Opinion ID: 3049934
Heading Depth: 1
Heading Rank: 14

Heading: pugh’s sentence

Text: PUGH was sentenced to 60 months’ probation on four bribery conspiracy counts (Counts 1 involving McNair, 51 involving Swann, 75 involving Wilson, and 78 involving Barber), nine substantive bribery counts (Counts 15, 61-63, 71, 83-86), and eleven counts of honest services mail fraud (Counts 90-100). The district court ordered PUGH to pay a $19.4 million fine, a special assessment of $9,600, and $239,652 in restitution to the Jefferson County Commission. On appeal, PUGH challenges only the fine. 157
The PSI stated that PUGH performed nearly $200 million worth of construction work for sewer projects for Jefferson County between 1997 and 2003 and that a majority of this work was for JCESD-related projects. The PSI listed bribes given by PUGH to McNair, Swann, Chandler, Barber, and Wilson, totaling $395,514.134 The PSI stated that PUGH had this net income: $19.09 million in 2001, $15.32 million in 2002, $9.10 million in 2003, $2.94 million in 2004, and $3.67 million in 2005. PUGH’s federal tax returns reported net income of $17.89 million in 2001, $14.95 million in 2002, $8.10 million in 2003, $3 million in 2004, and $3.97 million in 2005. According to the PSI, PUGH received more than $109 million in JCESD contracts related to the bribery conspiracy from August 1999 to June 2003. This $109 million reflected only PUGH’s portion of its joint venture work for Jefferson County. The PSI determined that from 1999 to 2002 PUGH earned an average 134 This $395,514 in restitution consists of PUGH’s payments of: (1) $192,000 to McNair ($175,000 for construction, remodeling, and cash for his studio and $17,200 installation of hand railings for his studio); (2) $149,102 to Swann ($140,680 for Guthrie Landscaping, $7,422 for installation of waterfall and pond, and $1,000 in gift certificates to Alabama Book Smith); (3) $610 to Chandler for condominium rental at Pelican Beach Condominiums; (4) $49,102 to Barber ($47,927 for McCalla, Alabama land, $148 for casino trip to Vicksburg, Mississippi, $546 resort trip to Biloxi, Mississippi, and $481 trip to Gulf Shores, Alabama); and (5) $4,500 to Wilson (UAB scholarship). 158 profit of 43.61% and that PUGH’s profit from County contracts was $47.92 million.135 The PSI: (1) assigned PUGH a base offense level of 10, pursuant to U.S.S.G. § 2C1.1(a) (2003); (2) added 2 levels because the offense involved more than one bribe, pursuant to § 2C1.1(b)(1); and (3) added 22 levels because the net profit to PUGH was between $20 million and $50 million, pursuant to §§ 2C1.1(b)(2)(A) and 2B1.1(b)(1)(L),136 yielding a total offense level of 34.137 Under the § 8C2.4(d) table, this total offense level of 34 required a base fine amount of $28.5 million. However, the PSI determined PUGH’s pecuniary gain under § 8C2.4(a)(2) was its $47.92 million profit from the County contracts. Under § 8C2.4(a), the base fine amount became $47.92 million, because PUGH’s $47.92 million pecuniary gain was greater than the $28.5 million amount from the § 8C2.4(d) fine table and greater than the pecuniary loss of $319,425 suffered by the victim 135 PUGH later filed for Chapter 11 bankruptcy. At the time PUGH’s PSI was prepared, the bankruptcy case was pending. In April 2008, the bankruptcy court confirmed PUGH’s proposed plan of liquidation. See In re Roland Pugh Constr., Inc., No. Bk-06-71769-CMS-11, 2007 WL 509225 (Bankr. N.D. Ala. Feb. 12, 2007). The bankruptcy court ordered PUGH to establish a trust account in the amount of $19,409,600, which would be used to pay the federal criminal fine assessed in the present case. In re Roland Pugh Constr., Inc., No. Bk-06-71769CMS-11 (Bankr. N.D. Ala. Apr. 21, 2008). 136 The PSI listed the table section as “§ 2B1.1(b)(1)(M)” but applied the enhancement listed in § 2B1.1(b)(1)(L) of that table, which provides a 22-level enhancement for amounts between $20 million and $50 million. 137 The PSI for PUGH used the November 1, 2003 edition of the Sentencing Manual. 159 County. The PSI determined PUGH’s culpability score was 7 under § 8C2.5, because (1) PUGH had 50 or more employees and (2) individuals with substantial authority (Board Chairman Roland Pugh, CEO Grady Pugh, and President Yessick) participated in the offenses. This culpability score of 7 resulted in a minimum fine multiplier of 1.4 and a maximum multiplier of 2.8, under § 8C2.6. Based on these multipliers and the base fine of approximately $47.92 million, the PSI calculated the guidelines fine range to be $67,089,446.48 to $134,178,892.96. The statutory maximum fine was $95,842,066, pursuant to 18 U.S.C. § 3571(b), (d) (i.e., double the pecuniary gain of $47.92 million). Thus, the PSI concluded PUGH’s advisory guidelines fine range was $67,089,446 to $95,842,066. The PSI stated PUGH appeared unable to pay a fine within that $67 million to $95 million guidelines range and recommended the district court reduce the fine if it determined PUGH was unable to pay the minimum fine amount. The PSI noted that, under § 8C3.4, the guidelines fine could be offset by 67.75%, because (1) PUGH was a closely held organization, (2) three of PUGH’s owners (Roland Pugh, Yessick, and Grady Pugh) whose total interests amounted to 67.75% had already been fined for the same offense conduct, and (3) one owner (Andy Pugh) 160 had a 32.25% interest and was not convicted in the bribery scheme. PUGH objected to the PSI’s calculation of profits or pecuniary gain. PUGH argued there was no evidence that PUGH obtained any contracts, or the $47.92 million in profits, because of its bribes. PUGH contended its base offense level should be based on the $129,138.81 amount of bribes PUGH paid, which would result in a total offense level of 22 and a base fine of $1.2 million.138
The district court ordered briefs addressing the fine amount. PUGH’s brief reiterated its challenge to the PSI’s calculations, arguing there was no evidence the County suffered any pecuniary loss from the bribery scheme. The government recalculated PUGH’s pecuniary gain based on a job-by-job analysis of PUGH’s contracts with the County. The government submitted a list of bribery and post-bribery jobs, which showed the revenue earned, gross profit, gross profit percentage, and “improper gain” for each job. The government calculated an average unit price for items used by PUGH in eight of its projects over a 20-month period from 2001 to 2002 and then compared those prices for this time period to the average unit price PUGH charged the County for these items during the bribery 138 PUGH’s total did not use certain amounts that were included in the PSI, such as (1) $60,696 that PUGH claimed Swann repaid to PUGH, (2) $37,000 worth of unperformed work on Swann’s home that PUGH paid Guthrie for, and (3) $167,679 in items PUGH gave to McNair. 161 period of 1997 to 2001. The government determined PUGH’s improper gain was $24.667 million, while PUGH made about $20 million in “normal profit.” Based on the improper gain of $24.667 million and applicable multipliers, the government concluded PUGH’s guidelines fine range was $34.533 million to $69.067 million.139 PUGH’s reply brief then challenged the government’s recalculation for failing to account for a price increase that occurred in 2003 and for using artificially low post-bribery prices in 2001 and 2002. PUGH claims this skewed the government’s analysis of PUGH’s profits to reflect greater profits during the bribery period. PUGH also claimed that, to prove PUGH profited from the bribery scheme, the government had to show that PUGH’s bribes caused the PRC to limit the number of cured-in-place contracts.
The district court conducted a lengthy sentencing hearing, including two days of evidence and a partial day of argument on evidence assessment and factual 139 When comparing the unit prices of bribery-period and post-bribery jobs, the government’s analysis used only PUGH’s sewer rehab jobs — and not other jobs such as wastewater treatments, trunk sewer jobs, and annual contracts — so that the analysis would reflect an “apples-to-apples” comparison. FBI Agent Tom Mayhall stated PUGH earned about $55 million from other work from the County, which was not included in the improper gain calculation. Although the government points out PUGH continued to make some bribes in 2001 and well into 2002, the majority of PUGH’s bribes were given prior to December 31, 2000, and the government thus compared the profit before the end of 2000 with that in 2001-02. 162 determinations. The government presented evidence as to the bribes PUGH paid and the revenue and profits PUGH earned from its County contracts during the bribery scheme. For example, FBI Agent Tom Mayhall calculated PUGH’s improper gains by comparing (1) the average unit price of items on invoices for sewer rehab jobs PUGH submitted to the County during the bribery scheme through the end of 2000 with (2) the average unit price of items on eight sewer rehab jobs PUGH performed in 2001 and 2002. Based on this comparison, Agent Mayhall concluded PUGH’s improper gain was approximately $24.667 million.140 Agent Mayhall testified about PUGH’s bribes to County employees and the benefits PUGH received from its County contracts and as a result of the PRC’s decisions. PUGH maintained that the increase in profits was not substantial and was based on areas of PUGH’s business other than its work for the County. The district court rejected the government’s pricing analysis, finding that the evidence failed to show the line items in PUGH’s contracts were affected by the bribes PUGH paid. The court found PUGH paid bribes to County employees because PUGH was “afraid of what might happen if [it] did not do so” and that 140 Agent Mayhall testified PUGH made about $44.536 million total gross profit on about $109 million in revenue on JCESD rehab jobs during the bribery period. Mayhall testified that of this $44.536 million total gross profit, about $19.869 million was a result of PUGH’s normal profit margin, and the remaining $24.667 million was therefore improper gain. Mayhall added that PUGH had about $22 million in cash on hand, which earned about $77,000 per month in interest, and bankruptcy creditors claimed less than $200,000 of that cash. 163 “what might have happened is that [PUGH] might have lost all its contracts, those current and future, with the County and the profits associated with those contracts.”141 The court further found, for example, “that the Swann bribes . . . were designed to ensure that [PUGH] stayed in good favor with Mr. Swann so that [PUGH] would have and continue to have the opportunity to receive contracts and be paid on contracts from Jefferson County.” The court later stated “there [was] an expectation that if you do business with the County, you’re expected to do this. And I think that the reason [PUGH] did it was because others were doing it and it wanted to protect the contracts it had.” The court also found that, beginning in August 1999, PUGH started making bribes “in order to maintain its standing in the revenues and profits realized in the contracts awarded by Jefferson County; and, indeed, they became extremely high profits during that bribe period.” The district court found that PUGH made its first bribe in August 1999 and its final bribe in September 2002. The court found that (1) from September 1, 1999 to December 31, 2002, PUGH benefitted from the bribes, (2) during this 1999-2002 period PUGH generated from its County contracts a total profit of 141 Judge David R. Proctor conducted the Barber trial and sentenced the Pugh defendants. 164 $43,985,869,142 and (3) given PUGH’s $107,887,832 in revenues, this $43,985,869 profit was a 40.77% profit margin during that period. Using that profit to calculate the base fine amount, the district court determined the guidelines fine range was $61,580,216 to $87,971,738. See U.S.S.G. §§ 8C2.5, 8C2.7. After considering PUGH’s ability to pay, the district court reduced the fine to $21 million. The district court then gave a $1.6 million offset for fines paid by individuals who owned at least 5% of PUGH, which resulted in a final fine of $19.4 million.
On appeal, PUGH primarily raises objections to the manner in which the district court arrived at the $19.4 million fine, but none of them has merit. The PSI contained extensive financial information about PUGH’s revenue and profits. The district court’s fact-findings are supported by the record and undisputed facts in the PSI, and PUGH has shown no clear error in any of them. PUGH also has shown no legal error in any of the district court’s calculations regarding the advisory guidelines fine range or in any other matters under the sentencing guidelines. PUGH’s brief as to the fine mainly resorts to claiming PUGH did not have 142 The court found, “[t]he September 1, ‘99 date signifies the first contract awarded to Pugh by the County after the August 1999 concrete work was done for McNair.” The court stated: “I have not attributed any profits made by Pugh in 2003, although the government may well have a good argument that profits in 2003 and revenues in 2003 continued to be effected [sic] because of the bribes paid in ‘99, 2000, 2001 and 2002.” The court added: “Likewise, I have not attributed any pre-September 1999 gain to Pugh Construction based upon the bribe scheme that was in place and paid by other contractors.” 165 adequate notice of certain arguments or adequate opportunity to respond. The record refutes those claims too. The parties submitted numerous sentencing briefs and offered a substantial amount of evidence as to PUGH’s revenue and profits. PUGH claims it did not know the district court would consider that the bribes were paid out of fear of losing contracts or future payments thereon. However, PUGH’s counsel, in arguing that the bribes were unrelated to the PRC, relied on the fact that the contractors feared what would happen if they did not pay bribes: [L]et me explain to [the court] why I think the contractors make such payments to public officials. .... [T]he best testimony that I heard about that was from Mr. William Dawson. Mr. Dawson was an engineer, independent, who was doing work for Jefferson County. . . . Mr. McNair invited him to come by the studio. And when he got there, Mr. McNair said, Mr. Dawson I’ve never asked you for anything before, but what I would like is for you to buy me an audio-visual equipment, some sort of a projector or something of that nature, and he had a book. And he said this is the model and this is what I would like to have. Well, Mr. Dawson didn’t want to do that. And he went home and he thought about it and finally he did it. And he did it because he was afraid of what Chris McNair would do to him if he didn’t. So when these people come and put the touch on a contractor or someone, I think it’s the fear of the unknown. In closing arguments, PUGH’s trial counsel maintained that any benefits PUGH provided to the County employees were given purely out of friendship. PUGH cannot now claim it had an inadequate opportunity to explain its motivation in 166 paying bribes or to prepare for the ultimate approach the district court took in deciding on the amount of the fine. If anything, counsel’s argument succeeded in reducing the amount of the fine imposed to well below the advisory guidelines range of $61,580,216 to $87,971,738. PUGH has shown no reversible error in any procedural aspects of the sentencing proceedings before the district court in PUGH’s case.