The Hagen’s Stole $27M or 15 Percent of What Two Houston Doctors Finched ($170M). Look What Happened at Sentencing.

LIT COMMENTARY

PUBLISHED BY LIT: DEC 18, 2021

NO JAIL FOR $170M+ HEALTHCARE FRAUD BY TWO HOUSTON, TEXAS DOCTORS

HOUSTON – Two ophthalmologists and their eye clinic must pay millions of dollars for fraudulently billing Medicare in relation to the evaluation and treatment of glaucoma, announced Acting U.S. Attorney Jennifer B. Lowery.

“Deliberately overcharging the government for medical services wastes our country’s precious health care resources,” said Lowery. “We will not stand idly by as providers in our district attempt to abuse the system.”

NO JAIL FOR $500K+ HEALTHCARE FRAUD BY WOODLANDS, TEXAS PHYSICIAN

HOUSTON – A 49-year-old local physician has agreed to pay $523,331 to settle allegations he submitted false claims for the placement of electro-acupuncture devices and for making false statements when applying for a loan from the Paycheck Protection Program (PPP), announced Acting U.S. Attorney Jennifer B. Lowery.

Dr. Emad Bishai is an anesthesiologist and pain management physician who practices in The Woodlands. Woodlands Pain Institute PLLC is his primary practice entity.

Texas man who bought Lamborghini with $1.6 million PPP loan sentenced to 9 years in prison

HOUSTON, Texas — A Houston businessman was sentenced to nine years in prison for a scheme in which he obtained and laundered more than $1.6 million in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Ex-NFL player Bellamy gets 3 years for  $1.2M COVID relief fraud

TAMPA, Fla. — Former NFL player Josh Bellamy has been sentenced to three years and one month in federal prison for fraudulently obtaining over $1.2 million in COVID-19 relief funds.

Bellamy, 32, of St. Petersburg, Florida, was sentenced Friday in Tampa federal court, according to court records. He pleaded guilty in June to conspiracy to commit wire fraud. Besides serving prison time, Bellamy must also pay restitution.

FORT MYERS BUSINESSMAN SENTENCED TO THREE YEARS IN FEDERAL PRISON FOR $2.1M PPP LOAN FRAUD

FORT MEYERS, FLORIDA – Senior U.S. District Judge John Steele has sentenced Casey David Crowther (35, Fort Myers) to three years and one month in federal prison for two counts of bank fraud, two counts of making a false statement to a lending institution, and two counts of money laundering.

The court also ordered Crowther to forfeit $2,739,081.21, $630,482.37, and a 40’ catamaran boat, which were the proceeds of the Paycheck Protection Program (PPP) fraud and the mortgage fraud offenses.

Medical Equipment Company Owners Sentenced to More Than 12 Years for $27 Million Fraud Scheme

DEC 16, 2021 | REPUBLISHED BY LIT: DEC 18, 2021

A Texas woman and an Austrian national were sentenced yesterday to 151 months in prison for a $27 million Medicare kickback conspiracy.

According to the evidence presented at trial, Leah Hagen, 50, of Arlington, and Michael Hagen, 54, a citizen of Austria and Arlington resident, owned and operated two durable medical equipment (DME) companies, Metro DME Supply LLC and Ortho Pain Solutions LLC. From March 2016 to January 2019, the defendants paid kickbacks and bribes to their co-conspirator’s call center in the Philippines in exchange for signed doctors’ orders for DME that were used to submit false claims in excess of $59 million to Medicare. From those claims, Medicare paid the defendants more than $27 million. The defendants transferred millions of dollars overseas to, among other things, purchase a home in Spain.

To conceal the payments of kickbacks and bribes from the authorities, the defendants, through their DME companies, signed sham contracts that disguised payments as marketing and business process outsourcing. The DME claims submitted by the defendants to Medicare were for services that were medically unnecessary and not provided as represented. In some cases, beneficiaries were convinced to accept braces they did not need or want and were offered gift cards in exchange for accepting those braces.

On July 8, the Hagens were convicted following an eight-day trial on charges of conspiracy to defraud the United States and to pay and receive health care kickbacks and conspiracy to launder money.

The Hagens were sentenced by U.S. District Judge Jane J. Boyle of the Northern District of Texas, who also ordered them to pay $27,104,359 in restitution.

Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division; U.S. Attorney Chad E. Meacham of the Northern District of Texas; Special Agent in Charge Miranda Bennett of the Department of Health and Human Services, Office of the Inspector General’s (HHS-OIG) Dallas Region; Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division; and Special Agent in Charge Matthew J. DeSarno of the FBI’s Dallas Field Office made the announcement.

This case was investigated by HHS-OIG and the FBI’s Dallas Field Office and was brought as part of Operation Brace Yourself, a federal law enforcement action led by the Health Care Fraud Unit of the Criminal Division’s Fraud Section, in partnership with the U.S. Attorney’s Offices for the District of South Carolina, District of New Jersey, and the Middle District of Florida.

Assistant Deputy Chief Adrienne Frazior and Trial Attorneys Brynn Schiess and Catherine Wagner of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section leads the Health Care Fraud Strike Force. Since its inception in March 2007, the Health Care Fraud Strike Force, which maintains 15 strike forces operating in 24 districts, has charged more than 4,200 defendants who have collectively billed the Medicare program for nearly $19 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Topic(s):
Health Care Fraud
Component(s):
Criminal Division
Criminal – Criminal Fraud Section
Press Release Number:
21-1254

INVOLVED IN HERB KIMBLE CASE?

GET HELP NOW

Herb Kimble Healthcare Fraud Case

A massive fraud scheme involving more than $1 billion against federal programs was recently announced earlier this year by South Carolina federal investigators. This national fraud scheme involved physicians purchasing unnecessary medical tests and billing Medicare for them, costing Medicare millions of dollars in the process. It ended when several physicians alerted the federal government.

Herb Kimble, who runs call centers in the Philippines, is a U.S. citizen charged in the investigation. Although they operate in many countries, they are not considered legitimate institutions in any country.

Kimble pleaded guilty on April 4th in a closed-door proceeding in federal court in Columbia. Kimble cooperated with federal prosecutors and agreed to pay restitution of at least $40 million for his involvement in the fraud.

If Kimble’s fraud or a similar situation happened to you, you need to know what to do and how to respond quickly. At Bell, P.C. Healthcare Fraud Group, we have handled thousands of criminal cases from inception to trial and appeal. If you are under federal investigation or you have been charged with a federal offense, you need to contact James Bell. We will come up with the right defense strategy to help protect your freedom, your assets, and your reputation.

Based on the plea agreement, Kimble agreed to testify before a federal grand jury, as well as reveal all that he knew about the scheme and its participants. He provided substantial information to the government in its investigation of the healthcare fraud scheme.

Leveraging several U.S.-based intermediary companies, Kimble and his associates cheated the government out of close to $1 billion in unnecessary Medicare payments since 2014.

Before Kimble started collaborating, the federal government estimated that it had been fraudulently charged for only $9.4 million. Since Kimble’s cooperation helped expand the scope of the investigation, prosecutors suggested that he receive probation as part of the plea agreement.

According to officials, Kimble fraudulent activity included selling cheap, medically unnecessary back, leg, and neck braces to thousands of elderly people, who paid for them with Medicare. The scheme also included doctors who wrote false prescriptions without actually seeing patients.

Kimble’s fraudulent activities took place in Florida, California, New Jersey, Texas, Pennsylvania, and South Carolina. The scheme also used several other companies and bank accounts to support the flow of finances and appear legal, officials said.

CONTACT US TODAY

If you have been a victim of Kimble fraud, then you need to call an experienced trial attorney at the Healthcare Fraud Group. We specialize in fraud and we will guide you through the process. Give us a call 888-402-4054 so that we can discuss possible ways to recover your losses.

United States v. Hagen

(3:19-cr-00146)

District Court, N.D. Texas

MAR 27, 2019 | REPUBLISHED BY LIT: DEC 18, 2021

MEMORANDUM OPINION AND ORDER

Before the Court is Defendants Leah and Michael Hagens’ Joint Rule 33 Motion for New Trial (Doc. 289). For the reasons that follow, the motion is DENIED.

I. BACKGROUND1

The Hagens, husband and wife, were each charged by superseding indictment with one count of conspiracy to defraud the United States and to pay and receive health care kickbacks, and one count of conspiracy to commit money laundering. Doc. 50, Superseding Indictment, 5–11. They were tried together before a jury beginning on June 28, 2021, and were each convicted on both counts. Doc. 282, Verdict, 1.

According to the Superseding Indictment, the Hagens owned durable medical equipment (DME) companies and enrolled these companies in Medicare to provide DME to Medicare beneficiaries. Doc. 50, Superseding Indictment, 2, 7. Medicare reimburses providers who render services to beneficiaries. Id. at 3.

The Superseding Indictment charged the Hagens with paying, through one of their DME companies—Metro DME Supply—“illegal kickbacks and bribes in the amount of approximately $6.6 million to Herb Kimble,” a co-conspirator, “in exchange for completed, signed prescriptions for DME and other Medicare-required documents (collectively referred to as ‘doctors’ orders’).” Id. at 7.

The Superseding Indictment further charges the Hagens with paying, though their other DME company—Ortho Pain Solutions—“illegal kickbacks and bribes in the amount of approximately $8.2 million to Herb Kimble . . . in exchange for doctors’ orders.” Id. at 8.

Such conduct, according to the Superseding Indictment, violates the Anti-Kickback Statute.

The Government alleged that “[t]o facilitate and conceal the payment of kickbacks and bribes from Medicare and state regulators, [the Hagens and Kimble] through [Kimble’s companies, Pantheon and Chronos], created sham contracts, invoices and other documentation that disguised the payments as for marketing and business process outsourcing, among other services.” Id.

The Government’s theory at trial was that the Hagens’ lump sum payments to Kimble’s companies for completed doctors’ orders were “reverse-engineered” on these sham invoices to conceal the fact that the Hagens were paying for doctors’ orders. Doc. 291, Gov’t’s Resp., 6.

The Hagens’ theory at trial, on the other hand, “was that they lacked criminal intent because Mr. Kimble assured them that they were paying for legitimate marketing and business processing services, and that the companies providing these services operated in a lawful and compliant way.” Doc. 289, Defs.’ Mot., 3.

The Court permitted the Hagens to examine Skora outside the presence of the jury to form a record of what Skora’s testimony would be.

In his proposed testimony Skora confirmed that Pantheon and Chronos were his clients. Id. at 14–15.

Skora described that the scope of his engagement was federal and state regulatory compliance advice. Id. at 21–22.

And Skora testified that Kimble did not tell Skora that he was selling doctors’ orders. Id. at 24.

This is hardly the key exculpatory information that the Hagens allege.

Moreover, the Hagens elicited this testimony from Kimble himself.

The Hagens cross-examined Kimble on the fact that attorneys reviewed the contracts for compliance purposes, Tr. Vol. 4, 149–57; the Government never disputed this.

And Kimble explained that he had attorneys review the contracts so that they would appear legitimate to auditors. Id.

Skora’s testimony that he advised Pantheon and Chronos on regulatory matters and that he was unaware that Kimble was selling doctors’ orders would therefore have had little or no effect.

See United States v. Flitcraft, 803 F.2d 184, 186 (5th Cir. 1986) (affirming exclusion of “case law and documents” the defendant claimed caused him to believe he was not breaking the law “because [the defendant] testified to the documents he relied on and their contents,” thus “the documents themselves would have had little further probative value”).

This conclusion is bolstered by the fact that Kimble engaged Skora after the Hagens signed their relevant agreements with Kimble. Tr. Vol. 7, 35 (noting Skora was engaged in October 2017); id. at 29 (noting the Hagens signed contracts with Kimble on April 4, 2016 and September 20, 2017).

Thus, Skora’s testimony would have been irrelevant to the contracts at issue in this case and was properly excluded.

Finally, putting aside the fact that the Hagens have not identified any specific document in the group of 650 that would have impacted the jury’s verdict and how, this pile of physical evidence—comprising emails between Kimble and his attorneys—is inadmissible for the same reason as Skora’s testimony.

B. The Court Did Not Improperly Restrict Any Trial Testimony.

The Hagens testified in their own defense at trial. The Hagens now state their respective testimonies were improperly restricted. Doc. 289, Defs.’ Mot., 6. They also claim the cross- examination of three Government witnesses was cut short. Id. at 7.

1. The Court did not improperly restrict Leah Hagen’s testimony.

The Hagens claim that “Leah Hagen was prevented from offering critical testimony on her background, how she became personally familiar with [DME], and how she was able to fund the initial marketing campaign with Mr. Kimble’s companies.” Id.

This is simply not true.

Leah Hagen did testify how she became familiar with DME and how the Hagens got the money to fund their “initial marketing campaign[.]” Id.

In particular, Leah Hagen testified that she was in a car accident in college, causing her temporary paralysis. Tr. Vol. 6, 77–78. She then confirmed that this was her “introduction to durable medical equipment[.]” Id. at 79. She described the various pieces of DME she personally used. Id. at 79–80. She further testified that she began to work for a doctor at his DME company, and her experience using DME helped her get that job. Id. at 81.

Later, when asked where Leah Hagen obtained the money to do the “marketing campaign” she stated that her “father had passed away” and “left [her] $40,000.” Id. at 178–79.

While the Court did not permit Leah Hagen to give details about her car accident, id. at 76, or to explain how her father passed away, deeming these details irrelevant, the contention that Leah Hagen was not permitted to testify about her introduction to DME or the source of her money is incorrect.

Nor did the Court err in preventing Leah Hagen from testifying as to irrelevant content. “A criminal defendant’s constitutional right to present a defense covers ‘relevant testimony.’”

United States v. Rivas-Estrada, 761 F. App’x 318, 328 (5th Cir. 2019) (per curiam) (quoting Rock v. Arkansas, 483 U.S. 44, 55 (1987)).

The district court has discretion to exclude the testimony of a criminal defendant when that testimony “provokes . . . sympathy” but is not relevant.

See United States v. Willis, 38 F.3d 170, 177 (5th Cir. 1994) (battered woman’s syndrome); Rivas-Estrada, 761 F. App’x at 328–29 (cancer treatments).

Here, while the Court permitted Leah Hagen to testify that she was raised as a Jehovah’s Witness, the Court did not permit her to elaborate on what that “mean[t.]” Tr. Vol. 6, 71.

Further, Leah Hagen was not permitted to explain what happened when she was seven after her mother “met a new man, and . . . came into [Leah Hagen’s] bedroom.” Id. at 72.

Leah Hagen began to cry when she brought this up.3

These categories of testimony were irrelevant and would have served only to evoke the jury’s sympathy.

The Court properly excluded them.

2. The Court did not improperly restrict Michael Hagen’s testimony.

Next, the Hagens state that “Michael Hagen was prevented from testifying as to his version of the events that occurred during the visit to Mr. Kimble’s companies in the Philippines.” Doc. 289, Defs.’ Mot., 7.

The Court rejects this argument.

The evidence at trial revealed that during the course of his relationship with the Hagens, Kimble moved his business operation from one location (“the first office”) to another (“the second office”), both of which the Hagens visited. Tr. Vol. 7, 247.

During his testimony, Michael Hagen was asked “what [he] saw” at the first office. Id. at 245. After Michael Hagen began describing physical attributes of the first office, the Court cut him off, as this testimony was “a little bit repetitive” of Leah Hagen’s testimony. Id. at 245–46.

Indeed, Leah Hagen briefly described the first office in her testimony the prior day. Tr. Vol. 6, 224. Moreover, Michael was permitted to compare the second office to the first office: “It was a lot bigger than the first one, even more modern. Super organized, better divided. More spacious. It looked very good.” Tr. Vol. 7, 247.

The Hagens fail to explain how the physical description of the first office was material to their case. In any event, the Hagens were permitted to testify as to the physical attributes of both offices.

 3. No new trial is warranted on the basis of other limitations on witness testimony

Next, the Hagens repeat their argument regarding Skora’s proposed testimony. Doc. 289, Defs.’ Mot., 7. Because the Court has fully addressed Skora’s testimony above, it will not repeat those holdings here. And finally, the Hagens also mention in passing that “other critical witness examination also was cut short (including but not limited to the cross-examinations of Stephen Quindoza, Special Agent Kelly Luquette, and Justin Cain), precluding the Hagens from establishing the prejudicial bias, lack of relevance for sponsoring exhibits, and improper use of witnesses as undisclosed experts in violation of Federal Rule of Evidence 702.” Id.

The Hagens do not elaborate on how the cross-examination of these witnesses was “cut short” or cite to specific examples in the trial transcript. See id. Such a “passing reference” to this alleged error is insufficient for the Court to grant any relief, much less grant the Hagens a new trial. Nguyen, 507 F.3d at 839.

C. The Court Did Not Improperly Restrict the Hagens’ Cross-Examination of Kimble

According to the Hagens, Kimble was “the key Government witness[.]” Doc. 289, Mot., 8. The Hagens cross-examined Kimble across two days.

After “about three hours and 15 minutes,” and counsel’s statement that he “ha[d] at least another hour” of cross-examination to complete, the Court briefly permitted cross-examination to continue before imposing a fifteen-minute time limit for counsel to conclude his cross-examination. Tr. Vol. 4, 220, 228–29.

However, the Court proceeded to permit counsel to cross-examine Kimble another thirty-minutes until the Court released the jury on its lunch break. Id. at 238. Additionally, the Court permitted counsel “one more half an hour” for cross-examination after the lunch break. Id. However, after the lunch break, counsel concluded his cross-examination “15 minutes early.” Id. at 261.

And after the Court asked counsel if he was “sure” he was finished, counsel confirmed: “I’m sure.” Id. at 260–61.

The Hagens argue their ability to cross-examine Kimble was inhibited by the Court’s time limitations. Doc. 289, Defs.’ Mot., 8. The Court rejects this.

The Court has “wide latitude” to restrict cross-examination “based on concerns about, among other things, harassment, prejudice, confusion of the issues, the witness’ safety, or interrogation that is repetitive or only marginally relevant.” United States v. Herman, 997 F.3d 251, 272 (5th Cir. 2021) (citations omitted). Here, the Court’s restrictions on the Hagens’ cross-examination of Kimble were based on concerns about “repetitive [and] only marginally relevant” testimony and within that “wide latitude[.]” Id.; see also Tr. Vol. 4, 228.

In any event, the Court will not grant the Hagens a new trial based on their purported inability to more fully cross-examine Kimble when Kimble was subject to re-call by the Hagens in their case-in-chief and counsel concluded the cross-examination before the Court-imposed time limit had lapsed.

D. The Hagens Were Provided the Raymond Shores Interview Report with Ample Time to Make Use of It

One of the Government’s witnesses at trial was Raymond Shores. Shores is Kimble’s brother, and he testified that he knows the Hagens through Kimble. Tr. Vol. 2, 254.  Shores testified that he owned several DME companies that “purchased patients”—or doctors’ orders—“from [his] brother.” Id. at 262.

And when asked if he knew how the Hagens got their doctors’ orders, Shores testified that “they purchased them from [his] brother[,]” too. Id. at 268.

Shores testified that he knew this because he talked to Kimble about it, and because the Hagens confirmed it when Shores met them in the Philippines. Id. at 273. Finally, he generally explained how Kimble’s operation worked. Id. at 276–84.

During redirect examination, the Government asked Shores about a meeting between him, the Government, and the FBI in early March 2020 in Miami. Tr. Vol. 3, 77–78. Notes from that meeting are memorialized in a five-page report (“the Shores Report”). See Doc. 290, Defs.’ Sealed Ex. 1.

When the Government asked Shores about this meeting at trial, the Hagens did not object to the substance of Shores’s testimony. Tr. Vol. 3, 77–80. However, on re-cross, counsel for the Hagens revealed that she had “never seen” the report at issue. Id. at 82. Counsel was then immediately given a copy during a sidebar (“the sidebar”). Id. This occurred on June 30, 2021. Id. at 1.

The Hagens began their case-in-chief one week later, on July 6, 2021. Tr. Vol. 6, 66. That morning, the Government notified the Court that, while it had produced the Shores Report in May 2020, defense counsel was unable to locate it in their files. Tr. Vol. 6, 4–5. The Government further stated that, along with all its productions, it provided defense counsel with a “production log” detailing the items within each production. Id. at 6.

Defense counsel acknowledged this but stated that, at least with respect to the production purportedly containing the Shores Report, they did not compare documents to the corresponding production log. Id. at 10–11. Thus, they “didn’t notice [the Shores Report] was on the log and not in the documents.” Id.⁴

Maintaining that they “should have had the report before his cross-examination,” the Hagens declined to re-call Mr. Shores in their case- in-chief. Id. at 58.

The Court acknowledges that the Government maintains it turned over the Shores Report in May 2020, see Doc. 291, Gov’t’s Resp., 14–15, but for the purpose of this Order, the Court assumes without deciding that the Government did not turn over the Shores Report until the sidebar.

Nonetheless, the Court concludes no error resulted from this.

When evidence is produced late, “the analysis . . . turns on whether the defendant was prejudiced by the tardy disclosure.” United States v. Morrison, 833 F.3d 491, 508 (5th Cir. 2016). And “[i]f the defendant received the material in time to put it to effective use at trial, his conviction should not be reversed simply because it was not disclosed as early as it might have and, indeed, should have been.” United States v. McKinney, 758 F.2d 1036, 1050 (5th Cir. 1985) (citations omitted).

Moreover, in the Northern District of Texas, criminal defendants have a reciprocal duty to inspect, within twenty-one days of production, for, among other things, “missing material.” NDTX Standard Protocol for Discovery Production in Federal Criminal Cases at 3, available at http://www.txnd.uscourts.gov/sites/default/files/documents/DiscoveryProtocol.pdf.

Here, the Hagens received the Shores Report with enough time to make use of it. The Shores Report is five pages, the Hagens received it a full week before they presented their case-in-chief, and Shores was subject to recall.

United States v. Decker, 543 F.2d 1102, 1105 (5th Cir.1976) (affirming disclosure of information to correct false testimony after witness testified but while still subject to recall); United States v. Nixon, 634 F.2d 306, 311–13 (5th Cir. 1981) (affirming disclosure of witness immunity agreement at time of witness’s testimony).

Moreover, as defense counsel implicitly conceded when describing the team’s method of reviewing productions, defense counsel did not comply with the reciprocal inspection obligation. See Tr. Vol. 6, 10–11. Under these circumstances, the Court finds no error even if the Hagens did not have access to the Shores Report until the sidebar.

E. The Court Did Not Admit Unfairly Prejudicial or Irrelevant Evidence.

According to the Hagens, “the Government introduced numerous pieces of evidence, testimony, and argument relating to” the medical need of the braces provided to the Medicare beneficiaries by the Hagens. Doc. 289, Defs.’ Mot., 15. Without pointing to any specific pieces of such evidence or testimony, the Hagens argue that this evidence constitutes a variance from the Superseding Indictment. Id. at 16.

Indeed, the Hagens state that they “had no notice that the medical necessity of braces or topics related to doctors’ interactions with patients would be at issue at trial[.]” Id. Moreover, they claim “injecting” medical necessity into the case is prejudicial because the Hagens had no role in the doctors’ prescribing decisions. Id. at 17.

The Court rejects this argument.

The Supreme Court has “held on several occasions that an indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs the defendant of the charge against

which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.”

United States v. Bailey, 444 U.S. 394, 414 (1980) (citations and quotation marks omitted).

A material variance occurs “when the proof at trial depicts a scenario that differs materially from the scenario charged in the indictment but does not modify an essential element of the charged offense.”

United States v. Meza, 701 F.3d 411, 423 (5th Cir. 2012) (quoting United States v. Mitchell, 484 F.3d 762, 769 (5th Cir. 2007)).

A variance did not occur here, and the Hagens were on notice that medical necessity of the braces they provided might come up.

The Superseding Indictment, contrary to the Hagens’ assertion, provides notice that medical necessity would be an issue.

It clearly alleges that in order for a DME claim to qualify for reimbursement from Medicare, it must be “medically necessary to the treatment of the beneficiary’s illness or injury[.]” Doc. 50, Superseding Indictment, 3.

Moreover, the Government argues that “[e]vidence of the false nature of the prescriptions, as well as testimony from Medicare beneficiaries whose prescriptions the defendants used to bill Medicare were acts ‘done in furtherance of the alleged conspiracy’ and were ‘part of the very act charged.’” Doc. 291, Gov’t’s Resp., 17 (quoting United States v. Barnes, 803 F.3d 209, 220 (5th Cir. 2016)).

The Court agrees. Indeed, the Court finds the evidence of the medical necessity of the prescriptions went to the Hagens’ knowledge and intent. There is no error warranting new trial arising from this evidence.

F. The Court Did Not Improperly Admit Rule 404(b) Evidence.

Pretrial, the Government filed a notice of intent to offer evidence under Rule 404(b). By this notice, the Government informed the Hagens of its intent “to call witness Adam Twersky,” former manager of a call center called “Brightstar DME and Visionary,” who would testify that the Hagens “paid kickbacks to the owner of Brightstar, John Krawczyk, in exchange for doctors’ orders through. . . Metro DME Supply[.]” Doc. 138, Gov’t’s Notice, 1.

The Government also notified the Hagens that it anticipated Kimble would testify that he introduced the Hagens to Twersky. Id. at 2.

The Court initially ruled pretrial that Twersky’s testimony would be “more prejudicial than probative” because it was too similar to the charged conduct. Doc. 223, Order, 2.

However, the Court ruled at trial that the Hagens opened the door to evidence about the Brightsar and Visionary arrangement and permitted the Government to cross-examine Leah Hagen regarding the arrangement. Tr. Vol. 7, 4–13, 68–81.

During cross-examination, Leah Hagen confirmed that “for about ten days” she bought similar “[m]arketing and BPO” services from another entity called Brightstar (“the Brightstar Evidence”). Id. at 68. She then confirmed that the contracts she had with Brightstar were “a little different but similar” to the contracts she had with Kimble. Id. at 70.

The Hagens argue that admitting the Brightstar Evidence was erroneous, as it had “no probative value.” Doc. 289, Defs.’ Mot., 19. They further argue that, at the very least, the Court should have engaged in an “on-the-record balancing of probative value versus unfairly prejudicial effect[.]” Id.

But the Court did not err here.

First, the Court properly admitted the Brightstar Evidence because Leah Hagen opened the door to it.

Federal Rule of Evidence 404(b) precludes introduction of evidence of a person’s general criminal disposition, but it permits introduction of evidence of “other crimes, wrongs, or acts” which tend to prove a person’s “motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident.” Fed. R. Evid. 404(b).

Criminal defendants can open the door to evidence of their other wrongs or acts by testifying that they lacked criminal intent or made a mistake.

See United States v. Canga-Renteria, 1993 WL 117861, at *3 (5th Cir. Mar. 26, 1993) (per curiam) (table decision) (“When Canga-Renteria claimed that he was mistaken as to the purpose of the trip to Louisiana, he opened the door to evidence which rebutted his defense of mistake. Consequently, the district court properly allowed the prosecution to introduce the 1986 conviction under Fed.R.Evid. 404(b)’s absence-of-mistake provision.”); United States v. Maldonado, 472 F.3d 388, 398 (5th Cir. 2006) (“A defendant may not complain on appeal that he was prejudiced by evidence relating to a subject which he opened up at trial.” (cleaned up and citation omitted)), abrogated on other grounds by Kentucky v. King, 563 U.S. 452 (2011).

Leah Hagen opened the door to the Brightstar evidence here.

As the Court explained on the record at trial:

I read through . . . [t]he Twersky stuff last night and the details of it, and I think it’s admissible now that she’s testified. She spent the whole time talking about lack of intent and this and that, so I think it’s admissible.
. . .

I don’t know that it was admissible before she testified. But since she testified and it was all about intent, . . . then I think it goes to intent, it goes to motive, it goes to opportunity, plan, I really do, and I know – I don’t know about the Government needing it, but I think that – that she testified to that and . . . I’m going to let them do it.

Tr. Vol. 7, 4, 8.

Indeed, Leah Hagen began her testimony by telling the jury that she believes she was arrested in this matter “[b]ecause a con man duped” her. Tr. Vol. 6, 68.

She then reiterated that she “[a]bsolutely [did] not” “enter into an agreement to purchase doctors’ orders from Mr. Kimble or his companies[.]” Id. at 69.

She further testified that, after speaking extensively with Kimble regarding his operation and independently researching Kimble herself, she “ha[d] the impression that his companies were legitimate operations.” Id. at 135–36.

By this direct testimony, and further confirmation on cross-examination, that she did not intend to violate the Anti-Kickback Statute, Leah Hagen opened the door to the Brightstar Evidence to refute her claim of lack of intent.

Nor was the Brightstar Evidence unduly prejudicial.

Extrinsic evidence that goes to the defendant’s intent is not inadmissible as long as its probative value is not “substantially outweighed by its inherent prejudice.”

See United States v. Beechum, 582 F.2d 898, 910 (5th Cir. 1978) (en banc).

Here, Leah Hagen’s testimony of her lack of intent increased the probative value of the Brightstar Evidence, causing the Court to shift its prior ruling.

And this probative value was not substantially outweighed by any prejudice. Indeed, any prejudice to the Hagens arising from the Brightstar Evidence was mitigated by the fact that the Government simply elicited it from Leah Hagen on cross- examination, rather than by calling Twersky as it initially sought to do. The Brightstar Evidence comprised a few minutes of testimony and a handful of exhibits.

The inherent prejudice of this evidence did not substantially outweigh its probative value.5

G. The Court Did Not Make Improper Comments or Omissions During Trial.

The Hagens next argue that the Court made “[i]mproper comments” (and omissions) during the course of trial that together “had the effect of endorsing the Government’s case and undermining the Hagens’ defense, thus improperly influencing the jury. Doc. 289, Defs.’ Mot., 19.

The Hagens raise seven of these alleged improprieties on the part of the Court.

As a preliminary matter, the Court notes that the jury was instructed orally by the Court, and formally in the jury charge, that they must “not assume from anything [the Court] may have said during the trial that [the Court has] any opinion about any of the issues in the case. Except for the instructions to [the jury] on the law, [the jury] should disregard anything [the Court] may have said or done during the trial in arriving at [its] own verdict.” Tr. Vol. 8, 161; Doc. 281, Jury Instructions, 4.

Nonetheless, the Court will address each of the alleged improprieties in turn.

None of them singly, or in combination, warrant a new trial.

First, in Kimble’s cross-examination, “during a line of questioning by defense counsel that was essential to exposing the fact that the [doctors’] orders were not guaranteed and that they fluctuated weekly,” the Court asked Kimble, “But your doctor orders were . . . guaranteed, right?” Doc. 289, Defs.’ Mot., at 19–20 n.6 (emphasis omitted) (quoting Tr. Vol. 4, 74).

The Hagens cite this as contributing to their need for a new trial. It does not; it was not error. The Court has discretion to “clarify facts presented to the jury[.]”

United States v. Bourgeois, 950 F.2d 980, 985 (5th Cir. 1992).

This discretion extends to asking witnesses questions.

United States v. Duncan, 919 F.2d 981, 989 (5th Cir. 1990).

The Court did not step outside its discretion here.

Second, the Court “made comments . . . on the efficacy of the cross-examination” of Kimble.

Doc. 289, Defs.’ Mot., 20 n.6 (citing Tr. Vol. 4, 228–30).

The Court assumes the Hagens are referring to the Court’s comment to the Hagens’ counsel that “it seems like you’re just . . . thinking of things off the top of your head now. But I can’t tell.”

Tr. Vol. 4, 228.

This is not an error.

United States v. Iredia, 866 F.2d 114, 119 (5th Cir. 1989) (per curiam) (finding no abuse of discretion where trial judge, among other things “rebuked or admonished defense counsel in the presence of the jury, or expressed dissatisfaction with counsel’s insistence on following the rules of evidence”).

Third, while reading the jury charge aloud on the record, the Court omitted the “Burden of Proof, Reasonable Doubt” heading and read aloud only the substantive content of that instruction.

Doc. 289, Defs.’ Mot., 20 n.7.

The Hagens note this as contributing to their need for a new trial.

Putting aside the fact that each juror had a physical copy of the jury instructions and could follow along while the Court read them aloud—and those jury instructions included all instruction titles—the notion that the inadvertent omission of the title of a jury instruction would warrant an entirely new trial is wholly frivolous.

See generally Doc. 281, Jury Instruction.

Fourth, while reading the instruction on “Impeachment by Prior Inconsistencies,” the Court noted for the jury, “This is like the emails[.]”

Doc. 289, Defs.’ Mot., 20 n.7 (citing Tr. Vol. 8, 166).

The Court’s discretion extends to “comment[ing] on [and clarifying] the evidence[.]”

Duncan, 919 F.2d at 989.

The Hagens offer no explanation as to how this stray comment prejudiced the jury.

The Court finds no error here.

Fifth, while explaining to the jury that it would be able to review the Superseding Indictment in deliberations, the Court stated:

I am also sending you back the superseding indictment. I will remind you that the indictment is just a piece of paper. It is no evidence whatsoever of guilt. But you need it because you have to see the charges the Government charged and, in particular to page 9, I think it is, are the overt acts that they have to prove, and they are all there. So you can look at it for reference, but that is it.

Tr. Vol. 8, 195.

By taking issue with the Court’s comment that “they are all there,” see Doc. 289, Defs.’ Mot., 20 n.7, the Hagens lodge another frivolous complaint against the Court’s exercise of its sound discretion in instructing the jury.

The Hagens do not explain why the “they are all there” comment is error, let alone how it could have impressed the jury in a manner prejudicial to the Hagens. See id.

To the contrary, the Court’s comment instructed the jury in a manner helpful to the Hagens by informing the jury that the Government was required to prove the overt acts that it charged, and where the jury may find “all” those acts.

The Hagens’ suggestion that a deliberate ignorance instruction is inappropriate in a case such as this where the Government has charged a person with doing something “knowingly,” Doc. 289, Defs.’

Mot., 22–23, is unfounded.

“Deliberate ignorance is the equivalent of knowledge.”

United States v. Menendez, 315 F. App’x 103, 109 (11th Cir. 2008) (per curiam) (citing United States v. Peddle, 821 F.2d 1521, 1524 (11th Cir. 1987)).

The Fifth Circuit has found no error in instructing the jury on deliberate ignorance in “specific intent” cases.

Nguyen, 493 F.3d at 624–25 (“Since the jury found the Nguyens deliberately ignorant, and thus, subjectively aware of the high probability of illegalities around them, evidence of their continued facilitation of those highly suspicious transactions may constitute ‘specific intent’ to further an illegal purpose for which they were deliberately ignorant.”).

Indeed, “[t]o the extent that the deliberate ignorance instruction is merely a way of allowing the jury to arrive at the conclusion that the defendant knew the unlawful purpose of the conspiracy, it is hardly inconsistent with a finding that the defendant intended to further the unlawful purpose.”

Id. (cleaned up and citations omitted).

The Hagens’ suggestion that the deliberate ignorance instruction should have been accompanied by a balancing instruction is similarly unfounded.

In the charge conference, the Hagens proposed the following balancing instruction:

“The deliberate ignorance instruction does not lessen the Government’s burden to show beyond a reasonable doubt that the knowledge or elements of the alleged crimes have been satisfied.”

Tr. Vol. 8, 43.

However, the Hagens conceded in this hearing that their proposed balancing instruction was not in the Fifth Circuit Pattern Jury Instructions. Id.

And they provided no further support for this proposed balancing instruction either at the charge conference or in their briefing on the pending motion.6

The Hagens lodge two additional complaints about the Court’s jury charge that similarly do not warrant a new trial. First, the Hagens state that “other instructions that were not supported by the evidence were also given, including on aiding and abetting.”

Doc. 289, Defs.’ Mot., 22 (citations to the transcript omitted).

Second, they claim “[i]t was also error to deny the Hagens’ requested jury instructions, including the instructions on law enforcement testimony and the personal services safe harbor under the Anti-Kickback Statute.” Id. (citations to the transcript omitted).

The Hagens offer no support for their contention that the evidence did not warrant an aiding and abetting instruction, and they offer no support for their contention that the omission of the safe harbor and law-enforcement testimony instructions were errors.

Thus, the Hagens have not sufficiently raised these grounds for relief. See Nguyen, 507 F.3d at 839.

Finally, the Hagens claim that “allowing the jury to review the indictment was improper and prejudicial[.]” Doc. 289, Defs.’ Mot., 23.

This is unfounded because “[t]he trial court has discretion to permit the jury to have a copy of the indictment during its deliberations.”

United States v. Haynes, 573 F.2d 236, 241–42 (5th Cir. 1978) (citations omitted).

And the Hagens acknowledge that the Court instructed the jury that the indictment is not evidence.

Sixth, the Hagens cite one comment from the transcript in which the Court states,

“I hope you won’t have to send me any notes,” arguing that the “jury was discouraged from sending notes[.]”

Id. (citing Tr. Vol. 8, 196).

Even assuming this comment in isolation could be construed as “discourag[ing] . . . notes,” the Hagens fail to read the relevant portion of the Court’s instructions regarding notes as a whole:

If you want to talk to me – if you have a question about something, it’s really, really important that you have a dispute as to that question. If I get a bunch of notes about, ‘What does this mean in the indictment?” Or, “What is that?” I won’t answer them. We’ll just say that the evidence that you have, the instructions that you have are all you’re going to get. I mean, you-all have everything you need to decide this case now.

I know you don’t feel confident, but you will feel confident once you go back there and talk. But if you do send out a note, make sure that it’s on something substantive that you are in disagreement about.

For example, say, We’re in disagreement about this portion of Mr. Kimble’s testimony, or this portion of Mr. Shores’, or this portion of Mr. Hagen’s or something like that, we want to know what he said. Don’t ask me for the whole transcript. Don’t ask me – you know, just be very, very sparing with your notes, because it will take us a while to get back to you; we will get back to you.

And I hope you won’t have to send me any notes, but I have to warn you-all about notes because it’s very important. I will want one note from you, which is who your foreperson is and how you will spend your time. So you set your schedule.

Tr. Vol. 8, 195–96.

In sum, the Court did not discourage the jury from sending notes.

To the contrary, it thoroughly explained how and when the jury may send notes.

No reasonable juror would have understood from the Court’s narrative that the jury should not send notes.

Finally, after reading the formal charge to the jury, the Court stated:

“When you reach your verdict – I hope it’s soon. But if you reach a verdict, stick it – sign it, stick it in here, and then seal the envelope.” Id. at 195.

The Hagens cite this comment as contributing to their need for a new trial.

Doc. 289, Defs.’ Mot., 20 n.7.

It does not.

The Hagens offer no reason this stray comment prejudiced the jury.

This was not error.

Nor do these comments or omissions taken together warrant a new trial. As the Court has explained above, none of these alleged improprieties were error. The Hagens offer no support for their contention that, taken together, the alleged improprieties gave the jury the impression that the Court favored the Government.

H. No “Other Improprieties” Warrant a New Trial.

Next, the Hagens raise a laundry list of “improprieties” by the Government that they argue deprived them of a fair trial. Those improprieties are:

(1) inaccurate statements made during a hearing held on June 24, 2020, that Rule 16 discovery had been completed, when in fact it had not;

(2) withholding Brady material;

(3) failing to produce the Shores Report prior to trial as required by Rule 16, Brady, and Giglio;

(4) declining to provide information regarding the production of the Shores Report;

(5) injecting the issue of Shores’ alleged PTSD symptoms without having notified the Hagens of any such issues prior to his testimony;

(6) seeking to suppress and exclude exculpatory exhibits and testimony pertaining to Mr. Kimble’s consultation with his attorneys (as to whom he had waived privilege);

(7) portrayals to the jury of patient recordings in a way that gave the impression that the patients were provided braces without the need to consult with a doctor, when in fact the recordings make clear that the patients were repeatedly told they could not receive a brace without consulting with a doctor (who would, in turn, decide whether a prescription for a brace was appropriate);

(8) inaccurate portrayals of the nature of emails during the cross-examination of Leah Hagen;

(9) using inadmissible, selective, and altered images of the Chronos portal as evidence;

and

(10) questioning the reliability of the Government’s own witness interview reports, especially ones containing exculpatory information.

Id. at 21–22 (citations and footnotes omitted).

The Court need not, and will not, delve into these. Aside from two sentences and a few Supreme Court citations regarding prosecutorial misconduct, this list is the entirety of the “other improprieties” section of the Hagens’ brief. See id. As the Fifth Circuit has made clear, the Court “does not have the authority to grant a motion for a new trial under Rule 33 on a basis not raised by the defendant,” Shoemaker, 746 F.3d at 631–32, or raised insufficiently by only “passing reference[.]”

Nguyen, 507 F.3d at 839–40.

In any event, some of these alleged improprieties relate to the Hagens’ fully briefed claimed errors. To that extent, the Court has dealt above with those alleged errors above and incorporates those holdings here. Finally, to the extent the Court has addressed any of these alleged improprieties by order earlier in the litigation of this matter, those findings remain sound and undisturbed.

No new trial is warranted due to prosecutorial improprieties.

I. No Issues With the Court’s Jury Instructions Warrant a New Trial.

Next, the Hagens argue that a new trial is warranted because “[j]ury instructions were admitted over the Hagens’ objections, and other instructions requested by the Hagens were improperly denied.” Doc. 289, Mot., 22.

Mainly, the Hagens dispute the Court’s instruction on deliberate ignorance, stating that it was improper because “the Government’s case was based on an alleged agreement to defraud that was knowingly entered[,] . . . and the Government did not elicit any testimony supporting[] deliberate ignorance.” Id.

They further urge that they were denied a “requested balancing instruction that should have accompanied the deliberate ignorance instruction.” Id. However, contrary to the Hagens’ assertions, a deliberate ignorance instruction was properly given, and no balancing instruction was warranted.

“The term deliberate ignorance denotes a conscious effort to avoid positive knowledge of a fact which is an element of an offense charged, the defendant choosing to remain ignorant so he can plead lack of positive knowledge in the event he should be caught.” United States v. Lara-Velasquez, 919 F.2d 946, 951 (5th Cir. 1990) (quotations and citation omitted).

“The key aspect of deliberate ignorance” is a conscious attempt to avoid confirming illegal conditions or events that one strongly suspects exist. Id.

“The purpose of the deliberate ignorance instruction is to inform the jury that it may consider evidence of the defendant’s charade of ignorance as circumstantial proof of guilty knowledge.” Id.

But the instruction is not appropriate in all criminal cases.

“The proper role of the deliberate ignorance instruction is not as a backup or supplement in a case that hinges on a defendant’s actual knowledge.”

United States v. Kuhrt, 788 F.3d 403, 417 (5th Cir. 2015).

The Fifth Circuit has articulated that the instruction is appropriate only when the evidence raises two inferences:

“(1) the defendant was subjectively aware of a high probability of the existence of the illegal conduct;

and

(2) the defendant purposely contrived to avoid learning of the illegal conduct.”

Id. (citing United States v. Brooks, 681 F.3d 678, 701 (5th Cir. 2012)).

Here, a deliberate indifference instruction was appropriate.

As the Government points out, “there is no dispute that both Leah Hagen and Michael Hagen claimed a lack of guilty knowledge; their central defense at trial . . . is that they were ‘conned’ by Mr. Kimble.” Doc. 291, Gov’t’s Resp., 22 (citing Tr. Vol. 6, 68–70).

Moreover, there was sufficient evidence that the Hagens had a subjective awareness of “a high probability” that their conduct was illegal.

See Kuhrt, 788 F.3d at 417.

First, the evidence demonstrated that the Hagens were on notice from Medicare that their claims were suspect. Second, the Hagens’ own testimonies suggested that they buried their heads in the sand to avoid positive knowledge of the illegality of Kimble’s operation. For example, Michael Hagen conceded that he never received any raw leads from Kimble. Tr. Vol. 7, 320 (“I had no interest in seeing [the raw leads]. I had them kept at Pantheon and then handed over to Chronos at the BPO.”).

He then confirmed that he never received any documents showing “the hours worked for BPO” because they “would have not made sense” to him. Id.

Michael Hagen also confirmed on cross-examination that they never had their contracts with Kimble reviewed by their own attorneys. Tr. Vol. 7, 156–57.

The Court deemed this evidence sufficient to establish subjective awareness of a high probability of illegal conduct and purposeful contrivance to avoid positive knowledge of such.

This finding remains unchanged.

United States v. Nguyen, 493 F.3d 613, 622 (5th Cir. 2007) (approving of deliberate ignorance instruction in money laundering conspiracy case, distinguishing between a “repeated failure to inquire,” which can suggest purposeful contrivance, and “a single suspicious incident”);

United States v. Demmit, 706 F.3d 665, 676 (5th Cir. 2013) (affirming use of instruction in money laundering case where defendant defrauded customers of their insurance annuity business and evidence showed defendant deposited large sums of cash into her bank accounts, made numerous purchases totaling thousands per month even though business commissions clearly could not support such spending, and customers notified her that money had not been deposited into their annuity accounts).

In sum, no new trial is warranted due to the alleged problems with the Court’s instructions to the jury.7

J. The Verdict Is Not Against the Weight of the Evidence.

Finally, the Hagens contend the verdict is against the weight of the evidence. Doc. 289, Defs.’ Mot., 23. The Court rejects this argument.

First, the Hagens contend their convictions under 18 U.S.C. § 371 are unsupported because the Government failed to prove the Hagens’ intent, and because the Government failed to prove “payment per order[.]” Id. at 24. Regarding intent, the Hagens emphasize:

(1) the Hagens’ own “extensive[]” testimonies that they lacked intent;

and

(2) a portion of Kimble’s cross-examination in which he confirmed that he told law-enforcement during an interview that “the Hagens believed the system was correct,” or “[l]egal.” Id. (quoting Tr. Vol. 4, 236).

But the Hagens ignore all the evidence supporting the opposite conclusion, including Kimble’s testimony on direct examination that the Hagens knew their contracts with Kimble were disguises. Tr. Vol. 3, 120–23, 166; see also, e.g., Gov’t’s Exs. 1241, 1147, 1148, 1149 (emails between Kimble and the Hagens discussing how the Hagens would be invoiced); Tr. Vol. 1, 62–63 (employee of the Hagens testifying that the Hagens paid for doctors’ orders); Tr. Vol. 2, 273 (Shores testifying that the Hagens knew how Kimble’s operation worked).

Indeed, as noted above, the competing theories at trial were

(1) that the Hagens knew Kimble’s operation was illegal and knowingly entered sham contracts to conceal their conduct,

and

(2) that the Hagens, conned by Kimble, in fact lacked knowledge that his operation was illegal.

The jury’s verdict is not against the weight of the evidence. It simply reflects that they credited the Government’s theory—and the evidence to support it—over the Hagens’ theory and their testimonies.

The Hagens’ “payment per order” argument is similarly without merit.

First, as the Government points out, it is a crime to pay for doctors’ orders, whether or not the quantity of those orders is set in advance. See 18 U.S.C. § 371.

Second, the evidence at trial demonstrated that the Hagens requested a specific number of doctors’ orders each week. See Gov’t’s Exs. 902, 1219, 1237, 1240, 1242.

The evidence further established that the Hagens would obtain replacement orders from Kimble when they received defective ones. E.g., Tr. Vol. 3, 248.

Second, the Hagens contend their convictions under 18 U.S.C. § 1956(a)(2)(A) are unsupported because the Government failed to prove the Hagens sent money overseas with the intent to promote an unlawful activity.

This contention is part and parcel of the Hagens’ argument that the Government failed to prove intent sufficient to support the conspiracy-to-defraud conviction. Because the evidence was sufficient to support the Hagens’ convictions for conspiracy to defraud, this argument is rejected summarily.

The verdict is not against the weight of the evidence, and no new trial is warranted on this ground.

IV. CONCLUSION

For the foregoing reasons, the Hagens’ Joint Rule 33 Motion for New Trial (Doc. 289) is

DENIED.

SO ORDERED.

UNITED STATES DISTRICT JUDGE

SIGNED: August 26, 2021.