UNITED STATES COURT OF APPEALS

Transcription

1 Case: Date Filed: 04/17/2015 Page: 1 of 45 No UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT UNITED STATES OF AMERICA, v. Appellee, PETER E. CLAY, TODD S. FARHA, PAUL L. BEHRENS, AND WILLIAM L. KALE, Defendants-Appellants. On Appeal from the United States District Court for the Middle District of Florida, No. 8:11-cr JSM-MAP Before the Honorable James S. Moody, Jr. REPLY BRIEF FOR DEFENDANT-APPELLANT TODD S. FARHA LAURA L. VAUGHAN GEORGE & TITUS, PA 100 S. Ashley Drive Tampa, FL (813) April 17, 2015 PETER G. NEIMAN ALAN E. SCHOENFELD WILMER CUTLER PICKERING HALE AND DORR LLP 7 World Trade Center 250 Greenwich Street New York, NY (212) SETH P. WAXMAN CATHERINE M.A. CARROLL SINA KIAN DANIEL WINIK WILMER CUTLER PICKERING HALE AND DORR LLP 1875 Pennsylvania Ave. NW Washington, DC (202) seth.waxman@wilmerhale.com

2 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 2 of 45 No AMENDED CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT In compliance with Federal Rule of Appellate Procedure 26.1 and Eleventh Circuit Rule 26.1, the undersigned hereby certifies that the persons and entities listed below have an interest in the outcome of this case. Other than WellCare Health Plans, Inc. ( WellCare ), none of the entities listed below is publicly traded. WellCare Health Plans, Inc. is a publicly traded company, and its stock ticker is WCG. There is no parent corporation or publicly held corporation that owns 10% or more of its stock. Adams, Natalie H., Counsel for United States of America America s 1st Choice California Holdings, LLC, Indirect wholly-owned subsidiary of WellCare Behrens, Paul L., Defendant-Appellant Bentley, Arthur Lee, III, Counsel for United States of America Bereday, Thaddeus, Defendant Berman, Douglas A., Amicus Curiae Berman, Nathan M., Counsel for Thaddeus Bereday Boss, Barrett L., Counsel for Todd S. Farha Bowers, John J., Counsel for United States of America Burke, Donald, Counsel for Peter E. Clay Califano, Michael G., Counsel for Paul L. Behrens Carroll, Catherine M.A., Counsel for Todd S. Farha - C1 of 7 -

3 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 3 of 45 No Clay, Peter E., Defendant-Appellant Cleary, Lauri E., Counsel for William L. Kale Comprehensive Health Management, Inc., Indirect wholly-owned subsidiary of WellCare Comprehensive Reinsurance, Ltd., Indirect wholly-owned subsidiary of WellCare Cooper, Todd J., Counsel for Paul L. Behrens Daniel, Stephanie A., Counsel for Florida Agency for Health Care Administration Donahue, Patrick M., Counsel for William L. Kale Easy Choice Health Plan, Inc., Indirect wholly-owned subsidiary of WellCare Exactus Pharmacy Solutions, Inc., Indirect wholly-owned subsidiary of WellCare Farha, Todd S., Defendant-Appellant Fernandez, Jr., Jack E., Counsel for Thaddeus Bereday Fisher, Jeffrey L., Amicus Curiae Florida Agency for Health Care Administration, Victim Florida Healthy Kids Corp. * Fugate, Lee, Counsel for Thaddeus Bereday * The government s Certificate of Interested Persons (filed July 11, 2014) identifies Florida Healthy Kids Corp. as a victim. There was no claim or finding below that Florida Healthy Kids Corp. was a victim of any crime charged in this case. - C2 of 7 -

4 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 4 of 45 No Garinther, Geoffrey R., Counsel for WellCare Health Plans, Inc. George, Peter E., Counsel for Todd S. Farha Green, Bruce, Amicus Curiae Harmony Behavioral Health IPA, Inc., Indirect wholly-owned subsidiary of WellCare Harmony Behavioral Health, Inc., Indirect wholly-owned subsidiary of WellCare Harmony Health Management, Inc., Indirect wholly-owned subsidiary of WellCare Harmony Health Plan of Illinois, Inc., Indirect wholly-owned subsidiary of WellCare Harmony Health Systems, Inc., Indirect wholly-owned subsidiary of WellCare Hasbun, Marcos E., Counsel for Thaddeus Bereday Hoppmann, Karin B., Counsel for United States of America Jung, William F., Counsel for Peter E. Clay Kale, William L., Defendant-Appellant Kehoe, Gregory W., Counsel for WellCare Health Plans, Inc. Kian, Sina, Counsel for Todd S. Farha Krigsman, Cherie L., Counsel for United States of America Lamken, Jeffrey A., Counsel for Paul L. Behrens Lerman, Daniel N., Counsel for Peter E. Clay Lauro, John F., Counsel for Paul L. Behrens - C3 of 7 -

5 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 5 of 45 No Matthews, Michael P., Counsel for Paul L. Behrens McCullough, J. Bradford, Counsel for William L. Kale Michelich, John A., Counsel for United States of America Miller, Gregory R., Amicus Curiae and Counsel for Amici Curiae Professors and Practitioners Missouri Care, Incorporated, Indirect wholly-owned subsidiary of Well Care Moody Jr., James S., United States District Court Judge Moylan, Daniel P., Counsel for WellCare Health Plans, Inc. Nathans, Larry Allen, Counsel for William L. Kale Neiman, Peter G., Counsel for Todd S. Farha Ohana Health Plan, Inc., Indirect wholly-owned subsidiary of WellCare Olympic Health Management Services, Inc., Indirect wholly-owned subsidiary of WellCare Olympic Health Management Systems, Inc., Indirect wholly-owned subsidiary of Well Care O Neill, Robert E., former United States Attorney Pattillo Jr., Michael G., Counsel for Paul L. Behrens Pizzo, Mark A., United States Magistrate Judge Raleigh, Lisa M., Counsel for Florida Agency for Health Care Administration Reed, Stanley J., Counsel for William L. Kale Rhodes, David P., Assistant United States Attorney, Chief, Appellate Division - C4 of 7 -

6 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 6 of 45 No Robbins, Lawrence S., Counsel for Peter E. Clay Saltzburg, Stephen A., Amicus Curiae Schoenfeld, Alan E., Counsel for Todd S. Farha Sisco, Paul M., Counsel for Peter E. Clay Sonnett, Neal R., Amicus Curiae Stancil, Mark T., Counsel for Peter E. Clay Sterling Life Insurance Company, Indirect wholly-owned subsidiary of WellCare Stith, Kate, Amicus Curiae The WellCare Community Foundation, Indirect wholly-owned subsidiary of WellCare The WellCare Management Group, Inc., Indirect wholly-owned subsidiary of WellCare Titus, Jr., Douglas J., Counsel for Todd S. Farha Totaro, Martin V., Counsel for Paul L. Behrens Trezevant, Jay G., Counsel for United States of America United States of America, Plaintiff-Appellee Valiente, Lauren L., Counsel for Paul L. Behrens Vaughan, Laura L., Counsel for Todd S. Farha Walker, Lucas M., Counsel for Paul L. Behrens Waxman, Seth P., Counsel for Todd S. Farha WCG Health Management, Inc., Direct wholly-owned subsidiary of WellCare - C5 of 7 -

7 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 7 of 45 No Weinberg, Jr., Morris, Counsel for Thaddeus Bereday WellCare Health Insurance Company of Kentucky, Inc., Indirect whollyowned subsidiary of WellCare WellCare Health Insurance of Arizona, Inc., Indirect wholly-owned subsidiary of WellCare WellCare Health Insurance of New York, Inc., Indirect wholly-owned subsidiary of WellCare WellCare Health Plans, Inc., (NYSE ticker symbol: WCG), Petitioner and Movant below Well Care Health Plans of California, Inc., Indirect wholly-owned subsidiary of WellCare WellCare Health Plans of New Jersey, Inc., Indirect wholly-owned subsidiary of WellCare WellCare Health Plans of Tennessee, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Connecticut, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Florida, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Georgia, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Kansas, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Louisiana, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Nevada, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of New York, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Ohio, Inc., Indirect wholly-owned subsidiary of WellCare - C6 of 7 -

8 Case: United States v. Clay, et al. Date Filed: 04/17/2015 Page: 8 of 45 No WellCare of South Carolina, Inc., Indirect wholly-owned subsidiary of WellCare WellCare of Texas, Inc., Indirect wholly-owned subsidiary of WellCare WellCare Pharmacy Benefits Management, Inc., Indirect wholly-owned subsidiary of Well Care WellCare Prescription Insurance, Inc., Indirect wholly-owned subsidiary of WellCare Windsor Health Group, Inc., Indirect wholly-owned subsidiary of WellCare Windsor Health Plan, Inc., Indirect wholly-owned subsidiary of WellCare Windsor Management Services, Inc., Indirect wholly-owned subsidiary of WellCare Winik, Daniel, Counsel for Todd S. Farha Wisotsky, Steven, Amicus Curiae /s/ Seth P. Waxman SETH P. WAXMAN April 17, 2015 A party listed for the first time on this Amended Certificate of Interested Persons and Corporate Disclosure Statement is italicized. - C7 of 7 -

9 Case: Date Filed: 04/17/2015 Page: 9 of 45 TABLE OF CONTENTS Page AMENDED CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT... C1 TABLE OF AUTHORITIES... iii STATEMENT REGARDING ADOPTION OF BRIEFS... v PRELIMINARY STATEMENT... 1 ARGUMENT... 4 I. FARHA S CONVICTIONS SHOULD BE REVERSED UNDER WHITESIDE... 4 II. THE EVIDENCE WAS INSUFFICIENT TO SUPPORT FARHA S CONVICTIONS BASED ON THE CY2006 SUBMISSIONS... 5 A. The Government Had To Prove The CY2006 Submissions Were False And Farha Knew It... 5 B. There Was No Evidence Farha Acted With The Requisite Mens Rea The government s attempt to disparage the advice Farha received from counsel fails The government s suggestion that Farha targeted a particular payback amount or was warn[ed] about the Plans submissions is meritless The government s remaining evidence cannot bear the weight the government assigns to it C. The Government Failed To Prove Farha s Execution Of A Fraud Scheme liability was not presented to the jury i -

10 Case: Date Filed: 04/17/2015 Page: 10 of The evidence is insufficient to convict Farha of aiding and abetting the alleged CY2006 execution The jury rejected conspiracy and thus Pinkerton liability III. IV. THE DISTRICT COURT S ERRONEOUS JURY INSTRUCTION REQUIRES A NEW TRIAL ON THE HEALTHCARE-FRAUD COUNTS THE ADMISSION AND USE OF WEALTH EVIDENCE WAS REVERSIBLE ERROR V. THE GOVERNMENT S USE OF WELLCARE S FINANCIAL RESTATEMENT CONSTITUTES PREJUDICIAL ERROR CONCLUSION CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE - ii -

11 Case: Date Filed: 04/17/2015 Page: 11 of 45 TABLE OF CITATIONS CASES Page(s) Chiarella v. United States, 445 U.S. 222 (1980) *Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct (2011)... 4, 22, 23 Pinkerton v. United States, 328 U.S. 640 (1946) Sovereign Military Hospitaller Order v. Florida Priory of Knights Hospitallers, 702 F.3d 1279 (11th Cir. 2012) United States v. Bradley, 644 F.3d 1213 (11th Cir. 2011) United States v. Brown, 459 F.3d 509 (5th Cir. 2006) United States v. Carothers, 121 F.3d 659 (11th Cir. 1997) United States v. Carrasco-De-Jesus, 589 F.3d 22 (1st Cir. 2009) United States v. Dominguez, 661 F.3d 1051 (11th Cir. 2011)... 5 United States v. Frick, 588 F.2d 531 (5th Cir. 1979) United States v. Gomes, 969 F.2d 1290 (1st Cir. 1992) United States v. Goyal, 629 F.3d 912 (9th Cir. 2010) United States v. Hosseini, 679 F.3d 544 (7th Cir. 2012) United States v. Khoury, 901 F.2d 948 (11th Cir. 1990)... 5 United States v. Klopf, 423 F.3d 1228 (11th Cir. 2005)... 5 United States v. Lee, 603 F.3d 904 (11th Cir. 2010) United States v. Lopez, 649 F.3d 1222 (11th Cir. 2011) United States v. Lua, 972 F.2d 1345 (9th Cir. 1992) (unpublished) United States v. Medina, 485 F.3d 1291 (11th Cir. 2007) iii -

12 Case: Date Filed: 04/17/2015 Page: 12 of 45 United States v. O Sullivan, 255 F. App x 407 (11th Cir. 2007) United States v. Powell, 469 U.S. 57 (1984) United States v. Rosas-Fuentes, 970 F.2d 1379 (5th Cir. 1992) United States v. Tarallo, 380 F.3d 1174 (9th Cir. 2004) United States v. Trujillo, 146 F.3d 838 (11th Cir. 1998) United States v. Verbitskaya, 406 F.3d 1324 (11th Cir. 2005) *United States v. Whiteside, 285 F.3d 1345 (11th Cir. 2002)... 4 United States v. Williams, 390 F.3d 1319 (11th Cir. 2004) United States v. Yates, 733 F.3d 1059 (11th Cir. 2013), rev d on other grounds, 135 S. Ct (2015)... 20, 25 Zamboni v. R.J. Reynolds Tobacco Co., 2015 WL (M.D. Fla. Jan. 13, 2015) STATUTORY PROVISIONS 18 U.S.C , 21, 24 OTHER AUTHORITIES Eleventh Circuit Pattern Jury Instructions (Criminal Cases) (2010) iv -

13 Case: Date Filed: 04/17/2015 Page: 13 of 45 STATEMENT REGARDING ADOPTION OF BRIEFS Pursuant to Federal Rule of Appellate Procedure 28(i) and Eleventh Circuit Rule 28-1(f), Todd Farha hereby adopts Parts I and II of the Reply Brief for Defendant-Appellant Paul Behrens. - v -

14 Case: Date Filed: 04/17/2015 Page: 14 of 45 PRELIMINARY STATEMENT The trial evidence mainly the government s own witnesses and exhibits established the following critical facts as to Todd Farha: Outside counsel advised Farha that reporting payments to an affiliated BHO was an available option under the 80/20 regime and indeed an option that some WellCare competitors were using; WellCare s legal personnel uniformly informed Farha that the Plans 80/20 submissions were reasonable, accurate, and defensible ; and Farha played no role at all in preparing, approving, or submitting the CY /20 calculations the only submissions for which the jury convicted. These facts reveal the insufficiency of the government s proof. The core of the prosecution s theory was that Farha was responsible for the decision to establish Harmony in 2003 and to use payments to Harmony in the Plans 80/20 calculations. But it is not a crime for a CEO to adopt a regulatory strategy identified by outside counsel and embraced by competitors that leads to submissions that appropriate personnel confirm are correct. Having lawfully adopted that strategy in 2003, and having received multiple confirmations that the resulting submissions were proper, Farha surely committed no crime by his inaction years later when the CY2006 submissions were made.

15 Case: Date Filed: 04/17/2015 Page: 15 of 45 To salvage its failed case, the government first asks the Court to do away with the most basic requirement in a healthcare-fraud case: proof that the defendant knew the submissions were false. As explained in the Behrens Reply (at 20-25), this would require the Court to rewrite the government s own indictment, overrule numerous prior decisions, and untether healthcare fraud from any commonsense understanding of wrongdoing. There is no basis to do so here. But even if the Court were to do so, the government s case would still fail, because there was no evidence that Farha had any culpable intent as to the CY2006 submissions, for which he had no role and was not even consulted. The government suggests that intent could be inferred from routine business judgments Farha made in earlier years, for which the jury refused to convict. As the jury evidently agreed, however, this evidence shows only Farha s preference for commonsense negotiation tactics (e.g., deciding when to raise an issue with a regulator) and prudent restraint in dealing with a large customer (e.g., preferring a reasonable calculation leading to some refund to AHCA over one leading to no refund). Given the substantial and essentially undisputed direct evidence of good faith, this evidence does not come close to meeting the government s burden of proof. Only by misrepresenting the record can the government cast Farha s conduct in a sinister light. For example, the government selectively quotes an Farha - 2 -

16 Case: Date Filed: 04/17/2015 Page: 16 of 45 wrote to WellCare general counsel Thad Bereday in September 2003: [T]his Goddamn thing is costing us 400k a month Get it done. Spend $$... This is absolutely stupid. Gov t Br. 14 (quoting GX-1024) (ellipses supplied by the government). But the government s ellipses conceal Farha s explanation of how he wanted Bereday to [g]et it done namely, by spend[ing] $$ on GT Greenberg Traurig. GX Urging your general counsel to hire a respected law firm is hardly a badge of fraud. The government also repeatedly manipulates the relevant chronology. It says, for example, that Farha proposed Harmony s establishment only after being shocked by the results of a Payback Study allegedly prepared for Farha by WellCare actuary Todd Whitney. Gov t Br. 13. But the study which was never presented to Farha, much less prepared for him could not have prompted Harmony s creation, since it was done in October 2003, A490 (30:2-8), one month after Harmony was incorporated, GX The government is entitled on appeal to all reasonable inferences from the evidence. But it is not entitled to rewrite or reorder that evidence. The government s case is legally insufficient, and Farha s convictions should be reversed. In the alternative, two legal errors require a new trial. First, the district court told the jury that it could find culpable knowledge if it concluded that Defendants - 3 -

17 Case: Date Filed: 04/17/2015 Page: 17 of 45 exhibited deliberate indifference to the submissions accuracy. But Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011), holds that deliberate indifference is insufficient to establish knowledge. The government dismisses Global-Tech as a patent case, but Global-Tech drew its discussion entirely from criminal-law principles, and every circuit to address the issue (including this one, in an unpublished opinion) has concluded that Global-Tech applies in criminal cases. Second, the government s extravagant presentation of wealth evidence warrants a new trial. The government conceded that it could not show the alleged fraud contributed in any way to Defendants financial success. It therefore had no legitimate reason to parade three days of wealth evidence before the jury as the capstone of its case. ARGUMENT I. FARHA S CONVICTIONS SHOULD BE REVERSED UNDER WHITESIDE Farha adopts Behrens s argument that reversal is required under United States v. Whiteside, 285 F.3d 1345 (11th Cir. 2002). See Behrens Reply, Part I. 1 1 The government suggests in a footnote that Farha waived his Whiteside challenge by adopting Behrens s argument rather than repeating that argument in his brief. Gov t Br. 79 n.23. But Whiteside is not an issue of the factual sufficiency of the evidence supporting the jury s verdict. The objective reasonableness of Defendants interpretation is a legal question to be resolved by the Court as a matter of law. 285 F.3d at And even if that were not so, the general bar on adopting codefendants sufficiency arguments does not apply - 4 -

18 Case: Date Filed: 04/17/2015 Page: 18 of 45 II. THE EVIDENCE WAS INSUFFICIENT TO SUPPORT FARHA S CONVICTIONS BASED ON THE CY2006 SUBMISSIONS To establish that Farha had the criminal state of mind required for healthcare fraud, the government had to present evidence showing that Farha (1) knew the [reports] submitted [to AHCA] were, in fact, false, United States v. Medina, 485 F.3d 1291, 1297 (11th Cir. 2007); (2) acted with knowledge that his conduct was unlawful, United States v. Dominguez, 661 F.3d 1051, 1068 (11th Cir. 2011); and (3) harbored the specific intent to deceive or cheat AHCA, United States v. Klopf, 423 F.3d 1228, 1240 (11th Cir. 2005). The government met none of those requirements. A. The Government Had To Prove The CY2006 Submissions Were False And Farha Knew It The government s threshold argument that it need not show falsity much less knowing falsity fails under Eleventh Circuit law, which holds that in a health care fraud case, the defendant must be shown to have known that the claims submitted were, in fact, false. Medina, 485 F.3d at 1297; see Behrens Reply It likewise fails where, as here, the indictment rests on allegations of falsity, see A1 (Indictment 32), and the government s post-trial filings reaffirmed that theory, see Dkt. 772 at 37 ( Defendants are guilty not because they failed to make where, as here, those arguments turn[] on common facts and their legal import. United States v. Khoury, 901 F.2d 948, 963 n.13 (11th Cir. 1990)

19 Case: Date Filed: 04/17/2015 Page: 19 of 45 additional disclosures to AHCA, but because their statements (the expenditure information) were false. ). Indeed, if the 80/20 submissions were not false, then AHCA received precisely the refund to which it was entitled. It was undisputed that the Plans provided all the required services and more. See Behrens Br. 22. Accordingly, there could be no fraud. See Behrens Reply 24. B. There Was No Evidence Farha Acted With The Requisite Mens Rea The government s own evidence established that Farha was repeatedly advised that WellCare s basic methodology reporting the outpatient portion of the Plans payments to Harmony was an available option, and that the specific filings the Plans made following that methodology were reasonable, accurate, and defensible. See Farha Br. 9-10; Behrens Br To overcome the strong inference of innocent intent arising from this evidence, the government needed convincing evidence of a culpable mental state. It cites none. 1. The government s attempt to disparage the advice Farha received from counsel fails Farha was consistently advised by in-house and outside counsel as to the lawfulness of the Plans reporting. The government called WellCare s outside counsel Gary Clarke and Frank Rainer as its own witnesses. These seasoned Florida healthcare lawyers stood behind the advice given to Farha, testifying that - 6 -

20 Case: Date Filed: 04/17/2015 Page: 20 of 45 WellCare s reporting methodology was reasonable under governing legal requirements. See Farha Br. 9-10; Behrens Br The government s response to this critical exculpatory testimony finds no support in the record. The government suggests that counsel s advice related to BHO arrangements before 80/20 and thus no longer applied after the Statute s enactment. Gov t Br. 83. Clarke said the opposite. He testified that he specifically asked other HMOs how they report and comply with the 80/20 requirement and state law regarding behavioral health. A564 (65:14-66:20). He confirmed that, in those conversations, he was talking about the 80/20 provision. A564 (66:21-24). Rainer also testified that he assisted the Plans with their 2004 submissions underst[anding] that [Harmony] was being implemented. A563 (28:7-9); see also Farha Br. 20 n.6. The government also says the lawyers advice applied only to unaffiliated BHOs. See Gov t Br Clarke said the opposite. Clarke knew well before Harmony was incorporated that WellCare wanted to set up its own BH subsidiary and cap[] [its contractual payments] at 80% of premium set by AHCA. GX Indeed, Farha enlisted Clarke to determine the appropriate 2 The government questions (at 83-85) whether counsel had done sufficient diligence to provide legal advice. Whatever relevance that might have in assessing an advice-of-counsel defense, it has none here. Farha s mens rea must be assessed based on the advice he received, not on what his lawyers should have considered before rendering it

21 Case: Date Filed: 04/17/2015 Page: 21 of 45 contract between HMO and BH sub. Id. Clarke in turn advised Bereday that Florida Health Partners subcapitated to related entities and that was acceptable under the 80/20 calculation to AHCA. A584 (95:18-23) (emphasis added). He also told Bereday that United Health Plans subcapitated to its related BHO and reported the subcapitation, which was something like 78 or 79 percent of total premium received for those two services. A564 (66:18-67:10; ); see also A562 (91:16-93:24) (Rainer testifying that Bereday instructed that the Plans wanted to mirror United Healthcare and form a captive subsidiary ). 3 The government trumpets outside counsel s inability to issue a clean opinion on the Plans reporting. Gov t Br. 84. But their inability to issue a clean opinion Clarke s colloquial term for a legal opinion that in all probability would be upheld if there were any kind of problems or allegations or appeals, A564 (102:17-20) had nothing to do with doubts about the reasonableness of the Plans reporting. The lawyers affirmed at trial that they stood by the advice they 3 The government implies a motive to conceal behind the change in the BHO s name from WellCare Behavioral Health to Harmony. Gov t Br. 17. But Clarke testified, without contradiction, that there were business reasons for the name change. A760 (30:5-22) (change would benefit marketing efforts and enhance competitiveness). And Harmony s connection to WellCare was no secret. WellCare s letterhead listed Harmony as an affiliated company, see, e.g., A588 (10:2-11:7), and WellCare told AHCA of its creation of, and contract with, its affiliated BHO, GX-1052, and the name change to Harmony, A466 (102:5-103:21). The government thus acknowledged at trial that [p]eople at [AHCA] knew about Harmony. It s a non-issue. A761 (143:10-11)

22 Case: Date Filed: 04/17/2015 Page: 22 of 45 had given Farha testifying that WellCare s reporting methodology was reasonable under the governing legal requirements. See supra pp Rather, the lawyers couldn t render a clean opinion because there were too many unsolved issues with this, in essence, new statute and contract amendment. A564 (103:21-104:7); see also A563 (60:7-61:24) (Clarke could not issue a clean opinion where AHCA was not acting with clarity, and there were no court rulings and no rules ). Those circumstances of regulatory ambiguity confirm that the Plans submissions were not criminally false, see Behrens Br ; they cannot be evidence of a culpable mental state. The government s effort to discount the testimony of Mike Turrell is equally weak. Turrell was the in-house lawyer responsible for preparing Farha s briefing on the 80/20 calculations. Turrell knew that WellCare used subcapitation payments to Harmony in its 80/20 calculation, and he testified that he would have warned others had he seen anything wrong with the submissions. See Farha Br (quoting testimony). He never saw the need to do so. Id. The government speculates (at 85) that Turrell did not understand the details of the 80/20 calculations. But Turrell knew at least as much as Farha. The document the government identifies as putting Farha on notice of the relevant details was a PowerPoint briefing that Turrell himself prepared, which showed that the Plans 80/20 submissions were made on the basis of the cost based capitation - 9 -

23 Case: Date Filed: 04/17/2015 Page: 23 of 45 to Harmony. See Gov t Br. 27 (citing GX-1290, GX-1290a); see also A559 (107:24-108:12). 4 If, as the government contends, that document left Turrell the lawyer who prepared it with too little information to understand the submissions were fraudulent, it could not have put Farha on notice either. 2. The government s suggestion that Farha targeted a particular payback amount or was warn[ed] about the Plans submissions is meritless The government posits that Farha must have known the CY2006 submissions were false because he supposedly directed that the payment match a target rather than reflect actual expenses. See Gov t Br. 32 (titling section on CY2006 submissions [Farha] wants to pay a million dollars ). But there was zero evidence that Farha set any target for CY The evidence connecting Farha to a target was in connection with the CY2005 submissions for which the jury 4 The government inaccurately says that Bereday gave West s summary i.e., the calculation spreadsheet West prepared to Farha. Gov t Br. 27. What Bereday and Turrell presented to Farha, however, is the Turrell PowerPoint briefing described above. See A557 (85:18-19; 86:8-9). That presentation which the government cites (GX-1290a) but is not included in the government s appendix can be found on the district court docket at Dkt West s testimony that he speculated to Jian Yu that Farha wanted a payback in the neighborhood of $1 million for CY2006, Gov t Br. 34 (citing A504 (70-71)), is no evidence of what Farha actually wanted or directed. West testified that he did not know one way or the other what Mr. Farha wanted. A541 (98:16-21). That was because West never had any conversation with Farha about the 80/20 payback, let alone a conversation about the CY2006 submissions. A505 (27:3-7); see also A541 (98:13-15). Moreover, the CY2006 calculations were accurate. See Behrens Reply

24 Case: Date Filed: 04/17/2015 Page: 24 of 45 acquitted him. And even as to CY2005, all anyone testified Farha did was reject a proposal to pay no refund at all, preferring instead an alternative calculation leading to a refund of approximately $1 million. See Gov t Br. 30. Evidence that Farha preferred one reporting outcome to another might have had some probative force if there were only one lawful reporting method. But there were several: AHCA s auditor alone identified five calculation methods it deemed reasonable, including counting subcapitations to a related entity, as the Plans did. See Behrens Br WellCare s outside counsel identified multiple available methods, including the subcapitation method. See GX-1131a; Farha Br The government s expert and WellCare s auditors (in the after-the-raid restatement following consultation with AHCA) took a different approach from one another, and came up with a different number for each year. A632 (34:2-4). With several reasonable options available, Farha s rejection in CY2005 of the most aggressive option was evidence of prudence, not fraudulent intent. 6 The government also asserts that in 2004, WellCare CFO Paul Behrens warned Farha about the 2002 and CY2003 submissions, reporting that some 6 The government cites evidence that in connection with the reporting Dave Smith and Greg West were charged by Todd Farha to find a way not to pay back 10 million dollars they had to find[] a way to make it zero. Gov t Br. 20. But that was quite evidently understood as a direction to get the best result within the law, not to make up numbers, for the payback that resulted was not zero but about 6.5 million (Gov t Br. 22), and was defensible in an audit (GX-346-4; see A534(62:10-13))

25 Case: Date Filed: 04/17/2015 Page: 25 of 45 unspecified they had had difficulty obtaining verifiable data that we felt could survive audit and that Kale was already wavering in his support of this number. Gov t Br (quoting GX-346-4). The government says Farha responded, ok, suggesting that Farha was signing off notwithstanding Behrens s warn[ing] that the submissions were somehow unlawful. None of that is accurate. Behrens did not send the the government cites (GX-346-4); WellCare general counsel Thad Bereday did. Bereday did not warn Farha; he said the Plans calculations were as aggressive as possible while still defensible. GX (The government omits that part.) And Bereday told Farha that he needed to sign the certification, and that outside counsel Frank Rainer would hand deliver the submissions to AHCA the next day. Id. (The government omits that part, too.) Farha s response ok to an from his general counsel conveying that the submissions were defensible and outlining next steps hardly shows knowledge that the CY2006 submissions were unlawful. 7 7 The encounter-data evidence the government cites (at 40-45) sheds no light on Farha s mens rea, as it was undisputed that Farha had nothing to do with encounter data

26 Case: Date Filed: 04/17/2015 Page: 26 of The government s remaining evidence cannot bear the weight the government assigns to it Finally, the government seeks to infer intent from two episodes that reflect nothing more than ordinary business practices. First, the government says Farha s intent to defraud can be inferred because he promulgated WellCare policies promising to abide by the 80/20 requirements. Gov t Br. 102 n.29. But multiple government witnesses testified that the policy and procedure documents were nothing more than the actual [AHCA/WellCare] contract language placed in a policy and procedure. A488 (90:24-91:6); see also A466 (114:1-3); A488 (91:4-6) ( [W]e lifted that language out of the contract verbatim[.] ). Reiterating contract language was not a false statement and does not show fraudulent intent. The lawyers all testified that the contracts supported WellCare s methodology, see Behrens Br ; Behrens Reply 5-13, forcing the government to argue (at 74) that Farha was not charged with violating the contracts. Second, the government imagines that Farha s engagement with AHCA over an unrelated reporting matter namely, an industry-wide discussion of the definition of outpatient behavioral services a year before the CY2006 filings shows fraudulent intent because Farha must have intended to deflect attention from the undisclosed Harmony method of reporting. Gov t Br. 62. That argument assumes that, because WellCare relied on payments to its BHO for 80/

27 Case: Date Filed: 04/17/2015 Page: 27 of 45 reporting, the company had no legitimate interest in the definition of outpatient behavioral services. That is flatly wrong. As government witnesses Sattaur and Turrell testified, the definition was important to WellCare independent of 80/20 reporting, because it affected the rates AHCA paid the Plans. See, e.g., A559 (123:13-23) (Turrell) (defining services narrowly would negative[ly] affect how much [AHCA] paid the plan, so it would be in WellCare s interest to argue for a broader definition); A589 (87:4-10) (Sattaur) ( limiting codes in the rate setting process could have a very substantial effect on [WellCare s] business ). 8 Participating in an industry effort to persuade AHCA to agree to an expansive definition of reportable services one that directly benefited WellCare was a legitimate business strategy, not a diversion. There was testimony that Sattaur and Turrell viewed these industry-wide discussions as an opportune time to advise senior AHCA officials that the Plans reported accurately based on their capitated arrangement with a BH subcontractor. GX But escalating any issue to senior decisionmakers is 8 The issue also affected the Plans 80/20 reporting, notwithstanding the use of Harmony. For example, in CY2006, actuary Jian Yu calculated the Plans refund based on the specific codes in AHCA s cover letter. See Behrens Reply As government witness Carol Barr-Platt explained, some of those codes were added for CY2006 as a compromise resulting from negotiations between AHCA and the industry. A466 (90:16-93:2). 9 There was no testimony that anyone was instructed to conceal the calculation methodology. Turrell and Sattaur both testified that no one ever told

28 Case: Date Filed: 04/17/2015 Page: 28 of 45 not to be done lightly. See A561 (83:20-23) (Turrell explaining that you can always escalate, but it s very difficult to deescalate an issue ). Here, it would have signaled that WellCare viewed the BHO question as an open one. Having been advised that the statute and contract left room for an advantageous calculation method, WellCare was entitled to rest on its analysis. No negative inference can fairly be drawn from the decision not to invite senior AHCA officials to treat the issue as a subject for negotiation. 10 If one assumes that Farha viewed Harmony as a sham, it is of course possible to see these episodes as consistent with a culpable mental state. But given the actual evidence that Harmony was a legitimate entity that provided genuine, valuable services and that Farha was assured the methodology was sound and the submissions accurate these episodes do not come close, separately or together, to providing sufficient evidence of guilty knowledge and intent beyond a reasonable doubt. See United States v. Brown, 459 F.3d 509, 525 (5th Cir. 2006) ( [I]f we them to misrepresent anything to AHCA. See A589 (97:4-15) (Sattaur); A560 (101:8-19) (Turrell). 10 The government tries to link Sattaur s departure from WellCare to his disagreement with Farha on this issue of how to negotiate with AHCA. Gov t Br. 26 n.8. But the disagreement preceded Sattaur s departure by a full year, A590 (22:20-23:22), and Sattaur testified that his leaving had nothing to do with AHCA or AHCA related issues, A589 (13:25-14:2). And shortly before Sattaur left WellCare in April 2007, he certified that the CY2006 behavioral health expenditures information was true and correct to the best of [his] knowledge and belief. GX-0603; GX

29 Case: Date Filed: 04/17/2015 Page: 29 of 45 begin with the assumption that [the defendant] is guilty, the documents can be read to support that assumption. But if we begin with the proper presumption that [the defendant] is not guilty until proven guilty beyond a reasonable doubt, we must conclude that the evidence is insufficient[.] ). C. The Government Failed To Prove Farha s Execution Of A Fraud The government nowhere disputes that Farha did not personally execute the alleged fraud as to CY2006. And for good reason: The evidence showed that Farha did not receive the CY2006 templates and cover letters from AHCA, did not prepare the CY2006 submissions, did not consult on their preparation, did not review them, and did not approve them. See Farha Br The government instead argues that the jury could have convicted Farha because he engaged in a scheme to defraud, or under various theories of secondary liability traceable to Harmony s establishment in Even apart from the government s failure to prove mens rea which is, standing alone, fatal to its case each theory fails. 11 Given this undisputed evidence, the government s repeated invocation of Sattaur s testimony that Farha and his regulatory affairs personnel maintained tight control over the 80/20 issue proves nothing. Gov t Br. 54; see also id. at 26 n.8, Sattaur s testimony referred specifically to communications with AHCA. See A588 (38:6-40:10). Whatever tight control Farha and his regulatory personnel maintained on that subject, it did not extend to the CY2006 calculations or submissions, about which he was not consulted

30 Case: Date Filed: 04/17/2015 Page: 30 of Scheme liability was not presented to the jury The government argues first that the jury could have convicted Farha for participating in an overall scheme even if he did not participate in the execution of that scheme as to CY2006. Gov t Br But the government concedes (at 95) that the jury was not instructed on this theory. The jury was instructed that it could convict Farha only if he knowingly executed or attempted to execute a scheme by making submissions of false and fraudulent behavioral health expenditure information in April of A679 (23:13-22). The government cannot support the verdict by inventing theories of liability on which the jury was never instructed. See Chiarella v. United States, 445 U.S. 222, 236 (1980); see also United States v. Tarallo, 380 F.3d 1174, 1184 (9th Cir. 2004) ( Because the jury was not instructed that it had to find beyond a reasonable doubt all elements of coschemer vicarious liability, on appeal the government may not rely on this new theory. ). The government also fails to identify a single case approving of a scheme liability instruction in a healthcare-fraud case under The government instead cites mail- and wire-fraud cases discussing whether the defendant had to participate in each mailing or use of the wire. Those cases do not apply to healthcare fraud, where the prosecutable act is the execution of the scheme, rather than participation in it. See Behrens Reply 22 & n.16. Evidence of Farha s

31 Case: Date Filed: 04/17/2015 Page: 31 of 45 putative participation in prior years submissions, without evidence of his participation in the alleged CY2006 execution, is legally insufficient. 2. The evidence is insufficient to convict Farha of aiding and abetting the alleged CY2006 execution As the government acknowledges, a defendant cannot be convicted of aiding and abetting a crime unless he share[d] the requisite criminal intent and [took] steps to cause or further the crime s commission. Gov t Br. 96; see, e.g., United States v. Williams, 390 F.3d 1319, 1324 (11th Cir. 2004). Here, in addition to its failure to prove criminal intent, the government offered no evidence that Farha took any steps to further the alleged execution of the fraud for CY2006 i.e., the submission of allegedly false reports in April The government cites measures Farha allegedly took in prior years (for which the jury refused to convict) directing Harmony s formation in 2003, signing the initial certifications to AHCA for CY2002 and CY2003 expenditures, and encouraging the payment of some refund (rather than no refund) for CY2005. But the government does not explain how these actions furthered the preparation and filing of allegedly false CY2006 submissions in April In two sentences, the government declares the evidence sufficient to convict Farha of attempting to execute the fraud for CY2006. To prove the actus reus of attempt, the government must prove the defendant engaged in conduct that constitutes a substantial step toward the commission of the crime. United States v. Carothers, 121 F.3d 659, 661 (11th Cir. 1997). Farha took no steps in support of the CY2006 submission, which was handled entirely by others without his input,

32 Case: Date Filed: 04/17/2015 Page: 32 of The jury rejected conspiracy and thus Pinkerton liability Finally, the government argues for the first time that it need not show Farha s participation in the CY2006 submission because the jury could have convicted him under Pinkerton v. United States, 328 U.S. 640 (1946), without any evidence linking him to the CY2006 submission. The government waived this argument by failing to raise it below when Farha challenged the sufficiency of the evidence in his Rule 29 motion. 13 In any event, the argument fails for two reasons. First, the jury demonstrably did not convict Farha on a Pinkerton theory, because it was properly instructed that it could not do so unless it first found Farha guilty of the charged conspiracy a finding it never made. See A679 (20:17-21) (Pinkerton instruction). The government argues (at 98-99) that a failure to obtain a let alone the required substantial step. See United States v. Lee, 603 F.3d 904, 920 (11th Cir. 2010). 13 See United States v. Hosseini, 679 F.3d 544, 550 (7th Cir. 2012) (arguments not presented on Rule 29 motion are waived); United States v. Carrasco-De-Jesus, 589 F.3d 22, 26 (1st Cir. 2009) (waiver doctrine applies equally to criminal defendants and the government); see also United States v. Lua, 972 F.2d 1345 (9th Cir. 1992) (unpublished) (declining to reach Pinkerton theory because the government waived it by failing to argue it during Rule 29 hearing); United States v. Gomes, 969 F.2d 1290, 1295 (1st Cir. 1992) (refusing to consider legal standard government proposed for first time on appeal; the government s afterthought cannot salvage the guilty verdict ); cf. Gov t Br. 99. The government s suggestion that Farha somehow waived the point by not challenging its never-previouslyadvocated Pinkerton theory is a non-starter. Farha s opening brief argued that the evidence was insufficient to sustain his conviction; he was not required to respond to a theory of sufficiency the government never raised below

33 Case: Date Filed: 04/17/2015 Page: 33 of 45 conspiracy conviction need not void a Pinkerton conviction. But that is true only where it is known that the jury relied on a Pinkerton theory to convict the defendant on a substantive count, such as when that was the only theory presented or the jury returned a special verdict. In such a case, the acquittal on conspiracy might not void the substantive conviction because there is no bar on inconsistent verdicts. See United States v. Powell, 469 U.S. 57, (1984). But the relevant verdicts here are not inconsistent. The government offered the jury other theories on which to convict Farha of healthcare fraud (i.e., as a principal or as an aider and abettor). In view of the presumption that the jury followed the court s instructions, see United States v. Lopez, 649 F.3d 1222, 1237 (11th Cir. 2011), the jury s rejection of the predicate for Pinkerton liability conspiracy simply means it must have convicted Farha of healthcare fraud under a different theory. The government must defend the verdict on the theories the court s instructions permitted the jury to consider, not a theory the jury was instructed not to consider. See, e.g., United States v. Yates, 733 F.3d 1059, 1063 n.4 (11th Cir. 2013) (element charged to jury was necessary for conviction pursuant to the law of the case doctrine ), rev d on other grounds, 135 S. Ct (2015). Second, the government presented insufficient evidence that Farha had the requisite mens rea for conspiracy. The government had to show that Farha participated in the alleged agreement with knowledge of its illegal purpose

34 Case: Date Filed: 04/17/2015 Page: 34 of 45 United States v. Frick, 588 F.2d 531, 535 (5th Cir. 1979). For the reasons noted above, the government s evidence was manifestly insufficient for a reasonable jury to find that Farha acted with knowledge that his conduct, or that of any of his alleged co-conspirators, was illegal. To the contrary, the evidence showed that Farha never doubted the legality of the Plans 80/20 methodology. And because the evidence is insufficient to convict Farha of conspiracy, it is also insufficient to convict him of substantive offenses on a Pinkerton theory. See, e.g., United States v. Rosas-Fuentes, 970 F.2d 1379, 1383 (5th Cir. 1992). * * * Against powerful direct evidence of Farha s innocent state of mind, the government offers manipulations, omissions, and defaulted and meritless secondary theories of liability. Based on the evidence and argument presented at trial, no reasonable jury could have concluded that Farha had the requisite mens rea or participated in the submissions for which he was convicted. III. THE DISTRICT COURT S ERRONEOUS JURY INSTRUCTION REQUIRES A NEW TRIAL ON THE HEALTHCARE-FRAUD COUNTS At the very least, Farha, Behrens, and Kale are entitled to a new trial. To prove healthcare fraud, the government had to show that Defendants knowingly and willfully execute[d] the charged scheme i.e., submitted false statements. 18 U.S.C. 1347(a); see supra pp But the district court mistakenly instructed the jury that it could find knowledge of falsity upon a showing of deliberate

35 Case: Date Filed: 04/17/2015 Page: 35 of 45 indifference as to the truth. That instruction contravenes the Supreme Court s holding that deliberate indifference does not constitute knowledge. See Global- Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011). The government does not dispute that if the instruction was erroneous, the convictions must be reversed. Nor could it. The instruction explains why the jury, after acquitting Farha of the CY2006 false-statement counts (to which the deliberate-indifference instruction did not apply), convicted on the CY2006 fraud counts (to which it did) even though both sets of counts turned on the very same submissions. And by making indifference sufficient to convict, the instruction may have misled the jury into viewing the exculpatory fact that Farha played no role in the CY2006 submissions as a reason to find him guilty. The government argues instead that the instructions were correct, implying that the district court rewrote the pattern instructions as Defendants urged to avoid any error under Global-Tech. Gov t Br That is not what happened. The pattern instruction provided: A statement or representation is false or fraudulent if it is about a material fact that the speaker knows is untrue or makes with reckless indifference as to the truth and makes with intent to defraud. Eleventh Circuit Pattern Jury Instructions (Criminal Cases) 326 (2010) (emphasis added). Defendants objected, arguing that because the statute requires knowledge, a showing of reckless indifference would not suffice; Global-Tech requires

36 Case: Date Filed: 04/17/2015 Page: 36 of 45 either actual knowledge of falsity or willful blindness to falsity (both of which are more stringent than recklessness or deliberate indifference). A664 (58:23-59:14). The district court responded by making a cosmetic change, replacing reckless indifference with deliberate indifference. It charged: A statement or representation is false or fraudulent if it is about a material fact that the speaker knows is untrue or makes with deliberate indifference as to the truth and makes with intent to defraud. A679 (24:16-19) (emphasis added). The court thus instructed the jury in precisely the deliberate indifference language Global-Tech rejected. The fact that the court also gave a separate willful-blindness instruction does not cure the error. Cf. Gov t Br By giving both instructions, the court permitted the jury to find knowledge of falsity under either standard. And where a jury is instructed that it may rely on two or more independent grounds, one of which is legally insufficient, reversal is required. United States v. Verbitskaya, 406 F.3d 1324, 1332 (11th Cir. 2005). The government further claims Global-Tech applies only in civil patentinfringement cases. Br. 172, 174. But Global-Tech imported its rejection of the deliberate-indifference standard from criminal cases, finding the contours of willful blindness well established in criminal law. 131 S. Ct. at As Defendants showed, several cases including an unpublished decision of this