Court Opinion

ID: 19561
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:25:40+00
Date Added: 2024-06-11T15:04:24.028438
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT

                       _____________________

                            No. 98-20821
                       _____________________

          UNITED STATES OF AMERICA,

                               Plaintiff-Appellee,

          v.

          RICHARD ALLISON HAMMOND,

                               Defendant-Appellant.

_________________________________________________________________

          Appeal from the United States District Court
               for the Southern District of Texas

_________________________________________________________________

                         December 8, 1999

Before KING, Chief Judge, and REYNALDO G. GARZA and EMILIO M.
GARZA, Circuit Judges.

PER CURIAM:

     Defendant-Appellant Richard Allison Hammond appeals his

conviction for one count of embezzling union funds in violation

of 29 U.S.C. § 501(c) and the district court’s sentencing

determinations under seven counts of embezzling union funds in

violation of 29 U.S.C. § 501(c).       We affirm his conviction, but

we vacate his sentence and remand for resentencing.

                                I.

     Hammond was formerly the president and business manager of

Local Union 988 (the “Local”) of the International Brotherhood of

Teamsters (the “Teamsters”).   In 1994, the Teamsters heard

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complaints of possible misuse of union funds at the Local and

began an audit of various accounts.    The forensic accountant who

performed the audit tendered his results, and a hearing was

conducted pursuant to Article 19 of the Teamsters’ constitution

to determine whether certain officers, trustees and business

agents of the Local had violated their duties.    Hammond was found

guilty of embezzling union funds.    The Teamsters found that

Hammond had charged personal expenses to the Local on his union

American Express card and that he had misused funds from the

Local’s Health and Welfare account as well as its Democrat,

Republican, Independent Voter Education (“DRIVE”) account.

Hammond’s fellow executive board member, Lewis Stewart, and the

Local's business agent, Gerald Doerr, were also found guilty of

embezzling due to personal charges on their union credit cards.

In addition, seven officers and trustees, including Stewart, were

found to have breached their fiduciary duty to the Local

membership by failing to examine Hammond’s credit card charges in

their monthly audits of the Local.    A fifteen-count indictment

against Hammond followed.

     At trial, Hammond was convicted on fourteen of the fifteen

counts: Count One, for embezzling employee welfare benefit plans

in violation of 18 U.S.C. § 664; Counts Two through Ten, for

embezzling union funds in violation of 29 U.S.C. § 501(c)

(“Section 501(c)”); Count Eleven, for making false statements to

a bank in violation of 18 U.S.C. § 1014; and Counts Thirteen

through Fifteen, for tax evasion in violation of 26 U.S.C. §

                                2
7201.   In its presentence report (“PSR”), the probation office

recommended that eleven points be added to Hammond’s base level

pursuant to U.S.S.G. § 2B1.1(b)(1)(L) because the amount of loss

attributable to him was $407,752.49.    Hammond filed objections,

contesting, in relevant part, the loss calculations on seven

counts of violating Section 501(c).

     At Hammond’s sentencing hearing, the district judge

recalculated the total loss, in accordance with several

objections not at issue here, to be $369,122.49.    The

recalculation did not affect Hammond’s base level.    In all other

respects, the district judge overruled Hammond’s objections and

adopted the PSR.    Hammond was sentenced to 51 months of

imprisonment and five years of supervised release.    He was also

ordered to pay $369,000 in restitution and a $25,000 fine.

     On appeal, Hammond raises issues only with respect to Counts

Two through Nine, for embezzling union funds in violation of

Section 501(c).    He contests the district court’s loss

calculations under Counts Two through Eight, which involve his

personal charges on the union American Express card.      In

addition, he challenges the sufficiency of evidence for his

conviction for Count Nine, which involves his misuse of lobbying

funds in the Local’s DRIVE account.

A.   Sufficiency of evidence

     Hammond contends that the evidence is insufficient to

support his conviction for misusing the Local’s DRIVE funds in

violation of Section 501(c).    Viewing the evidence in the light

                                  3
most favorable to the verdict, we inquire whether a rational

trier of fact could have found from the evidence and inferences

therefrom that the defendant was guilty beyond a reasonable

doubt.    See United States v. Lokey, 945 F.2d 825, 836 (5th Cir.

1991).

     To establish a Section 501(c) violation,1 the government

must prove that Hammond lacked authorization to convert union

funds to his own use and that his misuse of the money was

“coupled with a fraudulent intent to deprive the union of its

funds.”    United States v. Durnin, 632 F.2d 1297, 1300 (5th Cir.

1980); see United States v. Dixon, 609 F.2d 827, 829 (5th Cir.

1980); United States v. Nell, 526 F.2d 1223, 1232 (5th Cir.

1976).    Fraudulent intent requires actual knowledge that the use

was unauthorized.    See Dixon, 609 F.2d at 829; United States v.

Rubin, 591 F.2d 278, 282 (5TH Cir.    1979).   Intent will generally

be established circumstantially and may be established by proving

the lack of benefit to the union from the use of the funds.     See

United States v. Belt, 574 F.2d 1234, 1238 n.17 (5th Cir. 1978).

Once the government demonstrates that the use of funds was

unauthorized, however, it need not prove a lack of benefit to the

     1
      Section 501(c) of the Labor-Management Reporting and
Disclosure Act provides:
     Any person who embezzles, steals, or unlawfully and
     willfully abstracts or converts to his own use, or the
     use of another, any of the moneys, funds, securities,
     property, or other assets of a labor organization of
     which he is an officer, or by which he is employed,
     directly or indirectly, shall be fined not more than
     $10,000 or imprisoned not more than five years, or
     both.
29 U.S.C. § 501(c).

                                  4
union as part of its case.   See Nell, 526 F.2d at 1232.

     We find that the record contains sufficient evidence of

Hammond’s lack of authorization and fraudulent intent to uphold

his conviction.   Hammond spent $19,300 to lease land on which to

hunt deer, and he paid for these leases from DRIVE funds.     DRIVE

funds are generally spent on contributions to local political

campaigns, membership education and grassroots political

activity.   DRIVE fund guidelines state that the money “cannot be

used for general purposes or entertainment unrelated to

communication to members.”   The fund is maintained at the

Teamsters’ national office and, upon request from a local union,

the national office distributes the money.   The local union’s

executive board then determines how the money will be spent.     A

former Local trustee testified that the executive board never

approved Hammond’s use of the money or even discussed the DRIVE

fund at all.   In addition, an official from the Teamsters’

national office testified that the Teamsters’ guidelines provide

a narrow scope of acceptable uses for DRIVE funds and that the

purchase of deer leases would not fall within these guidelines.

Hammond argues that the guidelines are merely suggestions and

that he did not break any law or union rule in purchasing the

leases.   A rational juror could nevertheless conclude that a

union president of twenty-five years would be aware of the

strictures of the DRIVE fund guidelines and recognize that an

expenditure for deer leases was unauthorized.

     Furthermore, Hammond requested the funds from the national

                                 5
office by letter, stating that the money would be used for “area

politics” and to “advance the membership, voter registration and

voter information.”   He stated at trial that he had purchased the

deer leases in order to entertain political figures.   He conceded

that he had never taken a political figure to the deer leases and

had taken only five to seven other Local members there.   The

seller of the deer leases testified that Hammond had rarely used

the leased land and that the only people he had seen Hammond

bring there were his son and some of Hammond’s friends.   Although

certain Local members may have benefitted from the deer leases by

using them with Hammond, the lack of benefit to the Local as a

whole coupled with the apparent deception regarding the stated

uses to which the DRIVE funds would be put were sufficient to

establish that Hammond fraudulently intended to deprive the Local

of the use of its funds.

B.   Sentencing

     The district court, adopting the PSR’s calculations, found

that the total loss attributable to Hammond for misuse of his

union American Express Card was $231,502.49: Hammond himself was

responsible for charging personal expenses worth $189,790, while

third-party charges attributable to Hammond totaled $41,712.49.

Hammond contends that the district court improperly included

certain charges in calculating the total loss, which affected the

determination of his offense level at sentencing.   We review the

district court’s application and interpretation of the sentencing

guidelines de novo and its factual findings for clear error.     See

                                 6
United States v. Torres, 114 F.3d 520, 526 (5th Cir. 1997).

1.   Loss Calculation

     Hammond contends that the district court erred in

attributing to him a $189,790 loss from his credit card

expenditures.   This court reviews a district court’s loss

determination for clear error.   See United States v. Sutton, 77
F.3d 91, 95 (5th Cir. 1996).   “For the purposes of subsection

(b)(1) [of U.S.S.G. § 2B1.1], the loss need not be determined

with precision.   The court need only make a reasonable estimate

of the loss, given the available information.”   United States

Sentencing Commission, Guidelines Manual, § 2B1.1, comment. (n.3)

(Nov. 1998).

     The district court based its loss calculation on the results

of the Teamsters’ forensic audit ordered prior to the Article 19

hearing.   The forensic accountant discovered $189,790 in

questionable charges on Hammond’s credit card which the district

court concluded were “reasonable to count as related conduct...in

the case of Mr. Hammond, since he was not only sworn but paid to

keep track of these things for the benefit of the union members.”

Hammond argues that the district court should have lowered the

$189,790 loss figure because (1) at the Article 19 hearing, the

Teamsters found only $60,000 of loss due Hammond’s misuse of his

credit card, (2) in its investigation, the FBI excluded certain

categories of expenditures the district court’s calculation

includes, and (3) at trial, Hammond was convicted of embezzling

$101,200, only $59,450 of which was related to American Express

                                 7
charges.

     The district court properly noted that the government and

the Teamsters attributed lower loss totals to Hammond because

their investigations required a higher standard of proof.    That

is, they were unable to definitively prove that Hammond’s

American Express charges were not legitimate Local expenses.    The

Teamsters, for example, noted that Hammond had been charged with

embezzling over $189,000, but they found him guilty of embezzling

$60,000 for “plainly personal items.”    For sentencing purposes,

however, the government need only prove facts by a preponderance

of the evidence.    See United States v. Hull, 160 F.3d 265, 269

(5th Cir. 1998); United States v. Jackson, 978 F.2d 903, 913 (5th

Cir. 1992).

     The Teamsters’ forensic accountant testified at trial and

detailed the method he used to investigate Hammond’s American

Express charges.    The accountant stated that, because Local

officials were not required to turn in receipts specifying what

their expenses were for, it was impossible to determine whether

their charges were personal or business-related.    He therefore

traced many of the charges through the records of specific

vendors listed in the Local’s itemized American Express bill.      He

found monthly charges for thousands of dollars worth of guns,

clothing in particular sizes, luggage bearing Hammond’ initials,

and other “items which did not appear to relate to union

business.”    Hammond testified that the bulk of these charges were

business-related.    The rest, he alleged, were mistakenly charged

                                  8
on the union’s American Express, rather than on his own.      Given

the paucity of evidence supporting Hammond’s claims, it is

plausible in light of the record as a whole that the accountant’s

findings provided a reasonable estimate of the total loss

attributable to Hammond from his American Express charges.

Therefore, the district court’s reliance on the forensic audit

for its finding of loss was not clearly erroneous.

2.   Third-party misconduct

     Hammond also argues that the district court erred by

attributing to him losses due to embezzlement by third parties

and that the inclusion of these losses in his total loss

increased his base offense level at sentencing by one level.       We

review the district court’s application of the Sentencing

Guidelines de novo.     See United States v. Dean, 59 F.3d 1479,

1494 (5th Cir. 1995).

     Under section 2B1.1(b) of the Sentencing Guidelines, the

base offense level for embezzlement is calculated based on the

dollar amount of the loss caused by the embezzlement.    In

calculating this base offense level, the sentencing judge holds

the defendant accountable for losses due to the defendant’s own

conduct as well as for those due to the defendant’s “relevant

conduct.”   U.S.S.G. § 1B1.3.   A defendant’s relevant conduct

includes “all reasonably foreseeable acts and omissions of others

in furtherance of jointly undertaken criminal activity.”      Id. §

1B1.3(a)(1)(B).   Application Note Two to section 1B1.3 explains

that “a defendant is accountable for the conduct...of others that

                                   9
was both: (1) in furtherance of the jointly undertaken criminal

activity; and (2) reasonably foreseeable in connection with that

criminal activity.”   Id. § 1B1.3, comment. (n.2).   The Note

explains further that, in applying this test, a “court must first

determine the scope of the criminal activity the particular

defendant agreed to jointly undertake.”   Id.   Thus, in order for

Hammond to be accountable under section 1B1.3 for the losses

incurred by third parties, the district court must have made

findings establishing that: (1) Hammond agreed to undertake

criminal activities jointly with third parties, (2) the losses

caused by the third parties were within the scope of that

agreement, and (3) the third parties’ misconduct was reasonably

foreseeable to Hammond.   See United States v. Evbuomwan, 992 F.2d
70, 74 (5th Cir. 1993).   These findings need not be expressly

made, but the meaning of the court’s findings must be clear.     See

United States v. Lghodaro, 967 F.2d 1028, 1030 (5th Cir. 1992).

     The PSR attributed to Hammond the personal expenses of two

employees that were charged to union American Express cards.     The

PSR stated starkly that “[t]he total loss from the American

Express credit card account, including personal expenses by two

employees, is $231,502.49.”   The PSR did not identify the

employees, nor did it specify the exact amount of loss they

caused.   The original PSR, however, had not included these third-

party charges in its loss calculations.   It was revised after

consideration of the government’s objection that Hammond should

be held accountable for such losses.   Relying on the Teamsters’

                                 10
findings in the Article 19 hearing, the government argued that

the loss attributable to Hammond should include $41,712.49 in

personal charges made by Louis Stewart, the Local’s former board

member, and Gerald Doerr, the Local’s former business agent.    The

revised PSR reflected these charges but contained no finding that

Hammond had agreed to a joint undertaking of criminal activity.

     Hammond filed an objection to the revised PSR, arguing that

his employees’ charges should not be included in his loss

calculations “[a]bsent proof of an agreement between Hammond and

other Union members to defraud the Union.”   The district court

overruled Hammond’s objection and adopted the PSR’s calculations,

stating:

     One of the arguments is you shouldn’t be charged for
     some of these expenditures by others because the
     argument goes you couldn’t have reasonably known what
     they were doing. You were paid a huge salary to know
     what they were doing and to double check it. Unlike
     the nice man in the bank fraud conspiracy I pointed to,
     you were their leader, you ran things, you knew what
     they were doing and you knew why they were being
     allowed to get along. It is perfectly reasonable to
     charge you with the $41,000 defalcation of the others.

     The district court’s statement clarifies that Hammond should

have reasonably foreseen the misconduct of Local employees.    The

statement does not, however, constitute a particularized finding

that Hammond agreed to participate in an embezzling scheme with

Stewart and Doerr.   Nor does it explain how Stewart’s and Doerr’s

American Express charges furthered any joint undertaking of

criminal activity with Hammond or were within the scope of any

such agreement with him.   We made it clear in United States v.

Evbuomwan that such findings were “absolute prerequisites” to a

                                11
sentence adjustment based on third-party misconduct. 992 F.2d at

74 (holding that foreseeability of third-party misconduct was

irrelevant absent concurrent findings that defendant agreed to

undertake criminal activity jointly with third parties and that

third-party misconduct was within scope of that agreement).

     The district court’s reference to the “$41,000 defalcation

of the others” appears to rely on the Teamsters’ findings that

Stewart and Doerr embezzled over $41,000 of Local funds.

Although the court made references to the Teamsters’ Article 19

decision during sentencing, it never stated that it was relying

on any of the Teamsters’ findings.   Furthermore, the court never

specifically identified Stewart and Doerr when discussing the

$41,000 loss, much less an agreement to undertake criminal

activity with Hammond.   The district court’s observation that

Hammond was the “leader” who “ran things, [] knew what they were

doing, and [] knew why they were being allowed to get along”

suggests that there may have been an atmosphere of complicity

among officials at the Local.   While an atmosphere of complicity

may be some evidence of jointly undertaken criminal activity, we

ask for a specific finding of jointly undertaken activity because

“the mere knowledge that criminal activity is taking place is not

enough for sentence enhancement under § 1B1.3.”   Evbuomwan, 992
F.2d at 74.   Therefore, we must vacate the sentence and remand

the case so that the district court can comply with the

requirements of the Sentencing Guidelines when resentencing

Hammond.

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                                 III.

     For the foregoing reasons, we AFFIRM Hammond’s conviction,

VACATE his sentence and REMAND this case to the district court

for resentencing consistent with this opinion.   On remand, the

district court may reimpose the same sentence if it is able to

rule explicitly that Hammond agreed to a joint undertaking of

criminal activity with Louis Stewart and Gerald Doerr, and that

Stewart’s and Doerr’s American Express charges were within the

scope of that agreement.   Otherwise, the district court must

determine the correct loss attributable to Hammond and impose a

sentence consistent therewith.

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