United States v. Dearing

United States Court of Appeals for the Ninth Circuit · Criminal Law

Criminal LawHealth Care FraudAiding and AbettingJury InstructionsSufficiency of the Evidence18 U.S.C. § 1347health care fraudwillfulness

Facts

Dearing co-owned Life Springs Mental Health with his brother, and the clinic depended on Medicaid billing. After an October 2002 audit, Medicaid investigator Snider told Dearing that the clinic was improperly billing for services by an unqualified employee, for services lacking a physician-signed treatment plan, and for services provided outside the facility. Multiple employees later told Dearing that those same illegal billing practices continued, and he was present when his brother made statements discouraging disclosure. Despite this, Dearing took no effective corrective action, discouraged employee concerns, misrepresented his awareness to an investigator, and continued to share in the company’s profits.

Issue

Whether the evidence was sufficient for a rational jury to find that Dearing knowingly and willfully aided and abetted health care fraud under 18 U.S.C. § 1347. Whether the district court erred by giving a jury instruction stating that intent to defraud could be shown by reckless indifference to the truth or falsity of statements.

Rule

For health care fraud under 18 U.S.C. § 1347, a willful act is one done with a bad purpose and with knowledge that the conduct is unlawful. Willfulness may be inferred from circumstantial evidence of fraudulent intent, including knowledge of ongoing fraud, concealment, misrepresentations, and continued profit, and intent to defraud may be proved by reckless indifference to the truth or falsity of statements so long as the jury is also separately required to find that the defendant acted knowingly and willfully.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Owen Mercer owns half of Red Mesa Behavioral Services, a clinic that bills a state health program. After a compliance review tells Owen that the clinic is billing for counseling by unlicensed staff and for sessions lacking required physician approval, three employees later repeat that the same billing continues, but Owen leaves operations unchanged and keeps taking quarterly profit distributions.

If Owen is charged with aiding and abetting health care fraud, which is the strongest argument that the evidence is sufficient to prove willfulness?

Explanation. Willfulness under § 1347 requires a bad purpose and knowledge that the conduct is unlawful. The majority held that direct proof is rare and that willfulness may be inferred from circumstantial evidence such as notice of ongoing fraud, concealment, misrepresentations, and continued profit. Here, official notice plus repeated employee warnings, no corrective action, and continued profit support a rational inference of willfulness. Mere ownership alone would not automatically suffice, but these combined facts do.