Opinion ID: 2811263
Heading Depth: 3
Heading Rank: 1

Heading: Loss over $400,000 Enhancement

Text: The district court imposed a 14-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(1)(H), for an intended loss in excess of $400,000. The district court acknowledged that the fraudulent scheme involved $1,100,000—LKG’s $550,000 contract fee plus the $550,000 of in-kind services LKG falsely represented it contributed—but limited its calculation to actual pecuniary loss, which it found was $550,000. Madrid argues on appeal that (1) to calculate 41 Case: 13-50414 Document: 00513091274 Page: 42 Date Filed: 06/24/2015 No. 13-50414 loss, the court must make a finding as to the defendant’s subjective intent, and the district court failed to do so here, and (2) the court erred in concluding that the actual loss was $550,000 because there is evidence in the record that LKG in fact provided some valuable services in return for the $550,000 contract fee. “The application notes to § 2B1.1 state that for the purpose of this calculation, ‘loss is the greater of actual loss or intended loss.’” Nelson, 732 F.3d at 520 (emphasis added). Here, the district court calculated loss under § 2B1.1 based on a determination of actual pecuniary loss to the County, and thus did not need to consider Madrid’s subjective intent, which Madrid contends was the lesser of the two measurements. Accord United States v. Schaffer, 439 F. App’x 344, 346 (5th Cir. 2011) (unpublished) (explaining that it is “immaterial whether the intended loss was less than the actual loss because, in general, ‘loss is the greater of actual loss or intended loss’” (quoting U.S.S.G. § 2B1.1)). Because the district court did not base the loss calculation on intent, but rather on actual pecuniary harm, Madrid’s subjective intent is irrelevant. Next, with regard to the district court’s finding of fact that the actual loss to the County was the entire $550,000 the County paid to LKG under its contract fee, we conclude that this finding is not clearly erroneous and therefore must be upheld. The district court rejected defense counsel’s arguments that LKG provided some work under the contract and, therefore, the actual pecuniary loss was not the full $550,000 provided to LKG, but, rather, that amount minus the value of their work. The district court stated on the record that it “spent a lot of time” reviewing its notes and the transcript and “could not find anything of benefit the county received” from LKG’s 42 Case: 13-50414 Document: 00513091274 Page: 43 Date Filed: 06/24/2015 No. 13-50414 contract. The district court also adopted the findings of fact contained in the PSR, 25 which concluded, among other things, that investigating agents in this case discovered no evidence of services having been performed by LKG Enterprises for the county of El Paso, Texas, per LKG’s contract. In addition, in a Victim Impact Statement submitted by El Paso County Judge Veronica Escobar on behalf of El Paso County, she indicated that El Paso County received no benefits from LKG. These findings are consistent with the evidence adduced at trial. 26 Although there is some evidence in the record that arguably suggests LKG performed in part under the contract, that evidence does not make the district court’s factual finding that the County received no valuable benefit from the LKG contract clearly erroneous. For example, LKG’s evaluation reports indicated that it collected data on over 100 children after its IRB was obtained. However, the evidence established that the data which LKG reportedly collected had not been entered into the national database and was not accessible to the Collaborative after LKG’s contract was terminated. Likewise, Madrid points to the evidence demonstrating that he worked to help prepare a 1,000-page sustainability report for LKG. However, the evidence also established that Madrid’s sustainability report was largely plagiarized and duplicative of information already available to the Collaborative, and that it did not meet the requirements of the SAMHSA grant. Moreover, Madrid does not assign a value to the work purportedly completed under the contract nor point us to any record evidence suggesting there was an actual pecuniary 25The district court properly adopted the PSR’s findings of fact, as Madrid did not “present rebuttal evidence or otherwise demonstrate that the information is materially unreliable.” United States v. Jackson, 596 F.3d 236, 243 (5th Cir. 2010). 26For example, Peter Selby testified that when he returned to his position as head of the evaluation team, he discovered that LKG had failed to enter any data during its tenure. Lisa Tomaka also testified that money was provided to LKG without any verification or documentation that any work or services had been provided. 43 Case: 13-50414 Document: 00513091274 Page: 44 Date Filed: 06/24/2015 No. 13-50414 value associated with this inadequate work completed under the contract. Accordingly, the district court’s finding that $550,000 was the amount of the actual pecuniary loss is not clearly erroneous because it is plausible in light of the record as a whole. See generally United States v. Lambright, 320 F.3d 517, 518-19 (5th Cir. 2003). We therefore conclude that the district court did not err in imposing the fourteen-level enhancement based on its finding that the loss was in excess of $400,000. b. “Organizer or Leader” Enhancement under § 3B1.1(a) Section 3B1.1(a) provides for a four-level enhancement if “the defendant was an organizer or a leader of a criminal activity that involved five or more participants or was otherwise extensive.” The commentary to § 3B1.1 indicates that a court may consider various factors in making this determination, including “the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, . . . the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others.” U.S.S.G. § 3B1.1, cmt. n.4. As noted supra, the government’s evidence established that it was Madrid who arranged for the initial meeting between Garcia and Zavala and that, at the meeting, Madrid did most of the talking regarding Zavala’s contract with LKG. The phone log evidence also suggested that Madrid had more frequent contact with Briones during the relevant time period than Garcia. Further, Garcia answered affirmatively when asked whether Madrid was “pulling the strings” and was the person who “put the team together” and helped make critical decisions, despite Garcia’s title as the principal of LKG or his status as the “front man.” The evidence therefore supports a conclusion that Madrid “possessed some decisionmaking power, participated extensively 44 Case: 13-50414 Document: 00513091274 Page: 45 Date Filed: 06/24/2015 No. 13-50414 in the crime, and exercised control and authority over his coconspirators.” United States v. Lage, 183 F.3d 374, 384 (5th Cir. 1999). The district court’s finding that Madrid recruited others for participation in the conspiracy and that the enhancement was supported by the evidence is not clearly erroneous. Therefore, the district court did not err by imposing the four-level enhancement under § 3B1.1. Accord Brown, 727 F.3d at 340 (finding that district court did not abuse its discretion in imposing an enhancement under § 3B1.1 where the defendants recruited others to join the conspiracy, even if they did not “conceive[] of or principally orchestrate[] the scheme”). c. “Position of Trust” Enhancement under § 3B1.3 Madrid challenges the two-level sentencing enhancement under § 3B1.3 based upon the district court’s finding that he abused a position of public trust. Section 3B1.3 instructs that “[i]f the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase by 2 levels.” To impose an enhancement under this section, the district court must conduct a two-step inquiry: First, the court must determine whether the defendant occupied a position of trust at all. If not, the inquiry ends and no enhancement accrues. If, however, this initial query produces an affirmative response, the court must proceed to ascertain the extent to which the defendant used that position to facilitate or conceal the offense. United States v. Ollison, 555 F.3d 152, 165 (5th Cir. 2009). With regard to the second prong, we have held that the person occupying the position of trust must use that position to “significantly facilitate the commission or concealment of the offense.” Id. (emphasis added); see also § 3B1.3 cmt. n.1 (explaining that “the position of public . . . trust must have contributed in some significant way to facilitating the commission or concealment of the offense”). In other words, 45 Case: 13-50414 Document: 00513091274 Page: 46 Date Filed: 06/24/2015 No. 13-50414 where an individual occupies a position of trust which is essential or “instrumental” to committing the offense, the enhancement applies. See United States v. St. Junius, 739 F.3d 193, 209 (5th Cir. 2013). First, the record supports a finding that Madrid occupied a position of trust as the CEO of Aliviane and as a member of the Collaborative’s governance team. See, e.g., United States v. Pruett, 681 F.3d 232, 249 (5th Cir. 2012) (upholding enhancement under § 3B1.3 where defendant was the president and CEO of a company charged with violating the Clean Water Act). Second, as a result of Madrid’s positions, he had access to influential members of the government and access to information regarding the inner workings of the SAMHSA grant, without which it would have been “extraordinarily difficult . . . to accomplish [the] criminal pursuits.” Id. The district court therefore did not abuse its discretion by imposing this two-level enhancement. d. “Sophisticated Means” Enhancement under § 2B1.1(b)(10)(C) Madrid’s next argument with regard to the U.S.S.G. enhancements is that the district court abused its discretion in imposing a two-level enhancement for using “sophisticated means” pursuant to § 2B1.1(b)(10)(C). The commentary to § 2B1.1 indicates that “‘sophisticated means’ means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense.” U.S.S.G. § 2B1.1 cmt. n.9(B). Here, the district court explained that the means were “clearly sophisticated” because “there was a panoply of misrepresentations in this case that [Madrid] directly and indirectly took part [in].” The district court stated that, for example, the videos played for the jury regarding Madrid’s testimony before the Commissioners Court reflects statements Madrid made to “cover[] this up.” Additionally, the PSR, which the district court adopted, found that the “criminal enterprise involved the complicated process of submitting 46 Case: 13-50414 Document: 00513091274 Page: 47 Date Filed: 06/24/2015 No. 13-50414 proposals and bidding on a government contract, avoiding the risks associated with bribing a public official by diverting funds through a third party, and devising a plan to funnel payments to a . . . third party.” Madrid contends that these findings are clearly erroneous because there was no concealment of the funds used to funnel payments to Briones. Rather, LKG contracted with Soria, and then Soria contracted with Madrid, and each reported payments on tax forms submitted to the federal government. However, the evidence adduced at trial established that, despite the facially valid contracts between the parties, none of the coconspirators performed under the contracts and each coconspirator submitted fraudulent invoices in furtherance of the scheme to wrongfully procure federal program funds. Likewise, as the district court noted, Madrid and Briones made fraudulent statements in writing to SAMHSA and misrepresentations before the Commissioners Court. Such complex methods support the district court’s plausible finding of fact that the offense involved complex or intricate conduct. See, e.g., United States v. Beacham, 774 F.3d 267, 277 (5th Cir. 2014) (upholding a sophisticated means enhancement where the defendant was convicted of wire fraud and bank fraud conspiracy based on, inter alia, the “different levels of people engaged in the fraud, . . . [and] the use of false [verification forms]”). We therefore conclude that the district court’s imposition of the sophisticated means enhancement was not in error. e. Multiple Bribes Enhancement under § 2C1.1(b)(1) Madrid argues that the district court abused its discretion in imposing a two-level enhancement under § 2C1.1(b)(1) based upon its finding that “the offense involved more than one bribe or extortion” in light of the evidence regarding the bribes to Briones and Cobos. “The ‘offense’ referred to in section 2C1.1(b)(1) includes ‘the offense of conviction and all relevant conduct under § 47 Case: 13-50414 Document: 00513091274 Page: 48 Date Filed: 06/24/2015 No. 13-50414 1B1.3 (Relevant Conduct)’ . . . . Relevant conduct includes offenses that are part of the same course of conduct or common scheme or plan as the offense of conviction.” United States v. Roussel, 705 F.3d 184, 198 (5th Cir. 2013) (citation and quotation marks omitted). Madrid contends that the evidence regarding the bribery of Cobos is not “relevant conduct” and cannot form the basis of the enhancement. For the same reasons that we held that the evidence regarding Cobos was intrinsic to the conspiracy to defraud a program receiving federal funds, we conclude that the district court did not err by imposing the two-level enhancement under § 2C1.1(b)(1). See United States v. Barraza, 655 F.3d 375, 385 (5th Cir. 2011) (holding that where “two briberies involved similar modus operandi, a common purpose, and occurred in close temporal proximity[,] . . . [the two] briberies were part of a common scheme or of the same course of conduct [and therefore], the second uncharged bribe may be used to increase the offense level for [the defendant’s bribery conviction”). 2. Substantive Reasonableness Madrid argues that his 180-month prison term is substantively unreasonable in light of: his age, and specifically, because he was 68 years old at sentencing, the sentence amounts to life imprisonment; his lack of criminal history; his service in the Army and to the community; and because the sentence is disproportionately high in comparison to the other coconspirators’ sentences. Madrid raised these points at sentencing and the district court considered his arguments. The district court noted the severity of the crime at issue and that Madrid’s coconspirators’ sentences were less severe because they cooperated with the government and pleaded guilty. The district court then found that the U.S.S.G. recommended range of 235-240 months imprisonment was “excessive,” and that sentence below the recommended 48 Case: 13-50414 Document: 00513091274 Page: 49 Date Filed: 06/24/2015 No. 13-50414 range would suffice for deterrence purposes and the other sentencing goals of 18 U.S.C. § 3553(a). Madrid was then sentenced to 180-months in prison, 55 months less than the bottom of the recommended U.S.S.G. range. “On appeal, the district court’s sentence is reviewed for reasonableness under an abuse-of-discretion standard.” Peugh v. United States, 133 S. Ct. 2072, 2080 (2013). To demonstrate that the district court abused its discretion in applying the § 3553(a) factors, Madrid must show “that the sentence does not account for a factor that should receive significant weight, it gives significant weight to an irrelevant or improper factor, or it represents a clear error of judgment in balancing sentencing factors.” Heard, 709 F.3d at 424-25. After consideration of the “totality of the circumstances, including the extent of any variance from the Guidelines range[,]” United States v. Fraga, 704 F.3d 432, 439-40 (5th Cir. 2013) (internal citation and quotation marks omitted), we conclude that Madrid has not demonstrated that the district court’s below-Guidelines sentence constitutes an abuse of discretion. First, with regard to Madrid’s argument that his sentence is unreasonable because it is disproportionately high as compared to Garcia’s and Briones’s sentences, we conclude that this contention is without merit. Madrid rightly notes that his sentence is substantially longer than Garcia’s 48-month sentence and Briones’s 30-month sentence. Pursuant to § 3553(a)(6), district courts shall consider “the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct.” Here, the district court expressly considered this sentencing factor and found that there was a warranted, reasoned basis for the differences in sentences among the coconspirators: Briones and Garcia cooperated with the investigation and pleaded guilty to the charges. We cannot conclude that the district court abused its discretion in finding that the disparity between 49 Case: 13-50414 Document: 00513091274 Page: 50 Date Filed: 06/24/2015 No. 13-50414 Madrid’s and his coconspirators’ sentences was warranted here and, thus, the disparity does not render his sentence substantively unreasonable. See, e.g., United States v. Garcia Mendoza, 587 F.3d 682, 688 (5th Cir. 2009) (finding that the district court properly imposed a within-Guidelines sentence despite disparities among the codefendants’ sentences because, inter alia, some codefendants received reduction in sentences for their cooperation with the government). Next, with regard to Madrid’s argument that the district court failed to give adequate weight to his age and background, the record reflects that the district court considered these mitigating factors, as well as the need for deterrence and the nature of the offense, and imposed a below-Guidelines sentence, recognizing that the Guidelines range was “excessive” in this particular case. There is no evidence on the record that the district court failed to account for a relevant factor, gave significant weight to an improper factor, or made a clear error in judgment. See Fraga, 704 F.3d at 439-40. “In essence, [Madrid] is asking the court to reweigh the § 3553(a) sentencing factors. As we have previously held, ‘[a]ppellate review is highly deferential as the sentencing judge is in a superior position to find facts and judge their import under § 3553(a) with respect to a particular defendant.’” Heard, 709 F.3d at 435 (quoting United States v. Campos–Maldonado, 531 F.3d 337, 339 (5th Cir. 2008)). Accordingly, we hold that the district court’s below-Guidelines sentence is not substantively unreasonable. 3. Restitution Madrid contends that the district court clearly erred in finding that the County received no benefit from the LKG contract and thus erroneously awarded restitution in the amount of $550,000 (which was thereafter amended to $514,000 to account for the amount of restitution that Briones was required 50 Case: 13-50414 Document: 00513091274 Page: 51 Date Filed: 06/24/2015 No. 13-50414 to pay). Madrid incorporated his arguments regarding the district court’s finding of intended loss—i.e., that the evidence established that the County did receive some benefit from LKG’s work under the contract and thus the evidence does not support the district court’s finding that the entire contract price was lost. Madrid cites United States v. Sharma, 703 F.3d 318, 322 (5th Cir. 2012), for the proposition that “every dollar [of restitution] must be supported by the record evidence,” and contends that the record does not support each dollar of the restitution award here. “We review ‘the legality of a restitution order de novo and the amount of the restitution order for an abuse of discretion.’” United States v. Beacham, 774 F.3d 267, 278 (5th Cir. 2014) (footnote and internal citations omitted). “The district court ‘abuses its discretion when its ruling is based on an erroneous view of the law or a clearly erroneous assessment of the evidence.’” Id. Although the district court is required to make findings of fact to support each dollar amount of restitution, the district court’s findings of facts are reviewed for clear error and thus not reversible on appeal unless the district court’s finding is implausible in light of the record as a whole, or in other words, the court is “left with the definite and firm conviction that a mistake has been committed.” Sharma, 703 F.3d at 322. For the reasons discussed above, although there is some evidence suggesting LKG did some amount of work during its tenure as the evaluation team, the evidence, as the district court found, nowhere establishes what financial benefit, if any, the County actually received from any of LKG’s sustainability or evaluation work. The district court’s finding of fact that the actual pecuniary loss as a result of the scheme was the entire cost of the LKG contract, $550,000, is not clearly erroneous and does not amount to an abuse of discretion. 51 Case: 13-50414 Document: 00513091274 Page: 52 Date Filed: 06/24/2015 No. 13-50414 Madrid additionally contends that the district court erred in finding that restitution be paid to SAMHSA because restitution must only go to victims directly and proximately harmed by the defendant’s offense. Madrid argues that, at the time that the PSR was written, SAMHSA has not sought reimbursement from the County because nothing needed to be returned to the federal government and thus ordering restitution to be paid to SAMHSA was in error. Here, the evidence demonstrated that SAMHSA provided the funds for the costs of evaluation services under the County’s contract, and thus SAMHSA is properly considered a victim for purposes of restitution. Accord United States v. Caldwell, 302 F.3d 399, 419-20 (5th Cir. 2002) (concluding that the state of Mississippi is a “victim” for purposes of restitution where the evidence supported a finding in a mail fraud prosecution that the defendant defrauded a corporation “created by state statute and funded by state bonds”). 4. Forfeiture Madrid raises the same factual arguments regarding the forfeiture order, contending that the district court clearly erred in ordering forfeiture in an amount reflecting the entire proceeds jointly procured by the coconspirators—$550,000. “This court reviews ‘the district court’s findings of fact under the clearly erroneous standard, and the question of whether those facts constitute legally proper forfeiture de novo.’” United States v. Juluke, 426 F.3d 323, 326 (5th Cir. 2005) (quoting United States v. Marmolejo, 89 F.3d 1185, 1197 (5th Cir. 1996)). “Forfeiture[] . . . is punitive; it seeks to disgorge any profits that the offender realized from his illegal activity.” United States v. Taylor, 582 F.3d 558, 566 (5th Cir. 2009) (quoting United States v. Webber, 536 F.3d 584, 60203 (7th Cir. 2008)); see also Read, 710 F.3d at 231 (“While restitution represents a victim’s loss from the defendant’s offense, forfeiture represents 52 Case: 13-50414 Document: 00513091274 Page: 53 Date Filed: 06/24/2015 No. 13-50414 the defendant’s gain from the offense.”) (citations omitted). Generally, “[c]riminal forfeiture focuses on the disgorgement by a defendant of his ‘illgotten gains[,]’” and thus a forfeiture order must reflect the profits procured by the defendant. United States v. Contorinis, 692 F.3d 136, 146 (2d Cir. 2012). However, “[t]his general rule is somewhat modified by the principle that a court may order a defendant to forfeit proceeds received by others who participated jointly in the crime, provided the actions generating those proceeds were reasonably foreseeable to the defendant.” Id. at 147 (emphasis added). Here, after a forfeiture hearing, the district court found that LKG provided no quantifiable service or benefit to the County under the terms of the contract and, therefore, the proceeds of the offense were $550,000—the entire LKG contract price. For the reasons already explained, the record evidence supports the district court’s finding that the coconspirators jointly profited the entire $550,000 received from the County, and that the receipt of the $550,000 was a reasonably foreseeable result of the conspiracy. Accordingly, the district court’s findings of fact supporting its forfeiture order were not clearly erroneous and the district court did not err in imposing a $550,000 forfeiture order.