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United States v. Hong

United States Court of Appeals, Ninth Circuit

September 12, 2019

United States of America, Plaintiff-Appellee,
v.
Simon Hong, AKA Seong Hong, AKA Seong W. Hong, AKA Seong Wook Hong, Defendant-Appellant.

          Argued and Submitted April 12, 2019 Pasadena, California

          Appeal from the United States District Court for the Central District of California D.C. No. 2:16-cr-00038-DOC-1 David O. Carter, District Judge, Presiding

          Carlton F. Gunn (argued), Kaye McLane Bednarski & Litt, Pasadena, California, for Defendant-Appellant.

          Kerry Creque O'Neill (argued) and Byron McLain, Assistant United States Attorneys; Lawrence S. Middleton, Chief, Criminal Division; Nicola T. Hanna, United States Attorney; United States Attorney's Office, Los Angeles, California; for Plaintiff-Appellee.

          Before: Richard A. Paez and Richard R. Clifton, Circuit Judges, and Morrison C. England, Jr., [*] District Judge.

         SUMMARY [**]

         Criminal Law

         The panel reversed convictions for aggravated identity theft (18 U.S.C. § 1028A(a)(1)), affirmed convictions for health care fraud (18 U.S.C. § 1347) and illegal remunerations for health care referrals (42 U.S.C. § 1320a-7b(1)(A)), and remanded for resentencing, in a case in which the defendant, who owned and operated acupuncture and massage clinics, engaged in a fraudulent Medicare-billing scheme with physical therapy companies.

         Reviewing for plain error, the panel wrote that because the evidence of actual knowledge was overwhelming, it did not need to determine whether the district court erred by giving a deliberate-ignorance instruction on the knowledge element of health care fraud.

         The panel held that even reviewing de novo, none of the defendant's arguments regarding the sufficiency of the evidence to support the illegal-remunerations convictions warrants reversal. The panel held that there was sufficient evidence for the jury to conclude (1) that patient referrals were one purpose for the kickbacks, (2) that the defendant referred the patients' Medicare information to the physical therapy companies, and (3) that the defendant received kickbacks for arranging the furnishing of services with the physical therapy companies. The panel held that any error in omitting the "furnishing of services" language in the jury instruction was harmless.

         The panel reversed the aggravated identity theft convictions because the defendant did not "use" the patients' identities within the meaning of § 1028A, where neither the defendant nor the physical therapists attempted to pass themselves off as the patients. The panel held that United States v. Osuna-Alvarez, 788 F.3d 1183 (9th Cir. 2015), forecloses the defendant's argument that the "without lawful authority" element of aggravated identity theft was not satisfied because the patients voluntarily provided their information.

         The panel held that the district court did not err in applying Sentencing Guidelines enhancements for the defendant's obstruction of justice and aggravating role in the offense.

          OPINION

          PAEZ, CIRCUIT JUDGE:

         Simon Hong owned and operated acupuncture and massage clinics. He provided the Medicare-eligibility information and identities of his clinics' patients to physical therapy companies. Those companies would then submit claims to Medicare seeking payments for physical therapy treatments that had not been provided. The physical therapy companies paid a majority of the funds they received to Hong, who the government successfully prosecuted for health care fraud and related offenses.

         Hong appeals his jury convictions for health care fraud in violation of 18 U.S.C. § 1347, illegal remunerations for health care referrals in violation of 42 U.S.C. § 1320a-7b(b)(1)(A), and aggravated identity theft in violation of 18 U.S.C. § 1028A(a)(1). He also challenges the district court's calculation of the United States Sentencing Guidelines ("U.S.S.G.") advisory range (i.e., the "advisory sentencing guidelines range"). We have jurisdiction pursuant to 18 U.S.C. § 3742(a) and 28 U.S.C. § 1291. We reverse the convictions for aggravated identity theft and remand for resentencing. On all other grounds we affirm.

         I.

         At trial, the government presented witnesses who had participated in the Medicare billing scheme and been separately charged as "co-schemers" (Joseff Sales, Eddieson Legaspi, and Danniel Goyena). The government also called as witnesses four patients who had received treatment at Hong's clinics; two federal investigators; a Medicare claims-processing expert; and a man who had coordinated a similar scheme with Hong's help (Byong Min). The government, with these witnesses and documentary evidence, established the following facts.

         Hong owned and operated three massage and acupuncture clinics in Southern California under the company names CMH Practice Solution, Hong's Medical Management, and HK Practice and Solution, Inc. Hong made arrangements with outpatient physical therapy companies, RSG Rehab Team, Inc. ("RSG") and Rehab Dynamics, Inc. ("RDI"), wherein he would provide the infrastructure of a clinic and they would bill Medicare. Unlike Hong and his clinics, as physical therapy companies, RSG and RDI had Medicare provider numbers that allowed them to submit claims for payments.

         Hong provided the clinic space, a receptionist, massage therapists, acupuncturists, drivers, and patients who were on Medicare. The patients received massage and acupuncture treatments, but essentially no physical therapy. The patients did not pay for any treatments. They provided their Medicare identification information to the clinics and believed that Medicare would pay for the massages. Medicare does not pay for massages or acupuncture.[1]

         RSG and RDI physical therapists used the patients' Medicare information to submit claims to Medicare for physical therapy services. Hong instructed the therapists to bill Medicare for four and later five units per patient per date of visit (where a unit is 15 minutes of service) in order to make more money. RSG and RDI paid Hong's companies 56% of the payments they received from Medicare.

         Hong's relationship with RSG began when he asked RSG to "back-bill[]" Medicare for physical therapy treatments that had not been provided in the past. Sales, a physical therapist for RSG, testified that when he went to Hong's clinics he "almost never" provided physical therapy treatments. Legaspi, a physical therapist for RDI, testified that he only met with about half of the patients for whom he prepared claims. Legaspi observed that "about [one] hundred percent" of the patients received acupuncture or massages from Hong's employees "as opposed to any form of physical therapy." When therapists asked Hong about providing patients with more physical therapy, Hong told them the patients prefer massages and might stop coming to the clinics if made to exercise.

         Patients similarly testified that they received little to no physical therapy services. They received "maybe 5 to 10 minutes" of physical therapy compared to approximately "40 to 50 minutes" of massage treatment each time they went to the clinic. The patients who testified learned of the clinics through family or people in their neighborhoods, not through their doctors. They went to Hong's clinics because of pain, and they wanted the massage or acupuncture treatments.

         Through this scheme, thousands of false claims were submitted to Medicare for physical therapy services between May 2009 and November 2013. Medicare paid a little over $2.9 million, of which Hong received just over $1.6 million. Hong received checks for his share of the Medicare payments at least once a week.

         Hong also taught Min how to operate massage clinics and bill Medicare for physical therapy. When Min learned he was being investigated for fraud, he reached out to Hong, and Hong coached him to lie to investigators. Min testified that Hong told him to say that after the patients received physical therapy treatment, he would just provide acupuncture or massage treatment as an "extra service." Min also arranged for Hong to reassure the president of Min's physical therapy clinic, Julian Yniguez, that nothing would come of the investigation. Cooperating with investigators, Yniguez recorded his conversation with Hong. Min ultimately pled guilty to health care fraud and illegal remunerations in a separate case.

         Later, federal investigators also recorded an interview with Hong, during which Hong said he knew acupuncture and massages could not be billed to Medicare. Hong agreed with the investigators that he was at his clinics "every day."

         After the government rested, Hong moved for acquittal on all counts pursuant to Federal Rule of Criminal Procedure 29, arguing insufficient evidence. The district court denied the motion. Hong did not present any witnesses.

         The jury returned a guilty verdict on all counts: eight counts of health care fraud (Counts 1-8) (18 U.S.C. § 1347), nine counts of illegal remunerations (i.e., kickbacks) (Counts 9-17) (42 U.S.C. § 1320a-7b(b)(1)(A)), and two counts of aggravated identity theft (Counts 18-19) (18 U.S.C. § 1028A(a)(1)).

         At sentencing, the district court calculated an offense level of 30 and a criminal history category I, which meant the advisory sentencing guidelines range was 97-121 months, in addition to a mandatory consecutive 24-month sentence for the aggravated identity theft convictions. See 18 U.S.C. § 1028A(a)(1). Relevant here, in reaching that range the district court applied a four-level role enhancement under U.S.S.G. § 3B1.1(a) because Hong was an "organizer or leader" in criminal activity involving five or more participants. In addition to Hong, the district court found that Sales, Legaspi, Min, and Goyena were also participants in the scheme and recognized that there may have been others. The district court also acknowledged that another person named as a co-schemer in the indictment, Marlon Songco, had pled guilty. The district court also applied a two-level ...


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