Opinion
S2 98 Cr. 1134 (WHP)
November 8, 2000
MEMORANDUM AND ORDER
The Government in this criminal action charges defendants Niels Lauersen and Madga Binion, licensed medical doctors, with conspiring to commit health care fraud and mail fraud and to make false and misleading statements to health care insurers. Lauersen also is charged individually with two counts of witness tampering. The procedural history of this action is described in a prior Memorandum and Order dated August 20, 1999. See United States v. Lauersen, No. 98 Cr. 1134 (WHP), 1999 WL 637237 (S.D.N.Y. Aug. 20, 1999).
The first trial of this action commenced on January 24, 2000 and ended in a mistrial on March 6, 2000 due to the jury's inability to arrive at an unanimous verdict. See United States v. Lauersen, No. S 98 Cr. 1134 (WHP), 2000 WL 675377 (S.D.N Y May 24, 2000).
In the months preceding the start of the second trial, scheduled for November 13, 2000, the Government advised defendants of its intent to offer "other acts" evidence, pursuant to Rule 404(b) of the Federal Rules of Evidence, to show the defendants' intent, knowledge and absence of mistake. This Memorandum and Order constitutes this Court's rulings with respect to the motions in limine of defendants to preclude the Government from offering such Rule 404(b) evidence and the motion of Binion for a severance in the event the other acts evidence against Lauersen is admitted.
The Court will direct the Clerk of the Court to docket and file as part of the record in this matter the following letters submitted by. the parties: Letter from Santa Kedia dated October 13, 2000; Letter from Harlan A. Levy dated October 16, 2000; Letter from Christine H. Chung and James G. Cavoli dated October 19, 2000; Letter from Santa Kedia dated October 23, 2000; Letter from Harlan A. Levy dated October 23, 2000.
By way of background, the Second Superceding Indictment ("Indictment") alleges that Lauersen and Binion submitted invoices, operative reports and other records to insurance companies misrepresenting the medical procedures performed in various types of fertility treatments, collectively referred to as "assisted reproductive technology" (or "ART") procedures. The Indictment charges that defendants, over a period of at least ten years, submitted documents indicating that patients had undergone gynecological procedures covered by their insurance policies, when in fact the patients had received fertility treatments which their insurers generally did not cover.
Relevant to the motions presently before this Court, the Indictment alleges that as part of the purported scheme to receive payment for ART procedures, Lauersen in operative reports falsely represented "ART surgeries to be one or more gynecological procedures, such as exploratory laparoscopy, fractional dilatation and curettage (`DC'), aspiration of ovarian cyst, ovarian cystectomy, and/or treatment of endometriosis . . . ." (Indictment ¶ 11(b).) In addition, the Indictment alleges that Binion created anesthesiology reports for uncovered ART surgeries that contained misrepresentations, such as "the amount of time the patient was under anesthesia for a single surgery session," in order to conceal the fact that the operations were ART surgeries. (Indictment ¶ 11(e).)
I. Motions To Exclude "Other Acts" Evidence
Pursuant to notices furnished to defendants on June 16, 2000 and September 26, 2000, the Government informed defendants that it may seek to introduce five categories of other acts evidence:
1. proof that with respect to his gynecological (or non-ART) patients, Lauersen exaggerated the size of cysts found in patients and claimed to have treated patients for endometriosis, two diagnoses identical to those he is charged with falsely attributing to patients undergoing ART procedures;
2. proof that Lauersen submitted false recertification forms to insurance companies in which he failed to disclose that he was under investigation by the New York State Office of Professional Misconduct ("OPMC") or a defendant in any malpractice suit;
3. proof that Lauersen, in connection with a proceeding before the OPMC, attempted to persuade one witness to falsify medical records and another not to testify, and in addition asked a patient to compose a false patient history to conceal wrongdoing on his part;
4. proof that Lauersen and Louise Weidel falsely reported the number of ART cycles they had performed, excluding those not deemed to have a high probability of success, for the purpose of artifically inflating Lauersen's rate of success in performing ART procedures; and
5. proof that Lauersen and Binion participated in "gynecological time-inflation" fraud. Defendants move to preclude the admission of this evidence on a number of grounds. The Government opposes the defendant' motions.
In the Govenment's September 26, 2000 Rule 404(b) notice to defendants, the Government indicated that it may seek to introduce evidence on three alleged false diagnoses to non-ART patients; (i) diagnoses of menometrorrhagia; (ii) diagnoses of endometriosis; and (iii) claims of having performed cysectomies on cysts of exaggerated size. Because the Government in its October 19, 2000 letter appears to have abandoned the category of evidence relating to menometrorrhagia, the Court expressly does not consider its admissibility in this Memorandum and Order.
Rule 404(b) states:
Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident . . . .
The Second Circuit follows the "inclusionary" approach to admissibility of extrinsic acts under Rule 404(b). This approach permits evidence of other acts to be used if it is relevant for some other purpose than to show a probability that the defendant committed the alleged crime because he is a man of bad character. E.g., United States v. Germosen, 139 F.3d 120, 127 (2d Cir. 1998); United States v. Benedetto, 571 F.2d 1246, 1248 (2d Cir. 1978). Beyond the purposes explicitly set forth in Rule 404(b), the Second Circuit has upheld the admissibility of other acts evidence to establish the background of how a criminal relationship developed or to help the jury understand the basis for the co-conspirators' relationship of mutual trust. United States v. Pipola, 83 F.3d 556, 566 (2d Cir. 1996). In addition, other acts evidence may be admitted where it is closely "intertwined" with the evidence regarding the charged offenses. See United States v. Gonzalez, 110 F.3d 936, 942 (2d Cir. 1997); Benedetto, 571 F.2d at 1250.
Courts have come to recognize that the admission of extrinsic acts, while probative of the crimes charged, may subject the defendant to a danger of improper prejudice. See Huddleston v. United States, 485 U.S. 681, 691 (1988); Michelson v. United States, 335 U.S. 469, 475-76 (1948); Benedetto, 571 F.2d at 1249. Thus, a district court has broad discretion regarding the admissibility of extrinsic acts, see Pipola, 83 F.3d at 566, and is authorized to exclude relevant evidence when its "probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless considerations of cumulative evidence." Fed.R.Evid. 403; Old Chief v. United States, 519 U.S. 172, 180 (1997) "Evidence is prejudicial only when it tends to have some adverse effect upon a defendant beyond tending to prove the fact or issue that justified its admission into evidence." United States v. Figueroa, 618 F.2d 934, 943 (2d Cir. 1980). Unfair prejudice does not refer solely to evidence that may inflame the emotions of the jury, but "means an undue tendency to suggest decision on an improper basis." Fed.R.Evid. 403 advisory committee's note; accord Old Chief, 519 U.S. at 180.
To protect against unfair prejudice that may emanate from the admission of extrinsic evidence, a district court must assess the admissibility of such evidence through the following inquiries: (i) whether the evidence is offered for a proper purpose; (ii) whether the evidence is relevant under the standards set forth in Rules 401, 402 and 104(b); (iii) whether, under Rule 403, the probative value of the proffered evidence is substantially outweighed by its potential for unfair prejudice; and (iv) whether, under Rule 105, the court must provide a limiting instruction to the jury to ensure that the other acts evidence is considered only for the proper purpose for which it was admitted. See Huddleston, 485 U.S. at 691-92; Pipola, 83 F.3d at 566; United States v. Colon, 880 F.2d 650, 656 (2d Cir. 1989). The Government bears the burden of demonstrating admissibility under Rule 404(b). United States v. Nachamie, 101 F. Supp.2d 134, 137 (S.D.N.Y. 2000).
A. False diagnoses of non-ART patients
The Government seeks to admit evidence that Lauersen attributed false diagnoses to non-ART patients that were identical to the alleged false diagnoses made to ART patients. The Government states that it will introduce evidence showing that Lauersen falsely wrote in operative reports relating to his gynecological (non-ART) patients that, for example, he performed a cystectomy involving a cyst with the dimensions of 4 x 5 centimeters, when the pathology report showed that the cyst was much smaller. In addition, the Government states that it will establish that Lauersen claimed that he was treating gynecological patients with endometriosis by surgery, when the lab reports showed that he had not recovered any endometrial tissue. The Government argues that evidence relating to Lauersen's gynecological patients is highly probative and proves Lauersen's intent and lack of mistake when he made the same representations in the operative reports relating to his fertility (or ART) patients. This Court agrees and denies Lauersen's motion to preclude such evidence. See United States v. Myerson, 18 F.3d 153, 165-67 (2d Cir. 1994) (in tax fraud case, affirming admission of prior instances of fraudulent billing by an attorney-defendant to prove fraudulent billings with respect to other clients); United States v. Smith, 727 F.2d 214, 219-20 (2d Cir. 1984) (affirming admission of similar acts of securities fraud to show defendant's knowledge of, and intent to engage in, "free-riding" securities scheme).
Lauersen's multi-layered objections to this evidence do not overcome its substantial probative value. Lauersen's principal argument for the exclusion of this evidence rests on its potential for unfair prejudice. Lauersen submits that this evidence portrays him as an incompetent doctor and will unnecessarily inject the substance of the OPMC proceedings into this trial. This Court does not discount the merit of this argument and has expressed its concern to the Government about "federalizing" the claims investigated by the OPMC. Nevertheless, the Government has represented to the Court that its proof in this regard will focus "narrowly on the proof relevant to Lauersen's knowledge and intent." (Letter from Christine H. Chung and James G. Cavoli dated October 19, 2000 at 6 n. 1.) Based on this express representation and the strong probative value of the proffered evidence, this Court cannot conclude that the potential for unfair prejudice favors exclusion. However, this Court admonishes the Government that this case is not about Lauersen's competency as a physician. This Court will limit the Government's presentation of evidence on this issue in its case-in-chief to the two categories of misrepresentations pertaining to gynecological surgeries (exaggerated cyst size and surgical removal of endometriosis) that are identical to the alleged misrepresentations pertaining to fertility procedures.
Lauersen also argues that the Government's presentation of this evidence should await the conclusion of the defendants' case, so that this Court can ascertain whether the issue of Lauersen's intent is actually in dispute. In support of this argument, Lauersen contends that at the first trial his defense to the allegations that he made false representations with regard to performing cystectomies and removing endometriosis in his fertility patients was that those representations were true, not that they were false but done without intent or by mistake. This, however, was not the case, as Lauersen's attorney argued on several occasions that he committed "innocent mistakes." (E.g., Trial Transcript ("Tr.") at 4052-54.) Still, even if Lauersen did not argue lack of intent or mistake at the first trial, that does not forestall the introduction of such evidence in the Government's case-in-chief during the re-trial. Neither Lauersen nor his counsel have made a "statement to the court of sufficient clarity to indicate that the issue will not be disputed." See United State v. Colon, 880 F.2d 650, 659 (2d Cir. 1989);see also United States v. Pitre, 960 F.2d 1112, 1119 (2d Cir. 1992);Figueroa, 618 F.2d at 942. Tellingly, in a recent letter to this Court, Lauersen's counsel asked that when the case is summarized by the Court during the jury selection process, potential jurors be told, among other things, that Lauersen "contends that he acted in good faith." (Letter from Gerald L. Shargel dated October 25, 2000.)
Furthermore, Lauersen argues that the evidence with respect to his gynecological patients should be excluded because his defense of the allegations will lengthen the trial and cause jury confusion. This argument is not persuasive. Based on the showing of probative value by the Government, considerations about trial management or jury confusion do not merit excluding the evidence.
B. False recertifications
The Government seeks to admit statements contained in eligibility forms submitted in 1996 and 1998 to Aetna/U.S. Healthcare and Oxford Health. While the Government obtusely proffers that this evidence "informs the jury's assessment of defendant's knowledge and intent," the logical real effect of this evidence is to call into question Lauersen's competency as a physician and, therefore, invites the jury to prejudge Lauersen and to decide the case on an improper basis. The danger of unfair prejudice substantially outweighs any marginal relevance this evidence may have to the Government's case. See Fed.R.Evid. 403. Accordingly, Lauersen's in limine motion in this respect is granted and the Government is precluded from offering evidence relating to the alleged false recertifications.
C. Evidence of other acts of witness tampering
The Government seeks to admit evidence that Lauersen attempted to influence witnesses in connection with the proceeding before the OPMC. In particular, the Government indicates that its proof at trial would consist of at least two witnesses. One proffered witness, a nurse, would testify that Lauersen asked her to alter time records of a medical procedure in which, it is claimed, that Lauersen incorrectly applied forceps and used excessive force in the delivery of baby, possibly resulting in brain damage. (See Attachments to Letter from Christine H. Chung and James G. Cavoli dated October 19, 2000.) A second witness proffered by the Government would testify to Lauersen's efforts to have her prepare an inaccurate patient history and to dissuade her husband from cooperating with the OPMC investigation. This witness apparently is suing Lauersen for malpractice. (See Transcript of Oral Argument dated November 2, 2000.)
The unfair prejudice associated with this evidence overwhelms any probative value bearing on Lauersen's intent regarding the witness tampering counts. This evidence tends to prove that Lauersen has the propensity to commit such acts and, consequently, is likely to lead the jury to prejudge the issue, rather than to assess the merits to the charges actually before them. Moreover, the two witnesses proffered by the Government are saddled with the visible specters of unfair prejudice in other, and perhaps more significant, respects. The prospect of having a jury learn the disturbing details of a complicated delivery or the fact that Lauersen is the subject of administrative action by the OPMC concerning his license to practice medicine will, without a doubt, unfairly prejudice him in defending the offenses charged.
Given the substantial unfair prejudice, Lauersen's motion in limine is granted. The Government is precluded from offering evidence of uncharged acts of witness tampering and obstruction alleged to have occurred in connection with the OPMC proceeding.
D. Underreporting of fertility procedures to SART
The Government seeks to offer proof that Lauersen and Louise Weidel, a laboratory manager in Lauersen's office, underrepresented the number of fertility procedures reported to the Society for Assisted Reproductive Technologies ("SART"). The Government claims that this evidence is not extrinsic to the charged fraud, but is necessarily intertwined with the evidence regarding the alleged offenses and relevant to explain the dimension of the charged fraud. This Court agrees. Accordingly, Lauersen's motion in limine on this score is denied.
E. The "time-inflation" fraud
The Government seeks to offer evidence relating to Binion's alleged time-inflation with respect to non-fertility procedures. In the first trial, the Court ruled that the Government may adduce evidence that Binion's inflation of the time recorded on her anesthesia reports for gynecological surgeries, such as laparoscopies, to show that she acted knowingly and intentionally with respect to the offenses charged in the indictment. (Trial Tr. at 3579.) The Court determined that the evidence of Binion's time inflation does not fall within Rule 404(b) because it is "intrinsic" to, and "inextricably intertwined" with, the counts in the indictment and is probative of Binion's intent and knowledge. (Trial Tr. at 3579-80.)
Binion objects to this evidence and asks the Court to revisit its ruling. Binion argues that there is no scientific foundation to the Government's contention that laparoscopies performed by Lauersen lasted 15 to 20 minutes (which is based solely on the testimony of Dr. Neil Ratner, an unindicted co-conspirator who is cooperating with the Government) in light of the testimony of both the defense and Government experts that laparoscopies last at least one hour.
The Court declines to depart from its earlier ruling and thus denies Binion's motion. The Court is not persuaded by Binion's argument directed to the scientific foundation of the Government's claim that laparoscopies performed by Lauersen lasted 15 to 20 minutes. The fact that the parties' experts may agree that laparoscopies, based on their own personal experience and observations, last at least one hour does not negate the possibility that laparoscopies performed by Lauersen lasted a quarter to a third of that time. Binion's argument goes to weight, not admissibility, and while the Government's argument may seem problematic, a jury will ultimately have to decide the issue.
II. Binion's Motion For Severance
Binion argues that to the extent the Government is permitted to offer other acts evidence against Lauersen, she is entitled to severance.
"There is a preference in the federal system for joint trials of defendants who are indicted together." Zafiro v. United States, 506 U.S. 534, 537 (1993); see also United States v. Salameh, 152 F.3d 88, 115 (2d Cir. 1998). Joint trials promote efficiency and "generally serve the interests of justice by avoiding inconsistent verdicts and enabling a more accurate assessment of relative culpability. Zafiro, 506 U.S. at 537; Richardson v. Marsh, 481 U.S. 200, 210 (1987). The decision to grant or deny a severance motion is committed to the discretion of the trial court. Salameh, 152 F.3d at 115; see also Fed.R.Crim.P. 14 (court may grant a severance if it appears that a defendant is prejudiced by a joinder of defendants for trial).
Where, as here, more than one defendant is joined for trial, the admission of Rule 404(b) evidence against one defendant presents the inevitable risk of "spillover," or unfair prejudice, to the co-defendant. "The typical spillover claim is that evidence admissible against only one defendant is prejudicial to all defendants and that individual trials should have been held to avoid that prejudice." United States v. DiNome, 954 F.2d 839, 843 (2d Cir. 1992). The Second Circuit has noted that "[t]here are few areas in which it is as important for this court to keep a watchful eye as on the admissibility of similar offenses in a case involving more than a single defendant." Figueroa, 618 F.2d at 944 (quoting United States v. Rosenwasser, 550 F.2d 806, 814 (2d Cir. 1977) (Gurfein, J. dissenting)).
In recent years, the Supreme Court has reinforced the utility of limiting instructions in the context of multiple defendant trials. The Supreme Court has adopted the rule that "juries are presumed to follow their instructions," Richardson, 481 U.S. at 211, and that instead of severance "less dramatic measures, such as limiting instructions, often will suffice to cure any risk of prejudice." Zafiro, 506 U.S. at 539;accord Salameh, 152 F.3d at 116; Figueroa, 618 F.2d at 946.
The basis for Binion's application is that she will be prejudiced by evidence designed to depict Lauersen as "a corrupt doctor." However, as detailed above, the Rule 404(b) evidence permitted by this Court relating to alleged false diagnoses of non-ART patients pertains only to Lauersen's conduct. The evidence of false diagnoses is offered by the. Government to prove Lauersen's knowledge, intent and absence of mistake and does not relate to Binion's actions. Therefore, the possibility of prejudicial spillover to Binion is minimal. The appropriate remedy is a limiting instruction that evidence admissible under Rule 404(b) against Lauersen is to be considered only for the purpose of weighing his guilt or lack of guilt. In addition, because the evidence relating to the underreporting of fertility procedures to SART is relevant to the conspiracy count involving both defendants, Binion cannot claim prejudice as a result of being jointly tried with Lauersen. See Salameh, 152 F.3d at 115; DiNome, 954 F.2d at 843-44.
Accordingly, Binion's motion for a severance is denied.