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IN United States v. Philip Esformes, No. 19-13838, 19-14874, United States Court of Appeals, Eleventh Circuit (January 6, 2023) Philip Esformes challenged his convictions for health care fraud, kickbacks and money laundering and the related restitution and forfeiture order. After Esformes filed this appeal, President Trump commuted his prison sentence, making every challenge to it moot.
In his remaining appeals, Esformes argued that his charges should have been dismissed due to prosecutorial misconduct, that the trial court improperly admitted expert testimony against him, that the admissible evidence against him was insufficient to sustain his conviction, and that the punitive damages and forfeiture judgments should be reversed.
BACKGROUND
Esformes owned and operated the “Esformes Network” – several medical facilities in Miami-Dade County, Florida. The network included “skilled nursing,” residential medical facilities that provided services performed by nurses, such as physical therapy or the operation of sensitive medical equipment. Medicare or Medicaid will only pay for a stay in a qualified nursing facility if the patient is medically certified as necessary and if the patient spent at least three days in an acute care hospital immediately prior to 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 carried a significantly longer prison term. Eformes then offered to pay a significant sum of money more [Guillermo] Delgado so he could flee the United States and avoid prosecution in the United States.”
The Delgados signed a sealed agreement, began recording their conversations with Esformes, and forwarded to the government several recordings, including some involving conversations between Esformes and his lawyers.
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 Esforme’s Eden Gardens medical facility to “seize[e] . . . business records related to the health care fraud investigation of Eformes.” The government knew in advance that Norman Ginsparg, an Illinois-licensed attorney who worked with Eformes, had an office in Eden Gardens. And a member of Eformes’ defense team warned agents that there were privileged materials in Eden Gardens. The government established a “dirty protocol” to identify privileged documents found in the search and to prevent the prosecution team from seeing them. It selected agents not otherwise involved in the investigation to conduct the search. But these measures failed.
The district court concluded that the prosecutors were guilty of misconduct but rejected a finding of bad faith and dishonesty. At Eforme’s two-month trial, prosecutors presented three types of evidence for this appeal. First, Esforme’s co-conspirators, including Gabriel Delgado, testified about the conspiracy, its means and their roles in it. Second, prosecutors presented summary testimony from Michael Petron, who identified various transactions in Esforme’s financial records as bribes, kickbacks and attempts to conceal illegal earnings.
JURY JUDGES
The jury convicted Esformes on 20 counts. The jury failed to reach a verdict on 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’ prison term to time served but “smile[ft] intact and in fact the remaining three-year term of supervised release with all its conditions, the unpaid balance of his . . . restitution liability, if any, and all other elements of the sentence
DISCUSSION
The Eleventh Circuit, after a lengthy review, concluded:
- that the presidential conversion renders Esforme’s appeal of his prison sentence moot but otherwise does not affect his appeal.
- the trial court did not abuse its discretion in refusing to dismiss the indictment or to quash the prosecutors for misconduct.
- affirmed the admission of Dr. Cifu’s expert testimony.
- confirmed that the refund amount was not manifestly incorrect.
- held that there was sufficient evidence for the jury to convict Esformes of money laundering and that the forfeiture based on money laundering was lawfully calculated.
- The district court’s decision on restitution was not clearly erroneous. There was ample evidence of actual losses to the government; indeed, defrauding the government was at the heart of the Esformes Network conspiracy.
- The district court’s decision on confiscation was legal. It is a federal crime to engage in a transaction knowing that it “is designed in whole or in part . . . to conceal or conceal the nature, location, source, ownership, or control of the proceeds of specified illegal activity . . . .” When a defendant is found guilty of federal money laundering, the district court “shall order that the person forfeit to the United States all property, real or personal, involved in such crime, or all property traceable to such property.”
- Legally sufficient evidence supported Esforme’s money laundering convictions.
- Eforme’s sentence did not violate the constitution.
- Esformes does not dispute the $38.7 million calculation of the value of the property “involved in” his crimes, so any forfeiture below $77.4 million was presumptively constitutional. And the Es-formes offer no basis for rebutting this presumption.
Esformes will be tried on the six points that are not subject to the president’s commute.
Health insurance scams that steal millions from US government programs are amassing riches beyond the dreams of normal health care providers. The wealth that Esfromes acquired was not earned, it was stolen. He was correctly convicted on many counts and sentenced to prison. President Trump allowed him to get out of prison early but refused—because he was so clearly guilty—to pardon him. Because the jury could not decide on six counts, and because the original verdict was correct, the government will be able to retry him on the six counts that were not proven in the first trial.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud for insurers and policyholders alike. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com
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