Monday, September 23, 2013

Court Erroneously Excluded Character Evidence & Calculated Restitution to Include Loss Outside Alleged Time Period

United States v. De Leon, No. 12-40244 (Aug. 29, 2013) (Stewart, Davis, Wiener)

De Leon was convicted at trial of five counts of health-care fraud.  His attorney called his mother as a character witness.  After some background questions, the attorney asked whether De Leon was a law-abiding citizen.  The Government objected citing Federal Rule of Evidence 608(a).  The Court sustained the objection and instructed De Leon that his second character witness would be limited to testifying as to De Leon’s reputation for truthfulness.  The defense attorney did not call the second witness and then rested. 

The district court erred in excluding evidence of De Leon’s law-abiding character.  “‘[E]vidence of the defendant’s pertinent trait’ is admissible.  [Fed. R. Evid. 404(a)(2)(A).] And evidence of the defendant’s ‘character as a law-abiding citizen . . . is always relevant.’” Rule 608(a) applies only to a witness’s credibility, and De Leon was not a witness.  This erroneous ruling, however, did not affect De Leon’s substantial rights since there was “overwhelming evidence of De Leon’s knowing submission of fraudulent claims.”  The panel affirms the conviction.

The district court also plainly erred in calculating the restitution award.  The PSR calculated the loss as the $2.9 million paid by Medicare and Medicaid to De Leon, on any and all claims, from 2005 through 2011.  The temporal scope of the conduct charged in the indictment was June or July 2008 through April 2010.  “Restitution is limited to the loss actually caused by the offense of conviction . . . [and] cannot be awarded for ‘losses’ attributable to conduct outside the temporal scope of the scheme charged . . . [or] for conduct not charged as part of the scheme.”  Thus, payments to De Leon in 2005, 2006, 2007, and 2011 cannot be counted among the actual losses incurred.

The district court conducted several hearings to try to discern which of the payments were fraudulent.  Ultimately, the court concluded that “it was ‘difficult, if not impossible, to ascertain with precision the actual loss,” so the court estimated that the total loss totaled $750,000 split evenly between Medicare and Medicaid.  The panel vacates the restitution reward and remands for recalculation even though the district court did not award the full $2.9 million since the record does not suggest that the district court excluded the sums outside of the temporal scope of the Indictment.  “By calculating restitution on the basis of the PSR’s exaggerated ‘ceiling,’ the district court indisputably awarded restitution for claims outside the scope of the charged conspiracy.

The panel notes, though, that on remand the district court can assign De Leon the burden of demonstrating the amount of credit he is due if the court concludes that justice requires this burden shift:

“Even though the MVRA puts the burden on the government to demonstrate the amount of a victim’s loss, a sentencing court may shift ‘the burden of demonstrating such other matters as the court deems appropriate . . . [to] the party designated by the court as justice requires.’ . . . ‘[W]e have approved the transfer of at least a portion of the burden to a defendant to establish his entitlement to a restitution credit.’ 

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