This post, like others I’ve done, focuses not on the investigation and/or prosecution of someone for committing a computer-related crime, but on the sentencing imposed on someone who was convicted of such a crime.
The case is U.S. v. Feldman, __ F.3d __, 2011 WL 3250554 (U.S. Court of Appeals for the 2d Circuit 2011), and this is a summary of how it began: From 1997-1997, Jerome H. Feldman, a psychiatrist, owned a mental health care clinic in Florida; by June, 1997, he had operated the clinic for over two years and had “filed claims for, and had received, over a million dollars of Medicare and Medicaid funds.” U.S. v. Feldman, supra.
State and federal authorities began investigating him for possible health care fraud, which led to the closing of the clinic and the suspension of Medicare and Medicaid payments to the center and to Feldman. U.S. v. Feldman, supra. From 1996-1999, he operated three HIV clinics; after he was barred from receiving Medicare payments, Feldman hired doctors “with their own provider numbers” and billed Medicare under their names, receiving roughly $580,000 from this venture. U.S. v. Feldman, supra.
On August 23, 1999, Feldman entered into a plea agreement with federal prosecutors, admitting he “was guilty of health care fraud” through his operation of the original clinic. U.S. v. Feldman, supra. Later that year, he skipped a conference with prosecutors, fled the country and went “to live in the Philippines as a fugitive.” U.S. v. Feldman, supra.
After he made it to the Philippines, Feldman
hoped to capitalize on a Philippine policy (rescinded in 2008) allowing foreign visitors to obtain organ transplants from unrelated Filipino living donors. In November 2000, Feldman registered the website www.liver4you.org using the alias `Alberto Gomez.’
By May 2001, the website . . . offered live kidney transplants and live or cadaver liver transplants allegedly to be performed by qualified surgeons in a Philippine hospital. The website claimed that the transplant program was run by the Philippines Ministry of Health, and listed the following prices:
kidney transplant: $65,000-$95,000
liver transplant: $130,000
The website listed several email addresses, including fastertransplant @yahoo.com, at which persons interested in obtaining an organ transplant could request further information. `Dr. Mitchel Michaelson’ and his associate `Alberto Gomez’ -- both aliases of Feldman's--promised to arrange a patient's transplant surgery. . . .
During the course of his liver4you.org scheme, Feldman attracted at least five patients. . . . [E]ach patient (or caretaker) learned from the liver4you.org website of Feldman's offer to secure an organ transplant; initiated contact with Feldman using an email address listed on the liver4you.org website; paid money to Feldman to receive an organ transplant; and learned, after traveling to the Philippines, that Feldman lacked the power, outside of the normal workings of the Philippine medical system, to guarantee an organ transplant. In total, the five patients or their caretakers lost over $300,000.
U.S. v. Feldman, supra.
I don’t have space here to go through the sad tales associated with the five patients. I’ll just note that each paid for a transplant, then Feldman said there were problems (no available kidney or liver) and sometimes sought more money to secure what was needed; three died (one from complications of having a transplant in the Philippines); and after one woman’s husband died after not receiving the transplant they had paid for, she received $27,000 in bills from the Philippine hospitals where he stayed and, despite “his promise that those costs were covered, Feldman refused to pay any of the bills and refused to refund any money.” U.S. v. Feldman, supra. (Earlier, he pressed for more money, until she “begged [him] for time to reverse mortgage her home”, because they had already sent him their life savings. U.S. v. Feldman, supra.)
On February 3, 2009, U.S. authorities located Feldman in the Philippines. On February 11, a [New York] grand jury . . . indicted Feldman with five counts of wire fraud, see 18 U.S. Code § 1343, based on Feldman's liver4you.org scheme to defraud organ transplant patients.
The five wire fraud counts were based on two wire transfers by the first organ transplant patient, two wire transfers by the fourth patient, and one wire transfer by the fifth patient, all to Feldman's Alberto Gomez bank account in DeWitt. On March 18, the Philippines deported Feldman to Guam, where he was arrested for wire fraud. Feldman then consented to his removal to the Northern District of New York.
U.S. v. Feldman, supra. On August 6, 2009, Florida prosecutors charged Feldman with one count of health care fraud in violation of 18 U.S. Code § 1347. U.S. v. Feldman, supra. That charge was later transferred to New York and joined to the wire fraud case. U.S. v. Feldman, supra. On August 7, he pled guilty to all six counts. U.S. v. Feldman, supra.
On May 7, the district court judge sentenced him under the U.S. Sentencing Guidelines. U.S. v. Feldman, supra. As I’ve noted in earlier posts, Guidelines sentencing is a complex process, which begins, as Wikipedia notes, with a base offense level:
The district court increased Feldman's base offense level by 16 levels, after finding [he] was responsible for $2,027,796.63 in total losses, . . . given $1,131,771.05 from the JFC Center false claims fraud, $586,040.58 from the [HIV clinic] fraud, and $309,985 from the organ transplant wire fraud.
In addition, . . . the court increased Feldman's base offense level by two levels for committing wire fraud through mass-marketing using the liver4you.org website, see [U.S.S.G.] § 2B 1. 1(b)(2)(A)(ii); two levels because the wire fraud involved the conscious or reckless risk of death or serious bodily injury; . . . and two levels for obstructing justice by fleeing to the Philippines and remaining a fugitive for nearly a decade. . . The district court considered the resulting Guidelines range of 151 to 188 months and imposed a sentence of 188 months in prison.
U.S. v. Feldman, supra.
Feldman appealed the sentence, arguing, in part, that the judge “erred by applying a two-level enhancement under U.S.S.G. § 2B 1.1(b)(2)(A)(ii).” U.S. v. Feldman, supra. As the opinion notes, under this section of the Guidelines a fraud crime is subject to
a two-level Guidelines increase if the offense `was committed through mass-marketing.’ U.S. S.G. § 2B 1.1(b)(2)(A)(ii).” The Sentencing Commission's Application Note defines `mass-marketing’ as:
`a plan, program, promotion, or campaign that is conducted through solicitation by telephone, mail, the Internet, or other means to induce a large number of persons to (i) purchase goods or services; (ii) participate in a contest or sweepstakes; or (iii) invest for financial profit.’
. . . . [T]he Note states that `[m]ass-marketing' includes . . . a telemarketing campaign that solicits a large number of individuals to purchase fraudulent life insurance policies.’ U.S.S.G. § 2B1.1, Application Note 4(A).
U.S. v. Feldman, supra.
Feldman argued that
the enhancement does not apply for two principal reasons. First, Feldman argues that his liver4you.org website was not `solicitation’ because `[t]he only way someone could have viewed his website was either by directly entering the internet address or through a third-party search engine.’
The Court of Appeals disagreed:
Soliciting individuals to purchase organ transplants was the very reason the website existed -- as even the name liver4you.org makes clear. The § 2B1.1(b)(2)(A)(ii) enhancement does not require that Feldman use the most active marketing method possible. . . .
Feldman created a public website, available for viewing by anyone with an internet connection, and he did so to attract people desperate for organ transplants. [His] offer on a public website to provide organ transplants, with listed prices, and with contact information for interested purchasers, is among the types of mass-marketing contemplated by Section 2B1.1(b)(2)(A)(ii).
U.S. v. Feldman, supra.
Feldman also argued that the § 2B 1. 1(b)(2)(A)(ii) enhancement did “not apply because the liver4you.org website `was not intended to induce a large number of persons to purchase goods or services’ because `only a very limited number of people would have any interest’ in an organ transplant.” U.S. v. Feldman, supra. Again, the Court of Appeals did not agree:
As the Sentencing Commission understood, because a single public website on the internet can, and is designed to, reach a large number of people, use of such a website to induce people to enter into a fraud can vastly increase the scale of the fraud, making the defendant more culpable. . . . Feldman's liver4you.org website was publicly available, soliciting anyone who could read it and write an email -- a large population, even if it reached only those who could read English. . . .
Although the enhancement defines mass-marketing in terms of `a large number of persons,’ . . . the liver4you.org website was available to all throughout the world, and we take judicial notice of the fact that the number of people throughout the world who need liver or kidney transplants is, unfortunately, not so limited. Even limited to the United States, the U.S. Department of Health and Human Services reports that 80,000 to 90,000 people were waiting for a kidney or liver transplant in each of the years 2006, 2007, and 2008, during which [he] conducted his liver4you.org scheme. . . . .
Moreover, Feldman has provided no indication that the website was so limited in distribution that it was not able to reach a large number of persons. In sum, the district court did not err by applying a two-level mass-marketing enhancement. . . .
U.S. v. Feldman, supra.
Because it rejected these and the other arguments Feldman made in challenging his sentence, the Court of Appeals affirmed the sentence. U.S. v. Feldman, supra.
If you’d like to see a photo of Feldman and a screen shot of the organ transplant site, when it existed, you can find both here.