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Lobacz v. United States

United States District Court, E.D. New York

January 18, 2018

FRANK LOBACZ, M.D., Petitioner,
v.
UNITED STATES OF AMERICA, Respondent,

          For Petitioner: Doar Rieck Kaley & Mack By: John F. Kaley, Esq.

          For Respondent: Richard P. Donoghue Interim United States Attorney By: Michael P. Canty, AUSA

          MEMORANDUM & ORDER

          Denis R. Hurley, United States District Judge.

         Petitioner Frank Lobacz (“Defendant” or “Lobacz”) moves pursuant to 28 U.S.C. § 2255 to vacate, set aside, or correct his sentence arising from a 2010 conviction in this Court. Lobacz contends he received ineffective assistance from his trial counsel in violation of his Sixth Amendment right. Having considered all the bases asserted in support of that claim, the petition is denied.

         BACKGROUND

         I. Procedural History

         On November 12, 2010, Lobacz was convicted, following a jury trial, of two counts of healthcare fraud, one count of filing a false IRS Form 550 regarding withdrawals from a pension account, and three counts of income tax evasion for the years 2000, 2001, and 2002. He was sentenced principally to 65 months incarceration and a term of three years supervised release.

         Lobacz appealed his conviction asserting that: (1) he was denied effective assistance of counsel because trial counsel did not move to sever the healthcare counts from the pension and tax fraud counts; (2) the evidence was insufficient to establish the mens rea element of the Form 550 offense; and (3) the district court erred in calculating the applicable guideline range. On March 26, 2015, his convictions were affirmed by the Second Circuit. See U.S. v. Lobacz, 603 Fed.App'x 48 (2d Cir. 2015). The Circuit dismissed Lobacz's ineffective-assistance claim without prejudice to the filing of a petition for relief under 28 U.S.C. § 2255 and rejected the remaining grounds.

         Thereafter the present motion was timely filed. While Lobacz has been released from incarceration, he is presently serving his 3-year term of supervised release and therefore is considered in custody for purposes of this motion to vacate.[1] See, e.g., Byrd v. Evans, 420 Fed.App'x 28, 29 (2d Cir. 2011); Scanio v. United States, 37 F.3d 858, 860 (2d Cir. 1994). In his motion, Lobacz asserts that he received ineffective assistance of counsel in that trial counsel (1) failed to move for a severance of counts and (2) failed to investigate and present witnesses and evidence.

         II. The Trial Testimony

         The following summarizes the testimony at trial.

         A. The Government's Case

         1. The Health Care Fraud Scheme

         During the relevant time frame, Lobacz was a licensed physician and owner of Frank M. Lobacz, M.D., P.C., a medical practice with offices in Bay Shore, Brentwood and Deer Park, New York. (GA 309.)[2]

         In 2000, Lobacz hired Dr. Young Ho Shin, a 70 year-old semi-retired medical practitioner to assist in his medical practice. Dr. Shin worked about three days per week and was paid a salary of $500.00. Dr. Shin did not recall treating Lobacz and claimed never to have treated Lobacz's wife or children, or his family friends, Sander and Elaine Shadoff. Moreover, Dr. Shin did not provide “trigger point injections” (anti-inflamatory injections) as part of his medical practice. However, beginning in 2000 and continuing until 2008, Lobacz submitted insurance claims (1) to Emblem Health-Group Health Inc. (“GHI”) for neurotransmitter electrodes, trigger point injections and inhalation treatments by Dr. Shin to Lobacz, his wife and his two minor children; and (2) to United Health Care Insurance Company of New York-the Empire Plan (“UHC”) for treatment of various ailments by Dr. Shin to the Shadoffs. (Tr. 50-58, 150, 156, 314-19.)

         GHI processed over 2, 400 claims from 2000 to 2008 and paid over $440, 000 to Lobacz for Dr. Shin's purported treatment of Lobacz and his family. These claims evidenced that Lobacz and his family were being treated upwards of four times a week for respiratory ailments. Despite the frequency of these purported treatments, GHI received no other claims for doctor visits - such as claims for asthma specialists, pulmonologists or emergency room treatment, - or for prescription drugs or home treatment equipment, such as nebulizers, typically associated with the treatment of asthma. Moreover, once GHI stopped paying claims submitted under Lobacz's member ID number in 2008, no additional claims for treatments for the Lobacz family were submitted to GHI. Finally, Elaine Shadoff testified that she never observed any of the Lobacz family members exhibiting respiratory difficulties although she spent numerous hours with them on multiple occasions. (Tr. 52-57, 62-63, 246-49.)

         Between 2000 and 2008, Lobacz also submitted claims for over 1, 200 days of treatment purportedly administered by Dr. Shin to the Shadoffs, resulting in UHC paying approximately $287, 000 directly the Shadoffs. They then provided the reimbursement checks to Lobacz or his medical staff, after which they would be endorsed by Lobacz and deposited into his bank accounts. The Shadoffs testified that the treatment claims submitted to UHC were fraudulent. They were never treated by Dr. Shin; they never received treatments on the weekends; they were out of town during days that they were purportedly by being treated by Dr. Shin; and they did not know what a triggerpoint injection was. (Tr. 144-56, 172-204, 236, 242, 1220-21.)

         2. The False IRS Form 550 Regarding Withdrawals from Pension Account

         In 1989, Lobacz's medical practice put into effect the Frank M. Lobacz, D.O. P.C. Pension Plan, an employee benefit plan. The plan was readopted in 1994 and 2002. The plan had three beneficiaries, including Lobacz. Lobacz was both the plan administrator and trustee of the plan. As such, he was responsible for assuring that the plan was properly maintained so as to be able to provide benefits to its participants, with his specific responsibilities being set forth in the Plan Document. Lobacz hired a third-party administrator, Schloss and Company, to assist in the operation of the Pension Plan. (GA 2-14; Tr. 1008.)

         The Plan Document specifically prohibited the mixing of pension funds and personal funds and prohibited a plan administrator/trustee from self-dealing in the assets of the plan. Under the Plan Document a participant was permitted to take a distribution from the Plan only if it was not a prohibited transaction; loans to beneficiaries who were not retired were prohibited with limited exceptions. One such exception was a loan to a beneficiary in an amount of half the beneficiary's interest or $50, 000 which ever was less. As trustee/plan administrator Lobacz was responsible for notifying the third party administrator of any such loan and to assist the third party administrator in creation of paperwork setting forth the terms of the loan. (GA 3-17, 110-116.)

         As plan administrator, Lobacz was required by the Internal Revenue Service to file a Form 550 with the Department of Labor each year. The Form 550 sets forth the assets and liabilities of the Plan and notifies the IRS of any nonexempt or “party-in-interest” transactions involving the plan. Schloss and Company would complete the Form 550 based on information provided by Lobacz. Lobacz, as plan administrator, would sign the form attesting under penalty of perjury that its contents was true, correct, and complete to the best of his knowledge and belief. (GA 13-16.)

         Beginning in 2000 and continuing into 2002, Lobacz took prohibited withdrawals from the pension plan in the form of wire transfers or checks. He withdrew a total of $381, 000 in 2000 and $645, 000 in 2002, using the monies to pay off mortgages on properties he owned, including two vacation homes, for credit card bills, and for his daughter's college tuition. Lobacz neither informed the third-party administrator of these withdrawals nor reported them on Form 550 as party-in-interest withdrawals. Specifically, the Form 550 filed for the year 2002 answered no to the question of whether the plan had engaged in any non-exempt transactions with any party in interest. (GA 16-20, 31-47; Tr. 626-60, 1288-98, 2317-18.)

         3. Tax Fraud

         Lobacz failed to report the nonexempt withdrawals from the Pension Plan on his tax returns. Lobacz's accountant and tax preparer, Adley Sampson (“Sampson”), testified he was unaware of any withdrawals from the Pension Plan by Lobacz in 2000 and 2001; he learned of the 2002 withdrawals as a result of events surrounding Lobacz's severe trading loss in August of 2002. After discussing with Lobacz the taxable nature of the 2002 withdrawals, he opined that if the money was returned in full by year's end, it might qualify as a loan but that such a position was a “weak” one. (Tr. 711, 789-97, 846-48, 963-70.)

         Lobacz also failed to report options income of $37, 529.54 and $985, 433 for the years 2000 and 2001 respectively, withholding information concerning this income from documents he provided to Sampson. Sampson testified that he only became aware of the 2001 options income while assisting Lobacz with matters related to his option trading losses in 2002; he then prepared an amended return for 2001 and advised Lobacz to file it. While Lobacz claimed that he was told that the options income was not taxable, that testimony was problematic in that he had previously reported a loss on options income on his 1997 federal return. The IRS agent who conducted an audit of Lobacz's income tax returns for 2000, 2001, and 2002 testified that he had outstanding tax liabilities of $1, 282, 746.25, $897, 951.40 and $705, 756.75, respectively for those years as a result of failing to report options income and the Pension Plan withdrawals. (Tr. 610-21, 760-70, 772-85, 797-99, 1163-82.) David Reiss, Lobacz's financial advisor at Prudential where he maintained both a personal account and an account for the pension plan during the relevant time period, testified that between 2000 and 2002 Lobacz would call fifteen to twenty times a day and described him as the most involved client he ever had in terms of Lobacz's sophistication and know-how. Reiss described how at market close Lobacz would write down “the price of his positions” and that night would calculate what his trading power for the next day was, a task Prudential used computers for, and that Lobacz's calculations were “uncannily very similar” to the computer's calculations. Reiss described discussions with Lobacz at the end of 2000 wherein Lobacz requested certain transactions so that some losses in his account could be used to offset profits made earlier in the year. Reiss also described various transfers from the pension account to Lobacz's personal account, as well as withdrawals from the pensions account in the form of checks payable to Lobacz, (Tr. 624-25, 630-660, 704.)

         B. The Defense Case

         Four witnesses were called by the defense: three of Lobacz's employees and his wife. In addition, ...


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