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United States v. Elbeblawy

United States Court of Appeals, Eleventh Circuit

August 7, 2018

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
KHALED ELBEBLAWY, Defendant-Appellant.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:15-cr-20820-BB-1

          Before WILLIAM PRYOR and MARTIN, Circuit Judges and WOOD, [*] District Judge.

          WILLIAM PRYOR, Circuit Judge.

         This appeal from the convictions and sentence of Khalid Elbeblawy for conspiracy to commit healthcare fraud and wire fraud, 18 U.S.C. § 1349, and conspiracy to defraud the United States and pay healthcare kickbacks, 18 U.S.C. § 371, calls to mind the familiar warning that anything you say to the government can and will be used against you. While he owned or managed three home health entities, Elbeblawy hired patient recruiters and bribed doctors and staffing groups to refer patients with Medicare coverage to his agencies; he falsified medical records; and he billed Medicare for tens of millions of dollars in unnecessary medical services. After he had cooperated with the investigation of these crimes for two years, Elbeblawy and his attorney signed a plea agreement and a statement about its factual basis. The agreement waived two evidentiary rules that would ordinarily bar the admission of statements made during plea discussions. But before Elbeblawy pleaded guilty in open court, he changed his mind and demanded a jury trial. At trial, the district court admitted the factual basis for the plea agreement as well as other evidence that the government obtained as a result of Elbeblawy's cooperation. The jury convicted Elbeblawy, and the district court sentenced him to 240 months of imprisonment and ordered him to forfeit approximately $36 million. We conclude that the district court did not err when it admitted the factual basis for the plea agreement because Elbeblawy knowingly and voluntarily signed a valid waiver. And we reject Elbeblawy's arguments that the district court committed other errors at his trial when it calculated his Sentencing Guidelines range. But we vacate the forfeiture order and remand for entry of a new order because the district court impermissibly held Elbeblawy jointly and severally liable for the proceeds of the conspiracy. We affirm in part, vacate in part, and remand.

         I. BACKGROUND

         Khaled Elbeblawy owned or managed three home health agencies that provided in-home medical nursing and other services to homebound patients, and he used each to defraud Medicare of millions of dollars. Elbeblawy began defrauding Medicare when he was working as a billing agent at Willsand Home Health. He and Eulises Escalona, the owner of Willsand and a cooperating witness for the government, were "falsifying . . . medical records, []exaggerating the symptoms [of] . . . patients in order to get paid [by] Medicare," and billing for services that were never provided. Elbeblawy quickly saw the potential to bilk Medicare for still more money. He asked Escalona for a promotion to marketing director and offered to "go out there [in] the community and recruit doctors . . . [who would accept] kickbacks." He told Escalona that if they "pa[id] kickback[s]," and took "doctors to lunch or g[ave] them nice gift[s]," the doctors would refer patients to them. Escalona agreed, and they began to pay doctors between $400 and $800 per referral. They insisted on paying the doctors only in "[c]ash because cash is the only way that nobody can trace if you pay somebody or not."

         Elbeblawy also hired "[b]etween eight [and] ten" "patient recruiters" and purchased referrals from nurses and other home health entities or staffing groups that lacked the authority to bill Medicare. Because the groups required a "large amount of money," it was impractical to pay them in cash. Elbeblawy and Escalona consulted a lawyer who informed them that it was illegal to pay for patient referrals. Undeterred, Elbeblawy and Escalona disguised check payments to the groups by inflating the rate they paid for staffing services. And they described checks to the patient recruiters as payments for consulting and other services. Escalona testified that 90 percent of the patients of Willsand were referred because of a kickback of some kind.

         Elbeblawy and Escalona also paid the doctors to approve unnecessary medical services. Elbeblawy would pick the most profitable services, falsify the medical records, and pay the doctors in cash-filled envelopes to sign the appropriate documents. Escalona testified that the majority of the patients of Willsand did not need the services billed to Medicare.

         Although Elbeblawy began to hold himself out as the chief executive officer of Willsand, Escalona refused to make him a full partner and instead agreed to become equal partners with him in a new firm, JEM Home Health. Elbeblawy managed the day-to-day operations of the new agency, which had "the same modus operand[i]" as Willsand and used many of the same sources for patient referrals. Around March 2009, Elbeblawy became the sole owner of JEM.

         In November 2009, Medicare suspended payments to JEM in response to "reliable information that [JEM] billed Medicare and received payment for home health services provided to beneficiaries who are not, in fact, homebound and were not homebound during the time the services were rendered." Safeguard Services, a Medicare contractor responsible for investigating healthcare fraud, audited JEM. The audit revealed that almost 74 percent of claims submitted between July 2008 and July 2009, and almost 99 percent of claims submitted between August 2009 and February 2010, should never have been paid.

         Elbeblawy then started yet another home health agency, this time in his ex-wife's name, and failed to disclose that he was affiliated with a suspended agency. From the beginning, Elbeblawy ran Healthy Choice Home Health. And in 2013, he bought the company from his ex-wife for ten dollars in accordance with a "stock purchase option agreement" they entered in 2010. All told, Medicare paid $29.1 million for claims from Willsand, $8.7 million for claims from JEM, and $2.5 million for claims from Healthy Choice.

         Elbeblawy later decided to "cooperate with the [g]overnment and accept responsibility." For approximately two years, Elbeblawy helped investigators obtain evidence against his former conspirators. For example, he provided the government with a handwritten list of the doctors, home health groups, and recruiters with whom he used to work. And he recorded more than 30 incriminating conversations about kickbacks with his former conspirators. He offered one physician "the same number [they] used to do." And he told another physician that he "remember[ed] what [he] used to do with [the physician] before," and he told the physician to "[l]et [him] know what [he] ha[d] in mind" for payment.

         In June 2015, Elbeblawy and his attorney signed a plea agreement and, fourteen days later, a written factual basis for the agreement. The agreement provided that, "[i]n the event of . . . a breach[, ] . . . the [d]efendant waives any protection[] afforded by . . . Rule 11 of the Federal Rules of Criminal Procedure and Rule 410 of the Federal Rules of Evidence," both of which bar the admission of statements made during plea discussions. The agreement also stated that "the [g]overnment w[ould] be free to use against the [d]efendant, directly and indirectly, in any criminal or civil proceeding[, ] any of the information, statements, and materials provided by him pursuant to th[e] [a]greement, including offering into evidence or otherwise using the attached Agreed Factual Basis for Guilty Plea." Elbeblawy's attorney testified that he met with Elbeblawy at least twice to discuss the agreement, that he "literally read" the agreement to him, and that he "walk[ed] [Elbeblawy] through each paragraph separately."

         After he signed the agreement, Elbeblawy "changed [his] mind" and refused to plead guilty, so the government prosecuted him for conspiracy to commit healthcare fraud and wire fraud, 18 U.S.C. § 1349, and conspiracy to defraud the United States and pay healthcare kickbacks, 18 U.S.C. § 371. Before the trial, the district court denied Elbeblawy's motion to suppress the signed factual basis for the plea agreement on the ground that Elbeblawy did not knowingly and voluntarily waive the protections of Rule 410 and Rule 11. It held a two-day evidentiary hearing at which Elbeblawy, his attorney, and a government investigator testified. And it explained that Elbeblawy "has a college degree," that "[t]here were several meetings between [Elbeblawy] and [his] attorney," that Elbeblawy was "engaged" and "asked many questions" before he signed the agreement, and that "[h]is questions were answered." Based on this evidence, the district court found that Elbeblawy "made a free and deliberate choice to continue to cooperate" and that he "had full knowledge of [his] actions and [their] consequences."

         At trial, the government introduced the factual basis for the plea agreement as well as the evidence Elbeblawy helped the government obtain. And it called Escalona and Kansky Delisma, one of the doctors who accepted kickbacks, to testify. Elbeblawy testified in his own defense and declared that he was completely "framed" by the government.

         At the end of the trial, the district court instructed the jury on both conspiracy counts. It instructed the jury that "[t]o . . . defraud the United States" under section 371 "means to cheat the [g]overnment out of . . . property or money or to interfere with any of its lawful [g]overnment functions by deceit, craft, or trickery." The wording of this instruction varied slightly from the wording in the indictment, which alleged that Elbeblawy conspired "to defraud the United States by impairing, impeding, obstructing, and defeating through deceitful and dishonest means, the lawful government functions of the United States Department of Health and Human Services." The jury found Elbeblawy guilty of each object on both conspiracy counts: conspiracy to commit healthcare fraud and wire fraud, and conspiracy to defraud the United States and pay healthcare kickbacks.

         The district court denied Elbeblawy's motion for a new trial based on an alleged violation of his right to due process under Brady v. Maryland, 373 U.S. 83 (1963). Elbeblawy argued that the government unconstitutionally failed to disclose an exculpatory interview report that revealed that Delisma originally denied working with Elbeblawy. The district court reviewed the evidence at trial, which included testimony by Delisma admitting that he knew Elbeblawy as well as a video of Elbeblawy giving him a kickback. And it concluded that the interview report did not create a "reasonable probability that the outcome of th[e] trial would have been different" had the report been disclosed.

         The district court imposed a forfeiture order of $36, 400, 957. See 18 U.S.C. § 982(a)(7). Because Escalona testified that about 90 percent of the patients of Willsand and JEM were referred because of kickbacks, the district court reduced the total amount Medicare paid to the three clinics-$40, 445, 507-by 10 percent. This number represented "the total amount of the gross proceeds traceable to the commission of the conspiracy, not the amount that was received directly by . . . Elbeblawy." The district court also ruled that "Elbeblawy's convicted co-conspirators [were] jointly and severally liable for th[e] forfeiture money judgment up to the amount of their respective forfeiture money judgments."

         At the sentencing hearing, the district court ruled that the 2015 Sentencing Guidelines applied, that Elbeblawy used "sophisticated means" to commit his crimes, and that the loss amount from the conspiracy exceeded $25 million. Elbeblawy argued that an earlier, less-stringent version of the Guidelines applied because his criminal conduct occurred before November 2011. But the district court ruled that the 2015 Guidelines applied because the "continuing criminal conduct . . . began in 2006 and ended in 2013." It also applied a sophisticated-means role enhancement because the conspiracy "was a sophisticated and very extensive and elaborate operation." The district court explained that Elbeblawy "recruited . . . patient recruiters" and "directly paid the doctors . . . [and] made arrangements for those meetings and those payments." And it stated that Elbeblawy "was involved in the fraudulent contracts ...


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