Court Opinion

ID: 2832667
Source: CourtListenerOpinion
Date Created: 2015-09-01 16:00:57.06608+00
Date Added: 2024-06-11T12:08:40.539075
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                           File Name: 15a0615n.06

                                         No. 14-1727

                           UNITED STATES COURT OF APPEALS
                                                                                    FILED
                                                                               Sep 01, 2015
                                FOR THE SIXTH CIRCUIT
                                                                           DEBORAH S. HUNT, Clerk
UNITED STATES OF AMERICA,                          )
                                                   )
       Plaintiff-Appellee,                         )
                                                   )
                      v.                           )        ON APPEAL FROM THE
                                                   )        UNITED STATES DISTRICT
RICHARD SHANNON,                                   )        COURT FOR THE EASTERN
                                                   )        DISTRICT OF MICHIGAN
       Defendant-Appellant.                        )
                                                   )

BEFORE:       KEITH, CLAY, and STRANCH, Circuit Judges.

       DAMON J. KEITH, Circuit Judge. Defendant-Appellant, Richard Shannon, appeals

his conviction and sentence stemming from his involvement in a large-scale Medicare fraud

scheme in which twenty-one people were indicted. Shannon was convicted of one count of

conspiracy to commit health care fraud in violation of 18 U.S.C. § 1349 and sentenced to 86

months imprisonment. On appeal, Shannon argues that (1) the district court erred in allowing the

Government to introduce his proffer statements into evidence during trial; and (2) the district

court’s sentence was procedurally unreasonable.        We AFFIRM the district court’s ruling

admitting Shannon’s proffer statements. However, because the district court’s sentence failed to

comport with Federal Rule of Criminal Procedure 32(i)(3)(B), we VACATE Shannon’s sentence

and REMAND for resentencing.
No. 14-1727, United States v. Shannon

                                        I.   BACKGROUND

        On October 26, 2012, a jury found Shannon guilty of one count of conspiracy to commit

health care fraud. On May 13, 2014, Shannon was sentenced to 86 months incarceration. The

circumstances surrounding Shannon’s conviction are as follows:

        In 2008, Shannon met Mohammed Shahab, an owner and operator of various health care

agencies in Michigan, through another co-conspirator. Shannon subsequently agreed to work for

Shahab as a “marketer” or “recruiter” for two of Shahab’s home health-care agencies: All

American Home Health Care (“All American”) and Patient Choice Home Health Care (“Patient

Choice”). Both agencies were run by Hassan Akhtar. Shannon’s role required him to obtain

account information and signatures on pre-signed medical notes from Medicare beneficiaries in

exchange for $50-$100 and/or prescription narcotics. Shannon then delivered these pre-signed

notes to the health care agencies where they were fraudulently signed by medical professionals.

The billing staff then billed the Medicare accounts for services that were not rendered. Shannon

was paid $400-$600 for each “patient” he recruited.       To disguise their illegal scheme as

legitimate payment for services rendered to Shahab’s agencies, Shahab instructed Shannon to

establish his own company in order to submit invoices to Shahab’s agencies for payment.

Shannon established Shannon Community Liaison, and Richard Shannon Community Liaison, to

receive payment.

        On July 13, 2010, an indictment charged Shannon and several others with conspiracy to

commit health care fraud in violation of 18 U.S.C. § 1349. On December 3, 2010, Shannon,

along with counsel, met with the Government to make a proffer statement. Prior to the proffer

statement, Shannon and his attorney were provided with a proffer agreement, also known as a

                                               2
No. 14-1727, United States v. Shannon

Kastigar letter. The agreement was signed by the Government, Shannon, and his defense

counsel. The agreement provided, in relevant part, that:

                 (2) Except as otherwise specified in this letter, no statement made
                 by you or your client during this proffer discussion will be offered
                 against your client in the government’s case-in-chief in any
                 criminal prosecution of your client for the matters currently under
                 investigation.

                 (3) If your client is prosecuted, the government may use your
                 client’s statements in cross-examining your client, and to rebut any
                 evidence offered by your client that is inconsistent with the
                 statements made during this discussion. This is to ensure your
                 client does not abuse the opportunity for this proffer discussion by
                 making false or misleading statements, either at the proffer
                 discussion or at trial.

(R. 496-2, Proffer Agreement, Pg ID 2149). During the proffer session, Shannon made several

inculpatory statements regarding his involvement in the health care fraud conspiracy.

        At Shannon’s trial, the Government offered the testimony of Akhtar, who pleaded guilty

and cooperated with the Government. Akhtar testified that he ran Shahab’s clinics, Patient

Choice and All American (R. 622, Trial Transcript, Pg ID 3633), and that he knew Shannon as a

recruiter for these clinics. (Id. at Pg ID 3634). Akhtar testified that he paid Shannon $400 for

every patient Shannon recruited, and that Shannon claimed to pay each patient between $50 and

$100, in addition to prescription pain pills. (Id. at Pg ID 3643, 3640). Akhtar further testified

that he received a call from a patient stating that he had not received money that Shannon

promised to him. (Id. at Pg ID 3637-39). On cross-examination, the following exchange

occurred between Shannon’s counsel and Akhtar:

                 Q [defense counsel]: Okay. And that’s not firsthand knowledge,
                                      correct? You didn’t see Mr.—Mr. Shannon
                                      paying any patients, correct?
                 A [Akhtar]:          No, sir.
                 Q [defense counsel]: Okay. And you didn’t direct Mr. Shannon
                                      to pay any patients, correct?

                                                  3
No. 14-1727, United States v. Shannon

               A [Akhtar]:           No, sir.
               Q [defense counsel]: That was just the rumor going around in the
                                     office, correct?
               A [Akhtar]:           No.
               Q [defense counsel] That wasn’t a rumor?
               A [Akhtar]            It was not a rumor if patient is calling and
                                     asking that Shannon had me sign the
                                     paperwork and did not give me the money
                                     he promised.
               Q [defense counsel] Okay. Well, if he didn’t pay him the money
                                     that he promised, that means he didn’t pay
                                     them, correct?
               A [Akhtar]            That’s why patient was calling, to get the
                                     money.
               Q [defense counsel] Okay. I understand that’s why they were
                                     calling, but they weren’t paid, correct?
               A [Akhtar]            At that time, yes.
               Q [defense counsel] Okay.          And you have no firsthand
                                     knowledge of them actually paying the
                                     patient, correct? We’ve already established
                                     that, right?
               A [Akhtar]            Right, I did not see him because I was in the
                                     office.
(R. 623, Trial Transcript, Pg ID # 3802). On October 16, 2012, in response to this exchange and

Shannon’s questioning of other witnesses, the Government filed its Motion to Use Statements

Made by Defendant Richard Shannon During Proffer Sessions.1 (R. 496, Pg ID # 2140-58). In

its motion, the government asserted that Shannon waived the restrictions on the use of his proffer

statements when Shannon’s counsel “repeatedly attempted to elicit testimony that [was]

inconsistent with [] statements by [Defendant].” The district court found that the defense’s

cross-examination went “too far,” and led to an inference that was inconsistent with Shannon’s

proffer.    (R. 674, Trial Transcript at 19, Page ID 5638).                 The district court granted the

Government’s motion to allow introduction of Shannon’s proffer statements. The jury found

Shannon guilty of one count of conspiracy to commit health care fraud.

        1
           The Government also asserted that the defense’s cross-examination of other witnesses triggered the
waiver provision of Shannon’s proffer agreement. However, the district court found that the defense’s cross-
examination of these additional witnesses was merely to test the witnesses’ credibility, and thus found no waiver.
Therefore, the waiver issue before this Court pertains only to the cross-examination of Akhtar.

                                                        4
No. 14-1727, United States v. Shannon

        During sentencing, Shannon objected to the Government’s fraud loss calculation.2

Particularly, Shannon disputed the Government’s assertion that he received $186,775.00 from

the conspiracy, contending that at trial, the Government had argued and put forth proof only that

Shannon profited $55,350.00. Using a statistical extrapolation formula, the Government then

calculated the amount of the fraud loss as $1,680,975.00.3 This amount was derived from an

extrapolation of: (1) the total amount paid to Shannon of $186,775.00; (2) divided by an average

payment to Shannon of $500 per patient; and (3) multiplied by the average Medicare payment of

$4,500 per patient episode. While not disputing that it had only put forth evidence of $55,350.00

at trial, the Government countered that, during the sentencing phase, the court was free to

consider evidence of Shannon’s other relevant conduct. Thus, the Government submitted, as an

exhibit to its Sentencing Memorandum a chart purporting to show additional payments to

Shannon. These charts appeared to show that Shannon had actually profited an additional

$131,425.00 from separate, but related, schemes of health care Medicare fraud, bringing his

profit to $186,775.4

        The district court accepted the Government’s $1,680,975.00 fraud loss calculation, which

resulted in a 16-point increase and an advisory guideline sentence range of 92-115 months. The

district court sentenced Shannon below the guidelines to 86 months imprisonment. Shannon

appeals.

        2
          Shannon does not challenge or dispute the government’s fraud loss calculation formula.
        3
          Shannon’s Presentence Report also attributed $1,680,975 in fraud loss to Shannon.
        4
          The Government asserts that upon further review, it found that Shannon actually received a total of
$191,175 from the fraud, but that for purposes of sentencing, it would use the amount identified by the Probation
Department in Shannon’s Presentence Report.

                                                       5
No. 14-1727, United States v. Shannon

                                         II.     DISCUSSION

        A. Admission of Proffer Statement

                 1. Waiver Language

        Shannon first argues that the district court erred in allowing the Government to introduce

portions of his proffer statements into evidence. Specifically, Shannon challenges the district

court’s determination that he waived the protections of his proffer agreement by offering

evidence that was inconsistent with his proffer statements. Shannon contends that he did not

“offer any evidence” because he did not “call any witnesses or put on any defense case.”

Appellant Br. 20.       The Government, on the other hand, asserts that Shannon waived the

protections of his proffer agreement when he cross-examined Akhtar, thereby eliciting responses

that were inconsistent with his proffer statements. This cross-examination, the Government

argues, amounts to an “offer of evidence.”

         In considering this issue, we engage in a two-part analysis. We first look at the terms of

Shannon’s proffer agreement for an interpretation of its contents. The agreement is a “contract

that must be interpreted ‘to give effect to the intent of the parties.’” United States v. Barrow, 400
F.3d 109, 117 (2d Cir. 2005). “Because the interpretation of a contract is generally a question of

law, we first review the first issue de novo.” Id. “If we conclude that the proffer agreement

waiver does apply in this case, our second step is to review for abuse of discretion the district

court’s evidentiary rulings admitting [Shannon’s] proffer statements, and we will not reverse

unless an error affects a ‘substantial right.’” Id. (internal citations omitted).

        Generally, statements made by defendants in proffer sessions are inadmissible under Rule

410 of the Federal Rules of Evidence. Barrow, 400 F.3d at 116. The rule states in pertinent part:

                 Except as otherwise provided in this rule, evidence of the
                 following is not, in any civil or criminal proceeding, admissible

                                                   6
No. 14-1727, United States v. Shannon

                 against the defendant who made the plea or was a participant in the
                 plea discussions:

                         (1) a guilty plea that was later withdrawn;

                         (2) a plea of nolo contendere plea;

                         (3) a statement made during a proceeding on either of
                             those pleas under Federal Rule of Criminal Procedure
                             11 or a comparable state procedure; or

                         (4) a statement made during plea discussions with an
                             attorney for the prosecuting authority if the discussions
                             did not result in a guilty plea or they resulted in a later-
                             withdrawn guilty plea.

Fed. R. Evid. 410 (emphasis added). However, defendants may waive Rule 410 objections,

“absent evidence that a waiver is unknowing or involuntary.” United States v. Fifer, 206 F.

App’x 502, 509 (6th Cir. 2006); see also United States v. Mezzanatto, 513 U.S. 196, 205 (1995)

(holding that Rule 410 creates “‘a privilege of the defendant,’ and, like other evidentiary

privileges, [it] may be waived or varied at the defendant’s request.”).

        The waiver provision at issue here, permitted the Government to use Shannon’s proffer

statements “to rebut any evidence offered by [Shannon] that [was] inconsistent with the

statements made during [the proffer session].” (R. 496-2, Proffer Agreement, Pg ID 2149).

Shannon does not challenge the validity of the proffer agreement; instead, he urges this Court to

find that he did not violate the provisions of the agreement because he did not “offer evidence”

by cross-examining Akhtar. Shannon contends that his cross-examination of Akhtar was simply

a rebuttal of the Government’s direct questioning and was aimed at establishing Akhtar’s lack of

first-hand knowledge about payments to beneficiaries.               We find Shannon’s arguments

unpersuasive. While Shannon relies heavily on this argument, guidance from our sister circuits’

precedent is more compelling.

                                                    7
No. 14-1727, United States v. Shannon

        In United States v. Krilich, 159 F.3d 1020 (7th Cir. 1998), the defendant contended that

the waiver provision in his proffer agreement was limited to evidence presented through his own

witnesses, not evidence obtained by cross-examination of the prosecution’s witnesses. 159 F.3d

at 1025. The waiver provision stated:

                 [S]hould [defendant] subsequently testify contrary to the substance
                 of the proffer or otherwise present a position inconsistent with the
                 proffer, nothing shall prevent the government from using the
                 substance of the proffer at sentencing for any purpose, at trial for
                 impeachment or in rebuttal testimony, or in a prosecution for
                 perjury.

Id. at 1024. The Seventh Circuit rejected this argument finding that “[e]vidence is evidence,

whether it comes out on direct or cross-examination.” Id. at 1025. It opined that “[o]ne can

‘otherwise present’ a position through arguments of counsel alone, so it is very easy to see how a

position can be ‘presented’ by evidence developed on cross-examination and elaborated by

counsel.” Id. The court concluded that “[i]ntroduction of the [proffer] statements [] was proper

if either [the defendant’s] testimony, or evidence that he presented through the testimony of

others, contradicted the proffer.” Id. (internal citations omitted) (emphasis added).

        In Barrow, 400 F.3d 109, the defendant challenged the district court’s finding that his

counsel’s trial conduct triggered the waiver clause of his proffer agreement.           The waiver

provision permitted the government to use the defendant’s proffer statements “‘to rebut any

evidence offered or elicited, or factual assertions made, by or on behalf of [him] at any stage of a

criminal prosecution.’” Id. at 116. The defendant contended that only a “specific or direct

contradiction between his proffer statement and an assertion by counsel” would trigger the

waiver clause. Id. at 117. The Second Circuit disagreed, determining that the waiver’s use of

the words “any evidence” created an expansive waiver, and applied to all evidence, whether

“offered directly or elicited on cross-examination.” Id. at 118 (emphasis added). Finally, in

                                                  8
No. 14-1727, United States v. Shannon

United States v. Hardwick, 544 F.3d 565 (3d Cir. 2008), the defendant’s proffer agreement

provided that the government could “rebut any evidence or arguments offered on [the

defendant’s] behalf.” 544 F.3d at 570. The Third Circuit determined that the “testimony elicited

from [] witnesses on cross-examination was aimed at inferring that [others], rather than [the

defendant], were responsible for the murders [], contrary to the statements [defendant] made

under the proffer agreement.” Id. at 571 (emphasis added).

        Relying on these cases, we agree with the district court that Shannon did offer evidence

when he elicited testimony from Akhtar on cross-examination. Shannon’s argument that he did

not offer any evidence because he did not call any witnesses or put on a defense case is

unconvincing. Evidence is defined as “something (including testimony, documents, and tangible

objects) that tends to prove or disprove the existence of an alleged fact; anything presented to the

senses and offered to prove the existence or nonexistence of a fact.” Black's Law Dictionary

(10th ed. 2014). A party does not offer evidence only by calling its own witnesses or putting on

its own case. Indeed, as noted by the Krilich court, evidence may be offered through cross-

examination.     Krilich, 159 F.3d at 1025.     And as is consistent with the Barrow court’s

determination, because Shannon’s waiver provision allowed the government to rebut “any

evidence,” this included evidence offered on direct or elicited on cross-examination. Thus, we

reject Shannon’s argument and conclude that the elicitation of testimony from Akhtar on cross-

examination amounted to an “offer of evidence” under the terms of the proffer agreement.

        Shannon contends that reliance on these cases is misplaced because the waiver provision

at issue in each of these cases was broader than the waiver provision in the instance case.

Shannon argues that the waiver provisions are distinguishable because an “offer of evidence”

does not equate to an “argument” as used in Hardwick; a “position” as used in Krilich; or

                                                 9
No. 14-1727, United States v. Shannon

“elicited evidence” as used in Barrow. Shannon’s argument is unavailing. While the waivers

are not identical, they need not be.       All three cases support the general rule that cross-

examination of a witness can amount to an “offer of evidence.”

                 2.   Triggering the Waiver Provision

         Having determined that Shannon did offer evidence when he cross-examined Akhtar, we

must now consider whether this evidence was inconsistent with Shannon’s proffer and triggered

the waiver provision. Because this is an evidentiary ruling, we review the district’s court

decision to admit Shannon’s proffer statement for abuse of discretion.            United States v.

Henderson, 626 F.3d 326, 333 (6th Cir. 2010). We will not reverse unless an error affects a

“substantial right”—that is, if the error had a “substantial and injurious effect or influence” on

the jury’s verdict. Id. (citation omitted). “[A]n erroneous admission of evidence that does not

affect the ‘substantial rights’ of a party is considered harmless, and should be disregarded.”

United States v. Whittington, 455 F.3d 736, 738 (6th Cir. 2006) (citation omitted).

         Shannon asserts that his cross-examination was aimed at challenging the accuracy and

credibility of Akhtar’s testimony. He claims that defense counsel was merely responding to the

testimony elicited by the Government from Akhtar and establishing that Akhtar did not have

first-hand knowledge about the payments to beneficiaries.           The district court, however,

concluded that defense counsel’s cross-examination “went too far” and was “problematic.” We

agree.

         While Shannon certainly has the constitutional right to confront and question the

witnesses against him, see U.S. Const. amend. VI, “[i]mpeachment of a witness need not be

‘contrary to’ or ‘inconsistent with’ a defendant’s admission of guilt in a bargaining proffer.”

Krilich, 159 F.3d at 1025. “Statements are inconsistent only if the truth of one implies the falsity

                                                10
No. 14-1727, United States v. Shannon

of the other.” Id. at 1025-26. In Hardwick, the court rejected the defendant’s contention that his

questioning on cross-examination was “intended only to impeach the credibility of the

Government’s cooperating witnesses and to challenge their recollections of certain events.”

Hardwick, 544 F.3d at 571. The court found no error in the district court’s determination that the

defendant also attempted to challenge his role in the crimes, contrary to his proffer statements.

Id. Accordingly, the court found that the district court did not abuse its discretion in admitting

the defendant’s proffer statements. Id.

        Similarly, we find that the testimony elicited from Akhtar was not only aimed at

questioning his credibility and accuracy, but also at inferring that Shannon did not pay

beneficiaries, an inference that is inconsistent with his proffer statements. A review of the trial

transcript shows that, Shannon’s counsel elicited from Akhtar the admission that Akhtar lacked

first-hand knowledge about the payments:

                 Q [Defense Counsel]:        . . . [Y]ou indicated on direct
                                             examination that you had knowledge
                                             of Mr. Shannon paying patients.
                                             You remember that testimony?
                 A [Akhtar]:                 Yes, sir.
                 Q [Defense Counsel]:        Okay. And that’s not firsthand
                                             knowledge, correct? You didn’t see
                                             Mr.—Mr. Shannon paying any
                                             patients, correct?
                 A [Akhtar]:                 No, sir.

(R. 623, Trial Transcript, Pg ID 3801-02).           But Shannon’s counsel did not stop there.

Subsequent questioning was aimed at eliciting testimony from Akhtar that was inconsistent with

Shannon’s proffer—that he did, in fact, pay beneficiaries. Shannon’s counsel attempted to create

the inference that Shannon did not pay beneficiaries at all because some of the beneficiaries

called Akhtar to complain that Shannon had not paid them:

                                                11
No. 14-1727, United States v. Shannon

                 Q [Defense Counsel]:          That was just the rumor going
                                               around in the office, correct?
                 A [Akhtar]:                   No.
                 Q [Defense Counsel]:          That wasn’t a rumor?
                 A [Akhtar]:                   It was not a rumor if patient is
                                               calling and asking that Shannon had
                                               me sign the paperwork and did not
                                               give me the money he promised.
                 Q [Defense Counsel]:          Okay. Well, if he didn’t give him
                                               the money that he promised, that
                                               means he didn’t pay them, correct?
                 A [Akhtar]:                   That’s why patient was calling, to
                                               get the money.
                 Q [Defense Counsel]:          Okay. I understand that’s why they
                                               were calling, but they weren’t paid,
                                               correct?
                 A [Akhtar]:                   At that time, yes.

(Id. at 3802) (emphasis added). Counsel’s questions about the payments were not confined to

temporal proximity (i.e., that means he didn’t pay them at that time, correct?); rather, the

questioning shows that counsel was attempting to negate the fact that Shannon had ever paid

beneficiaries—in contradiction to his proffer. Thus, per the waiver provision, the Government

was free to rebut this evidence by introducing Shannon’s proffer statements. We find that the

district court did not abuse its discretion in so concluding.

        Shannon also contends that the admission of his proffer statements affected his

substantial rights and denied him a fair trial because the “central theme of [his] defense was to

challenge his knowledge and culpability of the offenses.” Appellant Br. at 26. Shannon claims

that the Government offered little proof that he knew about and intended to participate in the

conspiracy, but then “trumpeted” Shannon’s proffer statements in its closing as evidence of

Shannon’s guilt. See Appellant Br. at 26-27. Having determined that the district court did not

err in admitting Shannon’s proffer statements, we reject this argument. As explained above, it

was not an abuse of discretion for the district court to conclude that Shannon triggered the waiver

                                                  12
No. 14-1727, United States v. Shannon

provision of his proffer agreement, thereby allowing the Government to use his proffer

statements to rebut the inconsistent evidence that he offered. Shannon, with counsel present,

freely stipulated to the conditional use of his statements by signing the proffer agreement, and he

has not argued that this waiver was made unknowingly or involuntarily.

        Accordingly, we conclude that Shannon did offer evidence when he cross-examined

Akhtar, and that this testimonial evidence was inconsistent with his proffer. Consequently, the

district court did not abuse its discretion in admitting Shannon’s proffer statements into evidence.

        B. Sentencing

        Shannon also argues that his sentence was procedurally unreasonable. Shannon bases his

argument on two assignments of error: (1) that the district court failed to comply with Federal

Rule of Criminal Procedure 32 when it ruled on Shannon’s objection to the fraud loss

calculation; and (2) that the district court erroneously relied on the Government’s relevant

conduct evidence in determining fraud.

        We review sentences under a deferential abuse-of-discretion standard. United States v.

Wallace, 597 F.3d 794, 802 (6th Cir. 2010). A court will be deemed to have imposed a

procedurally unreasonable sentence if it “failed to calculate the Guidelines range properly;

treated the Guidelines as mandatory; failed to consider the factors prescribed at 18 U.S.C.

§ 3553(a); based the sentence on clearly erroneous facts; or failed to adequately explain the

sentence.” United States v. Coppenger, 775 F.3d 799, 803 (6th Cir. 2015) (citations omitted).

For purposes of sentencing enhancements under the Guidelines, we review the district court’s

method of calculating loss de novo. United States v. White, 492 F.3d 380, 414 (6th Cir. 2007).

Findings of fact underlying the district court’s loss calculations, however, are reviewed for clear

error. Id. “A finding that the calculations were clearly erroneous will follow only if this Court

                                                13
No. 14-1727, United States v. Shannon

‘on the entire evidence is left with the definite and firm conviction that a mistake has been

committed.’” Id. (quoting United States v. Ware, 282 F.3d 902, 907 (6th Cir. 2002)).

        In its Sentencing Memorandum and during sentencing, the Government contended that

Shannon had actually profited $186,775.00, contrary to the $55,350.00 it asserted and proved at

trial. The Government contends that it is a well-established principle that a sentencing court may

consider relevant conduct in estimating a loss amount. Thus, the Government asserts, during the

sentencing phase, it was free to introduce, and the district court was free to consider, evidence of

Shannon’s relevant conduct. During the sentencing phase, the Government introduced evidence

that Shannon received additional money recruiting for other Shahab-related health care agencies

and Acure—a Shahab-affiliated health care agency. In the separate prosecution of Acure’s

owner, the Government introduced a chart purporting to show that, in addition to the $55,350.00

Shannon made recruiting for All American and Patient First, he also made $120,975.00

recruiting for Acure and $10,450.00 recruiting for the other Shahab-related entities. During

Shannon’s sentencing phase, the Government re-submitted this same chart with its Sentencing

Memorandum and referred to it during sentencing. The Government never sought to introduce

this chart during Shannon’s trial.

        Under § 1B1.3 of the Sentencing Guidelines, “[c]onduct that is not formally charged or is

not an element of the offense of conviction may enter into the determination of the applicable

guideline sentencing range.” United States v. Hill, 79 F.3d 1477, 1481 (6th Cir. 1996) (citing

U.S.S.G. § 1B1.3, background). This “relevant conduct” may be considered if it is “part of the

same course of conduct or common scheme or plan as the offense of conviction.” Hill, 79 F.3d at

1481 (citing U.S.S.G. § 1B1.3(a)(2)). “To qualify as part of a ‘common scheme or plan’ under

the ‘relevant conduct’ guideline, the offenses ‘must be substantially connected to each other by

                                                14
No. 14-1727, United States v. Shannon

at least one common factor, such as common victims, common accomplices, common purpose,

or similar modus operandi.’” Hill, 79 F.3d at 1481 (citing U.S.S.G. § 1B1.3, application note

9(A)). Relevant conduct is not limited to conduct for which the defendant has been convicted.

United States v. Maken, 510 F.3d 654, 658 (6th Cir. 2007).

        As an initial matter, Shannon contends that admission of the Government’s relevant

conduct evidence was error because the evidence was not a part of the record and the

Government submitted the evidence at sentencing without any foundation. Shannon asserted at

sentencing that some “minimum concern of due process” needed to be met before the

Government would be allowed to introduce the evidence. (R. 705, Sentencing Transcript, Pg ID

6844). But Shannon’s argument disregards our precedent that sentencing judges may engage in

judicial fact-finding and consider evidence under a preponderance of the evidence standard.

United States v. Moncivais, 492 F.3d 652, 665 (6th Cir. 2007) (quoting United States v. Gates,

461 F.3d 703, 708 (6th Cir. 2006) (“[W]e find that judicial fact-finding in sentencing

proceedings using a preponderance of the evidence standard. . . does not violate either Fifth

Amendment due process rights, or the Sixth Amendment right to trial by jury.”). Accordingly,

consideration of relevant conduct evidence during sentencing does not violate a defendant’s due

process rights.

        However, failure to actually find facts by a preponderance of the evidence on contested

matters during sentencing is error. Federal Rule of Criminal Procedure 32(i)(3)(B) requires the

district court to rule on “any disputed portion of the presentence report or other controverted

matter,” at sentencing. White, 492 F.3d at 415 (quoting Fed. R. Crim. P. 32(i)(3)(B)). In White,

we stated that the “‘court may not merely summarily adopt the factual findings in the

presentence report or simply declare that the facts are supported by a preponderance of the

                                              15
No. 14-1727, United States v. Shannon

evidence.’” Id. (internal citation omitted). Rather, once the defendant raises a dispute regarding

the presentence report during sentencing, the district court must “actually find facts, and it must

do so by a preponderance of the evidence.” Id. at 416 (emphasis in original). And we reiterated

that “literal compliance” with Rule 32 is required “‘for a variety of reasons, such as enhancing

the accuracy of the sentence and the clarity of the record.’” Id. at 415. Furthermore, “[w]hen a

defendant raises a particular[, nonfrivolous] argument in seeking a lower sentence, the record

must reflect both that the district judge considered the defendant’s argument and that the judge

explained the basis for rejecting it.” Wallace, 597 F.3d at 803 (internal quotation marks omitted).

        Shannon objected to the Government’s fraud loss calculation during sentencing, arguing

that the Government failed to submit any evidence at trial that he profited in the amount of

$186,775.00. The Government countered that the “fraud loss. . . [was] tied directly to the

amount of payments that were paid to Mr. Shannon directly or to his company. . . ,” and that

“[t]he Court need only make a reasonable estimate of loss.” (R. 705, Sentencing Transcript, Pg

ID 6841). The Government further asserted that the additional profit was a part of Shannon’s

relevant conduct and that the district court was free to consider the additional amount that

Shannon allegedly gained.           In response to Shannon’s objection and the Government’s

explanation, the district court stated:

                Okay. I’m satisfied that the amount of loss calculated by the
                Government of 1.6 million dollars in false payments by
                Medicare is the amount of loss that the Court should
                consider in this particular case based upon the $186,775 and
                the $4,500 per home health care episode, and the Court so
                finds.

(R. 705, Sentencing Transcript, Pg ID 6845). We agree with Shannon that the district court erred

in failing to comply with Federal Rule of Criminal Procedure 32(i)(3)(B).

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No. 14-1727, United States v. Shannon

        Once Shannon objected to the Government’s fraud loss calculation, the district court was

required to explain its factual findings for determining that Shannon would be held accountable

for the fraud loss amount. The district court not only failed to make any factual findings for this

amount, but failed to do so by a preponderance of the evidence. United States v. Triana, 468
F.3d 308, 321 (6th Cir. 2006) (“Under the Guidelines, the district court is to determine the

amount of loss by a preponderance of the evidence…”). Indeed, the district court failed to even

state whether it accepted the Government’s relevant conduct evidence. While consideration of

relevant conduct evidence may have been appropriate in this case, we make no determination as

to its weight. We conclude only that the district court did not satisfy Rule 32 in determining

Shannon’s fraud loss.        Thus, although the district court may have properly relied on the

Government’s relevant conduct evidence, it did not articulate, on the record, its factual findings

proved by a preponderance of the evidence, for attributing the $186,775.00 amount to Shannon.

Accordingly, we must remand the case to the district court for resentencing. See United States v.

Orlando, 281 F.3d 586, 601 (6th Cir. 2002) (“Although the evidence may justify holding

[defendant] accountable for $449,000 of laundered money, the district court’s failure to explain

its factual determination requires us to remand the case for his resentencing.”).

                                        III.   CONCLUSION

        For the reasons stated above, we AFFIRM the district court’s admission of Shannon’s

proffer statement. However, we VACATE Shannon’s sentence and REMAND for resentencing.

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