United States v. Blockett ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 6, 2009
No. 08-60172 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA
Plaintiff - Appellee
v.
KENNETH L BLOCKETT
Defendant - Appellant
Appeal from the United States District Court
for the Northern District of Mississippi
USDC No. 2:06-CR-149-1
Before SMITH, GARZA, and CLEMENT, Circuit Judges.
PER CURIAM:*
Kenneth L. Blockett 1 (“Blockett”) appeals from the district court’s denial
of his motion for judgment of acquittal, following his conviction on charges of
conspiring to defraud the United States and making false statements to federal
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
1
Milton D. Tutwiler was convicted of conspiring to defraud the United States, theft
of federal grant funds, and knowingly making false statements to federal agencies. He was
sentenced to 63 months’ imprisonment and appealed both his conviction and sentence. During
the pendency of his appeal, he died of cancer and his appeal was dismissed. Only Blockett’s
appeal remains before us.
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agencies. Blockett also appeals his sentence of 51 months’ imprisonment.
Because we find that the evidence was sufficient to convict and the sentence
imposed was properly calculated, we affirm.
FACTS AND PROCEEDINGS
In an effort to alleviate rural poverty, in the early 1990’s, Congress
established rural empowerment zones funded through the Department of Health
and Human Services (“HHS”). The Mid-Delta Empowerment Zone Alliance
(“MDEZA”) was one of the programs funded by HHS to award grants for projects
undertaken to revitalize the Mississippi Delta region. The Mississippi
Development Authority (“MDA”) holds all grant funds until MDEZA is prepared
to disburse them. Once an MDEZA grant is awarded, funds are only disbursed
after the grantee has submitted a “Request for Cash” which includes a detailed
explanation of how the money is to be spent. If and when funds from a previous
disbursement are completely accounted for, MDEZA entertains and grants
additional payments from the remaining grant funds.
In 2001, the Town of Winstonville, Mississippi, (the “Town”) acting
through its Mayor, Milton D. Tutwiler (“Tutwiler”), applied and was approved
for an economic development grant from MDEZA in the amount of $1,311,337.
The grant was for the construction of a chemical plant that would produce
household cleaners and provide approximately fifty jobs in the impoverished
community. The Town submitted a Request for Cash to cover initial
architectural engineering and related services for the construction. MDEZA
granted the request and issued a check for $130,337. The Town later sought
additional funds for administrative expenses in the amount of $15,000. This
request was also granted. Subsequently, based on detailed cost summaries,
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MDEZA approved an initial advance of $556,715 to begin building the chemical
plant. Construction was to commence immediately.
In October 2001, the Town engaged Blockett Construction Associates
(“Blockett Construction”), owned by Blockett, to oversee and perform
construction. The Town submitted a request for payment from Blockett
asserting that $556,715 of work had been completed and requested an additional
$754,622. The request stated that the project had been completed. Because only
$609,285 remained in the grant, payment of the requested amount was not
possible.
In December 2001, the Town modified its previous request and submitted
a second Request for Cash, this time seeking disbursement of the balance of the
grant funds. The request included invoices from Blockett detailing the
expenditure of the previous $556,715. MDEZA denied this second Request for
Cash because the agency determined that it had been provided insufficient
documentation to support the initial expenditure of $556,715. Shortly
thereafter, the MDEZA project manager visited the site and found that, despite
representations that the chemical plant was completed, the work was only
beginning. The project manager observed a work crew pouring a slab of concrete
on the site but nothing else had been constructed.
After MDEZA denied the request, Tutwiler and Blockett attempted to
access the grant funds by applying directly to MDA. Required to provide the
same type of supporting documentation MDEZA had demanded, Tutwiler and
Blockett again submitted invoices stating that the project had been completed.
Blockett later submitted other documentation but modified the completion
representation to indicate that the project was only fifty-four percent complete.
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These documents stated that $609,285—the grant balance—was needed to finish
the project. As MDEZA had done, MDA denied this request because the
documentation provided was insufficient to show that the money previously
disbursed had been spent properly.
MDA had numerous meetings with Tutwiler and Blockett in an attempt
to remedy the documentation deficiency. At one such meeting, Blockett
submitted a package of materials again purporting to justify the expenditures
from the initial disbursement. Many of these documents were different from
those previously submitted. Notably, two Blockett Construction invoices claimed
that J.B. Taylor Electrical Company (“J.B. Taylor Electrical”) had been paid a
total of $42,509.95 for electrical work.
In August 2002, becoming suspicious of the discrepancies in
documentation and the lack of progress observed by the project manager when
visiting the site, Special Agent Rick Moody (“Moody”) of the State Auditor’s
Office was assigned to investigate. Moody visited the construction site and
found that a concrete slab, some metal framing, and a temporary light pole was
the sum total of the project’s progress.
Moody began reviewing the J.B. Taylor Electrical invoices and became
suspicious that these were false documents. Attempting to verify these invoices,
Moody discovered that no such company existed but was able to locate an
individual by the name of Jerry Taylor (“Taylor”). Moody met with Taylor and
found that he and Tutwiler had known each other for forty years and had been
gambling cohorts for much of that time. Taylor informed Moody that he was not
a licensed electrician and had never been to the construction site, done any
electrical work for the chemical building, or been hired to do any work in the
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future. Upon being shown the J.B. Taylor Electrical invoices, Taylor stated that
the invoices were not his though some of his contact information was listed on
the document. Taylor also disclosed that he had been separately contacted by
both Tutwiler and Blockett, presented with the J.B. Taylor Electrical invoices,
informed that an investigation was under way, and told to represent to the
investigator that the invoices were advances for work at the chemical plant.
While the invoices were fictitious, the payments to Taylor were real. The
money had been paid to cover Tutwiler’s gambling debts. The two friends had
arranged for Tutwiler to use Taylor’s American Express card to obtain gift
certificates at a Hollywood Casino which would then be cashed at the casino’s
lobby. This allowed Tutwiler to gamble without using his own credit cards.
Tutwiler would then pay off Taylor’s American Express card. The invoices
indicating Blockett Construction payments to J. B. Taylor Electrical matched
payments—both in date and amount—made to Taylor’s credit card account.
Further investigation revealed that other invoices submitted by Blockett
and Tutwiler were fabricated. After interviewing the sub-contractors involved,
Moody found that only a fraction of the work Blockett claimed was ever paid or
performed. Grant money deposited in Blockett’s construction account was also
traced to personal expenses and payments to family members.
Based on the results of the investigation, on October 24, 2006, a federal
grand jury indicted Blockett and Tutwiler on six counts. Count one charged
Blockett and Tutwiler with conspiring to defraud the United States in violation
of 18 U.S.C. § 371, count two charged them with theft of federal grant funds in
violation of 18 U.S.C. §§ 2 and 666(a)(1)(A), and counts three, four, five, and six
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charged the two with knowingly making false statements to federal agencies in
violation of 18 U.S.C. §§ 2 and 1001.
Trial began in May 2007. Both Blockett and Tutwiler moved for judgment
of acquittal at the close of the government’s evidence, arguing that the
government had adduced insufficient evidence to convict. The motions were
renewed at the end of the trial. The district court denied all motions.
The jury returned a verdict finding Blockett guilty on counts one, four,
five, and six—conspiring to defraud the United States, and knowingly making
false statements to federal agencies. At sentencing, the court held that Blockett
was liable for attempting to defraud the government of the entire grant
amount—$1,311,337. The judge determined that Blockett misappropriated the
initial $556,715 payment from MDEZA and that the $754,622 figure Blockett
and Tutwiler attempted to draw from the grant was the intended loss amount.
The total grant amount increased Blockett’s offense level by sixteen points. An
additional two point enhancement was assessed for Blockett’s attempt to
influence Taylor’s testimony during the investigation.
Blockett was sentenced to 51 months for each of the four counts, to be
served concurrently. He was also ordered to pay restitution of $556,715. A
special assessment of $400 was also imposed. He now appeals the district court’s
denial of his motions for acquittal, arguing that: (1) the evidence was insufficient
to support the jury verdict and (2) the district court miscalculated the
appropriate intended loss amount for sentencing.
STANDARD OF REVIEW
We have long held that “[t]he standard of review in assessing a challenge
to the sufficiency of the evidence in a criminal case is whether a ‘reasonable trier
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of fact could have found that the evidence established guilt beyond a reasonable
doubt.’” United States v. Mergerson, 4 F.3d 337, 341 (5th Cir. 1993) (quoting
United States v. Bell, 678 F.2d 547, 549 (5th Cir. 1982) (en banc)). To determine
whether the evidence was sufficient to convict, “a court views all evidence and
all reasonable inferences drawn from it in the light most favorable to the
government.” Id. “The evidence need not exclude every reasonable hypothesis
of innocence or be wholly inconsistent with every conclusion except that of guilt,
and the jury is free to choose among reasonable constructions of the evidence.”
United States v. Moreno, 185 F.3d 465, 471 (5th Cir. 1999).
In reviewing a district court’s loss calculation, “[f]actual determinations
regarding loss amount for guideline calculation purposes are reviewed for clear
error.” United States v. Ollison, 555 F.3d 152, 164 (5th Cir. 2009). Furthermore,
“[a] district court’s determination of the amount of loss caused by fraud is given
wide latitude.” United States v. Brewer, 60 F.3d 1142, 1145 (5th Cir. 1995).
DISCUSSION
I. Sufficiency of the evidence
Blockett argues that the evidence against him was insufficient to convict
him of conspiring to defraud the United States and knowingly making false
statements to federal agencies because he lacked the requisite intent to commit
these offenses. In particular, Blockett asserts that the government misread the
documents presented to MDEZA and MDA, arguing that the requests for
payment did not make claims about the current status of the project—indicating
that the chemical plant had been completed—but were actually intended to
reflect the expenditures needed for future services. With respect to the
government’s evidence that the various invoices submitted by Blockett and
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Tutwiler were fabricated, Blockett admits to having created these documents but
asserts that he did so not to defraud the government but to aid minority
subcontractors who often lack the resources to produce paperwork. The
subcontractors, he asserts, agreed with the amounts shown on the invoices. He
further maintains that he was introduced to Taylor by Tutwiler and simply
relied on Tutwiler’s representations that Taylor was an electrical and
mechanical contractor. The payments made to Taylor’s American Express card,
Blockett argues, were requests for payment made by Taylor himself who
represented that he needed the cash to commence work on the project. He
further maintains that the project was not completed because of an unrelated
suit by an aggrieved contractor which resulted in an injunction that halted the
project.
To establish conspiracy to defraud the United States in violation of 18
U.S.C. § 371, “there must be proof (1) of an agreement among two or more
persons (2) to accomplish something that constitutes an offense against the
United States, and (3) an overt act by one of them in furtherance of the
conspiracy.” United States v. Lichenstein, 610 F.2d 1272, 1276 (5th Cir. 1980).
Furthermore, “the government must prove the requisite intent to commit the
substantive offense.” United States v. Charroux, 3 F.3d 827, 831 n.4 (5th Cir.
1993) (internal quotation and citation omitted). A violation under 18 U.S.C. §§
2 and 1001 for knowingly making false statements to federal agencies is
established by showing: “(1) a statement, that is (2) false (3) and material, (4)
made with the requisite specific intent, (5) within the purview of government
agency jurisdiction.” Lichenstein, 610 F.2d at 1276. As we have long held, “18
U.S.C. § 1001 is designed to protect federal funds and functions from fraudulent
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interference. . . . [T]he requirement that defendant intend to deceive by making
a statement which he knows is false serves to insure against punishing one who
has committed no culpable act.” United States v. Montemayor, 712 F.2d 104,
107–108 (5th Cir. 1983) (quotation omitted). “[T]he evidence need not . . .
conclusively demonstrate a conspirator’s state of mind; ‘[i]t suffices to show facts
and circumstances from which the jury reasonably could infer that [a
conspirator] knew her conduct was unauthorized and illegal.’” United States v.
Hopkins, 916 F.2d 207, 213 (5th Cir. 1990) (alterations in original) (quoting
United States v. Bordelon, 871 F.2d 491, 494 (5th Cir. 1989)).
Blockett’s challenge to the sufficiency of the evidence fails. The jury had
ample evidence from which to reasonably determine that Blockett knew his
conduct was illegal and undertook the scheme with the specific intent to defraud
the government. Trial testimony showed that Blockett and Tutwiler embarked
on a fraudulent scheme to use a government development grant for their own
purposes. While Blockett was not initially involved when Tutwiler secured the
grant, the grant disbursements were transferred into his construction account.
Blockett submitted documents stating that the building was completed, or at
least half finished, when little to no construction had been performed. The sub-
contractors whose invoices Blockett created and submitted to MDEZA and MDA
testified that they had only performed a fraction of the work claimed by Blockett,
that the invoices were altered after being signed, and that they had not been
hired to perform future work on the project. Further, Taylor testified that
Blockett attempted to influence his testimony and persuade him to lie when the
project came under investigation. The evidence also showed that Blockett
cashed thousands of dollars in checks out of his Blockett Construction account,
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gave the money to family members who fraudulently claimed to work on the
project, and made car payments to various dealerships with project funds.
Because “[w]e accept all credibility choices that tend to support the jury’s
verdict,” United States v. Anderson, 933 F.2d 1261, 1274 (5th Cir. 1991), it is
clear that a reasonable jury could conclude that Blockett intended to defraud the
government when he engaged in these activities. Furthermore, “juries are free
to choose among all reasonable constructions of the evidence.” Charroux, 3 F.3d
at 831 (internal quotation omitted). Thus, the argument on which Blockett
relies most heavily—that the government misunderstood the documents
submitted—also fails. Even if the documents could be read as projections of
future expenditures rather than claims for past work completed, the jury was
free to choose between these two theories, especially when the latter was
bolstered by extensive witness testimony and documentary evidence. The jury
had ample evidence on which to base its verdict.
II. Sentencing calculation
Blockett argues that the district court improperly calculated the intended
loss amount—$754,622—placed in danger by Blockett’s fraud because he asserts
that this figure included funds in use before Blockett became involved in the
project. Blockett maintains that the following amounts, totaling $757,052,
should not have been taken into consideration: (1) the initial Request for Cash
in the amount of $130,337 to cover architectural engineering and related
services, (2) an additional $15,000 disbursement for administrative expenses,
and (3) the initial advance of $556,715 to begin construction. Because these
three amounts approximate the figure used at sentencing, Blockett argues that
these are the funds upon which the district court must have based its decision.
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A district court’s loss calculation in fraud cases is given “wide latitude.”
Brewer, 60 F.3d at 1145. In determining the loss amount, “we have found it
proper to calculate loss based on the risk engendered by the defendant’s criminal
conduct, even where the actual loss was lower.” Id. (upholding the district
court’s sentencing determination of the loss amount as the full amount of the
loan obtained through fraud from the governmental agency even though the
actual loss incurred was less than half that amount); see also United States v.
Wheeler, 79 Fed. App’x. 656, 664 (5th Cir. 2003) (unpublished) (affirming the
district court’s loss calculation for sentencing based on the loss defendants
attempted to inflict through their fraudulent misrepresentations); United States
v. Looney, 178 F.3d 1291, *5 (5th Cir. 1999) (unpublished) (affirming the district
court’s loss determination at sentencing where the calculated loss included the
amount owed in restitution as well as the amount defendant took from the
victims but later returned).
Blockett’s asserted calculation is not borne out by the record. There is no
indication that the district court added up various numbers to reach roughly
$757,000. On the contrary, the district court stated that the $754,622 amount
was based on the additional request for disbursement made by Blockett. The
district court ordered restitution in the amount of $556,715—an amount to
which Blockett did not object at sentencing and does not challenge now—and
specifically noted that Blockett, having been found guilty of the conspiracy
count, was also found guilty of the overt act in furtherance of that conspiracy of
making the additional $754,622 request for cash from the federal agencies.
Furthermore, in making the loss amount determination, the district court
relied on the jury verdict as well as the presentence report’s findings of fact.
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Generally, a [presentence report] bears sufficient indicia of
reliability to permit the sentencing court to rely on it at sentencing.
The defendant bears the burden of demonstrating that the
[presentence report] is inaccurate; in the absence of rebuttal
evidence, the sentencing court may properly rely on the
[presentence report] and adopt it.
Ollison, 555 F.3d at 164 (internal quotations omitted). Blockett did not object
to the district court’s reliance on the presentence report and its findings of fact
and does not raise such an objection here. The presentence report specifically
states that “[t]he loss amount for guideline calculation purposes will be
$1,311,337. Of the afore-mentioned loss amount, $556,715 represents the
restitution amount and $754,622 represents the intended loss in this case.”
In addition, any arguments that attack expenditures or funds disbursed
before the attempt to secure the additional $754,622 are unavailing because they
do not change the sentence calculation. Even if Blockett should not have been
held responsible for the $130,337 architectural engineering expense and the
$15,000 in administrative expenses, attempts to exclude these amounts fail for
two reasons. First, these funds made up no part of the $754,622 claim Blockett
attempted to secure from MDEZA and MDA—the only figure Blockett
challenges. Second, even if we were to exclude these amounts from the total
offense level calculation, Blockett’s offense level would remain unchanged.
U.S.S.G. § 2B1.1. The district court therefore did not commit clear error in
failing to subtract out these amounts.
Ultimately, even though Blockett was unsuccessful in securing the second
disbursement, the district court did not err in holding him responsible for the
entire $1.3 million grant because this is the amount placed at “risk . . . by
[Blockett’s] criminal conduct.” Brewer, 60 F.3d at 1145. The $556,715 initial
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disbursement deposited in Blockett’s account and misappropriated by Blockett
and Tutwiler in addition to the $754,622 in the second request for cash is the
grant total upon which the district court based its sentencing decision. A review
of the record, the presentence report, and applicable caselaw reveals that the
district court did not commit clear error in its loss calculation.
CONCLUSION
The judgment of the district court is AFFIRMED.
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