Court Opinion

ID: 4321361
Source: CourtListenerOpinion
Date Created: 2018-10-16 19:00:22.109158+00
Date Added: 2024-06-11T13:28:25.786730
License: Public Domain

UNPUBLISHED

                      UNITED STATES COURT OF APPEALS
                          FOR THE FOURTH CIRCUIT

                                      No. 17-4406

UNITED STATES OF AMERICA,

                    Plaintiff - Appellee,

             v.

DANIEL FRANK LYON, JR.,

                    Defendant - Appellant.

                                      No. 17-4410

UNITED STATES OF AMERICA,

                    Plaintiff - Appellee,

             v.

DENNIS JOE LYON,

                    Defendant - Appellant.

Appeals from the United States District Court for the Middle District of North Carolina,
at Greensboro. William L. Osteen, Jr., District Judge. (1:15-cr-00416-WO-3; 1:15-cr-
00416-WO-6)

Submitted: August 30, 2018                                  Decided: October 16, 2018
Before GREGORY, Chief Judge, DUNCAN, Circuit Judge, and SHEDD, Senior Circuit
Judge.

Affirmed by unpublished per curiam opinion.

Brian M. Aus, BRIAN AUS, ATTORNEY AT LAW, Durham, North Carolina; David B.
Freedman, CRUMPLER, FREEDMAN, PARKER & WITT, Winston-Salem, North
Carolina, for Appellants. John P. Cronan, Acting Assistant Attorney General, Matthew
S. Minor, Deputy Assistant Attorney General, Thomas E. Booth, Criminal Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Matthew G.T.
Martin, United States Attorney, Frank J. Chut, Jr., Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Greensboro, North Carolina, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

       A jury convicted brothers Dennis Joe Lyon and Daniel Frank Lyon, Jr., of

numerous counts related to a scheme in which they provided worthless surety bonds to

obtain a construction contract from the United States Department Veterans Affairs (VA).

Dennis Joe Lyon was convicted of conspiracy to defraud the United States, in violation of

18 U.S.C. § 371 (2012); 14 counts of major fraud against the United States by obtaining

money under false pretenses, in violation of 18 U.S.C. §§ 2, 1031(a)(2) (2012); and 3

counts of wire fraud, in violation of 18 U.S.C. §§ 2, 1343 (2012). The district court

sentenced Dennis Joe to 120 months’ imprisonment, followed by three years of

supervised release, and ordered $4,030,577.42 in restitution. Daniel Frank was convicted

of 13 counts of major fraud against the United States by obtaining money under false

pretenses, in violation of 18 U.S.C. §§ 2, 1031(a)(2). The district court sentenced him to

48 months’ imprisonment, followed by three years of supervised release, and ordered

$3,707,985.87 in restitution.

       On appeal, the Lyons challenge the district court’s admission of evidence

regarding two prior surety fraud schemes and the sufficiency of the evidence to support

their convictions. Dennis Joe Lyon further challenges the district court’s imposition of a

sentencing enhancement based on his leadership role in the scheme, and Daniel Frank

Lyon challenges the district court’s calculation of the amount of loss attributable to him.

We affirm.

                                            3
                                            I.

       The Lyons first contend that the district court erred by admitting evidence of a

prior scheme to present fraudulent bond paperwork and false certifications of contract

compliance in relation to two other construction projects. They contend that the evidence

was not intrinsic to the criminal charges before the jury and that any probative value was

substantially outweighed by the evidence’s prejudicial effect.      We review a district

court’s decision to admit evidence regarding a defendant’s prior conduct under Fed. R.

Evid. 404(b) for abuse of discretion. United States v. Hall, 858 F.3d 254, 264 (4th Cir.

2017). “We . . . will not reverse a district court’s decision to admit [Rule 404(b)]

evidence unless it was arbitrary or irrational.” United States v. Faulls, 821 F.3d 502, 508

(4th Cir. 2016) (internal quotation marks omitted).

      “Federal Rule of Evidence 404(b)(1) provides that evidence of a crime, wrong, or

other act is not admissible to prove a person’s character in order to show that on a

particular occasion the person acted in accordance with the character.” Hall, 858 F.3d at

265 (alteration and internal quotation marks omitted); see United States v. Sterling, 860
F.3d 233, 246-47 (4th Cir. 2017) (providing standard). “Although ‘other acts’ evidence

is not admissible to prove criminal propensity, such evidence ‘may be admissible for

another purpose, such as proving motive, opportunity, intent, preparation, plan,

knowledge, identity, absence of mistake, or lack of accident.’” Hall, 858 F.3d at 266

(quoting Fed. R. Evid. 404(b)(2)). “The government bears the burden of establishing that

evidence of a defendant’s prior bad acts is admissible for a proper purpose.” Id. Finally,

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the prejudicial effect of prior acts evidence is mitigated by limiting instructions given by

the district court. United States v. Cowden, 882 F.3d 464, 473 (4th Cir. 2018).

       We conclude that the district court did not abuse its discretion in admitting at trial

evidence concerning the prior fraud schemes. The evidence was relevant, as it showed

the Lyons’ modus operandi, including that Dennis Joe Lyon recruited others and directed

them to sign fraudulent bonds, affidavits of individual surety, and escrow receipts in

order to obtain construction contracts and that Daniel Frank Lyon falsely certified

compliance with the contracts in order to obtain progress payments. Indeed, the prior

fraud evidence was particularly probative because it rebutted the Lyons’ claim that their

codefendants orchestrated the fraud scheme instead of them. Finally, we conclude that

the probative value of the prior fraud evidence outweighs its prejudicial nature,

particularly in light of the district court’s limiting instructions.

                                               II.

       The Lyons further assert that the district court erred in denying their motions for

judgment of acquittal because the evidence was insufficient to establish their guilt. We

review the denial of a Fed. R. Crim. P. 29 motion for acquittal and other “challenge[s] to

the sufficiency of the evidence de novo.” United States v. Palomino-Coronado, 805 F.3d
127, 130 (4th Cir. 2015). In assessing the sufficiency of the evidence, we determine

whether there is substantial evidence to support the convictions when “viewed in the light

most favorable to the government.” Id. (defining substantial evidence). Thus, “reversal

for insufficiency must be confined to cases where the prosecution’s failure is clear.” Id.

(internal quotation marks omitted).

                                                5
       The Lyons contend that, without the admission of the Rule 404(b) evidence

pertaining to their prior fraud schemes, the evidence submitted at trial tended to support a

finding that certain codefendants perpetrated the fraud scheme alone, without the help of

Dennis Joe Lyon. However, because we conclude that the evidence of prior fraud

schemes was properly admitted—particularly in light of the evidence’s tendency to show

Dennis Joe Lyon’s recruitment and direction of the various codefendants—this argument

is unavailing. Furthermore, even without the evidence of the prior fraud schemes, we

consider the evidence presented at trial sufficient to allow the jury to conclude that

Dennis Joe Lyon recruited his codefendants and directed them to prepare the worthless

bonds, affidavits of individual surety, and escrow receipts. See 18 U.S.C. § 1301(a)

(providing elements of major fraud); United States v. Burfoot, __ F.3d __, __, No.

17-4266, 2018 WL 3747370, at *4 (4th Cir. Aug. 8, 2018) (stating elements of wire

fraud); United States v. Landersman, 886 F.3d 393, 406 (4th Cir. 2018) (stating elements

of § 371 conspiracy).

       The Lyons further contend that the evidence was not sufficient to establish Daniel

Frank Lyon’s knowledge of the fraudulent scheme, and in particular that he was not

aware of the funding and timeline problems associated with the construction project.

However, we conclude that the evidence tended to demonstrate that Daniel Frank Lyon’s

coconspirators informed him of the problems at the construction site and allowed the jury

to permissibly infer that Daniel Frank Lyon intentionally provided incorrect contact

information in connection with the contract compliance paperwork to avoid responsibility

for these problems. At any rate, even if Daniel Frank Lyon was not aware of the

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financial and timeline problems onsite during construction, we consider the evidence

sufficient to sustain Daniel Frank Lyon’s fraud convictions based on his fraudulent

certifications that the project was proceeding according to contract specifications,

particularly in light of the fraudulent bonds supporting the project bid. See 18 U.S.C.

§ 1301(a).

                                            III.

       Next, the Lyons contend that the district court improperly applied a four-level

sentencing enhancement to Dennis Joe Lyon based on his role as a leader and/or

organizer in the fraud scheme. He contends that his codefendants, both charged and

uncharged, are as culpable as he is. We review the district court’s adjustment for role in

the offense for clear error. See United States v. Thorson, 633 F.3d 312, 317 (4th Cir.

2011). A four-level enhancement is applied “[i]f the defendant was an organizer or

leader of a criminal activity that involved five or more participants or was otherwise

extensive.” U.S. Sentencing Guidelines Manual § 3B1.1(a) (2016); United States v.

Kellam, 568 F.3d 125, 148 (4th Cir. 2009) (articulating factors courts consider in

distinguishing between roles).     “The burden is on the government to prove by a

preponderance of the evidence that the sentencing enhancement should be applied.”

United States v. Steffen, 741 F.3d 411, 414 (4th Cir. 2013).

       We conclude that the district court did not clearly err in applying the § 3B1.1(a)

role adjustment. The evidence established that Dennis Joe Lyon ran the bond company

central to the fraud scheme and that, in that capacity, he assigned specific roles to his

employees in relation to the scheme. Furthermore, as explained above, the properly

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admitted evidence of prior fraud schemes undermined Dennis Joe Lyon’s assertion that

his codefendants acted without his direction.

                                           IV.

      Finally, the Lyons argue that the district court erred in attributing over $3.7

million in losses to Daniel Frank Lyon. The district court arrived at this number after

adding the amount of loss suffered by unpaid subcontractors to the amount paid by the

VA to find a replacement contractor after the Lyons’ contractor defaulted. The Lyons

contend that this calculation is in error, pointing to evidence of delays in the project

because of permitting issues, weather, and soil and rock complications, and that the

project was nearly complete at the time of the default. As with role adjustments, we

review the district court’s loss determination for clear error. United States v. Shephard,

892 F.3d 666, 672 (4th Cir. 2018).

      “The government must prove the amount of loss by a preponderance of evidence.”

United States v. Catone, 769 F.3d 866, 876 (4th Cir. 2014). “The district court, though it

need not reach a precise figure as to loss, must make a reasonable estimate of loss based

on the available information in the record.” Id. (internal quotation marks omitted). “The

sentencing judge is in a unique position to assess the evidence and estimate the loss based

upon that evidence.     For this reason, the court’s loss determination is entitled to

appropriate deference.” USSG § 2B1.1 cmt. n.3(C).

       We conclude that the district court did not clearly err in determining the loss

amount of over $3.7 million attributable to Daniel Frank Lyon.          The district court

properly based its loss determination on the cost of the replacement contract less the

                                            8
amount that remained on the original contract, reflecting the reality that the VA had to

hire a new contractor to finish the parking deck after the Lyons’ contractor defaulted and

the project’s surety bonds were found to be worthless. Nor do we consider that the

project was plagued by weather, soil problems, and other issues to be relevant. The

record establishes that the VA terminated the general contractor’s contract because it

carried no liability insurance, and not because of delays or any of the other problems

identified by the Lyons.     Furthermore, the worksite problems did not justify that

subcontractors were not paid for their work. The district court permissibly concluded that

the losses suffered by the unpaid contractors and by the VA in paying a replacement

contractor to finish the parking deck would not have occurred but for the Lyons’

fraudulent bond scheme.

      Accordingly, we affirm the district court’s judgments. We dispense with oral

argument because the facts and legal contentions are adequately presented in the

materials before this court and argument would not aid in the decisional process.

                                                                              AFFIRMED

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