United States v. Rosie Diggles , 928 F.3d 380 ( 2019 )

Case: 18-40521 Document: 00515011481 Page: 1 Date Filed: 06/26/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 18-40521 FILED
June 26, 2019
Lyle W. Cayce
UNITED STATES OF AMERICA, Clerk
Plaintiff - Appellee
v.
ROSIE DIGGLES; WALTER DIGGLES; ANITA DIGGLES,
Defendants - Appellants
Appeals from the United States District Court
for the Eastern District of Texas
Before HIGGINBOTHAM, JONES, and COSTA, Circuit Judges.
GREGG COSTA, Circuit Judge:
Multiple hurricanes—especially Rita and Ike—ravaged the eastern
Texas Gulf Coast in the first decade of this century. Untold millions in federal
disaster assistance helped rebuild those communities. But some people took
advantage of that taxpayer generosity. A jury found that was the case for the
three family members charged with fraud in this case: Walter and Rosie
Diggles and their daughter Anita.
All three now argue that there was insufficient evidence to convict them.
They also contend that, if their convictions were valid, four conditions of their
supervised release must be vacated because the district court did not read
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them aloud at sentencing. We affirm their convictions and two of the disputed
conditions, remanding to adjust one condition and remove another.
I.
The Deep East Texas Council of Governments (DETCOG) is an
association of local governments in a twelve-county area near the Louisiana
border. 1 Using federal and state grants, DETCOG funds programs geared
toward housing, the elderly, and the disabled, among other efforts. It also
administers federal hurricane-relief funds.
Congress responded to Hurricanes Katrina and Rita, and later Dolly and
Ike, by appropriating block grants for relief efforts. The Texas Health and
Human Services Commission administered the funds the state received.
DETCOG in turn received millions of those dollars, which it used to reimburse
various service providers in east Texas.
One of those providers was the Deep East Texas Foundation. The
Foundation operated in Jasper out of the New Lighthouse Church of God in
Christ. It sought and received reimbursements from DETCOG for a variety of
services, including “case management” (counseling and assisting individuals
in need of individual financial support); the 21st Century Learning Center (an
after-school and summer program for at-risk children); and annual conferences
hosted by the New Lighthouse Church. A “vendor agreement” between
DETCOG and the Foundation set reimbursement rates for several services,
including case management and education.
A chart may be helpful. The green arrows represent the flow of federal
funds. The blue arrows represent the chain of reimbursement requests.
1 We recite the facts in the light most favorable to the government given the guilty
verdicts.
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Walter Diggles wore many hats in this reimbursement chain. He (1) ran
DETCOG as its executive director; (2) was the founder of the Foundation and
had signature authority over its bank account; and (3) was the pastor at the
New Lighthouse Church, out of which the Foundation operated its programs.
Also, one of those programs—the Learning Center—was run by his wife Anita
and daughter Rosie.
Walter’s multiple roles enabled the fraud. Once the hurricane funds left
the state agency, Walter could control them the rest of the way. And all it took
for the state to send money was for Walter to certify that DETCOG was using
the money properly. For each request for Katrina and Rita funds, Walter
would certify that “all outlays” were “for the purposes set forth” in the grant
agreement. For the Dolly and Ike grants, he would certify that DETCOG had
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“completely verified the supporting information/evidence” from its vendors so
as to “justify the amounts set forth” in the requests for further funding.
But the programs’ expenses did not support many of the amounts
DETCOG sought. Here are some examples:
The Learning Center: The Foundation’s vendor agreement called for
reimbursement for “Education & Training” at between $48 and $144 per “unit”
(the Learning Center treated an hour of instruction as a unit). But the
Learning Center’s teachers were paid less than $20 per hour. Anita
nevertheless prepared paperwork requesting reimbursement at rates as high
as $110 per hour. The Foundation sent that paperwork to DETCOG, where
Walter would sign off. The rate inflation added up: Between 2009 and 2011,
the Foundation got roughly $240,000 for education expenses, while paying its
teachers less than $130,000.
The Learning Center’s transportation costs tell a similar story. The
vendor agreement did not set a unit rate for transportation, but the Learning
Center charged one: at least $10, and sometimes as high as $17, per student
for round-trip transportation to and from the Learning Center in vans. The
designated pick-up areas were mostly in Jasper, and the few in surrounding
communities were no more than 5–10 miles away. But the reimbursement
rates meant the Foundation received, in one of the most extreme instances,
nearly $7,500 for four days of transportation costs. Between 2008 and 2011,
the Foundation billed north of $200,000 for transportation despite paying less
than $30,000 in transportation-related expenses. The government
acknowledges that those numbers do not include amounts paid to drivers, but
Learning Center workers who drove the vans were paid around $8 an hour—
nowhere near enough to account for the $170,000 discrepancy.
Case Management: The vendor agreement set rates for case management
at, as with education, between $48 and $144 per hour. But one case manager
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testified he was paid just $10 an hour, and another testified she was paid $27.
Between 2009 and 2011, the Foundation received $150,000 for case
management expenses but paid case managers just $82,000.
2009 “Closeout”: In 2009, the Foundation sought and received a
“closeout” payment of $245,000 for unreimbursed expenses. That included a
$116,000 request for the Foundation’s 2008 payroll expenses. But this was
double billing—the Foundation had already billed for payments to its workers
throughout 2008.
2010 Conference: Walter’s church held annual conferences, which one
witness described as akin to revivals. In addition to worship, the conferences
featured workshops on topics like single parenting and credit repair. For its
2009 conference, the Foundation sought and received reimbursement for 186
“units” of training (each workshop attended was a unit, and some attendees
went to more than one workshop) at $48 each—a total reimbursement just shy
of $9,000. By way of supporting documentation, the Foundation submitted the
attendees’ sign-in sheets, which reflected the workshops they went to.
For the 2010 conference, the Foundation got more than four times as
much: $39,000. But the supporting documentation was a fabrication; it was a
copy of the 2009 sign-in sheets with just a few additions. The purported
attendees were the same, and the tops of both sets read “Annual Conference
July 7-11, 2009.” The difference was that some of the “2010” sign-in sheets had
blank spots filled in to make it look like attendees went to additional
workshops as well as those they attended in 2009.
2012 Conference: At its 2012 conference, the church performed health
screenings. The screening equipment (cholesterol machines and glucometers
that could be used any number of times, plus one-time-use blood sugar test
strips) cost about $750. But the Foundation sought and received
reimbursement at $144 for each of 61 people screened, or $8,784 total.
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Where did the extra money go? Walter, Anita, and Rosie used it for
personal expenses. Over 99% of the money in the Foundation’s accounts was
from hurricane relief. The Foundation transferred hundreds of thousands of
those dollars into the New Lighthouse Church’s accounts. And money in the
church accounts went to pay the defendants’ credit card bills, to write checks
to cash or to family members, and to pay for other personal expenses.
The grand jury charged Walter with conspiracy to commit wire fraud,
eleven counts of wire fraud, two counts of theft from a program receiving
federal funds, and three counts of money laundering. It charged Rosie with
the conspiracy count, ten counts of wire fraud, and a money laundering count.
Anita was charged with only the conspiracy count. The jury convicted on all
counts. The district court sentenced Walter to 108 months. Rosie and Anita
received below-Guidelines sentences of 54 months. The district court also
imposed terms of supervised release for each defendant and ordered Walter to
pay $1.33 million in restitution, with Rosie and Anita jointly and severally
liable for just over $970,000.
II.
Each defendant argues that the government’s evidence was insufficient
to find them guilty. We review the evidence “in the light most favorable” to the
verdict. United States v. Miles, 360 F.3d 472, 476–77 (5th Cir. 2004). We must
affirm the verdict unless no rational jury could have found the defendants
guilty beyond a reasonable doubt. United States v. Njoku, 737 F.3d 55, 62 (5th
Cir. 2013).
A.
Walter challenges the sufficiency of the evidence for each count. We
begin with his arguments that go to all counts and then consider his challenges
to individual ones.
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Walter does not dispute that the Foundation asked for and received more
than its expenses, but contends that doing so was allowed for two reasons.
First, he argues that the Foundation charged rates set by its vendor agreement
with DETCOG. But the jury had good reason to see the vendor agreement as
part of the fraud, not a defense to it (to say nothing of the fact that it set rates
for teachers and case managers but not, for instance, for transportation or
health screenings). Walter’s idea appears to be that negotiated rates cannot
be fraudulently inflated. But he was essentially on both sides of the
agreement—this was not an arm’s length negotiation. Walter signed the
vendor agreement for DETCOG in his capacity as executive director; he had
the last word on the rates and on one occasion rejected an attempt by DETCOG
employees to lower them. On the other side of the vendor agreement, while
Walter did not sign on the Foundation’s behalf (its president, R.C. Horn, did),
Walter was the founder of the Foundation, had signature authority over its
bank accounts, and pastored the church out of which it operated. There is also
evidence that he held substantial sway over Horn. Walter thus controlled the
agreed rates. That made the scheme a more sophisticated one, not a lawful
one.
Walter’s other argument for why the Foundation was allowed to bill
above costs is based on federal guidance on how nonprofits should treat
overhead costs. The contract between the Commission and DETCOG cites an
OMB circular on accounting principles for nonprofits, which says that
overhead costs may be allocated to reimbursements for services rendered
under a grant. See OFFICE OF MGMT. & BUDGET, CIRCULAR NO. A-122, Cost
Principles for Non-Profit Organizations, at 7 (2004) (allowing allocation of costs
that are “necessary to the overall operation of the institution, although a direct
relationship to any particular cost objective cannot be shown.”). But even if
some of the Foundation’s rate inflation was to cover overhead costs allocated
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to the hurricane-relief grants, there is no reason to think that accounted for
reimbursements so far above what the Foundation paid for those services.
Plus, no one contemporaneously believed DETCOG was reimbursing the
Foundation in part for overhead. One of DETCOG’s managers for block-grant
funds testified that DETCOG employees understood that reimbursements
could not exceed a vendor’s actual costs for services. Similarly, a memo from
DETCOG’s controller instructed that the Foundation’s “hourly rate for
education services and case management should not exceed actual costs.” The
Foundation’s reimbursement requests, too, purported to bill for the “cost” of
particular “allowable services,” without any indication that overhead was
included. The jury reasonably rejected Walter’s overhead-cost defense.
Before getting into Walter’s count-specific arguments, we address one
more generally applicable issue: intent to defraud. Insufficient evidence of that
intent would undermine most of Walter’s convictions. 2 But there is plenty.
Walter was the pastor of the church out of which the Foundation operated and
sometimes paid the Foundation’s employees. So there is good reason to
conclude that Walter knew both what employees were being paid and at least
the approximate costs of other services the Foundation provided. He
nevertheless certified to the Commission that the Foundation’s paperwork
(which included inflated rates) justified the reimbursements. In one instance
particularly revealing of Walter’s intent, DETCOG employees grew concerned
during 2009 about the Foundation’s reimbursement rates. They decided to
reduce them, but Walter instructed that they be put “back the way they were.”
2 See United States v. Simpson, 741 F.3d 539, 547 (5th Cir. 2014) (fraud conspiracy
under 18 U.S.C. § 1349 requires proof of intent to defraud); United States v. Hoffman, 901
F.3d 523, 545 (5th Cir. 2018) (same for substantive wire fraud). Walter’s money laundering
convictions required that the funds he transacted came from a “specified unlawful activity.”
18 U.S.C. § 1957. The grand jury alleged the fraud conspiracy as that activity, so those
convictions also require intent to defraud.
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It is hardly surprising that Walter wanted to keep the overbilling gap; he was
its main beneficiary. Roughly $400,000 went from the Foundation to the
church accounts, out of which Walter paid over $150,000 in credit card bills,
paid off a $40,000 loan to an entity run by Walter and his son, and made
numerous checks out to family members and to cash. The evidence paints a
compelling picture of Walter’s intent to defraud.
Moving on to his to count-specific arguments, Walter argues that the
email that is the interstate wire for his first wire fraud count—one he sent
conditionally approving reimbursement for the church’s 2010 annual
conference—did not involve a misrepresentation. This misunderstands the
wire requirement. The wire “need not contain a falsehood”; it need only further
the fraud scheme (which itself must involve lies). United States v. Hoffman,
901 F.3d 523, 545–46 (5th Cir. 2018). The Count 2 email advanced the fraud
as it put the Foundation one step closer to obtaining government funds for the
2010 conference. See id. at 547 (holding that an email that was “a step in
verifying” costs submitted to the government furthered a fraud scheme). And
we have already explained that the overall fraud scheme contained numerous
misrepresentations related to costs, including the ultimate submission of
fabricated paperwork to support requests related to the 2010 conference.
Walter’s other ten wire fraud convictions involve interstate transfers
from the church’s main bank account to his credit cards. These likewise
furthered the fraud. Indeed, to the fraudster, obtaining the proceeds is not just
part of the fraud, it is the reason for it. See United States v. Vilar, 729 F.3d 62,
95 (2d Cir. 2013) (“In as much as [the defendant] used the wire transfers to
send the money to his own account, the wire transfers were undoubtedly in
furtherance of the scheme to defraud.”). There is sufficient evidence for all the
wire fraud convictions.
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Next, Walter disputes his two convictions for theft from a program
receiving federal funds. That crime occurs when an agent of a federally funded
entity steals or “knowingly converts” at least $5,000 of the organization’s
property. 18 U.S.C. § 666(a)(1)(A). The first of these counts was based on the
2010 conference (the one with the fabricated sign-in sheets), and the second
was based on the 2012 conference (the one with the health screenings). As to
the 2010 conference, we reject Walter’s argument that he was unaware of the
phony documentation. Along with the evidence generally showing that Walter
orchestrated the overbilling scheme, Walter approved reimbursements for both
the 2009 and 2010 conferences despite the nearly identical supporting
paperwork. When the $39,000 in federal funds arrived at the Foundation,
Walter promptly wrote a $39,000 check to the church days later.
For the 2012 conference, Walter instructed the Foundation’s president
(Horn) to cut a $7,500 check to a health service run by Walter’s sister as part
of the reimbursement. Horn did as he was told, but Walter deposited the check
into the main church account, which he essentially used as a personal account.
That conversion, combined with the evidence that the Foundation received
over $8,000 in reimbursement for health screenings that cost it less than
$1,000, supports the conviction.
We last address Walter’s money laundering convictions. A section 1957
crime occurs when a defendant engages in a financial transaction with
property worth over $10,000, knowing that the property was derived from
unlawful activity. United States v. Alaniz, 726 F.3d 586, 602 (5th Cir. 2013).
The statute does not require concealment of funds, id., so Walter’s objection on
that ground fails. But his argument that the charged funds did not come from
unlawful activity (or at least that he did not know that) do target an element
of the offense. We consider those objections to each count.
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The first money laundering count involves deposits Walter made
following the 2010 conference. We have already addressed Walter’s knowledge
of the fabrication underlying that reimbursement. When, armed with that
knowledge, Walter deposited the $39,000 check from the Foundation he
violated section 1957.
The next two counts relate to the 2009 “closeout” reimbursement, the one
that double billed for the Foundation’s 2008 payroll. Walter used some of these
federal funds to purchase CDs, which he later cashed and deposited back into
the church account. For the reasons we have already recited demonstrating
Walter’s involvement in, indeed leadership of, the fraud, the jury could find
that he was not oblivious to the unlawful source of these funds. Walter’s
transactions with the closeout funds support his section 1957 convictions. 3
We uphold each of Walter’s convictions.
B.
We now move to Anita, who was charged and convicted only of
conspiracy. We have already explained that the evidence supports the jury’s
finding that Walter orchestrated a scheme to defraud. The sufficiency question
for Anita is whether she agreed to participate in it, with the intent that it
succeed. See United States v. Simpson, 741 F.3d 539, 547 (5th Cir. 2014).
Direct evidence of an agreement to commit a crime is rare, so
circumstantial evidence often proves a conspiracy. There is enough of that type
3Walter’s deposits into the church’s bank account were “monetary transactions” under
section 1957. See 18 U.S.C. § 1957(f)(1). And although Walter does not raise the issue of
distinguishing the proceeds of the fraud from the subsequent deposits of those proceeds, we
note that the fraud was complete once the overbilled funds hit the Foundation’s account, over
which Walter had signature authority. See United States v. Leahy, 82 F.3d 624, 635 (5th Cir.
1996) (“Fraudulent schemes produce proceeds, ‘at the latest when the scheme succeeds in
disgorging the funds from the victim and placing them into the control of the perpetrators.’”
(quoting and emphasizing United States v. Allen, 76 F.3d 1348, 1361 (5th Cir. 1996)). The
fraud got the money into the Foundation’s account; the money laundering got it into the
church’s.
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of evidence here—in the form of concerted action, knowledge of the fraud, and
profiting from it—to support the conviction. Anita and Walter worked together
to make the overbilling happen: Anita administered the Learning Center,
submitting the inflated reimbursement requests, which Walter signed off on.
See United States v. Curtis, 635 F.3d 704, 719 (5th Cir. 2011) (noting that
“concerted action” is evidence of agreement). Anita knew about the overbilling.
As the person overseeing the Learning Center, Anita could see both sides of
the ledger. She authorized pay for teachers, signed checks for fuel, and knew
what the drivers were paid. But she requested reimbursement at higher “cost
per unit” rates. Last but not least, she benefitted from the fraud, using the
proceeds to pay for her car and rent among other things. See id. at 719(recognizing that receiving a substantial share of a fraud conspiracy’s proceeds
is evidence of involvement). The jury reasonably found Anita guilty of
conspiracy.
C.
Rosie challenges her convictions for conspiracy and wire fraud. Her case
is closer than Anita’s. Both were supervisors at the Learning Center, and there
is evidence that Rosie too knew what its actual costs were. Yet unlike with
Anita, there is no evidence that Rosie handled reimbursement requests. That
is, while Anita knew and facilitated both sides of the ledger, Rosie appears only
to have participated in the Learning Center’s operations, not its funding.
But as long as the evidence supports a reasonable inference that Rosie
knew of the overbilling scheme, her “minor participation” in it can support her
convictions. United States v. Stephens, 571 F.3d 401, 404 (5th Cir. 2009). Rosie
was at the Learning Center daily and told employees what to do. She made
hiring decisions and ran staff meetings. Rosie was thus integrally involved in
the functioning of the Learning Center, without which a substantial portion of
the overbilling scheme would not have been possible. If Rosie knew that Anita
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was submitting inflated reimbursement requests for Walter to sign off on, the
jury could conclude from her supervision of the Learning Center that she had
agreed to help facilitate the fraud.
Although the proof of Rosie’s knowledge is weaker than it is for the other
defendants, it is enough for us to uphold the verdict of the jury that sat through
this nine-day trial. Rosie was married to one conspirator, and her daughter
was another. Those family ties are insufficient on their own to prove she joined
the conspiracy, but they are one factor that can be considered along with other
indications that she knew about the fraud. United States v. Willett, 751 F.3d
335, 340 (5th Cir. 2014). Foremost among that additional evidence, Rosie knew
that hurricane money was travelling from DETCOG into the church accounts,
which she then used for personal expenses. Rosie admitted that she knew
Walter ran DETCOG and that the Foundation got grant funds from DETCOG.
She also knew that money in the church accounts came from the Foundation;
on one occasion, she deposited a $30,000 check from the Foundation into the
church’s youth department account. She had signature authority on that
account, almost all the money in which came from the Foundation, as well as
the church’s main account. The jury could infer from her access to those
accounts that she knew the church received hundreds of thousands of dollars
from the Foundation.
She also benefitted from the fraud. In addition to what she derived from
Walter’s use of proceeds to pay credit card bills, Rosie made around $13,000 in
cell phone payments (among others) from the youth department account. She
also made $15,500 in credit card payments from the account for her ministry,
“Heart to Heart,” where nearly all the money came from the youth department
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account. 4 In the absence of overbilling, there would have been no money left
over for personal expenses like these. Rosie’s awareness and use of the extra
cash coming from the Foundation supports the inference that she knew the
Foundation was overbilling.
Statements Rosie made to the FBI could also be one of the puzzle pieces
that the jury concluded fit together to show guilt. When asked about Walter’s
role at the Foundation, Rosie said that Walter had nothing to do with it beyond
providing advice when requested, and specifically that Walter did not help the
Foundation get any grant money. She also said that the money in the Heart
to Heart account came from donations—that is, not the Foundation. The jury
could have taken those false statements to indicate that Rosie knew she ought
to hide her awareness of the scheme. See United States v. Villarreal, 324 F.3d
319, 325 (5th Cir. 2003).
We uphold each of Rosie’s convictions.
III.
Only Rosie appeals the prison time she received. She argues that the
district court misapplied a two-level enhancement added when “the offense
involved . . . a misrepresentation that the defendant was acting on behalf of a
charitable, educational, religious, or political organization, or a government
agency.” U.S.S.G. § 2B1.1(b)(9)(A). The enhancement clearly applies if a
defendant lied about having any connection to a listed organization. Less
obviously, it also applies if a defendant had authority to act for a charity but
diverted some of the funds the nonprofit received for “personal gain.” Id. cmt.
4 These credit card and phone payments were the bases for Rosie’s ten individual wire
fraud convictions. As we find enough evidence that she joined the scheme to defraud, these
payments were one way she received the benefit of that fraud. They thus furthered the
scheme and support her wire fraud convictions. See Vilar, 729 F.3d at 95.
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n.8(B); see United States v. Reasor, 541 F.3d 366, 372 (5th Cir. 2008). That is
the basis for the enhancement here.
Rosie argues that although Walter solicited funds for DETCOG, and
Anita solicited funds for the Learning Center, she never solicited funds so could
not have made a covered misrepresentation. This ignores that the Guidelines
hold Rosie responsible for the foreseeable acts of her coconspirators. U.S.S.G.
§ 1B1.3(a)(1)(B). The requests for government funds were foreseeable, indeed
integral, parts of the conspiracy. As we have upheld Rosie’s conviction as a
coconspirator, Walter’s and Anita’s solicitations are attributable to her. There
was no Guidelines error.
IV.
Each defendant challenges the four special conditions of supervised
release listed in their judgments. These conditions require each defendant to:
(1) “pay any financial penalty that is imposed by the judgment”; (2) “provide
the probation officer with access to any requested financial information for
purposes of monitoring restitution payments and employment”; (3) “not incur
new credit charges or open additional lines of credit without the approval of
the probation officer” until full payment is made; and (4) “not participate in
any form of gambling” until full payment is made. The defendants’ objection
is that the district court did not officially recite these conditions at sentencing.
Instead, the judge told them that the conditions recommended in their
Presentence Reports, which included the four special conditions, would be
conditions of their supervised release. He even identified the page numbers of
the PSRs listing the conditions. The government nonetheless concedes that by
failing to “orally recite the special conditions one by one,” the district court
erred, warranting removal of the four special conditions from the defendants’
judgments.
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The requirement that a judge orally state a sentence is a product of the
defendant’s constitutional right to be present at sentencing. United States v.
Martinez, 250 F.3d 941, 942 (5th Cir. 2001). To preserve that right, the oral
pronouncement controls over a conflicting written judgment. United States v.
Mudd, 685 F.3d 473, 480 (5th Cir. 2012). A true conflict is not required;
including an unpronounced aspect of the sentence in the written judgment may
“broaden” the oral sentence and thus “conflict” with it. United States v. Rivas-
Estrada, 906 F.3d 346, 350 (5th Cir. 2018). We have been strict about this
requirement, recently holding that a district court abused its discretion in
telling the defendant only that the conditions listed in the PSR would be
imposed. Id. at 350–51.
Rivas-Estrada is difficult to reconcile with older caselaw holding that
written notice of the conditions at sentencing suffices. See United States v.
Rouland, 726 F.3d 728, 734 (5th Cir. 2013) (upholding practice in which the
government moves at sentencing to admit an exhibit listing special conditions,
even though the court does not individually recite them); see also United States
v. Al Haj, 731 F. App’x 377, 379 (5th Cir. 2018) (finding no error when
defendant signed a paper listing the conditions). The need for notice underlies
the oral pronouncement requirement. Rouland, 726 F.3d at 733–34 (5th Cir.
2013). 5 When a sentencing judge makes no mention, either directly or
indirectly, of a condition, the lack of notice deprives the defendant of an
5 More precisely, whether the defendant had notice of a special condition determines
the standard of review. Without adequate notice, discrepancies between the written
judgment and the oral pronouncement are reviewed for abuse of discretion; with it, they are
reviewed for plain error. Rivas-Estrada, 906 F.3d at 348–49; Rouland, 726 F.3d at 733–34.
But this determination is the “critical” one. Rivas-Estrada, 906 F.3d at 348; see Rouland,
726 F.3d at 734 (accepting defendant’s concession that an unpronounced special condition did
not affect his substantial rights, as necessary for reversal under plain error review).
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opportunity to object. But the defendant has that opportunity when the court
referred to a list of the conditions being imposed. Id. at 734.
The only difference between this case and Rouland is that the referenced
lists of the Diggles’ conditions were their Presentence Reports rather than a
separate document. It is hard to see why that makes a difference. But see
Rivas-Estrada, 906 F.3d at 349–50 (framing the district court in Rouland as
having done “more than the minimum” by offering a “unique chance to object”).
One of the first questions a court typically asks at sentencing is whether the
defendant has reviewed the PSR. The court followed that standard script in
this case. As the key sentencing document, the PSR is also available at the
hearing. The defendant thus has written notice of the conditions and an
opportunity to object both when a court refers to a list in the PSR (especially
when it does so by page number as happened here) and when it refers to
Rouland’s separate exhibit listing the conditions.
But we are bound to follow Rivas-Estrada’s view that referring to the
PSR is not enough, which is why the government concedes. We are not,
however, required to follow the government’s overall concession on this issue.
United States v. Hope, 545 F.3d 293, 295 (5th Cir. 2008). Our “independent
review,” id., reveals no conflict between the oral sentence and the written one
for three of the disputed special conditions. One of them is so obviously in tune
with the oral sentence that it cannot be said to have created a conflict. Two
others, despite being described as special conditions, are actually standard
conditions (though one needs a slight adjustment). And an unannounced
standard condition does not create a conflict. Rivas-Estrada, 906 F.3d at 348.
At this point, some background on the types of supervised release
conditions is useful. Mandatory conditions are required by statute. U.S.S.G.
§ 5D1.3(a). Standard conditions are “recommended” in all circumstances. Id.
§ 5D1.3(c). As both are “implicit in the very nature of supervised release,” they
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are presumed to be part of the judgment and need not be orally pronounced.
United States v. Torres-Aguilar, 352 F.3d 934, 936 (5th Cir. 2003) (quoting
United States v. Truscello, 168 F.3d 61, 62 (2d Cir. 1999)). In contrast, special
conditions are ones that “may be appropriate” on a case-by-case basis, U.S.S.G.
§ 5D1.3(d), and that ad hoc applicability warrants putting defendants on notice
at sentencing by reading special conditions aloud.
The key is that sometimes a condition labeled special is really a standard
condition. See Rouland, 726 F.3d at 735 (“[S]pecial conditions may be
tantamount to standard conditions under the appropriate circumstances,
thereby precluding the need for an oral pronouncement.”). Aside from being
potentially “appropriate” in any case, the special conditions in section 5D1.3(d)
are “recommended” in certain circumstances. And when a condition is
recommended, it is essentially a standard condition and thus need not be orally
pronounced. Torres-Aguilar, 352 F.3d at 937–38. That the Guidelines would
still call that condition special is “irrelevant.” Id. at 937 (quoting United States
v. Asuncion-Pimental, 290 F.3d 91, 94 (2d Cir. 2002)).
Under this principle, the access-to-financial-information condition is a
standard condition. It is recommended by section 5D1.3(d) when restitution is
ordered, which it was for each defendant. U.S.S.G. § 5D1.3(d)(3). As a result,
the district court did not err in failing to recite this standard condition at
sentencing.
The Guidelines also recommend a no-new-credit condition when
restitution is ordered. U.S.S.G. § 5D1.3(d)(2). So a prohibition on new credit
was implicit in the defendants’ oral sentences. But the Guidelines version
prohibits new credit “unless the defendant is in compliance with the payment
schedule.” Id. The defendants’ written judgments set up a monthly payment
schedule but, in contrast to the Guidelines, prohibit new credit “unless
payment . . . has been made in full.” The written judgments thus broaden the
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extent of the prohibition; under the Guidelines version, the defendants could
open new lines of credit so long as they keep up with their payments, but under
the written judgment, they can open new lines of credit only once they pay the
full amount of restitution. We remand for the district court to reform the
written no-new-credit condition to match the one implied by the oral sentence
of restitution—that is, the Guidelines version. See United States v. Mireles,
471 F.3d 551, 558 (5th Cir. 2006) (“If a conflict exists, the appropriate remedy
is remand to the district court to amend the written judgment to conform to
the oral sentence.”).
As for the condition requiring payment of financial penalties, we do not
see how it could conflict with an oral sentence imposing those penalties. See
United States v. Warden, 291 F.3d 363, 365 (5th Cir. 2002) (explaining that a
written condition does not conflict with an unpronounced condition if the
condition “is clearly consistent with the district court’s intent . . . as evidenced
in the statements made by the court at the sentencing hearing”). Requiring a
defendant to make those payments is consistent with, if not essential to, those
penalties. Indeed, a “special” condition requiring payment of restitution is
largely unnecessary. Making restitution payments is a mandatory condition
of supervised release, as the defendants’ written judgments also reflect.
U.S.S.G. § 5D1.3(a)(6). This may show that the “special” condition was for the
most part redundant (it just adds payment of the special assessment, an
amount that pales in comparison to restitution), but it also shows that it does
not conflict with the rest of the sentence.
We do, however, vacate the no-gambling condition. The Guidelines do
not include it as a condition recommended if restitution is ordered. And
forbidding gambling is not so “clearly consistent” with an oral pronouncement
of restitution as to be reasonably encompassed within that pronouncement.
Contrast Warden, 291 F.3d at 365 (holding that a written condition requiring
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defendant to pay for drug treatment was clearly consistent with a pronounced
condition requiring the defendant to get drug treatment).
* * *
We AFFIRM the judgments of conviction, VACATE the “no-new-credit”
and “no-gambling” conditions for the supervised release terms, and REMAND
for the district court to amend its written judgments by (1) reforming the no-
new-credit condition to conform to section 5D1.3(d)(2) of the Guidelines, and
(2) removing the no-gambling condition.
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