Source: http://openjurist.org/91/f3d/677
Timestamp: 2015-07-02 10:09:53
Document Index: 99575445

Matched Legal Cases: ['§ 286', '§ 287', '§ 1001', '§ 270', '§ 52', '§ 52', '§ 286', '§ 1001', '§ 1001', '§ 494', '§ 286', '§ 287', '§ 286', '§ 287', '§ 52', '§ 52', '§ 52', '§ 52']

91 F3d 677 United States v. Upton R | OpenJurist
91 F. 3d 677 - United States v. Upton R	Home91 f3d 677 united states v. upton r
91 F3d 677 United States v. Upton R 91 F.3d 677
41 Cont.Cas.Fed. (CCH) P 76,965
UNITED STATES of America, Plaintiff-Appellee,v.Antony Michael UPTON, Santa Barbara Castle DevelopmentCorp., a/k/a Castle Construction Corp., and RonaldR. Barrick, Defendants-Appellants.
No. 95-50206.
Richard L. Durbin, Jr., Mark Randolph Stelmach, Assistant U.S. Attorneys, Office of the United States Attorney, San Antonio, TX, James H. DeAtley, Austin, TX, for U.S.
Kenneth E. Houp, Jr., Austin, TX, for defendants-appellants Upton and Santa Barbara Castle Development Corp.
William A. White, Austin, TX, for defendant-appellant Barrick.
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 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.
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 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
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.
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 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 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.
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, 87 F.3d 663, 667-68 (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 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, 513 U.S. 841, 115 S.Ct. 127, 130 L.Ed.2d 71 (1994)).
In order to sustain a conviction under the substantive count for filing false, fictitious or fraudulent claims to the United States under 18 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, --- U.S. ----, 116 S.Ct. 107, 133 L.Ed.2d 60 (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).
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 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 t