Appellate court, however, finds judge erred in awarding company $132,565 in restitution
The U.S. Court of Appeals for the Ninth Circuit has affirmed the 12.7-year prison sentence the CNMI district court imposed on former Commonwealth Healthcare Center employee Melvin G. Ada for stealing over $1.7 million from CHC.
The Ninth Circuit, however, ruled that district court judge Ramona V. Manglona erred in awarding $132,565 in restitution to Missouri-based Midwest Medical Supply Co.
The Ninth Circuit vacated the restitution award and remanded it to the district court for recalculation.
Ninth Circuit judges Mary M. Schroeder, Dorothy Wright Nelson, and M. Margaret McKeown issued the ruling on Monday.
Ada pleaded guilty to 56 charges of theft or embezzlement, heath care fraud, and money laundering—all related to misappropriating and diverting CNMI Treasury checks made payable to MMS totaling over $1.7 million. The checks were supposed to pay for dialysis consumables and equipment that MMS had supplied the hospital.
In December 2015, Manglona slapped Ada with a sentence of 12.7 years in prison.
Ada appealed Manglona’s decision and the award of restitution to MMS.
The U.S. government has conceded that the restitution award was excessive.
The 9th Circuit judges said that Manglona did not err in applying the “sophisticated means” enhancement to Ada’s theft and fraud convictions.
The judges said that under the U.S. sentencing guidelines, “sophisticated means” involves “especially complex or especially intricate conduct pertaining to the execution or concealment of an offense.”
The judges said that Ada opened and used bank accounts with names deceptively similar to MMS to deposit stolen MMS checks, and he manipulated financial records to conceal his fraudulent scheme.
Ada similarly argued that Manglona erred in imposing a two-level sophisticated money laundering enhancement to his money laundering convictions.
Although the sentencing guidelines note that sophisticated laundering typically involves the use of fictitious entities, shell corporations, or offshore financial accounts, this is not required for the enhancement to apply, the judges said.
They said Ada deposited and transferred numerous stolen checks through multiple bank accounts with deceptive names. Thus, the judges said, Manglona did not abuse her discretion.
Ada also asserted that Manglona erred in imposing a two-level leadership enhancement to his money laundering convictions.
The judges said the sentencing guidelines allows this “if the defendant was an organizer, leader, manager, or supervisor in any criminal activity” involving “one or more other participants.”
A participant is someone “who is criminally responsible for the commission of the offense” even if acquitted, they said—in this case, Ada’s wife, whose participation was proved by a preponderance of evidence. Therefore Manglona did not err in imposing the leadership enhancement, the judges said.
The judges said that Ada’s embezzlement caused significant disruption at the hospital, forcing the closure of its peritoneal dialysis clinic for several months. It also endangered public health by forcing patients to undergo more serious treatment, including emergency surgery, after the clinic’s closure, the judges said.
Therefore, the judges said, Manglona did not abuse her discretion.
On the award of restitution to MMS, the judges said that MMS presented testimony, email correspondence, and 11 invoices claiming that CHC had not paid it $76,914, but MMS’ presentation established only that CUC refused to pay the 11 invoices.
The U.S. government concedes that MMS failed to establish that Ada caused CHC’s failure to pay MMS the $79,914.
“That portion of the award is not supported,” said the judges in vacating the restitution award.
After a restitution hearing in March 2016, Manglona found Ada liable to pay restitution in the total amount of $699,484.34 to CHC and MMS.
Manglona ordered Ada to pay $566,919 to CHCC and $132,565 to MMS.
Manglona said if the defendant is unable to pay the amount immediately and in its entirety, then he shall pay the amount on an installment basis.
MMS, through counsel Richard W. Pierce, has submitted a claim for restitution in the amount of $132,565 on 13 invoices.
The U.S. government, through assistant U.S. attorney Garth Backe, opposed awarding restitution to MMS.
Backe said the U.S. government has serious concern as to whether MMS meets the definition of a “victim.”
Backe said until some questions are answered, it is the good-faith position of the U.S. government that MMS’ accounting system is simply too unreliable to support an award.
At the hearing, Ada, through counsel Colin Thompson, did not object to the restitution in the amount of $566,919.26 payable to CHC.
Manglona found MMS to be a victim in this case and awarded the company $132,565.08 in restitution.
Ada was previously assigned as a medical supply specialist at CHC. His wife, Leyda, used to be a sales representative for MMS.
On June 26, 2015, a federal jury reached a verdict, acquitting Leyda of the charges of conspiracy to commit money laundering and money laundering, but finding her guilty of perjury.
In April 2016 Leyda was sentenced to two years and three months imprisonment. She also appealed.
Leyda is out pending the outcome of her appeal.