United States v. Marchetti
In United States v. Marchetti, —- F.4th —-, No. 22-40617 (5th Cir. Mar. 20, 2024), the Fifth Circuit affirmed the defendant’s conviction for conspiracy to commit illegal remunerations in violation of 18 U.S.C. § 371, and it affirmed his sentence of 48 months’ imprisonment. In all, the court rejected five arguments raised by Marchetti.
Marchetti was convicted after a jury trial, in which the Government presented evidence of a scheme to fabricate reports regarding pharmacogenetic testing paid for by Medicare. Marchetti operated a “distributor” company and had a network of sub-distributors, all of whom served as salespeople who sent referrals to the testing company.
To increase the amount of money provided to Marchetti, the testing company sent Marchetti “the data needed to fabricate … reports.” For example, Marchetti’s company submitted reports “indicating activity from Drs. Chipotle, Lettuce, McDonald, Carl’s, Burger, and King.” Another time, the testing company paid Marchetti’s company a $75,'000 “bonus” for its referrals. Marchetti also had an agreement with a “buffer” company that would pay him a 40% commission on “each reimbursable assay that pays over $200.” Evidence showed that company was created “to articifially buffer [the conspirators] from any kind of feedback or anything that would come to the company … [regarding] a legal problem.”
Throughout the scheme, the conspirators had multiple conversations about the legality of the payment scheme, and when one employee substantiated his concerns about the illegality of the scheme, the others told him to “butt out.”
Ultimately, Marchetti was convicted of conspiracy to violate the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), which makes it a crime to knowingly and willfully solicit, receive, offer, or pay kickbacks, bribes, or illegal remuneration in return for referrals.
Ruling 1: The evidence was sufficient to prove an Anti-Kickback violation based, at least, on the use of the “buffer company.” As for the rest of the conduct, the court called it “undoubtedly sketchy and maybe even criminal,” but, “by and large, [not] a violation of the Anti Kickback Statute.” Regardless, the conspirators had an “unlawful objective” of redirecting referrals to the “buffer company,” and that was enough to support his conviction.
In an earlier case, United States v. Miles, 360 F.3d 472, 480 (5th Cir. 2004), the court had outlinedwhen “non-doctors would fall within the scope of the” Anti-Kickback Statute. In Miles, the court reversed a conviction because “[t]he payments … were not made to the relevant decisionmaker.”
Later, in United States v. Shoemaker, 746 F.3d 614, 628 (5th Cir. 2014), the court elaborated that the distinction is between “'a payer’s intent to induce ‘referrals,’ which is illegal, and the intent to compensate advertisers, which is permissible.” A conviction cannot be based solely on proof that a provider compensated an advertiser after each purchase unless the advertiser unduly influenced or acted on behalf of the purchaser. The focus should be “on intent, not titles or formal authority,” although the identity of the payee is relevant to the intent of the payer.
In this case, it was not enough that the Government proved Marchetti was compensated based on the value of each referral — that structure alone was not sufficient to convict under the Anti-Kickback Statute. The Government would have also needed to prove the conspirators intended “improperly to influence” the people who made healthcare decisions on behalf of patients.
It was, however, sufficient for the Government to show that the buffer company scheme worked this way: “Medical service provider pays salesman, salesman makes choice about service provider, salesman is never overruled.” Here, there was enough evidence that “Marchetti might have been the relevant decisionmaker. And he was being compensated per referral. That [was] a substantive” violation of the Anti-Kickback Statute.
Ruling 2: The district court did not abuse its discretion in refusing to give the jury Marchetti’s proposed theory-of-the-case instruction. A defendant has a general right to “have the court instruct the jury on the defense’s theory of the case,” but “a defendant is not entitled to a judicial narrative of his version of the facts.”
Here, Marchetti failed the court’s three-part test for reviewing a district court’s decision to omit a request jury instruction — that omission is only an abuse of discretion if it “(1) is substantively correct; (2) is not substantially covered in the charge given to the jury; and (3) concerns an important point in the trial so that the failure to give it seriously impairs the defendant’s ability to present effectively a partic ular defense.” See United States v. Lucas, 516 F.3d 316, 324 (5th Cir. 2008).
Ruling 3: The district court did not abuse its discretion in giving the jury the Government’s version of a “good faith defense” instruction. The instruction did not lessen the mens rea requirement, did not omit necessary information, and did not constructively amend the indictment.
Ruling 4: There was no cumulative error because there was no error at all.
Ruling 5: The district court appropriately calculated Marchetti’s Sentencing Guidelines under USSG § 2B4.1(b)(1)(B), based on the value of the bribes he received rather than the value of the improper benefit he received. That Guideline directs courts to use whichever value is greater, and here the value of the bribes was higher.