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United States v. Nerey

United States Court of Appeals, Eleventh Circuit

December 12, 2017

CARLOS RODRIGUEZ NEREY, Defendant-Appellant.

         Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:15-cr-20436-DPG-8

          Before HULL, JORDAN, and BOGGS, [*] Circuit Judges.

          HULL, Circuit Judge

         In this direct criminal appeal, defendant Carlos Rodriguez Nerey appeals both his convictions and total sentence related to his role as a patient recruiter and his receipt of kickbacks in a complex health care fraud scheme. Following a five-day trial, a jury found defendant Nerey guilty on the two charges against him in the indictment. After thorough review of the briefs and extensive trial record, and with the benefit of oral argument, we affirm.


         On September 29, 2015, defendant Nerey and several other individuals- including Milka Alvarez, Jesus Perez, Joel Alvarez, Sandra Jaramillo, Adolfo Larrea, and Maria Teresa Pupo-were charged in a thirteen-count superseding indictment. All of Nerey's co-defendants eventually pled guilty while he proceeded to trial. Nerey was charged on two counts: (1) conspiracy to defraud the United States under 18 U.S.C. § 371 by paying and receiving health care kickbacks, in violation of 42 U.S.C. § 1320a-7b(b)(1)(A), (b)(1)(B), and (b)(2)(A) (Count 2) and (2) knowingly soliciting and receiving kickbacks in connection with a federal health care program, in violation of 42 U.S.C. § 1320-7b(b)(1)(A) (Count 9).

         On April 1, 2016, a jury found Nerey guilty on both counts. The district court denied Nerey's motion for judgment of acquittal before the verdict was rendered and denied his renewed motion thereafter. On May 27, 2016, the district court sentenced Nerey to sixty months' imprisonment on each count to run concurrently, three years of supervised release, and restitution in the amount of $2, 366, 746.


         Because defendant Nerey challenges the sufficiency of the evidence supporting his convictions, we outline the trial evidence about the Medicare program, the various home health care agencies engaged in the fraud and kickbacks, and Nerey's involvement.

         A. Medicare

         Medicare is a health insurance program overseen by the federal government and is intended for people of age 65 or older or people with a qualifying disability. Medicare is funded through taxpayer contributions and small recipient premiums. Patients who qualify for Medicare benefits have services furnished by a Medicare provider like a doctor, hospital, or home health agency. Once a service is performed, that provider can bill Medicare and claim payment. Medicare contractors designated by the respective states will then review claims submitted for payment. Some claims take two weeks to process, while others may take up to a month.

         Claim reviewers look to the following five components for the legitimacy of claims: (1) the patient's entitlement to Medicare; (2) proper enrollment of the provider; (3) the provision of services; (4) compliance with coverage rules; and (5) proper reporting of records. Because Medicare receives such a high volume of claims, however, rarely do all claims receive a complete and thorough review. Categorically, Medicare does not pay for claims based on kickbacks or bribes. See 42 U.S.C. § 1320-7b(b).

         B. Home Health Care

         Under Medicare, "home health care" refers to medical services for patients who require special treatment because they are "homebound." Homebound patients suffer from a physical or mental limitation that prohibits them from leaving home on a routine basis without the assistance of a wheelchair, walker, or another individual.

         Homebound status must be determined and documented by a physician. For home health care agencies to properly bill Medicare, their patients must have a prescription for home health care. Patients must meet with a physician and establish a plan of care in order to legitimately receive a prescription. Thereafter, the treating physician is required to provide progress notes once treatment begins.

         All treatment provided in home health care is by skilled professionals- licensed doctors, nurses, and therapists. With respect to therapy, Medicare covers physical therapy, occupational therapy, and speech language pathology. Massage therapy is not covered under home health care. Likewise, therapy notes taken after a session must be recorded by, and come from, a licensed physical therapist.

         Relevant to our review is the fact that home health care agencies engage in fraud when they, inter alia, (1) submit claims for a patient who does not qualify for treatment, (2) fail to perform the work billed to Medicare, or (3) pay a kickback to a patient recruiter. As the name suggests, a patient recruiter procures eligible Medicare beneficiaries and exchanges their information with providers for a kickback on any claims paid by Medicare.

         C. Jesus Perez and Mercy Home Care, Inc.

         The fraud perpetrated in this case, including Nerey's involvement, centers on Jesus Perez, one of Nerey's co-defendants. Perez had a long history with home health care agencies, starting with his work at Wong Home Health Care in 2006 and then La Caridad in 2013 or 2014. At trial, Perez admitted to engaging in Medicare fraud and paying patient recruiters as far back as his work at La Caridad.

         Eventually, in late 2014, Perez transitioned to working for Mercy Home Care, Inc. ("Mercy HC"), where he continued these illegal practices. Before he became the owner of Mercy HC, Perez complained to Nerey, one of his previous acquaintances, about the salary Perez was receiving there as an employee. Nerey responded by suggesting that Perez begin inflating invoices.

         Perez later became the owner of Mercy HC in October 2014 and enlisted the assistance of close friends and family, including Jesus Garcia and Adolfo Larrea, to help run his operation. At trial, Joel Alvarez described Adolfo Larrea as Perez's "right hand." Several individuals, including Perez's then-wife, Anelys Ayala, were used to cash checks for the payment of illegal kickbacks to recruiters. Another patient recruiter at Mercy HC was Yovani Suarez, who went by the nickname "Tito." As the group would later discover, Suarez was a confidential informant for the Federal Bureau of Investigation ("FBI").

         Perez's testimony suggested that he obtained ownership of Mercy HC from its actual owner, Contrado Pineida, through falsified documents. Perez insisted that the transfer was nonetheless done at Pineida's instruction. Under Perez's leadership, Mercy HC submitted fraudulent claims to Medicare and negotiated extensive kickbacks for patient recruiters.

         Raciel Leon served as the manager at Mercy HC and kept a book of patient recruiters and payoffs. Leon's logbook was used to keep track of which recruiters held claim to recruiting which patients. It included patient information along with a column coded by letters to mask kickback recipients. To keep track of his patients, Nerey would cross-reference this logbook with his own records. While each recruiter had his or her own letter or letters, entries containing the letter G stood for "gordo, " or "fat guy" in Spanish, which was Nerey's nickname. When paying their recruiters, Perez and Leon utilized inflated invoices, which were later submitted to Medicare, to mask payoffs and made special notations on the memo lines in checks to recruiters-such as "SS" or "special service"-to identify recruiting payments.

         D. Nerey, Sweet Life Staffing, and Nerey Professional Services, Inc.

         Around November 2014, Nerey became associated with Mercy HC. Nerey was active in Mercy HC's operation by recruiting patients through an established book of patients and purchasing prescriptions, both real and forged, for home health care. Sandra Jaramillo and Karla Garcia, two other co-defendants, both testified that defendant Nerey carried around a small notebook full of patient names and information. At Mercy HC, Nerey was Perez's top source of patients, all of whom were eligible Medicare beneficiaries. Perez paid Nerey between $1, 800 and $2, 200 per patient recruited.

         Nerey used several companies-the two most relevant being Sweet Life Staffing ("Sweet Life") and Nerey Professional Services, Inc. ("NPS")-to funnel kickback money. Mercy HC would split payments to Nerey between cash to him, which he requested, and checks to Sweet Life and NPS, which eventually became necessary due to the amount of money involved in the conspiracy.

         Sweet Life was a therapy-staffing company used by Nerey to process his recruiting kickbacks. While several witnesses testified that Nerey claimed ownership of Sweet Life, the registered owner was actually Daylin Cabrera. Nonetheless, Nerey required that all of the patients he recruited be assigned to Sweet Life for "therapy." Nerey processed kickbacks through Sweet Life using inflated and falsified invoices for fraudulent therapy services. Invoices were handled in several ways, but often broken into smaller $30 amounts per therapy session to cover up larger kickback amounts.

         Nerey was not a licensed physical therapist or nurse, but nearly every fact witness testified that he regularly wore medical scrubs when they encountered him. Likewise, witnesses reported that patients received massages from Nerey and others he employed in the place of prescribed physical therapy. Karla Garcia described Nerey's therapy office as a "very little" building with two small rooms and a lobby located inside a shopping center.

         Defendant Nerey also owned and created NPS as a shell corporation to deposit and process kickback payments. NPS observed no formalities of an established business and paid no taxes, wages, or licensing fees during its existence. The company itself provided no services other than processing payments related to Nerey's patient-recruiting activities, and it enjoyed a 60% profit margin. Nerey also used NPS to pay for fraudulent and forged home health prescriptions, which he obtained mostly through Dr. Hugo Espinosa at Yava Medical Office, Inc. ("Yava Medical") and Karla Garcia at Larkin Community Hospital ("Larkin Hospital").

         E. Recruiting Karla Garcia

         Karla Garcia worked as a medical assistant at Larkin Hospital. She was introduced to defendant Nerey through another patient recruiter identified only as "Alexis." Around October or November 2014, Karla and Nerey met for the first time in a Wendy's parking lot to discuss patient recruiting. At this meeting, Nerey told Karla that he received recruiting kickbacks from Mercy HC and a company called Holistic Home Health. Nerey agreed to pay Karla $150 per prescription and $600 per patient. He explained an approach for recruiting and instructed her on exactly how to forge prescriptions. Nerey later told Karla that it was also necessary to pay patients to keep them quiet.

         At some point, Karla's husband also became involved in paying off patients and processing funds through a shell company he created for Karla, Kb Health Consultants, LLC. Karla testified that defendant Nerey offered her husband a job as a "physical therapist" at Sweet Life even though he had no formal training.

         After Karla and Nerey had a falling out over kickback payments, she began recruiting patients independently for Perez. Karla was fired from Larkin Hospital in April 2015, but she continued working as a patient recruiter. The operation at Mercy HC was becoming so successful that, in an effort to slow the amount of money funneled out, the agency had to lower patient admission rates to only those patients who were truly homebound. Around the same time that Karla entered the business, Perez decided that it was time to expand.

         F. Joel Alvarez and D&D&D Home Health Care, Inc.

         Joel Alvarez became involved in the conspiracy through Jesus Garcia, an above-mentioned associate whose son went to school with Alvarez's daughter. Garcia introduced Alvarez to Perez in a meeting at Mercy HC in November 2014. Nerey was also present at that meeting. Perez explained aspects of home health services and patient recruiting to Alvarez and asked him to enter the business.

         In December 2014, at the behest of Perez, Alvarez provided a capital investment in the amount of $80, 000 for the purchase of a new home health agency, D&D&D Home Health Care, Inc. ("D&D&D"), to be owned jointly with Perez and Garcia. Due to his relative experience and contacts in the field, Perez established the operation and negotiated kickback rates for patient recruiting. At the beginning, D&D&D did not have a sufficient patient volume to be profitable.

         To get the business off the ground, D&D&D immediately began providing kickbacks to patient recruiters, specifically defendant Nerey. In fact, the initial efforts to drum up business were facilitated entirely through Nerey. D&D&D paid kickbacks to Nerey at the same rate negotiated at Mercy HC. Because of his established book of patients, Nerey was able to negotiate favorable rates with Perez. Like Mercy HC, all of D&D&D's patients had to be eligible Medicare beneficiaries because the agency was not approved by any other health maintenance organization ("HMO").

         In January 2015, Alvarez's wife, Sandra Jaramillo, also became involved in the scheme. Her role at D&D&D was to manage kickbacks. Raciel Leon, the manager at Mercy HC, trained Jaramillo to track kickback payments in a logbook. Jaramillo copied Leon's system, and Alvarez later digitized the results in a chart. Nerey described his recruiting efforts to Jaramillo as "filling the nest" for D&D&D.

         At trial, Alvarez explained that recruiter kickbacks, a primary illegal aspect of the operation, were often referred to among the group as the "parte negra, " which translates from Spanish as the "black part." Alvarez claims he later discovered that not only were patient recruiters being paid in kickbacks but so were the patients themselves. Patients involved in the scheme would regularly call D&D&D asking for "flowers, " which referred to a promised kickback. Nerey and others would also use code ...

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