Eleventh Circuit Allows Retrial of Esformes

Presidential Commutation Doesn’t Stop Retrial On Cases Where Jury was Hung

In United States Of America v. Philip Esformes, Nos. 19-13838, 19-14874, United States Court of Appeals, Eleventh Circuit (January 6, 2023) Philip Esformes challenged his convictions of healthcare fraud, illegal kickbacks, and money laundering and the related restitution award and forfeiture judgment. After Esformes filed this appeal, President Trump commuted his sentence of imprisonment and rendered any challenge to it moot. In his remaining challenges, Esformes argued that his indictment should have been dismissed because of prosecutorial misconduct, that the district court erroneously admitted expert opinion testimony against him, that the admissible evidence against him was insufficient to sustain his convictions, and that the restitution award and forfeiture judgment should be vacated.

BACKGROUND

Esformes owned and operated the “Esformes Network”-several medical facilities in Miami-Dade County, Florida. The Network included “skilled nursing facilities,” residential medical facilities that provided services performed by nurses, such as physical therapy or the operation of sensitive medical devices. Medicare or Medicaid will pay for a stay at a skilled nursing facility only if the patient receives medical certification that the admission is necessary and if the patient spent at least three days in an acute care hospital immediately before admission. After a grand jury indicted two of his associates, Gabriel and Guillermo Delgado, Esformes entered into a joint-defense agreement with the Delgados. The government later added a drug charge to Guillermo Delgado’s indictment that threatened a significantly higher term of imprisonment. Esformes then “offered to pay a significant sum of money to [Guillermo] Delgado so that he could flee the United States and avoid prosecution in the United States.” The Delgados signed a sealed plea agreement, began recording their conversations with Esformes, and passed along to the government multiple recordings, including some that involved conversations between Esformes and his attorneys.

The following year, an indictment charged that Esformes and others conspired to use the Network to defraud Medicare and Medicaid of millions of dollars. The Federal Bureau of Investigation executed a search warrant for Esformes’s Eden Gardens medical facility to “seize business records related to the health-care fraud investigation of Esformes.” The government knew beforehand that Norman Ginsparg, an Illinois-licensed attorney who worked with Esformes, had an office at Eden Gardens. And a member of Esformes’s defense team warned the agents that there were privileged materials at Eden Gardens. The government established a “taint protocol” to identify privileged documents found in the search and to keep the prosecution team from seeing them. It chose agents who were not otherwise involved in the investigation to conduct the search. But these measures failed.

The district court concluded that the prosecutors committed misconduct but rejected a finding of bad faith and dishonesty. At Esformes’s two-month trial, prosecutors presented three types of evidence material to this appeal. First, Esformes’s co-conspirators, including Gabriel Delgado, testified about the conspiracy, its means, and their roles in it. Second, the prosecutors presented summary testimony from Michael Petron, who identified various transactions in Esformes’s financial records as bribes, kickbacks, and efforts to conceal illegal proceeds.

THE JURY CONVICTIONS

The jury convicted Esformes on 20 counts. The jury failed to reach a verdict with respect to the six remaining counts, and the government has stated that it intends to retry Esformes on those counts. After Esformes filed his appeal, then-President Donald Trump commuted Esformes’s term of imprisonment to time served but “le[ft] intact and in effect the remaining three-year term of supervised release with all its conditions, the unpaid balance of his . . . restitution obligation, if any, and all other components of the sentence.

DISCUSSION

The Eleventh Circuit, after a lengthy review, concluded:

1. that the presidential commutation renders Esformes’s appeal of his prison sentence moot but does not otherwise affect his appeal.

2. the district court did not abuse its discretion when it declined to dismiss the indictment or to disqualify the prosecutors due to misconduct.

3. affirmed the admission of Dr. Cifu’s expert-opinion testimony.

4. affirmed the restitution amount as not clearly erroneous.

5. held that there was sufficient evidence for the jury to convict Esformes of money laundering and that the forfeiture judgment based on money laundering was lawfully calculated.

6. The District Court’s Restitution Order Was Not Clearly Erroneous. There was plenty of evidence of actual loss to the government; indeed, defrauding the government was the core of the Esformes Network conspiracy.

7.    The District Court’s Forfeiture Order Was Lawful.

8. It is a federal crime to engage in a transaction knowing that it “is designed in whole or in part . . . to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity” When a defendant is found guilty of federal money laundering, the district court “shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property.”

9.Legally Sufficient Evidence Supported Esformes’s Money-Laundering Convictions.

10.  Esformes’s Sentence Did Not Violate the Constitution.

Esformes does not contest the $38.7 million calculation of the value of the property “involved in” his crimes, so any forfeiture under $77.4 million was presumptively constitutional. And Es-formes offers no basis to rebut that presumption. Esformes will be tried on the six counts not the subject of the Presidential commutation.

ZALMA OPINION

Health insurance fraud perpetrators who steal millions from U.S. Government programs garner wealth beyond normal health care providers’ dreams. The wealth Esfromes acquired was not earned, it was stolen.

He was properly convicted on many counts and sentence to prison.

Since the jury could not decide on six counts, and since the original verdict was proper, the government will be able to try him again on the six counts that were not proved in the first trial.

Insured Must Occupy Dwelling

Canada Requires Owner Occupant to Occupy Dwelling for Coverage to Apply

In Dang C. v. Industrielle-Alliance, Assurance Auto et Habitation Inc., 2022 QCCA 1739, the Court of Appeal for the Province of Quebec, an opinion in French, provided that Dang was the sole insured under a policy which covered “owner occupant” (“propriétaire occupant“) and “your dwelling” (“votre bâtiment d’habitation“).

Respondent had insured the house since 2012 and in May 2018, the house was damaged by fire. During its investigation, the insurer concluded that appellant had sporadically traveled to the United States from 2013 to 2016 and that she had been living in the United States since February 2016 without any intention to reside in Quebec.

The insurer established with two independent insurance company representatives that they would not have renewed the policy had they known that the insured did not have any intention of coming back to live in the house.

The Court of Appeal Decision

The Court concluded that “owner occupant” must be interpreted according to its ordinary meaning and in a manner which an ordinary person who seeks insurance would understand. The Court of Appeal also added that it would not intervene in the decision of the trial judge to retain the testimony of the two independent insurance company representatives to support the decision to annul the policy.

The word “occupant” adds to the word “owner” the notion of living in the house insured. Furthermore, the expression “your dwelling” confirms the meaning which the insurer intended on giving to its contract which, until February 2016, conforms to what the Dang wanted to insure, her house in Trois-Rivières. The insurer satisfied its burden of establishing that the insured no longer was “owner occupant” of the house.

ZALMA OPINION

Our neighbors in Canada agree with the courts in the U.S. that a policy that insures a residence premises and requires the insured to occupy the residence for coverage to apply. This insured moved countries and became a permanent resident of Texas, she was not living in the home in Quebec and therefore the risk insured was changed and she could recover nothing under the policy. Ms. Dang hid the change from her insurer and lost.