination

of its witnesses by the preemptive promise by defense

_________________________________________________________________

6. See Internal Operating Procedure 9.1 ("[N]o subsequent panel

overrules the holding in a published opinion of a previous panel").

29

counsel not to question the witness concerning the plea.

That rule is not the rule of this Circuit. See Gaev, 24 F.3d

at 477-78 ("While plea agreements have often been

admitted in response to actual or anticipated attacks on a

witness's credibility, an attack is not always necessary to

justify their introduction") (emphasis added).

I urge that the Court consider this issue en banc because

the majority opinion here -- as the majority opinion did in

Thomas, which concerned an almost identical set of facts --

in effect rules out the use of any guilty plea, without regard

to the discretion of the District Court, so long as defense

counsel promises not to question the witness concerning

the plea. Thomas and the analysis of the majority in the

present case, when seen through the lens of Gaev,

Gambino, Newman, Gullo and Restaino, makes a mockery of

the holdings in those cases. To resolve the conflict between

these precedents and Thomas and this case, the Court as

a whole should confront this issue.

III

The majority has concluded that the evidence presented

at trial was insufficient to support the conviction of

Horvath, Majority Op. at 12, although there was sufficient

evidence to support the convictions of Lukesh and

Universal. Majority Op. at 13-14. My reading of the record

leads me to a contrary conclusion with regard to Horvath.

Because I conclude that the jury's verdict can be easily

sustained by the evidence produced at trial, and that the

admission of Bonjo's and Martin's guilty pleas does not

affect this conclusion, I would affirm the conviction of

Horvath.

The District Court enunciated and applied the correct

standard in reviewing a challenge to a jury verdict based on

insufficiency of evidence. In reviewing a jury verdict, the

court "must view the evidence in the light most favorable to

the jury verdict and presume that the jury verdict properly

evaluated credibility of the witnesses, found the facts, and

draw rational inferences." United States v. Iafelice, 978 F.2d

92, 94 (3d Cir. 1992). A conviction must be sustained if the

verdict is supported by substantial evidence, and all

30

reasonable inferences must be viewed in a light most

favorable to the Government. Id. This Court must simply

determine whether "the conclusion chosen by the fact

finders was permissible." United States v. McGill, 964 F.2d

222, 230 (3d Cir. 1992), cert. denied, 506 U.S. 1023 (1992).

If there is substantial evidence to support the verdict, we

will not reverse even though this Court may have decided

the case differently. United States v. Sain, 141 F.3d 463,

470 (3d Cir. 1998).

Despite the majority's emphasis upon the fact that much

of the evidence that the District Court relied upon to link

Horvath to the fraudulent scheme did not directly relate to

the Hynds incident charged in Count One, the elements of

mail fraud do not necessitate that a defendant participate

in every act executed in furtherance of that scheme. As the

District Court noted, relying on Pearlstein, 576 F.2d at 541,

the jury can infer the requisite intent from circumstantial

evidence.

To obtain a conviction under section 1341, the

Government must establish (1) the existence of a scheme to

defraud; (2) the participation by the defendant in the

particular scheme charged with the specific intent to

defraud; and (3) the use of the United States mails in

furtherance of the fraudulent scheme. See United States v.

Hannigan, 27 F.3d 890, 892 (3d Cir. 1994).

Here, the evidence showed that Horvath, the Director of

Finance, and Lukesh, the Director of Operations, actively

participated in the daily operations of Universal and worked

closely together. Both knew that Universal was having

difficulty with Independence Blue Cross in getting its

speech therapy services reimbursed. In addition, the

testimony from the Universal administrators (i.e., Martin,

Blum Bonjo, and Wendy Gold) indicated that Horvath

and Lukesh created a "coercion" culture in which pressure

was placed upon Universal's employees to obtain

reimbursement in any way possible.

Specifically, Gold testified that Horvath and Lukesh had

placed her under enormous pressure to increase

production, which included pressure to rewrite the patient

documentation. Blum Bonjo testified that she met with

31

Horvath and Lukesh together weekly for discussions about

cases in which Medicare denied reimbursement for the

speech services rendered and also testified that Universal

handled non-billable cases by rewriting patient

documentation to make such treatment billable.

Similarly, Martin testified that Horvath said that "he

wanted the documentation billable no matter what had to

be done to it." Some of the cases were put on hold (meaning

that they would not be submitted for billing) because they

did not seem appropriate for billing to Medicare. Martin

testified that when the number of claims on hold were high,

Horvath instructed that the claims be billed without

doctors' signatures. Further, Martin stated that the

documentation had to be rewritten and altered and

originals had to be destroyed in order to avoid

discrepancies in the documentation. Finally, the District

Court reviewed the evidence presented at trial and found

that Horvath was very active in the daily operations of

Universal from the outset of the scheme, and closely

monitored the results of the speech therapy practice.

Horvath, through his approval of Universal's "rewriting"

policy, sanctioned the fraudulent scheme alleged in Count

One, for which he was found guilty.

In my view, there is no question that the jury's verdict

linking Horvath to the fraudulent scheme is supported by

the record. There was sufficient evidence to convince the

jury, and this Court should not "weigh evidence or

determine the credibility of witnesses." United States v.

Casper, 956 F.2d 416, 421 (3d Cir. 1992) (quoting Glasser,

415 U.S. at 80). Reversal for insufficiency of evidence

should not be granted except where the failure of the

prosecution is "clear." Id. That situation is not present here.

See also United States v. Anderson, 108 F.3d 478, 480-81

(3d Cir. 1997) ( "Only when the record contains no

evidence, regardless of how it is weighed, from which the

jury could find guilt beyond a reasonable doubt, may an

appellate court overturn the verdict"); United States v.

McGlory, 968 F.2d 309, 321 (3d Cir.), cert. denied, 506 U.S.

956 (1992).

The question, then, for the jury to answer was whether

the evidence sufficiently established that Horvath was

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connected to the conduct charged in Count One. The jury

determined that there was, and the record more than fairly

supports that determination.

IV

As the majority has reversed the convictions on all three

defendants, its opinion does not discuss the sentence

imposed by the District Court, which was the subject of the

government's cross-appeal. Although I would affirm the

respective convictions of Horvath, Lukesh and Universal, I

would reverse the District Court's sentence calculation

under the Sentencing Guidelines ("the Guidelines"), as

presumably the issue of uncharged and acquitted conduct

can arise again in this case.

The majority opinion, oddly enough, does not reflect the

sentences imposed upon the defendants. Let me do so. The

District Court sentenced Universal to two years' probation

and a $25,000 fine. Horvath and Lukesh were sentenced to

three years of probation each. Horvath was fined $10,000,

plus $705.20 in restitution. Lukesh was fined $15,000,

plus restitution of $705.20.

Under Section 1B1.3 of the Guidelines, a District Court

can consider relevant conduct when calculating a

defendant's guideline range whether or not that conduct

was formally charged. See United States v. Watts, 519 U.S.

148, 152-53 (1997); see also U.S.S.G. S 1B1.3 cmt. 1 ("The

principles and limits of sentencing accountability under

this guideline are not always the same as the principles

and limits of criminal liability. [T]he focus is on the specific

acts and omissions for which the defendant is to be held

accountable . . . rather than on whether the defendant is

criminally liable.") In addition, under Watts, a defendant's

guideline range is affected even by acquitted conduct, as

long as that conduct has been proved by a preponderance

of the evidence. See Watts, 519 U.S. at 156. See also United

States v. Cianci, 154 F.3d 106 (3d Cir. 1998); United States

v. Baird, 109 F.3d 856 (3d Cir. 1997) (finding conduct

uncharged pursuant to plea agreement may be considered

at sentencing).

33

Notwithstanding the Guidelines and Watts, at sentencing,

the District Court declined to consider uncharged and

acquitted conduct when calculating defendants' guidelines

ranges. Instead, the District Court only considered the loss

associated with the conviction obtained in Count One--

totaling $1,411.20 -- without explaining why it was not

considering the uncharged and acquitted conduct that the

Government sought to be included. I believe that this

omission was an abuse of discretion.

While I conclude that the evidence proved that Horvath,

Lukesh, and Universal could be held accountable for the

relevant (i.e., uncharged or acquitted) conduct, at the very

least, the District Court should have made findings of fact

as to why it declined to consider that conduct in the

calculation of the sentences of Horvath, Lukesh and

Universal. See, e.g., E.C. Ernst, Inc. v. Koppers Co. Inc., 626

F.2d 324 (3d Cir. 1980) (remanding because District Court

failed to make factual findings and thus this Court could

not determine how District Court assessed evidence). The

District Court merely identified the standard under Watts

and its conclusion not to consider the relevant conduct

without stating its reasons, stating "I find under the Watts

case that the burden is preponderance of the evidence and

decline to include that conduct in the specific offense

characteristics."

Given that the District Court ruled in denying the post-

conviction motion that there was substantial evidence to

support the underlying conviction in Count One, I fail to

understand how the District Court could conclude that the

Government had not met its burden by a preponderance of

the evidence of Horvath, Lukesh, and Universal's

involvements in the other related counts of the very same

scheme to defraud.

The inclusion of uncharged and acquitted conduct, which

may have amounted to a total loss of $343,500, would have

resulted in an increase of eight levels under the Guidelines.

See U.S.S.G. S 2F1.1(I). Horvath had an offense level of 8,

providing a guidelines range of 0-6 months, and Lukesh

had an offense level of 10, providing a guideline range of 6-

12 months. If uncharged and acquitted conduct were

considered at sentencing, however, Horvath's sentencing

34

range could have increased to 21-27 months (i.e., to offense

level 16) and Lukesh's range could have increased to 27-33

months (i.e., offense level 18).

Accordingly, I would hold the defendants accountable at

sentencing for the uncharged and acquitted conduct with

which they were involved in executing their fraudulent

scheme.

V

In its opinion, the majority has reversed a jury verdict

founded on sufficient evidence and has reversed detailed

evidentiary rulings by the District Court. In doing so, the

majority has violated four appellate strictures: 1) it has

ignored our established standard of review under Glasser,

which requires that all reasonable inferences be resolved in

favor of the government in an appeal challenging sufficiency

of the evidence; 2) it has substituted its own "jury verdict"

for that of the enpanelled jury; 3) it has refused to give the

required deference to a District Court Judge's discretionary

rulings; and 4) it has perpetuated a jurisprudential conflict

over the admission of codefendant guilty pleas at trial.

The trial transcript and post-conviction order reveal that

the District Court carefully considered the arguments

raised by the defendants, and rejected them in accordance

with principles long established by prior panels of this

Court. Under these circumstances, when the issues raised

on appeal concern evidentiary issues addressed by the

District Court in a careful analysis that considered the

arguments for both sides, I am unable to agree that the

District Court abused its discretion -- a claim that not even

the majority justifies.

In sum, therefore, I cannot subscribe to the majority

opinion because I believe that the guilty pleas were

admitted for a proper purpose and because there was

sufficient evidence to support Horvath's conviction. The

evidence revealed an elaborate scheme of fraud on the

medical insurance system of this country, which, although

35

not acknowledged by the majority, is a continuing problem

that has cost our country dearly.7

I also conclude that the District Court erred in failing to

state its reasons for not considering the uncharged and

acquitted conduct of the defendants at sentencing.

Accordingly, I respectfully dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

7. See note 1, supra.

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