United States v. Roy Hebron , 684 F.3d 554 ( 2012 )

Case: 11-30513 Document: 00511888313 Page: 1 Date Filed: 06/15/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 15, 2012
No. 11-30513
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ROY EUGENE HEBRON,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Louisiana
Before SMITH, GARZA, and SOUTHWICK, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Roy Hebron pleaded guilty of conspiracy to defraud the United States in
connection with major disaster benefits in violation of 18 U.S.C. §§ 371 and 1040.
He appeals his sentence, arguing that the government violated the plea agree-
ment by advocating for a higher loss calculation than the one agreed to and that
the district court erred in its loss calculation by including legitimate claims with
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No. 11-30513
fraudulent ones. We affirm.
I.
Hebron was mayor of Ball, Louisiana. After Hurricane Rita made landfall
in September 2005, Hebron and Brenda Kimball, the town clerk, applied for
funds from the Federal Emergency Management Agency (“FEMA”). Through its
Public Assistance Program, FEMA provides help to local governments so they
may quickly recover from major disasters, reimbursing towns for work such as
debris removal, emergency protective measures, and the repair of disaster dam-
age to publicly owned facilities. Thus, FEMA helps towns cover the costs
associated with hurricane recovery, such as extra hours worked by town employ-
ees and extra equipment used in recovery efforts. After the hurricane, Ball
requested about $134,000 from FEMA.
In the wake of Hurricane Gustav three years later, Hebron and Kimball
again requested more than $309,000 from FEMA on behalf of Ball. But after
reviewing the claim, the FBI launched an inquiry into possible fraud that impli-
cated almost every employee of the small town, but specifically targeting the
mayor, town clerk, chief of police, and several other members of the police
department.
The investigation revealed that town officials had engaged in extensive
fraud intended to bilk FEMA out of hundreds of thousands of dollars. As exam-
ples, Hebron claimed that the town had used sixteen 1½-ton trucks during the
Gustav cleanup efforts, when in reality it used one-ton trucks, a difference in
cost of about $11,730. Kimball and another female employee were listed in the
project worksheets submitted to FEMA as operating trucks and trailers for
hours, but they performed no manual labor at all during the clean-up efforts, a
discrepancy of $13,397. One employee told the FBI he worked for a few hours
on one weekend using a chainsaw and filling sandbags, but the documents sent
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to FEMA had listed him as using a chainsaw and operating a truck and trailer
for thirty-two days. These are but a few examples of the many fraudulent
claims; the presentence report (“PSR”) noted that “discrepancies could be found
in practically every employee/contractor” claim.
Other fraudulent claims by Hebron and Kimball were more complete fabri-
cations. For instance, Hebron and Kimball billed FEMA almost $10,000 for
dumpsters used following Hurricane Gustav, at the same time seeking and
receiving reimbursement from Keep Louisiana Beautiful, Inc., a nonprofit organ-
ization, for the same dumpsters. As another example, Hebron requested reim-
bursement for about $21,000 in overtime hours worked by the town’s employees,
but FEMA’s policy provides for overtime compensation only if the applicant
normally pays its employees for overtime hours worked. Because Ball does not
have a history of paying its employees for overtime hours, Hebron intended to
defraud FEMA of all the requested overtime compensation. Upon further inves-
tigation, the FBI learned that Ball also billed more than $11,000 in overtime
expenses after Hurricane Rita, though the investigation into the Rita reimburse-
ments was less thorough, so the extent of the fraud following Rita is less well
known.
Hebron’s role in all of this was extensive and integral. He and Kimball
prepared and submitted the official FEMA documents and the fraudulent inter-
nal Town of Ball documents that served as backup for all the town’s employees,
such as employee time sheets and town checks payable to individual employees.
Hebron even went so far as calling a meeting for all town employees at which
each employee was presented with bi-weekly time sheets to sign. The employees
did not know who had calculated the work hours performed or how it was fig-
ured, but Hebron openly discussed “fudging” time and squeezing as much from
FEMA as possible. On a separate occasion, when Barber and another employee
presented Hebron with mileage reports from the police cruisers, Hebron insisted
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that the mileage be inflated.
After being indicted on three counts, Hebron pleaded guilty, pursuant to
a written plea agreement, on only the first count: conspiracy to defraud the
United States in connection with major disaster benefits (18 U.S.C. §§ 371 and
1040). In addition to agreeing to dismiss the other two counts, the government
agreed as follows:
9. [A]lthough not binding on the Court, the parties agree that the
applicable loss amount is less than $200,000.00;
10. . . . [Hebron] understands and acknowledges that a final deter-
mination of the applicable guidelines range cannot be made until
the completion of the presentence investigation;
11. The sentencing judge alone will decide what sentence to impose;
and
12. The failure of the Court to adhere to a sentencing recommenda-
tion tendered by counsel shall not be a basis for setting aside the
guilty plea which is the subject of this agreement.
The government recommended a loss calculation between $70,000 and
$120,000; Hebron argued that the appropriate number was $66,798.57; and the
PSR calculated the loss as over $320,000. The government then endorsed the
PSR’s calculation.
Loss calculation was the main focus of the sentencing hearing. Hebron
argued for, at most, $105,556, and the government essentially supported the
PSR’s calculation of $320,000, contending that $105,556 was “just the floor” of
the appropriate amount, although both numbers would be reasonable. Hebron’s
primary objection to the PSR’s calculation was that it included likely legitimate
payments to the town with the fraudulent ones and thus was unreasonable.
The court overruled Hebron’s objections and adopted the PSR’s sentencing
calculation, which included a twelve-point increase because the loss was over
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$200,000; the court departed downward in recognition of Hebron’s long career
in public service. The court sentenced Hebron to 48 months in prison, three
years of supervised release, $25,000 in fines, and $105,556.10 in restitution to
FEMA, owed jointly and severally with his codefendants.
II.
Hebron contends that the government breached the plea agreement when
it advocated for the $320,000 loss amount in contravention of the plea agree-
men’s terms of a loss of less than $200,000. This court reviews the alleged
breach under the plain-error standard, because Hebron did not object to any
breach in the district court. Puckett v. United States, 556 U.S. 129, 134-43
(2009). Hebron argues that, at sentencing, his challenge to the loss amount and
his assertion that the government had taken a position at sentencing inconsis-
tent with the position in its sentencing memorandum suffice to preserve error
on appeal. To the contrary, without a specific objection alerting the district court
that the government has breached the plea agreement, the error is not
preserved.1
To meet the plain-error standard, Hebron must show that (1) there is
error; (2) the error was clear and obvious, not subject to reasonable dispute; and
(3) the error affected his substantial rights. Puckett, 556 U.S. at 135. Assuming
those three prongs are satisfied, this court has the discretion to remedy the
error, but only if it seriously affects the fairness, integrity, or public reputation
of judicial proceedings. Id. In evaluating whether a plea agreement was
1
United States v. Neal, 578 F.3d 270, 272 (5th Cir. 2009) (“To preserve error, an objec-
tion must be sufficiently specific to alert the district court to the nature of the alleged error
and to provide an opportunity for correction.”) (citing United States v. Ocana, 204 F.3d 585,
589 (5th Cir. 2000)); see also Puckett, 556 U.S. at 132-33 (ruling that a breach of plea agree-
ment to an acceptance-of-responsibility reduction error was not preserved by a challenge to
denial of reduction and criticism of the government’s inconsistent positions).
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breached, we apply general principles of contract law, construing the terms
strictly against the government as drafter, to determine “whether the govern-
ment’s conduct is consistent with the defendant’s reasonable understanding of
the agreement.” United States v. Elashyi, 554 F.3d 480, 501 (5th Cir. 2008) (cita-
tions and internal quotation marks omitted).
In the plea agreement, the government agreed to a loss calculation of
under $200,000. Although it abided by that agreement in its initial sentencing
memorandum, it contended at the sentencing hearing that a calculation of
$320,000 was not only reasonable but should be applied. Although it acknowl-
edged that $105,000 would also be reasonable, it contended vigorously that
$105,000 was “just the floor” and that a higher amount should be imputed as
loss.
It is evident that the government breached the agreement. Hebron rea-
sonably understood it to require the government not to oppose a loss calculation
of less than $200,000 or at least not to argue for a higher one. The various
justifications offered by the government do not change the conclusion that the
error was clear and obvious.
First, the government contends that its statements at sentencing were the
result of merely providing candid and full disclosure of the facts in response to
questioning. See United States v. Reeves, 255 F.3d 208, 211 (5th Cir. 2001).
Though the government did appropriately answer the court’s questions about
how the PSR had calculated the $320,000 amount, it “crossed the line” from exe-
cuting its duty to lay out the facts to advocating for a loss amount greater than
the one to which it agreed.2
2
United States v. Munoz, 408 F.3d 222, 227-28 (5th Cir. 2005); see also id. at 227(“Although the Government has a duty to provide the sentencing court with relevant factual
information and to correct misstatements, it may not hide behind this duty to advocate a posi-
tion that contradicts its promises in a plea agreement.”).
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For example, when the government advocated that the court use the
“intended loss amount,” the court questioned, “And that intended amount is the
three twenty plus thousand dollars that’s mentioned in the PSR atSSis it 46?”
The government responded, “I think it’s Paragraph Number 47, Your Honor, in
the amended or revised version dated May 9th of 2011. $320,868.22.” Later, the
government similarly argued that Hebron should be “held accountable for the
entire amount,” namely $320,000. The court also appears to have interpreted
the government’s statements as urging a higher loss calculation. The govern-
ment “could have chosen to not take a position on the enhancement, but instead
chose to remark on the appropriateness of its application,” and, as a result, it
violated the plea agreement by arguing for a higher loss calculation than agreed
to, “even if mildly.”3
Citing Puckett, 556 U.S. at 140 n.2, the government also maintains that,
because the court requested specific argument on the issue of loss calculation,
the government was no longer bound to the plea agreement on that issue. The
Court in Puckett had left open the possibility that a clear breach of the plea
agreement was not error, because of intervening circumstances between the plea
and the sentencing hearing. Specifically, the government had agreed to an
acceptance-of-responsibility downward adjustment, but before sentencing, the
defendant had engaged in more criminal activity, so the Court noted that “the
Government might well have argued that it was excused from its obligation.” Id.Here, in contrast, the court’s asking of a question with regard to loss does
not hinder performance so as to excuse the contractual obligation in the same
manner as suggested in Puckett. Thus, the government breached the plea agree-
ment, the breach was in error, and the error is clear.
Nevertheless, the breach did not affect Hebron’s substantial rights,
3
United States v. Roberts, 624 F.3d 241, 247-48 (5th Cir. 2010); see also United States
v. Valencia, 985 F.2d 758, 761 (5th Cir. 1993).
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because it likely did not influence the sentence. To meet this third prong of the
plain-error analysis in the sentencing context, Hebron bears the burden of show-
ing with a reasonable probability that, but for the error, he would have received
a lesser sentence. United States v. Villegas, 404 F.3d 355, 364 (5th Cir. 2005);
see also Puckett, 556 U.S. at 141-42. The district court had extensive briefing on
the loss issue, had read the thorough and comprehensive PSR that recommended
a loss calculation of over $320,000, and had the benefit of lengthy oral argument
and expert witness testimony. It ultimately adopted an amended version of the
PSR, including its loss calculation.
The sentencing-hearing transcript reveals that the court based its sen-
tencing decision on the facts presented in the PSR (as appropriately explained
by the government), the sentencing guidelines and commentary, and the fact
that Hebron had not proffered an alternative method of calculation; there is no
indication that the government’s specific arguments in favor of the higher loss
calculation affected the sentence. Hebron provides no evidence to the contrary.
In sum, the breach of the plea agreement likely did not affect the sentence, so
Hebron’s substantial rights were not affected and, as a result, the court did not
plainly err.
Finally, even if the error affected Hebron’s substantial rights, this is not
the rare case in which we should exercise our discretion to require resentencing
on the ground that the error “seriously affect[s] the fairness, integrity, or public
reputation of judicial proceedings.” Puckett, 556 U.S. at 135 (citations and inter-
nal quotation marks omitted). The district court carefully considered all of
Hebron’s various objections to the PSR and even granted a downward departure
for his extensive career in public service, despite the court’s one-word description
of this case as “sad” and the court’s personal expression of “disappointment in
Mr. Hebron.” The government’s breach of the plea agreement added very little,
aside from clarification of facts, to what the court already knew from the detailed
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PSR. And the issue of loss calculation, as explained below, is an arduous one in
this case.
“Meeting all four prongs [of the plain-error test] is difficult, as it should
be.” Id. (citation and internal quotation marks omitted). Hebron has not satis-
fied that difficult standard; even if the third prong had been satisfied, we would
not exercise our discretion to vacate the sentence.
III.
Hebron argues that the district court erred in its calculation of loss by
including likely legitimate payments from FEMA to the Town of Ball with the
fraudulent ones, in contravention of United States Sentencing Guidelines
§ 2B1.1. Although generally the calculation of the amount of loss is a factual
finding reviewed for clear error, United States v. Sanders, 343 F.3d 511, 520 (5th
Cir. 2003), Hebron challenges the method used to calculate loss, which, as an
application of the guidelines, is reviewed de novo, United States v. Harris, 597
F.3d 242, 250-51 (5th Cir. 2010). Nonetheless, the guidelines emphasize the
deference that must be shown to the sentencing judge, who is in a unique posi-
tion to assess the applicable loss, so this court need only determine whether the
district court made “a reasonable estimate of the loss.” U.S.S.G. § 2B1.1
cmt. 3(C).
The guidelines dictate an eight-level increase if the amount of loss was
between $70,000 and $120,000 and a twelve-level increase if the loss was
between $200,000 and $400,000. U.S.S.G. § 2B1.1(b)(1). The applicable loss is
generally the greater of actual lossSSwhich includes only reasonably foreseeable
harm resulting from the fraudSSand intended lossSSwhich includes the harm
intended to result from the offense. U.S.S.G. § 2B1.1 cmt. 3(A). In a case involv-
ing government benefits such as this, the guidelines commentary provides that
loss shall be considered to be not less than the value of the benefits
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obtained by unintended recipients or diverted to unintended uses,
as the case may be. For example, if the defendant was the intended
recipient of food stamps having a value of $100 but fraudulently
received food stamps having a value of $150, loss is $50.
Id. cmt. 3(F)(ii).
The district court adopted the PSR’s loss calculation, which separated the
various categories of reimbursements the town had requested from FEMA after
Hurricanes Gustav and Rita. After Gustav, the town requested about $83,000
in labor reimbursements. Of that, about $21,000 was for overtime hours, which,
as explained above, is all fraudulent because of both FEMA’s and the town’s
reimbursement policies. In addition, the PSR noted that the time sheets for
non-overtime hours for virtually every employee were falsified, and accurate
time sheets either never existed or were destroyed. The probation officer, in
preparing the PSR, thus was unable to determine how much of the requested
labor reimbursements were legitimate and how much were fraudulent, so all
$83,000 was included in the intended-loss calculation.
The same is true for equipment reimbursements. The town requested
about $157,000 for equipment used during the clean-up, but as noted earlier, the
FBI investigation revealed many falsifications, including false reporting of truck
sizes ($11,730 of fraud), false reporting of who had used such equipment (a dif-
ference of about $13,400 in one instance), and false reporting of how many hours
employees had used such equipment. Most of these were discovered as fraudu-
lent by comparing employee statements with the project worksheets submitted
to FEMA, but the PSR noted that these are “merely a sampling of obvious dis-
crepancies.” Thus, the PSR concluded: “Due to the extensive fraudulent report-
ing of equipment hours, there is no method to reasonably separate fraudulent
claims from legitimate claims related to PW 83, Category ASSequipment. There-
fore, the entire amount will be considered fraudulent.”
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The PSR also included, as loss, all of the administrative expenses reported
(about $5,000), in light of the fact that those hours were likely spent in preparing
all the fraudulent documentation and included all the contracted work per-
formed (about $9,700) because that work was plainly double-billed to a nonprofit
organization. The PSR also found that the same sort of extensive fraud, which
made it impossible to separate legitimate from fraudulent claims, is true with
the policing hours and equipment billed to FEMA (about $54,500). In sum, the
PSR calculated, as intended loss, all of the approximately $309,300 billed to
FEMA for cleanup and protective efforts after Gustav.
With regard to Hurricane Rita, the PSR calculations were much more con-
servative. The investigation into the fraud after Hurricane Rita was less exten-
sive, so of the $133,720 requested after Rita, the PSR included as loss only the
fraudulently reported overtime hours (about $11,600), even though the same
type of fraud that occurred after Gustav may have occurred after Rita. Thus, the
PSR recommended a total intended loss of over $320,000.
For restitution purposes, however, the calculation was much lower. The
PSR noted that the town likely benefited from the fraudulent payments from
FEMA much more so than did Hebron himself (or any of his co-defendants). The
PSR therefore included in the restitution calculation only “certain acts to which
specific values can be associated with the defendant,” totaling about $105,600.
For the most part, this included only reimbursement payments that the proba-
tion officer knew to be fraudulent.
Both sides agree that the sentencing guidelines require that loss calcu-
lations in government-benefit cases include only fraudulent ones and not pay-
ments to which the town was legitimately entitled. The parties also agree, as
did the district court, that at least some of the reimbursements requested were
for legitimate labor performed and equipment used. Finally, all agree that there
is no reasonable way to separate the legitimate FEMA reimbursements from the
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fraudulent ones; indeed, the district court relied on the PSR’s calculations in
part because Hebron was unable to provide an alternative method that could
reliably isolate the fraudulent payments. Thus, the central question is whether
it was unreasonable for the district court to have considered all of the requested
reimbursements from FEMA after Gustav as intended loss because, on account
of Hebron’s fraudulent conduct, the fraudulent requests cannot be separated
from the legitimate ones.
Hebron contends that the court used an unreasonable method because the
burden is on the government to show some factual basis for concluding that all
of the payments resulted from fraud. See United States v. Randall, 157 F.3d
328, 331 (5th Cir. 1998). Because it cannot, Hebron argues, the amount calcu-
lated as restitution, which includes only reimbursements for which the govern-
ment has direct evidence showing fraud, should be used (about $105,600). Fur-
ther, the guidelines require that loss be calculated on “a reasonable estimate . . .
based on available information,” U.S.S.G. § 2B1.1 cmt. 3(C); Hebron contends
that instead of using only the “available information” that shows fraudulent con-
duct, the government and the district court have just thrown up their hands by
including all requested payments.
The government responds on several fronts. First, it points out that the
PSR noted only the most obvious discrepancies uncovered by the investigation
and that the fraud was so pervasive and extensive that the $105,000 restitution
calculation used by Hebron is almost certainly an underestimation. Second, by
including only overtime payments for its Rita calculation, the government points
out that the PSR likely underestimated the fraud for the Rita reimbursements,
which was likely as extensive as for Gustav. Considering this, it is likely that
the fraudulent payments after both hurricanes totaled more than $200,000, the
threshold number for sentencing purposes. Third, and most compellingly, the
government argues that, although it generally bears the burden of proving loss,
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in a case in which the defendant’s fraud is so pervasive that it thwarts the gov-
ernment’s ability to do so, reasonable estimates are permissible unless the defen-
dant shows that they are inaccurate. Hebron, the government asserts, should
not be able to hide behind his own extensive fraud to escape a longer sentence.
There is no binding Fifth Circuit precedent directly on point, but a review
of cases in which district courts have made a “reasonable estimate” of loss
provides some guidance. The defendant in United States v. John, 597 F.3d 263,
279 (5th Cir. 2010), was convicted of stealing and disseminating the corporate
bank account information of seventy-six companies; the PSR calculated intended
loss by aggregating the credit limits on each account and adding the amount by
which the credit limit was exceeded on one particular account. Although the
actual loss was only $78,750, that calculation yielded an intended loss of
$1,451,865. Id. at 278-79. This court upheld that calculation, despite the fact
that only four of the seventy-six accounts were fraudulently charged (and only
one to its maximum credit limit), because the district court could reasonably
infer that the defendant and her confederates intended to steal from the other
seventy-two accounts they had taken information from and disseminated. Id.
at 279-81. Similarly, this court several times has upheld loss calculations that
aggregate the credit limits of stolen credit cards, even though the government
was not able to prove that the defendant would use all the credit cards that were
stolen or would charge them to their limits.4
Unpublished cases from this circuit and cases from our sister circuits pro-
vide more guidance. In United States v. Fisk, 233 F. App’x 371, 373 (5th Cir.
2007), the loss was calculated as the total of all ten insurance claims that were
at least partially fraudulent. The defendant objected, contending that the court
erred by including the legitimate portions of the insurance claims with the
4
See United States v. Harris, 597 F.3d 242, 251-59 (5th Cir. 2010); United States v.
Sowels, 998 F.2d 249, 250-52 (5th Cir. 1993).
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fraudulent ones. Noting that insured parties are generally not entitled to any
part of an insurance claim where the figures have been inflated, this court
upheld the district court’s decision to shift the burden “to Fisk to show that cer-
tain portions of each insurance claim [were] legitimate” once the government
had met its burden by showing that at least some portion of each claim was
fraudulent. Id. Because Fisk, like Hebron, submitted no evidence to make such
a showing, the entire amount of all the insurance claims was counted as loss. Id.The decision in United States v. Miell, 661 F.3d 995 (8th Cir. 2011), cert.
denied, 132 S. Ct. 1777 (2012), provides the most analogous case. A landlord was
charged with mail fraud after fraudulently retaining the security deposits of
hundreds of tenants by inflating the costs of repairs needed after they moved out
and often demanding additional alleged repair costs. Id. at 997. The district
court calculated the loss by multiplying the number of rental units by the aver-
age security deposit per unit, then subtracting the average amount of security
deposit returned for those units that had any amount of their deposit returned.
Id. at 1001. The defendant objected, noting that this calculation included the
costs of legitimate repairs along with the fraudulent ones. The Eighth Circuit
nonetheless upheld the calculation, reasoning:
The district court’s loss calculation properly included these sums
because they flowed from the government’s evidence that Miell’s
claims against damage deposits were “systematically tainted with
fraud,” leading the district court to conclude that it was “difficult, if
not impossible, to give him any credit for parts of his claims that
might have been legitimate, if he had tried to assert those claims by
legitimate means.” . . . Because the district court made a reasonable
estimate of loss, one that is plausible in light of the record as a
whole, its loss determination was not clearly erroneous. Id.We agree with Miell, which presents facts strikingly similar to this case.
Hebron should not reap the benefits of a lower sentence because of his ability to
defraud the government to such an extent that an accurate loss calculation is not
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possible. As the government reasons, Hebron should not be able to hide behind
his extensive fraud to escape a longer sentence. Thus, endorsing the method
articulated in Fisk, we conclude that although the government generally bears
the burden of showing that the alleged intended loss was garnered by fraudulent
means, where the government has shown that the fraud was so extensive and
pervasive that separating legitimate benefits from fraudulent ones is not reason-
ably practicable, the burden shifts to the defendant to make a showing that par-
ticular amounts are legitimate. Otherwise, the district court may reasonably
treat the entire claim for benefits as intended loss.
There may be alternative methods that could have yielded a more accurate
calculation. For example, the probation officer could have requested from FEMA
data about nearby towns of a similar size, then consider the average amount
requested after Gustav as an estimate of the amount of legitimate reimburse-
ments requested by the town, then subtracting that amount from the total
request to reach the intended loss. Although other courts have taken a similar
approach in circumstances like these, see United States v. Sufi, 455 F. App’x 672
(6th Cir.), cert. denied, 132 S. Ct. 1772 (2012), the facts of this case do not dis-
close whether FEMA has such data, whether Hurricanes Gustav and Rita were
large and powerful enough to affect different parts of the state in a uniform man-
ner, or whether a sampling of similarly sized towns around Ball would have a
small enough standard deviation such that the average reimbursement claim
amount would be a reasonable estimate. This court need not determine whether
the district court’s estimate was the most reasonable, but rather only that it is
a reasonable calculation.
Hebron provided no figures such as the one suggested above, nor any other
evidence, to furnish the court with a reasonable estimate of the amount of bene-
fits legitimately requested by the town. Meanwhile, the government has persua-
sively shown that Hebron’s fraud, which included the fabrication of nearly every
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relevant town record, was so extensive and pervasive that separating the town’s
legitimate claims from the fraudulent ones is, as conceded by all parties, impos-
sible. As a result, the court committed no error by including the entire amount
requested from FEMA after Hurricane Gustav, as well as a small portion
requested after Hurricane Rita, as intended loss.
The judgment of sentence is AFFIRMED.
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