Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-04094/USCOURTS-ca4-07-04094-0/pdf.json

Parties Involved:
Larry Andrew Carey
Appellant
United States of America
Appellee

Document Text:

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA, 

Plaintiff-Appellee,

v.  No. 07-4103

JOHN ALVIS JACKSON, JR.,

Defendant-Appellant. 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee,

v.  No. 07-4094

LARRY ANDREW CAREY,

Defendant-Appellant. 

Appeals from the United States District Court

for the Western District of Virginia, at Lynchburg.

Norman K. Moon, District Judge.

(6:04-cr-70118)

Argued: January 31, 2008

Decided: May 1, 2008

Before WILLIAMS, Chief Judge, and MOTZ and

KING, Circuit Judges.

Affirmed by published opinion. Judge King wrote the opinion, in

which Chief Judge Williams and Judge Motz joined. 

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COUNSEL

ARGUED: Melissa Windham Friedman, ANDERSON & FRIEDMAN, Roanoke, Virginia; Joseph Abraham Sanzone, SANZONE &

BAKER, P.C., Lynchburg, Virginia, for Appellants. Thomas Ernest

Booth, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Anthony F. Anderson, ANDERSON & FRIEDMAN, Roanoke, Virginia, for Appellant John Alvis

Jackson. John L. Brownlee, United States Attorney, Jennie M. Waering, Assistant United States Attorney, OFFICE OF THE UNITED

STATES ATTORNEY, Roanoke, Virginia; Amanda L. Riedel,

UNITED STATES DEPARTMENT OF JUSTICE, Washington,

D.C., for Appellee.

OPINION

KING, Circuit Judge:

John Alvis Jackson, Jr. and Larry Andrew Carey (together, the

"Defendants"), were prosecuted in the Western District of Virginia on

multiple fraud and theft offenses involving a loss of more than $15

million. The Defendants were each convicted by a jury in early 2006

of the following offenses: 

• two counts of bank fraud, in contravention of 18 U.S.C.

§ 1344 (the "bank fraud offenses"); 

• five counts of wire fraud, in violation of 18 U.S.C.

§ 1343 (the "wire fraud offenses"); 

• a single count of making false statements in documents

required by the Employee Retirement Income Security

Act of 1974 ("ERISA"), in contravention of 18 U.S.C.

§ 1027 (the "ERISA false statement offense"); 

• two counts of theft from an ERISA-covered pension

plan, in violation of 18 U.S.C. § 664 (the "ERISA theft

offenses"); and, 

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• a single count of theft from a health care benefit program, in contravention of 18 U.S.C. § 669 (the "health

care program theft offense"). 

Jackson was also convicted of conspiracy to commit various federal

offenses, in violation of 18 U.S.C. § 371 (the "conspiracy offense").

In late 2006, Jackson was sentenced to 108 months in prison and

Carey was sentenced to 87 months. These consolidated appeals

ensued. 

On appeal, the Defendants present multiple contentions of error.

First, they challenge their convictions on the ERISA theft offenses,

raising the primary issue in this appeal: whether, pursuant to § 664 of

Title 18, unpaid employer ERISA pension plan contributions constitute "assets" of the plan. Second, the Defendants contest the sufficiency of the evidence supporting certain of their convictions. Finally,

they challenge their sentences on several grounds. As explained

below, we reject their contentions and affirm. 

I.

A.

On September 15, 2005, a grand jury in the Western District of

Virginia returned an indictment against the Defendants, charging

them with, inter alia, the bank fraud offenses (Counts One and Two),

the wire fraud offenses (Counts Three through Seven), the ERISA

false statement offense (Count Ten), the ERISA theft offenses

(Counts Eleven and Twelve), the health care program theft offense

(Count Thirteen), and the conspiracy offense (Count Fourteen).1 The

1The indictment alleged two other offenses — bank fraud, in violation

of 18 U.S.C. § 1344 (Count Eight), and money laundering, in violation

of 18 U.S.C. § 1956(a)(1)(B)(i) (Count Nine) — and made a forfeiture

allegation pursuant to 18 U.S.C. §§ 981(a)(1)(C), 982(a)(2) and (7)

(Count Fifteen). Jackson and a third defendant, his daughter, were

charged in Counts Eight and Nine. Jackson’s daughter was never tried

and the charges against her were dismissed. The prosecution dismissed

Counts Eight and Nine against Jackson. Count Fifteen, the forfeiture allegation, was also dismissed. 

UNITED STATES v. JACKSON 3

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Defendants pleaded not guilty and were tried before a jury over an

eleven-day period in February and March 2006. 

The prosecution’s trial evidence consisted primarily of extensive

business records and the testimony of several fact and expert witnesses. Jackson testified on his own behalf, denied involvement in

any criminal activity, and presented six witnesses in support of his

defense. Carey presented expert testimony in his defense, but did not

testify. The trial evidence is summarized below.2

1.

The Burruss Company, a wood products business involved in the

manufacturing of flooring for tractor-trailers and residential homes,

was headquartered in Galax, Virginia, with offices in Lynchburg, Virginia, and manufacturing plants in Virginia, Tennessee, and Kentucky. Jackson served as President and Chief Executive Officer of

Burruss from 1989 until October 2000. Carey began working for Burruss in 1976 and eventually became its Chief Financial Officer, a

position he held until October 2000. 

In 1991, investor Grant Minor Wilson and two others purchased

Burruss. Wilson served as one of Burruss’s directors from 1991

through 1994. In 1995, Wilson created Burruss Holding Company

and exchanged his Burruss stock for the ownership of Burruss Holding (the "1995 refinance"). Burruss and Burruss Holding then retired

the balance of Burruss’s stock for approximately $14 million procured by loan from Fleet Capital, and issued a promissory note for

$10 million to buy out the other Burruss shareholders. Burruss, as a

result, became a wholly owned subsidiary of Burruss Holding. Wilson, by controlling Burruss Holding, became its primary representative and dealt directly with Jackson, Burruss’s President and CEO,

and Carey, its CFO.3

2The facts spelled out herein are drawn from the trial record. We recite

the evidence in the light most favorable to the prosecution, as the prevailing party at trial. See United States v. Bursey, 416 F.3d 301, 304 n.1 (4th

Cir. 2005). 

3Burruss Holding sold part of its shares to other investors, reducing

Wilson’s direct ownership to about 45%. The shares of the other Burruss

Holding investors were held in voting trusts, however, and Wilson had

the right to vote those shares for ten years. 

4 UNITED STATES v. JACKSON

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The 1995 refinance resulted in a loan agreement that Burruss negotiated with Fleet, dated April 7, 1995. In his newly acquired capacity,

Wilson discussed the Fleet loan agreement extensively with Jackson

and Carey. The loan agreement was asset-based, and Burruss collateralized the Fleet loan with its fixed-assets and working-capital. The

fixed-assets portion of the Fleet loan was secured by Burruss’s real

estate, machinery, and equipment, and was initially for $6 million.

Between 1995 and 2000, the Fleet loan agreement was amended multiple times to increase Burruss’s borrowing capacity under the fixedassets portion of the loan. The balance of the fixed-assets portion of

the loan, as of September 28, 2000, reached over $10 million. The

second aspect of the Fleet loan related to Burruss’s working-capital,

and was secured by its accounts receivable and inventory. The

working-capital portion comprised the "lion’s share" of the loan, with

the amount thereof varying from day-to-day. As of September 28,

2000, the principal of the working-capital part of the Fleet loan was

over $25 million, and at other times it exceeded $31 million. 

The terms of the Fleet loan agreement required that all of Burruss’s

assets be pledged as collateral. Consequently, any funds received by

Burruss from selling its assets were to be paid to Fleet. Under the loan

agreement, Burruss was entitled to sell only $25,000 worth of equipment annually without Fleet’s approval. In addition to pledging Burruss’s assets as collateral for the Fleet loan, a "support agreement"

required its officers to operate and maintain Burruss in a manner that

would properly support the Fleet loan, and to promptly inform Fleet

of any fraud, conversion, or misapplication of Burruss’s assets, or any

breach of the loan agreement. Wilson, Jackson, and Carey executed

support agreements with respect to the Fleet loan. 

2.

By 1996, Burruss began having problems paying its vendors in a

timely fashion and was unable to maintain its inventory and raw

materials. Several of Burruss’s small vendors needed to be paid in a

shorter time frame than the business could accommodate, and thus

declined to sell supplies to it. Jackson discussed with Wilson the creation of an entity to purchase timber from small vendors and resell it

to Burruss with an industry-standard markup, enabling Burruss to

accumulate and maintain the inventory it needed. Soon thereafter,

UNITED STATES v. JACKSON 5

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Jackson and his wife, along with Carey, formed a separate business

called Virginia Wood Products ("VWP"). VWP served as a broker to

secure timber for Burruss and provided it with sixty- to ninety-day

payment terms. Burruss was then able to secure raw materials (primarily timber) through VWP from vendors who would no longer sell

directly to Burruss. 

The books and records of Burruss, however, revealed that many of

the small vendors selling to VWP were also continuing to sell supplies to Burruss. Although VWP had no storage facilities and did not

physically handle the timber it purchased for delivery to Burruss —

and even though VWP’s work was actually performed by Burruss

employees — VWP marked-up the price of such timber by 5% to 8%

before reselling it to Burruss. VWP did not typically pay its vendors

any more expeditiously than Burruss did.

In addition to its inventory issues, Burruss had additional difficulties in 1996. One of its most profitable facilities was largely destroyed

by fire, severely impacting Burruss’s profits. In addition, a Canadian

company entered the tractor-trailer flooring business, competing with

Burruss and severely reducing its most profitable component. Burruss

recovered from those difficulties, however, and eventually became an

even larger producer of residential flooring. 

In 1998, Jackson asked Wilson for a salary increase and a bonus,

explaining that he had not received either in some time. In response,

Wilson raised Jackson’s salary to $200,000 per year, plus a $50,000

yearly bonus. Wilson agreed that Jackson could draw his bonuses

from a Burruss Holding account maintained at Wachovia Bank in

Lynchburg (the "secret Wachovia account"), in order to conceal payment of the bonuses from other Burruss personnel. The secret

Wachovia account was not referenced or listed in any of Burruss’s

records, and was thus concealed from Fleet. 

3.

Between 1995 and 1999, the Fleet loan agreement was amended at

least eight times to increase Burruss’s borrowing limits. Under the

working-capital portion of the loan agreement, Burruss had a borrowing base of 85% against its eligible accounts receivable, 70% against

6 UNITED STATES v. JACKSON

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its raw materials, and 65% against its finished goods. In order to

obtain an advance under the loan agreement, Burruss was obligated

to submit a Borrowing Base Certificate ("BBC") to Fleet, on which

it reported the current status of its inventory and eligible accounts receivable.4

 Carey was primarily responsible for preparing the BBCs, and,

in doing so, compiled a list of Burruss’s inventory and eligible

accounts receivable — sometimes from inventory reports and sometimes by fabricating them. A Carey subordinate, Donna Elliott —

Burruss’s office manager and corporate secretary in Galax — actually

completed the BBCs and transmitted them by fax to Fleet in North

Carolina. In response, Fleet wired the advanced funds to a Burruss

account at Wachovia in Lynchburg.5

4.

As Burruss financially deteriorated throughout 1998, Jackson and

Carey began inflating the company’s assets on the BBCs they used to

obtain advances under the Fleet loan. BBCs were inflated in several

ways: (1) by falsely creating inventory from a closed plant; (2) by creating false invoices for goods that had not been sold; (3) by falsely

overvaluing inventory; and (4) by altering the original dates of

accounts receivable. In carrying out this asset inflation scheme, Jackson repeatedly instructed Carey to mischaracterize raw lumber as purchased goods, thereby inflating the BBCs. Jackson also suggested to

Carey that such raw lumber be characterized as finished product, thus

increasing Burruss’s borrowing power. At Carey’s direction, Elliott

faxed false inventory reports and inflated BBCs to Fleet on four occasions in September and October of 2000.6

4

"Inventory," for purposes of the BBCs, meant all of Burruss’s raw

materials and finished goods. "Eligible accounts receivable" meant all of

Burruss’s accounts receivable excluding invoices more than sixty days

past due or ninety days beyond an original date. 

5The Burruss account at Wachovia Bank in Lynchburg was used as

Burruss’s primary operating account. It is separate and distinct from the

secret Wachovia account maintained by Burruss Holding. 

6The false inventory reports and inflated BBCs constitute the underpinnings of the wire fraud offenses (Counts Three through Seven). 

UNITED STATES v. JACKSON 7

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In 1999 and 2000, Jackson sold nine pieces of Burruss’s equipment, valued at a total of approximately $260,000, without notifying

Fleet as required by the loan agreement. Although these assets were

owned by Burruss and pledged to Fleet, the proceeds from the sales

were deposited into the Burruss Holding secret Wachovia account.

Carey largely used the secret Wachovia account for deposits of insurance receipts, tax refunds, and other funds representing assets of Burruss that had been pledged to Fleet. Neither Jackson, Carey, nor any

other Burruss representative notified Fleet that its collateral had been

sold, or that funds representing collateral under the Fleet loan agreement had been deposited in the secret Wachovia account. Jackson and

Carey paid themselves from the secret Wachovia account the sums of

approximately $514,000 and $230,000, respectively, between May

1998 and February 2000. Jackson also directed Carey to pay $68,000

to VWP from the secret Wachovia account, without any supporting

invoices. During that same period, VWP was used to distribute substantial sums of money from Burruss to Jackson and Carey personally. Between 1997 and 2000, VWP paid Jackson over $473,000, and

Carey over $530,000. 

5.

During the relevant period, Burruss maintained three separate

ERISA plans, for both pension and health purposes, that covered most

of its 1200 to 1400 employees. First, Burruss maintained a pension

plan for its non-union salaried employees (the "Company Plan"). Second, it maintained a pension plan for its unionized employees (the

"Union Plan").7 Third, Burruss established and utilized a health care

benefit program for its employees (the "Health Plan"). Each of these

ERISA plans was used by the Defendants as a vehicle for carrying out

offenses underlying these appeals. The relevant details of the three

ERISA plans and their relationships to the various offenses are

described further below. 

7The Union Plan was limited to unionized employees working at Burruss’s plant in Alcoa, Tennessee. The contributions to that Plan were

substantially less than those made to the Company Plan. 

8 UNITED STATES v. JACKSON

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a.

Under the Company Plan, an account was maintained for each eligible participant, and the funds and moneys in each participant’s

account resulted from employer contributions made by Burruss. Burruss was obligated to contribute 3% of the aggregate annual compensation of all eligible participants to the Company Plan. The Company

Plan obligated Burruss to provide each plan participant with an annual

account statement, as of the last day of the calendar year. Pursuant to

an "Adoption Agreement" of 1994, the Company Plan required Burruss to allocate and credit the annual employer contributions to the

proper participant accounts.8

The Union Plan required Burruss to establish a bookkeeping

account for each eligible unionized employee, to pay into each

account the participant’s share of Burruss’s annual Plan contributions,

and to prepare annual participant statements after making the proper

allocations for each Plan Year. The Union Plan defined the "valuation

date" as the "last day of the Plan Year," and gave each participant a

vested and nonforfeited interest in his plan account. J.A. 2872-74.9

The Adoption Agreement defined a Plan Year as twelve consecutive

months ending December 31st, and it required Burruss to contribute

fifteen cents to the account of each plan participant for each hour of

service. 

Burruss was designated as the Plan Administrator for the Company

Plan and Carey served as Assistant to the Plan Administrator. Carey

was designated as Plan Administrator for the Union Plan. Jackson and

Carey both performed administrative duties for each of the Plans.

Accordingly, Jackson signed the bargaining agreement with the

union; and both Carey and Jackson signed the Plan contribution

checks. The Trustee for both Plans was Crestar Bank, which was later

renamed SunTrust Bank. Each Plan Administrator possessed the "primary authority for filing the various reports, forms and returns with

8The Company Plan and the Union Plan have separate Adoption

Agreements, which establish the Plans and define the terms and conditions thereof. 

9Citations herein to "J.A. ___" refer to the contents of the Joint Appendix filed by the parties in this appeal. 

UNITED STATES v. JACKSON 9

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the Department of Labor and the Internal Revenue Service." J.A.

2788. For example, Carey, on behalf of the Company Plan, filed a

Form 5500 Annual Return/Report of Employee Benefit Plan for Plan

Year 1997 with the Department of Labor. 

As of December 31, 1998, Burruss owed approximately $322,000

to the Company Plan for Plan Year 1998. Pursuant to IRS regulations,

Burruss was entitled to defer its 1998 contribution until its federal

income tax return was due on March 15, 1999, or, if it obtained a filing extension, until September 15, 1999. On October 15, 1999, Burruss filed its 1998 Form 5500 for the Company Plan with the

Department of Labor, signed by Jackson. On the Form 5500, Jackson

stated that Burruss owed $322,169 to the Company Plan and that it

had made the Plan contribution in that amount. The Form’s question

15(c) required that the sum of any funding deficiency be reported, and

Jackson left the question blank. As of October 15, 1999, however,

Burruss had made no contributions to the Company Plan for Plan

Year 1998. 

In early 2000, Frank Dishman, a pension account manager with

Crestar Bank, met with Jackson and Carey concerning Burruss’s

ERISA plan obligations. According to Dishman, Jackson and Carey

believed that "they did not have to make these [contributions], that

they had discontinued making contributions to the plan." J.A. 1527-

29. Dishman advised them that Burruss could cease making its Plan

contributions only by terminating the Plans according to law. Dishman also advised the Defendants that Burruss had not made its 1998

Company Plan contribution. In response, Carey falsely asserted that

he had mailed the 1998 contributions for both Plans to Crestar in

December 1999. Dishman, however, advised them that Crestar had

not received any such payments. 

Carey thereafter directed Elliott to falsely record, on Burruss’s general ledger of March 29, 2000, that Burruss had sent a check to Crestar Bank on December 31, 1999, for the 1998 Company and Union

Plan contributions.10 On April 14, 2000, Dishman again advised

10Contributions for the Company and Union Plans were overdue in

early 2000 and Burruss assertedly combined its annual contributions into

one check. 

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Carey by letter that Crestar had not received the 1998 Company Plan

contribution. On April 18, 2000, however, the Trustee received a Burruss check dated December 20, 1999, signed by Jackson and Carey,

for the 1998 Company and Union Plan contributions. When Dishman’s successor from SunTrust Bank, Sybill Wolff, asked Carey

about the late contributions, Carey asserted that he had given the

check to Dishman earlier, who had probably lost it. 

Burruss was obligated, for Plan Year 1999, to contribute over

$324,000 to its Company and Union Plans. In 2000, Jackson and

Carey separately observed in the company records that the 1999 contributions to the Plans were due by September 15, 2000, and Jackson

mentioned the possibility of terminating the Company Plan. Wolff

met with Carey in mid-August 2000 and reminded him that the 1999

contributions to the Plans were due by September 15. As that date

approached, Wolff repeatedly called Carey and advised him to make

the 1999 contributions. Although Carey assured her that Burruss

would make those contributions, it never did. Wolff thereafter called

Carey several times concerning the missed payments. Carey avoided

most of those calls. When he did respond, he simply asserted that a

mistake must have been made. Wolff also called Jackson, who

directed her to speak to Carey about the problem. On October 18,

2000, Wolff advised Carey by letter that Burruss had not made its

1999 contributions to the Company and Union Plans, and that Burruss

could be penalized for not making them. 

In early September 2000, SunTrust Bank sent Burruss the 1999

individual account statements for the participants of both Plans. Each

statement reflected a participant’s account balance for the Plan Year

ending December 31, 1999, reflecting Burruss’s contribution for that

Plan Year. SunTrust later advised the participants of both Plans that,

although it had mistakenly credited their accounts with accrued benefits for the 1999 Plan Year, an "earnings reversal" had been made

because Burruss "failed to submit the required contribution for the

1999 Plan Year." J.A. 722-30. SunTrust also informed the participants

that "[s]ince the statement you received last year included an accrual

for that contribution, an adjustment has been made on the enclosed

statement to reflect the fact that no contribution was received." Id.

UNITED STATES v. JACKSON 11

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b.

As mentioned above, Burruss also maintained an ERISA Health

Plan for its employees, and contracted with the Piedmont Community

Health Plan ("PCHP") to process health care claims. Jackson signed

the PCHP contract on behalf of Burruss, and Carey administered the

Health Plan in conjunction with Jacqueline Mosby, PCHP’s controller. In order to finance the Plan, Burruss made weekly withholdings

from its employees’ earnings for contributions to the Health Plan. 

In 2000, Burruss began paying PCHP only part of its employee

withholdings for the Health Plan, resulting in a $698,000 deficiency

by June of that year. On August 1, 2000, Burruss failed to pay PCHP

more than $109,000, even though those moneys and funds had been

withheld from its employees’ earnings for health care contributions.

By early October 2000, PCHP had ceased paying health care claims

under the Health Plan, resulting in substantial unpaid medical

expenses for the covered Burruss employees.11

6.

In June of 2000, Jackson and Carey hired Ray Equi to oversee Burruss’s reporting to Fleet on the BBCs. Equi promptly discovered that

Burruss’s inventory and accounts receivable had been overstated on

the BBCs and, in August 2000, he prepared and directed memoranda

to that effect to both Jackson and Carey. Equi also refused to sign any

inflated BBCs. On August 17, 2000, Equi advised Jackson that Burruss’s inventory and accounts receivable were being overstated, that

Burruss was close to its lending limits on the Fleet loan, and that

much of its inventory and accounts receivable were not loan-eligible.

In August 2000, Carey fired Equi, who later served as a key witness

for the prosecution.12

11As a result of PCHP’s failure to pay health care claims for Burruss’s

employees, the affected employees became personally liable for their

medical expenses. Ironically, Jackson was forced to pay over $36,000 for

his own heart surgery in October 2000. 

12Other important witnesses for the prosecution included Grant Wilson, who controlled Burruss Holding; Donna Elliott, the corporate secretary; and Frank Dishman, of Crestar (SunTrust), the Trustee of the

Company and Union Plans. 

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On October 18, 2000, Wilson and Carey flew to Atlanta for a meeting with Fleet. During the trip, Carey advised Wilson that Burruss

was suffering from inventory shortages and, after the meeting, Wilson

travelled to Galax to examine Burruss’s finances. After examining

Burruss’s records, Wilson ascertained that it had overstated its assets

on the BBCs submitted to Fleet by more than $11 million, and that

Burruss was in serious financial trouble. 

On October 24, 2000, Wilson hired Kevin O’Halloran, a crisis

manager from Newbridge Management LLC, to operate Burruss.

O’Halloran and Ralph Brotherton, a CPA, then conducted an extensive review of Burruss’s records. They interviewed Carey repeatedly,

seeking to ascertain Burruss’s true financial condition. Carey admitted that he had intentionally inflated the BBCs submitted to Fleet in

order to obtain working capital for Burruss and to make the business

more attractive to potential buyers. Carey also acknowledged that he

had deposited Burruss’s insurance receipts, tax refunds, and other

funds into the secret Wachovia account. Carey asserted that he had

not made the 1998 and 1999 ERISA contributions to the Company

and Union Plans because there were more pressing expenses due.

Carey explained that Burruss’s financial problems should be resolved

after being sold, and that he expected a personal financial benefit

from the sale.13 Significantly, O’Halloran and Brotherton testified

against the Defendants at trial. Unfortunately, all efforts to sell Burruss failed. Ascertaining that it had no other option, Burruss declared

bankruptcy on November 7, 2000. 

B.

At the conclusion of the prosecution’s case-in-chief, and again at

the conclusion of the trial evidence, the Defendants moved for judgments of acquittal. See Fed. R. Crim. P. 29(a) (authorizing motion for

judgment of acquittal after conclusion of prosecution’s case-in-chief

and again at conclusion of all evidence). The court denied these

acquittal motions, however, and the jury found Jackson guilty on all

charges, and Carey guilty on all charges except the conspiracy

offense. 

13Wilson made unsuccessful efforts to sell Burruss in 1999 and 2000.

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In post-trial proceedings, Jackson and Carey renewed their motions

for judgments of acquittal and also sought, in the alternative, a new

trial. See Fed. R. Crim. P. 29(a) and 33. The district court denied

those requests, explaining its rulings in a Memorandum Opinion filed

on June 7, 2006 (the "Opinion").14 The Opinion’s bases for these rulings, specifying that the various convictions were amply supported by

the evidence and that there was no sound reason for awarding the

Defendants a new trial, included the following: 

• On the bank fraud and wire fraud offenses, the evidence

was sufficient to support Jackson’s convictions because

he oversaw the daily operations of Burruss, was Carey’s

superior, was familiar with the borrowing arrangement

with Fleet, had directed Carey to inflate inventory, had

instructed Elliott to overvalue inventory to increase Burruss’s borrowing power, and had been advised by Equi

that the accounts receivable were inflated. See Opinion

3-4. 

• On the wire fraud offenses, the evidence supported Jackson’s convictions because he "knew of and approved

previous faxes to Fleet, and could foresee that the

inflated [BBCs] would continue to be faxed." Id. at 5. 

• On the bank fraud offenses, the court observed that,

although "a bank must be the intended victim of a bank

fraud scheme, it need not be the immediate victim." Id.

at 7. Here Burruss was a victim of the fraud scheme, but

"Fleet suffered the ultimate risk of loss." Id.

• On the ERISA false statement offense, the evidence was

sufficient to sustain Jackson’s conviction because company policy required him to sign checks above a certain

sum, and he had not sought to correct the 1998 Form

5500 (although he knew that a 1998 Plan contribution

had not been made). Id. at 8. 

14The district court’s Opinion is found at J.A. 2464-81. 

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• The evidence was sufficient to support Carey’s conviction on the false statement offense in Count Ten, in that

he was a co-signer on company checks and had created

false accounting entries to cover-up nonpayment of the

1998 ERISA contributions. Id. at 8-9. 

• On the ERISA theft offenses, the employer contributions

to ERISA pension funds became assets of the ERISA

plans when they became due and payable. The Defendants were not required to be fiduciaries of the Plans

because 18 U.S.C. § 664 prohibits "any person" from

committing a § 664 offense, and makes no reference to

fiduciary status. Id. at 10-12. 

• Jackson was not entitled to judgment of acquittal on the

ERISA theft offenses because the "handwriting from his

planner and notepads indicat[ed] that he knew the pension contributions were due," demonstrating his "reckless disregard for the interest of the pension plans." Id.

at 12. 

• On the health care program theft offense, the government, by "showing that funds were withheld from

employee paychecks for contribution to the healthcare

plan," presented sufficient evidence to sustain the Defendants’ convictions. Id. at 13-14. 

• On the conspiracy offense, the evidence was sufficient to

establish that Jackson had conspired with Elliot in inflating the BBCs. Id. at 15. 

• Finally, the Defendants’ were not entitled to a new trial,

because the evidence was sufficient to sustain their convictions and because they were not prejudiced by the

improper exclusion or admission of evidence. Id. at 16-

17. 

C.

The presentence investigation reports (the "PSRs") for Jackson and

Carey calculated their advisory sentencing ranges under the 2000 ediUNITED STATES v. JACKSON 15

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tion of the Sentencing Guidelines. The PSRs grouped their offenses

and awarded them base offense levels of 4, see USSG § 2B1.1(a), to

which they added the following: two-level increases because the

grouped offenses involved more than minimal planning, id.

§ 2B1.1(b)(4)(A); four-level increases for substantially jeopardizing

the safety and soundness of a financial institution, id.

§ 2B1.1(b)(6)(A); two-level increases for embezzling from ERISA

plans while serving as plan fiduciaries, id. § 3B1.3; and seventeenlevel increases because the loss exceeded $10 million, id.

§ 2B1.1(b)(1)(R). Jackson’s PSR also recommended a two-level

increase because he committed perjury while testifying at trial. Id.

§ 3C1.1. Premised on criminal history categories of I, Jackson’s total

offense level was 31 and his advisory sentencing range was 108 to

135 months, and Carey’s total offense level was 29 and his advisory

sentencing range was 87 to 108 months. 

The district court conducted Jackson and Carey’s sentencing hearings on January 3, 2007, and, after largely accepting the PSRs’ recommendations, the court denied the prosecution’s motion for role-inthe-offense enhancements against Jackson and Carey. Importantly,

the court also ruled that the PSRs’ recommended seventeen-level

increases for causing a loss exceeding $10 million were applicable.

The Defendants objected to this ruling, contending that the loss calculations made in the PSRs were incorrect. They asserted that the loss

calculations should reflect only the actual and foreseeable loss, which

was less than $10 million. They also claimed that Burruss and its

assets had been overvalued from the beginning and that the loss suffered by Fleet was due to Burruss’s unforeseeable decision to file for

bankruptcy. The court rejected these contentions and, after weighing

the evidence, the advisory Guidelines ranges, and the 18 U.S.C.

§ 3553(a) sentencing factors, sentenced Jackson and Carey at the bottom of their advisory ranges: 108 and 87 months, respectively. The

Defendants thereafter filed these appeals, and we possess jurisdiction

pursuant to 28 U.S.C. § 1291. 

II.

In their consolidated appeals, the Defendants first contend that they

cannot be subjected to criminal liability under § 664 of Title 18 for

the two ERISA theft offenses. Additionally, they contest the suffi16 UNITED STATES v. JACKSON

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ciency of the evidence to support certain of their convictions. We

address these contentions in turn.15

A.

With respect to their convictions on the ERISA theft offenses in

Counts Eleven and Twelve, the Defendants contend that the district

court erred when it ruled that unpaid employer contributions to the

Company and Union Plans constituted "assets" of the Plans under 18

U.S.C. § 664.16 Specifically, they assert that their convictions on the

ERISA theft offenses must be vacated, as a matter of law, because

"unpaid employer contributions are not assets of a plan until they are

paid into the plan unless the plan documents specifically state otherwise." Br. of Appellants 28-29. Because the Plan documents fail to

specify that unpaid employer contributions constitute plan assets, the

Defendants maintain that they cannot be guilty of the ERISA theft

15The Defendants have also raised challenges to their sentences, which

are disposed of in Part III hereof. 

16The primary issue in this appeal relates to whether, under 18 U.S.C.

§ 664, unpaid employer ERISA pension plan contributions constitute

"assets" of the plan. Section 664 provides, in relevant part, that 

[a]ny person who embezzles . . . or unlawfully and willfully . . .

converts to his own use . . . any of the moneys, funds . . . or other

assets of any [ERISA plan] shall be fined . . . or imprisoned . . .

or both. 

The ERISA theft offenses relate specifically to the Company and Union

Plans. Count Eleven of the indictment, alleges, in pertinent part, as follows: 

That between on or about January 1, 1999 and on or about

March 15, 2000, in the Western District of Virginia, the

[D]efendants, . . . while fiduciaries of the Company Plan, did

embezzle, steal and unlawfully and willfully abstract and convert

to their own use, and to the use of others, an amount not less than

$318,246.27, which constitutes moneys, funds, securities, premiums, credits, property and other assets of the Company Plan, an

employee pension benefit plan subject to [ERISA]. 

J.A. 59-60. Count Twelve, in operative language that is identical to that

in Count Eleven, relates to the conversion of the moneys and funds of

the Union Plan. 

UNITED STATES v. JACKSON 17

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offenses. They further contend that, even if the unpaid ERISA contributions were assets of the Company and Union Plans, they cannot be

guilty because they were never fiduciaries of the Plans. 

Relying primarily on the Second Circuit’s opinion in United States

v. LaBarbara, 129 F.3d 81 (2d Cir. 1997), the district court ruled that

unpaid employer contributions become "credits" and are ERISA "plan

assets" when they are "due and payable to the plan." Opinion 9-11.

The court deemed irrelevant the Defendants’ claim that they had

never served as fiduciaries of the Plans, because § 664 explicitly

applies to "any person" who steals or embezzles the moneys, funds,

or assets of an ERISA plan. We review de novo a ruling by a district

court on an issue of statutory interpretation. United States v. Green,

436 F.3d 449, 456 (4th Cir. 2006); see also LaBarbara, 129 F.3d at

86, 88 (reviewing de novo district court’s interpretation of statutory

term "assets" under § 664). 

1.

In order to prove the ERISA theft offenses, the prosecution was

obligated to establish the elements of § 664, i.e., that Jackson and

Carey (1) committed acts of embezzlement or conversion; (2) that

such acts of embezzlement or conversion involved the moneys, funds,

or assets of an ERISA plan; and (3) that such acts were committed

with the specific intent of depriving the ERISA plan of its moneys,

funds, or assets. See 18 U.S.C. § 664; see also United States v. Whiting, 471 F.3d 792, 800-01 (7th Cir. 2006) (observing that § 664 is

violated when any person willfully or intentionally converts ERISA

funds to his own use or use of another); United States v. Krimsky, 230

F.3d 885, 860 (6th Cir. 2000) (observing that, for conviction under

§ 664, prosecution must prove accused embezzled or converted funds,

moneys, or assets of ERISA plan with specific intent of depriving

plan of such moneys, funds, or assets).17 Although § 664 does not

17On Counts Eleven and Twelve, the district court instructed the jury,

in a manner consistent with the foregoing authorities, as follows: 

Elements which must be proved beyond a reasonable doubt

before a defendant may be found guilty under [§ 664] proscribing embezzlement are . . . [one,] the defendant fraudulently and

18 UNITED STATES v. JACKSON

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explicitly provide that unpaid employer contributions constitute

ERISA plan assets, § 1103 of Title 29 specifies that such assets are

held in trust, and not for the employer’s benefit. The Second Circuit

concluded that, when an ERISA employer has paid wages or salaries

to its employees, it is contractually bound to contribute to any ERISA

plan that it maintains. In its LaBarbara decision, the court decided

that an employer must comply with its contractual obligations to

make contributions to its ERISA plan, and that such a contractual

obligation constitutes an "asset" of the ERISA plan. See 129 F.3d at

88; see also In re Luna, 406 F.3d 1192, 1198-1201 (10th Cir. 2005)

(holding that contractual right to collect unpaid contributions is plan

asset). 

Notwithstanding the Defendants’ assertions that Burruss’s unpaid

employer contributions did not constitute assets of the Company and

Union Plans for purposes of the ERISA theft offenses, the relevant

facts and legal principles support the district court’s ruling. When

Burruss established its ERISA pension plans, it bound itself to the

terms thereof. Both Plans mandated annual contributions based upon

hours worked, and wages and salaries paid. Burruss could properly

extricate itself from those ERISA obligations only by proper termination of the Plans. See 29 U.S.C. § 1103. We thus agree with the district court and the Second Circuit, and are satisfied that Burruss’s

unpaid contributions to the Plans constituted the "moneys, funds, or

assets" thereof for purposes of § 664. As a result, the Defendants’

contention in that regard must be rejected. 

2.

The Defendants also contend that, even if the unpaid ERISA contributions were assets of the Company and Union Plans, they neverwillfully embezzled, stole, or converted property, money or

funds to his own use or the use of another; [two,] the property,

money, or funds taken belonged to an employee benefit plan

subject to ERISA; [and three,] the defendant acted with the

intent to deprive the pension plan of its funds, with reckless disregard for the interests of the pension plan. 

J.A. 2220-21. 

UNITED STATES v. JACKSON 19

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theless cannot be guilty of the ERISA theft offenses because they

were never fiduciaries of the Plans. The Defendants assert that, in

order for them to be criminally liable under § 664, the prosecution

had to prove that they were such fiduciaries. See Luna, 406 F.3d at

1198, 1201 (observing that for defendant in civil ERISA fraud action

to be personally liable, he must be fiduciary of ERISA plan). Indeed,

as they point out, Counts Eleven and Twelve actually allege that the

Defendants were fiduciaries. See J.A. 59-61 (alleging that Defendants,

"while fiduciaries" of the Plans, embezzled and converted moneys,

funds, and assets of Plans). 

The district court ruled against the Defendants on this point, however, because § 664 plainly applies to "any person" who steals or

embezzles the moneys, funds, or assets of an ERISA Plan. Opinion

11-12. Importantly, the court’s instructions to the jury were consistent

with § 664, and did not mandate a jury finding that either Jackson or

Carey were fiduciaries. Counts Eleven and Twelve, in alleging that

the Defendants were fiduciaries of the Plans, were thus at odds with

the express terms of § 664. Such surplusage does not constitute appellate error, however, for at least three reasons. First, the Defendants

did not pursue a variance or surplusage claim in the district court or

on appeal.18 Second, § 664 does not require that an accused be a fiduciary, but is plainly drawn in terms of "any person." 

Finally, in these circumstances, the Defendants were shown to be

fiduciaries of the Plans. Under ERISA, a "fiduciary" is a person who

"exercises any authority or control respecting management or disposition of its assets, . . . or discretionary responsibility" with respect to

18Because the Defendants have not raised a variance or surplusage

claim on appeal, any such claim has been waived. See Fed. R. App. P.

28(a)(9)(A) (requiring appellant’s brief to contain contentions and reasons for them, with citations to authorities and parts of record relied on);

United States v. Al-Hamdi, 356 F.3d 564, 571 n.8 (4th Cir. 2004)

(observing that contentions not raised in opening brief are waived). Even

if the Defendants had raised such a claim, however, it would not alter the

result here, because the fiduciary allegations of the ERISA theft offenses

were merely surplusage and not error. See Ford v. United States, 273

U.S. 593, 602 (1927) (holding that allegations of indictment unnecessary

to and independent of essential allegations may be ignored). 

20 UNITED STATES v. JACKSON

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an ERISA plan. 29 U.S.C. § 1002(21)(A). ERISA also provides that

an "administrator" is an example of a fiduciary. Id. § 1002(14)(A).

ERISA defines an "administrator" as "the person specifically so designated by the terms of the instrument under which the plan is operated." Id. § 1002(16)(A)(I). 

The Defendants contend that SunTrust, rather than either of them,

was the Plan Administrator of the Company and Union Plans. Carey,

however, was expressly named as Plan Administrator in the Union

Plan’s documents, and as Assistant Plan Administrator in the Company Plan documents. Furthermore, in Phelps v. C.T. Enters., Inc.,

394 F.3d 213, 221 (4th Cir. 2005), we observed that, even though an

officer of a business is not a named fiduciary of an ERISA plan, he

is nevertheless a fiduciary when he assumes plan responsibilities or

exercises control over whether to pay plan contributions. Jackson, as

Burruss’s CEO, was thus a fiduciary of the Company and Union

Plans, because he assumed Plan responsibilities and exercised control

over whether Burruss made its ERISA plan contributions. Under the

undisputed facts, both Jackson and Carey performed administrative

duties associated with the Plans: (1) Jackson signed Form 5500 as

Plan Administrator and sponsor for Plan Year 1998; (2) Carey signed

the Form 5500 as Plan Administrator for Plan Year 1997; (3) Jackson

signed the collective bargaining agreement with the union; and (4)

both Carey and Jackson signed the ERISA plan contribution checks.19

B.

The defendants next challenge the sufficiency of the evidence in

support of certain of their convictions — both defendants challenge

the evidence on a bank fraud offense (Count Two); Jackson challenges the evidence on the other bank fraud offense (Count One), as

19The Defendants argue that the Tenth Circuit’s decision in Luna supports their position on appeal, and that their convictions on the ERISA

theft offenses cannot stand because they were not "acting" as fiduciaries

when they diverted the Plans’ assets to their own use. See Luna, 406 F.3d

at 1203-04 (observing that employers who exercise neither control nor

authority over ERISA plan assets are not fiduciaries of plan). The Defendants’ reliance on Luna is misplaced, however, because it is not controlling precedent and is factually distinguishable. 

UNITED STATES v. JACKSON 21

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well as on each of the wire fraud offenses (Counts Three through

Seven); and Carey challenges the evidence on the ERISA false statement offense (Count Ten). Under our precedent, an appellate review

of a sufficiency issue is only to assess "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier

of fact could have found the essential elements of the crime beyond

a reasonable doubt." United States v. Young, 248 F.3d 260, 273 (4th

Cir. 2001). We have applied this settled legal principle and carefully

assessed the trial record on the sufficiency of evidence contentions,

as summarized in the Opinion. See supra Part I.B. Premised on this

assessment, we agree with the district court’s analysis of the evidence

sufficiency contentions, as spelled out in its Opinion and summarized

herein. We therefore affirm its rejection of the Defendants’ evidence

sufficiency challenges. 

III.

The Defendants also challenge their sentences on several grounds.

Most compellingly, they contend that the district court erred in setting

their offense levels under the Sentencing Guidelines by (1) miscalculating the applicable fraud-loss amount, and (2) penalizing them for

substantially jeopardizing the safety and soundness of a financial

institution. We assess these issues in turn. 

A.

First, the Defendants contend that the district court miscalculated

the fraud-loss amount under section 2B1.1(b) of the Guidelines,

which erroneously resulted in a seventeen-level increase to their

offense levels. The Defendants seek to limit the amount of loss used

for sentencing purposes to what was, in their view, reasonably foreseeable.20 We review de novo a district court’s interpretation of what

20The Defendants derive this foreseeability language from commentary

to the 2005 edition of the Guidelines, defining "actual loss" as "the reasonably foreseeable pecuniary harm that resulted from the offense."

USSG § 2B1.1 cmt. n.3 (2005). The Defendants have, however, erroneously relied on the 2005 edition of the Guidelines. The PSRs calculated

the Defendants’ recommended sentences based on the 2000 edition, and

the district court largely adopted the PSRs’ recommendations. Although

we review the Defendants’ sentences under the 2000 edition, which does

not contain this same language, we nevertheless consider the Defendants’

foreseeability contention and find it unpersuasive. 

22 UNITED STATES v. JACKSON

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constitutes a "loss" under the Guidelines, while accepting its loss calculation in the absence of clear error. United States v. Allen, 491 F.3d

178, 193 (4th Cir. 2007). Pursuant to section 2B1.1 cmt. n.2, "loss"

is the value of the property taken, damaged, or destroyed. In calculating loss, section 2B1.1 cmt. n.3 provides, in pertinent part, that "the

loss need not be determined with precision. The court need only make

a reasonable estimate of the loss, given the available information."

Here, the court determined that the PSRs had accurately calculated

the applicable loss to be greater than $10 million. 

The Defendants contend, however, that the extent of the loss resulting from their offenses was largely unforeseeable. Their primary basis

for this contention is that the loss suffered by Fleet was unforseeable

because it was actually caused by Burruss’s decision to file bankruptcy.21

In contrast, the prosecution contends that Burruss’s bankruptcy and

Fleet’s loss were foreseeable because the Defendants’ criminal activities drove Burruss into bankruptcy and deprived Fleet of its collateral.

We are unable to accept the Defendants’ assertion that Burruss’s

decision to file for bankruptcy resulted in an unforseeable loss. As the

jury found, it was the Defendants’ criminal activities and their mismanagement of Burruss that drove Burruss into bankruptcy and

deprived Fleet of its collateral. As a result, the district court did not

err in its findings on the fraud-loss amount. 

B.

Next, the Defendants contend that the district court erred in

increasing their offense levels, pursuant to section 2B1.1(b)(6)(A) of

the Guidelines, on the premise that they substantially jeopardized the

safety and soundness of a financial institution (namely, the Company,

Union, and Health Plans). They argue, in this regard, that Burruss did

not qualify as a "large corporation" under the Guidelines; the ERISA

plans in question were not terminated by Jackson’s actions, but rather

21Jackson was hospitalized on October 12, 2000, and had open-heart

surgery on October 13, 2000. During his hospitalization and recuperation, Wilson discovered that Burruss’s assets had been inflated and hired

O’Halloran to run the company. Incredibly, the Defendants contend that

Jackson’s absence also led to unforseeable losses to Fleet. 

UNITED STATES v. JACKSON 23

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by the new Plan Administrators; and that the Plans were not jeopardized because, as a result of a settlement in a related civil suit, Jackson surrendered his individual account to reimburse the Plans. The

prosecution contends that the Defendants’ "large corporation" argument is undercut by the $1.4 million loss suffered by the ERISA

Plans, plus the fact that the Plans were jeopardized when the Defendants stole their assets in 1999 to 2000. Finally, the prosecution contends that the Defendants’ argument that they did not terminate the

Plans lacks merit because their criminal activities forced Burruss into

bankruptcy, thus causing the terminations. 

The Defendants present no authority to support their claim that

Burruss did not qualify as a "large corporation." The Defendants

derive their "large corporation" assertion from Guidelines section

2B1.1 cmt. n.8, which provides, in pertinent part: 

"Union or employee pension fund" and "any health, medical, or hospital insurance association," as used [in defining

a financial institution], primarily include large pension funds

that serve many individuals (e.g., pension funds of large

national and international organizations, unions, and corporations doing substantial interstate business), and associations that undertake to provide pension, disability, or other

benefits (e.g., medical or hospitalization insurance) to large

numbers of persons. 

Unfortunately for the Defendants, the evidence satisfies this Guidelines provision. The Funds in this case served over half of Burruss’s

1200 to 1400 employees and operated in multiple states, providing

medical and retirement benefits to both union and non-union employees. And, the moneys and assets the Defendants embezzled from the

Plans amounted to approximately $1.4 million over a two-year period.

Finally, the Guidelines do not specify the "size" that a corporation

must be before its ERISA plan qualifies as a "financial institution."

The Defendants’ contention that the Plans were not jeopardized

because Jackson reimbursed them also lacks merit. The Plans were

jeopardized when moneys belonging to them were diverted for the

Defendants’ self-enrichment. Finally, it is not necessary to the application of this enhancement that the Plans be terminated: it is only nec24 UNITED STATES v. JACKSON

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essary that the Plans be placed in "jeopardy" of termination. See

USSG § 2B1.1 cmt. n.9.22 The Plans were, in any event, ultimately

terminated because of the Defendants’ criminal activities — which

drove Burruss into deep financial difficulty and ultimately resulted in

its bankruptcy. Consequently, the sentencing court did not err in finding that the Defendants substantially jeopardized the safety and

soundness of a financial institution.23

22According to the Guidelines, 

[a]n offense shall be deemed to have "substantially jeopardized

the safety and soundness of a financial institution" if, as a consequence of the offense, the institution became insolvent; substantially reduced benefits to pensioners or insureds; was unable on

demand to refund fully any deposit, payment, or investment; was

so depleted of its assets as to be forced to merge with another

institution in order to continue active operations; or was placed

in substantial jeopardy of any of the above. 

USSG § 2B1.1 cmt. n.9 (emphasis added). 

23We are content to summarily reject the Defendants’ other sentencing

contentions. First, the Defendants assert that the Sentencing Guidelines

are unconstitutional because sentencing enhancements may be imposed

on the basis of non-jury factual findings, and mitigating character evidence does not reduce a defendant’s Guidelines sentence. The Supreme

Court has determined however, that the Sixth Amendment is not violated

by an advisory Guidelines regime. See United States v. Booker, 543 U.S.

220, 233, 265 (2005). In any event, the district court properly considered

mitigating character evidence, albeit with respect to the 18 U.S.C.

§ 3553(a) factors, rather than the Guidelines. Finally, the Defendants

maintain that the district court erroneously applied a "presumption of

reasonableness" to sentences within the applicable Guidelines ranges.

Although the Defendants are correct that a district court is not entitled

to apply such a presumption, see United States v. Battle, 499 F.3d 314,

322 (4th Cir. 2007), there is no indication that the district court did so

in this case. 

UNITED STATES v. JACKSON 25

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IV.

Pursuant to the foregoing, we affirm Jackson’s and Carey’s convictions and sentences.

AFFIRMED

26 UNITED STATES v. JACKSON

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