## Facts

- Jack and Margie Mills operated home health-care agencies involved in Medicare reimbursement billing.
- The government charged the Millses in federal court with multiple offenses arising from an alleged Medicare home-health billing fraud scheme, including mail fraud and false statements.
- Margie Mills was convicted on two counts of making false statements under 18 U.S.C. § 1001 based on passenger-manifest forms required by Medicare’s carrier (Aetna) for Medicare-reimbursed charter air travel.
- Margie signed two passenger manifests stating she flew from St. Simons Island, Georgia, to San Antonio, Texas, and returned in August 1992 for corporate business.
- Evidence showed Margie actually traveled only to Mobile, Alabama (where the aircraft stopped), attended a high-school reunion, and did not return on the charter flight from San Antonio.
- Over Margie’s objection, the district court admitted evidence that in 1993 she concealed a jewelry purchase from customs officials when returning from Europe to evade import duties.
- The government argued the customs incident showed Margie’s intent and willingness to deceive government agents for financial gain; the district court admitted it as Rule 404(b) evidence of intent.
- The Millses appealed their convictions and sentences.

## Issues

1. Whether the district court abused its discretion under Federal Rule of Evidence 404(b) by admitting Margie Mills’s customs-evasion incident to prove intent for her § 1001 passenger-manifest falsification counts.
2. How the “victim” of a Medicare-fraud scheme is identified for certain Sentencing Guidelines purposes.
3. Whether the evidence and sentencing rulings supporting the broader Medicare-fraud convictions and enhancements were sufficient and legally proper.

## Decision

- The Eleventh Circuit held the district court abused its discretion by admitting the customs-evasion incident as Rule 404(b) evidence because it functioned primarily as impermissible propensity proof and carried substantial unfair-prejudice risk.
- The court nevertheless found the Rule 404(b) error harmless in light of strong independent evidence that Margie knowingly submitted false passenger manifests.
- The court largely affirmed the Millses’ convictions and sentences, with later modification on rehearing as to part of the sentencing analysis.

## Legal Principles

- Rule 404(b) bars other-acts evidence offered to prove a person’s character in order to show action in conformity with that character; “intent” cannot be used as a label for propensity reasoning.
- Other-acts evidence offered to show intent must have a meaningful, case-specific connection to the charged conduct; weak similarity increases the risk the jury will misuse the evidence as proof of general dishonesty.
- Even if offered for a permitted purpose, other-acts evidence must be excluded when its probative value is substantially outweighed by the danger of unfair prejudice under Rule 403.
- Erroneous admission of other-acts evidence does not require reversal if the appellate court concludes the error did not substantially influence the verdict given the strength of the remaining proof.
- In Medicare-fraud sentencing analysis, the United States (through the Medicare program) is treated as the victim for certain Guidelines determinations, affecting victim-related enhancements in that context.

## Conclusion

The Eleventh Circuit ruled that admitting Margie Mills’s customs-evasion conduct as Rule 404(b) evidence improperly invited a propensity inference, but it affirmed because the mistake was harmless given the independent evidence of knowing falsification of Medicare-related passenger manifests, while otherwise upholding the principal convictions and sentencing determinations (subject to later limited modification on rehearing).


United States v. Mills, 138 F.3d 928 (11th Cir. 1998)