United States v. Kalu

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS June 29, 2015
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 14-1068
KIZZY KALU,
Defendant - Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 1:12-CR-00106-MSK-1)
Robert T. Fishman, Ridley, McGreevy & Winocur, PC, Denver, Colorado, appearing for
Appellant.
James C. Murphy, Assistant United States Attorney (John F. Walsh, United States
Attorney, with him on the brief), Office of the United States Attorney for the District of
Colorado, Denver, Colorado, appearing for Appellee.
Before MATHESON, BACHARACH, and MORITZ, Circuit Judges.
MATHESON, Circuit Judge.
Kizzy Kalu recruited foreign nationals to come to the United States for specialized
nursing employment, required them to work as non-specialized laborers in nursing
homes, retained a portion of their wages for personal profit, and threatened them with
deportation and financial ruin if they did not comply with his demands. As part of the
scheme, he misrepresented the terms of their employment to the government to obtain
visas and bring the foreign nationals into the country.
The government determined Mr. Kalu’s enterprise was fraudulent and charged
him in a 95-count superseding indictment. After a trial, a jury found Mr. Kalu guilty of
89 of the counts alleged, including (1) mail fraud under 18 U.S.C. § 1341 and 18 U.S.C.
§ 2; (2) encouraging and inducing an alien under 8 U.S.C. § 1324(a)(1)(A)(iv),
(a)(1)(B)(i), and 18 U.S.C. § 2; (3) visa fraud under 18 U.S.C. § 1546 and 18 U.S.C. § 2;
(4) forced labor under 18 U.S.C. § 1589 and 18 U.S.C. § 2; (5) trafficking in forced labor
under 18 U.S.C. § 1590 and 18 U.S.C. § 2; and (6) money laundering under 18 U.S.C.
§ 1956 and 18 U.S.C. § 2. The district court sentenced Mr. Kalu to 130 months of
imprisonment on some counts and 120 months on others, with the sentences running
concurrently. The court also ordered forfeiture in the amount of $475,592.94 and
awarded $3,790,338.55 in restitution.
Mr. Kalu argues the district court erroneously instructed the jury on various
offenses and seeks reversal of his convictions. He also contends the district court abused
its discretion in calculating restitution. Exercising jurisdiction under 28 U.S.C. § 1291and 18 U.S.C. § 3742(a), we affirm the district court.
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I. BACKGROUND
A. Factual History
H-1B visas are temporary worker visas for those who work in a “specialty
occupation.” 8 C.F.R. § 214.2(h)(1)(ii)(B). The visa grants a “nonimmigrant alien”
admission to the United States for an initial tenure of up to three years. Id.§ 214.2(h)(9)(iii)(A)(1). The application process requires the employer to attest to a
number of employment conditions in a Labor Condition Application (“LCA”)—including
that the employee will be working in a specialized position, performing particular job
duties, and earning above a certain threshold for the location where the position is
located—and then file a form (“I-129”) with the Department of Homeland Security to
petition for an H-1B visa. The employer must notify the government if the underlying
conditions of employment change. Id. § 214.2(h)(2)(i)(E). H-1B visas are employer
specific; if the foreign national ceases to work for the sponsoring employer, the
government must be notified and the visa may be cancelled or, under some conditions,
transferred to a different employer. Id. § 214.2(h)(2)(i)(D).
Mr. Kalu recruited nurses from abroad, charging them a fee—typically $6,500—to
procure H-1B visas to allow them to enter the United States.1 He oversaw the submission
1
The sponsoring employer is legally required to pay the H-1B petition fee. If the
foreign nationals initially pay the fee, the employer must reimburse them. At trial, the
foreign nationals in this case testified that Mr. Kalu did not reimburse them for their visa
fees.
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of 41 H-1B visa petitions, primarily for foreign nationals from the Philippines, which
indicated they would work for Adam University (“AU”) as “nurse
instructor/supervisors.”2 The federal government grants 65,000 H-1B visas per year, but
educational institutions are exempt from the H-1B visa cap.
When they arrived in the United States, the foreign nationals did not work for AU.
Instead, Mr. Kalu’s for-profit corporation, Advanced Training and Education for Foreign
Healthcare Professionals Group, LLC (“FHPG”), placed the foreign nationals as
employees in nursing homes in Colorado.3 Although the foreign nationals were admitted
as employees of AU, Mr. Kalu did not update the government and continued to file visa
petitions after October 1, 2008, when AU no longer had a physical presence in Colorado
and had ceased to exist in any meaningful fashion. He continued to represent to the
nurses, his attorney, and immigration officials that AU was functioning and recruiting
foreign nationals for employee positions.
2
Some of the foreign nationals were promised employment as a “clinical nurse
practitioner.”
3
In some visa petitions, Mr. Kalu listed FHPG as the sponsoring employer. When
the federal government questioned whether FHPG was a non-profit organization and not
subject to the H-1B visa cap, Mr. Kalu represented that FHPG was affiliated with AU, a
degree-granting entity which contracted to use the facilities of Teikyo Loretto Heights
University. Mr. Kalu indicated that a portion of FHPG’s work would “directly benefit”
AU. Mr. Kalu then informed his attorney that AU would be employing the foreign
nationals directly, and subsequent petitions listed AU as their employer.
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Upon arriving in the United States, the foreign nationals discovered they would be
working as unspecialized laborers in nursing homes and not as instructors or supervisors
as indicated on their visa petitions. Mr. Kalu arranged for the nurses to work in particular
nursing homes and orchestrated their remuneration. The nursing homes typically paid
FHPG $35/hour for the nurses’ labor, and FHPG would pay $20/hour of that rate to the
nurses themselves. Mr. Kalu eventually told many of the nurses they would have to find
their own nursing jobs with non-FHPG-affiliated facilities. He informed the nurses that,
because they would be paid for these non-FHPG jobs by the nursing homes directly, they
would be required to pay him over a thousand dollars per month, whether or not they
were working. If the nurses did not pay him, Mr. Kalu threatened to report them, have
their visas revoked, have them deported, or enforce a $25,000 penalty for breaching their
contract.
Mr. Kalu’s scheme relied on a number of fraudulent misrepresentations that
allowed him to bring the nurses to the United States, keep them in the country, and profit
from their labor. The H-1B visa applications falsely indicated the foreign nationals
would be AU employees, when they were in fact required to sign separate employment
contracts with Mr. Kalu’s company and were outsourced to nursing homes.4 The
applications also indicated the foreign nationals would be nurse instructors/supervisors
4
Mr. Kalu instructed the foreign nationals not to bring these separate employment
contracts to their interviews at the embassy, informing them that if the embassy saw
them, the visa would be denied.
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and thus engaged in a “specialty occupation”—a requirement for an H-1B visa—when
they in fact did not have any meaningful instruction or supervision responsibilities and
would be ordinary nurses in nursing homes.5 The applications further referenced job
offers from AU falsely representing that the foreign nationals would be earning $72,000
per year, which would satisfy the requirement that they be paid at or above the prevailing
wage for Denver, when none of them actually earned that amount. Most were paid
$20/hour, and many worked outside of Denver.6 The applications did not indicate Mr.
Kalu would be retaining a sizable portion of their wages for his personal gain. The
government argued 14 foreign nationals provided labor, at least in part, because Mr. Kalu
held them in debt for various costs and informed them that if they did not work in a
nursing home he would be required to report them to the government and they could face
deportation.
5
The relevant statute and implementing regulations define “specialty occupation”
as “an occupation that requires (A) theoretical and practical application of a body of
highly specialized knowledge, and (B) attainment of a bachelor’s or higher degree in the
specific specialty (or its equivalent) as a minimum for entry into the occupation in the
United States.” 8 U.S.C. § 1184(i)(1); see 8 C.F.R. § 214.2(h)(4)(i)(A).
6
Mr. Kalu argues the nurses could have made $72,000 per year, but this would
have required them to work approximately 65 hours per week. Even if overtime would
have enabled them to make $72,000, this argument does not satisfy the legal criteria for
an H-1B visa. The salary promised to H-1B visa workers must be “a base salary, a set
salary, a guaranteed salary that the employer intends to pay the foreign national.” ROA,
Vol. 4 at 737-38. Furthermore, trial testimony established some employees could not
find more than 40 hours of work a week.
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B. Procedural History
On March 1, 2012, Mr. Kalu and Philip Langerman, the president and founder of
AU, were named in a 132-count indictment. On February 12, 2013, a superseding
indictment charged Mr. Kalu with: (1) Counts 1-22 of commercial carrier/mail fraud in
violation of 18 U.S.C. § 1341 and 18 U.S.C. § 2; (2) Counts 23-37 of encouraging and
inducing an alien in violation of 8 U.S.C. § 1324(a)(1)(A)(iv), (a)(1)(B)(i) and 18 U.S.C.
§ 2;7 (3) Counts 38-40 of visa fraud in violation of 18 U.S.C. § 1546 and 18 U.S.C. § 2;8
(4) Counts 41-54 of forced labor in violation of 18 U.S.C. § 1589 and 18 U.S.C. § 2; (5)
Counts 55-64 of trafficking in forced labor in violation of 18 U.S.C. § 1590 and 18
U.S.C. § 2 and (6) Counts 65-95 of money laundering in violation of 18 U.S.C. § 1956and 18 U.S.C. § 2.9Mr. Kalu pled not guilty. He argued he was a middleman tasked with arranging
visas and it was AU’s obligation to ensure the foreign nationals were working as nursing
instructors/supervisors. He contended only AU indicated the nurses would earn $72,000
annually, while FHPG’s website and Mr. Kalu’s own communications with the nurses
indicated they would be paid $20/hour. He also argued he acted in good faith in
7
The government alleged Mr. Kalu had encouraged or induced 15 nonimmigrant
workers to illegally enter and reside in the United States.
8
The government charged these counts based on the three I-129 petitions Mr.
Kalu personally signed.
9
The superseding indictment also included forfeiture allegations under 21 U.S.C.
§ 853(p).
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accordance with advice he received from Denise Perez, the attorney who reviewed the H-
1B petitions. After a 15-day trial and three days of deliberation, a jury found Mr. Kalu
guilty of the charges in Counts 1-18, 22-49, 51-59, 61-67, and 69-95, for a total of 89 of
the 95 counts alleged.
At sentencing, the district court determined Mr. Kalu’s total offense level was 38
and his criminal history category was 1. The presentence report (“PSR”) calculated the
United States Sentencing Guidelines (“Guidelines”) range as 235 to 293 months of
incarceration. The PSR observed the Guidelines range exceeded the statutory maximum
of 240 months for Counts 1-18, 22, 41-49, 51-59, 61-67, and 69-95 and 120 months for
Counts 23-40. Based on these calculations, the district court noted the applicable range
would be 235 to 240 months for Counts 1-18, 22, 41-49, 51-59, 61-67, and 69-95 and 120
months for Counts 23-40. The court rejected the Government’s request for a 300-month
sentence, explaining that Mr. Kalu’s crimes were largely economic, distinguishing them
from forced-labor cases involving physical brutality or isolation. After considering the
circumstances of the offense, the court opted to use a total offense level of 32, which
yielded a guideline range of 121 to 151 months of incarceration. It sentenced Mr. Kalu to
130 months of imprisonment on Counts 1-18, 22, 41-49, 51-59, 61-67, 69-95, and 120
months for Counts 23-40, with the sentences on all counts running concurrently. The
court ordered Mr. Kalu to pay $475,592.94 in forfeiture and $3,790,338.55 in restitution
to compensate the nurses for their losses.
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Mr. Kalu subsequently appealed his convictions and the restitution ordered by the
court.
II. DISCUSSION
On appeal, Mr. Kalu argues the district court erroneously instructed the jury
regarding the charged offenses and incorrectly calculated the restitution award. We
review each of the disputed jury instructions and conclude Mr. Kalu’s claims do not
survive plain error review. We also determine the district court properly calculated the
restitution owed to the foreign nationals.
A. Jury Instructions
Mr. Kalu contends four jury instructions misstated or altered offenses charged in
the superseding indictment. To determine whether the district court erred, “[w]e review
the jury instructions de novo and ‘view them in the context of the entire trial to determine
if they accurately state the governing law and provide the jury with an accurate
understanding of the relevant legal standards and factual issues in the case.’” United
States v. Thomas, 749 F.3d 1302, 1312 (10th Cir. 2014) (quoting United States v.
Bedford, 536 F.3d 1148, 1152 (10th Cir. 2008)). “In doing so, we consider whether the
district court abused its discretion in ‘shaping or phrasing . . . a particular jury instruction’
and deciding to give or refuse a particular instruction.” Id. at 1312-13 (alteration in
original) (quoting Bedford, 536 F.3d at 1152). “Ordinarily, failure to instruct on such an
essential element as intent or knowledge requires reversal.” United States v. Prince, 647
F.3d 1257, 1265 (10th Cir. 2011) (quotations and alterations omitted).
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Mr. Kalu claims one of these jury instructions constructively amended the
indictment. To determine whether the district court erred on that ground, “[w]e review de
novo whether the jury instructions constructively amended the indictment. . . . To
constitute a constructive amendment, the district court proceedings must modify an
essential element of the offense or raise the possibility the defendant was convicted of an
offense other than that charged in the indictment.” United States v. DeChristopher, 695
F.3d 1082, 1095 (10th Cir. 2012) (quotations and citations omitted). “A variance that
expands the [i]ndictment is considered a constructive amendment and is per se reversible
error.” United States v. Davis, 55 F.3d 517, 521 (10th Cir. 1995). “A variance that does
not rise to the level of a constructive amendment does not require reversal.” Id.In this case, our review goes beyond considering error because Mr. Kalu
acknowledges he did not raise these challenges before the district court and presents them
for the first time on appeal. When a party fails to object to an instruction at trial, we
review for plain error, which “exists only where (1) there was error, (2) that is plain, (3)
that affects substantial rights, and (4) that seriously affects the fairness, integrity or public
reputation of judicial proceedings.” Bedford, 536 F.3d at 1153 (quotations omitted); see
Fed. R. Crim. P. 52(b); United States v. Brown, 400 F.3d 1242, 1253 & n.6 (10th Cir.
2005) (applying this standard to constructive amendments not raised at trial). To survive
plain error review, the error must be so serious it “affects the defendant’s fundamental
right to a fair and impartial trial.” United States v. Uresti-Hernandez, 968 F.2d 1042,
1046 (10th Cir. 1992) (quotations omitted). Mr. Kalu bears the burden of demonstrating
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the existence of plain error warranting relief. United States v. Balderama-Iribe, 490 F.3d
1199, 1204 (10th Cir. 2007).
1. Specific Intent to Defraud (Instruction 17)
Counts 1-22 of the superseding indictment charged Mr. Kalu with mail fraud.10
Mr. Kalu argues the district court plainly erred by failing to instruct the jury that specific
intent to defraud is an element of mail fraud under 18 U.S.C. § 1341. The statute states in
relevant part:
Whoever, having devised or intending to devise any scheme or artifice . . .
for obtaining money or property by means of false or fraudulent pretenses,
representations, or promises, . . . for the purpose of executing such scheme
or artifice or attempting so to do, places in any post office or authorized
depository for mail matter, any matter or thing whatever to be sent or
delivered by the Postal Service, or deposits or causes to be deposited any
matter or thing whatever to be sent or delivered by any private or
commercial interstate carrier . . . shall be fined under this title or
imprisoned not more than 20 years, or both.
18 U.S.C. § 1341.
The superseding indictment charged Mr. Kalu under this statute, alleging he
“devised and intended to devise a scheme to obtain money by means of false and
fraudulent pretenses and representations,” and as part of this scheme, “made false and
fraudulent representations to foreign nationals, the State of Colorado, the government of
the United States, and others in order to obtain money, and aided and abetted the same.”
10
Mr. Kalu was also charged with aiding and abetting mail fraud under 18 U.S.C.
§ 2.
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ROA, Vol. 1 at 92. In support of the charge, it detailed a number of specific
representations and acts Mr. Kalu made to advance his scheme.
The jury instructions for Counts 1-22, however, did not contain the element of
intent to defraud. Instruction 17, the elemental jury instruction pertaining to § 1341,
stated:
[t]o prove each of Counts 1-22, the Government must establish, beyond a
reasonable doubt, all of the following four elements:
1. That Mr. Kalu knowingly participated in a scheme or plan to obtain
money or property from another person through false representations, as
that scheme is described in the Superseding Indictment;
2. That Mr. Kalu knew that the representations that were being made as
part of the scheme were false;
3. That the false representations were material; and
4. That Mr. Kalu knew or could have reasonably anticipated that a person
would use the mails or an interstate private or commercial carrier to
transmit documents relating to the scheme, as set forth in the Superseding
Indictment.
ROA, Vol. 1 at 485.
Mr. Kalu argues the Government was required to prove he acted with the specific
intent to defraud. See United States v. Taylor, 832 F.2d 1187, 1192 (10th Cir. 1987);
United States v. Gamble, 737 F.2d 853, 856 (10th Cir. 1984). He contends intent is an
element of mail fraud whether a defendant is charged with devising a scheme to defraud
or a scheme to obtain money by false pretenses. See United States v. Haber, 251 F.3d
881, 887 (10th Cir. 2001); Tenth Circuit Pattern Jury Instruction No. 2.56.
The Government argues the jury instructions were not erroneous. The Tenth
Circuit indicated in United States v. Cronic, 900 F.2d 1511, 1513 (10th Cir. 1990), that
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§ 1341 establishes two separate if overlapping offenses: a scheme to defraud and a
scheme to obtain money by means of false or fraudulent pretenses, representations, or
promises. The Government contends only the former includes the element of intent to
defraud. Because Mr. Kalu was charged with only the latter, it argues a jury instruction
regarding intent to defraud was unnecessary.
a. The district court erred by failing to instruct on intent to defraud
Mr. Kalu correctly recognizes that intent to defraud is an element of § 1341. The
district court erred by failing to instruct the jury on this element.
The underlying premise of the Government’s argument—that § 1341 contains two
separate offenses with distinct elements—is incorrect. The Supreme Court has clarified
since this court decided Cronic that § 1341 contains a single offense and does not
separately prohibit a “scheme or artifice to defraud” and a scheme or artifice “for
obtaining money or property by means of false or fraudulent pretenses.” See Loughrin v.
United States, 134 S. Ct. 2384, 2391 (2014); Cleveland v. United States, 531 U.S. 12, 25-
26 (2000).11 Our more recent decisions also recognize that § 1341 contains a single
11
Because Tenth Circuit case law previously construed § 1341 to contain two
independent offenses, we wish to explain how that construction has been undermined by
Supreme Court decisions elaborating upon McNally v. United States, 483 U.S. 350, 356-
58 (1987) (superseded by statute on other grounds). McNally examined the history of
§ 1341 and explained that “adding the second phrase simply made it unmistakable that
the statute reached false promises and misrepresentations to the future as well as other
frauds involving money or property.” Id. at 359.
In Cleveland, the Supreme Court rejected the argument “that § 1341, as amended
in 1909, defines two independent offenses: (1) ‘any scheme or artifice to defraud’ and
Continued . . .
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offense, and reiterate that intent to defraud is a necessary element of mail fraud. See
United States v. Zar, No. 13-1111, Slip Op. at 22 (10th Cir. 2015) (observing “Cleveland
. . . effectively overruled Cronic”).
______________________________________
Cont.
(2) ‘any scheme or artifice . . . for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises.’” 531 U.S. at 25-26. The Cleveland
Court invoked McNally, observing that “[w]ere the Government correct that the second
phrase of § 1341 defines a separate offense, the statute would appear to arm federal
prosecutors with power to police false statements in an enormous range of submissions to
state and local authorities.” Id. at 26. It “declin[ed] to attribute to § 1341 a purpose so
encompassing where Congress has not made such a design clear.” Id.
Last year in Loughrin, the Court more strongly emphasized that “despite the word
‘or,’ McNally understood [§ 1341] as setting forth just one offense—using the mails to
advance a scheme to defraud.” 134 S. Ct. at 2391. The Loughrin Court acknowledged
that, in 1984, “every Court of Appeals to have addressed the issue had concluded that the
two relevant phrases of the mail fraud law must be read ‘in the disjunctive’ and
‘construed independently,’” but underscored that “McNally disagreed, eschewing the
most natural reading of the text in favor of evidence it found in the drafting history of the
statute’s money-or-property clause.” Id. It stressed that the McNally Court examined
both phrases in § 1341 and established “the back clarified that the front included certain
conduct, rather than doing independent work.” Id.
In light of Cleveland and Loughrin, our previous precedent indicating § 1341
contains two separate offenses appears untenable. The Government relies on that
precedent to suggest that intent to defraud is only necessary when proving a scheme to
defraud and not necessary when proving a scheme for obtaining money or property by
means of false or fraudulent pretenses, representations, or promises. Although this court
did indicate in Cronic that § 1341 contained two offenses after the Supreme Court
decided McNally—perhaps assuming McNally resolved only the question of how courts
should define “scheme or artifice to defraud”—the Court’s subsequent decisions in
Cleveland and Loughrin underscore that McNally stands for the principle that § 1341
contains only a single offense. Construed as a single offense, it is clear that intent to
defraud is an element of mail fraud under § 1341. See United States v. Zar, No. 13-1111,
Slip Op. at 22 (10th Cir. 2015); United States v. Welch, 327 F.3d 1081, 1104 (10th Cir.
2003).
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In post-Cleveland decisions, we have consistently indicated that specific intent to
defraud is an element of a § 1341 offense. See United States v. Welch, 327 F.3d 1081,
1104 (10th Cir. 2003) (“The elements of federal mail fraud as defined in 18 U.S.C.
§ 1341 are (1) a scheme or artifice to defraud or obtain property by means of false or
fraudulent pretenses, representations, or promises, (2) an intent to defraud, and (3) use of
the mails to execute the scheme.”); see also United States v. Porter, 745 F.3d 1035, 1050
(10th Cir. 2014) (reiterating elements set forth in Welch); United States v. Schuler, 458
F.3d 1148, 1152 (10th Cir. 2006) (same). Even when our decisions construed § 1341 to
contain two offenses, they required specific intent to defraud for each of them. See, e.g.,
United States v. Deters, 184 F.3d 1253, 1257 (10th Cir. 1999) (“The essential elements of
fraud under 18 U.S.C. § 1341 are (1) the devising of a scheme either to (a) defraud or (b)
obtain money through false or fraudulent pretenses, representations, or promises; (2) a
specific intent to defraud; and (3) the use of the United States mails to execute the
scheme.”); see also Haber, 251 F.3d at 887 (same); United States v. Gigot, 147 F.3d
1193, 1196 n.2 (10th Cir. 1998) (same); United States v. Kennedy, 64 F.3d 1465, 1475
(10th Cir. 1995) (same). The list of these essential elements indicates specific intent to
defraud applies to all § 1341 violations.
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The Government does not cite any authority that affirmatively indicates specific
intent to defraud is not a requirement of an “obtaining money or property” offense.12 We
conclude proof of intent to defraud is required for a scheme to obtain money or property,
and the district court erred in failing to include this element in Instruction 17.
b. The error was plain
Having identified error, we determine the error was plain. We measure plain error
at the time of appeal. See United States v. Cordery, 656 F.3d 1103, 1107 (10th Cir.
2011). The Supreme Court’s construction of § 1341 was established long before the
appeal was filed, see, e.g., Cleveland, 531 U.S. at 25-26 (construing the relevant statute in
2000), and our own case law identifying intent as an element of a § 1341 offense
similarly predated the appeal, see, e.g., Welch, 327 F.3d 1104 (listing the elements for the
relevant statute in 2003). Although the Government now argues otherwise, its briefing to
the district court indicated it too understood intent to defraud is an element of § 1341, and
observed “a separate good faith instruction is unnecessary where a district court properly
instructs the jury on the element of intent to defraud,” ROA, Vol. 1 at 381-82, and “the
12
Our case law identifies “an intent to defraud” as the second element of a § 1341
offense. See Porter, 745 F.3d at 1050; Schuler, 458 F.3d at 1152; Welch, 327 F.3d at
1104. Our pattern jury instructions describe this second element as “specific intent to
[defraud] [obtain money or property by false or fraudulent pretenses, representations or
promises].” Tenth Circuit Pattern Jury Instruction 2.56. We note the instructions define
the intent requirements synonymously, specifying that “an ‘intent to [defraud] [obtain
money or property by means of false or fraudulent pretenses, representations, or
promises]’ means an intent to deceive or cheat someone.” Tenth Circuit Pattern Jury
Instruction 2.56. All § 1341 offenses require an intent to defraud.
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United States’ proposed instruction for the element of mail fraud includes the mens rea
element of intent to defraud,” ROA, Vol. 1 at 383. We consider the error plain, and
therefore conclude Mr. Kalu has satisfied the second step of plain error review.
c. The erroneous instruction does not warrant reversal
Having demonstrated plain error, Mr. Kalu must also show the error “affects
substantial rights” and “seriously affects the fairness, integrity or public reputation of
judicial proceedings.” Bedford, 536 F.3d at 1153 (quotations omitted). Mr. Kalu’s
primary defense was that he acted in good faith because he trusted the legal advice of
counsel and relied upon AU to honor its contractual obligations toward the nurses. He
contends the district court rendered that defense irrelevant by not requiring the jury to
find intent to defraud, and that this constituted reversible error. These arguments are
unavailing.
Mr. Kalu has not shown the error affected his substantial rights. “Satisfying the
third prong of plain-error review—that the error affects substantial rights—‘usually
means that the error must have affected the outcome of the district court proceedings.’”
United States v. Gonzalez-Huerta, 403 F.3d 727, 732-33 (10th Cir. 2005) (en banc)
(quoting United States v. Cotton, 535 U.S. 625, 632 (2002)). “To meet this burden, the
appellant must show ‘a reasonable probability that, but for the error claimed, the result of
the proceeding would have been different.’” Id. at 733 (quoting United States v.
Dominguez Benitez, 542 U.S. 74, 82 (2004)). No such probability exists in this case.
-17-
The Tenth Circuit has repeatedly noted that, because fraudulent intent is difficult
to prove with direct evidence, it may be inferred from circumstantial evidence considered
in its totality. See Porter, 745 F.3d 1054; Schuler, 458 F.3d at 1152; Welch, 327 F.3d at
1105; United States v. Trammell, 133 F.3d 1343, 1352 (10th Cir. 1998); United States v.
Prows, 118 F.3d 686, 692 (10th Cir. 1997); Taylor, 832 F.2d at 1192-93.13 “Intent may
be inferred from evidence that the defendant attempted to conceal activity. Intent to
defraud may be inferred from the defendant’s misrepresentations, knowledge of a false
statement as well as whether the defendant profited or converted money to his own use.”
Prows, 118 F.3d at 692 (quoting Kathleen Flavin & Kathleen Corrigan, Eleventh Survey
of White Collar Crime: Mail Fraud and Wire Fraud, 33 Am. Crim. L. Rev. 861, 869-70
(1996) (citations and internal punctuation omitted)).
Here, the record amply demonstrates Mr. Kalu misrepresented the details of the
nurses’ employment and salaries to the nurses and to immigration officials, knew the
statements he was making were false, and profited from the scheme. Emails from Mr.
Kalu indicated he would repay visa, attorney, and transportation fees to the foreign
nationals, and testimony at trial indicated he did not. The foreign nationals testified Mr.
Kalu misled them about who their employer would be, what they would do, and how
much they would be paid. The foreign nationals testified Mr. Kalu was not merely a
13
We note the principle does not relieve the Government of its burden to show
intent, it merely allows the Government to satisfy the burden using inferential evidence.
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middleman, but the primary or only person with whom they interacted who represented
AU. Although Mr. Kalu attempts to blame advice of counsel, the Government presented
testimonial and documentary evidence of Mr. Kalu’s misrepresentations to Ms. Perez and
the government regarding AU, the program for the nurses, and what the foreign nationals
would do and how they would be paid. Because this evidence fully demonstrated intent
for the purposes of a fraud conviction, Mr. Kalu has not shown a reasonable probability
that, but for the error, the outcome of the trial would have been different.
Beyond the evidence, the jury was instructed on the question of Mr. Kalu’s
knowledge and found Mr. Kalu knew the representations were false and that Mr. Kalu did
not act in good faith. On appeal, Mr. Kalu himself acknowledges his false statements
were established at trial. See Aplt. Br. at 22 (“[T]he jury concluded that Mr. Kalu either
was directly responsible for, or aided and abetted, the making of false statements.”).
Because Mr. Kalu does not and cannot demonstrate he satisfies the third step of
plain error review, we affirm the district court.14
2. Constructive Amendment (Instruction 17)
Mr. Kalu next contends the district court’s mail fraud instruction constructively
amended the superseding indictment. Although the indictment alleged Mr. Kalu “devised
14
Mr. Kalu argues that if we reverse any convictions on Counts 1-64—which
encompass the mail fraud convictions—we must also reverse his money laundering
convictions on Counts 65-95. Because we do not reverse any convictions on Counts 1-
64, we do not reach this argument.
-19-
and intended to devise a scheme,” ROA, Vol. 1 at 92, Instruction 17 required the jury to
find only that he “knowingly participated in a scheme or plan to obtain money or
property from another person through false representation,” ROA, Vol. 1 at 485. In
Instruction 18, the court specified that, to convict Mr. Kalu, “it is not necessary that the
Government show that Mr. Kalu created the scheme or plan himself or with others, only
that he purposefully took part in helping to operate the scheme or plan.” ROA, Vol. 1 at
486.
Mr. Kalu observes the grand jury only charged him with devising or intending to
devise a scheme, and contends the district court constructively amended the indictment
by allowing him to be convicted for merely participating in it. “[I]t is a fundamental
precept of federal constitutional law that a court cannot permit a defendant to be tried on
charges that are not made in the indictment.” Hunter v. New Mexico, 916 F.2d 595, 598
(10th Cir. 1990) (quotations omitted). A court constructively amends the indictment “if
the evidence presented at trial and the instructions raise the possibility that a defendant
may have been convicted on a charge other than that alleged in the Indictment.” Davis,
55 F.3d at 520-21. We have identified two dangers of constructive indictments: (1) the
defendant must answer a charge that had not been brought by a grand jury, and (2) the
defendant is denied sufficient notice to present and prepare an adequate defense. See
Hunter, 916 F.2d at 599.
We conclude the district court did not constructively amend the indictment and did
not err in its instruction. In this instance, the jury instructions reflected the charges in the
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superseding indictment. The indictment, like the mail fraud statute, referred to Mr.
Kalu’s “having devised or intending to devise” a scheme, while the jury was instructed it
could find him guilty if he “knowingly participated” in the scheme. Because the Tenth
Circuit has construed the phrase “devised or intending to devise” to include knowing
participation in a scheme, Mr. Kalu has not shown the district court broadened the charge
in the indictment. “[U]nder well-established Tenth Circuit precedent a defendant may be
convicted under [§ 1341] if the government shows that the defendant joined a scheme
devised by someone else, as long as the defendant possessed the intent to defraud.”
Prows, 118 F.3d at 692; see also United States v. Washita Constr. Co., 789 F.2d 809, 817
(10th Cir. 1986); Gamble, 737 F.2d at 856; United States v. Gann, 718 F.2d 1502, 1505
(10th Cir. 1983) (holding a defendant “may be convicted of mail fraud if he knowingly
and willfully participates in a fraudulent scheme created and set in motion by others”).15
The use of the term “knowingly participated” instead of “devised or intended to
devise” did not alter any of the essential elements of a § 1341 offense,16 nor did it
15
Prows, Washita Construction, and Gamble suggest the defendant may be
convicted for participation in a scheme under § 1341 if they have the intent to defraud.
Gann, however, merely references knowing and willful participation in a scheme. As
discussed above, the evidence at trial would support conviction as a participant in a
scheme under either the intent or knowledge standard.
16
As noted above, the relevant elements are “(1) a scheme or artifice to defraud or
obtain property by means of false or fraudulent pretenses, representations, or promises,
(2) an intent to defraud, and (3) use of the mails to execute the scheme.” Welch, 327 F.3d
at 1104. Whether a person devises or participates in the scheme is not an element of the
offense.
-21-
prejudice Mr. Kalu’s defense at trial. The superseding indictment specified how Mr.
Kalu participated in the scheme in its description of the mail fraud offense, detailing the
precise acts at issue.17 All of these acts were based on Mr. Kalu’s participation, and none
were based on Mr. Kalu having devised or intended to devise the scheme. In light of our
precedent and the superseding indictment, Mr. Kalu has not demonstrated “the evidence
presented at trial and the instructions raise the possibility that [he] may have been
convicted on a charge other than that alleged in the Indictment.” Davis, 55 F.3d at 520-
21; see United States v. Farr, 536 F.3d 1174, 1180 (10th Cir. 2008) (citing United States
v. Miller, 471 U.S. 130, 144 (1985)).
Because Mr. Kalu has not demonstrated that the district court constructively
amended the indictment, we do not identify any error. We conclude the district court’s
instructions were proper. We need not proceed to the remaining steps of plain error
review.
3. Knowledge or Reckless Disregard (Instruction 23)
Mr. Kalu alleges the jury instructions misstated the necessary mens rea for
encouraging or inducing an alien. Mr. Kalu was convicted under 8 U.S.C. § 1324, which
states in relevant part that if a person “encourages or induces an alien to come to, enter,
or reside in the United States, knowing or in reckless disregard of the fact that such
17
The indictment also charged the defendant with aiding and abetting, putting Mr.
Kalu on notice that he could be criminally liable for participation in the scheme. Zar, No.
13-1111, Slip Op. at 25.
-22-
coming to, entry, or residence is or will be in violation of law,” and does so “for the
purpose of commercial advantage or private financial gain,” that person shall be fined,
imprisoned for up to 10 years, or both. 8 U.S.C. § 1324(a)(1)(A)(iv), (a)(1)(B)(i). The
superseding indictment charged Mr. Kalu in accordance with the statute, indicating he
did encourage and induce the aliens identified below to come to, enter, and
reside in the United States, knowing and in reckless disregard of the fact
that such coming to, entry, and residence was or would be in violation of
the law, and for the purpose of commercial advantage and private financial
gain.
ROA, Vol. 1 at 97.
The district court did not instruct the jury with the knowledge or recklessness
standard used in the statute and indictment. Instead, Instruction 23 used a knowledge or
negligence standard, and indicated the evidence must show that “Mr. Kalu knew or
should have known that the person’s entry into or residence in the United States would be
in violation of the law.” Id. at 492. In Instruction 24, the court clarified that “[i]n
determining whether the Government has proven that Mr. Kalu ‘knew or should have
known’ that a person’s entry into or residence in the United States would be contrary to
law,” the jury should consider Instruction 19, which defined what it means to act
“knowingly” and explained the good faith defense. Id. at 493. It also defined “should
have known,” noting “[a] person ‘should have known’ of a fact if that person knew of
circumstances that would lead a reasonable person to conduct a further inquiry into a
matter, and such further inquiry, had it been conducted, would reasonably have resulted
in the person learning of the fact.” Id. at 493.
-23-
Mr. Kalu contends the “should have known” instruction was insufficient and
inconsistent with the statute, our pattern instructions, and the instruction proposed by the
Government. See Tenth Circuit Pattern Jury Instructions 2.03, 2.04. Mr. Kalu contends
that a mens rea of knowledge or recklessness is an element of the crime charged, and the
jury instructions allowed him to be convicted on a negligence standard. Uresti-
Hernandez, 968 F.2d at 1045-46. The Government disagrees, and argues that because the
statute does not define the words “reckless disregard,” it is sufficient that a defendant is
merely “aware of” the alien’s status and acted willfully in furtherance of the alien’s
violation. See United States v. Franco-Lopez, 687 F.3d 1222, 1226-27 (10th Cir. 2012).
The Government contends the district court’s instruction was not plainly erroneous.
a. The district court erred by instructing the jury with a “should have known”
standard
We conclude Mr. Kalu is correct that the district court erred by instructing the jury
with a negligence standard rather than the actual knowledge or reckless disregard
standard specified in the statute. A finding of “actual knowledge or reckless disregard” is
an element of a § 1324 offense. Demonstrating Mr. Kalu “should have known” of the
foreign nationals’ status, which is equivalent to a negligence standard, does not suffice
under the statutory text, our case law, or the case law in other circuits.
First, we note the statute itself specifies the encouragement or inducement at issue
must be “knowing or in reckless disregard of the fact that such coming to, entry, or
-24-
residence is or will be in violation of law.” 8 U.S.C. § 1324(a)(1)(A)(iv). The only mens
rea specified is knowledge or recklessness—not negligence.
Second, the Tenth Circuit has not suggested a violation of § 1324 is established by
anything less than knowledge or reckless disregard. The case cited by the Government—
Franco-Lopez—relied on the Tenth Circuit’s en banc decision in United States v.
Barajas-Chavez, which said a determination “that the defendant was aware of the alien’s
status” and “that the defendant acted willfully in furtherance of the alien’s violation of the
law” were both elements of § 1324(a)(1)(A)(ii). 162 F.3d 1285, 1287 (10th Cir. 1999)
(en banc) (quotations omitted).18 The Government suggests the term “aware of” is
ambiguous and could permit a “should have known” mens rea, but neither Barajas-
Chavez nor the decisions it cites are ambiguous about the required mens rea. In Barajas-
Chavez, the court made clear that “[t]he statute requires that a defendant know or act in
reckless disregard of the fact that an individual is an illegal alien, and that defendant’s
transportation or movement of the alien will help, advance, or promote the alien’s illegal
entry or continued illegal presence in the United States.” 162 F.3d at 1288.
The decisions from the Fifth, Seventh, and Eighth Circuits that are cited by
Barajas-Chavez are similarly clear. See Barajas-Chavez, 162 F.3d at 1287 (citing United
18
Barajas-Chavez, 162 F.3d 1285, and Franco-Lopez, 687 F.3d 1222, dealt with
other forms of bringing in and harboring foreign nationals prohibited under related
subsections of § 1324. Because §§ 1324(a)(1)(A)(ii)-(iv) all contain an identical “actual
knowledge or in reckless disregard of the fact” element, however, we consider these
cases instructive when construing that element of § 1324(a)(1)(A)(iv).
-25-
States v. Parmelee, 42 F.3d 387, 391 (7th Cir. 1994); United States v. Diaz, 936 F.2d 786,
788 (5th Cir. 1991); United States v. Hernandez, 913 F.2d 568, 569 (8th Cir. 1990)). All
of these decisions required a determination the defendant acted knowingly or recklessly.
See Parmelee, 42 F.3d at 391 (“[W]e hold that a defendant’s guilty knowledge that his
transportation activity furthers an alien’s illegal presence in the United States is an
essential element of the crime stated in [§ 1324].”); Diaz, 936 F.2d at 788 (“The alien’s
status is an essential element, as is the defendant’s knowledge of the illegal status and her
knowing and intentional furtherance of the violation of the law by the alien.” (citations
omitted)); Hernandez, 913 F.2d at 569 (identifying “four elements to show a violation” of
§ 1324, including that “the alien was in the United States in violation of the law,” “this
was known to defendant,” and “the defendant acted willfully in furtherance of the alien’s
violation of the law”).19 Any ambiguity is further clarified by the Tenth Circuit pattern
jury instructions for § 1324(a)(1)(A)(ii), which include as an element that “the defendant
knew, or recklessly disregarded the fact, that [name of alien] was not lawfully in the
United States.” Tenth Circuit Pattern Jury Instruction 2.03; see also Tenth Circuit Pattern
19
Only the Fifth Circuit’s decision specifically referred to the defendant being
“aware of” the foreign national’s status, and it clarified that knowledge of unlawful status
and knowing and intentional furtherance of the violation were both essential elements of
the offense. See Diaz, 936 F.2d at 788.
-26-
Jury Instruction 2.04 (requiring knowledge or reckless disregard under
§ 1324(a)(1)(A)(iii)).20
Third, the other cases the Government cites require a similar showing of
knowledge or reckless disregard. The Government misreads United States v. Kendrick,
which did not use an “aware of” standard divorced from the proper mens rea. See 682
F.3d 974, 984 (10th Cir. 2012) (specifying “the government must prove beyond a
reasonable doubt that the defendant . . . knew or recklessly disregarded the fact that the
alien had not received prior official authorization to come to or enter the United States,”
and explaining that “[t]o act with ‘reckless disregard’ means to be aware of, but
consciously and carelessly ignore, facts and circumstances clearly indicating that the
person transported was an alien who had entered or remained in the United States in
violation of law” (quotations omitted)). Other decisions that use the “aware of” language
unambiguously require that a defendant know or act with reckless disregard. See, e.g.,
United States v. Guerrero-Damian, 241 F. App’x 171, 173 (4th Cir. 2007) (unpublished)
(citing Barajas-Chavez but reviewing whether the defendant “knew or acted with
reckless disregard of the fact that the aliens were in the country illegally”); United States
20
The Tenth Circuit does not have pattern jury instructions for the specific
subsection at issue, § 1324(a)(1)(A)(iv). The pattern instruction for § 1324(a)(1)(A)(ii),
which prohibits other forms of bringing in and harboring foreign nationals under the
same statute, specifically states that “‘[r]eckless disregard’ means deliberate indifference
to facts which, if considered and weighed in a reasonable manner, indicate the highest
probability that the alleged aliens were in fact aliens and were in the United States
unlawfully.” Tenth Circuit Pattern Jury Instruction 2.03.
-27-
v. Williams, 132 F.3d 1055, 1059 (5th Cir. 1998) (“The defendant’s knowledge of the
alien’s illegal status is an essential element of the offense.”). The Government cites no
authority suggesting the use of the term “aware of” allows the prosecution to satisfy the
essential elements of the offense by demonstrating a defendant “should have known” an
alien’s entry or residence would be illegal.
The statute, our decision in Barajas-Chavez, and case law from other circuits do
not support the contention that a defendant acts in “knowing or in reckless disregard of
the fact[s]” when they merely “should have known” an alien’s coming to, entry, or
residence in the United States is illegal. The phrase “aware of” in our precedents is not
satisfied by showing Mr. Kalu “should have known” the aliens’ coming to, entry, or
residence in the United States would be illegal. Under the jury instructions provided by
the district court, the jury was allowed to convict Mr. Kalu under a less demanding mens
rea than contained in the statute—negligence rather than knowledge or recklessness—and
that constituted error.
b. The error was plain
In light of the consistent use of a knowledge or recklessness mens rea in the
statute, our case law, and the case law of other circuits—and in the absence of any
authority suggesting a negligence standard would suffice—we consider the error in this
instance plain. The instructions did not “correctly state the governing law,” and the error
was “clear or obvious under current law.” United States v. Bader, 678 F.3d 858, 868
-28-
(10th Cir. 2012) (quotations omitted). We thus proceed to the remaining steps of plain
error review.
c. The erroneous instruction does not warrant reversal
Having determined that the district court plainly erred, we must determine whether
the error affected Mr. Kalu’s substantial rights or seriously affected the fairness, integrity,
or public reputation of the proceedings. We do not believe Mr. Kalu has made this
showing and thus do not consider the error reversible under plain error review.
The erroneous jury instruction does not satisfy the third element of plain error
review because there is not “a reasonable probability that the error affected the outcome
of the trial.” Id. (quotations omitted). Mr. Kalu has not demonstrated a reasonable
probability that the outcome would have been different if the jury had been required to
find Mr. Kalu acted with knowledge or in reckless disregard of the foreign nationals’
illegal entry or residence. The prosecution presented substantial evidence of Mr. Kalu’s
actual knowledge at trial.
The evidence demonstrated Mr. Kalu knew the nurses’ immigration status, advised
them in the visa process and their interactions with immigration officials, and coordinated
their transportation into the United States. It showed he was informed of the
requirements for the nurses to lawfully obtain an H-1B visa and the conditions he needed
to satisfy for their entry and presence in the United States to be legal. Finally, the
evidence revealed Mr. Kalu actively concealed from his attorney aspects of the foreign
nationals’ proposed employment that would have disqualified them from entering the
-29-
country. Mr. Kalu was not a peripheral player in the fraud. He oversaw every step of the
process before, during, and after the foreign nationals’ entry into the United States. This
is not a case where a defendant “had a plausible defense to the charges against him
primarily because of his professed lack of knowledge and alleged detachment from the
process of hiring the workers in question and verifying their immigration status.” De
Oliveira v. United States, No. 5:09-CR-50035, 2014 WL 2873888, at *7 (W.D. Ark. June
24, 2014).21 Because the evidence demonstrated Mr. Kalu had actual knowledge that the
foreign nationals’ entry into or residence in the United States would violate the law, the
error did not affect his substantial rights.
Mr. Kalu has not demonstrated a reasonable probability that the plain error in
Instruction 23 affected the outcome of his trial. We therefore conclude Mr. Kalu has not
satisfied the third step of plain error review and affirm the district court.
4. Threat of Serious Harm (Instruction 31)
Mr. Kalu further argues the jury instructions incorrectly defined “serious harm,”
thereby lowering the threshold for a forced labor conviction. Mr. Kalu was convicted
under the forced labor statute, which prohibits knowingly providing or obtaining labor or
services by a variety of means, including “serious harm or threats of serious harm.” 18
U.S.C. § 1589(a). The statute defines “serious harm” to include
21
In De Oliveira, the defendant admitted he “should have known” foreign
nationals were unlawfully present in the country, and the court said this did not meet the
statutory standard of actual knowledge or reckless disregard. 2014 WL 2873888, at *6.
-30-
any harm, whether physical or nonphysical, including psychological,
financial, or reputational harm, that is sufficiently serious, under all the
surrounding circumstances, to compel a reasonable person of the same
background and in the same circumstances to perform or to continue
performing labor or services in order to avoid incurring that harm.
18 U.S.C. § 1589(c)(2) (emphasis added). The superseding indictment charged Mr. Kalu
in accordance with the statute.
Mr. Kalu argues the district court erred by defining “serious harm” in such a way
that it encompassed acts that caused, rather than compelled, the nurses to continue
performing labor to avoid incurring harm. Instruction 31 defined “serious harm” as
any harm, whether physical or nonphysical, including psychological,
financial, or reputational harm, that is sufficiently serious, under all the
surrounding circumstances, to cause a reasonable person of the same
background and in the same circumstances to perform or to continue
performing labor or services in order to avoid incurring that harm.
ROA, Vol. 1 at 500 (emphasis added).
Mr. Kalu argues the district court plainly erred by failing to instruct the jury he
could only be found guilty under the forced labor statute if his threats compelled—rather
than caused—the nurses to provide labor involuntarily. Mr. Kalu contends that the
definition of “compel” is narrower than the definition of “cause,” and that the error
allowed the jury to convict Mr. Kalu without requiring the Government to prove each
element of forced labor beyond a reasonable doubt.
The Government argues the jury instructions on the forced labor counts were not
plainly erroneous. It urges us to consider Instruction 32, which generally advised the jury
that, to determine whether labor or services were provided “involuntarily,” they should
-31-
consider whether “as a result of Mr. Kalu’s use of the unlawful means discussed above,
the person named in the count continued to provide labor or services where, if Mr. Kalu
had not resorted to those unlawful means, the person would have declined to perform
additional labor or services.” ROA, Vol. 1 at 501. Instruction 32 also directed the jury to
consider all of the surrounding circumstances when determining whether the nurses
“chose to perform the labor or services voluntarily or involuntarily,” whether they were
“compelled to keep working,” and whether they provided labor or services
“involuntarily.” Id. The Government argues any distinction between the terms “compel”
and “cause” did not undermine Mr. Kalu’s defense because the jury was still required to
find that the nurses would not have performed the labor and services in the absence of
Mr. Kalu’s threats and other unlawful means. See id. It maintains that, in light of the
instructions as a whole, any potential distinction between causing and compelling would
be a distinction without a difference.
We conclude Mr. Kalu has not demonstrated the district court erred in its
instruction. First, Mr. Kalu does not cite any authority indicating that harm that “causes”
but does not “compel” a person to provide labor falls short of a violation of § 1589. His
cited authorities repeat the definition of “serious harm” contained in the statute, including
the word “compel,” but do not suggest that inflicting harm sufficiently serious to “cause”
a person to continue performing labor would fall short of that standard. See, e.g., United
States v. Dann, 652 F.3d 1160, 1169-70 (9th Cir. 2011) (paraphrasing the statutory
definition of “serious harm” without discussing whether compulsion and causation
-32-
differ); Garcia v. Curtright, No. 6:11-06407-HO, 2012 WL 1831865, at 3-4 (D. Or. May
17, 2012) (unpublished). Indeed, one of Mr. Kalu’s authorities uses causation language
to define a violation of § 1589. David v. Signal Int’l, LLC, No. 08-1220, 2012 WL
10759668, at *19 (E.D. La., Jan. 4, 2012) (determining “the concept of . . . forced labor
turns on whether the victim rendered labor because of the verboten physical force or legal
coercion” (emphasis added)).
The evidence at trial demonstrated Mr. Kalu repeatedly threatened the foreign
nationals with legal action, revocation of their visas, deportation, and financial ruin, and
some individuals testified he put them in fear of physical harm. These are precisely the
types of threats that could “compel a reasonable person of the same background and in
the same circumstances to perform or to continue performing labor or services in order to
avoid incurring that harm. 18 U.S.C. § 1589(c)(2). Mr. Kalu does not cite any authority
suggesting that “causing” and “compelling” are materially different in this context or that
“causing” someone to provide labor by means of physical or nonphysical harm is
permissible under the statute while “compelling” someone is not.
Second, the jury instructions as a whole are not erroneous. Instruction 32 advised
the jury to consider whether “as a result of Mr. Kalu’s use of the unlawful means
described above, the person named in the count continued to provide labor or services
where, if Mr. Kalu had not resorted to those unlawful means, the person would have
declined to perform additional labor or services,” and encouraged the jury to “consider
all of the attendant circumstances in determining whether the person chose to perform the
-33-
labor or services voluntarily or involuntarily.” ROA, Vol. 1 at 501. Although these
instructions were given to aid the jury in determining “whether the Government has
proven that ‘because of Mr. Kalu’s actions, the person named in the count provided that
labor or services involuntarily,’” id., and although the latter phrase was never included in
any other instruction, the inclusion of the involuntariness instruction adds to the overall
message in the instructions that the jury had to determine Mr. Kalu’s threats of harm were
sufficiently serious to compel the nurses’ labor.
This ends the inquiry. Mr. Kalu bears the burden of demonstrating error and
showing that error is plain. He has not demonstrated the use of the word “cause” instead
of “compel” when defining “serious harm” was erroneous, much less plainly erroneous,
and his argument accordingly fails.
B. Restitution
Mr. Kalu challenges the $3,790,338.55 restitution award as based on improper
methodology and inadequate evidence.22
22
The Government argues Mr. Kalu did not raise his precise objection before the
district court and contends the proper standard of review is plain error. The record shows
Mr. Kalu objected to the calculation of the restitution award and the documentation used
to support it. ROA, Vol. 4 at 2803-04 (“[T]he nurses who spent four weeks in trial this
past summer alleging that the contract with Mr. Kalu was fake or a sham now want
specific performance under the contract. . . . I don’t believe that’s the kind of lost wages
contemplated by the restitution statute.”); id. at 2804-05 (“And by my count, there are
only two pieces of supporting evidence. . . . Everything else is a restitution—a victim
impact statement where a victim involved in the case says, I believe I’m entitled to X, Y,
and Z. But there is nothing to back it up. It’s just a statement of what they want, what
they feel they’re entitled to, but no receipts or anything of that nature to back up the
Continued . . .
-34-
“We review the district court’s application of the [Mandatory Victims Restitution
Act (“MVRA”)] de novo, review its factual findings for clear error, and review the
amount of restitution awarded for abuse of discretion.” United States v. Gallant, 537
F.3d 1202, 1247 (10th Cir. 2008); see United States v. Shengyang Zhou, 717 F.3d 1139,
1152 (10th Cir. 2013). “[A] district court may not order restitution in an amount that
exceeds the actual loss caused by the defendant’s conduct, which would amount to an
illegal sentence constituting plain error.” United States v. James, 564 F.3d 1237, 1243
(10th Cir. 2009).
The MVRA instructs sentencing courts to order restitution to victims of
“offense[s] against property . . . committed by fraud or deceit” without considering the
economic circumstances of the defendant. 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii);
3664(f)(1)(A). The Government bears the burden of proving the amount of loss by a
preponderance of the evidence. 18 U.S.C. § 3664(e); Gallant, 537 F.3d at 1247. The
MVRA does not require “absolute precision,” id. at 1252, but losses cannot be
“speculative,” United States v. Serawop, 505 F.3d 1112, 1123 (10th Cir. 2007).
The district court awarded restitution to the nurses based on the AU job offer in
the H-1B petitions, which offered them three-year positions with an annual salary of
______________________________________
Cont.
claim.”). We believe these objections suffice to call the district court’s methodology into
question and opt to review the restitution award.
-35-
$72,000. The court calculated the nurses’ loss by identifying the salaries Mr. Kalu
promised to pay them and subtracting the money they actually made from their
employment during that period. As the court noted, the restitution awarded is therefore
“not an enforcement of the contract,” but “a loss created by false representation.” ROA,
Vol. 4 at 2882. Using this formula, the district court arrived at a total restitution figure of
$3,790,338.55.
Mr. Kalu argues the restitution award is faulty for two reasons. First, the $72,000
figure in the AU employment offer differed from the representation on Mr. Kalu’s
website, which said the nurses could earn up to $72,000 per year based on earning
$20/hour plus $30/hour for overtime beyond a 40 hour workweek. Many of the nurses
indicated they had been told they would be paid $20/hour in their direct communications
with Mr. Kalu. Mr. Kalu argues the nurses were only promised up to $72,000, not
guaranteed $72,000. Second, the court’s restitution calculation assumed each of the 26
nurses in question would have worked for the full three years of their proposed
employment, when the evidence presented at trial suggested many nurses would not work
for that duration. Mr. Kalu argues the case should be remanded for the district court to
enter a non-speculative restitution award.
We conclude the district court did not abuse its discretion in calculating
restitution. “A sentencing court may resolve restitution uncertainties with a view towards
achieving fairness to the victim, so long as it still makes a reasonable determination of
appropriate restitution rooted in a calculation of loss.” Gallant, 537 F.3d at 1252
-36-
(quotations omitted). We have therefore said that “in the case of fraud or theft, the loss
need not be determined with precision. The court need only make a reasonable estimate
of the loss, given the information available.” Id. (quotations omitted).
First, Mr. Kalu’s argument that some of his victims did not expect to make
$72,000 per year is unpersuasive. Disputes over the amount of restitution are resolved by
a preponderance of the evidence, and the Government carries the burden of showing the
amount of loss sustained by the victim as a result of the offense. The Government
demonstrated Mr. Kalu made affirmative representations that he would pay the nurses
$72,000 per year for three years, and those representations—filed in the form of visa
applications—provide clear and objective evidence of the promised value of the
employment. As the district court noted at the conclusion of its evidentiary hearing to
determine the proper amount of restitution, Mr. Kalu failed to present a better alternative
mechanism for calculating actual loss.23 Of the evidence presented at trial, the loss
created by false representation provides the most “reasonable estimate of the loss, given
the information available.” Gallant, 537 F.3d at 1252 (quotations omitted).
23
In district court, Mr. Kalu proposed as an alternative that foreign nationals could
show actual loss only “if they can make the argument that they were out of work, that
they had some other employment opportunity, and that Mr. Kalu was the cause of them
not being able to take advantage of that other opportunity.” ROA, Vol. 4 at 2864-65.
Like the district court, we fail to see how this provides a better calculation of actual loss.
It does not account for the promises Mr. Kalu made to induce the foreign nationals to
spend considerable sums of money, uproot themselves, and come to the United States,
nor does it recognize how the H-1B visa he arranged restricted the foreign nationals’
mobility and employment opportunities.
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Moreover, subsequent communications regarding salary expectations are
irrelevant if the Government demonstrates the visa applications promised to pay a salary
of $72,000 and this promise was necessary to secure the H-1B visas that allowed the
nurses to enter the United States and work for Mr. Kalu. The Tenth Circuit recently
reiterated “the principal aim of such restitution is to ensure that crime victims, to the
extent possible, are made whole for their losses,” and that “[t]his means restoring victims
to the position they occupied before the crime.” United States v. Ferdman, 779 F.3d
1129, 1132 (10th Cir. 2015). Whether Mr. Kalu had previously promised victims only
$20/hour ceased to be relevant when he filed visa paperwork promising them $72,000
annually in an employment period extending up to three years, as required under federal
law. Once the applications were submitted and the visas were granted, the nurses had
been promised that salary by Mr. Kalu and had a legitimate expectation they would
receive it. The district court did not abuse its discretion by determining that “restoring
victims to the position they occupied before the crime” required paying them the salary
on which their entry into the United States and subsequent employment was premised.
Id.24
24
The district court subtracted the amount the nurses actually earned from these
damages, which produced a calculation of actual loss that distinguishes this case from
instances of double recovery or expectation damages unanchored in actual loss. See, e.g.,
Ferdman, 779 F.3d 1129; United States v. Frazier, 651 F.3d 899, 905 (8th Cir. 2011);
United States v. Boccagna, 450 F.3d 107, 109 (2d Cir. 2006).
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Second, Mr. Kalu’s argument that some of the nurses inevitably would not have
worked the full three years under the scheme is unpersuasive. Mr. Kalu suggests it is
probable some nurses would not have worked the full three years. But he does not
indicate how we could determine if the award given by the district court exceeds the
calculation of “actual loss,” and does not explain how we could know which of the nurses
would have terminated their employment early and adjust the restitution they receive
accordingly. Indeed, testimony at trial established that many of the nurses terminated
their employment precisely because Mr. Kalu reneged on his promises. Without
evidence presented to the district court demonstrating that particular nurses would have
worked less than the promised three years even if Mr. Kalu had upheld his end of the
bargain, the district court was within its discretion to award the amount of loss created by
false representation less the amount of income actually earned.25 We therefore conclude
the restitution award was proper.
25
In Serawop this court affirmed a restitution award in the amount of the potential
earning capacity of a deceased three-year-old child, and held “that the district court
exercised its ‘abundant discretion’ when it crafted a restitution order to include the lost
income.” 505 F.3d at 1124; see also United States v. Oslund, 453 F.3d 1048, 1062-63
(10th Cir. 2006) (determining lost future income may be included in a restitution order).
Mr. Kalu suggests the district court’s determination that the women would work for the
full three years was speculative, but Serawop clearly demonstrates that reasoned
forecasting is permissible in the restitution context so long as the award does not exceed
the calculation of actual loss. Gallant, 537 F.3d at 1247; see also United States v.
Ahidley, 486 F.3d 1184, 1189 (10th Cir. 2007) (recognizing that, in calculating
restitution, “courts are permitted to draw inferences from the totality of the circumstances
through an exercise of logical and probabilistic reasoning” (quotations omitted)).
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III. CONCLUSION
For the foregoing reasons, we affirm Mr. Kalu’s convictions and the amount of
restitution awarded by the district court.
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