Respondents Brief — Fischer v. United States

Jan D ove - vhs

No. 99-116 ‘.

Jn the Supreme Court of the Gnited States

JEFFREY ALLAN FISCHER, PETITIONER

v.

UNITED STATES OF AMERICA

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

SETH P. WAXMAN

Sclicitor General

Counsel of Record

JAMES K. ROBINSON

Assistant Attorney General

MICHAEL R. DREEBEN

Deputy Solicitor General

LISA SCHIAVO BLATT

Assistant to the Solicitor

General

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether a hospital that receives annual payments of

between $10 and $15 million under the Medicare pro-

gram is an “organization, government, or agency [that]

receives * * * benefits in excess of $10,000 under a

Federal program involving * * * Federal assistance”

within the meaning of 18 U.S.C. 666(b).

TABLE OF CONTENTS

Opinion below

Jurisdiction

Statutory provision involved

Statement

| Summary of argument

a

Argument:

A hospital that receives in excess of $10,000 in Medi-

care payments is within the jurisdictional coverage of

Section 666 9

A. Medicare payments to hospitals are benefits under

| a federal assistance program within the mean-

ing of Section 666(b) 10

1. Medicare payments to hospitals are benefits ... 10

2. Hospitals are not exempt from receiving bene-

fits because they are not the intended bene-

ficiaries of the Medicare program but are re-

imbursed for providing services 16

8. Hospitals are aided by Medicare funds ............. 22

| B. Section 666(c) does not exempt Medicare pay-

ments to hospitals from the statute’s jurisdictional

coverage 23

C. The coverage of hospitals under Section 666 is

| consistent with this Court’s precedents construing

federal anti-discrimination statutes 28

D. The application of Section 666 to criminal acts

involving hospitals that receive Medicare pay-

ments is consistent with principles of federa-

lism 30

Conclusion 34

la

Appendix

(IID)

IV

TABLE OF AUTHORITIES

Cases:

Almendarez-Torres v. United States, 523 U.S. 224

(1998)

Brogan v. United States, 522 U.S. 398 (1998)

Deal v. United States, 508 U.S. 129 (1993)

Department of Revenue of Or. v. ACF Indus., Inc.,

510 U.S. 332 (1994)

Good Samaritan Hosp. v. Shalala, 508 U.S. 402

(1993)

Grove City College v. Bell, 465 U.S. 555 (1984) ..........0000.

Gustafson v. Alloyd Co., 513 U.S. 561 (1995)

INS v. National Ctr. for Immigrants’ Rights, Inc.,

502 U.S. 183 (1991)

Jarecki v. G.D. Searle & Co., 367 U.S. 303 (1961) ............

Kawaauhau v. Geiger, 523 U.S. 57 (1998)

National Collegiate Athletic Ass’n v. Smith, 525 U.S.

459 (1999)

Regions Hosp. v. Shalala, 522 U.S. 448 (1998) ............00+

Salinas v. United States, 522 U.S. 52 (1997) ..........000

REo RF KKK

=8S S885

11, 15,

16, 21, 27, 32

United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039

(5th Cir. 1984), cert. denied, 469 U.S. 1189 (1985) ...........

United States v. Copeland, 143 F.3d 1439 (11th Cir.

1998)

United States v. Del Toro, 513 F.2d 656 (2d Cir.),

cert. denied, 423 U.S. 826 (1975)

United States v. Hinton, 683 F.2d 195 (7th Cir. 1982),

aff’d sub nom. Dixson v. United States, 465 U.S. 482

(1984)

United States v. LaHue, 170 F.3d 1026 (10th Cir.

1999)

United States v. Marmolejo, 89 F.3d 1185 (5th Cir.

1996), aff’d on other grounds sub nom. Salinas v.

19

15, 27

15, 27

United States, 522 U.S. 52 (1997) 15, 19, 20, 24

Vv

Cases—Continued: Page

United States v. Mosley, 659 F.2d 812 (7th Cir.

1981) 15, 27

United States v. Nichols, 40 F.3d 999 (9th Cir.

1994) 19, 26

United States v. Rooney, 986 F.2d 31 (2d Cir. 1993) ....... 11,

19, 20

United States v. Shabani, 513 U.S. 10 (1994) 0.0... 21

United States v. Wells, 519 U.S. 482 (1997) 21

United States v. Westmoreland, 841 F.2d 572 (5th

Cir. ), cert. denied, 488 U.S. 820 (1988) 32

United States v. Zyskind, 118 F.3d 113 (2d Cir. 1997) ... 18

United States Dep't of Transp. v. Paralyzed Veterans

of Am., 477 U.S. 597 (1986) 29, 30, 31

United States v. Zvi, 168 F.3d (2d Cir.), cert. denied,

120 S. Ct. 176 (1999) 33

Westfall v. United States, 274 U.S. 256 (1927)... 32

Your Home Visiting Nurse Serv., Inc. v. Shalala,

525 U.S. 449 (1999) 3, 22

Constitution, statutes, regulations and rules:

U.S. Const. Art. I, § 8, Cl. 1 (Spending Clause) .................. 9,31

Bank Bribery Amendments Act of 1985, Pub. L. No.

99-370, § 2, 100 Stat. 779 28

Rehabilitation Act of 1973, 29 U.S.C. 794 29

Social Security Act, 42 U.S.C. 301 et seq.:

Tit. II, 42 U.S.C. 401 et seq.:

42 U.S.C. 421 18

Tit. IV-A, 42 U.S.C. G01 et 869. .eccsccssccsssecsessssenserecesensee 18

Tit. XVIII, 42 U.S.C. 1395 et seq.:

42 U.S.C. 1395-1395ece (1994 & Supp. IIT 1997) sesso 2

42 U.S.C. 1395¢ 2

42 U.S.C. 1395d(a) (1994 & Supp. 111 1997) wecccccsee 17

42 U.S.C. 1395¢ 12

42 U.S.C. 1395f 31

42 U.S.C. 1395f(a) 12, 16

42 U.S.C. 1395f(b)(1) 3

42 U.S.C. 1395g 31

we oem

Vi | Vil

Statutes, regulations and rules—Continued: Page Statutes, regulations and rules—Continued: Page

S ey = ~ 42 U.S.C. 2000d (Tit. VI) 29

: ‘ , ecnnanasianenmenssumnpnsenniesmesnanecesemenmassssunenets 18

42 U'S.C. 1395k 2 —

42 U.S.C. 13951(h)(5)(A) 12 ; Section 400.202 17

42 US.C. 1395n(a) 12 Section 413.64(e)-(f) 3

42 U.S.C. 1395n(c) 12 Section 424.51 12

42 U.S.C. 1395x(v)(1)(A) (1994 & Supp. ITT 1997) ....... 3 Section 488-489 5

42 U.S.C. 1395x(v)(1)(A)Gi) 3 Section 489, Subpt. C 12

42 U.S.C. 1395y(a) (1994 & Supp. ITI 1997) ..............00- 16 Section 489.10(b) 30

42 U.S.C. 1395bb 3 aR:

42 US.C. 1395ec (1994 & Supp. Ill 1997) eccccceccooce 3, 29, 31 Rule 14.1(a) 83

42 US.C. 1395ww(d) (1994 & Supp. lil 1997) seeeeeesese - 20 Rule 24.1(a) 33

42 U.S.C. 1395ww(d\5)(F) 22 .

Pub. L. No. 99-646, § 59(a), 100 Stat. 3612 27 | Miscellaneous:

7 U.S.C. 2018 (1994 & Supp. IV 1998) 31 38 Fed. Reg. 17,978-17,984 (1973) 30

7 U.S.C. 2018(a)(1) (Supp. IV 1998) 31 49 Fed. Reg. (1984):

7 U.S.C. 2020 (1994 & Supp. IV 1998) 18 ; p. 1639 22, 30

18 U.S.C. 201 15 } p. 1640 13

18 U.S.C. 215 27 | Edwin L. Crosby, M.D., Director and Executive Vice

18 U.S.C. 371 2, 33 | President of the Am. Hosp. Ass’n, The Atlantic

18 U.S.C. 641 13 ' Monthly (July 1966) 23

18 U.S.C. 665 13 HCFA Data Compendium (July 1999) 3, 22

18 U.S.C. 666 passim H.R. Rep. No. 335, 99th Cong., Ist Sess. (1985) .......-000»00» 28

18 U.S.C. 666(a) 9, 25 H.R. Rep. No. 797, 99th Cong., 2d Sess. (1986) .............+. 24, 27

18 U.S.C. 666(a)(1)(A) 2,9 Medicare Payment Advisory Comm’n, Report to the

18 U.S.C. 666(a)(1)(B) 10, 24 Congress: Medicare Payment Policy (Mar. 1999) ........ 22

18 U.S.C. 666(a)(2) 2, 10, 24 | S. Rep. No. 225, 98th Cong., 1st Sess. (1983) ............ 13, 14, 15

18 U.S.C. 666(b) passim The Random House Dictionary of the English Language

18 U.S.C. 666(c) 23, 25, 27, 28 ) (2d ed. 1987) ll

18 U.S.C. 1341 2, 33 Webster’s II New Riverside University Dictionary

18 U.S.C. 1343 2, 33 (1988) 11, 24

18 U.S.C. 1957 2 +

20 U.S.C. 1094(a) 31

20 U.S.C. 1094(a)(1) 31 |

20 U.S.C. 1094(a)(3) 31

20 U.S.C. 1681(a) 29

PB ASAE RAT RAE 18

GEE, TRO OO GIR, cenccecneeeeerrnememnneen 18

In the Supreme Court of the Anited States

No. 99-116

JEFFREY ALLAN FISCHER, PETITIONER

v.

UNITED STATES OF AMERICA

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

OPINION BELOW

The opinion of the court of appeals (Pet. App. Al-

A15) is reported at 168 F.3d 1273.

JURISDICTION

The judgment of the court of appeals was entered on

March 4, 1999. A petition for rehearing was denied on

April 28, 1999. (Pet. App. 16-17). The petition for a

writ of certiorari was filed on July 15, 1999, and was

granted on November 1, 1999. The jurisdiction of this

Court rests on 28 U.S.C. 1254(1).

(1)

2

STATUTORY PROVISION INVOLVED

Section 666 of Title 18, United States Code, is repro-

duced in an Appendix to this brief. App., infra, la-3a.

STATEMENT

Following a jury trial in the United States District

Court for the Middle District of Florida, petitioner was

convicted on one count of fraud involving an organiza-

tion receiving federal funds, in violation of 18 U.S.C.

666(a)(1)(A) and 2 (count 1); one count of giving a

kickback to an agent of an organization receiving fed-

eral funds, in violation of 18 U.S.C. 666(a)(2) and 2

(count 2); one count of mail fraud, in violation of 18

U.S.C. 1841 (count 3); two counts of wire fraud, in

violation of 18 U.S.C. 1343 (counts 4-5); one count of

conspiracy to commit the above offenses, in violation of

18 U.S.C. 371 (count 6); and seven counts of money

laundering, in violation of 18 U.S.C. 1957 (counts 7-13).

He was sentenced to 65 months’ imprisonment, to be

followed by three years of supervised release. He was

ordered to pay $1.2 million in restitution. The court of

appeals affirmed. Pet. App. Al-A15.

1. Title XVIII of the Social Security Act, 42 U.S.C.

1395-1395ece (1994 & Supp. III 1997), establishes the

federally funded Medicare Program to provide health

insurance to the elderly and disabled.’ A hospital par-

ticipating under the Medicare program must meet

specified conditions of participation and must file a

provider agreement with the Secretary of Health and

1 Part A of the program furnishes insurance that “provides ba-

sic protection against the costs of hospital, related post-hospital,

home health services, and hospice care.” 42 U.S.C. 1395c. Part B

of the program is a voluntary insurance program covering physi-

cian charges and other medical services. 42 U.S.C. 1395k.

3

Human Services certifying that the hospital meets

the statutory eligibility criteria. 42 U.S.C. 1395bb

and 1395cc (1994 & Supp. III 1997); 42 C.F.R. Pts. 488-

489. When hospitals provide eligible patients with

covered services, the Secretary, through fiscal inter-

mediaries acting as her agents, reimburses the hospital

in accordance with the Medicare Act and the

Secretary’s regulations. 42 U.S.C. 1395f(b)(1), 1395h,

1395x(v)(1)(A) (1994 & Supp. III 1997); Your Home

Visiting Nurse Servs. v. Shalala, 525 U.S. 449, 450-451

(1999).

Reimbursements to a hospital are made by peri-

odic estimated payments and year-end reconciliation.

Throughout the hospital’s fiscal year, the fiscal interme-

diary makes advance payments to the hospital that

reflect the hospital’s estimated costs of anticipated

services. 42 U.S.C. 1395g(a); 42 C.F.R. 413.60. At the

end of the year, the fiscal intermediary makes whatever

retroactive adjustments are appropriate to reconcile

the total amount of interim payments paid to the

hospital with the amount actually payable to the hospi-

tal under the program. 42 U.S.C. 1395x(v)(1)(A)(ii); 42

C.F.R. 413.64(e)-(f); Good Samaritan Hosp. v. Shalala,

508 U.S. 402 (1993). Each year, Medicare pays more

than $100 billion to approximately 6000 hospitals that

provide services under the program. Health Care

Financing Administration, 1999 Data Compendium 10,

77 (July 1999).

2. Petitioner was president and a partial owner of

QMC, a private company that performed billing audits

for health care providers. In 1993, he arranged for

QMC to obtain a $1.2 million loan from West Volusia

Hospital Authority (WVHA). WVHA is a county

agency responsible for operating two hospitals. In

1993, WVHA received between $19 and $15 million in

4

payments under the Medicare program. Pet. App. 3a;

J.A. 25, 26.

As security for the $1.2 million loan from WVHA,

petitioner pledged QMC’s accounts receivable and a $1

million letter of credit that QMC had obtained through

a foreign bank, First Asia Development Bank. QMC’s

accounts receivable, however, had already been

pledged to another QMC creditor, and the terms of the

$1 million letter of credit severely limited WVHA’s

ability to collect on it. Petitioner negotiated the loan

with WVHA’s chief financial officer, Robert Caddick.

Pet. App. 3.

Petitioner used the $1.2 million to repay creditors

and to raise the salaries of QMC’s five owner-employ-

ees, including petitioner. Petitioner also had QMC lend

at least $100,000 to a company owned by the First Asia

Development Bank representative who had assisted

QMC with the $1 million letter of credit. In addition,

petitioner used the loan proceeds by causing QMC to

open options-trading accounts, which lost about

$400,000. Pet. App. 4.

After the loan was made, QMC paid $10,000 to

Caddick’s mother, Stella Greenfield, by a check marked

“consulting fees,” even though Greenfield had never

performed services for QMC. Greenfield later sent the

check proceeds to Caddick. Petitioner noted on the

check’s invoice that the check was for a “loan origina-

tion fee.” Pet. App. 5. Caddick later tried to cover up

QMC’s $10,000 payment to him by proposing to QMC’s

vice president, Charles Kramer, that he backdate a

bogus “contract” for programming services that Cad-

dick had allegedly performed for QMC. Id. at 6.

When QMC was unable to repay the loan on its due

date, petitioner persuaded First Asia Development

Bank to send QMC a $1.2 million draft, which QMC

5

endorsed and presented to WVHA. First Asia, how-

ever, refused to honor the draft when WVHA’s bank

presented it. Pet. App. 4-5. In December 1994, peti-

tioner was removed from his position as president of

QMC. The next month, QMC filed for bankruptcy. Id.

at 6; Gov’t C.A Br. 17.

3. The court of appeals affirmed petitioner’s convic-

tion. Pet. App. 1-15. The court of appeals rejected

petitioner’s contention that the government had failed

to prove under 18 U.S.C. 666(b) that the organization

affected by the petitioner’s prohibited acts (WVHA)

“receives, in any one year period, benefits in excess of

$10,000 under a Federal program involving a grant,

contract, subsidy, loan, guarantee, insurance, or other

form of Federal assistance.” The court of appeals

explained that, under the plain terms of Section 666(b),

“the ‘benefits’ an organization receives under a federal

program can be in the form of ‘a grant, contract, sub-

sidy, loan, guarantee, insurance, or other form of Fed-

eral assistance.” Pet. App. 11 (quoting 18 U.S.C.

666(b)). The court of appeals further explained that, in

1993, WVHA received between $10 and $15 million

under the Medicare program for providing health care

services to covered individuals. Pet. App. 11. The

court concluded that, “[blecause WVHA received pay-

ments under a federal assistance program, WVHA

received a type of ‘benefits’ expressly covered by

§ 666(b).” Ibid.

The court of appeals rejected the argument that the

funds received by WVHA do not qualify as “benefits”

because WVHA is not the “target recipient” of benefits

under the Medicare program.* Pet. App. 12-15. The

“ The court of appeals observed that the record “did not clearly

establish whether WVHA received funds directly from the

6

court explained that the statutory text “focuses on the

source of ‘benefits,’” requiring that they were received

under a federal program involving federal assistance.

Id. at 14. That language serves to distinguish payments

made under an assistance program from payments

made in “a purely commercial transaction,” but, the

court concluded, the statute does not contain any addi-

tional requirement that the recipient be a “target

recipient.” Jd. at 15.

SUMMARY OF ARGUMENT

A. Section 666 covers acts of bribery involving

agents of an “organization, government, or agency

[that] receives, in any one year period, benefits in

excess of $10,000 under a Federal program involving a

* * * a form of federal assistance.” The jurisdictional

reach of that provision extends to hospitals that receive

more than $10,000 annually under the Medicare pro-

gram. Medicare is a quintessential “federal assistance”

program, and the funds it furnishes to hospitals qualify

as “benefits.” The term “benefits” under Section 666

includes the federal assistance payments made to fulfill

the goals of the federal program; it excludes payments

made as part of a purely commercial transaction.

Hospitals directly receive substantial federal payments

under Congress’s program to provide assistance to

elderly or disabled patients in need of medical care; the

payments are not made in a purely commercial context.

The history of Section 666 confirms its applicability

to hospitals that receive Medicare payments. The

broad language of Section 666 was enacted to ensure

Medicare program or received funds as an assignee” from a “target

recipient,” i.e., a Medicare patient, but that Section 666(b) applied

to hospitals whether or not the hospital received the payments

directly or as an assignee. Pet. App. 14.

7

federal authority to prosecute acts of bribery involving

agents of state and private entities that administered

federal assistance programs; Congress intended to

overcome limitations in prior law that left federal pro-

gram funds unprotected in the hands of their recipients.

The purpose of Section 666 also supports coverage of

hospitals that receive Medicare funds. Section 666 is

intended to protect the integrity of vast sums of federal

assistance funds by ensuring the integrity of the agents

of the organizations that receive them. The proper

administration of the Medicare program requires that

the hospitals that provide the covered medical care not

be undermined by corrupt practices of agents, which

could threaten the delivery of services or drive up their

costs.

Petitioner erroneously contends (Br. 14-15) that hos-

pitals do not receive “benefits” within the meaning of

Section 666 because the beneficiaries of the Medicare

program are patients, not hospitals. The focus of

Section 666, however, is on the source and character of

the payments made, not on whether the recipient is the

intended ultimate beneficiary of the federal program.

While the beneficiaries of most federal assistance pro-

grams are individuals, Section 666 applies when

the recipient is an “organization, government, or an

agency.” Congress intended Section 666 to apply to

federal funds paid to agencies and organizations under

federal food stamp, disability, welfare, Medicaid, and

housing programs even though the payments go to

providers of assistance rather than the individuals

sought to be assisted.

Petitioner’s theory that service providers cannot

receive “benefits” is also inconsistent with his conces-

sion (Br. 22-23) that Section 666 applies to fiscal inter-

mediaries and other entities that administer or disburse

8

federal program funds. Like hospitals, those entities

may provide services, and they are not the ultimate

intended program beneficiaries. His theory of “bene-

fits” is also in tension with the statute’s coverage of

benefits provided under a “contract” or “loan,” which

would normally entail a quid pro quo by the recipient.

In any event, even if there were a requirement that

hospitals themselves be “aided” by federal program

funds in order to receive “benefits,” there can no doubt

that hospitals, which receive substantial guaranteed

sources of revenues from the Medicare program, are

themselves aided.

B. Petitioner’s reliance on subsection (c) of Section

666 is misplaced. That Section states that “[tJhis

section does not apply to bona fide salary, wages, fees,

or other compensation paid, or expenses paid or

reimbursed, in the usual course of business.” That

exemption was intended to apply only to the bribery

and solicitation provisions of subsection (a), not to

the jurisdictional provision of subsection (b). Medicare

payments, in any event, could not be viewed as

“expenses paid or reimursed” under subsection (c). The

subsection, read as a whole, refers to compensation or

expense payments to individuals, not organizations or

governments. The origins of subsection (c) in a

counterpart exemption from the bank-bribery statute

confirm that it was intended to exempt certain pay-

ments to individuals, not the federal program payments

that were the object of protection under Section 666.

C. The applicability of Section 666 to hospitals that

receive Medicare payments is supported by this Court’s

precedents construing the reach of federal anti-dis-

crimination laws based on the receipt of federal

financial assistance. The Court has held that the actual

recipients of the federal assistance funds are covered,

9

while entities that merely benefit incidentally are not.

Accordingly, federal anti-discrimination laws have long

been understood to apply to hospitals that receive

Medicare funds. The parallel inquiry under Section 666

points to coverage of the same hospitals.

D. Finally, the application of Section 666 to hospi-

tals that receive Medicare payments does not threaten

principles of federalism or exceed Congress’s power

under the Spending Clause. Congress has a substantial

interest in ensuring that its federal program funds are

not dissipated or impaired by acts of fraud or corrup-

tion, and Section 666 applies only when an entity

voluntarily accepts those funds. This case presents no

issue of whether the statute requires any connection

between the funds at issue and the criminal act, for

petitioner has never raised any such claim. And, more

importantly, petitioner’s interpretation of the statute to

exclude hospitals entirely, despite their receipt of

billions of dollars under the Medicare program, would

preclude the application of Section 666 even to criminal

acts directed at the federal expenditures. That con-

struction would frustrate the purpose of Section 666.

ARGUMENT

A HOSPITAL THAT RECEIVES IN EXCESS OF

$10,000 IN MEDICARE PAYMENTS IS WITHIN THE

JURISDICTIONAL COVERAGE OF SECTION 666

Section 666(a) makes it an offense, “if the cir-

cumstauce described in subsection (b) of this section

exists,” for an agent of an organization, government, or

agency to engage in certain acts of theft and fraud

involving property valued at $5000 or more (18 U.S.C.

666(a)(1)(A)); for an agent of an organization, govern-

ment, or agency to corruptly accept anything of value

from any person intending to be influenced or rewarded

10

in connection with any transaction of the organization,

government, or agency involving $5000 or more (18

U.S.C. 666(a)(1)(B)); or for any person to offer or give

anything of value to any person intending to influence

or reward an agent of an organization, government, or

agency in connection with a transaction of such organi-

zation, government, or agency involving $5000 or more

(18 U.S.C. 666(a)(2)). Section 666(b) provides that

“(t]he circumstance referred (o i: subsection (a) of this

section is that the organization, government, or agency

receives, in any one year period, benefits in excess of

$10,000 under a Federal program involving a grant,

contract, subsidy, loan, guarantee, insurance, or other

form of Federal assistance.” 18 U.S.C. 666(b). The

text, history, and purpose of the statute all support the

conclusion that Section 666 applies to entities that

receive federal assistance program payments, including

Medicare payments to hospitals, because those pay-

ments constitute “benefits” “receive[d] * * * undera

Federal program involving * * * Federal assistance.”

A. Medicare Payments To Hospitals Are Benefits Under A

Federal Assistance Program Within The Meaning Of

Section 666(b)

1. Medicare Payments To Hospitals Are Benefits

a. There is no dispute in this case that WVHA is an

“organization, government, or agency” that “receive[d],

in any one year period,” more than $10,000 in federal

payments. Nor is there any dispute that the payments

were received “under a Federal [assistance] program,”

the Medicare program. The central issue in this case is

whether those payments qualify as “benefits” received

by WVHA within the meaning of Section 666(b). The

language and structure of Section 666 compel the

conclusion that the payments made by the Medicare

11

program to hospitals that furnish services to covered

patients are “benefits,” as that term is used in Section

666.

The language of Section 666 is “expansive [and] un-

qualified * * *, both as to bribes forbidden and the

entities covered.” Salinas v. United States, 522 U.S.

52, 56 (1997). It broadly provides that Section 666

extends to organizations and agencies that receive

“benefits * * * under a Federal program involving a

* * * form of Federal assistance.” In context, the

term “benefits” in that provision includes payments

under a federal assistance program. See United States

v. Rooney, 986 F.2d 31, 34 (2d Cir. 1993) (Section 666(b)

“expressly equates ‘benefits’ with ‘Federal assis-

tance.’”); see also Webster’s I] New Riverside Univer-

sity Dictionary 166 (1988) (defining “benefit” to include

“[playment[] made * * * in accord witha * * * pub-

lic assistance program”); The Random House Diction-

ary of the English Language 194 (2d ed. 1987) (defining

“benefit” to include “a payment * * * given by a

* * * public agency”). Congress’s intent to protect

federal assistance funds in the hands of their recipients

is further revealed by the title of Section 666—“Theft

or bribery concerning programs receiving Federal

funds.” (emphasis added). See Almendarez-Torres v.

United States, 523 U.S. 224 (1998) (title of statute

relevant when discerning meaning of a statute); JNS v.

National Ctr. for Immigrants’ Rights, Inc., 502 U.S.

183, 189 (1991) (same).

The focus of Section 666 on the federal-program

source of the funds is underscored by its requirement

that the “benefits” be received “under a Federal pro-

gram involving a grant, contract, subsidy, loan, guaran-

tee, insurance, or other form of Federal assistance.”

18 U.S.C. 666(b) (emphasis supplied). The statute is

12

careful to limit its coverage to federal “program[s]” that

provide “assistance.” Thus, “the use of the term ‘bene-

fits’ serves to emphasize * * * that the funds must

have been received by the organization, government, or

agency as part of an ‘assistance’ program, rather than a

purely commercial transaction—the federal govern-

ment’s purchase of goods from a contractor, for

example.” Pet. App. 14-15.

The Medicare program directly makes payments to

participating hospitals for providing covered services to

eligible patients. 42 U.S.C. 1395f(a) (Part A); 42 U.S.C.

1395n(a) and 1395/(h)(5)(A) (Part B); 42 C.F.R. 424.51

(“Medicare pays the provider for services furnished by

a provider.”).? The federal government does not pay

those funds, however, in order to purchase medical ser-

vices in a commercial transaction. Rather, the govern-

ment extends those funds under the Medicare program

to provide federal assistance to elderly and disabled

persons in need of medical care.‘ Because hospitals are

3 Hospitals may charge patients, however, for deductibles and

coinsurance. 42 U.S.C. 1395e (Part A); 42 U.S.C. 1395n(c) (Part B);

42 C.F.R. Pt. 489, subpt. C.

4 As the Secretary has explained in a related context, hospitals

that provide Medicare services do so based on their receipt of fed-

eral assistance and not as part of a purely commercial transaction

with the government:

{[U}nder Medicare and Medicaid the level of services is deter-

mined by providers who are * * * —with Federal assistance

—engaging in activities they have long performed. In this

respect Medicare and Medicaid payments are indistinguishable

from grants to pay the costs of medical services. Indeed,

{[Medicare] payments often cover medical costs of indigent

patients that hospitals would otherwise be required to absorb

pursuant to their other legal! obligations. In contrast, under a

procurement contract the government acts on its own account

as a consumer of goods, such as typewriters and paper clips, or

—s

13

the actual and direct recipients of Medicare funds, and

Medicare is a federal assistance programs, hospitals

receive “benefits * * * under a Federal program

* * * involving Federal assistance” within the

meaning of Section 666(b).

b. The history and purpose of Section 666 also

support a broad reading of its jurisdictional scope. The

history demonstrates that Congress intended Section

666 to cover entities receiving funds under a federal

assistance program. The Senate Judiciary Report ac-

companying Section 666 stated that the statute “is

designed to create new offenses to augment the ability

of the United States to vindicate significant acts of

theft, fraud, and bribery involving Federal monies that

are disbursed to private organizations or State and local

governments pursuant to a Federal program.” S. Rep.

No. 225, 98th Cong., Ist Sess. 369 (1983). The Report

observed that 18 U.S.C. 665 makes “theft or embezzle-

ment by an officer or employee of an agency receiving

assistance under the Job Training Partnership Act a

Federal offense,” but “there is no statute of general

applicability in this area.” S. Rep. No. 225, supra, at

369. The Committee further noted that the general

theft of federal property statute, 18 U.S.C. 641, was

inadequate to protect against theft from entities

receiving federal assistance funds. S. Rep. No. 225,

supra, at 369. The Committee explained that, “[i}n

services, such as hotel accommodations and rental car services

for traveling employees. The level of services under procure-

ment contracts is determined by the government and not, as

under Medicaid or Medicare, by the provider.

49 Fed. Reg. 1640 (1984) (concluding that hospitals are covered by

Section 504 of the Rehabilitation Act when they provide federally

assisted medical services, see pp. 28-30, supra).

14

many cases * * * title has passed to the recipient

before the property is stolen, or the funds are so

commingled that the Federal character of the funds

cannot be shown,” giving “rise to a serious gap in the

law, since even though title to the monies may have

passed, the Federal Government clearly retains a

strong interest in assuring the integrity of such

program funds.” Ibid.

With respect to the types of entities protected by the

statute, the Senate Report expressed Congress’s intent

that “the term ‘Federal program involving a grant, a

contract, a subsidy, a loan, a guarantee, insurance, or

another form of Federal assistance’ be construed

broadly, consistent with the purpose of this section to

protect the integrity of the vast sums of money dis-

tributed through Federal programs.” S. Rep. No. 225,

supra, at 370 (emphasis added). The one limitation that

Congress envisioned supports the proposition that the

statute covers recipients of federal assistance pay-

ments. As Congress explained:

The concept [of “Federal program”] is not unlimited.

The term * * * means that there must exist a

specific statutory scheme authorizing the Federal

assistance in order to promote or achieve certain

policy objectives. Thus, not every Federal contract

or disbursement of funds would be covered. For

example, if a government agency lawfully purchases

more than $10,000 in equipment from a supplier, it is

not the intent of this section to make a theft of $5000

or more from the supplier a Federal crime. It is,

however, the intent to reach thefts and bribery in

situations of the types involved in the Del Toro,

Hinton, and Mosley cases.

eo

15

S. Rep. No. 225, supra, at 370. Each of the cases cited

by the Committee involved bribery of an official or an

agent of an entity that received federal funds under an

assistance program. See United States v. Hinton, 683

F.2d 195, 198-200 (7th Cir. 1982) (bribery involving

officials of non-profit entity which administered HUD

community development grant funds), aff’d sub nom.

Dixson v. United States, 465 U.S. 482 (1984); United

States v. Mosley, 659 F.2d 812, 815-816 (7th Cir. 1981)

(bribery involving official of state agency responsible

for administering CETA program); United States v. Del

Toro, 513 F.2d 656, 662-663 (2d Cir.) (bribery involving

official of Model Cities Program funded by HUD), cert.

denied, 423 U.S. 826 (1975).°

The application of Section 666 to hospitals receiving

Medicare payments also furthers the statute’s purpose

“to protect the integrity of the vast sums of money

distributed through Federal programs from theft,

fraud, and undue influence by bribery.” S. Rep. No.

225, supra, at 370; see also United States v. Marmolejo,

89 F.3d 1185, 1193 (1996) (Section 666 “ensure[s] the

integrity of federal funds by protecting the integrity of

the organizations that receive them.”), aff’d swb nom.

Salinas v. United States, 522 U.S. 52 (1997).

That principle is illustrated by this case. Petitioner’s

conduct in obtaining a loan from WVHA, a Medicare

provider, by fraud and giving a kickback to WVHA’s

chief financial officer threatened the integrity of the

5 The Senate Report also explained that Section 666 was in-

tended in part to resolve the disagreement reflected in those cases

as to whether 18 U.S.C. 201, which prohibits bribery of a “public

official,” applied to “a person employed by a private organization

receiving Federal monies pursuant to a program.” S. Rep. No. 225,

supra, at 369; see also Salinas, 522 U.S. at 58-59.

16

Medicare program in which WVHA participated. The

sound administration of the program relies on officials

at participating hospitals who will not be swayed by

improper influences that interfere with providing medi-

cal care to patients or that drive up the costs of the

program. See, e.g., 42 U.S.C. 1395f(a), 1395y(a) (1994 &

Supp. III 1997) (Medicare program pays for only rea-

sonable and medically necessary services). Thus, the

“determination that WVHA is an agency receiving

‘benefits’ within the meaning of § 666(b) serves the

statute’s purpose of protecting from fraud, theft, and

undue influence by bribery the money distributed to

health care providers, and WVHA in particular,

through the federal Medicare program and other

similar federal assistance programs.” Pet. App. 11-12;

see also Salinas, 522 U.S. at 61 (acceptance of bribes by

official of a jail housing federal prisoners under an

agreement with the federal government “was a threat

to the integrity and proper operation of the federal

program”).

2. HospitakAre Not Exempt From Receiving Benefits

Because They Are Not The Intended Beneficiaries

Of The Medicare Program But Are Reimbursed

For Providing Services

Petitioner and his amicus contend (Br. 14-18;

NACDL Amicus Br. 10-14) that WVHA did not receive

“benefits” within the meaning of Section 666(b), be-

cause the only recipients of benefits under the Medicare

Act are the “individual patient[{s]” who receive medical

services. See, e.g., Pet. Br. 15 (“The party that receives

the benefits of that federal program is—and remains at

all times—the individual patient.”); Pet. Br. 25 (“the

entity that receives federal assistance under the federal

Medicare program is the individual patient”). Peti-

17

tioner notes (Br. 16-17) that the Medicare Act itself

specifies that individuals are entitled to receive hospital

insurance “benefits” in the form of payments to hospi-

tals on the individual’s behalf when the hospitals pro-

vide covered services. See 42 U.S.C. 1395d(a) (1994 &

Supp. III 1997) (“The benefits provided to an individual

by the insurance program under this part shall consist

of entitlement to have payment made on his behalf.”).

That definition, however, does not help petitioner, be-

cause it explicitly recognizes that the payments made to

hospitals providing services under Medicare are the

“benefits” furnished under the program. See also 42

C.F.R. 400.202 (“/hJospital insurance benefits means

payments [to providers] on behalf of * * * an entitled

individual for services that are covered”).°

It also is implausible to suggest that Congress

intended to limit the coverage of Section 666 to only

those entities that receive federal money as the in-

tended program beneficiaries. A recipient of “benefits”

under Section 666 is an “organization, government, or

an agency.” Those entities frequently are not the

intended beneficiary of a federal assistance program

but they nonetheless receive federal assistance funds

on behalf of the program beneficiaries. For instance,

Congress extends food stamp, disability, welfare,

Medicaid, and housing assistance to needy individuals

6 Amicus NACDL acknowledges (Br. 10) that “funds disbursed

through the Medicare program are ‘benefits’” when received by

patients, but argues that they are not when received by the hospi-

tal. The statute does not adopt the perspective of the recipient,

however, with the result that whether payments are deemed

“benefits” depends on who is receiving the federal funds (and why

they are being received). Rather, it designates funds as “benefits”

when they are received under a “Federal program” involving

“Federal assistance.”

18

by providing program funds to agencies and organiza-

tions that in turn provide assistance to program

beneficiaries.’ Congress presumably acted with full

knowledge of those programs when it drafted Section

666(b) broadly to protect substantial federal assistance

payments, whether or not the recipient entity is the

beneficiary of the program or provides assistance to the

individuals sought to be assisted by the program. See

United States v. Zyskind, 118 F.3d 113, 116 (2d Cir.

1997) (“Nothing in the language of § 666 suggests that

its reach is limited to organizations that were the direct

beneficiaries of federal funds. The jurisdictional sub-

section, (b), uses the word ‘receives,’ rather than the

phrase ‘is a beneficiary of.’”).

Tellingly, not even petitioner argues that the recipi-

ents of “benefits” under Section 666(b) are limited to

program beneficiaries. Petitioner does not dispute (Br.

22-23) that Section 666 applies to fiscal intermediaries

and other entities that administer or disburse funds

under a federal program. Such entities, of course, are

not the beneficiaries of an assistance program. A

hospital providing medical assistance with federal funds

intended for that purpose is no different from a fiscal

intermediary for purposes of Section 666.

Petitioner similarly argues (Br. 17, 24) that Medicare

payments to hospitals are not “benefits” because hospi-

tals are reimbursed for services performed. See also

NACDL Amicus Br. 14 (hospitals “do not * * * get

aid, they get paid”). That misses the point, because the

payments at issue are not simply commercial transac-

7 7 U.S.C. 2020 (1994 & Supp. IV 1998) (food stamps); 42 U.S.C.

421 (social security disability program); 42 U.S.C. 601 et seg. (wel-

fare); 42 U.S.C. 1396 et seg. (Medicaid); 42 U.S.C. 1437 et seq. (hous-

ing); 42 U.S.C. 5301 et seg. (community development).

eo. |

19

tions, see pp. 12-13, swpra, but are assistance funds.

“The inquiry is not whether there is a quid pro quo, but,

rather, whether the funds disbursed can be considered

Federal assistance within a specific statutory scheme

intended to promote public policy objectives and not

payments by the government as a commercial entity.”

Rooney, 986 F.2d at 35. The fact that hospitals are paid

or reimbursed in exchange for providing Medicare-

covered services does not mean that the payments are

not made under a federal assistance program.

The statutory language itself provides that benefits

can be in the form of “a grant, contract, subsidy, loan,

guarantee, insurance, or other form of Federal assis-

tance.” 18 U.S.C. 666(b) (emphasis added). “A straight-

forward reading of this text indicates that § 666(b)

encompasses many situations in which the government

receives consideration in return for federal assistance.”

United States v. Copeland, 143 F.3d 1439, 1441 (11th

Cir. 1998). Congress’s inclusion of the words “contract”

and “loan” are the most obvious indications that Con-

gress contemplated that the government could receive

consideration or a quid pro quo in return for extending

funds under a federal assistance program. “As a party

to a contract, the federal government presumably gets

something in return for its consideration, and a loan is

not typically a gift or charitable contribution.” United

States v. Nichols, 40 F.3d 999, 1000 (9th Cir. 1994) (per

curiam); see, e.g., United States v. Marmolejo, 89 F.3d

1185, 1190-1191 (5th Cir. 1996) (statute applied to

agency operating jail housing federal prisoners under

contact with federal government), aff’d on other

grounds sub nom. Salinas v. United States, 522 U.S. 52

(1997); Rooney, 986 F.2d at 34 (government-sponsored

20

loan qualified as a benefit even though recipient was

required to repay entire loan with interest).°

Petitioner further argues (Br. 22-24) that Section

666(b) does not apply to hospitals that receive Medicare

payments because hospitals do not administer a federal

program like the entities in Del Toro, Hinton, and

Mosley or otherwise disburse federal funds to an in-

tended beneficiary. The statute’s text, however, im-

poses no such requirement. The statute applies to any

entity that “receives * * * benefits * * * undera

Federal [assistance] program”; it draws no distinction

between entities that receive federal assistance pay-

ments as program beneficiary or administrator and

entities that receive federal assistance payments as

provider of medical services or other assistance to pro-

gram beneficiaries.’

8 Petitioner’s construction also conflicts with Congress’s intent

that Section 666 protect the federal assistance programs at issue

in Hinton, Mosley, and Del Toro. See pp. 14-15, supra. In each of

those instances, “the organization or city agency provided the

Federal government with a service by administering a government

program.” Rooney, 986 F.2d at 35; accord United States v.

Marmolejo, 89 F.3d at 1194 n.11. Yet petitioner concedes the

coverage of such entities. Pet. Br. 22-23.

® Petitioner remarkably asserts (Br. 23-24) that “[nJo federal

monies were ever distributed to WVHA” and that WVHA “does

not receive any funding from the federal government for its opera-

tional expenses.” Petitioner elsewhere in his brief (Br. 19-20)

acknowledges that Medicare pays hospitals for the costs and

expenses of providing covered services. Indeed, Medicare in 1993

paid WVHA $10 to $15 million, a portion of which was based on

fixed rates of pay for WVHA’s operating costs of providing inpa-

tient hospital care to Medicare patients. J.A. 27-28; see also 42

U.S.C. 1395ww(d) (1994 & Supp. III 1997) (prospective payment

system).

— ——_—_— i -

21

In any event, there is no principled reason to distin-

guish between the services provided by the entities at

issue in Del Toro, Hinton, and Mosley and the services

provided by hospitals participating under the Medicare

program. In both instances, the services are funded by

the federal program and provided in furtherance of a

federal mission. And the threat to the federal program

is the same whether the recipient affected by corrupion

administers federal funds or delivers medical serices

with federal assistance funds. Corruption affecting

both types of recipients threatens their stability and

impairs their capacity to provide the level and quality

of assistance envisioned by the federal program and

thereby adversely affects federal funds furnished by

the program.”

10 Contrary to the suggestion of petitioner’s amicus (NACDL

Br. 17-18), this case does not present a case of “guesswork reach-

ing out for lenity.” United States v. Wells, 519 U.S. 482, 499 (1997).

“The rule of lenity * * * applies only when, after consulting

traditional canons of statutory construction, [the Court is] left with

an ambiguous statute.” United States v. Shabani, 513 U.S. 10, 17

(1994). Here, both the text and history of Section 666 support the

treatment of Medicare payments to hospitals as benefits received

under a federal assistance program. By contrast, petitioner con-

strues the statute to protect only federal assistance payments that

do not reflect any element of compensation or reimbursement. At

the same time, however, petitioner acknowledges that the statute

extends to federal funds that are administered by recipients that

are not the intended beneficiaries and that are compensated for

their services. Because that interpretation has no textual support

or logical coherence, the rule of lenity has no application. See

Salinas, 522 U.S. at 66 (the “rule does not apply * * * when

invoked to engraft an illogical requirement to its text”).

22

3. Hospitals Are Aided By Medicare Funds

To the extent that Section 666(b) is read (wrongly,

we believe) to apply only to those recipients of federal

assistance funds that are themselves aided by the

funds, hospitals participating under Medicare meet that

requirement as well. The Medicare program provides a

guaranteed source of revenue to hospitals that provide

medical services to individuals who might not otherwise

seek or be able to afford medical care. See 49 Fed. Reg.

at 1639 (“The Medicare and Medicaid programs were

established for the purpose of providing medical ser-

vices to people who otherwise might not be financially

able to obtain them.”); see also Medicare Payment

Advisory Comm’n, Report to the Congress: Medicare

Payment Policy 61 (Mar. 1999) (prospective payment

rate adjustment under 42 U.S.C. 1395ww(d)(5)(F) for

hospitals serving a large number of indigent patients

“protect[s] access to care for Medicare and low-income

populations by assisting the hospitals they use’)

(emphasis added).

That source of revenue is significant. In 1997 alone,

the Medicare program paid more than $100 billion to

hospitals. 1999 Data Compendium, supra, at 10. As

the American Hospital Association, “the primary orga-

nization of hospitals in the United States,” recently ex-

plained to this Court, “Medicare payments for services

rendered to beneficiaries account for approximately

forty percent of the revenue of the average member

hospital. Hospitals * * * rely on Medicare as a major

source of revenue to assure their financial survival.”

Brief of Amici Curiae The American Hospital Associa-

tion and the Federation of American Health Systems at

1, Your Home Visiting Nurse Services, Inc. v. Shalala,

525 U.S. 449 (1999) (No. 97-1489); see also Pet. App. 7

23

(testimony by WVHA’s director of finance that “most

health care organizations collect a majority of their

funds from programs that are funded by the federal

government”). Thus, hospitals receive enormous

financial advantages from their participation in the

Medicare program.

B. Section 666(c) Does Not Exempt Medicare Payments Tu

Hospitals From The Statute’s Jurisdictional Coverage

Petitioner also relies on (Br. 19-21) Section 666(c),

which provides that “(t]his section does not apply to

bona fide salary, wages, fees, or other compensation

paid, or expenses paid or reimbursed, in the usual

course of business.” 18 U.S.C. 666(c). He argues (Br.

21) that, read “in conjunction,” subsections (b) and (c)

“clearly contemplate a distinction between benefits and

payments.” Subsection (c), however, does not exempt

from the statute Medicare payments that reimburse

hospitals for their costs and expenses of providing

covered services, and it does not alter the character of

such payments as “benefits” within the meaning of

subsection (b).

1! The American Hospital Association similarly acknowledged,

at the inception of the program, that Medicare provides financial

assistance to hospitals:

The enactment of Public Law 89-97 (Social Security Amend-

ments of 1965), commonly called Medicare, will be a great boon

to hospitals financially. Both hospitals and the medical profes-

sion have given thousands of hours of free care every year

since the profession and hospitals took root in this country.

Medicare will lift this enormous financial burden from hospi-

tals and enable them to improve their facilities, broaden their

services, train their personnel on a continuing basis, and take

other steps to continue the improvement of patient care.

Edwin L. Crosby, M.D., Director and Executive Vice President of

the Am. Hosp. Ass’n, The Atlantic Monthly 106 (July 1966).

24

1. The role of subsection (c) in Section 666 is to limit

the substantive scope of the criminal conduct prohibited

by Section 666—bribery under 18 U.S.C. 666(a)(2) and

solicitation under 18 U.S.C. 666(a)(1)(B)—clarifying

that bona fide salary (or other compensation or ex-

penses reimbursed) cannot be characterized as an im-

proper transaction. Subsection (c) thus “ensure[{s] that

the statute is not applied to ‘acceptable commercial and

business practices’”; the subsection has no application

“to the nature of the benefit that the agency receives

pursuant to the Federal program.” Marmolejo, 89 F.3d

at 1190 n.5 (quoting H.R. Rep. No. 797, 99th Cong., 2d

Sess. 30 (1986)).

Petitioner isolates the phrase “expenses paid or reim-

bursed” in arguing that Medicare payments received by

hospitals are exempt from statutory coverage. This

Court has repeatedly emphasized, however, that the

meaning of statutory language “cannot be determined

in isolation, but must be drawn from the context in

which it is used.” Deal v. United States, 508 U.S. 129,

132 (1993); see also Regions Hosp. v. Shalala, 522 U.S.

448, 460 n.5 (1998) (“In expounding a statute, we must

not be guided by a single sentence or member of a

sentence, but look to the provisions of the whole law,

and to its object and policy.”). The phrase “expenses

paid or reimbursed” in subsection (c) is surrounded by

the statutory terms “bona fide” and “in the ususal

course of business.” Those terms reveal Congress’s

intention to ensure the statute does not criminalize le-

gitimate, routine business transactions involving indi-

viduals. The adjective “bona fide” means “[pJerformed

or made in good faith,” Webster’s II New Riverside

University Dictionary 188 (1988), and it naturally

describes a payment that is not a sham transaction

masquerading a kickback. By contrast, “bona fide”

25

would be a meaningless way to limit the type of

qualifying federal financial assistance under Section

666(b), for all such assistance is “bona fide.” Similarly,

the phrase “usual course of business” would be

awkward language for Congress to use to restrict the

types of federal assistance programs protected by the

statute, for any government extension of funds under

such programs is within the usual course of the

government’s business. The phrase “expenses paid or

reimbursed,” taken in context, thus does not refer to

payments made under a federal assistance program

within the meaning of Section 666(b).

Other words surrounding the phrase “expenses paid

or reimbursed” similarly indicate that Congress in-

tended Section 666(c) to limit the types of payments

covered under Section 666(a), not the jurisdictional

provision of Section 666(b). The payments described

under Section 666(c) are “salary, wages, fees, and other

compensation paid, or expenses paid or reimbursed.” 18

U.S.C. 666(c) (emphasis added). The words “salary”

and “wages” connote payments to individuals, not pay-

ments to an “organization, government, or agency” that

is the recipient of financial assistance under Section

666(b). Under the well-established principles of

ejusdem generis and noscitur a sociis, the catch-all

description of “other compensation paid, or expenses

paid or reimbursed” similarly refers to payments to

individuals under Section 666(a), not payments to

entities under Section 666(b). See Brogan v. United

States, 522 U.S. 398, 403 n.2 (1998) (“Under the princi-

ple of ejusdem generis, when a general term follows a

specific one, the general term should be understood as a

reference to subjects akin to the one with specific

enumeration.”); Gustafson v. Alloyd Co., 513 U.S. 561,

575 (1995) (“[A] word is known by the company it keeps

(the doctrine of noscitur a sociis). This rule * * *

avoid[s] ascribing to one word a meaning so broad that

it is inconsistent with its accompanying words, thus

giving ‘unintended breadth to the Acts of Congress.’”)

(quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307

(1961)). Thus, by providing that “(tJhis section shall not

apply to bona fide salary, wages, fees, or other com-

pensation paid, or expenses paid or reimbursed, in the

usual course of business,” Congress meant to ensure

that individuals who receive legitimate compensation

payments would not be subject to the statute’s criminal

prohibitions.

2. Petitioner’s reliance on Section 666(c) also fails

because it violates “the elementary canon of con-

struction that a statute should be interpreted so as not

to render one part inoperative.” Department of Reve-

nue of Or. v. ACF Indus., Inc., 510 U.S. 332, 340 (1994)

(internal quotation marks omitted); accord Kawaauhau

v. Geiger, 523 U.S. 57, 61 (1998). To exclude from

statutory coverage any federal payment reflecting the

economic relationship of “compensation paid, or ex-

penses paid or reimbursed” would render the words

“contract” and “loan” in Section 666(b) meaningless, as

those forms of federal assistance by their nature include

an element of compensation or quid pro quo for the

federal funds. See p. 19, supra. As the Ninth Circuit

has explained, “to extrapolate from [the language of

Section 666(c)] a rule that the statute covers only

agencies that receive gifts or charitable contributions

from the federal government, and excludes all agencies

that provide the federal government with some form of

quid pro quo” would “not square with the remainder of

§ 666, which expressly does cover organizations receiv-

ing ‘benefits . . . under a Federal program involving a

. . contract .. . [or] loan’.” Nichols, 40 F.3d at 1000.

27

This Court also should reject petitioner’s interpre-

tation of Section 666(c) because it would exempt from

the statute’s protection federal assistance programs in

which federal funds are used to compensate the

recipient agency or entity for administering a federal

program, including those programs involved in Hinton,

Mosley, and Del Toro. See Salinas, 522 U.S. at 58

(declining to apply Section 666 inconsistently with

Congress’s intent to reach the situations at issue in Del

Toro, Mosley, and Hinton). In each of those decisions,

the federal assistance program at issue paid the entity

for its costs and expenses. See Hinton, 683 F.2d at 198-

200 (Community Development Block Grant program

paid organization’s costs and employees’ salaries);

Mosley, 659 F.2d at 815-816 (CETA program paid

agency’s costs and employee salaries); Del Toro, 513

F.2d at 661-662 (Model Cities Program paid 100% of

agency’s costs and 80% of its employees’ salaries).

3. The history of Section 666(c) confirms Congress’s

intention to limit the statute’s criminal prohibitions, not

its jurisdictional scope. When Congress in 1986 added

the current version of Section 666(c), Pub. L. No. 99-

646, § 59(a), 100 Stat. 3612, the House Report explained

that it was amending the statute “to avoid its possible

application to acceptable commercial and business prac-

tices.” H.R. Rep. No. 797, 99th Cong., 2d Sess. 30

(1986). The House Report explained that (id. at 30 n.9):

[Section 666] prohibits bribery of certain public

officials, but does not seek to constrain lawful com-

mercial business transactions. Thus, 18 U.S.C. 666

prohibits corruptly giving or receiving anything of

value for the purpose of influencing or being in-

fluenced in connection with any business, trans-

action, or series of transactions. The provision

28

parallels the bank bribery provision (18 U.S.C. 215).

See Pub. L. No. 99-370, 99 Stat. __ (1986). See also

H.R. Rep. No. 335, 99th Cong., Ist Sess. 1985.

Those statements reflect a congressional intent to

ensure that good faith or legitimate payments to

individuals are not punished as bribery.

The Report’s reference to the parallel bank bribery

provision also is significant. Congress earlier had

amended the bank bribery provision in 18 U.S.C. 215 to

include a subsection (c) that contains language identical

to that in Section 666(c). Bank Bribery Amendments

Act of 1985, Pub. L. No. 99-370, § 2, 100 Stat. 779. The

history of Section 215(c) demonstrates that the statu-

tory language was intended to immunize legitimate

business payments to employees from criminal punish-

ment. See H.R. Rep. No. 335, 99th Cong., Ist Sess. 1, 7

(1985) (purpose of Section 215(c) was to define “the

prohibited conduct” and to exempt from criminal pun-

ishment a “bonus paid an employee or the payment or

reimbursement of business expenses incurred by the

employee” or when “employees of credit unions receive

their salaries directly from the company with which the

credit union is connected”). The origins of Section

666(c) thus support the conclusion that the provision

limits the bribery and solicitation of bribery offenses

set forth in Section 666, and not the types of federal

programs protected by the statute.

C. The Coverage Of Hospitals Under Section 666 Is

Consistent With This Court’s Precedents Construing

Federal Anti-Discrimination Statutes

Treating hospitals as recipients of benefits under a

federal assistance program for purposes of Section 666

accords with decisions of this Court that have construed

similarly worded statutes that prohibit discrimination

29

under programs or activities “receiving Federal finan-

cial assistance.” 20 U.S.C. 1681(a) (Title IX); 29 U.S.C.

794 (Section 504 of Rehabilitation Act); 42 U.S.C. 2000d

(Title VI). This Court has construed that language to

require courts “to identify the recipient of federal

financial assistance,” i.e., the entity that enters into an

“agreement to accept the federal funds,” and “actually

‘receive[s]’” or is “intended to receive the federal

money.” United States Dep’t of Transp. v. Paralyzed

Veterans of America, 477 U.S. 597, 605, 606 (1986);

Grove City College v. Bell, 465 U.S. 555, 564-570 (1984)

(schools that participate in student loan programs are

recipients of federal funds under Title [X, whether the

school directly receives federal funds or students

receive the funds earmarked for educational purposes).

Petitioner agrees that determining the scope of the

civil rights statutes presents an “analogous question,”

but he contends (Br. 24-25) that hospitals profit only

indirectly from Medicare payments. Petitioner relies

(Br. 25) on the principle that the coverage of the anti-

discrimination statutes does not follow federal funds

“past the recipient to those who merely benefit” from

the funds. Paralyzed Veterans of America, 477 U.S. at

607; National Collegiate Athletic Ass’n v. Smith, 525

U.S. 459, 468 (1999) (“[e]ntities that receive federal

assistance, whether directly or through an intermedi-

ary, are recipients within the meaning of Title IX;

entities that only benefit economically from federal

assistance are not”).

Hospitals receiving Medicare payments, however,

are actual recipients of federal payments, not mere

indirect beneficiaries from assistance to other parties.

Hospitals enter into provider agreements with the

Secretary for the very purpose of obtaining federal

payments under Medicare, 42 U.S.C. 1395cc, and

30

hospitals are the direct, actual, and intended recipients

of assistance funds under Medicare. As this Court has

noted, the “key is to identify the recipient”; if the

program “extends money, then the recipient * * * is

the entity that receives the money.” Paralyzed

Veterans of America, 477 U.S. at 607 & n.11; see also id.

at 606 (rejecting argument that “confuses intended

beneficiaries with intended recipients”). It therefore

has been the Secretary’s long-standing view that

hospitals reimbursed under the Medicare program are

recipients of “Federal financial assistance” under Title

VI and Section 504 of the Rehabilitation Act. 38 Fed.

Reg. 17,978-17,984 (1973); 49 Fed. Reg. at 1639; see also

United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039

(5th Cir. 1984), cert. denied, 469 U.S. 1189 (1985). Ac-

cordingly, hospitals participating in the Medicare pro-

gram must agree to comply with the anti-discrimination

statutes applicable to recipients of federal financial

assistance. 42 C.F.R. 489.10(b). The well-established

treatment of hospitals as recipients of “Federal finan-

cial assistance” under anti-discrimination laws thus

strongly supports the conclusion that hospitals paid by

Medicare are the recipients of “benefits * * * under a

Federal [assistance] program.”

D. The Application Of Section 666 To Criminal Acts

Involving Hospitals That Receive Medicare Payments Is

Consistent With Principles Of Federalism

Petitioner finally argues (Br. 26) the application of

Section 666 to payments for “services provided under a

federal program * * * would, in effect, lead to

virtually limitless federal liability” and offend principles

of federalism that recognize the States’ primary respon-

sibility for enforcing the criminal laws. Petitioner’s

amicus similarly contends (NACDL Amicus Br. 29) that

31

Congress lacks power under the Spending Clause, U.S.

Const. Art. I, § 8, Cl. 1, to apply Section 666 to prohibit

bribery involving “any organization that in any way

receives in a year more than $10,000 from any source so

long as those funds had at any point passed through the

bailiwick of a federal program.”

This case, however, presents no issue of federalism.

Hospitals participating under Medicare receive pay-

ments directly under the program. 42 U.S.C. 1395f,

1395g, 1895n. And they receive those payments only as

a result of their voluntary choice to participate in the

program. 42 U.S.C. 1395cc. Cf. Paralyzed Veterans of

America, 477 U.S. at 606 (“By limiting coverage to

recipients, Congress imposes the obligations of § 504

upon those who are in a position to accept or reject

those obligations as a part of the decision whether or

not to ‘receive’ federal funds.”).” And, “(aJlthough the

2 Petitioner and his amicus argue (Pet. Br. 17-18; NACDL

Amicus Br. 3, 11-12 & n.12) that interpreting the term “benefits” to

include payments under federal assistance programs would sup-

port extending Section 666 to educational institutions that receive

tuition payments funded by federally guaranteed loans and gro-

cery stores that receive food stamps from customers, which peti-

tioner contends (Br. 17) would entail “a virtually limitless reach of

Congress’s authority under the Spending Power.” Assuming that

Section 666 would reach those distinct statutory programs, it

would not exceed Congress’s power. Grocery stores and schools

voluntarily choose to participate in a federal assistance program in

order to receive federal money. See 7 U.S.C. 2018 (1994 & Supp.

IV 1998) (food stamp program); 20 U.S.C. 1094(a) (student loan

program). And the government has an interest in ensuring the

integrity of program funds extended to those institutions. See,

e.g., 7 U.S.C. 2018(a)(1) (Supp. IV 1998) (“business integrity and

reputation of the applicant” relevant in determining eligibility to

accept and redeem food stamp coupons); 20 U.S.C. 1094(a)(1) and

(3) (requiring school to “use funds received * * * and any interest

or other earnings thereon solely for the purpose specified in and in

32

extent of the federal government’s assistance programs

will bring many organizations and agencies within the

statute’s scope, the statute limits its reach to entities

that receive a substantial amount of federal funds and

to agents who have the authority to effect significant

transactions.” United States v. Westmoreland, 841

F.2d 572, 577 (5th Cir.), cert. denied, 488 U.S. 820

(1988). In those circumstances, the application of Sec-

tion 666 to proscribe significant acts of theft, fraud, or

bribery involving hospitals receiving Medicare pay-

ments does not approach (let alone exceed) the limits of

Congress’s power. See Salinas, 522 U.S. at 61 (applica-

tion of statute to official who accepted bribes in con-

nection with prisoner held in a jail paid for in significant

part by federal funds did not “extend federal power

beyond its proper bounds”); see also Westfall v. United

States, 274 U.S. 256, 258-259 (1927) (Holmes, J.) (up-

holding constitutionality of statute criminalizing misap-

plication of funds of state banks belonging to Federal

Reserve System).

This case does not present the question whether

federal funds must be linked to the conduct prohibited

by Section 666. In Salinas, this Court rejected the

contention that Section 666 requires the bribe to affect

federal funds, but it reserved the question “whether the

statute requires some other kind of connection between

a bribe and the expenditure of federal funds.” 522 U.S.

at 59. Petitioner has never argued in this case that

there was not a sufficient connection between his giving

a kickback to WVHA’s chief financial officer for a loan

accordance with” student loan program and to “maintain such

administrative and fiscal procedures and records as may be

necessary to ensure proper and efficient administration of funds

received from the Secretary or from students” under program).

—— ae eh

33

and WVHA’s receipt of Medicare funds. In any event,

under petitioner’s construction of the word “benefits,”

Section 666 would not apply even to those acts of fraud,

bribery, or theft by a hospital official that directly

affected Medicare funds. See, e.g., United States v.

LaHue, 170 F.3d 1026 (10th Cir. 1999) (Pet. App. 18a-

32a) (physicians who received bribes from hospitals in

return for referring Medicare patients to hospitals).

That construction would defeat the federal govern-

ment’s strong interest in protecting the integrity of

entities that receive large amounts of federal assistance

payments, while failing to achieve any interest in pre-

serving the proper federal-state balance.”

13 Petitioner concludes by asserting (Br. 27) that a reversal of

his Section 666 convictions would entitle him to a reversal of his

count of conviction for conspiracy and to a remand with respect to

his mail and wire fraud counts of conviction. Petitioner has waived

those contentions, however, by raising them for the first time in

his merits brief before this Court. See S. Ct. Rules 14.1(a) and

24.1(a). In any event, those arguments lack merit. Petitioner

asserts no basis for reversal of his mail and wire fraud convictions,

and the mail and wire fraud offenses were charged as objects of the

conspiracy. J.A. 15. In those circumstances, no rational jury could

have found that the government failed to establish either of those

two valid objects of the conspiracy. See, e.g., United States v. Zvi,

168 F.3d 49, 55 (2d Cir.), cert. denied, 120 S. Ct. 176 (1999). Thus, as

petitioner conceded before the district court in seeking bond

pending this Court’s review, if petitioner is successful in obtaining

a reversal of his Section 666 convictions, “he will still be convicted

under Count Three, Mail Fraud, 18 U.S.C. § 1341; Counts Four and

Five, Wire Fraud, 18 U.S.C. § 1343; and Count Six, Conspiracy 18

U.S.C. § 871.” 11/5/99 Motion and Memorandum 5.

34

CONCLUSION

The judgment of the court of appeals should be

affirmed.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

JAMES K. ROBINSON

Assistant Attorney General

MICHAEL R. DREEBEN

Deputy Solicitor General

LISA SCHIAVO BLATT

Assistant to the Solicitor

JANUARY 2000

APPENDIX

Section 666 of Title 18, U.S. Code, provides:

§ 666. Theft or bribery concerning programs receiving

Federal funds.

(a) Whoever, if the circumstance described in

subsection (b) of this section exists —

(1) being an agent of an organization, or of a

State, local, or Indian tribal government, or any

agency thereof -

(A) embezzles, steals, obtains by fraud, or

otherwise without authority knowingly con-

verts to the use of any person other than the

rightful owner or intentionally misapplies, pro-

perty that -

(i) is valued at $5,000 or more, and

(ii) is owned by, or is under the care,

custody, or control of such organization,

government, or agency; or

(B) corruptly solicits or demands for the

benefit of any person, or accepts or agrees to

accept, anything of value from any person,

intending to be influenced or rewarded in

connection with any business, transaction, or

series of transactions of such organization, go-

vernment, or agency involving any thing of

value of $5,000 or more; or

(2) corruptly gives, offers, or agrees to give

anything of value to any person, with intent to

influence or reward an agent of an organization or

(la)

2a

of a State, local or Indian tribal government, or

any agency thereof, in connection with any busi-

ness, transaction, or series of transactions of such

organization, government, or agency involving

anything of value of $5,000 or more;

shall be fined under this title, imprisoned not more than

10 years, or both.

(b) The circumstance referred to in subsection (a) of

this section is that the organization, government, or

agency receives, in any one year period, benefits in

excess of $10,000 under a Federal program involving a

grant, contract, subsidy, loan, guarantee, insurance, or

other form of Federal assistance.

(c) This section does not apply to bona fide salary,

wages, fees, or other compensation paid, or expenses

paid or reimbursed, in the usual course of business.

(d) As used in this section -

(1) the term “agent” means a person author-

ized to act on behalf of another person or a gov-

ernment and, in the case of an organization or

government, includes a servant or employee, and a

partner, director, officer, manager, and repre-

sentative;

(2) the term “government agency” means a

subdivision of the executive, legislative, judicial, or

other branch of government, including a depart-

ment, independent establishment, commission,

administration, authority, board, and bureau, and

a corporation or other legal entity established, and

subject to control, by a government or govern-

3a

ment for the execution of a governmental or inter-

governmental program,

(3) the term “local” means of or pertaining to a

political subdivision within a State;

(4) the term “State” includes a State of the

United States, the District of Columbia, and any

commonwealth, territory, or possession of the

United States; and

(5) the term “in any one-year period” means a

continuous period that commences no earlier than

twelve months before the commission of the

offense or that ends no later than twelve months

after the commission of the offense. Such period

may include time both before and after the

commission of the offense.