welcome to joe flat is joining us but telephone today from off jacksonville and will ask any questions he may have been participating the complicated decision this case and one nor were they within the jurisdiction of the united states was out there red flag argument with a red flag argument about they would have been a red flag your honor i believe it's a specious argument the c d c as with everyone else's in the contracting industry knows that drywall workers are subcontractors on this project there were some days four or five some days in eighty no person no company in the united states my belief certainly not within the sate of georgia has eighty employees on their staff and they wanted to have to have a fake payroll they wasn't a fake payroll actually or out of office what they call it that's what that's what they were called by the government there were two what happened just to explain the drywall workers who were known within the industry to be independent contractors because nobody employs eighty of them in a company were hired on the job some for five some and forty depending on the day or the wake and the i was was told by their contract and by their employer their employer i was had employer they were employed by and contracted with multi multi said to them you got to put your workers on this form because you have to be able to show that you have met the davis bacon act and you have met that in terms of you paid your employees a prevailing wage and you haven't taken out any deductions that are illegal they get in this form they go you need to fill this out and that's exactly what they did i dropped a footnote my brief your honor that it's arguable that these were even false statements this was a labor department form that's required to be filed in order to show davis bacon and then referred to them as fake unreal pardon they being the defendants never referred to them as fake and real they the defendants did not believe at the time they filled these out of his hard work it's a real simple question yeah is that i don't refer to them as real are as fake and during their testimony at trial i believe that the government asked them things about did you file these bank ones or did you know about these fake ones and they would either answer yes i'm sorry i thought i had classification system their letters debbie to dot real and b to f c h k yes and i'm trying to explain your honor why they had to do that when they were originally hired on the kind i don't want to know why i had to do that i want to know whether that stood for real and fake i believe your honor that real some kind of akron is a mob just don't understand what our stand far and i and health and so far i mean if i could explain there were two sets that were done by a man who was one of the book keepers what they were trying to show was this is what's well yes it is an question to me was whether the defendant testified that they were fake bugs none right i ask you whether they ever referred to categories classifications or employees as real and fake they might have your honor i would have to really look back what was real the there were books that were able to show that the independent contractors were paid the prevailing wage and bacon they were also at the same time treated as independent contractors because they work and they were paid their wages they were also given a separate check and the ones that wanted to have the separate checked put in to the that's what was i will proceed with the assumption that you can explain why i'm trying to explain what you can explain in a way i can understand ok i'm asking you why they had to have two class classifications one of which was d real the other of which wasn't but was marked with a letter that starts the word fake write their employee made up those books and i'm trying to explain to your honor why that had to happen and why  develop why don't you just tell me what it stands for i don't remember exactly real i think was what they were actually paid and i don't remember what f or whether my client really ever knew at that well i don't remember but that wasn't what they were actually but if they were both what they were actually page wouldn't have to well it was but they're actually paid if i could explain in the end history my client was a dry wall broker because no business has a dry wallers they go out and get what is essentially day laborers and they have them come to the job and they pay them either by the day or by the week everybody knows that back knows that he is a general contractor i'm assuming c d c knows that because they put together buildings all the time so when they go to go on a project when my client entered into the contract with malky mackay said ok i need to have a bunch of workers  ija to fill out davis bacon forms so my client said ok and my client submitted forms and the forms they submitted were the certified payrolls on the certified payrolls they accurately represented what the deductions would be they were only legal ones and what their salary was they were only legal ones how much hours they worked everything on there was actually accurate they had to provide those as part of their contract with mulkey which has nothing to do with the c d c they presented those forms because they were required to under their contract to show what the deductions were and they gave that to their client the client knew what the deduction was the problem in those cases the c d c and the government it was trying to after the fact put a round peg in a square hole because they were trying to say ok we want to building belt and we want to build and build it gotta have drywall workers so we need like eighty of them some day we need a contract that we're going to get this done mulkey enters into a private contract with my client and my client provides the workers which have to be independent contractors because there is no one on earth who has eighty employees everybody knows that they can't be employees they are not that's not a fake thing that's just life you can't get a building build if you're going to wait around to find a contractor has eighty employees so what they did was what they had to do they hired out day laborers to come do the work in this case they filled out the payrolls the perils were the false statements not any kind of bank records or any bookkeeping it was it was the payroll records those payroll records were labor department davis bacon records those were supposed to go to mulki they have nothing to do with the c d c the indictment charges that there were false statements made to the c d c then when we come up on appeal i guess realizing no there weren't false statements intended to be made to the c d c the government argues well these were possumus labor department record well which is what everybody knows i'm asking you since your own off record territory now did the city say project manager who testified at least implicitly to th manager who was in charge of the project testified that if those records had disclosed truthfully what was going on and that had been discovered they would have halted the project and labor to do an investigation did he not he did he absolutely did has a very good credit that testimony jury could credit that testimony if it credited that testimony it could find that those records were material because they feel if they did an investigation that would otherwise have been conducted your honor no because in this case these records when he testified that he would it would have set out red flags he was asked specifically well what would you have done at that point there was nothing that the c d c the c d c was not a party would have tipped off the department of labor prompting  is there was evidence at trial that a jury if it credited it which was it parag that it could have found in made it different the false statements but i'm telling you that based on the record which was there was a contract that was entered according to the project manager a halt to the project and deal investigation it would not have changed anything he might have thought i will stop this but we know that it was no i r s violation we know there was no labor department house now how do you investigation right he could say anything i would have that doesn't mean it wouldn't have stopped the project and prompted an investigation which would have been a change in what was occurring and matt testimony was also contradicted by the fact that they had received ken out to the jury right no yes no jury gets to decide if your honor is not convinced by the materiality argument let me move to the jurisdictional argument which is unassailable go to love the judge show plats opinion in love controls this case was relying on low a one thousand nine hundred and forty four decision which is controlling the load decision makes it very clear there you didn't even have the sub of a saab you had a situation where somebody was working on a government contract with the alabama dry dock and shipyard that government contract it was clear that the payrolls were being paid by the government directly directly and this court held that there was no jurisdiction in that case we're allying on that case the earlier precedent this court in blankenship held that low controls and that when you have a situation where there is a subcontract and there is no direct pervy with the government you do not have federal jurisdiction it's an expansion to do that beyond what one thousand and one dollars would allow one thousand and one dollars jurisdiction is is dictated by rogers which is a supreme court decision it covers all matters confined to the authority of the fed i've had a real agency a department or agency has jurisdiction in the sense it has power to exercise authority and i particular situation but why is that not the situation when just as judge carnes has gone through and talked about that if the c d c had known the truth they would have alerted the department of labor and the department of labor could have shut down the project during investigation why is that not authority to act on the defendant st of all department labor couldn't shut it down because there is no davis bacon violation and  and number two well there's evidence there was you did i mean you can't say don't worry about jurisdiction and don't worry about materiality because us are you another issue the fact that they would have stopped the project is enough to support an inference of materiality if that were the case then blankenship would have come out otherwise because the us department transportation had the materiality issue the testimony at trial was that two separate tables had to be created because the defendants had to fill out these certified payroll forms in other words knowing that they were going to have to list deductions they had to calculate and keep two sets of payroll so they could lie on the forms and put the deductions you know are there and i gather is they thought it was material that's correct you're on the  it would have been two sets of books that's correct your honor and they knew that that mattered to the department labor because if they didn't do that they would have acted ask questions and it would have prompted an audit or interviews and all of the things that the c d c and the department of labor were entitled to do both by the contract and also by the statutes and regulations here that empowered them and frankly directed the department of labor to come up with a regulatory scheme that required  of payrolls subject to and this is in the statute subject to one thousand and one dollars and defend in our bill as in particular both defendants testified in this case and testified when pressed he said no he did say contrary to all of the language on the forms themselves contrary to all the office workers testimony contrary to the bookkeeper who the defendants got to calculate these deductions they were not in fact the holding from their workers wages defendant arbel as testified and when pressed he initially said yeah we just gave those forms to mulki we didn't know where they were going and when asked who told you to put tax adoptions on the form he said the customers he was asked who told you which customer then told you to lie on those forms well no one told us to lie on the forms which customer told you to put inaccurate information on that form and he conceded no one he conceded we chose to put that information on the form welkom because they knew that if they told time when to testify because he said there was no reason he could not give a reason other than that malky required the forms but he could not give a reason for why they did not actually truthfully fill it out had they truthfully filled it out you would have had a line of workers and there would have been a few of them where it would have shown deductions being withheld from their wages and then there would have been the vast majority where doctors were not being held that's what was happening and that's what the c d c project manager and the department of labor expert witness who testified said that would have raised a red flag that would have prompted an the testimony from the department of labor expert was that the departed labor would had a duty not just that they would have they would have had a duty to go to term and why that was happening why workers who were doing the exact same job were being treated brief and perhaps your argument as well today to be that materiality manged there would have been an investigation and it would have been halted pending an investigation now what's the law on that  why should the fact that there would have been an investigation be enough for your side without delving into what the result of an investigation would be which i don't know how you can that's correct and that is our position and it's because for materiality a statement is not required to in fact influence other words you courts of every head into the materiality crowd of one thousand and one not a requirement that the agency actually relies on a statement doesn't even require the agency seize a statement the point is it capable of influencing those agencies in cases of help that one way it can influence an agency is by concealing the truth and lowering it into an action so the action that both agencies would have taken here had they known the truth they couldn't do that and frankly without an investigation we can't get to the bottom of whether there was in fact a violation we don't know if the law was broken in any number of different ways separate from one thousand and one based on what they were fact doing because the department of labor in the c d c were not allowed to go in and review the payroll records to interview the employees to see what it was they were actually doing they were prevented from doing that by the false statements themselves so t could have shut down the project if we accept your argument here how have we not now said well in fact jurisdiction does follow federal money that any time there's a federal contract two responses to that question then i want to dress st just the factual differences between the record in the evidence that was before the court and blankenship and what was presented at trial in this case and separately i don't read blankenship and low and the other case of the  circuit as inconsistent with each other like the defendants do but st i think just at a high level there are some key differences between just the projects at issue and blankenship in this case in blankenship you had a state project transportation did receive funds in blankenship but that was a state florida project run by the florida department of transportation in that case the florida department of transportation contracted with and oversaw the general contractor here the c d c the federal agency contracted with an oversaw the project in that case there was no indication that there were a couple different types of false statements in blankenship one of which is that the opinion indicated were payroll similar to the wage and hour statement in this case but there was no indication that those payrolls were ever intended to or in fact were sent to the u s department transportation in this case they were required by cent to and reviewed by the c d c and i think your honor is is keen on important point blankenship that that case was really a funding case that there was a grant to the florida department of transportation that granted not necessarily relate to the specific project issue in this case the c d c was overseeing this federal project where the workers were going every day for more than a year and given those distinctions i think it's not that surprising that and i'll quote the court's language here because i think it is unique in the law that lack of evidence regarding the u s department of transportation's power and authority to act in a case that was really truly before the court the court said that the un contradicted testimony in that case was that the u s department of transportation dealt exclusively with the flor department transportation and looks soley to the florida department of transportation and that what was what the court called a unique and indirect lack of authority by the u s department transportation in that case and the court was relying on rogers which says we're not going to construe one thousand and one narrowly it should be construed broadly and when we construe broadly we look to whether the agency has the ability and the authority to act in a given situation and the stark contrast between the lack of evidence there and here the contract itself said and this is government's exhibit seventy on page thirty seven that the contractor had to keep all of these certified payrolls that the c d c was receiving for three years scuse me back was receiving for three years the c d c or the department labor could interview employees this is also page thirty seven dollars the failures of mit records would be grounds for department from both this project and any other federal project in the future and defense by their own testimony in this case said that they worked on many many many different federal projects and it's not just the contract the contract said all of that but there are also statutes and regulations that require those provisions to be in the contract and separately if there was not a contract certified payrolls are still required by statute and regulations on federal government contracts forty us c three thousand one hundred and forty five dollars prescribed at the secretary of labor shell prescribe regulations that require statements regarding wages paid and it specifically says that those statements regarding wages paid on federal government contracts should be subject to one thousand and one dollars and we've cited these provisions in our brief so i won't i will go through each of the department of fardy a corporation under a statute arguably part of the federal government sometimes it seems like it sometimes doesn't but there's something about the c d c s existence that sets it apart from say and other federal contracting agencies were required to collect these certified payroll so these are by perils are required on any federal government contract in this case the c d c was the federal contracting agency because it was a project   that the majority relied on in blankenship that was before the court not on sufficiency of the evidence after trial but that that the indictment had not adequately pled the element of jurisdiction and what the court said was that in that case you had a employee who just told his or her employer that they worked on a tuesday when they didn't know if that's the exact facts but that they work some period time when they didn't and what the court said was just because that company who that employee lied to happened to receive federal funds we have no indication that the federal agency had any authority to act it was just as your honor put it it was following the funds with nothing else and what the court said was alleging that alone was not sufficient and there was a concurring opinion in that case that noted that had the indictment alleged that that agency had the power to come in and do something that would have been sufficient that would  have that would have satisfied the element of jurisdiction in that case the lot of hard core language on thong was on the defendant's employment was drawn from his private contract with a private corporation of course all manner of one thousand and one dollars cases that don't involve funding if you lie to a federal agent that's a violation of one thousand and one but you're correct that argument is that this is a far far different situation than lo and blankenship in this case the false statements would not have even been required there would have been there would be no certified perils were it not a federal government contract with any testimony trial about what the f stood far and then other just yes your honor there were three office workers who worked in the defendant's office who testified at trial and there were pay rolls so you had a list of payrolls and you had one list and this stack was about this high that was what the defendants called c d c f k and you had another pile that was much smaller that was c c r l and that workers were at least one worker i can't recall specifically which one but one worker testified that f k stood for fake certainly the jury was entitled to infer that it stood for fake when it was as compared to w two it wasn't just r l w two at the top of the spreadsheet that list these employees said r e a l and the definitive book keeper was instructed to create these payroll separately and the payrolls that he created were f k and real referring f k to the employees who they were not reporting to the i r s and who were not in fact having taxes withheld from their wages five million dollars that was paid out across thirty four dollars different federal contracts where the defendants lied like they did to the c d c and that's the starting point the loss is the five million dollars now the defendants objected to that p s r and  claim that they should get a credit for a loss the government didn't dispute that the government didn't dispute or argue that that they shouldn't get some level of credit for that loss in other words if they did provide work on these different projects the point is that that  that loss is not necessarily zero just because they provided the work across these contracts and the c d c manager pointed out that the they would not this money would have been paid out but for the defendant's lies but for those lies they would have stopped payment they would have done an investigation and nobody would have been paid and so we agree that the net loss after giving the defendant some level of credit for loss is is is not five dollars but it's not zero and that it's difficult to put a number on that it's difficult to come up with upright precise amount for what the delta is there and the court recognized this in  going to the gain when it was not able to come up with represents germany's loss given the evidence that was available to it and you know there was no evidence before the court about the manner in which they got these other contracts the government actually put on a witness and it really a nerd to the defense benefit because the government put on a witness that testified about the the amounts that definit had invoiced on these different projects and the amount of profit that they got on each of those projects and so it was the government's witness who actually proved up the credit against loss and that a nerd to that and it's been a bit in this case and what the court then did was took a conservative and reasonable estimate of the game he cut that in half to account for overhead or anything else and and that is what the guidelines require they require a court to make a reasonable determination based on the information available to it  it so based on the defendant's internal documents they had these projects that indicated what they had billed and then they identified their profit margin and the defendants had argued they put on one witness whose only testimony was premised on false tax returns and he admitted that that was the only evidence the defendants put on and they so you had a profit margin of say twenty three percent across the different projects and the court said i hear you defense you're arguing that some of that might be overhead you might do different things that's not truly your profit and the court said even if i cut that in half you're still going to be within the same guidelines and handsome and range profit yes your honor so we took it from twenty so you take the five million dollars instead of taking twenty three percent to reflect their gain the court only took eleven and a half percent and that still put them in the same range in other words they did they did not receive a greater they would not have received a greater punishment even if the court went anywhere in that range from tween an eleven and a half and twenty three percent and i see my my time is running down we would just ask that the co make clear to the court that i know that the c d c witness testified that he would halt the project he also testified that he had received a stack i think it was fifty to certify payrolls that showed to ninety nine  fixed sixty five billion dollars contract with a fixed amount it was going to pay for drywall workers and that was it it did not go back and look and see anything else about what was going on it said back and have at it you deal with that it did not have anything to do with any of the workings of what was going on so that wasn't there was no harm it wouldn't government's theory i saw it somewhere when the break it was in the district court was that a real harm here is to the bidding process on the theory that they were able to underbid the competitors and that's which would have meant it cost the c d c less than it would have had they not engaged in this quote fraudulent and of quote activity any time you underbid the cost to the bet awards or is less than if you didn't under big there was wrong about that was the theory somewhere along the way yes your honor and what i was trying to explain earlier also there was no fraud in the bidding process because every single drywall worker who works on these projects and i would challenge the government to go look at every single government contract going and they are independent contractors there is no drywall and that was what it drove wanted to verify that statement you made in the record where would we go  road drove testified that's how it works he said that generally with respect to all the workers who work on these government projects because what happened in this case yuri could have credited are not credited  correct that is an act you know the wanna cases it's a strong line they could find the opposite of what he testified to after observing his demeanor and you're asking me now about sentencing and it was presented at sentencing and it is i fact a fact that the drywall contractors are in debate we can't ignore boudreau or the reality of the situation is that it wasn't going to change they are going to enter into and they a private contract and pursuant to the terms of the private contract they had to comply with davis bacon which which is what these forms were they were accurate under davis bacon when the government keeps talking about they would have called the labor department there is evidence in the record the only evidence was there was no davis back everybody agreed davis bacon was not violated it was it wasn't even charged because it wasn't violated labor department went into council we think your argument will take up