# Respondents Brief — Fischer v. United States

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0322%3A6

## Record

- **Collection:** Supreme Court brief
- **Document type:** Respondents Brief
- **Published:** January 1, 2000
- **Citation:** 529 U.S. 667

## Text

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0322%3A6. Public record. Not legal advice.