IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 11-50326

UNITED STATES OF AMERICA,

Plaintiff-Appellee 

v.

ERNESTO ALONSO LOPEZ, also known as Ernie Lopez, 

Defendant-Appellant 

Appeal from the United States District Court 

for the Western District of Texas

USDC No. 3:08-CR-1698-3

Before DAVIS, OWEN, and SOUTHWICK, Circuit Judges.

PER CURIAM:*

Ernesto Lopez appeals from his convictions for making a false statement

and conspiracy to make a false statement in violation of 18 U.S.C. §§ 371 and

1001. The district court found that Lopez’s conduct resulted in $86 million in

losses and sentenced Lopez to 36 months imprisonment, a downward departure

United States Court of Appeals

Fifth Circuit

F I L E D

August 20, 2012

Lyle W. Cayce

Clerk

Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

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from the Guidelines range. Lopez argues that the evidence was insufficient to

support the jury’s verdict. He also challenges his sentence, arguing that the

district court erred in finding that any loss resulted from his conduct and in

computing such a loss. We AFFIRM.

FACTUAL AND PROCEDURAL HISTORY

Lopez was employed as Chief Operating Officer of the National Center for

the Employment of the Disabled (“NCED”) from 2002 through April 2006. 

NCED participated in a program created by the Javits-Wagner-O’Day (“JWOD”)

Act. The program is designed to provide for the employment of disabled

individuals by designating federal contracts to be performed by nonprofits that

employ people who are blind or severely disabled. NCED’s participation in this

program resulted in contracts with several federal agencies. 

The Committee for Purchase from People Who are Blind or Severely

Disabled (“the Committee”) is the government agency responsible for overseeing

the JWOD program. Products that can be manufactured by the blind or severely

disabled are placed on a procurement list by the Committee. Once a product is

on the procurement list, the government entity must purchase that product from

the nonprofit designated by the procurement list.

For a nonprofit to qualify under JWOD, 75% of direct-labor hours must be

performed by individuals who are severely disabled. Documentation, including

a medical diagnosis that an individual is prevented from engaging in competitive

employment, is necessary to support that an individual is “severely disabled.” 

The regulations require an annual certification, Committee Form 404,

upon which the Committee relies to determine that the nonprofit is meeting the

requirements of the program. Each quarter, nonprofits submit the percentage

of direct-labor hours performed by severely disabled employees to NISH, an 1

“NISH” apparently is the formal name of the entity, having abandoned its former

1

name of the National Institute for the Severely Handicapped in favor of the acronym.

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intermediary between the Committee and the nonprofits. NISH compiles this

quarterly data to generate the Form 404 to be certified by the nonprofits

annually. If the nonprofit believes the numbers on the form are accurate, the

officers sign and return it. NISH then reviews the form and sends it on to the

Committee. 

As Chief Operating Officer, Lopez signed NCED’s Form 404 for the years

2003, 2004, and 2005. In compiling its quarterly numbers that were part of its

annual certification, NCED combined the labor hours worked by disabled

employees with its disadvantaged employees and reported all hours as

performed by disabled employees. Lopez was aware of the practice and signed

certifications regarding the percentage of disabled employees using this method.

In June 2005, an employee for the Committee, Lou Bartalot, met with

Lopez, NCED Chief ExecutiveOfficer Bob Jones, and the NCED human resource

manager. At this meeting, Lopez was told that it was improper to combine

disadvantaged employees with disabled employees in the hours reported to the

government. Jones told Bartalot that NCED believed many disadvantaged

employees were also disabled. Bartalot explained that JWOD required medical

documentation of disabilities. The Committee informed Jones that NCED would

need documentation that the individuals counted were severely disabled and

requested NCED adjust its 2005 and 2004 ratios. Bartalot expected the

documentation could take several months.

In October 2005, the NCED’s Human Relations manager sent Lopez the

Form 404 for his signature and explained that the total still included

disadvantaged employees. Lopez signed the form as presented to him. When

Bartalot received the annual certification, he noticed the numbers were similar

to the numbers he saw in June. Because Bartalot found NCED’s numbers

“highly suspect,” he took the issue to his boss. 

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As a result, Bartalot and two other individuals traveled to NCED to review

enough files to be “statistically certain as to whether or not the ratio was above

or below 75 percent.” When Bartalot determined that NCED was significantly

below the 75% requirement, a full review of NCED’s files was conducted. The

review revealed that only 9% of direct-labor hours were performed by employees

with adequate documentation. The Committee then took action and set

September 2006 as the deadline for NCED to come into compliance. Ultimately,

NCED reduced its workforce to come into compliance and changed its name to

ReadyOne.

In 2008, Lopez, Jones, and an NCED board member were indicted in the

United States District Court for the Western District of Texas. Lopez was

charged with 17 counts involving his employment at NCED. The jury returned

a verdict of guilty on two counts: Count 14, which charged Lopez with conspiracy

to make false statements and defraud the United States, and Count 17, which

charged Lopez with making a false statement in Form 404 on October 31, 2005.2

DISCUSSION

On appeal, Lopez argues that the evidence was insufficient to prove two

of the elements of making a false statement: (1) the statement was material, and

(2) an intent to deceive the Committee in making the statement. Lopez also

contends there was error regarding the determination of loss.

I. Materiality

We review the denial of a motion for judgment of acquittal de novo. United

States v. Richardson, 676 F.3d 491, 501 (5th Cir. 2012). In a challenge to the

sufficiency of the evidence, the court views the evidence “in the light most

Beside Count 14, on the verdict form the jury wrote “making a false statement.” 2

Although the conspiracy charged conduct from 2002 through 2005, the parties focus their

argument on evidence related to the October 2005 certification. We will do the same. 

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favorable to the government with all reasonable inferences and credibility

choices made in support of a conviction.” United States v. Najera Jimenez, 593

F.3d 391, 397 (5th Cir. 2010) (quotation marks and citation omitted). The court

will affirm the conviction if the evidence “allows a rational fact finder to find

every element of the offense beyond a reasonable doubt.” Id. (quotation marks

and citation omitted). 

To obtain a conviction under 18 U.S.C. § 1001, the government must prove

that Lopez knowingly and willfully made a statement to a federal agency that

was false and material. United States v. Taylor, 582 F.3d 558, 562 (5th Cir.

2009). A statement is material if it has “a natural tendency to influence or be

capable of influencing the decision of the decisionmaking body to which it was

addressed.” United States v. Abrahem, 678 F.3d 370, 374 (5th Cir. 2012)

(quotation marks and citation omitted). “Actual influence is not required – a

statement can be ignored or never read and still be material – and the statement

need not be believed.” Id.

In determining whether a false statement is material, the first step is to

ask two “questions of purely historical fact: (a) what statement was made? and

(b) what decision was the agency trying to make?” United States v. Gaudin, 515

U.S. 506, 512 (1995) (quotation marks omitted). Finally, to determine whether

the statement is material we must apply the legal standard of materiality to

these facts. Id. 

A. Questions of Historical Fact

Both parties agree that the answer to the first question is straightforward:

the statement is the certification that NCED had a 75% or greater percentage

of direct-labor hours performed by people with severe disabilities. 

Lopez recognizes that in the ordinary course of administration, the

decision the Committee is trying to make is whether the agency is eligible to

participate in the JWOD program. Lopez argues, however, the Committee was

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not making any decision based upon the 2005 Form 404 because the Committee

already knew NCED was not in compliance. Lopez points to evidence that

Bartalot knew in June 2005 that NCED was improperly combining employee

hours and knew that the past reports on which the Form 404 was based had not

been corrected. 

Bartalot testified that prior to receiving the Form 404 certification, he

believed NCED was performing physicals and was readjusting its ratio. After

his visit in June, Bartalot thought “it was possible to work things out” with

NCED. After observing the similarity in numbers in the 2005 Form 404,

Bartalot testified that if he believed “Mr. Jones that a majority of the people that

were disadvantaged were also severely disabled, that might be possible. But for

it to be exactly the same or as close . . . was highly unlikely.” Bartalot also

testified that NISH was aware of NCED’s method of combining disabled and

disadvantaged employees and had performed compliance training as recently as

September 2005. Bartalot stated that he would have expected NISH to do a

review before they approved the annual certification. 

Bartalot’s testimony reflects his knowledge of past inaccuracies and belief

that NCED was conducting physicals and documentation to correct past reports. 

The jury could reasonably infer that, despite past false statements, the

Committee was trying to decide whether NCED was in compliance with the

requirements of the JWOD program and, if not, whether probation and

ultimately expulsion was necessary. 

B. Applying the Legal Standard

Once the court answers the two questions of historical fact, we apply the

legal standard. See Najera Jimenez, 593 F.3d at 399-400. We now must decide

whether Lopez’s statement that more than 75% of direct labor hours were

performed by disabled employees was capable of influencing the Committee’s

decision as to whether NCED was in compliance with the JWOD program. 

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Lopez concedes that generally the certification is material because it is the

representation upon which the Committee relies to determine eligibility for

JWOD contracts. In this case, however, Lopez argues that the statement was

not material because a statement known to be false is not capable of influencing

the Committee’s decision. That is not so.

We have made “clear that the subjective knowledge of an agent or agency

that a statement is false does not factor into the materiality analysis.” Id. at

400. “Instead, we ask whether the functioning of the federal agency would have

been impaired had the agency relied on the defendant’s statement.” Id.

(quotation marks and citation omitted). Had the Committee relied on Lopez’s

representation, it could have decided NCED was eligible to participate in the

program without the knowledge that NCED had failed to conduct physicals and

correct its reporting errors. See id. Further, NCED could have continued

receiving contracts and operating without additional measures imposed in

March 2006. 

The evidence was sufficient to support the jury’s finding of materiality. 

We now turn to whether there was evidence of the necessary intent.

II. Intent to Mislead

“A false representation is one made with an intent to deceive or mislead.” 

United States v. Shah, 44 F.3d 285, 289 (5th Cir. 1995) (quotation marks and

citation omitted). A false statement is made knowingly and willingly “if the

defendant acts deliberately and with the knowledge that the representation is

false.” United States v. Guzman, 781 F.2d 428, 431 (5th Cir. 1986). Again, we

view all the evidence in the light most favorable to the verdict. United States v.

Harris, 666 F.3d 905, 907 (5th Cir. 2012). 

Lopez argues that there is no evidence he intended to deceive the

Committee because the evidence demonstrates he believed the Committee knew

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how NCED was reporting its hours and that he was open and honest throughout

the process. Lopez argues that the evidence demonstrates there was no

possibility he intended to mislead anyone. 

Lopez testified that he had been told not to combine the disadvantaged

and the disabled numbers prior to signing the 2005 Form 404, that he knew that

disadvantaged employees were included in the form, that he knew the 2005

Form 404 should have reported the true number of disabled employees, and that

he signed the 2005 Form 404 confirming that the report represented the

percentage of hours performed by disabled employees. He also testified that he

knew there would probably be some questions if the form reported a number less

than the 75% of direct-labor hours. 

Although Lopez testified that he believed the Committee knew that the

2005 percentage was computed by combining disabled and disadvantaged

employees when he signed the form, there was also evidence that he had signed

the form because “that’s what Mr. Jones wanted.” A reasonable jury could

conclude that Lopez intended to deceive the Committee in signing the form.

III. Determination of Loss

The district court determined that a special rule for government benefits

applied in this case. This rule provides that “loss shall be considered to be not

less than the value of the benefits obtained by unintended recipients or diverted

to unintended uses.” U.S.S.G. § 2B1.1 cmt. n.3(F)(ii). The district court found

that because NCED did not meet the 75% threshold, it was an “unintended

recipient” of JWOD contracts. Further, the district court found that Lopez

should be accountable for the contracts from the time of the certification in

October 2005 through March 2006 when the false statement was discovered. 

We review the district court’s method for determining loss de novo as an

application of the Guidelines. United States v. Harris, 597 F.3d 242, 250-51 (5th

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Cir. 2010). “Factual determinations regarding loss amount for guideline

calculation purposes are reviewed for clear error.” Taylor, 582 F.3d at 564

(quotation marks and citation omitted). 

Lopez first argues that the district court erred in determining that any loss

resulted from his conduct and, to the extent there was any loss, the district court

erred in computing its amount. Specifically, Lopez contends the government did

not present evidence that any contracts were awarded in reliance on the 2005

Form 404, that the certification only serves as the basis for continued

participation in the JWOD program, and that the contract was not cancelled

even after Lopez’s false statement was fully documented. 

The district court heard evidence that once the Committee confirmed that

NCED was not in compliance in March 2006, it required NCED to take steps to

come into compliance. Ultimately, NCED downsized and transferred a number

of contracts to a related corporation to comply with the Committee’s

requirements. Lopez’s certification enabled NCED to remain in the JWOD

program at its original levels before the Committee imposed these measures. 

Thus, the district court did not clearly err in determining that the false

statement allowed NCED to obtain benefits to which it was not entitled.

If any loss resulted from his conduct, Lopez argues that the district court

erred in determining that loss to be the face value of the contracts. Lopez

contends that loss should be computed by a price-variance method where the

court subtracts the price the government would pay a commercial provider from

the price the government paid NCED under the JWOD contract. 

The Application Note 3 to Section 2B1.1 states that, “Notwithstanding

subdivision (A)” – which is the “General Rule” for calculating loss in this case –

certain “special rules shall be used to assist in determining loss in the cases

indicated.” U.S.S.G. § 2B1.1 cmt. n.3(F); see United States v. Tupone, 442 F.3d

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145, 154 n.7 (3d Cir. 2006). One of the special rules is the government-benefits

rule at issue here. 

The Guidelines do not define “Government Benefits.” Decisions from our

sister circuits provide useful analysis. The Eighth Circuit held that a district

court properly applied the government-benefits rule where a defendant used

funds from a government program dedicated to asbestos removal to perform

renovations unrelated to asbestos removal. United States v. Peters, 59 F.3d 732,

733 (8th Cir. 1995). The Seventh Circuit described contracts received under a

municipal ordinance directing contracts to “minority- and woman-owned

businesses” as a government benefit. United States v. Leahy, 464 F.3d 773, 790

(7th Cir. 2006) 

The Eleventh Circuit described the Disadvantaged Business Enterprises

(“DBE”) program as an “affirmative action program[] aimed at giving exclusive

opportunities to certain women and minority businesses,” and as such was a

government-benefit program. United States v. Maxwell, 579 F.3d 1282, 1306

(11th Cir. 2009); see also United States v. Bros. Constr. Co. of Ohio, 219 F.3d 300,

317-18 (4th Cir. 2000) (applying the government-benefits rule in a case involving

contracting with a DBE). The court concluded that unlike standard construction

contracts, DBE “contracts focus mainly on who is doing the work.” Maxwell, 579

F.3d at 1306.

Contracts obtained through the JWOD program can be distinguished in

the same manner: the focus in the JWOD program is on providing employment

opportunities for the severely disabled, not on the specific product or service

provided. The district court did not err in applying the government-benefits rule

in this case and declining to use the price-variance method urged by Lopez. 

Although the district court did not err in applying the government-benefits

rule, it failed to exclude the benefits that reached intended beneficiaries. The

government-benefits rule was revised in 2001 “to clarify that loss . . . only

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includes amounts that were diverted from intended recipients or uses,” not

amounts received by authorized persons. U.S.S.G. app. C vol. II, at 180 (2010). 

“[I]f such benefits flowed through an unauthorized intermediary, as long as they

went to intended recipients for intended uses, the amount of those benefits

should not be included in loss.” Id. at 180. Because nine percent of NCED’s

direct labor hours were performed by the severely disabled, Lopez should not be

responsible for the funds that benefitted the severely disabled. 

Although the district court should have excluded the portion of the funds

that did in fact reach intended recipients, this exclusion would not result in a

lower offense level. The 24 level enhancement applies where loss is more than

$50 million but less than $100 million. See U.S.S.G. § 2B1.1(b)(1)(M). A

deduction for the funds attributable to the benefits obtained by intended

recipients would not result in a lower Guidelines range and therefore is

harmless. See Taylor, 582 F.3d at 564-65.

We AFFIRM.

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