Court Opinion

ID: 178400
Source: CourtListenerOpinion
Date Created: 2010-10-29 19:06:11+00
Date Added: 2024-06-11T17:25:44.825253
License: Public Domain

FILED
                                                           United States Court of Appeals
                                                                   Tenth Circuit

                                                                October 29, 2010
                     UNITED STATES COURT OF APPEALS
                                                  Elisabeth A. Shumaker
                                                                   Clerk of Court
                           FOR THE TENTH CIRCUIT

    UNITED STATES OF AMERICA,

               Plaintiff-Appellee,

    v.                                                  No. 09-3376
                                             (D.C. No. 2:08-CR-20055-KHV-1)
    LEONARD DOUGLAS LADURON,                             (D. Kan.)

               Defendant-Appellant.

                           ORDER AND JUDGMENT *

Before TYMKOVICH, Circuit Judge, PORFILIO, Senior Circuit Judge, and
GORSUCH, Circuit Judge.

         Leonard Douglas LaDuron pleaded guilty to conspiracy to commit mail

fraud, wire fraud, and making false statements, in violation of 18 U.S.C. §§ 371,

1341 and 1343. 1 At sentencing, the district court applied a four-level

*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
      LaDuron also pleaded guilty to one count of making false statements under
18 U.S.C. § 1001, based on his submission of false information in support of an
application for rental housing assistance through the Department of Urban
                                                                     (continued...)
enhancement to LaDuron’s base offense level under USSG § 3B1.1(a) because it

found he was a leader or organizer of an extensive criminal conspiracy involving

at least five participants. The court relied on this enhancement to sentence

LaDuron at the high end of the Guidelines range, to fifty-seven months’

imprisonment. On appeal, LaDuron argues there was insufficient evidence to

support the enhancement for his role in the conspiracy. Exercising our

jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742, we affirm.

                                         I.

      The conspiracy resulting in LaDuron’s fraud conviction involved the

federal government’s E-Rate Program. Administered by the Schools and

Libraries Division of the non-profit Universal Service Administrative Company

(“USAC”), the E-Rate Program provides subsidies to schools and libraries for use

in gaining internet access. A school applies to USAC for a grant under the

program and, if its application is accepted, USAC pays vendors directly for the

cost of setting up the school’s internet program. One of the program’s core

requirements is that each applicant school contribute some of its own funds

towards establishing internet capability. The percentage of this copayment varies

depending on the school’s level of need, but even a modest copayment obligation

1
 (...continued)
Development’s Choice Voucher Program. He does not appeal his sentence for
this conviction, however, and his violation of § 1001 has no bearing on this
appeal.

                                         -2-
is strictly enforced. The government explains that requiring even a modest

copayment from the schools is necessary to discourage wasteful spending. The

copayment acts as an incentive to schools to negotiate with equipment and service

providers for the lowest rates and ensures that schools purchase only the

infrastructure enhancements that they truly need.

      LaDuron became familiar with the program in 1998 working for National

Technology Services, an E-Rate service provider. He left that company in late

1998 or early 1999 and started his own E-Rate consulting company, Elephantine

Corporation, as well as two internet service providers, Myco Technologies, Inc.

and Serious ISP. Elephantine, which LaDuron staffed with his wife and mother,

solicited schools to participate in the E-Rate program and then prepared and

submitted the applications to USAC.

      In 1999 LaDuron met Benjamin Rowner and Jay H. Soled, co-owners of

DeltaNet, another internet service provider, and the three men hatched a plan to

deprive USAC of school copayments under the E-Rate Program. Under the

scheme, which for purposes of this discussion can be distilled to its basic

components, Elephantine would solicit a school to participate in the program by

promising that it would not have to make its copayment. Once a school was on

board, Elephantine would prepare a fraudulent application, typically including an

inflated school budget and fictional vendor bids, for submission to USAC. The

application unfailingly designated DeltaNet, Myco, and/or Serious ISP as the

                                         -3-
school’s internet service provider. USAC, upon approving the application, would

then pay that service provider the government’s share of the cost under the

program. Unbeknownst to USAC, however, and contrary to the copayment

obligation imposed on each participating school, DeltaNet actually funded many

of the schools’ copayments. LaDuron and his co-conspirators masked the source

of the funds by channeling the money through Serious ISP, which, in turn,

forwarded the money to the schools under the guise of donations. The schools

would then use the “donated” money to fund their copayments. Of course, the

donated money originated from USAC, which paid it to DeltaNet in the first place

as compensation for services provided under the program. Since only a fraction

of that compensation was needed to fund the schools’ copayments, the result was

huge profits for DeltaNet and the other service providers. The illegal scheme

lasted from 1999 to 2003, when, as is often the case, the conspirators had a falling

out over their ill-gotten gains. By that time, USAC had paid LaDuron’s

companies over $890,000.

      In April 2008, LaDuron, Rowner, and Soled were charged with conspiracy

to defraud the United States, in violation of 18 U.S.C. § 371. 2 Rowner and Soled

pleaded guilty pursuant to plea agreements. Each of them stipulated that he “was

a manager or supervisor of a criminal activity that involved five or more

2
      For her part in the conspiracy, LaDuron’s mother Mary Jo LaDuron was
charged with, and pleaded guilty to, making a false statement, in violation of
18 U.S.C. § 1001. She was fined and sentenced to two years probation.

                                         -4-
participants and was extensive in nature, resulting in a three-level increase for his

role in the offense under USSG § 3B1.1(b).” 3 R. Vol. 3 at 8.

      LaDuron entered his guilty plea without the benefit of a plea agreement. At

sentencing, the government requested a four-level enhancement under § 3B1.1(a)

based on LaDuron’s role as an organizer and leader of the conspiracy. In its

sentencing memorandum, the government first ensured the court that there were at

least five criminally culpable participants in the fraudulent scheme, including

“two Elephantine employees and one Serious ISP employee as well as the

defendant, Benjamin Rowner, and Jay Soled.” Id. Vol. 1 at 43 (internal quotation

marks omitted). The government argued that LaDuron clearly exercised control

over his companies’ employees. As an example, it submitted evidence showing

that in October 2002, Erik Chaney, a Serious ISP employee, followed LaDuron’s

direction to submit false documentation to USAC on behalf of a participating

school. LaDuron was also charged with occupying a leadership role in his

dealings with Rowner and Soled. The government argued that they were

dependent on LaDuron because he had sole responsibility for soliciting the

targeted schools and convincing school officials to sign contracts with DeltaNet.

The government also argued that the conspiracy was by its very nature “otherwise

3
      Section 3B1.1(b) provides for a three-level increase “[i]f the defendant was
a manager or supervise (but not an organizer or leader) and the criminal activity
involved five or more participants or was otherwise extensive.” (emphasis
added).

                                          -5-
extensive” within the meaning of § 3B1.1(a). It emphasized the intricate

funneling of money between DeltaNet, Serious ISP, and the participating schools

so as to mislead USAC into believing that the schools had met their copayment

obligations. And it noted that the schools themselves had been drawn into the

conspiracy unwittingly by paying DeltaNet with what the schools believed were

donated funds.

      LaDuron countered that a four-level enhancement for his role in the scheme

was unjustified. He conceded that his role was essential to the conspiracy’s

operation, but he insisted that he did not exercise control over Rowner and Soled,

which he claimed was critical to a four-level enhancement under § 3B1.1.

LaDuron argued that his co-conspirators “did not defer to [him] and were not

under [his] control.” R. Vol. 1 at 53. To the contrary, he claimed that “they

operated independent[ly] of [him] on many fronts and even became adversarial to

him on financial matters at the end of the conspiracy . . . .” Id. He reminded the

court that his co-conspirators had pleaded guilty to being managers or supervisors

of the conspiracy, not, he argued, subordinate roles. In any event, LaDuron noted

that no more than three people had been found criminally responsible for the

offense, and thus the government failed to show that the conspiracy involved five

or more participants. He argued that he deserved, at most, a two-level

enhancement under § 3B1.1(c).

                                         -6-
      The district court rejected LaDuron’s arguments, going so far as to say it

was “a really easy call to find that [he] was an organizer or leader of a criminal

activity that involved five or more participants and was otherwise extensive.”

R. Vol. 2 at 97. The court acknowledged the culpability of Rowner and Soled and

found that they shared “equal responsibility in terms of the manager or supervisor

enhancement.” Id. at 98. But it concluded that each conspirator, including

LaDuron, “organized and led the part of the conspiracy for which he had

responsibility.” Id. In addition to LaDuron, Rowner, Soled, and LaDuron’s

mother, the court found that Chaney had “knowingly” participated in the criminal

enterprise, thus bringing the number of conspirators to at least five. Id. at 98.

Finally, the court found that the presentence report “more than adequately

detail[ed]” an otherwise extensive criminal conspiracy within the meaning of

§ 3B1.1(a). Id. Based on these conclusions, the court granted the government’s

request for a four-level enhancement, which resulted in an offense level of

twenty-three and a recommended forty-six to fifty-seven month term of

imprisonment.

                                          II.

      “We review [LaDuron’s] sentence for reasonableness, giving deference to

the district court under the familiar abuse-of-discretion standard.” United States

v. Hamilton, 587 F.3d 1199, 1219 (10th Cir. 2009) (internal quotation marks

omitted). LaDuron does not appear to challenge the substantive reasonableness of

                                          -7-
his sentence. That is, he makes no argument that the length of his sentence,

fifty-seven months, is unreasonable in light of the factors enumerated in

18 U.S.C. § 3553(a). Rather, he challenges the procedure by which the court

arrived at his sentence, arguing that it had no basis to apply the four-level

enhancement. Under these circumstances, our review is limited to determining

“whether the district court improperly calculated the Guidelines range.” Id.

(internal quotation marks and brackets omitted). “In evaluating the application of

a Guidelines enhancement, we review factual findings for clear error, but to the

extent the defendant asks us to interpret the Guidelines or hold that the facts

found by the district court are insufficient as a matter of law to warrant an

enhancement we must conduct a de novo review.” Id. at 1222.

      An enhancement under § 3B1.1(a) is warranted only if (1) the defendant

was an “organizer or leader” of the criminal activity, and (2) the criminal activity

involved at least five participants or was otherwise extensive. As to the first

prong, it is enough if the evidence reveals that the defendant supervised at least

one other participant. Id.; see also United States v. Cruz Camacho, 137 F.3d

1220, 1224 (10th Cir. 1998). “This is not a particularly onerous showing,” and

need not be proven with specific examples. Hamilton, 587 F.3d at 1222. In this

case, the district court did cite specific examples, including LaDuron’s control

over his wife and mother in their capacity as Elephantine employees. In addition,

Erik Chaney held himself out as an employee of Serious ISP and he too took

                                          -8-
orders from LaDuron. This alone is sufficient to label LaDuron as an organizer or

leader, regardless of the nature of his relationship with Rowner and Soled. We

also note that the roles played by those defendants, and whether they too were

leaders and organizers or only managers and supervisors, does not affect

LaDuron’s sentence. The comments to § 3B1.1 clarify that multiple people can

qualify as a leader or organizer of one criminal conspiracy. Indeed, it appears

that all three of the main conspirators in this case would qualify for a four-level

enhancement under § 3B1.1(a). But of course, Rowner and Soled had the benefit

of their plea agreement and the government’s concession that their roles were

limited to managing and supervising, rather than leading and organizing. The

government made no such concession in LaDuron’s case, and we see no error in

the district court’s assessment of his role under § 3B1.1.

      Finally, we ask whether the conspiracy involved at least five participants or

was otherwise extensive. LaDuron insists the conspiracy involved less than five

people and he challenges the district court’s conclusion as to Chaney’s role,

arguing the evidence on this score was “ambiguous.” Aplt. Br. at 17. The

comments to § 3B1.1 define a participant as someone who is criminally

responsible for the commission of the offense even if he was not criminally

convicted. United States v. Scott, 529 F.3d 1290, 1303 (10th Cir. 2008). Chaney

was found to have met this definition because he followed LaDuron’s order to

submit false information to USAC on behalf of the River Run school in October

                                          -9-
2002. According to the district court, Chaney’s conduct likely supported grounds

for a criminal charge and, at a minimum, made him a “participant” for purposes

of § 3B1.1(a). This finding was not clearly erroneous, and as LaDuron does not

challenge any other individual’s categorization as a participant, the number of

participants stands at five. Consequently, we need not review the district court’s

alternative ruling that the conspiracy was otherwise extensive.

                                        III.

      The district court’s enhancement of LaDuron’s sentence under

USSG § 3B1.1(a) is AFFIRMED.

                                               Entered for the Court

                                               John C. Porfilio
                                               Senior Circuit Judge

                                        -10-