Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-04106/USCOURTS-ca4-07-04106-0/pdf.json

Parties Involved:
Robert E. Graham
Appellant
State of West Virginia

United States of America
Appellee

Document Text:

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 07-4106

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

ROBERT E. GRAHAM,

Defendant - Appellant,

and

STATE OF WEST VIRGINIA,

Party-in-Interest.

No. 07-4332

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

ROBERT E. GRAHAM,

Defendant - Appellant,

and

STATE OF WEST VIRGINIA,

Party-in-Interest.

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2

Appeals from the United States District Court for the Southern

District of West Virginia, at Beckley. David A. Faber, Chief

District Judge. (5:06-cr-00025)

Argued: December 5, 2007 Decided: March 13, 2008

Before MICHAEL and GREGORY, Circuit Judges, and John Preston

BAILEY, United States District Judge for the Northern District of

West Virginia, sitting by designation.

Reversed by unpublished per curiam opinion.

ARGUED: Michael Warren Carey, CAREY, SCOTT & DOUGLAS, P.L.L.C.,

Charleston, West Virginia, for Appellant. Hunter P. Smith, Jr.,

Assistant United States Attorney, OFFICE OF THE UNITED STATES

ATTORNEY, Charleston, West Virginia, for Appellee. ON BRIEF: John

A. Kessler, CAREY, SCOTT & DOUGLAS, P.L.L.C., Charleston, West

Virginia, for Appellant. Charles T. Miller, United States

Attorney, Charleston, West Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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1(a) Whoever, if the circumstance described in subsection (b)

of this section exists--

(1) being an agent of an organization, or of a State, local, or

Indian tribal government, or any agency thereof--

(A) embezzles, steals, obtains by fraud, or otherwise without

authority knowingly converts to the use of any person other than

the rightful owner or intentionally misapplies, property that--

(I) is valued at $5,000 or more, and

(ii) is owned by, or is under the care, custody, or control of such

organization, government, or agency...

shall be fined under this title, imprisoned not more than 10 years,

or both.

 (b) The circumstance referred to in subsection (a) of this

section is that the organization, government, or agency receives in

any one year period, benefits in excess in $10,000 under a Federal

program involving a grant, contract, subsidy, loan, guarantee,

insurance, or other form of Federal assistance.

3

PER CURIAM:

After a bench trial, the appellant, Robert E. Graham

(“Graham”) was convicted of stealing $31,129 from his employer, the

Council on Aging, Inc. (“COA”), an agency receiving federal funds,

in violation of 18 U.S.C. § 666(a)(1)(A).1 Graham appeals the

district court’s judgment, contending that (1) there is not

substantial evidence to support his conviction, (2) the district

court clearly erred in considering conduct for which Graham was

acquitted as “relevant conduct” for sentencing purposes, and (3)

the district court improperly ordered forfeiture. After a thorough

review of the evidence, we reverse Graham’s conviction.

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2

Occasionally, there was another person at the meeting who

would take minutes as well.

4

I.

The facts underlying this dispute are undisputed. For over

two decades, Graham was the Executive Director of two nonprofit

organizations, COA and All Care Home and Community Services, Inc.,

(“All Care”). The organizations worked together to identify and

provide services reimbursed by state and federal programs,

including Medicaid, to qualified recipients. Both COA and All Care

shared the same Board of Directors (“the Board”). Prior to the

Board’s quarterly meetings, Graham would send each board member a

packet of documents that included an agenda for the meeting, the

minutes from the previous board meeting, check registers, program

reports and “Director’s Notes.” Graham wrote the “Director’s

Notes” and the minutes from each meeting.2

Until 2001, Graham did not have a written contract with either

COA or All Care. This changed in December 2001, when Graham

provided the Board with two essentially identical employment

contracts for himself, one for each agency (“twin contracts”). The

Board president signed both contracts. For purposes of this case,

the relevant provision in each of the twin contracts concerned

Graham’s sick leave:

SICK LEAVE/PERSONAL BUSINESS: From the date of

employment sometime around May 1975 till the termination

of employment, Employee shall be entitled to one day per

month of accumulating Sick Leave, beginning on the first

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date of Employee’s employment. Sick leave may be

accumulated and carried over from year to year. Sick

leave benefits may be converted into cash compensation if

used for illnesses or upon the termination of this

contract.

(J.A. 955, 961.) In March 2002, Graham prepared an amended

contract between himself and COA that consolidated the twin

contracts into one. The Board president signed the consolidated

contract. In essence, the terms of the consolidated contract

provided Graham with the same cumulative benefits he received under

the twin contract framework. For example, the consolidated

contract combined Graham’s salaries and sick leave from the twin

contracts. The sick leave provision in the consolidated contract,

like the previous twin contracts, only allowed Graham to cash out

his sick leave under two circumstances: illness or termination.

(J.A. 977.)

In preparation for the January 27, 2003, Board meeting, Graham

sent out “Director’s Notes” in which he wrote, in part:

I am requesting to buy out some of my sick leave. It

shows in the books as an accrual. I can already but

[sic] out my vacation.

(J.A. 1001.) The minutes from that Board meeting stated that the

Board unanimously approved Graham’s request to “buy accrued leave.”

(J.A. 1003.) On the same day, Graham cashed out 1200 hours of

accrued sick leave which totaled $106,728 (gross) and $56,953.16

(net). (J.A. 1005-1110.)

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Subsequently, Graham’s Director’s Notes for the next two board

meetings on March 27, 2003, and May 14, 2003, included the

following identical request to continue buying out his accrued

leave:

I am requesting permission to continuing [sic] buying out

my vacation/annual and sick leave. It shows in the books

as an accrual. I can already but [sic] out my vacation.

(J.A. 1012; 1019.) In the Director’s Notes for the May 14, 2003,

meeting, Graham also added the following line to his request:

“This is the same as the notice from the last Board meeting.”

(J.A. 1019.) The Board approved both requests. Unlike his

previous cash outs in January, Graham did not cash out accrued sick

leave immediately after either of these Board meetings. However,

on June 18, 2003, Graham filed two written requests to cash out a

total of 250 hours of accrued sick leave. (J.A. 1308.) Both

requests were approved by the Treasurer of the Board, Hazel Lusk

(Lusk). Subsequently, Lusk approved three more requests for Graham

to cash out additional accrued sick leave on the following dates:

July 29, 2003 (350 hours), January 14, 2004 (250 hours), February

10, 2004 (100 hours). (J.A. 1308.) The total amount of accrued

sick leave Graham cashed out in 2003 and 2004 was $191,221.81

(gross) and $107,788.56 (net). (J.A. 1308.)

Beginning in January 2003, federal authorities launched an

investigation into COA’s business operations. By March 2003, West

Virginia authorities commenced their own investigation into COA.

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It is worth noting that Count 13 mirrored Count 14, except

that it concerned Graham’s allegedly improper cash outs of accrued

sick leave in 2003. However, because the district court found that

Graham had only violated the consolidated contract by cashing out

his leave in June and July 2003, but not in January 2003, the

7

On March 10, 2004, while West Virginia authorities were in COA’s

office reviewing records, the Board called an emergency meeting

during which Graham’s consolidated contract was revoked although

the Board offered Graham continuing employment under revised terms.

During the meeting, the Board also ordered Graham to repay all the

sick leave he cashed out in 2003. The Board did not demand that

Graham pay back the sick leave Graham cashed out in 2004. On March

11, 2004, Graham repaid COA the net proceeds of the sick leave he

cashed out in 2003 and on March 26, 2004, he repaid COA the net

proceeds of the sick leave he cashed out in 2004.

On July 18, 2006, a federal grand jury returned a second

superceding 39 count indictment against Graham. After pleading not

guilty to all of the charges and waiving his right to a jury trial,

Graham’s bench trial commenced on July 24, 2006. On August 30,

2006, the district court found Graham guilty of Count 14 of the

Second Superceding Indictment, which charged Graham with stealing

$31,129 from COA in 2004 by cashing out his sick leave in violation

of his employment contract and 18 U.S.C. § 666. In addition, the

district court ordered Graham to forfeit $31,129 as proceeds

traceable to the 18 U.S.C. § 666 violation. The district court

acquitted Graham on the remaining 38 counts.3

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district court found him not guilty as to that count.

4

Despite Graham’s objection to the application of a two point

enhancement for abuse of trust, the district court found that

because of the Board’s vulnerability and the fact that Graham

effectively controlled the Board, the two point adjustment was

proper. In addition, Graham objected to the loss calculation in

the PSR because it included payments in 2003 for which he was

acquitted. The district court denied Graham’s objection, finding

that since the payments Graham received in June and July 2003 were

obtained without Board approval, those incidents were properly

included as relevant conduct for purposes of sentencing.

8

The Pre-Sentencing Report (PSR) concluded that Graham’s

offense level was 16. Included in that calculation was a +2

adjustment because Graham abused a position of trust that

“facilitated the commission or concealment” of his crime.4

U.S.S.G. § 3B1.3. The PSR stated that this provision was

applicable because the Board “rubber stamped” all of Graham’s

decisions (J.A. 1312) and Graham took advantage of the Board’s

trust in order to facilitate his criminal conduct. Since Graham

had no criminal history points, he was placed in Criminal History

Category I. Based on a total adjusted offense level of 16 and a

Criminal History Category of I, the advisory guideline sentence for

Graham equaled 21-27 months.

The district court adopted the PSR’s finding and sentenced

Graham to 24 months imprisonment, a three year term of supervised

release, and fined him $10,000. In addition, the district court

ordered Graham to forfeit $31,129. Graham timely appealed the

district court’s judgment.

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II.

In determining whether sufficient evidence exists to support

a conviction, the appropriate inquiry is whether, taking the

evidence in the light most favorable to the Government, any

reasonable trier of fact could have found the defendant guilty

beyond a reasonable doubt. See e.g., U.S. v. Newsome, 322 F.3d

328, 333 (4th Cir. 2003) (“The standard governing our review is

whether there is substantial evidence, taking the view most

favorable to the Government, to support [the jury verdict] and we

have defined substantial evidence, in the context of a criminal

action, as that evidence which a reasonable finder of fact could

accept as adequate and sufficient to support a conclusion of a

defendant’s guilt beyond a reasonable doubt.” (internal citations

and quotation marks omitted.)) We now apply this standard to the

facts in this case.

In its memorandum order, the district court found Graham

guilty of Count 14 because:

. . . the conclusion is inescapable that Graham cashed in

the sick leave without the approval of his board, knowing

he needed board approval, thereby effectively stealing

the money or converting it to his own use. From the

evidence taken at trial it is clear that defendant, an

employee, took this money from COA without having any

board approval whatsoever. These transactions each

constituted major changes of the sort that required board

approval. The fact that Graham sought board approval for

the earlier cash outs of sick leave is compelling

evidence that he knew such approval was required. Graham

cavalierly disregarded the board and treated large

amounts of COA’s money as if it were his own, diverting

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In support of its argument, the Government also cites to

evidence that the district court did not rely on, including the

fact that Graham used some of the sick leave cash out money to buy

things for his girlfriend. In addition, the Government contends

that cashing out accrued sick leave was inconsistent with the

written policy of COA and that Graham only reimbursed COA after the

media began publishing stories about Graham’s contract with COA.

While these facts may demonstrate that Graham is not eligible for

the priesthood, they are irrelevant so far as the district court’s

determination of guilt is concerned. As the district court

concluded:

The events leading to this indictment are improper and

outrageous and cannot be condoned by the court. Graham

10

it to his personal use and to the detriment of those whom

COA and All-Care were created and funded to serve.

(J.A. 156.) The district court’s holding was motivated by the fact

that on three prior occasions Graham sought the Board’s approval to

cash out accrued sick leave. As a result, the district court

reasoned that Graham knew that he needed board approval for each

instance he cashed out accrued sick leave since the cash outs were

impermissible under the terms of the consolidated contract.

The Government argues that there is substantial evidence to

support the district court’s decision. The Government contends

that the evidence at trial demonstrates that Graham took advantage

of a Board that was comprised of elderly, disabled, and uneducated

men and women who rubber stamped all of his decisions. The

Government argues that Graham should have explicitly informed the

Board about how much sick leave he was actually going to cash out

and made certain that the Board understood that his request was

inconsistent with the terms of his contract.5

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failed miserably to fulfill his duties as a public

servant, engaging in conduct that squandered public

resources and adopting a life-style that reflected

discredit upon COA and All-Care, their directors and

employees. Bad conduct in and of itself, however, does

not equal criminal conduct. To convict a defendant of a

crime, the Government must establish beyond a reasonable

doubt by competent evidence each and every element of

each and every crime charged.

(J.A. 912.)

11

In order to convict Graham under 18 U.S.C. § 666, the district

court had to find, beyond a reasonable doubt, that Graham knowingly

stole funds from COA. On this critical matter, we believe both the

district court and the Government reached the wrong conclusion.

Quite simply, Graham’s cash outs in June and July of 2003 and

January and February of 2004 were not contrary to the authority

given to him by the Board. The Board repeatedly authorized Graham

to buy out his accrued sick leave and did not place any

restrictions on the amount of accrued sick leave he could cash out

or the timing of these cash outs. As such, the timing and amount

of the accrued leave cash outs are clearly insufficient for

purposes of establishing Graham’s intent to steal funds from COA.

In addition, the Board’s actions during the March 2004

emergency meeting provide strong circumstantial evidence that it

did not believe Graham violated any Board directives or that he

attempted to bamboozle the Board in order to bilk COA out of

hundreds of thousands of dollars. While the Board did reduce

Graham’s salary and benefits, it did not ask for Graham’s

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resignation. In fact, Graham’s salary and benefits were not

reduced as a punitive measure, but rather at the behest of Graham

in order to quell the media maelstrom that had overwhelmed the

organization. (J.A. 1044.) As the Board stated in its summary of

the emergency meeting:

“[t]he Directors of the [COA] are very proud of the

success and growth of the [COA] and believe that Robert

E. Graham has worked diligently and on behalf of the

[COA] for over 25 years and has brought success to the

[COA] and regrets that the press has not emphasized such

accomplishments.”

(J.A. 1044.)

III.

In summary, the salient facts in the instant case, taken in

the light most favorable to the Government are as follows: Graham

received the Board’s permission to cash out an indeterminate amount

of his accrued sick leave. There was nothing in any of the Board’s

decisions that placed any limitations on when and how much accrued

sick leave Graham could cash out. According to COA’s independent

audit, the gross value of Graham’s accrued sick leave as of

September 30, 2002, was $241,167. (J.A. 1087.) The total gross

amount of sick leave Graham cashed out in 2003 and 2004 was

$191,221.81, an amount that he conceivably could have cashed out in

January 2003 without violating any of the Board’s decisions.

Based on these facts, a reasonable trier of fact could not

find, beyond a reasonable doubt, that Graham knowingly stole any

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6In fact, at one point, COA’s Fiscal Officer questioned

Graham’s cash outs, and Graham accurately told her that the Board

had approved the cash outs.

13

money from COA. Graham’s consolidated contract with COA entitled

him to cash out his accrued sick leave upon his termination or due

to illness; however, the Board’s decisions in January, March, and

May of 2003 resulted in a de facto amendment that overrode these

restrictions. In essence, the Board gave Graham the ability to

cash out his accrued sick leave early without any limitation as to

the amount of accrued sick leave he could cash out or a specific

time period when such cash outs had to occur.

In addition, the evidence in the record clearly rebuts any

accusation that Graham was trying to hide his cash outs in

June/July 2003 and January/February 2004 - Graham filled out the

proper leave forms to cash out his accrued sick leave on each

occasion and the Board’s treasurer approved the forms and signed

the checks. The record is replete with minutes, notes, checks, and

records of Graham’s transactions, all of which were open to review

by COA’s independent auditors and COA’s Fiscal Officer.6 Indeed,

the fact that Graham continued to cash out accrued sick leave after

January 2003, the point at which the federal investigation into COA

commenced, provides striking evidence that Graham did not knowingly

steal any money from COA.

While we recognize that the amount of money cashed out by

Graham is substantial, that issue is ultimately irrelevant because

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7

Because we are reversing Graham’s conviction, it is

unnecessary to address Graham’s remaining contentions.

14

Graham had properly accrued all of that sick leave money during his

tenure at COA and All Care. The pertinent question is whether the

Board authorized him to cash out his sick leave in June/July 2003

and January/February 2004. We answer this question in the

affirmative because on this record it is undisputed that the Board

repeatedly authorized Graham to cash out his accrued sick leave

without any limitations.

IV.

Based on the reasoning above, we reverse Graham’s conviction

and sentence and remand to the district court to enter a judgment

of not guilty as to Count 14 of the Second Superceding Indictment.7

REVERSED

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