United States District Court, C.D. Illinois, Springfield Division
For Vernon Klinefelter, Geraldine Klinefelter, Defendants: Mark Kevin Wykoff , Sr, WYKOFF LAW OFFICE, Springfield, IL; Thomas O Finks, THOMAS O. FINKS, Attorney at Law, Taylorville, IL.
For USA, Plaintiff: Timothy A Bass, LEAD ATTORNEY, Patrick D Hansen, U.S. ATTY, Springfield, IL.
VERDICT and OPINION
Richard Mills, United States District Judge.
On March 7, 2012, Vernon Klinefelter and Geraldine Klinefelter were charged by Indictment with one count of wire fraud, one count of making a false statement to the Social Security Administration concerning an application for social security disability benefits, and one count of failing to disclose the occurrence of an event affecting an initial and continuing right to disability benefits. Both Defendants pleaded not guilty to the charges.
Pursuant to Rule 23(a) of the Federal Rules of Criminal Procedure, the Defendants waived their right to a jury trial and the Government consented to a bench trial. The Court approved the Defendants' waiver and the Government's consent. Both Defendants also waived their right to an individual trial and consented to be tried jointly. The bench trial commenced on April 7, 2014 and concluded on April 17, 2014.
Pursuant to Rule 23(c), the Court makes the following findings of fact.
The evidence showed that Defendant Vernon Ray Klinefelter was a licensed physician and surgeon in the State of Illinois. He married Defendant Geraldine Klinefelter in 1971. Geraldine Klinefelter was a registered nurse and an advanced practice nurse (nurse practitioner). The Defendants together operated Abundant Life Medical Clinic (Abundant Life) in Taylorville, Illinois. Dr. Klinefelter was also the resident/medical advisor of the Christian County Department of Public Health and was on staff as an independent contractor at St. Vincent Memorial Hospital in Taylorville, which is now known as Taylorville Memorial Hospital.
The first witness was Karen Randazzo. The Court found Ms. Randazzo to be credible. Ms. Randazzo, who has been an SSA Claims Representative since 2001, spoke to Geraldine Klinefelter on the telephone on March 31, 2004 regarding Vernon Klinefelter's application for disability benefits. According to Government's Exhibit 1D, as testified to by Ms. Randazzo, the interview was conducted with Mrs. Klinefelter due to Dr. Klinefelter's confusion and inability to remember dates. Ms Randazzo testified that her job during the interview is to record the information given to her by the applicant or applicant's representative.
The second witness was Patricia Wisniewski, a career SSA employee who was a technical expert at the time the Klinefelters were alleged to be defrauding the SSA. Although she testified that a technical expert is similar to a claims representative, a technical expert would often perform quality control with more complex cases or assist other employees with such cases. The Court found Ms. Wisniewski to be a credible witness.
An individual could work and still receive social security disability benefits. Ms. Randazzo testified regarding the amount of " countable earnings" an employee could average on a monthly basis which showed that an individual was engaged in substantial gainful activity (" SGA" ) and thus ineligible for disability benefits. The per-month amounts are reflected in Government's
Exhibit 1X as follows: (1) $780 in 2002; (2) $800 in 2003; (3) $810 in 2004; (4) $830 in 2005; (5) $860 in 2006; (6) $900 in 2007; and (7) $940 in 2008. Therefore, an employee who earned on average more than $800 per month in 2003 would be ineligible for social security disability benefits without regard to his or her medical condition. Similarly, an employee who earned in excess of $10,800 in 2007would not be entitled to disability benefits even if he or she had a serious medical condition. Ms. Randazzo testified that an individual was either totally disabled or was not--because there is no such thing as partial disability for purposes of SSA disability benefits. If an individual earned the amount reflected in Exhibit 1X, then he or she was engaged in SGA without regard to the person's medical condition.
Ms. Wisniewski testified that based on her review of the documentation, Dr. Klinefelter's involvement was more than a few hours per week. He saw patients on a regular basis and provided significant services to Abundant Life. Dr. Klinefelter's income was significantly higher than the threshold amount for SGA under the SSA guidelines from 2002-2005.
Ms. Randazzo testified that social security disability benefits originated in Baltimore, Maryland, and the SSA encouraged eligible individuals to receive benefits via direct deposit.
Dr. Klinefelter first applied for disability benefits in 2000. This application resulted in a J1 Denial which, according to Ms. Randazzo, meant that the applicant was capable of engaging in SGA doing some other type of work than his relevant past work.
The application filed on behalf of Dr. Klinefelter alleged a disability onset date of December 31, 2002. According to Government's Exhibit 1B  and Ms. Randazzo's testimony, Mrs. Klinefelter informed Ms. Randazzo that Dr. Klinefelter had not been actively involved in the family corporation since that date, when he turned all of his duties over to his wife who was a nurse practitioner. During that conversation, Mrs. Klinefelter also stated that Dr. Klinefelter could not perform simple mathematics and was no longer able to make rational decisions. Ms. Randazzo testified Mrs. Klinefelter told her that Dr. Klinefelter no longer saw patients, made no decisions and earned no income from the business. Ms. Wisniewski also testified that based upon her review of the file, it was reported that Dr. Klinefelter no longer saw patients. Those duties had been turned over to his spouse. Therefore, it was claimed that any earnings belonged to Mrs. Klinefelter.
Government's Exhibit 1AA is a summary of the Defendants' earnings at Abundant Life from 2001-2006.
Government's Exhibit 1C is the printed " Application for Disability Insurance Benefits" and appears to be consistent with the March 31, 2004 conversation between Ms. Randazzo and Mrs. Klinefelter, as testified to by Ms. Randazzo. The exhibit further provides that Dr. Klinefelter has a continuing obligation to notify SSA if his medical condition improves and he is able to return to work. Dr. Klinefelter stated that his summary earnings appears to be correct except for 2002. He said that the earnings belong to his spouse. Moreover, he reported having a number of disabilities that have progressively gotten worse. These include seizures, severe memory
problems and the inability to resolve simple mathematics. He further reported having a number of problems due to the medications he was taking at the time. Dr. Klinefelter affirmed that the information was true and signed the application on April 4, 2004. It was also signed by Mrs. Klinefelter as a witness.
Government's Exhibit 1E is a Form SSA-3368, which is titled " Disability Report" and is dated May 14, 2004. Dr. Klinefelter stated that he did not supervise other individuals while working as a medical doctor from 1984 to December 31, 2002. At the time, Dr. Klinefelter was examining other patients who had filed for disability benefits.
Government's Exhibit 1G is a second " Application for Disability Insurance Benefits" that was sent to Dr. Klinefelter. It is dated April 26, 2004 and appears to be identical in all respects to the April 4, 2004, Application, except it is signed only by Dr. Klinefelter on April 28, 2004.
Government's Exhibit 1H is an Activities of Daily Living Questionnaire which was submitted by Mrs. Klinefelter on behalf of Dr. Klinefelter and received by SSA on June 9, 2004. Dr. Klinefelter stated that he leaves home at least twice a week when his wife makes him go to the office. Government's Exhibit 1I is a Function Report prepared by Mrs. Klinefelter and dated June 1, 2004. She states in part, " Ray has almost become a recluse."
Government's Exhibit 1M is an SSA Request for Corrective Action dated November 22, 2004. Although Dr. Klinefelter had claimed an onset date of December 31, 2002, the information provided to SSA in June 2004 was that he tries to see two or three patients two afternoons per week. Therefore, additional information was sought.
Ms. Randazzo testified regarding a Report of Contact dated January 21, 2005, which is Government's Exhibit 1P. The report states that after not working at all from February 2003 to June 2003, Dr. Klinefelter started working one to two afternoons per week, seeing 1 to 3 patients. Mrs. Klinefelter oversaw all patients and made all management decisions. The report notes that benefits were denied for the alleged onset date of April 9, 1999. However, Dr. Klinefelter's earnings continued to decline and a determination was made that he had not engaged in SGA since December 31, 2002.
Government's Exhibit 1R is a Notice of Award dated February 11, 2005, advising Dr. Klinefelter that he is entitled to monthly disability benefits retroactive to June 2003. Although SSA had determined that Dr. Klinefelter became disabled on December 31, 2002, there was a requirement of five consecutive months of disability before a claimant became entitled to benefits. Dr. Klinefelter was advised he would soon receive $34,504.00 for the previous months in which he was determined to be disabled and $1,778.00 on a monthly basis thereafter. Pursuant to Government's Exhibit 1T, the Defendants' child was informed he would receive a retroactive sum of $11,143.00 due to Dr. Klinefelter's disability.
Ms. Randazzo identified Government's Exhibit 1Y as an SSA record of monthly disability benefits to Dr. Klinefelter ranging from February 2005 through January 2008. It also includes the payment to the Klinefelters' son which is dated March 15, 2005. Ms. Randazzo testified that, according
to the exhibit, the payments to Dr. Klinefelter continued until January 2008.
Ms. Randazzo testified that when the Defendants submitted forms stating that Dr. Klinefelter was not engaged in SGA, the SSA was not told that Mrs. Klinefelter was required to collaborate with a practicing physician. That information would be relevant to SSA if the business could not operate without a collaborating physician and Dr. Klinefelter was the only physician at Abundant Life at that time. It would be important in determining whether Dr. Klinefelter was engaged in SGA. Ms. Randazzo also testified that SSA was not told that Dr. Klinefelter was on staff at a hospital and had applied for re-credentialing during the time he was alleged to be disabled. This might also be significant in the SGA analysis. It would have been important for SSA to know if Dr. Klinefelter's condition could be controlled by medication. If SSA knew that Dr. Klinefelter was making more than the amounts listed in Government's Exhibit 1X during any of the months he received benefits, it would have determined that he was engaged in SGA and thus ineligible for benefits. If Ms. Randazzo had knowledge of Dr. Klinefelter's actual earnings in March of 2004 when speaking to Mrs. Klinefelter, she would have known that Dr. Klinefelter was ineligible for disability benefits.
Much of this information was corroborated by Ms. Wisniewski. Ms. Wisniewski also testified it would have been important information for SSA had it learned that during the time he was receiving disability benefits, Dr. Klinefelter was the medical doctor who examined a number of applicants who had applied for social security disability benefits.
According to Stipulation 1, Kelly Hartung is a witness who could testify regarding the Medicare enrollment forms and the systems and procedures used to enroll Illinois providers in the Medicare program. Government's Exhibit 9A is a " Medicare/Federal Health Care Provider/Supplier Enrollment Application," which was submitted in or about November 2001 in the name of Abundant Life. Dr. Klinefelter is listed as the provider for the clinic and the manager of the corporation. The application is signed by a person purporting to be Dr. Klinefelter on or about August 20, 2001. Dr. Klinefelter is also listed as the " MD/Owner" of the business on Government's Exhibit 9B, which is a supplemental Medicare Enrollment Application submitted on or about November 13, 2001. On or about November 30, 2001, as shown in Government's Exhibit I0C, a " provider number" was issued to Abundant Life which was to be listed on every claim for services provided by Abundant Life. The Stipulation further provides that in 2008, Gerry Klinefelter applied for and received a separate Medicare provider number showing her as the provider responsible for Abundant Life.
Diana Betrany of Cahaba Safeguard Administrators testified at trial. Cahaba investigates fraud and abuse in medical billing. Government's Exhibit 9E is an Overall Billing Summary Report for Abundant Life from March 22, 2002 through April 30, 2007. During that time, Dr. Klinefelter billed $207,187.80, of which $145,283.01 was allowed and $111,580.90 was paid. Government's Exhibit 9H is an Overall Billing Summary Report for Gerry Klinefelter for services from November 1, 2001 through July 31, 2008. During that time, the total sum billed was $451,615.60, of which $302,949.77 was allowed and $41,069.97 was deducted. The total sum paid was $210,580.46.
Unum, a private disability insurer, issued a policy to Dr. Klinefelter in 1995.
Joe Griffin, a disability claims manager, testified that Unum provided policies to those who were totally or partially unable to work. Disability benefits could be awarded for total or partial disability. Mr. Griffin testified that Dr. Klinefelter could work to a certain extent while still obtaining benefits. Unum required that information be provided monthly in order to continue obtaining benefits. According to an Unum Clinical Review Request dated March 3, 2004, which was admitted as Government's Exhibit 6JJJ, Mrs. Klinefelter reported that Dr. Klinefelter was out of work for most of 2003. At that time, she stated he was working three hours per week seeing patients only in her presence. This is inconsistent with the statement Mrs. Klinefelter would make to Ms. Randazzo four weeks later. Mrs. Klinefelter told Unum she was generating 90% of the income of the practice.
Patricia Wisniewski testified that if there was no partnership agreement between Dr. Klinefelter and Mrs. Klinefelter, the profits from Abundant Life should have been divided evenly. If divided evenly, then Abundant Life's profit and loss statements from January 2003 through August 2005 establish that Dr. Klinefelter was engaged in significant services and SGA at those times. Government's Exhibit 6PPP is a letter dated December 11, 2003 from Mrs. Klinefelter to Unum. The letter pertains to Dr. Klinefelter's " draw" for tax purposes. The letter states in part: " We did not feel that it mattered whose name was on the " draw" taken as our income since we had been married for thirty-two years and we considered the income as 'ours.'"
Donna Podeschi, a registered nurse in charge of quality assurance at Taylorville Memorial Hospital, testified regarding her knowledge of the Klinefelters at the time Dr. Klinefelter was applying for disability benefits. Ms. Podeschi was competent to testify regarding credentialing and hospital privileges at the time in question. Government's Exhibit 7C is an Addendum to the State's " Health Care Professional Recredentialing and Business Data Gathering Form" for Vernon Ray Klinefelter, M.D. The form was purportedly signed by Dr. Klinefelter on April 5, 2005. The form provides that Dr. Klinefelter is the collaborating physician for Gerry A. Klinefelter RN, FNP. Dr. Klinefelter stated that he was actively a member of the medical staff and had been since July of 1993.
On the form, Dr. Klinefelter lists Abundant Life as the primary site where he practices and states that " 2400" active patients are enrolled. Moreover, he stated approximately 5,000 patients visited the site each year. In the section on his own medical condition, Dr. Klinefelter stated that he had a seizure disorder, chronic back pain and peripheral neuropathy, a problem with his right arm resulting from the fracture of his humerus and hypopituitarism. Dr. Klinefelter claimed none of the conditions would affect his ability to practice or perform a full range of clinical activities because the conditions were controlled with medication.
Ms. Podeschi claimed she was not aware of any concerns with Dr. Klinefelter between 2003 and 2005. She did not recall any issues regarding Dr. Klinefelter that had to be reported to the Hospital Board. Ms. Podeschi reviewed Government's Exhibits 7G and 7G-1, which provided that Dr. Klinefelter was present at a number of staff meetings ranging from January of 2003 to December of 2006, though these records show he did not attend most of the staff meetings during that period of time.
Daniel Raab, the President and CEO of Taylorville Memorial Hospital, testified that he had a positive and professional relationship with the Klinefelters. Mr.
Raab attended most medical staff meetings and committee meetings. Between 2003 and 2007, Mr. Raab regularly interacted with Dr. Klinefelter and did not observe anything that caused him to be concerned about Dr. Klinefelter's condition. Moreover, no member of the hospital staff ever expressed any concern about Dr. Klinefelter to Mr. Raab.
Mr. Raab also testified that Dr. Klinefelter had admission privileges at the hospital during the time the crimes were alleged to occur. In smaller communities like Taylorville, all--or virtually all--area physicians have hospital privileges. The number of patients admitted by Dr. Klinefelter was extremely low when compared to other physicians. Mr. Raab testified that it is a somewhat rigorous credentialing process to obtain admission privileges. Dr. Klinefelter has not had admission privileges at Taylorville Memorial Hospital since 2008.
Ismie Mutual Insurance Company is a professional liability insurer for physicians. Robert Caine, an assistant legal counsel at Ismie, testified regarding Dr. Klinefelter's policy and the records associated with it. Although in September of 2001 Dr. Klinefelter disclosed his medical issues which affected his ability to practice, in November of 2005, in answer to the inquiry whether he had incurred or become aware of " having any illness or physical disability that impairs or potentially could impair your ability to practice medicine," Dr. Klinefelter marked " No."
Gerry Grigsby, a registered nurse and the former administrator of the Christian County Health Department, testified regarding Dr. Klinefelter's participation on the Christian County Health Board. The department is a local agency that provides programs and services. The board generally consisted of eight members who did not receive compensation. Ms. Grisby testified that the board typically met quarterly and the meetings generally lasted about one hour. The Minutes of the Christian County Health Board meetings ranging from January of 2003 to September of 2007 were admitted as exhibits. Government Exhibit 5E is a copy of the Minutes of the March 25, 2004 meeting, when Dr. Klinefelter was re-elected as President for the 2004 fiscal year. This was within one week of Mrs. Klinefelter's conversation with Ms. Randazzo about Dr. Klinefelter's application for SSA disability benefits.
Ms. Grigsby testified that Dr. Klinefelter was an active participant at the meetings and she could not recall him missing any meetings. She had no problems communicating with Dr. Klinefelter. Ms. Grigsby stated that if she left a telephone message for Dr. Klinefelter about a matter that required his attention, he would usually return her call by the next day.
According to Amended Stipulation 2, Marsha Eiter is a witness who is competent to testify as to the process that takes place when a claim is submitted by a medical provider performing services for a Medicaid recipient. Government's Exhibit 10F is a Provider Enrollment Application for Dr. Klinefelter and related documents dated on or about September 21, 2001, and an Agreement for Participation for Dr. Klinefelter dated October 29, 2001. Government's Exhibit 10G is an undated Provider Enrollment Application for Gerry A. Klinefelter, RN, FNP and related documents including an " Advanced Practice Nurse Collaborative Agreement" dated September 1, 2001. Dr. Klinefelter is listed as Mrs. Klinefelter's " Collaborating Physician" and the agreement is ...