Court Opinion

ID: 3020749
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:23:27.192209+00
Date Added: 2024-06-11T11:47:25.027681
License: Public Domain

United States Court of Appeals
                              FOR THE EIGHTH CIRCUIT

                                   ___________

                                   No. 97-3192
                                   No. 97-3193
                                   ___________

United States of America,               *
                                        *
      Plaintiff - Appellee,             *
                                        * Appeals from the United States
      v.                                * District Court for the
                                        * Western District of Arkansas.
McCord, Inc.; Loyd E. McCord,           *
                                        *
      Defendants - Appellants.          *
                                   ___________

                                 Submitted: January 13, 1998
                                     Filed: May 7, 1998
                                   ___________

Before LOKEN and MURPHY, Circuit Judges, and KYLE,* District Judge.
                           ___________

LOKEN, Circuit Judge.

        Loyd McCord is the president and sole shareholder of McCord, Inc., an
interstate trucking company. A United States Department of Transportation (“DOT”)
investigation revealed that McCord, Inc., employees had been systematically falsifying
truck driver duty status forms (“driver logs”) to conceal non-compliance with DOT
hours-of-service regulations. McCord and the company pleaded guilty to violating 18

      *
        The HONORABLE RICHARD H. KYLE, United States District Judge for the
District of Minnesota, sitting by designation.
U.S.C. § 1001, which prohibits the making of materially false statements in matters
within the jurisdiction of federal departments and agencies. They appeal their
sentences. The principal issue is whether the district court1 erred in applying the five-
level sentencing enhancement in USSG § 2F1.1(b)(4)(A) for fraud offenses that involve
“the conscious or reckless risk of serious bodily injury.” We affirm.

       DOT regulations impose hours-of-service limitations on truck drivers. Regulated
motor carriers may not permit their drivers to drive more than ten hours after an eight-
hour break, more than sixty hours per week, more than seventy hours in an eight-day
period, or after having been on duty fifteen hours. See 49 C.F.R. § 395.3. To enforce
these limitations, the regulations further provide that commercial motor carriers must
require drivers to record their “duty status” for each twenty-four-hour period, detailing
on a prescribed form their time spent driving, resting in the vehicle’s sleeper berth, on-
duty but not driving, and off duty. See 49 C.F.R. § 395.8(b).

       Advised that McCord, Inc., was falsifying driver logs, DOT investigators
discovered that the company hired others to fill out logs for the drivers, and that logs
systematically reflected the presence of a second or “ghost” driver on long trips,
creating the false impression that two drivers had taken turns driving and sleeping when
in fact a single driver had done all the driving. Sixteen hundred McCord, Inc., logs
were found to contain such falsehoods. These prosecutions followed.

        Pursuant to written plea agreements, McCord and the company agreed to plead
guilty to one-count informations charging violations of 18 U.S.C. § 1001. The district
court withheld approval of the plea agreements until Presentence Investigation Reports
were available. The government persuaded the probation office to recommend
§ 2F1.1(b)(4)(A) enhancements, which increased defendants’ base offense levels from

      1
        The HONORABLE JIMM LARRY HENDREN, United States District Judge
for the Western District of Arkansas.

                                           -2-
eight to thirteen. McCord and the company argued this was a breach of the plea
agreements. At sentencing, the district court found the agreements ambiguous on this
issue and rejected them, giving defendants an opportunity to withdraw their guilty
pleas. McCord, acting for himself and the company, adhered to the guilty pleas, and
the court proceeded with the sentencing hearing.2 After hearing evidence and
argument, the district court imposed § 2F1.1(b)(4)(A) enhancements. The court
sentenced McCord to twelve months in prison and two years supervised release. It
imposed a fine of $15,000 on McCord and a $100,000 fine on the company, to be
offset by payment of McCord’s individual fine.

                             The § 2F1.1(b)(4)(A) Issue.

       The Major Fraud Act of 1988 enacted 18 U.S.C. § 1031, which prohibits major
procurement fraud against the United States. Pub. L. No. 100-700, 102 Stat. 4631. In
addition, § 2(b) of that Act instructed the Sentencing Commission to promulgate
guidelines “for appropriate penalty enhancements, where conscious or reckless risk of
serious personal injury resulting from the fraud has occurred.” In response, the
Commission amended § 2F1.1, which establishes base offense levels for fraud offenses.
As amended, § 2F1.1(a) provides that the base offense level is six, and § 2F1.1(b) adds
enhancements for specific offense characteristics, which now include:

      (4) If the offense involved (A) the conscious or reckless risk of serious
      bodily injury . . . increase by 2 levels. If the resulting offense level is less
      than level 13, increase to level 13.

      2
        On appeal, McCord and the company argue the district court abused its
discretion in rejecting the plea agreements and urge us to compel specific performance.
However, the agreements expressly preserved the government’s right to “make all facts
known to the probation office and to the court.” Moreover, the agreements did not bind
the district court at sentencing. As defendants elected not to withdraw their guilty
pleas, there is no specific performance that would affect their sentences.

                                            -3-
§ 2F1.1(b)(4)(A). Rather than limit this amendment to procurement frauds, the subject
of the Major Fraud Act of 1988, the Commission concluded that the enhancement
“should apply to all fraud cases involving a conscious or reckless risk of serious bodily
injury.” USSG App. C, Amend. 156. Applying this enhancement, the district court
determined that the base offense level for both McCord and McCord, Inc., is thirteen.
On appeal, defendants argue that the enhancement does not apply to their offenses for
a number of reasons.

       First, relying on the Major Fraud Act’s legislative history, McCord and the
company argue that § 2F1.1(b)(4)(A) is limited to convictions for procurement fraud
violations of 18 U.S.C. § 1031. We disagree. The Sentencing Commission concluded
that a risk-of-serious-bodily-injury enhancement is appropriate for all fraud offenses.
This is well within the Commission’s general Guidelines authority, and nothing in the
Major Fraud Act or its legislative history suggests an intent to limit the Commission to
an enhancement for procurement fraud. See S. Rep. No. 100-503 (1988), reprinted in
1988 U.S.C.C.A.N. 5969. Therefore, we are bound to apply the enhancement as
written, which encompasses fraud convictions under 18 U.S.C. § 1001 as well as 18
U.S.C. § 1031. See generally Stinson v. United States, 508 U.S. 36, 42 (1993).

       Second, McCord and the company argue that a sentence under 18 U.S.C. § 1001
for their offenses may not exceed the criminal penalties authorized in the more specific
Motor Carrier Safety Act. See 49 U.S.C. § 521(b)(6). However, 18 U.S.C. § 1001 has
no maximum sentence, and there is nothing in 49 U.S.C § 521 suggesting an intent to
repeal or supersede 18 U.S.C. § 1001. Therefore, the government may prosecute under
§ 1001 even if the Motor Carrier Safety Act provided another basis for prosecuting the
same conduct. See United States v. Batchelder, 442 U.S. 114, 123-24 (1979); United
States v. Oliver, 908 F.2d 260, 264 (8th Cir. 1990).

                                          -4-
       Having rejected McCord’s threshold legal arguments, we come to the main issue
on appeal, whether the government proved by a preponderance of the evidence that the
§ 2F1.1(b)(4)(A) enhancement applies to these offenses. The government’s evidence
at sentencing consisted of the testimony of a DOT Special Agent who assisted in the
investigation. She testified that 1600 driver logs falsely concealed hours-of-service
violations. She also provided foundation for the admission of a 1990 National
Transportation Safety Board nationwide study of the effects of alcohol, drugs, fatigue,
and medical factors on 182 truck accidents in which the driver was killed. This study
concluded that driver fatigue was a factor in thirty-one percent of the accidents, that
nineteen percent of the drivers had been driving hours in excess of those permitted by
the DOT regulations, and that accident rates increase as drivers go beyond eight hours
of continuous driving. The government argued to the district court, and asserts on
appeal, that this evidence provided an adequate factual basis to impose the
§ 2F1.1(b)(4)(A) enhancements. We disagree.

        The enhancement applies when fraud involves “conscious or reckless risk of
serious bodily injury.” The normal meaning of reckless in the criminal law (unlike the
civil law) is that the defendant disregarded “a risk of harm of which he is aware.”
Farmer v. Brennan, 114 S. Ct. 1970, 1979 (1994). In an unrelated part of the
Guidelines, the Sentencing Commission adopted the criminal law meaning of the term
reckless in explaining its involuntary manslaughter Guideline:

      “Reckless” refers to a situation in which the defendant was aware of the
      risk created by his conduct and the risk was of such a nature and degree
      that to disregard that risk constituted a gross deviation from the standard
      of care that a reasonable person would exercise in such a situation.

USSG § 2A1.4, comment. (n.1). We conclude that the Commission intended this
meaning in § 2F1.1(b)(4)(A) as well. Therefore, the government must prove not only

                                          -5-
that the fraudulent conduct created a risk of serious bodily injury, but also that each
defendant was in fact aware of and consciously or recklessly disregarded that risk.

        Some fraudulent schemes include such obvious risks of serious bodily injury that
the criminal recklessness of their perpetrators will be self-evident, such as the
defendant who intentionally caused car accidents as part of the insurance fraud in
United States v. Hoffman, 9 F.3d 49 (8th Cir. 1993), cert. denied, 114 S. Ct. 1320
(1994), or the doctor who performed unnecessary surgery as part of the Medicaid fraud
in United States v. Laughlin, 26 F.3d 1523 (10th Cir.), cert. denied, 513 U.S. 965
(1994). But for most frauds, risk of serious bodily injury is less direct or less obvious.
In those cases, the § 2F1.1(b)(4)(A) enhancement requires evidence of risk related to
the particular defendant, as there was in United States v. Turner, 102 F.3d 1350, 1359
(4th Cir. 1996), where defendants falsely certified that miners had received training
required by the Federal Mine Safety and Health Act, and the court affirmed application
of the enhancement because of “the myriad of safety problems experienced over the
years at [defendants’ mine], the general danger of underground mining, and the
potential risks that could arise as a result of having untrained miners in that setting.”

       In this case, while hours-of-service regulations are undoubtedly motivated in part
by safety concerns, the limitations in the current DOT regulations have been in effect
for many decades. The government has not explained their specific relation to fatigue
and safe motor vehicle operation. Therefore, particularized proof of a defendant’s
knowledge of a safety risk created by particular recordkeeping violations is necessary
to prove criminal recklessness. The government’s proof at sentencing fell far short of
establishing such recklessness by Loyd McCord. In her direct testimony, the
government’s witness did not explain what specific hours-of-service violations had
been uncovered and how they relate to motor carrier safety. She did not explain
McCord’s role in the falsification of driver logs (the enhancement may not be based
solely upon strict liability for the corporate owner or chief executive officer). And she
did not refute McCord, Inc.’s, excellent safety record during the period in question.

                                           -6-
       For these reasons, if the record ended with the government’s case-in-chief at
sentencing, we would reverse the imposition of a § 2F1.1(b)(4)(A) enhancement on
Loyd McCord. But the record consists of much more than the direct testimony of the
DOT Special Agent and the 1990 NTSB study. First, on cross exam, the DOT Special
Agent testified that one driver log reported a driver and a ghost driver who drove 1528
miles in thirty hours; a single driver averaging sixty-five miles per hour would get less
than seven hours sleep during that trip. The agent further testified that she interviewed
a driver who said he was once so fatigued from driving too many hours that he checked
himself into a hospital, and a former driver who said that he quit driving for McCord,
Inc., because he “was run too hard.” While this hearsay may be of questionable
reliability because DOT stopped investigating once the plea agreements were
negotiated, and because the government offered no supporting driver testimony, the
district court was entitled to give it some weight.

        Second, defendants presented testimony by a transportation consultant hired to
implement a compliance program after the violations were uncovered. This witness
testified that when he began the program he encountered strong resistance to hours-of-
service compliance from the company’s drivers and dispatchers. This testimony
suggests that the violations here at issue reflected a pervasive corporate environment
in which safety concerns were of low priority.

       Finally, and in our view most significantly, the district court questioned Loyd
McCord at length before ruling on this issue. McCord -- an experienced truck driver --
admitted that his company was found guilty of previous hours-of-service violations in
1988 and again in 1994. He admitted knowing the ghost driver practice had continued,
knowing it was wrong, and failing to end the practice when he could have done so. He
also knew the company hired others to complete the false driver logs, a violation of the
regulation requiring drivers to maintain their logs personally.

                                          -7-
       We review a district court’s factual findings at sentencing for clear error. See
United States v. Wells, 127 F.3d 739, 744-45 (8th Cir. 1997). Given the large number
of violations, the general risks to drivers and others of driving large trucks while
fatigued, the specific evidence of particular McCord, Inc., drivers driving while
seriously fatigued, and Loyd McCord’s admissions that he was aware of repeated,
systematic hours-of-service violations and chose not to put an end to these unlawful
practices, we conclude that the district court did not clearly err in finding that the
offenses to which McCord and the company pleaded guilty involved a conscious or
reckless risk of serious bodily harm.

      The judgments of the district court are affirmed.

      A true copy.

             Attest:

                     CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                          -8-