Court Opinion

ID: 2682210
Source: CourtListenerOpinion
Date Created: 2014-07-08 07:01:45.087016+00
Date Added: 2024-06-11T13:12:39.510006
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 13-4417

UNITED STATES OF AMERICA,

                  Plaintiff - Appellee,

           v.

ALAN L. BUTLER,

                  Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.  Henry E. Hudson, District
Judge. (3:12-cr-00192-HEH-1)

Argued:   May 15, 2014                       Decided:   July 3, 2014

Before GREGORY, AGEE, and KEENAN, Circuit Judges.

Affirmed by unpublished opinion.        Judge Keenan wrote      the
opinion, in which Judge Gregory and Judge Agee joined.

ARGUED: William H. Burgess, IV, KIRKLAND & ELLIS, LLP,
Washington, D.C., for Appellant. Jamie L. Mickelson, OFFICE OF
THE UNITED STATES ATTORNEY, Atlanta, Georgia, for Appellee. ON
BRIEF:   Dana  J.   Boente,  Acting   United  States   Attorney,
Alexandria, Virginia, Gurney Wingate Grant II, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:

      Alan L. Butler pleaded guilty to conspiracy to commit mail

fraud, in violation of 18 U.S.C. § 1349, based on his conduct of

awarding construction contracts in the name of his employer to

companies in which Butler had an ownership interest.                 On appeal,

Butler argues that the district court overstated the loss to his

employer resulting from the fraud by failing to award a setoff

for   the   value     of   Butler’s    personal      labor.    Based      on   this

assigned error, Butler challenges the court’s application of a

14-level sentencing enhancement related to loss, as well as the

court’s forfeiture order in the amount of $864,914.61.

      Upon our review, we conclude that the district court did

not err in calculating the loss amount on which the sentencing

enhancement and the forfeiture order were based, because any

labor    performed    by   Butler     during   the   scheme   did   not   provide

legitimate value to his employer.               Accordingly, we affirm the

district court’s judgment.

                                        I.

      From 2002 through 2011, Butler worked as the vice president

and director of construction for CH Construction, LLC (CHC), a

Virginia corporation that developed residential real estate in

Virginia and North Carolina.            In his position with CHC, Butler

was     responsible    for    managing       CHC’s    construction     projects,

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adhering        to      established          budgets,         obtaining       bids       from

subcontractors,          and    selecting      and     overseeing        subcontractors.

       In 2004, Butler and his co-conspirator formed a business in

Virginia known as Valley Construction Corps (Valley).                               In 2011,

Butler       formed     another       business       in    Virginia      known      as    ACT

Resources and Remediation, LLC (ACT).                         Between 2004 and 2011,

Butler, on behalf of CHC, entered into contracts with Valley and

ACT    for      the     performance       of       exterior     stonework         and    other

construction-related work.                During this time, Butler concealed

from   CHC     and    its    owner,    Roger       Glover,     Butler’s    ownership       of

Valley and ACT.             Butler also concealed from CHC the fact that

Valley and ACT had hired other subcontractors to complete the

work for CHC.           By charging CHC a higher price for the work than

Valley and        ACT    paid   to    the    subcontractors        who    performed        the

work, Butler profited personally from these arrangements.

       In     December      2012,     a     grand     jury     returned       a    one-count

indictment against Butler charging him with conspiracy to commit

mail       fraud. 1      The    indictment          also      included    a       forfeiture

       1
        The mail fraud statute, 18 U.S.C. § 1341, prohibits
conduct that, through use of the mail, entails a scheme to
defraud, or to obtain “money or property by means of false or
fraudulent pretenses, representations, or promises.”     We have
set forth the elements of mail fraud as “(1) the existence of a
scheme to defraud, and (2) the mailing of a letter, etc., for
the purposes of executing the scheme.”         United States v.
Vinyard, 266 F.3d 320, 326 (4th Cir. 2001) (citation omitted).

                                               3
allegation.          In        January       2013,       the     district      court     accepted

Butler’s      guilty       plea    and       entered       a     judgment       of    conviction.

        The   probation         officer       who      prepared        Butler’s       presentence

report    (PSR)      calculated          a    total       offense      level     of    20,   which

included a 14-level enhancement based on a loss to CHC in an

amount    exceeding            $800,000.           The    enhancement       was       applied    in

accordance with United States Sentencing Guidelines (U.S.S.G.)

§ 2B1.1(b)(1)(H),              which    governs          fraud       offenses    resulting       in

monetary losses to the victim in amounts between $400,000 and

$1,000,000.          As    a    result       of    this        enhancement,      the    probation

officer recommended an advisory Guidelines range of 33 to 41

months’ imprisonment.

        Butler objected to the recommended enhancement and argued

that the asserted loss amount failed to include a credit for the

labor that he personally performed on behalf of Valley and ACT.

In response, the government contended that CHC’s pecuniary loss

was $864,914.61, which amount represented the difference between

CHC’s    payments         to    Valley       and    ACT        and   the   money      that   those

businesses paid to the subcontractors actually performing the

work.

     At       a    sentencing          hearing,          the     district      court     received

testimony         from    several        witnesses,             including       Butler.         The

government        presented        the       testimony          of    Special        Agent   David

Hulser, a certified public accountant for the Federal Bureau of

                                                   4
Investigation who participated in the investigation of the case.

During    this    investigation,      Hulser       reviewed   Butler’s    personal

bank statements and tax records, as well as the statements and

records of Valley and ACT.

        After    examining    these   documents,       Hulser   determined      that

Valley and ACT received a total of more than $1.6 million from

CHC.     Hulser also calculated that Valley and ACT had expended a

total of about $775,000 for labor performed by subcontractors.

By subtracting these costs from CHC’s total payments to Valley

and ACT, Hulser concluded that Butler, through Valley and ACT,

had “overbilled” CHC by $864,914.61.

       The government also presented the testimony of CHC’s owner,

Roger    Glover.        He   testified    that      after    Butler’s   fraud     was

discovered,       CHC    continued       to   do     business     directly      with

Environmental StoneWorks (ESW), one of the same subcontractors

hired by Valley to perform certain stonework.                      Glover stated

that ESW performed the same work that CHC previously had hired

Valley to perform, at roughly one-third the amount that Valley

had charged to CHC.          A representative of ESW corroborated this

testimony, and also stated that ESW charged about the same price

for its work performed directly for CHC as the price it charged

to Valley.

        Butler   testified    that,   generally,       the    prices    charged    by

Valley and ACT to CHC were equal to, or less than, the estimates

                                          5
submitted by other bidding companies.                            He also stated that when

he formed Valley, he intended not only to profit personally, but

also to provide a benefit to CHC by providing quality work that

eventually would result in improved sales.

       Butler also submitted as evidence a report prepared by a

construction consultant, who did not testify at the hearing.                                        In

the consultant’s report, which was based on information provided

by    Butler,    the     consultant         analyzed        the       fair    market       value    of

Valley’s      work     for    CHC,       and   calculated          the    value       of    Butler’s

“unbilled”       labor       and    other      expenses         relating       to   his     work    on

Valley’s projects for CHC.                     The consultant concluded that the

overall       price     that       CHC    paid          Valley    over        eight    years       was

$55,243.89 below the fair market value of the work that was

performed on CHC’s behalf.

       At the conclusion of the sentencing hearing, the district

court overruled Butler’s objection to the loss amount stated in

the    PSR,     and    applied       the       14-level         enhancement.           The     court

sentenced Butler to serve a term of 36 months’ imprisonment, and

ordered him to pay restitution in the amount of $864,914.61.

       Several        days    later,        the     court        held    a     hearing       on    the

government’s      motion       seeking         an       order    of     forfeiture.          At    the

hearing, Butler argued that a portion of his labor and certain

out-of-pocket expenses qualified as “direct costs” that should

reduce     the        total        amount       attributable             to    the         fraud    by

                                                    6
$339,246.57.          The    court     declined    to   offset     this   requested

amount, but credited Butler for certain documented expenses that

the government already had factored into its loss and forfeiture

calculations.     The court entered a final order of forfeiture in

the   amount     of     $864,914.61,       which    amount    the    court     found

represented the “net proceeds” fraudulently obtained by Butler.

Butler timely filed this appeal.

                                          II.

      On appeal, Butler asserts that the court erred in applying

the   14-level        sentencing       enhancement,     and   in    entering     the

forfeiture order in the amount of $864,914.61. 2                   Butler does not

dispute   that    the       district    court’s    calculations      of   loss   and

forfeiture amounts accurately represented the difference between

      2
       In his brief, Butler also argues that the court’s order of
restitution was based on an erroneous loss calculation.
However, Butler’s argument lacks merit because it fails to
address the statutes governing restitution in this case, which
require a court to order that a defendant “make restitution to
the victim of the offense” in the “full amount” of the victim’s
losses.   18 U.S.C. §§ 3663A(a)(1), 3664(f)(1)(A).     Unlike the
Guidelines and the forfeiture statute relied on by Butler, these
restitution statutes do not contain a particular provision
allowing a court to award a setoff in calculating the amount of
restitution owed.    Nevertheless, to the extent that Butler is
challenging the court’s restitution order, we conclude for the
reasons stated more fully in this opinion that the district
court did not abuse its discretion in awarding restitution in
the amount of $864,914.61.     See United States v. Llamas, 599
F.3d 381, 387 (4th Cir. 2010).

                                           7
CHC’s     payments     to    Valley      and     ACT   and     their       payments    to

subcontractors.         Instead,      Butler       contends     that    his      personal

labor provided legitimate value to CHC warranting a setoff in

both the calculated loss amount and the forfeiture amount.                              We

disagree with Butler’s argument.

       Initially, we observe that Butler relies on two distinct

setoff provisions described below, one relating to a sentencing

enhancement       involving       loss     amount      and     one     applicable      to

forfeiture.       Nonetheless, Butler’s argument presents the single

analytical     question          whether     his    alleged        “unbilled”        labor

provided legitimate value to CHC, thereby requiring a reduction

in the court’s calculation of loss and forfeiture amounts.

        We review for clear error the district court’s factual

findings    relating        to   these     calculations.           United    States     v.

Vinyard, 266 F.3d 320, 332 (4th Cir. 2001) (reviewing district

court’s    loss      determination         under    the      Guidelines      for     clear

error); United States v. Oregon, 671 F.3d 484, 490 (4th Cir.

2012)   (reviewing,         in   criminal       forfeiture     context,      a     court’s

findings of fact for clear error).                     We examine de novo the

district     court’s        legal     interpretation          of     the     Sentencing

Guidelines and the forfeiture statute.                       See United States v.

Steffen, 741 F.3d 411, 414 (4th Cir. 2013); Oregon, 671 F.3d at

490.

                                            8
       When calculating a loss amount for purposes of a sentencing

enhancement, a district court is required to make a “reasonable

estimate” of the loss amount sustained by the fraud victim based

on the evidence presented.                    U.S.S.G. § 2B1.1 cmt. n.3 (C).                        In

accordance with this provision, the court’s estimate of loss

amount must include a reduction for the value of any property or

collateral        returned       to    the    victim,         or   the    value    of       services

rendered to the victim.                U.S.S.G. § 2B1.1 cmt. n.3 (E)(i).

       In determining a forfeiture amount, a district court first

must     find     that         there     is    a       sufficient        nexus     between         the

forfeiture calculation and the crime.                           United States v. Martin,

662 F.3d 301, 307 (4th Cir. 2011) (citing Fed. R. Crim. P.

32.2(b)(1)(A)).                Under   18     U.S.C.      § 981(a)(1)(C),          property         is

subject      to       forfeiture       when        the    property        is     “derived       from

proceeds traceable” to the criminal offense.                                   When a “case[]

involv[es]        .    .   .    lawful      services”         that   are    “provided         in    an

illegal manner,” proceeds subject to forfeiture should be offset

by     the   “direct           costs   incurred          in    providing         the    goods       or

services,”        thereby         yielding          “net       proceeds.”              18    U.S.C.

§ 981(a)(2)(B).

       In the present case, the district court engaged in the same

analysis for calculating both the loss amount and the forfeiture

amount.      That calculation was based on the total amount that CHC

                                                   9
paid to Valley and ACT, minus the cost of the legitimate work

performed by their subcontractors.

      Although the district court assumed, without deciding, that

Butler performed the labor he claimed, the court declined to

allow a further reduction for that labor.                   The court held that

Butler’s labor was part of the fraud scheme and, therefore, did

not represent “legitimate” value received by CHC.                   We agree with

the court’s conclusion.

      The   essential       components        of   Butler’s     seven-year       fraud

scheme during his employment with CHC were his acts concealing

his ownership of Valley and ACT, and his conduct concealing his

involvement    with    the    contracts        awarded    to    those    companies.

Butler admitted that he took “significant steps” to hide from

CHC   and   Glover    his    ownership        interest    in    Valley     and   ACT,

including his action of obtaining false signatures on contracts

that his companies executed with CHC.                    Without concealing his

active participation in Valley and ACT, Butler could not have

executed the fraud scheme.

      As the district court recognized, the work performed by the

third party subcontractors at the direction of Valley and ACT

unquestionably       provided    legitimate         value      to   CHC.         Those

subcontractors       performed   construction         work     at   market       value

without any knowledge of, or involvement in, Butler’s scheme.

In contrast, all the work that Butler performed was done with

                                         10
the   purpose     of      increasing           the      benefit     he        received         from

performance of the fraudulent contracts.

      Although        Butler’s     “unbilled”          labor     did     not    involve         the

performance      of    services         that    were     unlawful       per    se,    we       must

consider   the    value       of   that        labor    within    the     context         of    its

purpose    in   furthering         Butler’s          criminal    enterprise.              Because

Butler    performed      this      labor       to    facilitate        completion         of    the

fraudulent contracts, and to perpetuate a scheme that required

concealment      of     his   interest          in     Valley     and    ACT,       his    labor

necessarily constituted “unlawful services” and did not provide

CHC any legitimate value. 3

      Under these circumstances, Butler was not entitled to a

credit    for   any     value      of    his     labor,    which        was    an    essential

component of the fraud scheme.                       See generally United States v.

Hartstein, 500 F.3d 790, 800 (8th Cir. 2007) (sentencing court

may refuse to credit defendant’s repayments when they relate

solely to the illegal purpose of continuing the scheme); United

States v. Ciccone, 219 F.3d 1078, 1087 (9th Cir. 2000) (court

      3
       The district court found on other grounds that any labor
performed by Butler did not provide legitimate value to CHC.
The court framed its analysis, in part, on its finding that
Butler’s employment with CHC required him to perform labor
relating to Valley and ACT’s subcontracts.       However, we are
“entitled to affirm on any ground appearing in the record,
including theories not relied upon or rejected by the district
court.”   United States v. McHan, 386 F.3d 620, 623 (4th Cir.
2004) (citation and internal quotation marks omitted).

                                                11
need   not   credit    a   defendant     for    services   that    permitted   the

fraudulent     scheme      to   continue).        Thus,    the    district   court

properly refused Butler’s request that effectively would have

rewarded him further for his criminal conduct.                      We therefore

hold that the district court did not err in denying Butler’s

claim for a setoff from the loss amount and a reduction in the

award of forfeiture, based on the “fair market value” of any

services that he rendered.             Accordingly, the court likewise did

not err by applying the sentencing enhancement and in entering

an order of forfeiture in the amount of $864,914.61. 4

                                        III.

       For   these    reasons,    we   affirm    Butler’s    sentence    and   the

district court’s forfeiture judgment.

                                                                         AFFIRMED

       4
        In his brief, Butler challenges the district court’s
authority to enter a forfeiture money judgment in a criminal
case.    However, before oral argument in the present case, we
issued our decision in United States v. Blackman, 746 F.3d 137,
144 (4th Cir. 2014), in which we concluded that forfeiture money
judgments in criminal cases are not only permissible but are
required when the defendant has spent or divested himself (to
the   exclusion   of  the  victim)  of   the  gains   at  issue.
Accordingly, as later acknowledged by Butler during oral
argument, Butler’s contention is foreclosed by our decision in
Blackman.

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