UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 95-50206

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

ANTONY MICHAEL UPTON,

SANTA BARBARA CASTLE DEVELOPMENT CORP.,

a/k/a Castle Construction Corp., and

RONALD R. BARRICK,

Defendants-Appellants.

Appeal from the United States District Court

For the Western District of Texas

 July 29, 1996

Before GARWOOD, DAVIS, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Ronald Barrick, Antony Upton and Santa Barbara Castle

Development Corporation, a/k/a/ Castle Construction Corporation,

were convicted on numerous counts of conspiring to defraud the

United States Air Force in violation of 18 U.S.C. § 286, and for

submitting false claims and making false statements to the Air

Force for reimbursement of bond premiums in violation of 18 U.S.C.

§§ 287 and 2. Barrick was also convicted on three additional

counts of making, or causing to be made, a fraudulent statement of
2

material fact to the Air Force in violation of 18 U.S.C. §§ 1001

and 2. The district court sentenced Barrick to 63 months

imprisonment, three years supervised release, and ordered Barrick

to pay restitution of $1,804,879.99. The district court sentenced

Upton to 24 months imprisonment, three years supervised release and

ordered Upton to pay $363,813.69 in restitution. Castle

Construction, the corporate defendant, was sentenced to five years

probation and ordered to pay $363,813.69 in restitution. On

appeal, Barrick, Upton and Castle Construction challenge their

respective convictions and sentences. We affirm in part and vacate

and remand in part. 

I. Background and Procedural History

Retired United States Air Force Colonel Ronald Barrick, a

practicing lawyer prior to these proceedings, owned Benefax Surety

Corporation (Benefax) and United Fidelity and Trust Company (United

Fidelity). Benefax, a Texas corporation, operated as a small

surety bond brokerage business and received finders fees from

construction contractors for locating individual sureties who would

provide and guarantee the payment and performance bonds required by

government contracts. The corporation had two full-time employees

and two part-time employees. Roland Maness, a certified public

accountant, and Pamela McDaniels, a licensed bonding agent and

office manager, worked full-time. Two students, Susan Frericks and

Christine McDaniels, provided part-time help. Barrick’s other

business, United Fidelity, a regulated Texas trust company, made
 

1 The Miller Act provides, in pertinent part:

Before any contract, exceeding $25,000 in amount,

for the construction, alteration, or repair of any public

building or public work of the United States is awarded

to any person, such person shall furnish to the United

States the following bonds, which shall become binding

upon the award of the contract to such person, who is

hereinafter designated as “contractor”:

(1) A performance bond with a surety or sureties

satisfactory to the officer awarding such contract,

and in such amount as he shall deem adequate, for

the protection of the United States.

(2) A payment bond with a surety or sureties

satisfactory to such officer for the protection of

all persons supplying labor and materials in the

prosecution of the work provided for in said

contract for the use of each such person. Whenever

the total amount payable by the terms of the

contract shall be not more than $1,000,000 the said

payment bond shall be in a sum of one-half the

total amount payable by the terms of the contract.

Whenever the total amount payable by the terms of

3

business loans to contractors who required start up or mobilization

funding. 

Barrick’s co-defendant, Antony Michael Upton, owned a small

construction company, Santa Barbara Castle Development Corporation

a/k/a Castle Construction (Castle). Castle built roofs for small

residential and commercial buildings. 

In the summer of 1989, Vandenburg Air Force Base in California

sought fixed price bids from civilian contractors on two roofing

contracts. Castle submitted a successful bid on Air Force

contracts, No. F04684-89-C-0047 and F04684-89-C-0052 (hereinafter

No. 47 and No. 52). The Miller Act, 40 U.S.C. § 270(a), required

Castle to provide both a performance bond and a payment bond after

its successful bid.1
the contract shall be more than $1,000,000 and not

more than $5,000,000, the said payment bond shall

be in a sum of 40 per centum of the total amount

payable by the terms of the contract. Whenever the

total amount payable by the terms of the contract

shall be more than $5,000,000 the said payment bond

shall be in the sum of $2,500,000.

40 U.S.C. § 270a(a) (1986). The Miller Act was amended in 1994 to

eliminate the requirement that the construction contract exceed

$25,000. See 40 U.S.C. § 270a(a) (Supp. 1996). 

 

2 An AIS states the assets and liabilities of the individual

surety and the resulting net worth that the surety holds to

guarantee the bond. A bank officer or officer of the court must

also sign a Certificate of Sufficiency located on the back of the

AIS. This certificate represents that the signer is aware of the

surety’s assets and that the AIS accurately represents the

financial position of the surety.

4

Castle then contacted Benefax and retained it to provide

individual sureties to guarantee the payment and performance bonds.

Benefax retained Martin H. McGuffin and Terry L. Kinser as

individual sureties for the contracts. To be properly accepted as

guarantors of these bonds, McGuffin and Kinser submitted notarized

Affidavits of Individual Surety (AIS).2 McGuffin’s AIS represented

his net worth as $3,782,677, while Kinser’s AIS stated a net worth

of $7,417,193. Trial testimony revealed that McGuffin signed blank

performance and payment bonds and the information was completed

later. McGuffin also admitted that the signature on one of the

AISs was not his. McGuffin testified that he told Barrick that he

was having financial difficulties and the bank would not sign the

Certificate of Sufficiency. Barrick told him not to worry and then

signed the Certificate of Sufficiency as the President of United

Fidelity. 
 

3 A Senior Vice President of Glendale Federal Savings Bank

signed the Certificate of Sufficiency for Kinser’s AIS.

 

4 At the time that these contracts were awarded, the federal

contract officers were not required to perform independent

investigations into the financial solvency of sureties or the

validity of an AIS.

5

Apparently, Kinser’s AIS also reflected an inflated net worth.

Kinser testified that the AIS showed an inflated net worth because

Barrick raised it to $5,000,000 on the AIS and then raised it again

to over $7,000,000.3 Kinser explained that he and Barrick knew

that the AIS figures were “incorrect and fraudulent.” Later, the

Air Force contract officers approved the AISs based on the

information provided by the sureties and guaranteed by the

signatures on the Certificates of Sufficiency.4 

Castle issued two checks to Benefax in payment of the bond

fees, but asked Barrick not to cash the checks until Castle

obtained either a bank loan, a loan from United Fidelity, or until

Castle received its first construction and bond reimbursement from

the Air Force roofing job. Castle sought outside financing for the

mobilization and bond fee costs but was unsuccessful.

Consequently, Castle had no mobilization money and could not start

the Air Force roofing job nor could it pay for the payment or

performance bonds. 

Barrick, through United Fidelity, apparently agreed to loan

Castle $100,000 for its mobilization costs. Because Castle had no

funding, Barrick also agreed to wire transfer the loan proceeds

before negotiating Castle’s two checks written to Benefax for

payment of the bond costs. Barrick gave Upton paid receipts for
 

5 Benefax did not appeal its conviction.

6

the Air Force roofing job’s payment and performance bonds and held

Castle’s two checks for these bonds.

Contractors are generally paid for their work and materials on

a monthly basis by submitting a progress payment claim. See 48

C.F.R. § 52.232-5(b). Furthermore, the Federal Acquisition

Regulations provide that the government shall, upon request,

reimburse the contractor for the cost of the payment and

performance bonds upon furnishing the government evidence that the

sureties received full payment. 48 C.F.R. § 52.232-5(g). 

Upton and Castle submitted to the government a request for

reimbursement of the bond costs on both contracts. As evidence

that the bonds had been paid, Upton attached the paid invoices from

Benefax. These invoices showed that Benefax had received

$27,047.40 from Castle for Contract 47 and $12,793 for Contract 52

and that Castle owed nothing on the bonds. The Air Force then

issued checks of $27,047.40 and $12,793 to “reimburse” the payment

of these premiums or bond costs. Castle never completed the

roofing jobs and the sureties did not honor their contractual

commitments. 

The Grand Jury returned an eight count indictment. Counts one

through four charged Barrick, Upton, Castle Construction, and

Benefax Surety Corporation5 with conspiracy to defraud and

knowingly submitting false claims to the Air Force on two different

construction contracts in violation of 18 U.S.C. §§ 286, 287 and 2.

Count five charged Barrick, Benefax, and Susan K. Frericks a/k/a
 

6 Susan K. Frericks a/k/a Susan K. Barrick pled guilty to a

misdemeanor for her role in improperly notarizing the surety’s

affidavit for Contract 52. She notarized the affidavit without

being in the presence of the surety, McGuffin. 

 

7 The jury found Roland Aaron Maness not guilty on all

charged counts.

7

Susan K. Barrick6 with knowingly and wilfully making false

statements to the Air Force in violation of 18 U.S.C. §§ 1001 and

2. Counts six and seven charged Barrick, Benefax, and Roland Aaron

Maness7 with knowingly and wilfully making false statements to the

Air Force in violation of 18 U.S.C. §§ 1001 and 2. Count eight

charged Benefax and Maness with presenting a falsely made, forged

or counterfeit writing to the Air Force in violation of 18 U.S.C.

§§ 494 and 2. The jury found Barrick, Upton, and Castle guilty on

all charged counts. Barrick, Upton, and Castle filed timely

appeals to their convictions and sentences.

II. Discussion

A. Sufficiency of the Evidence

Barrick, Upton and Castle Construction contend that the

evidence was insufficient to support their convictions for

conspiracy and submitting false claims to the Air Force in

violation of 18 U.S.C. §§ 286, 287 and 2. As a general rule we owe

great deference to the jury’s verdict. United States v. Walters,

1996 WL 350701, *4 (5th Cir. 1996). We review a defendant’s claim

that evidence was insufficient to support a verdict in the light

most favorable to that verdict and we will affirm the conviction

“`if a rational trier of fact could have found that the government
8

proved all essential elements of the crime beyond a reasonable

doubt.’” United States v. Schuchmann, 84 F.3d 752, 754 (5th Cir.

1996) (quoting United States v. Castro, 15 F.3d 417, 419 (5th

Cir.), cert. denied, 115 S. Ct. 127 (1994)). 

In order to sustain a conviction under the substantive count

for filing false, fictitious or fraudulent claims to the United

States under 19 U.S.C. § 287, the government must prove: “(1) that

the defendant presented a false or fraudulent claim against the

United States; (2) that the claim was presented to an agency of the

United States; and (3) that the defendant knew that the claim was

false or fraudulent.” United States v. Okoronkwo, 46 F.3d 426, 430

(5th Cir., cert. denied, 116 S. Ct. 1107 (1995). To sustain the

conspiracy part of this conviction under 18 U.S.C. § 286, the

government must prove: “(1) that there was a conspiracy to defraud

the United States; (2) that the defendant knew of the conspiracy

and intended to join it; and (3) that the defendant voluntarily

participated in the conspiracy.” Id.

In this case, the record shows that ample evidence exists to

support appellants’ convictions. Appellants do not contest the

first two prongs of their § 287 conviction, i.e., that a false

claim was submitted, and that the claim was presented to an agency

of the United States. Appellants argue that they did not know that

the claim was false or fraudulent. Their contention rests on the

alleged ambiguity of the term “payment” as it relates to the

payment and performance bonds under the Federal Acquisition

Regulations (FARs), 48 C.F.R. § 52.232-5 (1986). 
 

8 Webster’s defines “reimburse” as “1. to repay; 2. to pay

back or compensate (a person) for money spent or for losses or

damages incurred.” WEBSTER’S II NEW RIVERSIDE UNIVERSITY DICTIONARY 991

(1984).

9

Section 52.232-5(g) states: “In making these progress

payments, the Government shall, upon request, reimburse the

Contractor for the amount of premiums paid for performance and

payment bonds (including coinsurance and reinsurance agreements,

when applicable) after the Contractor has furnished evidence of

full payment to the surety.” 48 C.F.R. § 52.232-5(g). Appellants

contend that on December 4, 1989, Benefax agreed to accept the two

checks from Castle in full payment for the Miller Act bonds.

Appellants then agreed that Benefax would not negotiate these

checks until Upton obtained outside financing. Because the parties

allegedly believed that Castle’s writing of these checks

constituted payment for the bonds, Castle then submitted claims to

the Air Force for reimbursement of the bond costs. 

Appellants argue that the language of the Federal Acquisition

Regulations is ambiguous in that § 52.232-5(g) requires a

contractor to furnish evidence of full “payment” to the surety and

does not require the contractor to have “incurred the cost” of the

bond. We disagree. The plain language of § 52.232-5(g) provides

for the reimbursement of bond premiums. Reimbursement necessarily

implies that something has been paid which requires compensation

for money spent.8 

Furthermore, sufficient evidence exists upon which a rational

trier of fact could have found that appellants never planned on
10

cashing these checks and that their “good faith” misunderstanding

of the Federal Acquisition Regulation was, in reality, a scheme to

defraud the government. Upton faxed a letter dated October 5,

1989, to Benefax stating that per their “agreement,” Castle’s first

priority was to pay Benefax for the bond premiums from Contracts 47

and 52 through use of the first draw from the Air Force. The first

draw was to cover Castle’s bonding and mobilization costs. Upton

also signed a note to Barrick which referred to their “agreement”

and asked Barrick not to deposit the checks until there was a

complete wire transfer of funds. In the note, Upton also asked for

a “paid in full” invoice to bill the Air Force. Further, the

government elicited evidence of Upton’s bookkeeping tactics. Upton

listed the bond checks as non-debits, essentially acknowledging

that those checks would not be cashed. Upton also explained to one

of the sureties, Kinser, that he could not pay for the bonds before

the job started but that he would get the money from draws against

the Air Force and then repay Benefax who would then pay Kinser.

Barrick also told Kinser that he would have to wait until Upton

received his first draw from the Air Force to receive payment for

the bond. Barrick admitted to Agent Eddingfield that, in his

business, contractors obtained bonds with the understanding that

the checks for the bonds would not be negotiated until the

contractor recovered draws from the job. 

Testimony from M. Lee Shaffer, a special agent with the Air

Force Office of Special Investigations, and Kim Taylor, Castle’s

office manager/bookkeeper, revealed that Upton never intended for
11

the bond payment checks to be cashed. Upton, in fact, fired Taylor

for asking questions about the bookkeeping surrounding these checks

and why the checks were recorded as zero debit transactions. Ellen

Neal, an accountant hired by Upton in February 1990, also

questioned certain record-keeping practices by Upton and was

terminated. Based on these facts, the jury did not have to accept

the contentions of Barrick and Upton that there were no false

claims on the reimbursement of Contracts 47 and 52 because Upton

presented checks to Benefax for the payment of the bond fees. 

Even though these checks were never cashed, appellants contend

that the paid-in-full invoices were not false and Barrick and Upton

did not intend to defraud the government by seeking reimbursement.

However, ample evidence suggests that Barrick did engage in a

scheme whereby under-funded contractors, such as Upton, could

obtain construction contracts and improperly obtain “loans” from

the government for the bond fees. This scheme permitted underfunded construction companies to receive contract jobs that they

were unable to financially support. Therefore, considering the

evidence in a light most favorable to the jury verdict and

affording the government all reasonable inferences and credibility

choices, we hold that the government presented sufficient evidence

to show that Barrick, Upton, and Castle knew that the reimbursement

claims submitted to the Air Force for the two contract bonds were

false claims. Based on the facts in this record, a jury could

reasonably conclude that appellants engaged in a conspiracy to

defraud the Air Force by seeking reimbursement for these false
 

9 Barrick also contends that the district court erred in

failing to submit “willfully” to the jury as to the aiding and

abetting counts, 18 U.S.C. § 2. The district court’s instructions

followed the Fifth Circuit’s pattern instructions for these counts

and were correct statements of the law. Therefore, we find no

error with the district court’s instructions as to 18 U.S.C. § 2.

12

claims. 

B. Jury Instructions 

Next, appellants contend that the district court erred in

refusing to charge the jury on “good faith” and “ambiguity.”9 “We

afford the district court substantial latitude in formulating the

jury instructions and review a district court’s refusal to give a

requested instruction for abuse of discretion.” United States v.

Smithson, 49 F.3d 138, 142 (5th Cir. 1995) (citing United States v.

Chaney, 964 F.2d 437, 444 (5th Cir. 1992)). To successfully

challenge the district court’s refusal to include a requested

instruction, the appellants must show that their instruction “(1)

was a correct statement of the law, (2) was not substantially

covered in the charge as a whole, and (3) concerned an important

point in the trial such that the failure to instruct the jury on

the issue seriously impaired the defendant’s ability to present a

given defense.” Id. 

Appellants objected to the district court’s refusal to include

“good faith” and “ambiguity” in the jury instructions and now argue

that the district court’s failure to give these instructions

seriously impaired their ability to present a “good faith” defense.
13

We disagree. This Circuit permits a district court to refuse to

submit an instruction regarding a good faith defense if the defense

“is substantially covered by the charge given and the defendant has

had the opportunity to argue good faith to the jury.” United

States v. Giraldi, 1996 WL 339177, *8 (5th Cir. 1996); and see

United States v. Storm, 36 F.3d 1289, 1294 (5th Cir. 1994), cert.

denied, 115 S. Ct. 1798 (1995). Both Barrick and Upton presented

testimony and evidence in support of their good faith belief or

understanding that the bond fees had been paid by Castle

Construction’s checks. Appellants were permitted to argue that,

based on this belief, they never intended to defraud the

government. 

The good faith defense was also substantially covered by the

charge. The district court instructed the jury on “knowingly” and

“willfully.” The jury was instructed that “knowingly” “means that

the act was done voluntarily and intentionally and not because of

mistake or accident.” “Willfully” or “willingly” was defined to

“mean that the act was committed voluntarily and purposely, with

the specific intent to do something the law forbids - that is to

say, with bad purpose either to disobey or disregard the law.”

Appellants’ good faith defense was substantially covered by the

charge given and was argued to the jury. As such, we hold that the

district court did not abuse its discretion by charging the jury in

this manner. 

Appellants also argue that the district court erred in failing

to instruct the jury on “ambiguity” as it relates to the term
 

10 Barrick also contends that the district court erred in

denying his motion for judgment of acquittal based on evidence that

“payment” is an ambiguous term. Barrick fails to cite to authority

or present record references in support of his contention. We

decline to reach the merits of this argument because claims made

without citation to authority or references to the record are

considered abandoned on appeal. United States v. Ballard, 779 F.2d

287, 295 (5th Cir.), cert. denied, 475 U.S. 1109 (1986). 

14

“payment” under the Federal Acquisition Regulations § 52.232-5(g)

because “payment” is not defined by the regulations.10 The district

court refused to allow the jury to decide the meaning of “payment”

in § 52.232-5(g). The district court stated: “It borders on the

absurd to give an instruction to the jury as to -- they determine

regulations and statutes ambiguous. This was either a false claim

or not. The Government’s position is far more plausible than

[appellants], and that is that I should determine, as a matter of

law, payment, and then just submit the issue.” 

We hold that the district court correctly refused to allow the

jury to interpret § 52.232-5(g). See United States v. Vidaure, 861

F.2d 1337, 1340 (5th Cir. 1988), cert. denied, 489 U.S. 1088

(1989). In Vidaure, we affirmed a district court’s refusal to

instruct the jury on whether aggravated robbery met the statutory

definition of the term “violent felony” under 18 U.S.C. § 924

because the answer did not depend on probative value of the

evidence but instead depended on an interpretation of the statute.

Id. Similarly, the district court in this case refused to submit

an instruction on the term “ambiguity” as it relates to the term

“payment” under the Federal Acquisition Regulations because the

definition of the term “payment” depends on an interpretation of
 

11 Although we find the Eleventh Circuit’s decision in White

instructive, we are compelled to reach the issue of whether

materiality is an element of § 287 after the Supreme Court’s

decision in Gaudin. 

15

the statute and, as such, is a question of law for the court to

decide. Id. For the foregoing reasons, we agree that the

definition of the term “payment” under § 52.232-5(g) is a matter of

statutory interpretation and was correctly decided by the court as

a matter of law. 

C. Materiality as an Element of 18 U.S.C. § 287

Barrick maintains that United States v. Gaudin, 115 S. Ct.

2310, 2320 (1995), which required the jury to determine materiality

under 18 U.S.C. § 1001, also applies to § 287. Barrick argues that

the district court committed plain error by failing to submit the

question of materiality under § 287 to the jury. This court has

not expressly addressed whether materiality is an element of § 287.

See United States v. Haynie, 568 F.2d 1091, 1092 (5th Cir. 1978)

(“[T]he issue of whether materiality is an element of a section 287

charge has not been squarely presented to and decided by this

court.”). In Haynie, we concluded without deciding that, if

materiality is an element of § 287, “the issue is one for the trial

judge to handle as a question of law.” id.; and see United States

v. White, 27 F.3d 1531, 1534 (11th Cir. 1994) (quoting same)

(holding that it is unnecessary to determine whether materiality is

an element under § 287 because the forged signatures are material

as a matter of law).11 
 

12 We acknowledge that the Supreme Court has granted

certiorari in United States v. Wells, 116 S. Ct. 1540 (1996), on

the issue of whether materiality is an element of 18 U.S.C. 1041,

the crime of making false statements for the purpose of influencing

a federally insured banking institution. As in 18 U.S.C. § 287,

materiality is not explicitly included in the definition in § 1041.

Therefore, the Supreme Court’s decision in Wells may influence this

case and others that have wrestled with the scope of Gaudin’s

holding concerning materiality. However, we do not believe that the

decision in this case should be stayed pending the Supreme Court’s

decision in Wells. 

16

After Gaudin, materiality is considered a question of fact for

the jury to decide. Gaudin, 115 S. Ct. at 2313-2320. Therefore,

first we must determine whether materiality is an element of § 287

and, if so, we must then ascertain whether the district court

committed plain error by failing to submit the question of

materiality to the jury. Four Circuit Courts have addressed this

issue reaching two different conclusions.12 Compare United States

v. Wells, 63 F.3d 745, 750 (8th Cir. 1995) (holding that

materiality is an essential element of a § 287 charge), cert.

granted, 116 S. Ct. 1540 (1996), and United States v. Snider, 502

F.2d 645, 652 n.12 (4th Cir. 1974) (same) with United States v.

Taylor, 66 F.3d 254, 255 (9th Cir. 1995) (holding that while § 1001

expressly makes materiality an element of the offense, § 287 does

not and Gaudin does not apply to a § 287 conviction), United States

v. Parsons, 967 F.2d 452, 455 (10th Cir. 1992) (holding that

materiality is not an element required by § 287) and United States

v. Elkin, 731 F.2d 1005, 1009 (2d Cir. 1984) (same), cert. denied,

469 U.S. 822 (1984). 

In making our own determination of whether materiality is an

element of § 287, we look to the plain language of the statute.
17

Section 287 states: 

Whoever makes or presents to any person or officer

in the civil, military, or naval service of the

United States, or to any department or agency

thereof, any claim upon or against the United

States, or any department or agency thereof,

knowing such claim to be false, fictitious, or

fraudulent, shall be imprisoned not more than five

years and shall be subject to a fine in the amount

provided in this title. 

18 U.S.C. § 287 (Supp. 1995). The plain language of this provision

in no way suggests that materiality is an element of the offense.

“When we find the terms of a statute unambiguous, judicial inquiry

is complete except in rare and exceptional circumstances.”

Demarest v. Manspeaker, 498 U.S. 184, 190, 111 S. Ct. 599, 604

(1991) (citations omitted). The plain language of a statute must

be followed unless the language is “so bizarre that Congress could

not have intended it.” Id. at 191, 111 S. Ct. at 604. We therefore agree with our sister Circuits’ decisions in Taylor, 66 F.3d

at 255, Parsons, 967 F.2d at 455, and Elkin, 731 F.2d at 1009, and

hold that materiality is not an element of 18 U.S.C. § 287. Accord

United States v. Irwin, 654 F.2d 671, 682 (10th Cir. 1981) (the

legislative history of § 287 does not indicate that Congress

intended to make materiality an element of the statute), cert.

denied, 455 U.S. 1016 (1982). Because we hold that materiality is

not an element of § 287, Barrick’s argument that the district court

committed error by not submitting the question of materiality to

the jury fails. 

D. Materiality as an Element of 18 U.S.C. § 1001
18

The jury found Barrick guilty of counts five, six, and seven

for making false statements in violation of 18 U.S.C. § 1001.

Prior to Ray v. United States, 481 U.S. 736, 737, 107 S. Ct. 2093,

2093-94 (1987), once a defendant's conviction on a single count has

been sustained, it was not necessary for the appellate court to

reach the merits of the other counts. See, e.g., United States v.

Strickland, 509 F.2d 273 (5th Cir. 1975) (explaining the concurrent

sentence doctrine). However, under Ray, the district court's $50

assessment for each count serves as a collateral consequence of

those convictions and, in this case, forces us to consider

Barrick's remaining arguments. Ray, 481 U.S. at 737, 107 S. Ct. at

2093-94.

At the time of trial, this circuit had held that materiality

was an element of § 1001, but it was considered a question of law

for the court to decide. United States v. Hausmann, 711 F.2d 615,

617 (5th Cir. 1983). Based on this prior precedent, Barrick did

not object to district court's failure to charge the jury on

materiality. When the Supreme Court decided Gaudin, which was

after Barrick's trial but before the case was argued on appeal,

materiality became a question of fact for the jury to decide.

Gaudin, 115 S. Ct. at 2320. We review the district court's failure

to charge the jury on the question of materiality under § 1001 for

plain error when a defendant fails to object to the district

court's tendered instruction. United States v. Jobe, 77 F.3d 1461,

1475 (5th Cir. 1996) (failure to object to a district court's

instruction requires a review for plain error). 
19

Under plain error review, the petitioner must show that: (1)

error occurred; (2) the error was clear or obvious; and (3) the

error affected the petitioner's substantial rights. United States

v. Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en banc) (citing

United States v. Olano, 113 S. Ct. 1770, 1776-79 (1993)), cert.

denied, 115 S. Ct. 1266 (1995). The Supreme Court has added what

amounts to a fourth factor, that is, even if the petitioner

establishes these first three factors, a reviewing court “need not

exercise its discretion to correct the error unless it seriously

affects the fairness, integrity, or public reputation of judicial

proceedings.” Jobe, 77 F.3d at 1476 (citing Olano, 113 S. Ct. at

1778). Therefore, even if we assume that Barrick has shown that

error occurred; that the error was clear or obvious; and that the

error affected the petitioner's substantial rights, we may exercise

our discretion to sustain the conviction. Id. 

After a complete review of the record, we cannot say that the

Gaudin error affected the fairness, integrity, or public reputation

of these judicial proceedings. Consequently, we decline to

exercise our discretion to correct the error in Barrick’s

conviction under § 1001. 

E. Restitution: Upton and Castle Construction

Upton and Castle argue that the district court erred in

ordering restitution to materialmen and supplier “victims” not
 

13 Barrick did not raise the issue of whether the district

court properly ordered restitution on appeal. Consequently, he has

waived that issue. United States v. Miller, 952 F.2d 866, 874 (5th

Cir.), cert. denied, 505 U.S. 1220 (1992).

20

named in the indictment.13 Appellants recognize that United States

v. Pepper, 51 F.3d 469, 473 (5th Cir. 1995), expressly allows for

restitution to be ordered for unnamed victims of a crime when the

scheme is specifically defined in the indictment. However,

appellants maintain that, in this case, the “scheme” was limited to

obtaining two roofing contracts. They assert that the district

court’s restitution assessment illogically extends Pepper to

include restitution for all losses that occurred as a result of

their successful bids on the roofing contracts. Appellants

maintain that the materialmen and suppliers are not victims of the

scheme alleged in the indictment but were merely victims of

Castle’s failure to complete the roofing jobs. 

We agree. “Restitution for victims can only be awarded for

the loss caused by the specific offense that is the basis of the

offense of conviction.” Pepper, 51 F.3d at 473 (citing Hughey v.

United States, 495 U.S. 411, 413, 110 S. Ct. 1979, 1981 (1990)).

In the present case, Upton and Castle were convicted of conspiracy

to defraud the United States and of presenting false claims to the

United States in violation of 18 U.S.C. §§ 286, 287 and 2. The

charges involved the submission of fraudulent reimbursement claims

relating to bond fees for two government roofing contracts.

Nothing in the indictment suggests that the criminal conduct of

fraudulently obtaining these contracts caused losses to materialmen
21

and suppliers. 

The record shows that Upton and Castle completed 92 percent of

contract 47 and 78 percent of contract 52. Uncontroverted evidence

supports Upton and Castle Construction’s argument that the United

States Department of Labor froze all progress payments to Castle on

these contracts because of labor union wage disputes with its

employees. As a result, Castle walked off the job, but that

occurred seven months after it made the fraudulent claims to the

Air Force. No evidence suggests that the losses sustained by the

materialmen and suppliers were related to the fraudulent claims

charged in this indictment. Consequently, we hold that the

district court erred in ordering restitution for the materialmen

and suppliers not named in the indictment and vacate the

restitution assessments for materialmen and suppliers who suffered

losses due to Castle’s failure to complete the roofing jobs. 

F. Other Sentencing Issues

1. Obstruction of Justice

Barrick maintains that the district court erred in imposing a

two level increase in his offense level for obstruction of justice

based on his failure to produce subpoenaed corporate records and

his lies to the grand jury that he had produced all relevant

records. See United States Sentencing Commission, Guidelines

Manual, § 3C1.1 (Nov. 1995). Barrick contends that, during plea

negotiations, the government discovered that he had not produced

certain records and that he had lied to the grand jury. Because
 

14 Rule 11(e)(6)(D) states:

(6) Inadmissibility of Pleas, plea Discussions, and

Related Statements. Except as otherwise provided in

this paragraph, evidence of the following is not,

in any civil or criminal proceeding, admissible

against the defendant who made the plea or was a

participant in the plea discussions:

. . . 

(D) any statement made in the course of plea

discussions with an attorney for the government

which do not result in a plea of guilty or which

result in a plea of guilty later withdrawn.

 

15 U.S.S.G. § 1B1.8 states:

(a) Where a defendant agrees to cooperate with the

government by providing information concerning

unlawful activities of others, and as part of that

cooperation agreement the government agrees that

self-incriminating information provided pursuant to

the agreement will not be used against the

defendant, then such information shall not be used

in determining the applicable guideline range,

except to the extent provided in the agreement.

22

the government gained this information during plea negotiations,

the production of records and the veracity of his statements to the

grand jury should have been excluded from evidence under FED. R.

CRIM. P. 11(e)(6)(D)14 and U.S.S.G. § 1B1.8.15 

We afford a district court great deference in its application

of the sentencing guidelines. Storm, 36 F.3d at 1295. A finding

of obstruction of justice under § 3C1.1 is a factual finding

reviewed for clear error. Id. However, we review the district

court’s interpretation or application of the sentencing guidelines

de novo. United States v. Tedder, 81 F.3d 549, 550 (5th Cir.

1996). In this case, Barrick erroneously relies on Rule

11(e)(6)(D) for protection from his false testimony before two
23

grand juries. The district court held hearings, heard witnesses,

and made extensive findings on Barrick’s two level increase in

offense level for obstruction of justice. The district court

explained:

Well, the objection with regard to the

recommendation of the Probation Department on

obstruction of justice is overruled. I find

factually that the testimony of Mr. Barrick in the

grand jury on Page 11 of Exhibit 11, quote, “[a]nd

there is no one else that would have any records to

your knowledge that pertain to Benefax? Answer: No,

sir. Or to Fidelity and Surety? Answer: No, sir.

Question: United Fidelity, was that the other

business?

Answer: United Fidelity and Trust Company.

Question: All right, sir. Obviously what we’re

trying to establish on this record is that we have

obtained all of the records which were sought in

the subpoena. And I take it you are willing to

assure us that you have complied fully with the

subpoena and there are no other records in

existence to your knowledge?

Answer: That is correct.”

That that [sic] was false testimony as the

undisputed evidence establishes clearly that there

were mounds of other evidence. 

And then again on July 15, 1992, on Page 7 of

Exhibit 10, Line 24, “So that your testimony is you

have fully complied now with Items Number 3 and 4

and previously fully complied with Items 1 and 2? 

That is correct.” 

Even at that time there were more records

available that were delivered.

I also find factually that in light of the

failure to provide these records, which obviously

delayed the prosecution of this case and the

investigation by the grand jury and the

presentation of charges, so that ultimately these

cases are what I call stale. We are trying them in
24

1994 for events that occurred years before -- that

Mr. -- that one of the results and purposes of Mr.

Barrick ultimately was to attempt to negotiate a

favorable plea agreement before the Government had

all of the financial information and could see the

extent and duration of the criminal offenses that

were involved in this.

So I will sustain the recommendation of the

Probation Department with regard to the obstruction

of justice.

Barrick’s reliance upon FED. R. CRIM P. 11(e)(6)(D) to shield

him from an increase in offense level for obstruction of justice is

misplaced. We have held that Rule 11(e)(6)(D) and FED. R. EVID.

410(4) do not prohibit statements made during plea negotiations to

be used during sentencing. United States v. Paden, 908 F.2d 1229,

1234-35 (5th Cir. 1990), cert. denied, 498 U.S. 1039 (1991); and

see United States v. Medina-Estrada, 81 F.3d 981, 985-86 (10th Cir.

1996) (holding same). The two rules are virtually identical and

deserve the same treatment for purposes of their application to

sentencing proceedings. Id.; and see J. Moore & H. Bendix, MOORE’S

FEDERAL PRACTICE § 410.01[1.1] (2d ed. 1981) (suggesting that FED. R.

CRIM. P. 11(e)(6)(D) and FED. R. EVID. 410 should be treated the

same). 

In Paden, we also stated that “[a]t sentencing, the district

court may rely upon evidence of defendant’s credibility and

responsibility that is `sufficiently reliable.’” Paden, 908 F.2d

at 1225. In the present case, Barrick told the government that he

lied to the grand jury about submitting all records requested in

the subpoena. The district court correctly found these statements,

made by Barrick himself, to be sufficiently reliable and used them
 

16 Because we find no error in the district court’s

application or findings concerning U.S.S.G. § 3C1.1, we need not

address Barrick’s other arguments contesting the obstruction

enhancement. 

25

at sentencing to increase Barrick’s offense level for obstruction

of justice. After reviewing the record, we are convinced that the

district court committed no error. 

Barrick also argues that the district court erred in

increasing his offense level for obstructive conduct unrelated to

his offense of conviction. Barrick maintains that his false grand

jury testimony did not relate to the instant case and, as such,

should not be considered in applying § 3C1.1. However, the

enhancement for obstruction of justice under § 3C1.1 is proper any

time the defendant is aware of the action or investigation against

him and he conceals or attempts to conceal information material to

the investigation, prosecution, or sentencing of the instant

offense. United States v. Lister, 53 F.3d 66, 71 (5th Cir. 1995).

In this case, the obstruction enhancement was based on Barrick’s

untruthful testimony to the grand jury and his failure to produce

all relevant documents ordered by a subpoena. Even if we assume

that Barrick’s untruthful testimony and failure to produce certain

documents were unrelated to the offense of conviction, § 3C1.1 does

not require the obstructive conduct to be directly related to the

offense of conviction. Id. A sufficient nexus appears here. For

these reasons, we hold that the district court did not err in

increasing Barrick’s offense level for obstruction of justice under

U.S.S.G. § 3C1.1.16
26

2. “Organizer” of Criminal Activity 

Barrick contends that the district court erred in determining

that he was a “leader” or “organizer” under U.S.S.G. § 3B1.1 and,

therefore, subject to a four level increase in offense level. We

review a district court’s finding that a defendant was a “leader”

or “organizer” for clear error. United States v. Gaytan, 74 F.3d

545, 561 (5th Cir. 1996). 

Barrick’s argument appears to focus on his contention that he

was not a “leader” and that his organizational role in this offense

merely characterized him as a “middleman,” not subject to the four

level enhancement. We find this argument unpersuasive. The

district court clearly identified Barrick as an “leader” or

“organizer” under the guidelines. The court stated:

[A]s far organizers, I’ve got Mr. Barrick’s

daughter. The office manager had to know what was

going. [sic] Mr. Maness, even though he was

acquitted, was involved. Mr. Upton, Mr. Kinser,

Mr. McGuffin, Mr. Singh, Pam McDaniel, who is the

office manager; and at least five or six of the

other sureties that I’ve heard in evidence that

aren’t identified by name in the presentence

report, but that I’ve heard; and two of whom, --

Mr. Kelvington has indicated -- like Mr. Singh,

didn’t even come close on their assets. . . .I see

the organizer of five persons as a person who, in a

criminal activity does organize and use five people

for the criminal event, and there is no question

that Mr. Barrick did that with regard to the

sureties, the presentation of those records to the

Government. There are far more than five involved

in these criminal activities -- sureties that

couldn’t cover large overdrafts, much less the

millions of dollars that they were on in the

individual sureties.

United States Sentencing Guidelines § 3B1.1, comment. (n.4) lists

the following factors for a court to consider in determining
27

whether a defendant acted as a “leader” or “organizer:” 

the exercise of decision making authority, the

nature of the participation in the commission of

the offense, the recruitment of accomplices, the

claimed right to a larger share of the fruits of

the crime, the degree of participation in planning

or organizing the offense, the nature and scope of

the illegal activity, and the degree or control and

authority exercised over others.

After a thorough review of the record, we find it replete with

evidence supporting the district court’s finding that Barrick meets

some, if not all, of these requirements. Therefore, we find no

clear error.

CONCLUSION

Barrick’s conviction and sentence is AFFIRMED on all counts.

Upton and Castle Construction’s convictions are AFFIRMED on all

counts. Upton and Castle Construction’s sentences with respect to

restitution are VACATED and REMANDED for recalculation consistent

with this opinion. All other sentences are AFFIRMED. 

AFFIRMED in part and VACATED and REMANDED in part.