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United States v. Thomley

United States District Court, S.D. Mississippi, Eastern Division

December 10, 2018

UNITED STATES OF AMERICA
v.
HOPE EVANGULANE THOMLEY, et al.

          MEMORANDUM OPINION AND ORDER

          KEITH STARRETT UNITED STATES DISTRICT JUDGE.

         The Court briefly described the background of this case in its Order of November 14, 2018. See Order at 1, United States v. Thomley, No. 2:18-CR-18-KS-MTP (S.D.Miss. Nov. 14, 2018), ECF No. 145. Defendant Glenn Doyle Beach filed a Motion to Dismiss [105] the indictment, challenging its sufficiency. In broad terms, Defendant's arguments can be grouped into three basic categories: 1) Defendant contends that the Government did not allege sufficient factual details to support the charges, 2) Defendant contends that the activity described in the charges is not actually illegal, and 3) Defendant contends that the indictment is multiplicitous, charging a single offense in multiple counts.

         Defendant is mistaken as to the degree of factual detail the Government is required to include in the indictment. As demonstrated below, each count is legally sufficient, meeting the requirements of Rule 7 and applicable case law. Moreover, Defendant wholly ignores that otherwise legal actions can lead to criminal liability if done in pursuit of a criminal conspiracy. Finally, the Court finds that the indictment is not multiplicitous. For the reasons provided herein, the Court denies Defendant's Motion to Dismiss [105] the indictment.

         A. Standard of Review

         First, Defendant challenges the sufficiency of the indictment. The Rules of Criminal Procedure require than an indictment “be a plain, concise, and definite written statement of the essential facts constituting the offense charged . . . .” Fed. R. Crim. P. 7(c)(1). When reviewing the sufficiency of an indictment, the Court takes its allegations as true. United States v. Ratcliff, 488 F.3d 639, 643 (5th Cir. 2007). “An indictment is legally sufficient if (1) each count contains the essential elements of the offense charged, (2) the elements are described with particularity, and (3) the charge is specific enough to protect the defendant against a subsequent prosecution for the same offense.” United States v. Simpson, 741 F.3d 539, 547 (5th Cir. 2014).

         The Government is not required to “allege in detail the factual proof that will be relied upon to support the charges.” United States v. Caldwell, 302 F.3d 399, 412 (5th Cir. 2002). In fact, “[a]s a general rule, an indictment which alleges an element of the charged offense merely by reciting the words of the applicable statute is valid so long as the indictment alleges each of the requisite elements of the charged offense.” United States v. Williams, 679 F.2d 504, 508 (5th Cir. 1982).

         B. Count 1 - 18 U.S.C. § 1349

         In Count 1, the Government charged Defendants with conspiring to commit wire fraud and health care fraud. “The elements of a conspiracy under 18 U.S.C. § 1349 are: (1) two or more persons made an agreement to commit an unlawful act; (2) the defendant knew the unlawful purpose of the agreement; and (3) the defendant joined in the agreement willfully, with the intent to further the unlawful purpose.” Simpson, 741 F.3d at 547. The elements of a conspiracy can be inferred from circumstantial evidence. United States v. Willett, 751 F.3d 335, 339 (5th Cir. 2014). For example, an agreement can be inferred from concert of action, United States v. Dailey, 868 F.3d 322, 329 (5th Cir. 2017), and knowledge can be inferred from surrounding circumstances. Willett, 751 F.3d at 339. Every conspirator need not participate in every aspect of the scheme; rather, each must only “willfully participate[] in a scheme to defraud with the intent that the scheme's illicit objectives be achieved . . . .” United States v. Tencer, 107 F.3d 1120, 1127 (5th Cir. 1997).

         The elements of wire fraud are: “(1) a scheme to defraud; (2) the use of, or causing the use of, wire communications in furtherance of the scheme; and (3) a specific intent to defraud.” United States v. Kuhrt, 788 F.3d 403, 413-14 (5th Cir. 2015) (citing 18 U.S.C. § 1343; Simpson, 741 F.3d at 547-48).

         Finally, the elements of health care fraud are: “(1) the defendant executed a scheme or artifice to defraud a health care benefit program in connection with the delivery of or payment for health care benefits, items, or services; (2) the defendant acted knowingly and willfully with a specific intent to defraud; and (3) the scheme to defraud employed false representations.” United States v. Garcia, 432 Fed.Appx. 318, 322 (5th Cir. 2011) (citing United States v. Hickman, 331 F.3d 439, 443-45 (5th Cir. 2003)).

         In Count 1, the Government alleged that Defendants conspired and agreed to commit wire fraud and health care fraud from approximately April 2012 through January 2016 in Lamar County, Mississippi. Indictment at 8-9, United States v. Thomley, 2:18-CR-18-KS-MTP (S.D.Miss. May 15, 2018), ECF No. 4. The Government recited the precise elements of the wire fraud statute, id. at 9 (citing 18 U.S.C. § 1343), and the health care fraud statute. Id. at 9 (citing 18 U.S.C. § 1347). The Government further alleged:

It was a purpose of the conspiracy for the defendants and their co-conspirators to unlawfully enrich themselves by, among other things, (a) submitting and causing the submission of false and fraudulent claims to health care benefit programs; (b) submitting and causing the submission of claims to health care benefit programs based upon materially false and fraudulent pretenses, representations, and promises; and (c) concealing the submission of false and fraudulent claims to health care benefit programs.

Id. The Government then provided numerous specific factual allegations regarding the manner and means by which Defendants, including Beach, sought to accomplish the objects and purpose of the conspiracy. Id. at 10-14.

         Specifically, the Government alleged that Beach “identified, promoted, and mass-produced formulations of compound medications that health care benefit programs, including TRICARE, would reimburse at particularly high rates . . ., regardless of the individual medical needs of the beneficiaries or the effectiveness of the High-Yield Compounded Medication.” Id. at 10. The Government also alleged that Beach instructed his agent and co-conspirator Jason May “to run ‘test' or ‘dummy' claims with health care benefit programs to determine how much health care benefit programs would reimburse for the formulas.” Id. In other words, Beach allegedly had his agents submit fake claims on behalf of real patients to figure out how to maximize the profit on the fraudulent medications. Then Beach and his co-conspirators would mass-produce the High-Yield Compounded Medications before any health care provider had prescribed them or even identified a patient in need. Id. at 10-11.

         The Government alleged that Defendants produced pre-printed prescription forms to give health care providers, in case of an audit by a health care benefit program. Id. at 11. The Government also alleges that Beach directed marketers to include more medication than necessary in compounds so that the reimbursement rates would be greater, regardless of the patients' legitimate medical needs, and that Defendants “devised a number of bribery and kickback schemes to provide remuneration to marketers and prescribers who prescribed High-Yield Compounded Medication and to beneficiaries who accepted it.” Id. Accordingly, health care providers prescribed the High-Yield Compounded Medications regardless of the medical needs of their patients, in exchange for kickbacks and bribes, and often without even examining the patients. Id.

         According to the Government, Advantage Pharmacy - of which Defendant Beach owned an interest - dispensed the High-Yield Compounded Medications and submitted claims to the patient's health care benefit program. Id. at 12. On behalf of Advantage Pharmacy, Beach allegedly agreed to “collect copayments from beneficiaries without reducing or waiving” them, so that the health care benefit programs would reimburse the claims submitted by Advantage Pharmacy. Id. at 12-13. But Defendants conspired to “waive and reduce the copayments for the beneficiaries, including TRICARE beneficiaries, while making it appear to health care benefit programs . . . that the copayments were being collected” because they knew that patients would refuse the High-Yield Compounded Medications if they had to pay the full copayments. Id. at 13.

         Advantage Pharmacy's contract with Pharmacy Benefit Managers (“PBM's”) was eventually terminated for “poor audit performance and other issues, ” and it was prohibited by law from dispensing the High-Yield Compounded Medications. Id. So, Defendants then used another entity, Advantage Medical Infusion, to dispense the medications. Id. Defendants allegedly concealed their interest in Advantage Medical Infusion while continuing to receive much of its revenue. Id. The Government specifically alleges that Beach maintained control over Advantage Medical Infusion's bank accounts, but he represented to the Mississippi Secretary of State that he was no longer part of the business and requested that his name be removed from the annual reports. Id. at 13-14. Defendants allegedly continued the same fraudulent scheme through Advantage Medical Infusion after Advantage Pharmacy's contract with PBM's was rescinded. Id. at 14.

         These allegations are legally sufficient. The Government described the essential elements of the charged offense with particularity, and there is sufficient information to protect Beach from prosecution for the same crime in the future. That is all Rule 7 and the applicable case law requires. See Fed. R. Crim. P. 7(c)(1); Simpson, 741 F.3d at 547. The Court denies Beach's motion to dismiss Count 1.

         Beach argues that the Government did not allege sufficient facts to demonstrate that he agreed or conspired with the Thomleys. As noted above, the Government alleged that Defendants conspired and agreed to commit wire fraud and health care fraud from approximately April 2012 through January 2016 in Lamar County, Mississippi - reciting the precise elements of the applicable statutes. Indictment [4], at 8-9. “[A]n indictment which alleges an element of the charged offense merely by reciting the words of the applicable statute is valid so long as the indictment alleges each of the requisite elements of the charged offense.” Williams, 679 F.2d at 508. Moreover, the Government alleged numerous details about the purpose, manner, and means of the conspiracy, from which one may reasonably infer an agreement among Defendants. See Willett, 751 F.3d at 339; Dailey, 868 F.3d at 329.[1]

         Beach also argues that it is not illegal to formulate, produce, market, and prescribe High-Yield Compounded Medications; to run “test” or “dummy” claims; to submit claims to health care benefit programs; or to use multiple corporate entities in a business enterprise. But these were allegedly the manner and means Defendants used to accomplish the conspiracy's illicit goals. In other words, Beach completely ignores the alleged purpose and effect of these actions: to commit wire fraud and health care fraud.[2]

         C. Counts 4, 5, and 6 - 18 U.S.C. § 1347

         Next, Beach argues that Counts 4, 5, and 6 are insufficient because they do not provide enough specific facts about the charged crimes. Specifically, he argues that the Government 1) failed to allege any facts demonstrating that he knew the claims were fraudulent, 2) failed to allege a specific victim, 3) failed to allege the specific health care benefit program to which the claims were submitted, and 4) failed to specify how the claims were false or fraudulent.

         In Counts 4, 5, and 6, the Government incorporated all prior relevant allegations.[3] It also alleged that Beach committed health care fraud in violation of 18 U.S.C. § 1347. As noted above, the elements of health care fraud are: “(1) the defendant executed a scheme or artifice to defraud a health care benefit program in connection with the delivery of or payment for health care benefits, items, or services; (2) the defendant acted knowingly and willfully with a specific intent to defraud; and (3) the scheme to defraud employed false representations.” Garcia, 432 Fed.Appx. at 322.

         In Counts 4, 5, and 6, the Government alleged that Defendant Beach “did knowingly and willfully execute, and attempt to execute, a scheme and artifice to defraud a health care benefit program affecting commerce, as defined in” 18 U.S.C. § 24(b), “and to obtain, by means of materially false and fraudulent pretenses, representations, and promises, money and property owned by, and under the custody and control of, said health care benefit program.” Indictment [4], at 15. Each count describes a specific transaction, and the Government provided the beneficiary's initials, the prescription number, the date the claim was submitted for payment, and the amount paid. Id.

         These allegations are legally sufficient. The Government described the essential elements of the charged offense with particularity, and there is sufficient information to protect Beach from prosecution for the same crime in the future. That is all Rule 7 and the applicable case law requires. See Fed. R. Crim. P. 7(c)(1); Simpson, 741 F.3d at 547. The Court denies Beach's motion to dismiss Counts 4, 5, and 6.

         D. Count 14 - 18 U.S.C. § 371

         Next, Beach argues that Count 14 is insufficient because the Government did not provide enough specific facts about the conspiracy. Specifically, he argues that the Government 1) failed to define the term “kickback” or identify the actions which constituted the alleged kickbacks, 2) failed to explain how the marketing agreement between Advantage Pharmacy and Total Care Marketing was illegal, 3) failed to allege facts demonstrating that he knew the marketing contract was illegal, 5) failed to allege facts demonstrating that he paid any bribes to patients or physicians, 6) failed to allege that he knew any bribes had been paid to patients or physicians, 7) failed to allege the “routine” waiver of patient copayments, and 8) failed to specify the amount of alleged kickbacks.

         In Count 14, the Government alleged that Defendants knowingly conspired and agreed to commit violations of the Anti-Kickback Statute (“AKS”). “To support a conspiracy conviction under 18 U.S.C. § 371, the government must prove three elements: (1) an agreement between two or more people to pursue an unlawful objective; (2) the defendant's knowledge of the unlawful objective and voluntary agreement to join the conspiracy; and (3) an overt act by one or more of ...


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