# United States v. Angela Dee Isley

> Court of Appeals for the Eleventh Circuit · March 10, 2010 · 369 F. App'x 80

URL: https://www.frixlaw.com/law-library/cases/3063132

## Case

- **Full name:** UNITED STATES of America, Plaintiff-Appellee, v. Angela Dee ISLEY, Defendant-Appellant
- **Court:** Court of Appeals for the Eleventh Circuit
- **Decided:** March 10, 2010
- **Citations:** 369 F. App'x 80
- **Precedential status:** Unpublished
- **Opinion:** Opinion
- **Judges:** Dubina, Tjoflat, Bowen
- **Nature of suit:** NEW
- **Cited by:** 2 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
______________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 08-14534 MARCH 10, 2010
______________________ JOHN LEY
CLERK
D. C. Docket No. 05-00621-CR-01-CAP-1

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ANGELA DEE ISLEY,

Defendant-Appellant.

____________________

Appeal from the United States District Court
for the Northern District of Georgia
____________________

(March 10, 2010)

Before DUBINA and TJOFLAT, Circuit Judges, and BOWEN,* District Judge.

PER CURIAM:

A jury convicted Angela Dee Isley on fourteen counts relating to a scheme

*
Honorable Dudley H. Bowen, Jr., United States District Judge for the Southern District
of Georgia, sitting by designation.
to defraud the Medicare program, in violation of 18 U.S.C. § 1347; thirty-five

counts of honest services mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346;

and three counts of money laundering, in violation of 18 U.S.C. § 1957. Isley

appeals her convictions. For the reasons set forth below, we affirm the judgment

of the district court.

I. BACKGROUND

A. Facts and Pre-Trial Proceedings

Angela Denise Isley was hired by Orthoscript, Inc., a durable medical

equipment (“DME”) supply company1 located in Alpharetta, Georgia, to manage

its billing operations, which included the supervision and instruction of other

employees who prepared and submitted claims for payment to insurance

companies and Medicare.2 Under the Medicare program, Orthoscript submitted its

claims for reimbursement to a Medicare contractor known as a DME Regional

Carrier (“DMERC”). In the southeast region (Region C),3 the DMERC was

Palmetto Government Benefits Administrators (“Palmetto”), which processed and

1
Specifically, Orthoscript sold orthopedic supplies such as arm slings, wrist splints, and
walking boots to patients through their physicians in the southeast region of the United States.
Once a physician prescribed and dispensed the supplies, Orthoscript filed claims for payment to
insurance companies and Medicare.
2
Isley was also a shareholder in the company.
3
There are three other regions in the United States.
2
adjudicated Medicare claims from Orthoscript and other DME suppliers in the

region.

The Medicare program used a coding system called the Healthcare Common

Procedure Coding System (“HCPCS”), under which the DME items were assigned

product codes. When Orthoscript submitted a claim form to request Medicare

payment, it was required to accurately identify the actual products dispensed to the

patient by using the proper product code. To help the suppliers, Palmetto

published a Supplier Manual and other advisories, setting forth Medicare’s rules

for submitting claims, and it employed nurse educators to answer coding questions.

Additionally, another Medicare contractor, the Statistical Analysis DME Regional

Carrier (“SADMERC”), operated a coding help line and website to assist suppliers

to correctly code their products on Medicare claim forms.

Isley was first indicted on December 29, 2005, along with the owner and

CEO of Orthoscript, James Arch Nelson, on thirty-one counts of Medicare fraud;

specifically, they were charged with knowingly and willfully assigning incorrect

product codes to certain orthopedic supplies in order to generate higher payments

from Medicare than were authorized.4 In other words, the Government charged

that Isley and Nelson exectued a scheme to file Medicare claims and receive

4
Isley and Nelson were also indicted on six counts of fraud against the Federal
Employee Health Benefit Program, a federally funded health care benefit program for federal
employees.
3
payment for DME products that were not equivalent to the products actually

supplied to the patients. This alleged scheme to defraud Medicare took place from

January 1, 1999 to November 30, 2003.

On February 9, 2006, Isley filed a Brady motion 5 requesting that the

Government produce, for the relevant time period, all medical necessity reviews of

claims submitted to Palmetto by Orthoscript and other Region C DME suppliers

for the DME product codes at issue in the indictment. Palmetto, as the DMERC,

would at times subject a benefits claim to a medical necessity review, asking the

DME supplier for detailed information about its claim, including the

manufacturer’s picture and description of the item, the manufacturer’s invoice, and

the physician’s medical necessity letter and treatment notes. After this review, the

DMERC would approve or deny payment. The DMERC’s approval of a claim

after a medical necessity review is called an “MNA” (for Medical Necessity

Approval).6 According to Isley, the MNAs for the product codes at issue in the

indictment would show that the DMERC’s use of the codes was ambiguous,

confusing, and misleading. This, in turn, would show Isley’s use of the codes to be

5
Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L.Ed.2d 215 (1963), “places an
affirmative duty upon the [government] to reveal any ‘material’ evidence in its possession that
would tend to exculpate a defendant.” Breedlove v. Moore, 279 F.3d 952, 961 (11th Cir. 2002).
6
The majority of benefits claims were processed by the DMERC automatically, that is,
without a medical necessity review. If a benefits claim was denied, a DME supplier could
appeal. The review of claims on appeal, however, was not as detailed as a medical necessity
review.
4
reasonable and indeed expressly sanctioned by the DMERC. According to Isley,

the MNAs were necessary to show that she lacked the requisite mens rea to

commit fraud and that she was entitled to the defense of entrapment-by-estoppel.

The magistrate judge orally granted this motion for production of Brady

material at a hearing in February 2006. This ruling was later reversed in part by

written order upon the magistrate judge’s conclusion that MNA information

pertaining to other DME suppliers was not exculpatory and therefore need not be

produced to Isley. Isley appealed, and after oral argument, the district court

affirmed this ruling by Order dated September 1, 2006.

After the issuance of this ruling, Isley filed a Freedom of Information Act

request to Palmetto, seeking its MNAs of all DME suppliers for all product codes

in the indictment. Isley sent this same request to the DMERCs in the three other

regions as well. When months passed without response, Isley filed an ex parte

motion for the issuance of subpoenas duces tecum, through which she requested

subpoenas issued to the four DMERCs for the production of MNA information as

it related to the claims of all DME suppliers from January 1, 1999 to November 30,

2003 for the product codes at issue in the indictment.

While this motion was pending, the Government filed a superseding

indictment on February 20, 2007. Nelson was not named in the superseding

indictment; he had pled guilty on a lesser charge and agreed to testify against Isley.

5
The superseding indictment charged Isley with 14 counts of health care fraud

against Medicare and did not contain some of the product codes at issue in the

original indictment.7 These charges involved a time period from January 2001 to

December 2003. The superseding indictment added 36 counts of honest services

mail fraud,8 in which Isley was charged with using her position of control over the

finances of Orthoscript to misappropriate Orthoscript funds. Specifically, Isley

wrote checks drawn upon Orthoscript’s bank account to pay her personal expenses

charged on her personal credit card.9 Finally, the superseding indictment added

three counts of money laundering related to the funds she criminally derived from

the healthcare fraud.

With respect to Isley’s motion for the issuance of subpoenas duces tecum,

the Government argued that Isley had not shown that she had personal knowledge

during the relevant time period of how other DME suppliers were billing their

products or that she reasonably relied upon the other companies’ MNAs. Further,

Isley had not presented any evidence that she herself was confused about the

7
The superseding indictment did not contain charges of fraud against the Federal
Employee Health Benefit Program either.
8
The Government dismissed Count Twenty during the trial.
9
The Government had previously announced its intention to present these same
allegations as inextricably intertwined, or alternatively, as Rule 404(b) evidence. According to
the Government, the evidence of her misappropriation established a motive for Isley to increase
the payments made to Orthoscript from Medicare.
6
coding standards.10 Despite these protestations and an earlier ruling that such

information was not exculpatory, the district court allowed the issuance of the

subpoenas on March 6, 2007. The return date for the production of documents

responsive to the subpoenas was April 30, 2007. On that date, the Government

filed motions to quash the subpoenas. The matter came before the district court for

oral argument on June 25, 2007.

At oral argument, Isley argued that MNA information from all four regions

was necessary because she relied upon the approvals to inform her decisions with

respect to coding and because the evidence could be used to impeach government

witnesses who testify that the coding she used was clearly wrong. The United

States Attorney’s Office and the non-party governmental DMERC agencies argued

that the evidence was irrelevant and non-exculpatory. The district court heard

about certain confusion among the various agencies respecting where and in what

form the records were housed, as well as how difficult and expensive the

production of documents would be. In the end, the district court agreed with Isley

that the evidence may be Brady material and placed the burden of producing the

information upon the government.11 Consequently, the district court directed the

10
The Government made these same arguments in moving in limine to exclude evidence
of other DME suppliers’ Medicare billing practices and experiences with Medicare claims
reviews.
11
The district court stated:

7
Government to produce the MNA information of all providers for the relevant

codes only from Region C as a “sample” to determine whether the evidence was

exculpatory. Following this production, the court ruled that while the evidence

may be “relevant to some of the defendant’s possible defenses,” the burden and

cost of requiring the Government to produce the other regions’ MNAs outweighed

Isley’s need for such cumulative information.

B. Trial of the Case

The ten-day trial of the case began with jury selection on April 14, 2008.

The Government explained Isley’s Medicare fraud as a scheme to seek

reimbursement for expensive, custom-fabricated medical equipment (specifically,

wrist braces and walking boots) when the cheaper, pre-fabricated items had

actually been provided to patients. Pre-fabricated items are manufactured in bulk

for off-the-shelf distribution without a specific patient in mind. Pre-fabricated

items could be trimmed, molded, bent or otherwise modified for use by a specific

patient; however, this makes the item custom-fitted not custom-fabricated.

I’ll be frank with you. It’s absolutely inconceivable to me that the government’s
allowing these Medicare provider contractors, whatever they are, to run without
keeping any better records that can be searched than there are. Now, I’m not
going to try to sort out whether the people here today are telling the truth, or the
people behind them are giving them false information or not. It’s real simple for
me. I can turn the thing right back on its head and say I think it’s Brady material,
and the government can start sorting through the boxes, and get it here, and you
can sort out who’s who, and who’s got what, and when they did it, and whether
they turned over the boxes and not the electronic data or whatever.

(Tr. of Hrg. on June 25, 2007, at 105, R. on App. 212.)
8
Custom-fabricated items are molded or created specifically for an individual

patient. The indictment charges that on ten occasions (Counts One through Ten),

Isley billed Medicare for wrist braces using the custom-fabricated code of either

L3800 or L3907. It further charges that on four occasions (Counts Eleven through

Fourteen), Isley billed Medicare for walking boots using the custom-fabricated

code of L1960. With respect to all fourteen counts, the Government charged that

Isley’s use of these codes was fraudulent because the actual products dispensed

were pre-fabricated.

At trial, Isley had at her disposal all of the documents relating to the MNAs

from Region C for the product codes at issue in the indictment (L3800, L3907, and

L1960) as well as the other product codes that were no longer at issue in the case.

She did not, however, have any MNAs from the other three regions. Isley believed

that, as evidenced by the MNAs, Medicare erroneously approved the use of

custom-fabricated codes for pre-fabricated products. Isley had maintained

throughout the pre-trial proceedings that the MNAs were relevant Brady material

because she had relied upon them in making her own coding decisions. The

evidence at trial, however, belied this assertion.

Sandra Sosebee, who worked in the billing department at Orthoscript,

testified that she informed Isley on numerous occasions that the use of product

code L3907 for pre-fabricated wrist braces was incorrect. Isley explained that she

9
believed this custom-fabricated code could be used if a pre-fabricated wrist brace

was bent or molded to fit the patient. This matter was often discussed at manager

meetings, wherein Isley persisted with her belief that a bent or molded pre-

fabricated item could be billed using a custom-fabricated code. When Sosebee

expressed her concern that Medicare would not agree with this coding, Isley

responded: “Well, Medicare is stupid. I will deal with them when they come in

here.” Sosebee testified that Isley never told her that she could rely on a prior paid

claim in making a coding decision.

On April 12, 2004, Sosebee wrote to Isley, via e-mail, again questioning the

use of certain wrist brace codes. Sosebee suggested that prior paid claims could

inform the decision of what code should be used. In response, Isley wrote:

I would be hesitant to make any assumptions as to what Medicare is
telling us. We have concluded in the past that Medicare is not
consistent with regards to what they try to relay to us. I would not
make the leap that if Medicare made a payment that means it’s correct
and if they didn’t make a payment it is incorrect.

Another billing department employee of Orthoscript, Victoria Meguiar,

similarly testified that Isley looked at the fee schedule and the rate of

reimbursement in determining what code should be used. Further, while Meguiar

showed Isley letters indicating that Orthoscript’s billing codes were incorrect,

Isley, in turn, never showed Meguiar MNAs indicating that the billing codes were

correct. Meguiar was convinced that Orthoscript was coding certain products

10
incorrectly, and she set about trying to prove to Isley, through phone calls to the

DMERC, that Isley’s understanding of pre-fabricated versus custom-fabricated

product codes was incorrect.12 In fact, on one occasion, Meguiar changed the

billing codes for wrist splints to a pre-fabricated code, which lowered the

reimbursement rate. Isley confronted Meguiar and instructed her not to change the

codes again.

Melissa Carnes, who also worked in the billing department of Orthoscript,

testified that she was present during the meeting about custom-fabricated versus

pre-fabricated billing codes when Isley stated that Medicare is “stupid.” Carnes

further testified that no one else at Orthoscript shared Isley’s viewpoint on the use

of a custom-fabricated code for pre-fabricated items that were simply bent or

molded to fit a patient.13

Additionally, Sosebee, Meguiar, and Carnes all testified that the only

document to which Isley referred in their discussions of using the proper product

code was the Medicare fee schedule, which gave the rate of reimbursement for

each product code. In fact, Carnes stated that Isley told her Orthoscript could not

afford to use the pre-fabricated codes that Carnes wanted to use for certain items.

12
Meguiar testified that Isley wanted proof in “black and white” that Orthoscript was
billing incorrectly.
13
Of note, Isley conceded on cross-examination that she had no way of knowing whether
a doctor actually bent or molded a product to fit a patient once it is taken out of its box.
11
Finally, James Arch Nelson testified that Orthoscript employees came to him

when they became frustrated with Isley’s use of incorrect billing codes. He

attended a meeting between Isley and the employees, during which Isley explained

her position on the billing codes; Isley did not, however, refer to any MNAs to

support her position. Nevertheless, Nelson “sided with” Isley on the coding issue

even though it appeared to him that the other employees were right and that

Orthoscript was coding pre-fabricated products incorrectly.

During the course of the trial, Isley used the DMERC’s treatment of product

codes not charged in the superseding indictment to demonstrate confusion in the

industry. For instance, Orthoscript had coded certain walking boots with L2114

and L2116 codes.14 Orthoscript had received several MNAs for its claims that used

the L2114 and L2116 product codes; thus, Isley relied upon the MNAs in using

these codes. Subsequently, however, Orthoscript received both approvals and

denials for the same products coded with the L2114 and L2116 codes. The

confusion in the use of these codes led to an industry-wide review by the DMERC

of the L2114 and L2116 codes.

Despite the confusion over the use of the L2114 and L2116 codes, witnesses

aside from Isley testified that there was no industry confusion regarding

14
The use of the L2114 and L2116 product codes had been charged in the original
indictment but were not included in the superseding indictment.
12
Medicare’s definitions for custom-fabricated versus pre-fabricated products. Cathy

Plunkett, an experienced health care consultant, testified that the definitions were

“clear.” Missy Carnes, Vicky Meguiar, and Sandra Sosebee testified that they

were not confused by the definitions. Further, Isley herself testified that a DME

supplier could not use a custom-fabricated code if the doctor provided a pre-

fabricated item to a patient; Orthoscript supplied only pre-fabricated wrist splints

and walking boots to doctors’ offices.

Nevertheless, Isley maintained at trial that she relied upon the MNAs from

Region C as well as the other regions in the country to inform her decision on how

to code the products. The district court permitted Isley to testify about her futile

efforts to obtain the MNAs from Regions A, B, and D; moreover, Isley testified

that even though she did not get physical possession of the MNAs, Region A had

reported the existence of approximately 2000 MNAs, Region B had reported 812

MNAs, and Region D had reported between 1500 and 2500 MNAs.15

On cross-examination, however, Isley admitted that, with respect to seven of

the ten charges related to wrist braces, she could not have relied upon any MNAs

15
In considering the number of MNAs that existed in the other regions, it is important to
note that Isley had requested six different DME product codes, only three of which were charged
in the indictment. She requested and received the MNAs in Region C for the same six product
codes. It became apparent at trial, however, that a great majority of the MNAs from Region C
related to the uncharged product codes. Isley only speculates that the MNAs from the other
regions would not have a proportionate share of irrelevant MNAs, that is, MNAs unrelated to the
product codes charged in the indictment.
13
when filing Orthoscript’s claims because there were no MNAs for the relevant

product codes during the time that she had submitted the claims. With respect to

the later filed wrist brace claims, Isley admitted that she did not see any MNAs

related to the same product code until she reviewed discovery material in the case

in 2007. With respect to the walking boot code, L1960, Isley’s testimony of

reliance was refuted by Special Agent Erica Wilker’s testimony on rebuttal that for

the relevant time period, Region C did not perform a medical necessity review of

Orthoscript’s claims using product code L1960.16

In short, Isley attempted, through MNAs from Region C, to paint a picture

of confusion and ambiguity on behalf of the DMERC in the way that it processed

claims involving the subject DME product codes. Yet, the only confusion shown

related to uncharged product codes. Moreover, Isley presented no evidence, other

than her own testimony, that she relied upon any MNA in determining what codes

to utilize. Rather, the evidence presented at trial, as outlined above, directly

refuted her assertion of reliance.

C. Post-Trial Motion

On May 2, 2008, Isley filed a motion for a new trial based upon an alleged

16
In reviewing the three documents that Isley claimed to be MNAs from Orthoscript for
product code L1960, Wilker testified that one was not for code L1960, that one was an appeal
rather than an MNA, and that there was no evidence that the third was received and reviewed by
Palmetto.
14
Brady violation in that the Government failed to produce the MNAs from Regions

A, B, and D. In this motion, Isley again argues that these MNAs were material to

her defense that she relied upon the DMERC’s regular approval of using the same

DME product code for the same product as those criminalized in the indictment.

The district court denied the motion, ruling as follows:

Now, having the benefit of the evidence at trial, the court
concludes that the only use the defendant could have made of the
additional medical necessity approvals would be impeachment. This
is so because the evidence established that the defendant did not rely
on these medical necessity approvals to make her own coding
decisions.

(Order of August 8, 2008, at 2, R. on App. 280.) In considering whether the other

regions’ MNAs should have been produced for impeachment purposes, the district

court ruled that failure to produce cumulative impeachment evidence does not

constitute a Brady violation.

D. Isley’s Appeal

On August 8, 2008, Isley filed a timely notice of appeal, in which she asserts

the following errors. First, she argues the district court abused its discretion in

denying her motion for new trial based upon the alleged Brady violation. She next

argues that the district court erred in failing to give an “entrapment-by-estoppel”

instruction and in failing to give an “interpretive rules” instruction to the jury.

Finally, Isley argues that the district court erred by admitting evidence that Isley

15
made contributions to the Atlanta Lesbian Center and that she had an affair.

II. DISCUSSION

A. The Claimed Brady Violation

In this case, Isley argues that the Government violated Brady v. Maryland,

373 U.S. 83, 83 S. Ct. 1194, 10 L.Ed.2d 215 (1963), by failing to provide the

MNAs from Region A, B, and D. We review the district court’s denial of a motion

for new trial based on a Brady violation for abuse of discretion. United States v.

Vallejo, 297 F.3d 1154, 1163 (11th Cir. 2002). Under Brady, the Government

violates the Due Process Clause if it suppresses evidence favorable to the accused

when the evidence “is material either to guilt or to punishment.” Brady, 373 U.S.

at 87, 83 S. Ct. at 1197. Evidence favorable to the accused includes impeachment

evidence. United States v. Bagley, 473 U.S. 667, 676, 105 S. Ct. 3375, 3380, 87

L.Ed.2d 481 (1985). To obtain a new trial based upon a Brady violation, a

defendant must show:

(1) the government possessed favorable evidence to the defendant; (2)
the defendant does not possess the evidence and could not obtain the
evidence with any reasonable diligence; (3) the prosecution
suppressed the favorable evidence; and (4) had the evidence been
disclosed to the defendant, there is a reasonable probability that the
outcome would have been different.

Vallejo, 297 F.3d at 1164.

16
We cannot say that the district court abused its discretion here because Isley

cannot show that had she obtained the MNAs from other regions, the outcome of

her trial would have been different. This is because the evidence failed to establish

that she relied upon any MNA in making the coding decisions charged in the

indictment. While she testified at trial that she told Orthoscript employees that the

MNAs were her “trump card” with Medicare, the employees testified that she

never mentioned MNAs in explaining her coding decisions. Further, the evidence

showed that she could not have relied upon MNAs for most of the charged coding

decisions because no pertinent MNAs existed at the time Medicare was billed.

Isley also testified that she did not see the other relevant MNAs until she reviewed

the discovery material years after she made the coding decision. Thus, even

assuming that there exists MNAs relevant to the subject codes in the other regions

at the time Isley made her coding decisions, the jury rejected the notion that she

relied upon them.

To the extent that Isley sought a new trial based upon the impeachment

value of the MNAs from other regions, her argument similarly fails. Isley believed

that the other MNAs would impeach the Government witnesses by demonstrating

confusion and ambiguity in the application of the billing codes to the subject

products. Even if she could show confusion in the industry, Isley did not

demonstrate that any such confusion affected her decisions because she did not rely
17
upon the coding decisions in the industry.

Moreover, the district court determination that this impeachment evidence

was cumulative was not erroneous. At trial, Isley was able to show that some

errors had occurred in the medical necessity review process. Indeed, a large

portion of her defense focused on the confusing and misleading application of the

L2114 and L2116 codes for walking boots. Isley was therefore able to show that

the DMERC was not always consistent. However, evidence of this nature from

other regions would be merely cumulative.

In short, the MNAs from other regions are not material, i.e., if the MNAs

had been admitted at trial in Isley’s favor, there is not a reasonable probability of a

different outcome in this case. The district court therefore did not abuse its

discretion in denying Isley’s motion for a new trial.17

B. Jury Instructions

We review the district court’s refusal to give a requested jury instruction for

an abuse of discretion. United States v. Moore, 525 F.3d 1033, 1046 (11 th Cir.

2008). The denial of a requested instruction is reversible error if (1) the requested

17
We note that it is inconceivable that a district court could determine prior to trial that
evidence would be merely cumulative when the court has not seen or does not know the exact
nature of the evidence. Nevertheless, the district court’s post-trial conclusion in this case that the
MNAs from other regions were only cumulative impeachment evidence is not erroneous, as
explained above. Thus, any error conceivably committed by the district court prior to trial does
not warrant reversal of Isley’s conviction.
18
instruction correctly stated the law; (2) the actual charge to the jury did not

substantially cover the proposed instruction; and (3) the failure to give the

instruction substantially impaired the defendant’s ability to present an effective

defense. United States v. Richardson, 532 F.3d 1279, 1289 (11 th Cir. 2008).

Isley requested an entrapment-by-estoppel instruction. “Entrapment-by-

estoppel is an affirmative defense that provides a narrow exception to the general

rule that ignorance of the law is no defense.” United States v. Funches, 135 F.3d

1405, 1407 (11th Cir. 1998), quoted in United States v. Eaton, 179 F.3d 1328, 1332

(11th Cir. 1999). Entrapment-by-estoppel applies “when a government official

erroneously tells a defendant that conduct is legal and the defendant, believing the

official, acts on the advice.” United States v. Billue, 994 F.2d 1562, 1568 (11 th Cir.

1993). This defense is not available unless a defendant can show that she relied

upon an official government communication before acting in a manner proscribed

by law. United States v. Johnson, 139 F.3d 1359, 1365 (11 th Cir. 1998).

Isley contends that an entrapment-by-estoppel defense is supported by her

reliance upon the MNAs Palmetto sent to Orthoscript. That is, through the MNAs,

Palmetto advised her that her coding choices were correct.

We first note that Isley cannot point to a single statement or communication

19
to her personally upon which she relied to make her coding decisions.18 Rather,

she suggests that approvals of prior claims equated to affirmative statements upon

which she could rely in coding the fourteen subject claims of the indictment.19 To

the extent that there were misstatements through the MNAs about which product

codes were acceptable, unless these statements were made directly to Isley, her

reliance upon them is misplaced. See Eaton, 179 F.3d at 1332 (“For a statement to

trigger an entrapment-by-estoppel defense, it must be made directly to the

defendant, not to others.”)

Moreover, the evidence at trial established that there was no confusion in the

industry: pre-fabricated products could not be coded with custom-fabricated codes.

Thus, even assuming Isley relied upon an erroneous MNA, such reliance would not

be objectively reasonable.20 Thus, the district court did not abuse its discretion in

refusing to give the entrapment-by-estoppel charge.

18
Isley only points to a single phone call she personally made to Roberta Riddle, a nurse
educator with Palmetto, the DMERC. According to Isley, Riddle told her that she need only
match the doctor’s diagnosis code to the HCPCS product code in order for the selected code to
be proper. Other than the fact that Riddle and other employees privy to the telephone call deny
that Riddle made such a statement, the cross-coder lists several possible HCPCS codes for every
diagnosis code. A simple “match” is not possible. Moreover, Isley conceded that the cross-
coder was but a factor in determining the proper product code. Accordingly, Riddle’s advice to
use the cross-coder is not an affirmative statement supporting an entrapment-by-estoppel
defense.
19
Isley refers to Orthoscript’s reliance upon the MNAs Palmetto issued to Orthoscript
rather than any statement made to her personally upon which she relied.
20
As noted above, Isley did not show at trial that she relied upon any MNA in making
her coding decisions.
20
Isley also requested the following “Interpretative Rules” charge:

You have heard the testimony during the case of Palmetto’s
interpretations of various HCPCS (Healthcare Common Procedure
Coding System) product codes for wrist splints and walking boots.
The rules and regulations that have been mentioned during this trial
are what is known as “interpretative” rules and regulations. They
were not promulgated pursuant to the notice-and-comment
requirements of the Administrative Procedure Act. You are hereby
instructed that “interpretative” rules and regulations lack the force and
effect of law. As such, they are non-binding, and do not foreclose
alternative courses of action by durable medical equipment (DME)
providers.

Isley refers to the supplier manual and advisories issued by the DMERC and

SADMERC as the interpretative rules upon which the Government relied. Isley

contends that she was prosecuted under definitions of custom-fabricated and pre-

fabricated set forth in these documents; thus, the above charge was appropriate.

The district court did not abuse its discretion in refusing to give this charge

because Isley was not indicted for violating an interpretative Medicare rule.

Rather, she was charged with defrauding the Medicare program in violation of 18

U.S.C. § 1347. Isley knew that using custom-fabricated codes for pre-fabricated

products would cause Medicare to pay a higher rate for custom-fabricated

products.21 This conduct of intentionally manipulating the Medicare program is

21
By way of example, the evidence relating to count four of the superseding indictment
shows the following. Orthoscript was a stock and bill operation, which means that it would
stock and charge physicians for a supply of DME products, and once a physician dispensed a
product, Orthoscript would obtain the prescription form and bill Medicare for reimbursement.
With respect to count four, Orthoscript supplied several wrist braces to a physician’s office at a
21
made criminal by the Medicare fraud statutes, not the interpretative rules and

regulations. The interpretative rules to which Isley refers are relevant only

because they inform the jury on the question of whether the claims to Medicare

were false. In any event, the district court gave an “intent” instruction which

substantially covered the proposed charge.22

C. Admission of Extrinsic Evidence

On January 25, 2007, prior to the superseding indictment, the Government

filed a Rule 404(b) notice of its intent to introduce evidence that Isley had used

Orthoscript funds without permission to pay for unauthorized personal charges on

her corporate American Express account, including a $20,000 charitable donation

to the Atlanta Lesbian Center. The Government also included notice of its intent to

introduce evidence that Isley used Orthoscript funds without permission to pay for

charges on her personal Capital One credit card accounts. In response thereto,

Isley filed a motion to suppress, arguing that the Government was attempting to

inject her sexual orientation into the trial improperly.

charge of $4.10 each. Yet, when one of these wrist braces was prescribed to Patient E.A.,
Orthoscript submitted a claim to Medicare for $100. (See Gov’t Ex. 4A - 4G.)
22
The “intent” instruction given was as follows:

A statement or claim is not knowingly and willfully false if it is the
subject of a disputed legal question or if it represents a reasonable interpretation
of applicable rules or regulations. In this regard, the government has the burden
of proof beyond a reasonable doubt that Ms. Isley’s statements or claims were not
a reasonable interpretation of any applicable codes, rules or regulations.
22
In the superseding indictment, the Government charged Isley with 36 counts

of honest services mail fraud relating to her use of Orthoscript funds for the

payment of charges on the personal Capital One accounts of Isley and her

significant other, Tracy Hollis. The personal credit card charges against her

corporate American Express card, such as the charitable contribution, were not

charged in the superseding indictment. In denying Isley’s motion to suppress the

unindicted credit card transactions, the district court ruled that the charitable

donation evidence was admissible either as inextricably intertwined with the mail

fraud counts or relevant 404(b) evidence.

At trial, the Government called Hollis to testify about the two Capital One

credits cards that were the subject of the mail fraud charges. During direct

examination, the Government asked Hollis questions about her relationship with

Isley:

Q: Approximately how long were you involved in a relationship with Ms.
Isley?

A: About nine and a half years.

....

Q: And when did the relationship end?

A: In June of 2004.

Q: All right. I’m not going to go into it in great detail, just briefly, can
you tell the jury the nature of how the relationship ended?
23
A: [Isley] was having an affair.

....

Q: Would you describe [your subsequent contacts with Isley] to be
hostile, or amicable, or how would you describe it?

A: It was painful, difficult, but civil.

Isley did not object to this testimony.

On appeal, Isley objects to Hollis’s testimony that Isley had an affair and to

the admission of evidence that she made a $20,000 donation to the Atlanta Lesbian

Center.23

1. Hollis Testimony

Because Isley did not contemporaneously object to this testimony, we

review its admission for plain error only. United States v. Munoz, 430 F.3d 1357,

1375 (11th Cir. 2005). Under the plain error review standard, a defendant must

show (1) error, (2) that is plain and (3) that affects a defendant’s substantial rights.

United States v. Williams, 527 F.3d 1235, 1240 (11th Cir. 2008). To affect her

substantial rights, Isley must show the admission of this evidence affected the

23
During voir dire, defense counsel informed the venire that Isley is gay and asked
whether any venire member had feelings one way or another about gay people that would affect
their impartiality as jurors. On appeal, the Government argues that Isley cannot be prejudiced by
the admission of the extrinsic evidence challenged here because she first injected her sexual
orientation into the trial of the case. Because Isley knew during voir dire, however, that the
district court was going to allow evidence of her donation to the Atlanta Lesbian Center, she was
entitled to qualify the venire on the issue as a matter of trial strategy. Thus, any argument that
Isley somehow waived her objection to this evidence during voir dire is without merit.

24
outcome of the proceedings. United States v. Parker, 277 Fed. Appx. 952, at *4

(11th Cir. May 15, 2008).

First, Isley claims that Hollis’s testimony was not needed because Special

Agent Erica Wilker had already testified that the charges to the Capital One cards

were personal in nature; thus, Hollis was called solely to emphasize Isley’s sexual

orientation and to introduce evidence of her infidelity. To the contrary, Isley

specifically argued during the opening statement that the Capital One credit cards

were used for both personal and business expenses. Hollis, also an account holder,

was the only person other than Isley who could testify that the indicted transactions

were personal in nature. Prior to her testimony, the Government did not know

whether Isley planned to dispute the personal nature of the charges. Accordingly,

Hollis’s testimony was not unnecessary.

Second, the Government properly impeached Hollis under Federal Rule of

Evidence 607 by eliciting from her that she may have a bias against Isley because

of their break-up. Thus, we find no error in the admission of this evidence.

Nevertheless, Isley contends that if the testimony is admissible, its probative value

is substantially outweighed by the danger of unfair prejudice. Even if we were to

agree with Isley on this point, she is not entitled to a new trial because she has not

shown that its admission changed the outcome of the trial. The evidence of Isley’s

healthcare fraud and honest services mail fraud amply supports the convictions.
25
2. Charitable Donation Evidence

As an initial matter, we will review the admission of the evidence that Isley

donated $20,000 to the Atlanta Lesbian Center for an abuse of discretion. United

States v. Ramirez, 426 F.3d 1344, 1354 (11 th Cir. 2005). While the Government

points out that Isley did not contemporaneously object to the donation evidence

when it was admitted, Federal Rule of Evidence 103(a) provides that “[o]nce the

court makes a definitive ruling on the record admitting or excluding evidence,

either at or before trial, a party need not renew an objection or offer of proof to

preserve a claim of error for appeal.”24 In this case, the district court definitively

ruled prior to trial that the donation evidence would be admissible.

Federal Rule of Evidence 404 prohibits evidence of other bad acts to prove

the character of a person in order to show she acted in conformity therewith. This

evidence is admissible, however, if it may show proof of “motive, opportunity,

intent, preparation, plan . . . or absence of mistake.” Fed. R. Evid. 404(b).

Evidence of other bad acts is not extrinsic to the charged offense under Rule

404(b), however, “when it is (1) an uncharged offense which arose out of the same

transaction or series of transactions as the charged offense, (2) necessary to

complete the story of the crime, or (3) inextricably intertwined with the evidence

24
“When the ruling is definitive, a renewed objection . . . at the time the evidence is to
be offered is more a formalism than a necessity.” Fed. R. Evid. 103, advisory committee's note to
2000 Amendment.
26
regarding the charged offense.” United States v. Edouard, 485 F.3d 1324, 1344

(11th Cir. 2007) (internal quotations and citations omitted). Here, Isley does not

contest that the donation evidence was either inextricably intertwined with the

scheme to defraud Orthoscript through the unauthorized use of its funds or offered

for a proper purpose under Rule 404(b). Rather, Isley contends that its probative

value was limited and substantially outweighed by its potential for unfair

prejudice. Regardless of whether the donation evidence falls inside or outside the

scope of Rule 404(b), the evidence must still satisfy the requirements of Rule

403.25 Id.

The donation evidence was not the only evidence of unauthorized personal

charges on the corporate American Express card. The Government also presented

evidence that Isley used this credit card to pay for Christmas and birthday parties.

There was also evidence that she took unauthorized salary increases throughout the

relevant time period. All of these unauthorized expenditures occurred during the

same time that Isley was paying her Capital One accounts with Orthoscript funds.

It is probative of Isley’s intent and plan to defraud her employer and of her motive

in defrauding Medicare. The charitable donation was simply part and parcel of

such evidence. It was not unfairly singled out or emphasized by the prosecution.

25
Rule 403 provides: “Although relevant, evidence may be excluded if its probative
value is substantially outweighed by the danger of unfair prejudice . . . .”
27
Moreover, the nature of the donation had to be revealed to show that it was

personal and unauthorized, i.e., was not related to or did not further the business of

Orthoscript. Finally, any prejudice arising from the fact that the charitable

donation was made to the Atlanta Lesbian Center was mitigated by the defense’s

qualification of the jury to ensure there was no bias against her sexual orientation.

In short, the probative value of the charitable donation evidence was not

substantially outweighed by the danger of unfair prejudicial. See Edouard, 485

F.3d at 1344 n.8 (“Rule 403 is an extraordinary remedy, which should be used only

sparingly, and the balance should be struck in favor of admissibility.” (quotation

marks, citation, and brackets omitted)). The district court therefore did not abuse

its discretion in its admission of the evidence.

III. CONCLUSION

For all of the foregoing reasons, Isley’s convictions are AFFIRMED.

28

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/3063132. Public record. Not legal advice.