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United States v. Sblendorio

decided: September 8, 1987.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
VITO SBLENDORIO, WESLEY YONG, JAROSLAV HERDA, JASON SMITH, NANCIE COHEN, PAMELA WOLLEY, BOBBY PETERSON, MORTON GOLDSMITH, AND JOPHA CAMPBELL, DEFENDANTS-APPELLANTS



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division, No. 84 CR 129, John F. Grady, Chief Judge.

Easterbrook and Ripple, Circuit Judges, and Grant, Senior District Judge.*fn*

Author: Easterbrook

EASTERBROOK, Circuit Judge

Morton Goldsmith was the head of a chain of clinics and pharmacies, many flying the banner of Drug Industry Consultants, Inc. (DIC). Between 1981 and 1984 DIC's clinics and pharmacies, and those of associated enterprises, prescribed and sold large quantities of codeine-based cough syrups to addicts. The clinics were selective. To be a patient, you had to have a Medicaid card. Not necessarily yours; anyone's would do. The Medicaid card was the key to DIC's profits.

I

Someone with a Medicaid card who visited a clinic would have some blood drawn for analysis in a laboratory associated with DIC; the bill would be sent to Illinois for reimbursement under the Medicaid program (jointly funded by state and federal governments). Blood would be collected no matter what the visitor's reported ailment. The tests often were not performed; if the tests were performed, the results often were thrown away. Visitors to some clinics had to submit to breath (spirometic) tests. These were hastily performed, submitted to unqualified physicians for analysis, and thereafter ignored -- even when the physician's analysis indicated problems requiring medical attention. They were billed to the state just the same. (There is testimony, however, that some persons with obvious medical problems who entered a clinic by mistake, thinking it a place to get care, were sent elsewhere.)

The tests were sideshows. The main event was the prescription to satisfy the drug habits of the clientele. Physicians at DIC's clinics prescribed codeine-based cough syrups to more than 90 % of all visitors. Some physicians would prescribe anything the customer wanted; others asked for a verbal report of an ailment ("I have a cold"). Medicaid would not pay for these syrups. To generate profits, the clinics regularly prescribed other drugs (such as antibiotics) for which Medicaid would pay. The customers presented their prescriptions, paying only for the cough syrup. Often the customers threw the other items away in the pharmacy or immediately outside; some of the pharmacies simply did not fill the non-narcotic parts of the prescription; whether the customers saw the extra drugs or not, Illinois got the bill. During their operation, DIC and associated enterprises collected more than $19 million from Illinois and an unknown (but large) amount directly from the customers.

Both customers and physicians floated from one clinic to another. Some customers visited a DIC clinic daily. Some physicians were themselves drugged, with the assistance of pharmacies told to give the doctor whatever he ordered. The more stupefied the doctor, the more pliable in carrying out DIC's instructions.

The 149-count indictment charged 36 of the participants with a variety of offenses. Twenty-five of the defendants pleaded guilty or were dismissed; eleven stood trial and were convicted; nine of the eleven have appealed. The most serious charge, leveled against Goldsmith and Vito Sblendorio, is running a continuing criminal enterprise (CCE), in violation of 21 U.S.C. § 848. Both were convicted. All appellants were convicted of conspiring to violate 18 U.S.C. § 1962(c) and (d), part of the Racketeer Influenced and Corrupt Organizations Act (RICO), and of substantive violations of RICO. The RICO offense is operating an enterprise through a pattern of criminal offenses. The "enterprise" was DIC and affiliates; the "pattern" comprised mail fraud, obstruction of justice, and distribution of narcotics. The 84 counts of mail fraud, 18 U.S.C. § 1341, dealt with causing Medicaid checks to be mailed to pay for DIC's billings, and the "fraud" was that the bills were for goods and services that were not medically necessary, sometimes not even rendered. The 58 counts of unlawful distribution, 21 U.S.C. §§ 821-43, arose out of dispensing codeine-based drugs and sedatives that were not medically indicated. Goldsmith and Nancie Cohen (his factotum at DIC) were convicted of a single count of obstruction of justice, 18 U.S.C. § 1503, for failing to produce DIC's business records in response to subpoenas. Goldsmith and Cohen also were convicted of separate counts of perjury, 18 U.S.C. § 1623, for lying to the grand jury about their access to, and disposition of, DIC's business records.

The jury found most defendants guilty on most counts, although there were many acquittals (and on count 91 the jury returned both verdicts). Goldsmith received the highest sentence: 12 years' imprisonment and a $150,000 fine. Sblendorio, a pharmacist who ran several of the pharmacies and clinics under both DIC and an independent organization, was convicted of ICCE, mail fraud, and distribution, and received 10 years' imprisonment. The other appellants received lighter punishments, though at least one year in jail.

Seven of the nine contend that the evidence is insufficient with respect to at least one of the convictions. Some of these arguments point out genuine weaknesses in the government's case. Jopha Campbell, for example, was a physician employed by Mid-City Health Center, a clinic owned by Dorothy Oltean. Called the Catherine Health Center (with the Cherry Pharmacy next door -- DIC's enterprises shared common first initials) while DIC owned it, Mid-City was sold to Oltean, who had been a cashier or receptionist operator at Cherry. The prosecution maintains that the sale was an effort to mislead Illinois welfare officials about the clinic's beneficial ownership after Illinois stopped reimbursing DIC and made it hard for DIC's pharmacies to obtain codeine-based drugs. Campbell believes that Oltean's ownerships shows that Mid-City was not part of the DIC "enterprise" for purposes of RICO. The prosecution replies that the transfer was formal, that Oltean paid off DIC's debts and also paid "rent" to DIC for the premises, which the prosecution describes as a euphemism for passing the profits to DIC.

Other examples: Jason Smith points out that he did not prescribe codeine for an undercover agent on the agent's first visit and contends that he prescribed it on a second visit only after concluding that it was medically indicated. The prosecution responds that Dr. Smith charged the agent $5 extra for including a codeine syrup in the prescription and then prescribed many unnecessary items (including condoms!) to run up the Medicaid bill. The government observes that Dr. Smith's records show that he wrote prescriptions for codeine syrups to more than 95 % of his "patients". Goldsmith and Cohen contest their perjury and obstruction of justice convictions, saying that DIC really did not have the documents; the prosecution replies that DIC produced some of the documents in a hurry when one of its former employees said he needed them to defend himself, which supports an inference that DIC had them squirreled away somewhere or destroyed them at the last minute. There are many more controversies about the evidence.

Disputes of this nature are fodder for juries. Our inquiry is whether any rational trier of fact, taking the evidence and all legitimate inferences in the prosecution's favor, could have thought the facts sufficient to show guilt beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 61 L. Ed. 2d 560, 99 S. Ct. 2781 (1979); United States v. Fakhoury, 819 F.2d 1415, 1418 (7th Cir. 1987). The evidence is sufficient on each of the counts the defendants now contest.

We also conclude that the district judge did not abuse his discretion in admitting some evidence over the defendants' objection. The evidence was relevant to the defendants' knowledge of the type of operations these clinics and pharmacies were conducting, and the judge made a reasoned decision under Fed. R. Evid. 403 that the legitimate uses of the evidence outweighed its potential for improper prejudice.

II

At the conclusion of this lengthy trial, the jury had to consider hundreds of criminal charges. There were "only" 149 counts in the indictment, but most counts charged different combinations of defendants, and the jury had to consider each defendant separately under each count. After deliberating for less than three hours, the jury sent the court a note stating that one juror believed the evidence insufficient concerning every defendant and every count. The foreman's note concluded: "We don't know whether this would result in a hung jury or an acquittal for the body of defendants. I am appealing to you because I really don't know what to do about this particular juror."

"What to do about" a potentially deadlocked jury in this circuit was established by United States v. Silvern, 484 F.2d 879, 883 (7th Cir. 1973) (en banc). Using the court's supervisory powers, see Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 107 S. Ct. 2124, 2135-38, 95 L. Ed. 2d 740 (1987), Silvern prescribed an instruction, which may be given to a hung jury only if given during the initial charge too. The instruction adds several cautions to the traditional "dynamite charge" based on Allen v. United States, 164 U.S. 492, 501-02, 41 L. Ed. 528, 17 S. Ct. 154 (1896). The Silvern instruction is (484 F.2d at 883):

The verdict must represent the considered judgment of each juror. In order to return a verdict, it is necessary that each juror agree thereto. Your verdict must be unanimous.

It is your duty, as jurors, to consult with one another and to deliberate with a view to reaching an agreement, if you can do so without violence to individual judgment. Each of you must decide the case for yourself, but do so only after an impartial consideration of the evidence with your fellow jurors. In the course of your deliberations, do not hesitate to reexamine your own views and change your opinion if convinced it is erroneous. But do not surrender your honest conviction as to the weight or effect of evidence solely because of the opinion of your fellow jurors, or for the mere purpose of returning a verdict.

You are not partisans. You are judges -- judges of the facts. Your sole interest is to ascertain the truth from the evidence in the case.

This language is designed to ensure that no juror feels compelled to surrender a belief conscientiously held after time for reflection. The court concluded (484 F.2d at 883 & n.7): "unless and until we suggest any further change in the future, the instruction quoted in this opinion is the only deadlock instruction to be given. If in any jury trial tried after thirty (30) days from this opinion a supplemental instruction relating to a deadlock is given other than in the above form, a resulting conviction will be reversed and remanded for a new trial." For 14 years the court has reversed every conviction in which a deadlock instruction other than the Silvern instruction was given.

The district judge did not give the Silvern instruction. After consulting with counsel, the court gave an instruction dealing with the predicament of this jury, at this time. The instruction included some information (such as the fact that "anything short of 12 votes for either guilty or not guilty is no verdict") and some advice (such as: "The notion of taking a sweeping, all-encompassing position on the indictment as a whole so early in the deliberations may be one that will not hold up under further scrutiny."). After delivering the supplemental instruction, the court sent the jurors home for the day. The jury later deliberated for more than a week, returning the convictions we have described and 56 verdicts of not guilty.

The instruction as a whole was designed both to inform the jury of the effect of lack of unanimity and to cajole the juror in question to think about the evidence separately on each of the charges. None of the lawyers for the nine defendants who prosecute these appeals asked the court to give the Silvern instruction. That charge is designed for a jury that has deliberated at length and believes it cannot continue. A Silvern charge in this case might have ...


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