Thursday, August 31, 2017

Deliberate Ignorance Instruction Previously Rejected Allowed Based on Defense Closing Argument (8/31/17)

In United States v. Walter-Eze, ___ F.3d ___, 2017 U.S. App. LEXIS 16269 (9th Cir. 2017), here, the defendant appealed her convictions for conspiracy to commit health care fraud in violation of 18 U.S.C. § 1349, health care fraud in violation of 18 U.S.C. § 1347; and conspiracy to pay and receive health care kickbacks in violation of 18 U.S.C. § 371. There were no tax counts; tax is not mentioned in the opinion.  However, I have previously discussed the deliberate ignorance jury instruction device which feature prominently in the case.  (The deliberate ignorance concept goes by other terms such as willful ignorance and conscious avoidance; I use deliberate ignorance here because that is the term used by the court in the opinion.)  An issue with such jury instructions that I have previously discussed on this blog is whether the instruction allows the jury to convict without actually finding the knowledge required by the criminal statute or simple permits the jury to infer, in light of all the evidence, that the defendant had the knowledge.  This case does not speak to that issue, but it is interesting because of the way the deliberate ignorance instructions was presented to the jury.

The criminal charges were based on the following facts state by the Court:
III. Evidence at Trial 
At trial, witnesses called by the government testified to a five-year scheme run by Walter-Eze through her company Ezcor-9000 ("Ezcor") to fraudulently bill Medicare and Medi-Cal for durable medical equipment ("DME") provided to patients who had no need for the devices.n2 Recruiters would be paid kickbacks to find patients and doctors would be paid for prescriptions. Among the witnesses called were Wilmer Guzman and Elder Aguilar, workers for Walter-Eze, who explained the illegal kickback scheme and the provision of the DME; Dr. Edna Calaustro, who was paid by Ezcor to write prescriptions for unnecessary devices; and several beneficiaries (or their relatives) whose receipt of unnecessary devices served as the predicates for each of the substantive claims in Counts 2 through 6 of the indictment. The federal and state investigators who worked on the Ezcor case also testified.
   n2 Medi-Cal is California's Medicaid program serving low-income individuals, which will reimburse the DME supplier up to 20 percent of the maximum allowable amount after Medicare pays.
  Walter-Eze testified in her own defense. No other witnesses were called by the defense. 
The majority of the government's evidence at trial pertained to one type of DME in particular—power wheelchairs—for which Medicare paid a particularly high rate of reimbursement and which, in order to be prescribed, required doctors to determine that their patients had such limited mobility that they lacked the ability to perform activities of daily living in the home. Over 50% of the $3,432,776 of claims that Walter-Eze submitted to Medicare and Medi-Cal through Ezcor were for these high-value power wheelchairs and wheelchair accessories. The fraudulent claims were not limited to these items, but included additional DME, such as hospital beds and knee and back braces, which accounted for an additional 33% of Ezcor's business. Walter-Eze would pay recruiters such as Guzman kickbacks for each prescription that they brought in to Ezcor; the kickback amount would vary based on the reimbursement value of the piece of DME. Accordingly, the highest kickbacks were paid for power wheelchair prescriptions, followed by hospital beds, and knee and back braces. From January 2007 through early March 2012, Ezcor submitted $3,432,776 in reimbursement claims to Medicare and was paid $1,866,261. During this same period, Ezcor submitted claims to Medi-Cal totaling $89,011 and was paid $73,269. 
Walter-Eze denied that she paid kickbacks to recruiters, instead characterizing them as commissions paid to independent contractors. She also denied paying any money to Dr. Calaustro for prescriptions.
The facts relevant to the jury instruction are:

IV. Jury Instructions 
During the charging conference, the government requested a deliberate ignorance instruction based on Guzman's testimony that he told Walter-Eze that Medicare beneficiaries were only accepting the power wheelchairs because Guzman was offering them money, to which Guzman said Walter-Eze replied "I don't care. Just do what you have to do." The district court replied that, "if that's what she said, that's part of the conspiracy," and thus refused to give that instruction. Based on this ruling, the government's summation focused on Walter-Eze's actual knowledge of the fraud, and the defense's summation centered almost entirely on the argument that Walter-Eze was a naïve businesswoman who unwittingly became involved with unsavory characters who were violating the law. After the defense completed its summation, the government renewed its request for the deliberate ignorance instruction, and the district court explained that, while it had previously believed that the instruction would not be relevant, "defendant's theory in argument makes it relevant" because "after argument, the issue as to whether or not [*12]  [Walter-Eze] was simply careless is directly in front of the Court." Defense counsel argued that the instruction was not appropriate. The district court disagreed and instructed the jury regarding deliberate ignorance using Model Criminal Jury Instruction 5.7.
Now this is an unusual procedural posture.  The court's decision to give the deliberate ignorance instruction is usually made before closing arguments to the jury so that the lawyers will know the law that the jury will consider and be able to shape their arguments accordingly.  Here, in the government's opening closing argument and the defense's closing argument, the parties operated on the assumption that the Government either proved the required knowledge (guilty) or did not (not guilty).  At least in the eyes of the district court, the defense attorney sought to take advantage of that in a way that, depending upon the facts, might infer a pattern of deliberate ignorance.  So the district court gave the instruction immediately before the prosecutor's closing argument.

The defendant complained on appeal.  The Court rejected the defendant's argument as follows:
III. Deliberate Ignorance Instruction 
Walter-Eze next argues that the trial court erred when after denying the government's initial request to instruct the jury on "deliberate ignorance" and after the defense had already delivered its closing argument under the assumption that the instruction would not be given, the district court reversed itself, agreed to give the instruction, and allowed the government to argue deliberate ignorance in its rebuttal. We review the decision to give a deliberate ignorance instruction—also known as Jewell instruction, after United States v. Jewell, 532 F.2d 697 (9th Cir. 1976) (en banc)—for abuse of discretion. United States v. Heredia, 483 F.3d 913, 922 (9th Cir. 2007). 
Walter-Eze makes two arguments related to the district court's decision. First, she argues that because the government's case-in-chief relied primarily on the claim that Walter-Eze had actual knowledge of the healthcare fraud, the deliberate ignorance instruction had no basis in the evidence, created the risk that the jury would convict her based simply on criminal negligence, and thus was improper. Second, Walter-Eze contends that the timing of the district court's decision to give the instruction (after the defense had already made its summation, but before the government's rebuttal), deprived Walter-Eze of the right to fully defend herself. Neither argument has merit. 
A Jewell instruction may be given "if the instruction is 'supported by law and has foundation in the evidence.'" Heredia, 483 F.3d at 922 (quoting Jones v. Williams, 297 F.3d 930, 934 (9th Cir. 2002)). Jewell's "core holding" was that, for the purposes of a criminal statute, an individual without "positive knowledge" can be found to have acted "knowingly" if the individual "consciously avoided" obtaining actual knowledge. Id. at 918 (quoting Jewell 532 F.2d at 702). In deciding whether to give a Jewell instruction, "in addition to an actual knowledge instruction, the district court must determine whether the jury could rationally find willful blindness even though it has rejected the government's evidence of actual knowledge. If so, the court may give a Jewell instruction." Id. at 922. It follows that, if the record contains evidence to support a deliberate ignorance instruction, it does not matter that the government primarily relied upon a theory of actual knowledge. See United States v. Ramos-Atondo, 732 F.3d 1113, 1120 (9th Cir. 2013) ("[N]o established principle of law declares that the deliberate ignorance instruction cannot be given unless deliberate ignorance is the main thrust of the government's case-in-chief or closing argument. The law indeed is to the contrary."). 
A review of the record shows that the district court acted within its sound discretion in giving a deliberate ignorance instruction. At trial, evidence was presented upon which a reasonable jury could have concluded that even if Walter-Eze did not know about the illegal kickbacks and healthcare fraud, she deliberately failed to investigate while being aware of a high probability of the fraud. Once the defense in their summation articulated their theory of the case, i.e. that Walter-Eze was caught up in other peoples' schemes and had no knowledge of the criminal conduct, the district court rightly found that the defense had made the deliberate ignorance charge relevant to the entire course of conduct. 
In summation, in addressing the evidence that Dr. Calaustro was paid by Walter-Eze to write bogus prescriptions for power wheelchairs, the defense argued that there was no evidence that Walter-Eze ever went to Northern California to watch Dr. Calaustro examine a patient, denied that she ever spoke with Dr. Calaustro, and asserted that "she didn't know" that Dr. Calaustro was "writing hundreds and hundreds and hundreds of wheelchair prescriptions for a hundred dollars each." However, Brent Person, who works for the Centers for Medicare and Medicaid Services, testified that in his experience, "most physicians go their entire careers and only prescribe one or two power wheelchairs," but that most of Ezcor's power wheelchair prescriptions came from just four physicians, each of whom were "prescribing wheelchairs in the double-digits in only a few years." Allison Davis, a Special Agent for the Department of Health and Human Services, testified that it was "unusual" and "defies common sense" to see a DME supplier in Southern California supply patients who live in Northern California. 
Given the unusually high number of high-value prescriptions that came from just four doctors, one of whom, Dr. Calaustro, was located far from Ezcor's offices, a reasonable jury could find that Walter-Eze knew there was a high probability that the referrals were being obtained fraudulently but failed to investigate the matter to ascertain the truth. See, e.g., United States v. Nicholson, 677 F.2d 706, 710-11 (9th Cir. 1982) (finding deliberate ignorance instruction proper where the defendant remained willfully ignorant of the nature of his activity after the circumstances would "have put any reasonable person on notice that there was a 'high probability' that the [conduct] was illegal"). 
Walter-Eze's additional contention that the instruction was inappropriate because it could have led the jury to convict based on simple negligence is unavailing. Walter-Eze does not claim that the charge itself was an incorrect statement of the law, and the charge makes plain that negligence is not a sufficient basis for guilt. In Heredia, this Court unequivocally rejected the argument that "the Jewell instruction risks lessening the state of mind that a jury must find to something akin to recklessness or negligence." 483 F.3d at 924 ("Recklessness or negligence never comes into play, and there is little reason to suspect that juries will import these concepts, as to which they are not instructed, into their deliberations."). 
Walter-Eze's second claim is that she was denied "the right to defend herself" because, in violation of Federal Rule of Criminal Procedure 30(b)'s requirement that courts "inform the parties before closing arguments how it intends to rule on the requested instructions," the district court only decided to allow the deliberate ignorance instruction after the defense had already delivered its summation. As an initial matter, the district court correctly determined that defense counsel did make arguments in his summation which made a deliberate ignorance charge relevant, by asserting that Walter-Eze did not know and had no reason to know about her co-conspirator's criminal conduct. Indeed, defense counsel explicitly argued this point at length: 
And if that person is taken to a licensed physician, and there's no indication that these doctors were not licensed, and if that person gives a true and honest medical history which is then conveyed to my client, why should she think it's fraudulent? Why should she think there's no medical necessity? Why should she be convicted of Counts 2 through 6? It is ridiculous. 
It was therefore only as a result of defense counsel's argument that the district court felt it necessary to allow the government to articulate a deliberate ignorance theory. That argument invited an explanation for why and how Walter-Eze missed all the warning signs that fraud was occurring under her watch. 
But even if defense counsel did not have the opportunity to directly address the instruction in his summation, Walter-Eze was not prejudiced by this limitation. "Failure to comply with [Federal Rule of Criminal Procedure] 30 is reversible error . . . only if counsel's closing argument was prejudicially affected thereby," meaning counsel "was unfairly prevented from arguing his or her defense to the jury or was substantially misled in formulating and presenting arguments." United States v. Foppe, 993 F.2d 1444, 1451 (9th Cir. 1993) (quoting United States v. Gaskins, 849 F.2d 454, 458 (9th Cir. 1988)). Walter-Eze has not indicated how her counsel's summation would have been different had he known that the deliberate ignorance standard would apply. See United States v. Scott, 642 F.3d 791, 798 (9th Cir. 2011) (finding no prejudice where defendant does not articulate "any way in which his closing argument would have been different if the court had provided the instructions earlier"). As noted above, defense counsel already had argued not only that Walter-Eze did not know about her co-conspirators' scheme, but also that she had no reason to know of it, such that she should not be found guilty even under a deliberate ignorance theory. Because the inability to make additional argument to the jury did not "prevent [ ] defense counsel from making a point essential to the defense" that he did not already make, Walter-Eze was not prejudiced and the district court did not abuse its discretion in adding the deliberate ignorance instruction. United States v. Horton, 921 F.2d 540, 547 (4th Cir. 1990) (alteration in original) (quoting United States v. Sawyer, 443 F.2d 712, 713 (D.C. Cir. 1971)). 
Finally, defense counsel never asked the district court for the opportunity to respond to the added instruction, which we have previously found precludes a challenge upon appeal. United States v. Fontenot, 14 F.3d 1364, 1368 (9th Cir. 1994); see also United States v. James, 998 F.2d 74, 79 (2d Cir. 1993) ("Having failed to request additional argument and having thereby deprived [the district court] of the opportunity to correct any potential error, [defendant's] argument on appeal that Fed. R. Crim. P. 30 was violated because he was never given the chance to reargue is without merit. . . .").
JAT Comments:

1.  First, let me caveat my comments on the deliberate ignorance instruction.  I am a skeptic as to its use, particularly in those cases, such as tax crimes, that require the highest mens rea level -- intent to violate a known legal duty.  Cheek v. United States, 498 U.S. 192 (1991).  The Supreme Court has said that the statutory element willful is a word of several meanings, but in the tax context it means highest level of mens rea -- specific intent to violate a known legal duty.  In Anglo-American jurisprudence, guilt is normally found if the knowledge the defendant has was that he was doing the actions that the law says is a crime.  Ignorance of the law is not defense.  But, for specific intent crimes such as tax crimes, ignorance of the law is a defense.  The defendant must know the acts he performed was a violation of the law.  My concern with the deliberate ignorance instruction is that a jury -- and perhaps even a judge acting as fact finder when a jury has been waived -- may substitute deliberate ignorance for specific intent to violate a known legal duty.

2.  In this case, I don't think the mens rea for the crimes was "knowingly and willfully" (e.g., § 1347, Health Care Fraud, here) is the higher mens rea intent requirement a la Cheek (but I caveat that I have not researched the issue).  My concerns about the deliberate ignorance instruction may be not as strong as with the higher Cheek standard crimes.  I will assume for my further comments below that the crimes involved lesser willfulness and knowledge criminal elements than Cheek.

4. If the facts at trial truly permitted the deliberate ignorance instruction, the district court should have agreed to give the instruction ab initio so that the counsel for the parties could address it in closing arguments without interruption and without calling undue attention to it by disrupting the orderly flow of the closing arguments.

5.  I am not sure that the theoretical possibility that defense counsel could have requested an additional opportunity to argue the issue before the jury really is an adequate substitute for getting it right in the first instance.  In theory, to address the new theory of submission (deliberate ignorance), the prosecutors might have requested additional opening argument on that subject, with the defense then getting answering argument and the prosecutor then getting rebuttal.  At a minimum, upon request, the defense should have been permitted to address the issue before the prosecutors moved into the normal rebuttal.  That commotion could have, in my mind, drawn undue attention and credibility to the theory.  I am not sure, that on the  evidence summarized, the jury would not have convicted anyway without the instruction.

6.  It seems to me that the defendant's closing argument was designed to address the prosecutor's opening closing argument (constrained by the court's initial refusal to give the deliberate ignorance instruction) that it had proved beyond a reasonable doubt the level of knowledge required for the crime.  I think it is a thin line indeed between arguing that the prosecutor did not meet that burden because the defendant did not have the requisite knowledge.  I think the Court's initial failure to approve that instruction prior to closing arguments is really the problem.

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