United States v. Sutton, No. 08-3370 (7th Cir. 09/28/2009)

 

A jury convicted Varnador Sutton of a single count of violating 18 U.S.C. § 1347 (prohibiting health care fraud) for his role in perpetrating a fraudulent scheme to collect money from Indiana Medicaid.

 

In May 2005, Sutton created a business called Regenerations, Inc., which purported to provide psychological counseling services reimbursable by Indiana Medicaid. Over the course of the next two years, Sutton billed Medicaid over $9 million for alleged psychological counseling that was never provided. Although many of the claims were denied, Medicaid did pay Sutton approximately $3.2 million for the alleged services provided by Regenerations.

 

At sentencing, the district court increased Sutton's base offense level of six, see U.S.S.G. § 2B1.1(a)(2), six levels based on its conclusion that there were more than 250 victims, see U.S.S.G. § 2B1.1(b)(2)(C). On this point the court accepted the government's argument that each individual whose Medicaid number had been fraudulently used by Sutton should be counted as a victim under the guidelines.

 

At sentencing, the government argued that Sutton's crime had over 250 victims. It reached this figure by treating all of the 2000-plus individuals whose Medicaid numbers had been used by Sutton as victims of his fraud. Sutton maintained, however, that the only victims were the two entities that sustained monetary loss-Indiana Medicaid and the Centers for Medicare and Medicaid Services.

 

As relevant here, the application note to § 2B1.1(b)(2)(C) defines a "victim" as "any person who sustained any part of the actual loss determined under subsection (b)(1)." U.S.S.G. § 2B1.1 cmt. n.1. Subsection (b)(1), in turn, refers exclusively to the monetary loss occasioned by the crime, and the relevant application notes explain that the actual loss must be "pecuniary harm . . . that is monetary or that otherwise is readily measurable in money." Id.at cmt. n.3(A)(i), (iii).

 

Although he used their Medicaid numbers to dupe Indiana Medicaid and the Centers for Medicare and Medicare Services into paying for services that were never rendered, none of the individuals actually paid for a service they did not receive. Instead, Sutton simply appropriated their Medicaid numbers in order to bill Indiana Medicaid for services that were never rendered.

 

Thus, so far as the government's evidence shows, the inchoate harm of having their benefits wrongfully depleted never materialized into an actual monetary loss such as having to pay for benefits that would otherwise have been covered. Given the government's failure to demonstrate that any of the individuals suffered pecuniary harm, we are hard-pressed to see why we should treat all of those individuals as victims under § 2B1.1.

 

Because the guidelines are clear that monetary loss (or the intent of such loss) is required, and no such loss was suffered by the 2000-plus individuals whose identities were used by Sutton to perpetuate his fraud, the district court erred by imposing the six-level adjustment. Because there were in fact only two victims-Indiana Medicaid and Centers for Medicare and Medicaid Services-no additional upward victim adjustment was warranted. See U.S.S.G. § 2B1.1(b)(2); United States v. Icaza, 492 F.3d 967, 969-70 (8th Cir. 2007) (district court erred by treating many individual Walgreens stores as victims when all pecuniary harm could be traced to single parent corporation).

 

For the foregoing reasons, we AFFIRM Sutton's conviction, but VACATE his sentence and REMAND for resentencing.

For the full opinions visit the 7th Circuit Court of Appeals Web Site

For more about Chicago Criminal Defense Attorney Michael J. Petro, visit www.mjpetro.com. 

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