USA v. Winner (Sentencing Memo)

IN THE UNITED STATES DISTRICT COURTDISTRICT OF RHODE ISLAND

UNITED STATES OF AMERICA ::

v. : Criminal No. 11-000169S:

GARY WINNER :

UNITED STATES’ SENTENCING MEMORANDUM

I. Introduction

On September 29, 2011, the United States filed an Information and Plea Agreement in the

above-referenced matter. The defendant waived Indictment and, on November 17, 2011, pleaded

guilty to the four-count Information charging him with two counts of health care fraud, 18 U.S.C.

§ 1347, the introduction of an adulterated and misbranded medical device into interstate

commerce, 21 U.S.C. §§ 331(a) and 333(a)(2), and one count of money laundering, 18 U.S.C. §

1957. In connection with his guilty plea, defendant admitted that the loss to Medicare from his

health care fraud offenses was $2,210,152 and agreed to forfeit up to that amount.

Presently, sentencing is scheduled for February 10, 2011. The Presentence Report (PSR)

calculates defendant’s Guideline range at 70-87 months. The defendant objects to the PSR’s

inclusion of a two-level enhancement pursuant to Guideline § 2B1.1(b)(2)(A)(ii) for committing

his offense through mass-marketing, the PSR’s inclusion of a two-level enhancement pursuant to

Guideline § 2B1.1(b)(9)(C) because the offense involved sophisticated means, and a four-level

enhancement pursuant to Guideline §§ 3A1.1(b)(1) and (b)(2) because the defendant knew that

his offense included multiple vulnerable victims, namely senior citizens over the age of 65. In

addition, for various reasons, the defendant contends that instead of a sentence within the range

of 70-87 months, a reasonable sentence in this case would be eighteen months. The United

Case 1:11-cr-00169-S-DLM Document 20 Filed 02/09/12 of 15 PageID #: 196

States addresses each of defendant’s objections below, and responds to his contention that the

factors outlined in 18 U.S.C. § 3553(a) warrant a sentence well below the Guideline range.

II. Argument

A. Defendant’s Objections to the PSR

The defendant posits three objections to the PSR, two of which the United States does not

contest. The United States agrees that despite the seriousness of defendant’s four-year,

multimillion dollar, nationwide health care fraud schemes, the defendant’s actions do not

evidence the kind of “especially complex or especially intricate offense conduct pertaining to the

execution of or concealment of the offense” to warrant an enhancement pursuant to Guideline

§ 2B1.1(b)(9)(C). Guideline § 2B1.1 Application Note 8(B). Further, although the United States

contends that the senior citizens whom defendant exploited during the commission of his offense

are in fact victims within the meaning of Guideline § 3A1.1, the United States recognizes that the

First Circuit has cautioned against the presumed inclusion of categories of people, such as the

elderly, in the “vulnerable victim” category. See United States v. Fosher, 124 F.3d 52, 56 (1st

Cir. 1997). Thus, absent more specific evidence regarding the elderly victims of defendant’s

offenses, application of Guideline § 2B1.1(b)(9)(C) is inappropriate here.

Defendant’s objection to the Guidelines enhancement for telemarketing, however, should

be rejected. The defendant improperly contends that the mass-marketing enhancement under

Guideline § 2B1.1(b)(2)(A)(ii) does not apply unless the defendant mass-marketed to the victims

of the offense.

Defendant’s argument is contrary to the language of the Guidelines and relevant case law.

Section 2B1.1(b)(2)(A) states:

2


(Apply the greatest) If the offense ---

(i) involved 10 or more victims; or (ii) was committed through massmarketing, increase by 2 levels.

The clear language of the Guidelines does not limit the application of

§ 2B1.1(b)(2)(A)(ii) to situations where the defendant used mass-marketing to target victims of

the offense, but applies in any situation where the offense itself was committed through mass-

marketing.

The Fifth Circuit recently rejected the same argument that defendant maintains here, and

distinguished the case that defendant relies on in making his argument, United States v. Miller,

588 F.3d 560 (8th Cir. 2009). In United States v. Isiwele, 635 F.3d 196 (5th Cir. 2011), Isiwele

hired a recruiter to engage in a campaign of face-to-face marketing which was intended to reach a

large number of people. The recruiter gathered individuals’ Medicare and Medicaid information

which she then sold to Isiwele, who used the information to claim reimbursement from Medicare

and Medicaid, falsely claiming that he had sold these individuals wheelchairs. The court found

that although the victims of Isiwele’s crime were Medicare and Medicaid, the enhancement for

mass-marketing applied, citing previous Fifth Circuit case law:

The plain language of the Guidelines forecloses [the defendant’s] argument thatthe mass-marketing enhancement does not apply to his conduct. The mass-marketing enhancement is applicable if an “offense . . . was committed throughmass-marketing.” U.S.S.G. § 2B1.1(b)(2)(A)(ii). ‘Offense’ means the offense ofconviction and all relevant conduct under § 1B1.3 (Relevant conduct) unless adifferent meaning is specified or is otherwise clear from the context.” U.S.S.G. §1B1.1 cmt. n.1(H) . . . . (emphasis added).

Isiwele, 635 F.3d at 204-05 (quoting United States v. Mauskar, 557 F3d 219, 233 (5th Cir. 2009)).

Here, where the defendant utilized telemarketing to accomplish his criminal offenses, the

3


application of the mass-marketing enhancement is appropriate and defendant’s objection to its

application should be rejected.1

Further, the defendant urges the Court to find that the “proper scope” of the mass-

marketing enhancement is limited to “consumer fraud” crimes in which certain offenses

committed through telemarketing receive increased penalties. Defendant ignores the fact that

Section 1834(a)(17)(B) of the Social Security Act, 42 U.S.C. § 1395m(a)(17), prohibits suppliers

of durable medical equipment (DME), like himself, from making unsolicited telephone calls to

Medicare beneficiaries in an attempt to sell them items covered by Medicare Part B, except in

situations not applicable here. In fact, Section 1834(a)(17)(B) of the Social Security Act, 42

U.S.C. §1395m(a)(17)(B), specifically prohibits payment to a supplier who knowingly submits a

claim generated pursuant to a prohibited telephone solicitation. The purpose of the law is so that

Medicare beneficiaries are not pressured into buying items they neither need nor want and that

taxpayers and beneficiaries are not stuck paying the tab for unnecessary items. Thus, although

the considerations underlying the prohibition on telemarketing in the Medicare context are

slightly different than those which have lead to enhanced penalties for telemarketing crimes in

1 The defendant acknowledges the decision in Isiwele. Omitted, however, from thedefendant’s Sentencing Memorandum, is mention of the fact that the Isiwele court acknowledgedthat the circumstances of its prior case, United States v. Mauskar, 557 F.3d 219 (5th Cir. 2009),were dissimilar to Isiwele’s, something that defendant makes much of in his SentencingMemorandum in attempting to convince this Court not to follow Isiwele. Def.’s Sent. Mem. at 3n.2. The Isiwele court found the reasoning of Mauskar instructive: “[i]mplicit in the Mauskarcourt’s holding is the determination that the mass marketing efforts of the recruiters who escortedbeneficiaries to the defendant’s medical clinic was ‘relevant conduct’ constituting part of the‘offense’of health care fraud, such that the mass-marketing enhancement applied to the uiters’co-defendant. We explicitly adopt that reasoning today in holding that the district court did noterr in finding Isiwele eligible for the mass marketing enhancement on the basis of [hisrecruiter’s] face-to-face recruitment of Medicare/Medicaid beneficiaries. Isiwele, 635 F.3d at205.

4


the consumer fraud context, the application of the telemarketing enhancement is particularly

appropriate here were the success of the defendant’s scheme depended upon telemarketing and

he engaged in such practices despite knowing that they were prohibited under the Social Security

Act.

B. The Guideline Range Does Not Overstate the Seriousness ofDefendant’s Conduct

Defendant’s primary argument in support of a sentence outside the Guideline Range, is

that the loss table in Guideline § 2B1.1(b) is inherently flawed and overstates the seriousness of

his conduct. Defendant maintains that the loss table lacks an empirical basis, and thus, the Court

should not heed the advisory Guideline range that results from its application in this case. He

correctly points out that the Court, based on Kimbrough v. United States, 552 U.S. 85, 109-10

(2007), possesses the authority to deviate from the Guidelines based on policy grounds, including

disagreement with the guidelines.2

The changes in the loss table contained in Guideline § 2B1.1(b) that have occurred since

the Guidelines were implemented are unlike the crack/powder disparity the Supreme Court

addressed in Kimbrough. As the Kimbrough Court explained, in drafting the crack cocaine

guidelines, the Sentencing Commission failed to account for “empirical data and national

experience.” Id. at 109. Moreover, the Commission itself recognized that the crack/powder

disparity produced disproportionately harsh sentences for crack offenders. Id. at 110.

2 The defendant takes his Kimbrough based argument a step further and maintains that theCourt should determine the appropriate sentence in this case using an empirical approach. Hecites no case law in support of his position, and his suggestion is at odds with well-establishedcase law that outlines the proper approach courts are to follow when fashioning an appropriatesentence. See United States v. Pelletier, 469 F.3d 194, 203 (1st Cir. 2006).

5


Such is not the case with the loss table contained in Guideline § 2B1.1(b). In

implementing the loss table contained in Guideline § 2B1.1(b), the Sentencing Commission

“prescrib[ed] ‘heartland’ offense-level adjustments for victim loss” that “[were] based on

empirical evidence that ‘the amount of loss’ was among the ‘most important factors that

determined sentence length’ prior to the advent of the Sentencing Guidelines.” United States v.

Gregorio, 956 F.2d 341, 347 (1st Cir. 1992). At least one court has rejected a Kimbrough based

argument that it should flat out reject the application of amendments to Section 2B1.1 of the

Guidelines absent some actual policy disagreement by the court with the provisions. See United

States v. Sandoval, —F.3d—, 2011 WL 6762659, * 2-3 (7th Cir. Dec. 27, 2011).

Defendant cites to several cases in which courts have held that rote application of the

Guidelines results in offense levels that bear little relation to the conduct being punished . See

United States v. Adelson, 441 F.Supp. 2d 506 (S.D.N.Y. 2006), aff’d 301Fed. Appx. 93 (2d Cir.

2008); United States v. Parris, 573 F. Supp. 2d 744 (E.D.N.Y. 2008). Such is not the case here

and the cases cited by defendant are distinguishable.3 In Parris and Adelson courts were faced

with substantial loss amounts, which, in securities fraud cases such as those, often escalate

rapidly. The relevant Guideline ranges were also increased by a number of enhancements

applicable in such cases where the defendant was an officer of a publicly-traded company. In

Parris, the Guidelines calculation led to a sentencing range of 360 months to life in prison. See

573 F. Supp. 2d at 750. In Adelson, the district court found that the defendant’s guideline range

3 The defendant also cites United States v. Watt, 707 F. Supp. 2d 149, 151 (D. Mass.2010). In Watt, the defendant, a young computer programmer with no criminal history, did notprofit from his participation in the identity fraud conspiracy, but instead created a sniffer programfor the challenge of besting large corporations’ security programs. 707 F. Supp. 2d at 155-58.

6


would have been life in prison, even with a substantial reduction in the loss amount based on the

fact that the defendant was late to join the conspiracy. See 441 F. Supp. 2d at 510-11.

The concerns expressed in Parris and Adelson are not present here. The defendant’s

Guideline Range did not escalate exponentially based on sentencing enhancements applicable in

most securities fraud cases against officers and directors of publicly traded companies.

Moreover, unlike in a securities fraud case, where a district court is required to make complex

loss calculation determinations based on the extent to which the stock-price drop is attributable

to fraud, the loss here is directly attributable to the amount the defendant fraudulently billed to

Medicare. Here, the defendant put $2.2 million of fraudulently obtained money in his pocket,

and he is solely responsible for the planning, execution and success of the schemes which lasted

four years and spanned the nation. Indeed, the defendant’s scheme resulted in substantial profits:

the defendant’s adjusted gross income for the years 2007 through 2009 was $823,901,

$1,947,760, and $1,207,688, respectively. See PSR ¶ 60. In addition, the defendant stands

convicted of four criminal offenses: two separate counts of health care fraud in violation of 18

U.S.C. § 1347, the introduction of an adulterated and misbranded medical device into interstate

commerce, 21 U.S.C. §§ 331(a) and 333(a)(2), and one count of money laundering, 18 U.S.C. §

1957. Thus, the loss of $2.2 million dollars and corresponding offense level are appropriate

measures of the severity of the offense.

Moreover, even though some courts have criticized the Guidelines in the securities fraud

context, others have upheld substantial sentences for first-time white collar criminals who had

served as the leaders of major public companies. See United States v. Ebbers, 458 F.3d 110,

129-30 (2d Cir. 2006) (25-year sentence for CEO of World Com was reasonable); United States

7


v. Rigas, 583 F.3d 108, 121-24 (2d Cir. 2009) (12-year and 17-year sentences for top officers at

Adelphia were substantively reasonable).

More to the point, other cases involving loss amounts in the neighborhood of those

caused by the defendant have resulted in sentences greater than the advisory Guidelines range

here. See United States v. Naranjo, 634 F.3d 1198, 1206 (11th Cr. 2011) (affirming 120-month

sentence of imprisonment for conspiracy, fraud and money laundering relating to Ponzi scheme

resulting in losses of approximately $2,747,137.47; district court also applied victim and

leadership enhancements); United States v. Romero, 410 Fed. Appx. 460, 462 (3d Cir. 2010)

(unpublished) (affirming 150-month sentence for fraud convictions involving loss of

approximately $1,884,874; enhancements included abuse of position of trust, number of victims,

vulnerable victim, and an upward departure for cause extreme psychological injury); United

States v. Garcia-Pastrana, 584 F.3d 351, 393-94 (1st Cir. 2009) (sentences of 210 months and

108 months for defendants convicted of embezzling approximately $6.6 million from health care

benefit program and of money laundering were not substantively unreasonable; sentencing

enhancements applied), cert. denied, 130 S. Ct. 1724 (2010), and cert. denied, 130 S. Ct. 3303

(2010); United States v. Aenlle, 327 Fed. Appx. 152, 153 (11th Cir. 2009) (unpublished)

(affirming sentence of 84-months for defendant who submitted false claims to Medicare for

medically unnecessary medications where total loss amount equaled $1,048,487); Arakelian v.

United States, 2009 WL 211486 (S.D.N.Y. 2009) (defendant sentenced to 108 months in prison

based on guilty plea to fraud scheme resulting in approximately $4 million in loss; other

enhancements included more that 50 victims, obstruction of justice and leadership role;

defendant received acceptance credit). Thus, despite his attempt to argue otherwise, the

8


defendant’s Guidelines Sentencing Range, as evidenced by the sentences in other comparable

cases, does not overstate the seriousness of his offenses.

C. Sentencing Factors Pursuant to 18 U.S.C. § 3553(a)

As this Court is well-aware, after establishing the appropriate Guidelines Sentencing

Range, determining the appropriateness of any departures, the Court should then weigh the

sentencing factors enumerated in 18 U.S.C. § 3553(a) and any other considerations that may be

relevant in a particular case, in fashioning an appropriate sentence. Pelletier, 469 F.3d at 203.

All of these exercises inform the Court's assessment of whether to sentence the defendant below,

within, or above the GSR. Id.

(1) Defendant’s History and Characteristics

The defendant’s explanation for his conduct is not unlike other white collar criminals that

have stood before this Court. At the time of sentencing, they urge the Court to find that they are

fully rehabilitated, there is little chance of recidivism, and that little need exists to punish them

because of the chaos to their working and family lives that has already resulted from their crimes.

In the defendant’s case, those arguments understate the gravity of his offense.

The defendant did not commit one isolated criminal act. Over the course of the scheme,

in order to bill Medicare for the medically unnecessary arthritic packages and penis pumps, the

defendant made thousands of claims to Medicare that he knew were false. He claims in his

sentencing memorandum that the highly regulated nature of the Medicare program somehow

contributed to the commission of his crimes. Def.’s Sent. Mem. at 20-1. This statement is false

and indeed, the defendant’s continued reluctance to acknowledge his knowing violation of the

law, provides ample basis to reject his request for a sentence below the Guidelines range.

9


In pleading guilty, the defendant admitted to knowing that telemarketing Medicare

beneficiaries was prohibited. During the investigation of this case, former employees of the

defendant’s informed investigators that the defendant was aware that cold-calling Medicare

beneficiaries was against Medicare regulations and specifically instructed his employees never to

tell Medicare representatives that Planned Eldercare was initiating calls to beneficiaries.

In addition, the defendant knew that the waiver of co-payments was prohibited under

Medicare guidelines. Multiple employees informed investigators that they had informed the

defendant that he was required to charge copayments to Medicare beneficiaries. One former

employee reported that in response, the defendant remarked that if he did not waive copays, he

would lose business.

Furthermore, the defendant had a policy in place at Planned Eldercare to bill Medicare for

as many DME products as possible without regard to whether beneficiaries actually requested the

products or had a medical need for the items. Many Planned Eldercare employees questioned the

defendant about this policy and when they did, the defendant typically responded by saying that

“it doesn’t cost the client anything as the government is paying for it, and that the government

would just print more money, so order more.” In responding to Medicare beneficiaries who

contacted Planned Eldercare to complain about receiving items that they did not order, defendant

stated “[i]f you don’t need them, put them under the sink.” In sum, over the course of the four

years he committed his offenses, the defendant repeatedly, knowingly, violated the prohibitions

on the way in which DME operators may operate in order to accomplish his scheme. He billed

Medicare for DME products that individuals did not need, order or want, simply to line his own

pockets.

10


The defendant’s history and characteristics are adequately detailed in the PSR prepared by

the probation department. As a supplement to the PSR, defendant has submitted numerous

letters and an affidavit from Bushan S. Agharkar. This extended discussion of defendant’s

mental health and his treatment as a child does not provide a justification for sentencing him

below the Guideline range – this is not a case where the defendant suffered from a reduced

mental capacity during the commission of the offense. At the most, defendant’s psychological

portrait explains his greed and provides the motive that lead him to commit thousands of criminal

acts over the course of committing the offenses of which he stands convicted.

(2) Nature and Circumstances of the Offense

Medicare fraud affects every citizen in the United States. Waste, fraud and abuse take

critical resources out of the health care system, and contribute to the rising cost of health care for

all Americans. Here, the defendant has admitted to receiving approximately $2.2 million in

fraudulent payments from Medicare. The defendant knowingly ran his multimillion dollar,

nationwide, company in violation of Medicare law and regulations that would have prevented the

schemes’ success. He billed DME equipment to the Government and then sent beneficiaries

packages of items they did not want, need, or order. He billed Medicare for penis enlargers that

he purchased from X-rated websites and billed them to Medicare as Medical devices. Moreover,

he created inserts to the pump packages that falsely instructed beneficiaries on the medical

benefits of repeated use of the items.

Although Medicare is the true victim here, the defendant’s actions had wide-ranging

impact on many, many people. The investigation into defendant’s practices came about because

many beneficiaries, or their family members, took the time to complain to, among other entities,

11


the Centers for Medicare and Medicaid Services (CMS) about the fact that they had received

items they did not want or order. Beneficiaries often expressed concern and real agitation at the

fact that they had received boxes of items that they did not order. Many were anxious concerning

whether the billing of these items to their Medicare numbers would impact their future receipt of

DME should they need it. Many beneficiaries took steps to attempt to return the items to

Planend Eldercare, often times paying for the postage out of their own pockets. Others report

spending large amounts of time on the phone attempting to reach someone at Planned Eldercar in

order to arrange to return the items.

Indeed, interviews with former employees and beneficiaries suggest that defendant

received hundreds of complaints each month from beneficiaries about the fact that they had

received items they did not order. Some beneficiaries that received packages from Planned

Eldercare lived in such small apartments that the large boxes they received actually impacted

their living conditions. None of these complaints made an impact on the defendant, however,

and he continued his unlawful business practices and reaping the profits. Thus, the sentence

imposed by this Court must take into account the loss to Medicare, the impact on the nation’s

health system caused by the defendant’s conduct, and the impact that the defendant’s actions had

on the hundreds of Medicare beneficiaries of whom he took advantage. For all of the above

reasons, the Court should reject defendant’s suggestion that a sentence below the Guideline range

is warranted and instead find that based on the nature of the offense, a sentence at the low end of

the Guideline range is appropriate.

(3) The Need for the Sentence Imposed

Any sentence imposed by this Court also needs to reflect the seriousness of the offense,

12


promote respect for the law and to provide just punishment for the offense. Defendant’s conduct

in this case spanned a four-year period, involved three different crimes and reaped him at least

$2.2 million dollars profit. The defendant continued his crimes unabated for four years, despite

knowing that he was engaging in illegal practices and receiving hundreds of complaints

concerning his conduct. His actions evidenced a complete lack of respect for the law and the

public. Any sentence must ensure that he does not commit similar crimes in another context – a

sentence of eighteen months such as he asks for is insufficient to guarantee his continued

compliance with the law. Moreover, a sentence of eighteen months would suggest to others that

the risk of engaging in schemes this wide-spread and long-ranging is worth taking. As detailed

above, many courts have imposed sentences in the 100-month range for losses and crimes similar

to the defendant’s.

(4) Restitution

The defendant is under the mistaken impression that the amount of restitution to be

ordered in this case is subject to question. He has already admitted that the loss to Medicare is

$2,210,152. He has admitted that none of the products sent to Medicare beneficiaries were

medically necessary and offers little to support his current claims that if Medicare possibly would

have paid for the items, they cannot be included in the restitution amount.

Furthermore, criminal forfeiture and restitution serve two different purposes. Forfeiture

serves to punish the defendant and restitution is designed to make the victim whole. Thus,

requiring the defendant to pay both does not amount in double recovery. See United States v.

Newman, 659 F.3d 1235, 1241 (11th Cir. 2011); United States v. McGinty, 610 F.3d 1242, 1247

(10th Cir. 2010); United States v. Taylor, 582 F.3d 558, 566-67 (5th Cir. 2009); United States v.

13


Webber, 536 F.3d 584, 602-03 (7th Cir. 2008). In fact, as this Court is well aware, the

Mandatory Victim Restitution Act requires the Court to order restitution in this fraud case

without regard to forfeited funds. See 18 U.S.C. §§ 3664A(c)(1)(A)(ii).4 Accordingly,

restitution should be ordered in the full amount of $2,210,152.

III. Conclusion

Based on the foregoing, the United States respectfully requests that at the time of

sentencing the Court reject defendant’s request for a sentence below the Guidelines range and

impose a sentence at the low-end of the Guidelines range that appropriately reflects the factors

articulated in 18 U.S.C. § 3553(a).

Respectfully submitted,

PETER F. NERONHAUnited States Attorney

/s/ Dulce DonovanDULCE DONOVANAssistant U.S. AttorneyUnited States Attorney’s Office50 Kennedy Plaza, 8th FloorProvidence, RI 02903(401) 709-5000(401) 709-5017 (fax)[email protected]

4 The case cited by defendant in support of his contention that his restitution order shouldbe reduced by the amount the Government has forfeited, United States v. Ruff, 420 F.3d 772,775-76 (8th Cir. 2005), was not a fraud case and involved restitution going to a law enforcementvictim.

14


mailto:[email protected]

CERTIFICATE OF SERVICE

I, the undersigned, hereby certify that on this 9th day of February, 2012, the within UnitedStates Sentencing Memorandum was electronically filed with the Clerk of the United StatesDistrict Court for the District of Rhode Island using the CM/ECF System. The followingparticipant(s) has received notice electronically:

Sara E. Silva, Esq.William H. Kettlewell, Esq.Collora LLP600 Atlantic AvenueBoston, MA 02210

/s/ Dulce DonovanDULCE DONOVANAssistant U.S. Attorney

15


USA v. Winner (Sentencing Memo)

Documents

Transcript of USA v. Winner (Sentencing Memo)