United States v. David Shulick

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
Nos. 18-3305 & 19-1011
______
UNITED STATES OF AMERICA
v.
DAVID T. SHULICK,
Appellant
______
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D. C. No. 2-16-cr-00428-001)
District Judge: Honorable Harvey Bartle, III
______
Argued December 10, 2020
Before: MCKEE, PORTER and FISHER, Circuit Judges.
(Filed: April 13, 2021)
Hope C. Lefeber
Suite 1205
1500 John F. Kennedy Boulevard
Two Penn Center Plaza
Philadelphia, PA 19102
Lisa A. Mathewson [ARGUED]
Meredith A. Lowry
Suite 1320
123 South Broad Street
Philadelphia, PA 19109
Counsel for Appellant
Christopher J. Mannion
Michael T. Donovan
William M. McSwain
Robert A. Zauzmer [ARGUED]
Office of United States Attorney
615 Chestnut Street
Suite 1250
Philadelphia, PA 19106
Counsel for Appellee
______
OPINION OF THE COURT
______
FISHER, Circuit Judge.
Lawyer and businessman David Shulick owned a for-
profit education company through which he contracted with
the School District of Philadelphia to run its Southwest School,
an institution designed to help some of Philadelphia’s most at-
risk children. Under the contract, Shulick received over $2
million to provide teachers, counselors, security, and special
services to the charter school’s students. But instead of
spending the money on the students as the contract required,
2
he embezzled funds for his personal benefit and the benefit of
his co-conspirator, Chaka Fattah, Jr. After a complex, multi-
year fraud investigation, Shulick was ultimately charged and
convicted. He now appeals, alleging a number of errors,
ranging from speedy trial right violations to errors in
evidentiary rulings, faulty jury instructions, and sentencing
miscalculations. After careful review of each claim, we
conclude there was no reversible error in the proceedings and
will therefore affirm.
Shulick owned and operated Delaware Valley High
School Management Corporation (DVHS), a for-profit
business which provided alternative education to at-risk
students. DVHS’s business model was to contract with school
districts to handle the operation of their schools.
One of those school districts was the School District of
Philadelphia. In early 2010, the School District hired and
signed a contract with DVHS and Shulick to operate its
Southwest School in Philadelphia, an institution serving at-risk
high school students with attendance, behavioral, emotional,
and familial issues, including some who had dropped out of
school entirely. The contract provided that DVHS would
operate Southwest for the 2010-2011 and 2011-2012 school
years. The School District set forth a high-level plan for
Southwest, dictating the number of students enrolled at the
school and the services to be provided to them. Specifically,
DVHS had to provide (1) six teachers at a cost of $45,000 each;
(2) benefits for the staff at a total cost of $170,000 per year; (3)
four security workers totaling $130,000 per year; and (4) a
trained counselor and two psychology externs totaling
$110,000 per year. The agreement was not flexible as to
3
budgeted items. In a provision titled “Budget,” it required
DVHS to “carry out the Work and bill the School District
strictly in conformity with the Contractor’s Budget.” App.
4847. Within these parameters, DVHS and Shulick had
authority to manage and run the school. Shulick could
implement a curriculum and program and could hire and fire
staff as he saw fit.
Despite the contract’s clear requirements, Shulick failed
to provide the services and staff he agreed to. He failed to
employ the dedicated security personnel the contract required.
He hired fewer teachers, provided those whom he did hire with
far fewer benefits than the budget allocated, and paid his
educators salaries of only $36,000 a year—$9,000 less than
promised. Shulick then reduced their salaries even further if
they elected health insurance. He even attempted to lay off
teachers at the end of the school year to avoid paying them the
final few months of their salaries. Overall, Shulick represented
to the School District that he would spend $850,000 on salary
and benefits each year but spent under half of that: about
$396,000 in 2010-11 and about $356,000 in 2011-12. In all, of
the over $2 million in funds he received, he spent only
$1,186,001 on expenditures designated for Southwest.
Shulick’s failure to spend these funds on Southwest was
part of an elaborate conspiracy to embezzle money. Shulick
directed the unspent funds to co-conspirator Chaka Fattah, Jr.,
an employee and confidante of Shulick and the son of former
U.S. Representative Chaka Fattah, Sr. The two agreed that
Fattah, Jr. would use the funds to pay off various liabilities
incurred across Shulick’s business ventures, while also
keeping a cut of the embezzled money for himself.
At Shulick’s trial, a number of former DVHS
employees testified to the harmful effects this scheme had.
4
Teachers explained that students dealing with abuse, addiction,
trouble with the law, and other personal and familial hardships
never received access to the counseling assistance Shulick
promised to provide. Without security staff on site, teachers
had to attempt to keep the children safe while also educating
them. Some employees confronted Shulick about his failure to
pay for these services for Southwest’s students. He would lie
and direct his staff to misrepresent and misreport to cover up
his fraud.
After a multi-year investigation, Shulick was indicted
on October 11, 2016. He was charged with conspiring with
Fattah, Jr. to embezzle from a program receiving federal funds
(18 U.S.C. § 371); embezzling funds from a federally funded
program (18 U.S.C. § 666(a)(1)(A)); wire fraud (18 U.S.C. §
1343); bank fraud (18 U.S.C. § 1344); making a false statement
to a bank (18 U.S.C. § 1014); and three counts of filing false
tax returns (26 U.S.C. § 7206(1)). He was arraigned on October
13, 2016. The wire fraud charges were subsequently dropped.
A year later, Shulick moved to dismiss the indictment,
asserting his speedy trial rights. The District Court denied his
motion (and later, renewed motions), and the case ultimately
went to trial. Following a three-week trial, a jury convicted him
on May 8, 2018 on all charges.
On the conspiracy, federal program embezzlement,
bank fraud, and false statement counts, Shulick was sentenced
to 60 months’ imprisonment and three years’ supervised
release. On the three tax fraud convictions, Shulick was
sentenced to 20 months for each count, to be served
consecutively to each other but concurrently with the sentence
on the other convictions, plus a year of supervised release. The
District Court also imposed two fines of $20,000 each and a
5
special assessment of $700. It ordered restitution of $759,735
to the School District and $5,000 to PNC Bank.
1
Shulick appeals, asserting several theories to challenge
his conviction and sentence. After careful consideration, we
reject each.
Shulick first argues his conviction must be reversed
because the District Court violated his constitutional and
statutory rights to a speedy trial. The Sixth Amendment
guarantees “the right to a speedy . . . trial.” U.S. Const. amend.
VI. To effectuate this constitutional guarantee, Congress
enacted the Speedy Trial Act, 18 U.S.C. § 3161 et seq., which
“set[s] specified time limits . . . within which criminal trials
must be commenced.” United States v. Williams, 917 F.3d 195,
199 (3d Cir. 2019) (quoting United States v. Rivera Constr.
Co., 863 F.2d 293, 295 (3d Cir. 1988)).
The Speedy Trial Act requires that trial begin within 70
days of indictment or initial appearance, whichever occurs
later. 18 U.S.C. § 3161(c)(1). However, certain periods of time
may be excluded, including when a judge grants a continuance
“on the basis of his findings that the ends of justice served by
[the continuance] outweigh the best interest of the public and
the defendant in a speedy trial.” 18 U.S.C. § 3161(h)(7)(A).
1
The district court had jurisdiction pursuant to 18
U.S.C. § 3231. We have jurisdiction under 28 U.S.C. § 1291 to
review its final order of conviction, and under 18 U.S.C. § 3742to review the sentence.
6
In August 2017, as trial preparation was drawing to a
close, the Government discovered that years before, during its
lengthy investigation, one of the servers seized from DVHS
had been filed under the wrong case number. Instead of being
filed with the investigation into Shulick and Fattah, Jr.’s
conspiracy, the server was mistakenly filed with a separate,
unrelated investigation into former Congressman Chaka
Fattah, Sr. On realizing this mistake, the Government promptly
informed the District Court and made an untimely production
of 1.5 million pages of documents and 900,000 emails. It
declined, however, to voluntarily dismiss the indictment.
Shulick, invoking the Speedy Trial Act, moved to
dismiss the indictment. The District Court denied his motion,
saying it was only speculation that the remaining 64 days on
the 70-day clock would expire before the case was ready for
trial. 2 The Court also stated that, upon an appropriate motion
by the parties or sua sponte, it could, if necessary, continue the
trial upon making the appropriate findings to support that the
ends of justice would be served by a delay. In a separate order,
the Court did just that. It issued an ends-of-justice continuance
under § 3161(h)(7)(A) and moved the previously scheduled
October 2, 2017 trial to April 11, 2018.
Shulick argued in the District Court that the Speedy
Trial Act does not permit such a continuance where the delay
is caused by a “lack of diligent preparation . . . on the part of
the attorney for the Government.” 18 U.S.C. § 3161(h)(7)(C).
Rejecting that characterization, the Court held that
2
Six of the 70 days had passed between Shulick’s initial
appearance and an order by the District Court deferring the trial
based on the complexity of the case and time needed for
defense counsel to prepare.
7
the ends of justice served by granting this
continuance outweigh the best interest of the
public and defendant in a speedy trial,
specifically the case is so unusual or complex
due to the nature of the prosecution that it is
unreasonable to expect adequate preparation by
defense counsel for the trial itself within the time
limits otherwise set by the Speedy Trial Act.
App. 46; see 18 U.S.C. § 3161(h)(7)(B)(ii) (listing case
complexity as one of statutory bases for an ends-of-justice
continuance).
Shulick now argues that despite the District Court
articulating case complexity as its motivating reason, the
continuance could only have been granted for one reason—the
Government’s faulty production. The Court’s ruling was
therefore in error, says Shulick, because “[t]he reasons stated
by the judge” are required to “actually have been the factors
motivating his decision to grant the continuance.” United
States v. Crane, 776 F.2d 600, 606 (6th Cir. 1985). Shulick also
contends, as he did below, that the continuance was not
permissible, because “[n]o continuance . . . shall be granted
because of . . . lack of diligent preparation . . . on the part of the
attorney for the Government.” 18 U.S.C. § 3161(h)(7)(C).
We review a district court’s interpretation of the Speedy
Trial Act de novo; its fact-finding for clear error; and its
decision to grant a continuance, after proper application of the
statute to the facts, for an abuse of discretion. United States v.
Rivera Constr. Co., 863 F.2d 293, 295 n.3 (3d Cir. 1988).
Beginning with Shulick’s first argument, we first note there is
ample evidence to support that the case is complex. The
prosecution, stemming from a multi-year investigation
involving millions of pages of documents, was designated as
8
complex under 18 U.S.C. § 3161(h)(7)(B)(ii) from the time of
arraignment on October 13, 2016. The granting of
continuances in response to the various intricacies and knots in
the case is nothing new. In fact, Shulick requested and was
granted multiple continuances to wade through discovery
materials.
Beyond that, Shulick’s reliance on Crane is misplaced.
There, the Sixth Circuit concluded that the district judge’s
stated reasons for granting a continuance—case complexity,
among other things—were not the court’s actual motivation.
776 F.2d at 604. But unlike here, the district judge in Crane
admitted arranging “for [a] [m]agistrate to impanel a jury,”
despite being unavailable to try the case for the following two
weeks, in “an inappropriate effort to begin the trial within the
70 days.” Id. at 606 (citation omitted). Shulick has offered no
evidence of any similar inappropriateness, only an
unsubstantiated claim of pretextuality. We see nothing to
suggest the District Court acted with “an intent to merely pay
the Act lip service,” United States v. Gonzalez, 671 F.2d 441,
444 (11th Cir. 1982); rather, it rightfully acted to remedy the
Government’s admitted discovery violation by continuing the
trial to avoid prejudicing the defense and by enforcing a
previously issued ban on the prosecution from using at trial any
documents produced after June 1, 2017. This was a proper
remedy. See United States v. Cianciola, 920 F.2d 1295, 1300
(6th Cir. 1990) (holding that the district court properly granted
a continuance when the Government inadvertently failed to
timely provide discovery, as “the interests of justice in
allowing defense counsel more time to prepare for trial
outweighed the need for a speedy trial”).
Shulick’s second argument posits that even if the
District Court’s stated reason was the actual reason for the
continuance, the Government’s failure to comply with
9
discovery rules categorically prohibits an ends-of-justice
continuance, because a discovery violation always constitutes
a “lack of diligent preparation” under § 3161(h)(7)(C). The
Government responds by citing persuasive authority holding
that a discovery violation does not rise to the level of a “lack
of diligent preparation” unless it was in bad faith or the
violations were chronic.
The Speedy Trial Act does not define a “lack of diligent
preparation” and we have not yet addressed whether that
phrase means any discovery violation or only those of the more
egregious variety. Requiring a chronic mistake or bad faith
does, however, find support in decisions of our sister Circuits
and in persuasive district court rulings. See, e.g., Cianciola,
920 F.2d at 1300 (district court rightly excluded delay caused
by prosecutor’s inadvertent failure to mail a discovery
response because it was neither in bad faith nor chronic);
United States v. Henry, 698 F.2d 1172, 1174 (11th Cir. 1983)
(district court did not abuse its discretion in finding delay
excludable, where the Government failed to fully comply with
all discovery orders, as “a trial judge must be given broad
discretion in attempting to comply with the mandates of the
Speedy Trial Act and the exclusions thereto”); United States v.
Huff, 246 F. Supp. 2d 721, 726-27 (W.D. Ky. 2003) (“[I]t
would be unfair to classify the United States’ omission as a
lack of preparedness especially where the Court found that the
United States acted negligently, not in bad faith or as part of a
pattern of chronic discovery abuse.”); see also United States v.
Jain, No. 19-cr-59 (PKC), 2020 WL 6047812, at *11
(S.D.N.Y. Oct. 13, 2020) (collecting additional cases).
We are persuaded by these cases. “[T]he Speedy Trial
Act was not intended ‘to provide defendants with tactics for
ensnaring the courts into situations where charges will have to
be dismissed on technicalities.’” Cianciola, 920 F.2d at 1298
10
(quoting United States v. Bufalino, 683 F.2d 639, 646 (2d Cir.
1982)). Rather, it is well within the district courts’ expertise to
distinguish between one-off or lesser discovery violations and
those committed chronically or in bad faith. Leaving these
matters with the district courts also comports with their general
authority to oversee discovery and craft appropriate remedies
for discovery violations. See United States v. Lee, 573 F.3d
155, 161 (3d Cir. 2009) (“When a party fails to comply with
[Federal Rule of Criminal Procedure 16, which governs
discovery and discovery violations], the district court is
empowered to order that party to comply with the Rule, grant
a continuance, exclude the evidence, or enter other just
relief.”). Just as the District Court here fashioned an
appropriate continuance and sanction in response to the
Government’s discovery practices, so too will other trial judges
craft an appropriate response on a case-by-case basis—
something which Shulick’s categorical approach would
preclude.
Having rejected Shulick’s categorical rule, we now hold
that he fails to meet his burden of showing that the
Government’s untimely production rises to the level of a “lack
of diligent preparation” under the facts of the case. 18 U.S.C.
§ 3161(h)(7)(C). Shulick contends the Government’s conduct
was “chronic,” pointing to the District Court’s previous
criticisms of its slow, rolling productions during discovery.
However, these critiques pertained to earlier productions, not
the August 2017 production at issue. Shulick never asserted
any speedy trial claim with respect to these earlier productions,
instead using them as grounds for requesting multiple
11
continuances. 3 Shulick fails to make any non-cursory argument
about why the Government’s admittedly careless discovery
mistake—a one-time administrative mishap, which the
prosecution promptly admitted and which the District Court
appropriately remedied—is chronic. The continuance did not
violate the Speedy Trial Act.
Separate from his Speedy Trial Act argument, Shulick
argues that his Sixth Amendment right to a speedy trial was
violated. “In assessing a constitutional speedy trial claim, we
consider the ‘[l]ength of delay, the reason for the delay, the
defendant’s assertion of his right, and prejudice to the
defendant.’” United States v. Shaw, 891 F.3d 441, 454 (3d Cir.
2018) (quoting Barker v. Wingo, 407 U.S. 514, 530 (1972)).
“All factors must be considered and weighed as no one factor
is dispositive nor ‘talismanic.’” Hakeem v. Beyer, 990 F.2d
750, 759 (3d Cir. 1993) (quoting Barker, 407 U.S. at 533).
Applying the factors, the District Court found no Sixth
Amendment violation. It reasoned that there was an 18-month
delay from indictment to trial attributable to the Government
and that Shulick indeed asserted his right. He failed, however,
to establish prejudice. We review the District Court’s factual
findings for clear error and legal conclusions de novo. United
States v. Velazquez, 749 F.3d 161, 174 (3d Cir. 2014).
On appeal, Shulick argues, first, that the District Court
erred because it did not consider pre-indictment delay in its
Barker analysis. He relies on United States v. Ingram, in which
the Eleventh Circuit held it “appropriate to consider inordinate
pre-indictment delay in determining how heavily post-
3
This is not to say that a series of slow productions,
even those concerning different discoverable material, can
never support a “lack of diligent preparation.”
12
indictment delay weighs against the Government.” 446 F.3d
1332, 1339 (11th Cir. 2006). Shulick insists that the
Government delayed from the time the investigation began in
2011, and that an indictment could have been secured by late
2014. He was not indicted until October 2016.
The District Court correctly rejected this argument.
Unlike the Eleventh Circuit, we have held that “[t]he speedy
trial guarantee of the Sixth Amendment does not apply to pre-
indictment delay.” United States v. Sebetich, 776 F.2d 412, 429
(3d Cir. 1985). 4 This Court has explained that no “rights under
the Sixth Amendment . . . attach to a preindictment, pre-arrest
delay” as “‘the Sixth Amendment speedy trial provision has no
application until the putative defendant in some way becomes
an “accused,” an event which occurred in this case only when
the appellees [defendants] were indicted . . . .’” United States
v. Dukow, 453 F.2d 1328, 1330 (3d Cir. 1972) (quoting United
States v. Marion, 404 U.S. 307, 313 (1971)). As in Dukow, “our
inquiry on the speedy trial contention is at an end because the
indictment in this case was handed down within the applicable
period of limitations.” Id.Shulick’s second Sixth Amendment argument is that the
District Court wrongly rejected his claim of prejudice—the
most important factor in the Barker analysis. Hakeem, 990
F.2d at 760. This factor is to be “assessed in light of certain of
the interests which the speedy trial right was designed to
4
Rather, it is “the Due Process Clause of the Fifth
Amendment [which] protects defendants against oppressive
pre-indictment delay within the applicable limitations period.”
Id. at 430. Shulick, however, has only raised a Sixth
Amendment claim and has not attempted to “invoke the
extreme sanction of dismissal . . . under the Due Process
Clause.” Id.
13
protect: preventing oppressive pretrial incarceration,
minimizing anxiety and concern of the accused, and limiting
the possibility that the defense will be impaired.” Virgin
Islands v. Pemberton, 813 F.2d 626, 629 (3d Cir. 1987).
Pointing to that final interest, Shulick argues his ability to
present a defense was prejudiced when a witness, Philadelphia
School District Assistant Superintendent Benjamin Wright,
was rendered unavailable by illness. The District Court,
however, determined that Shulick failed to offer sufficient
factual support for this supposed prejudice, because he did not
explain what Wright’s testimony would be or even that it
would be favorable, despite having interviewed him before he
became unavailable.
On appeal, Shulick asserts—but again fails to
substantiate—that Wright’s testimony would have been
“important[] to Shulick’s authorization and good faith
defense.” Appellant’s Br. 40. As the District Court correctly
concluded, a conclusory claim of this sort falls short of what is
required of a defendant to successfully establish prejudice. See
Hakeem, 990 F.2d at 763 (“General allegations that witnesses’
memories have faded are insufficient to create prejudice . . .
Hakeem has not pointed to any evidence in the state record that
shows the [witnesses] would have been able to corroborate his
presence . . . .”). For example, in United States v. Harris, the
Fifth Circuit rejected a vague claim of prejudice similar to
Shulick’s. 566 F.3d 422, 433 (5th Cir. 2009). There, the
defendant argued he was prejudiced by the loss of a witness
who died twenty months after the indictment. Id. The
defendant, however, backed up his claim with only a
conclusory assertion that the witness “could have supported
defense assertions of innocence at trial.” Id. Such a “blanket
statement,” said the court, “gives no indication as to the content
and relevance of the lost testimony, and how its absence
14
impaired [the] defense.” Id. Shulick’s nonspecific claim of
prejudice is inadequate for this very same reason. The Harris
court also noted that the defendant failed to “explain why he or
his attorneys failed to take any steps to preserve [the witness’s]
testimony for trial.” Id. Shulick’s defense has been similarly
neglectful.
Beyond Shulick’s failure to substantiate his claim of
prejudice, his Sixth Amendment argument must be rejected for
another reason. Even if Shulick’s claims about Wright’s
testimony were true, the District Court correctly reasoned that
the School District’s (and Wright’s) purported satisfaction with
Shulick’s performance is legally irrelevant. “The negligence of
the victim in failing to discover a fraudulent scheme is not a
defense to criminal conduct.” United States v. Coyle, 63 F.3d
1239, 1244 (3d Cir. 1995). Thus, having rejected both his
statutory and constitutional claims, we conclude that the
District Court did not violate Shulick’s speedy trial rights.
Shulick next argues that the District Court committed
reversible evidentiary and instructional errors. We review a
decision on the admissibility of evidence for an abuse of
discretion and review on a plenary basis a district court’s
interpretation of the Federal Rules of Evidence. United States
v. Gonzalez, 905 F.3d 165, 195 (3d Cir. 2018).
1. The District Court properly defined “agency” under 18
U.S.C. § 666 and rightfully excluded an agency clause in the
Southwest contract
Shulick was convicted under 18 U.S.C. § 666, which
criminalizes theft from organizations receiving federal
funding. Under the statute, (1) “an agent of an organization”
(2) who “embezzles, steals, obtains by fraud, or otherwise
15
without authority knowingly converts to the use of any person
other than the rightful owner or intentionally misapplies,
property” (3) that “is valued at $5,000 or more” and (4) is
“owned by, or is under the care, custody, or control of such
organization,” commits a federal offense. 18 U.S.C.
§ 666(a)(1)(A). For the statute to apply, the organization must
“receive[], in any one year period, benefits in excess of
$10,000 under a Federal program.” Id. § 666(b).
In seeking to overturn his federal program theft
conviction, Shulick targets the requirement that the defendant
be an “agent” of the organization receiving federal funds. Id.
§ 666(a)(1)(A). He argues he was not an “agent” within the
meaning of the statute.
Under the statutory definition, an “agent” is “a person
authorized to act on behalf of another person or a government
and, in the case of an organization or government, includes a
servant or employee, and a partner, director, officer, manager,
and representative.” Id. § 666(d)(1). An independent contractor
who exercises managerial responsibility can be an “agent.”
United States v. Vitillo, 490 F.3d 314, 323 (3d Cir. 2007)
(stating that § 666(d)(1)’s list is not exhaustive, as “an ‘agent’
is merely a person with authority to act on behalf of the
organization receiving federal funds”).
With respect to agency, Shulick posits two errors. First,
he argues the District Court wrongly prohibited him from
presenting evidence of a clause in the Southwest contract
which reads: “Neither the Contractor nor the School District
shall have any power to bind the other party in any manner
whatsoever to any third party. The Contractor does not
function as an agent of the School District in its dealings with
any third party.” App. 4946-47. The District Court ruled this
clause irrelevant, reasoning that the parties “cannot bind the
16
federal government in a criminal trial . . . by simply saying
they’re not agents of one another.” App. 4455.
While “the bar for what constitutes relevant evidence
is low,” Forrest v. Parry, 930 F.3d 93, 114 (3d Cir. 2019), it
cannot be said that the District Court’s ruling was an abuse of
discretion. Indeed, the very cases Shulick cites support
exclusion of the clause. In United States v. Lupton, the Seventh
Circuit pointedly explained the lack of relevance of any such
contractual provision:
Whether Lupton is considered an “agent” for
purposes of 18 U.S.C. § 666 is determined by
that statute, not by the terms of a private contract.
Parties cannot contract around definitions
provided in criminal statutes; even if Lupton
could not be considered a common law agent
under [the] contract, it is nonetheless possible for
him to be an “agent” under the terms of 18
U.S.C. § 666(d)(1). . . . The statutory definition
of ‘agent’ is an expansive one.
620 F.3d 790, 800-01 (7th Cir. 2010); see also United States v.
Hudson, 491 F.3d 590, 594 (6th Cir. 2007) (stating that the
contract “does not resolve the inquiry” and rather, the focus
should be on “whether [the defendant] satisfies the statute’s
general definition of an agent—whether [he] was ‘authorized
to act on behalf of’ the school district’” (quoting 18 U.S.C.
§ 666(d)(1)). Here, the District Court did not stumble in
disregarding the parties’ contractual delineation of the scope of
Shulick’s authority, especially given the substantial evidence
showing that Shulick had the power to act on behalf of the
School District. He was given significant managerial control
over the administration of Southwest, such as the power to hire
17
and fire teachers, establish curriculum, and control day-to-day
activities.
Next, Shulick challenges the District Court’s jury
instruction on the agency element. The Court used language
from the Third Circuit’s model instruction, but also altered the
model in one respect. The model instruction reads:
A person may be an agent of an organization
without being an employee of that organization.
An outside consultant who exercises significant
managerial responsibility within the
organization is an agent of that organization if
the consultant is authorized to act on behalf of
the organization.
Third Cir. Model Crim. Jury Instr. 6.18.666A1A-1. The
District Court read the first sentence of the model but omitted
the second. 5 Shulick challenges that omission on appeal.
However, he failed to make this objection in the District Court,
5
The Court also correctly instructed the jury that:
An agreement between the parties to a contract .
. . does not establish an agency relationship is not
binding on the federal government in a criminal
prosecution. You must disregard any testimony
or other exhibit as to what the School District of
Philadelphia and Shulick, Delaware Valley High
School or Unique Educational Experiences has
agreed regarding any agency relationship in their
contracts. However, you may consider other
evidence related to the issue of agency.
App. 4423-24.
18
which “would constitute a waiver of [his] right to assert any
legal error unless it was of such a magnitude as to constitute
plain error.” Karabin v. Petsock, 758 F.2d 966, 969 (3d Cir.
1985). There was no plain error. “[A] model jury instruction
itself is neither law nor precedential,” but is “designed to help
litigants and trial courts . . . to distill the law correctly.”
Robinson v. First State Cmty. Action Agency, 920 F.3d 182,
190 (3d Cir. 2019). Here, the District Court adopted the crux
of the model instruction—someone outside an organization can
also be an agent—and that statement of the law accords with
our interpretation of § 666(d)(1). Vitillo, 490 F.3d at 323.
2. The District Court properly excluded irrelevant evidence
Shulick next argues that the District Court abused its
discretion in excluding evidence that would have shown that
he did not, as § 666(a)(1)(A) requires, use funds “without
authority”—i.e. in an “unauthorized or unjustifiable or
wrongful” way. United States v. Baroni, 909 F.3d 550, 582 (3d
Cir. 2018), abrogated on other grounds by Kelly v. United
States, 140 S. Ct. 1565 (2020). This evidence included a prior
request for proposal put out by the School District, which
arguably suggested that the District placed little importance on
a contract’s budget by weighting it at only 10% in a ranking
system used to evaluate bids for the job. It also included
evidence showing that School District employees failed to
object to certain expenditures which did not conform to the
contract’s budget, thereby ratifying them, according to
Shulick.
We see no abuse of discretion. The District Court
appropriately excluded the request for proposal on relevancy
grounds because it was specific to a 2008 bidding process that
predated by two years Shulick’s involvement with Southwest
and DVHS’s contract with the School District. On appeal,
19
Shulick merely re-ups his disagreement with the Court’s
relevancy determination but offers no legal authority or
reasoned argument to show reversible error.
The District Court also rightfully barred the evidence
suggesting that School District employees failed to
affirmatively object to Shulick’s noncompliant expenditures.
As we have already noted, “[t]he negligence of the victim in
failing to discover a fraudulent scheme is not a defense,” Coyle,
63 F.3d at 1244, so victim inobservance indeed bore no
relevance. The school district’s failure to catch Shulick’s
crimes does not negate his fraud.
3. The District Court properly excluded the expert testimony
of Frederick Hamilton
Shulick next challenges the District Court’s exclusion
of Frederick Hamilton’s testimony on the ground that he was
an untimely-disclosed expert witness. According to Shulick,
the trial court improperly classified Hamilton’s presentation as
expert testimony, subject to Federal Rule of Criminal
Procedure 16’s disclosure regime, rather than summary
evidence. See Fed. R. Evid. 1006 (allowing a “summary, chart,
or calculation to prove the content of voluminous writings,
recordings, or photographs that cannot be conveniently
examined in court.”).
The record shows otherwise. In a sidebar discussion
partway through the trial, District Judge Bartle questioned
defense counsel about their plans to call Hamilton as a witness.
In this discussion, as recounted in a judicially-approved
statement under Federal Rule of Appellate Procedure 10(c), the
Government asked the District Court to direct Shulick’s
counsel to fully disclose Hamilton’s expert opinions, bases,
and reasons. See Fed. R. Crim P. 16(b)(1)(C) (requiring a
defendant to, “at the government’s request, give to the
20
government a written summary” of any planned expert
testimony, which “must describe the witness’s opinions, the
bases and reasons for those opinions, and the witness’s
qualifications.”). At the time of this conversation, the defense
had provided only minimal information on Hamilton, namely,
his curriculum vitae and a short description of what he might
testify to—a disclosure which Judge Bartle agreed was
insufficient under Rule 16. Importantly, Judge Bartle stated
that if Shulick wanted to offer Hamilton as an expert witness,
the defense would have to make an additional, full disclosure
of his opinions, bases, and reasons. Judge Bartle then
specifically asked defense counsel whether they intended to
offer Hamilton as an expert. Defense counsel responded that
they would not make any further disclosure and that Hamilton
would be offered solely as a summary witness.
But when Hamilton was called to the stand at the
opening of the defense case, he attempted to offer expert
testimony. Specifically, Hamilton, a CPA who acknowledged
that he had previously served as an expert “hundreds of times,”
App. 4135, was asked why it was appropriate to allocate certain
shared costs across Shulick’s business ventures to the budget
for Southwest—a post-hoc analysis, involving the application
of Hamilton’s own formulas and judgment to facts. The
District Court ultimately excluded this testimony, accepting
the Government’s argument that it was undisclosed “expert
opinion based on his years of accounting experience, based on
his forensic background, and based on information that is not
available from the records.” App. 4146-47.
We agree and reject Shulick’s characterization of
Hamilton’s sophisticated analysis as mere summary. If a
purported summary includes “assumptions” and “inferences”
that “represent [the witness’s] opinion, rather than the
underlying information,” it is actually expert testimony
21
“subject to the rules governing opinion testimony.” Eichorn v.
AT&T Corp., 484 F.3d 644, 650 (3d Cir. 2007). Here, the
witness’s testimony would have involved him explaining his
analytical assumptions and professional opinion, based on his
accounting expertise, that it was appropriate to allocate some
of Shulick’s general (and even unrelated) business costs as
expenditures for the Southwest school. The apportionments
Hamilton advanced were not contained in any of the
documents governing the parties’ relationship. Rather, they
would have required the retroactive application of business and
accounting principles and Hamilton’s own judgment to the
facts—in other words, classic expert testimony, rightly
excluded.
Shulick next claims there was reversible error in the
District Court’s jury instructions on federal program theft. The
federal program theft statute makes liable a person who
“embezzles, steals, obtains by fraud, or otherwise without
authority knowingly converts to the use of any person other
than the rightful owner or intentionally misapplies, property.”
18 U.S.C. § 666(a)(1)(A) (emphasis added). Shulick argues the
District Court erred in instructing that an intentional
misapplication within the meaning of § 666(a)(1)(A) can be
found even if the misuse of funds still benefited the victim.
In so stating to the jury, the District Court deployed our
model instruction, 3d Cir. Model Jury Inst. 6.18.666A1A-3,
stating:
To intentionally misapply money or property
means to intentionally use money or property of
the School District of Philadelphia, knowing that
22
such use is unauthorized or unjustifiable or
wrongful. Misapplication includes the wrongful
use of the money or property for an unauthorized
[purpose], 6 even if such use benefitted the School
District of Philadelphia.
App. 4425-26 (emphasis added). Shulick contends the
emphasized language is bad law.
We exercise plenary review over the question of
whether a jury instruction contained an incorrect statement of
law. United States v. Friedman, 658 F.3d 342, 352 (3d Cir.
2011). At the outset, we note the general unlikelihood that a
model instruction is erroneous. See Robinson, 920 F.3d at 190
(“Given the care put into [its] drafting, we have observed it is
unlikely ‘that the use of [a] model jury instruction can
constitute error.’” (quoting United States v. Petersen, 622 F.3d
196, 208 (3d Cir. 2010))).
We now turn to the statutory text to determine if our
model is in accord with the law. Federal program theft occurs
when the defendant “embezzles, steals, obtains by fraud, or
otherwise without authority knowingly converts to the use of
any person other than the rightful owner or intentionally
misapplies, property.” 18 U.S.C. § 666(a)(1)(A) (emphasis
6
In reading this instruction, the District Court
accidentally substituted the word “person” for “purpose,”
saying that “[m]isapplication includes the wrongful use of
money or property for an unauthorized person.” App. 4426.
After being alerted of this slip of the tongue, the Court
corrected its misstatement, saying “I said ‘unauthorized
person.’ I should have said ‘unauthorized purpose,’ and you
will see that in the written instructions -- that it’s correct,
‘unauthorized purpose.’” App. 4464.
23
added). The emphasized phrase is a limiting condition, which
would require that the property be used for someone else’s
benefit besides the defrauded organization. In other words, if
the funds were still used to benefit the “rightful owner”—as
our model instruction provides—then this condition would not
be satisfied and federal program theft would not have occurred.
However, in parsing the statutory language, we must be
careful to determine which word or words this limiting
condition modifies. Again, federal program theft occurs when
the defendant “embezzles, steals, obtains by fraud, or
otherwise without authority knowingly converts to the use of
any person other than the rightful owner or intentionally
misapplies, property.” 18 U.S.C. § 666(a)(1)(A) (emphasis
added). The disjunctive “or” suggests that an intentional
misapplication of funds is a separate way of satisfying the
statute, apart from the earlier prohibition on conversion, which
is subject to the aforementioned limiting phrase. Under the rule
of the last antecedent, that qualification should be read only to
modify the word it immediately follows: “converts.” Id. §
666(a)(1)(A); see Lockhart v. United States, 136 S. Ct. 958,
962 (2016) (applying limiting phrase in a statute to only “the
antecedent immediately preceding it”). Most importantly for
our purposes, it would not narrow the meaning of
“intentionally misapplies,” as Shulick would have it.
Use of those words of limitation earlier in §
666(a)(1)(A) also shows that Congress knew how to expressly
impose a condition that would require the defrauded property
to inure to another’s benefit for liability to attach. If Congress
wished to subject intentional misapplication to this same
condition, it could have included parallel language after
intentional misapplication—for example, drafting the statute to
read: “intentionally misapplies for the use of any person other
than the rightful owner, property.” Congress, however, did not
24
do that. We generally presume such differences in drafting to
be purposeful. In re Bayer AG, 146 F.3d 188, 193 (3d Cir.
1998).
The interpretation we have espoused thus far finds
additional support when we compare the current version of §
666(a)(1)(A) to an earlier version of the statute. The prior
version placed the limiting condition after all six statutory
prohibitions, including willful misapplication, the precursor to
the “intentionally misapplies” prohibition. See Act of Oct. 12,
1984, Pub. L. 98-473, 98 Stat. 1837, 2143 (“embezzles, steals,
purloins, willfully misapplies, obtains by fraud, or otherwise
knowingly without authority converts to his own use or to the
use of another”) (emphases added). Under this version of the
statute, Shulick would have a better argument that the
condition qualifies all words before it, as a unitary whole. But,
by separating the intentional misapplication offense from that
qualifying language in the current text, Congress intended, we
believe, to reinforce that this term was not so limited. See Stone
v. INS, 514 U.S. 386, 397 (1995) (“When Congress acts to
amend a statute, we presume it intends its amendment to have
real and substantial effect.”).
Shulick counters this by pointing to snippets in the
legislative history which refer to Congress’ revisions as only a
“technical” amendment. S. Rep. No. 99-278, 99th Cong., 2d
Sess. (1986) (accompanying S. 1236, 99th Cong. § 59(a)
(enacted bill)), at 7 (1986); H.R. Rep. No. 99-797 (1986)
(accompanying H.R. 5241, 99th Cong. § 42(a) (House version)
(1986)), at 30). But such statements, which do not even address
the interpretive question at issue, cannot overcome what the
plain text commands. United States ex rel. Mistick PBT v.
Hous. Auth., 186 F.3d 376, 395 (3d Cir. 1999) (“[R]ecourse to
legislative history or underlying legislative intent is
25
unnecessary when a statute’s text is clear and does not lead to
an absurd result.”).
Our sister Circuits have also refused to limit intentional
misapplication under § 666(a)(1)(A) as Shulick asks us to do.
See United States v. Urlacher, 979 F.2d 935, 938 (2d Cir. 1992)
(“The first four prohibitions cover any possible taking of
money for one’s own use or benefit,” so “in order to avoid
redundancy, [‘intentionally misapplies’] must mean intentional
misapplication for otherwise legitimate purposes.”); United
States v. Cornier-Ortiz, 361 F.3d 29, 37 (1st Cir. 2004) (citing
Urlacher to conclude that using funds for legitimate purposes,
but in violation of conflict of interest rules, is still an intentional
misapplication); United States v. Frazier, 53 F.3d 1105, 1114
(10th Cir. 1995) (concluding there was a misapplication even
though “[t]he funds were [still] used to purchase computers and
computer equipment for the educational organization,” the
victim). We too have once stated that § 666(a)(1)(A) reaches
an unauthorized use of property which nevertheless benefits
the victim. See United States v. Baroni, 909 F.3d 550, 582 (3d
Cir. 2018) (“Misapplication includes the wrongful use of the
money or property for an unauthorized purpose, even if the use
actually benefitted the Port Authority.” (quoting the District
Court’s recantation of 3d Cir. Model Jury Inst. 6.18.666A1A-
3)).
Baroni, however, was reversed by Kelly v. United
States. 140 S. Ct. 1565 (2020). Under Kelly, says Shulick, the
rule of Model Instruction 6.18.666A1A-3 is no longer good
law. In Kelly, Bridget Anne Kelly and William Baroni, two
officials in the administration of former New Jersey Governor
Chris Christie, conspired to shut down toll plaza lanes on the
George Washington Bridge to punish the mayor of Fort Lee for
refusing to endorse Christie’s reelection bid. Id. at 1569-70. A
jury convicted Kelly and Baroni under § 666(a)(1)(A).
26
Reversing their convictions, the Supreme Court held that the
federal program theft statute was designed to safeguard only
against “property fraud” and not to “criminaliz[e] all acts of
dishonesty.” Id. at 1571. The defendants’ convictions were
therefore improper, because they never sought “to take the
government’s property”—they sought only to divert the State’s
regulatory power to injure a political adversary. Id. at 1572.
Shulick contends Kelly forecloses a conviction under §
666(a)(1)(A) where the jury has been instructed that a
misapplication of funds may still occur if the defendant’s
unauthorized spending still benefited the victim. Having heard
this instruction the jury may have convicted based on a belief
that Shulick did not take funds for his own or Fattah, Jr.’s
benefit, but simply spent them inconsistently with the budget
while still benefiting the School District. Kelly, however,
“confirms that §666(a)(1)(A) criminalizes [only] schemes to
‘obtain’ a victim’s property: ‘taking’ the property and
‘converting’ it to someone else’s use,” according to Shulick.
Appellant’s Reply 22 (quoting 140 S. Ct. at 1568, 1573-74).
He contends that just as Kelly and Baroni “exercised the
regulatory rights of ‘allocation, exclusion, and control’—
deciding that drivers from Fort Lee should get two fewer lanes
while drivers from nearby highways should get two more,” 140
S. Ct. at 1573, so too did he exercise the rights given to him in
reallocating the budget—an act unauthorized by the contract,
but not one which § 666(a)(1)(A) criminalizes.
In evaluating this argument, we first note that no other
Court of Appeals has yet to read Kelly as Shulick asks us to.
Urlacher, Cornier-Ortiz, and Frazier—which all support that
intentional misapplication does not necessarily require that
property be taken for another’s benefit—have never been
overruled and remain the law of the Second, First, and Tenth
Circuits.
27
If Shulick is correct and Kelly indeed changed the law,
then this occurred in 2020 when Kelly was decided. The timing
is important because Shulick’s trial took place in 2018—it
preceded Kelly and that change. “Where there were no legal
grounds for challenging an instruction at the time it was given,
but such grounds have arisen, due to the articulation of a new
rule of law between the time of conviction and the time of
appeal, we review for plain error.” United States v. Andrews,
681 F.3d 509, 517 (3d Cir. 2012). Because the law of our
Circuit in 2018 was the directive provided in Model Instruction
6.18.666A1A-3 and recited in Baroni, and because Kelly
would have reversed that rule only after Shulick’s jury
rendered its verdict, we review for plain error. See id. at 521(applying plain error review where “there was no plain error in
the District Court’s instructions at the time of trial, [but] the
error became apparent when the Supreme Court
in Skilling limited honest services fraud to bribes and
kickbacks.”); United States v. Retos, 25 F.3d 1220, 1230 (3d
Cir. 1994) (applying plain error review “where the error was
unclear at the time of trial but becomes clear on appeal because
the applicable law has been clarified” (quoting United States v.
Olano, 507 U.S. 725, 734 (1993))).
Under plain error review, we may correct an error “only
if the appellant demonstrates that: (1) there was an error; (2)
the error is clear or obvious; and (3) the error affected the
appellant’s substantial rights, which in the ordinary case means
it affected the outcome of the district court proceedings.”
Andrews, 681 F.3d at 521 (citation and internal quotations
omitted). “If all three conditions are met,” we “may then
exercise [our] discretion to notice a forfeited error, but only if
. . . the error seriously affect[s] the fairness, integrity, or public
reputation of the judicial proceedings.” Id. (quoting Johnson v.
United States, 520 U.S. 461, 467 (1997)).
28
When we apply this standard, Shulick cannot prevail.
Even if the District Court’s instructions were erroneous under
Kelly, and its error clear and obvious, the mistake would not
have prejudiced his substantial rights. 7 In this third step of the
analysis, the “defendant bears the burden of demonstrating that
the error was not harmless, i.e., that there is ‘a reasonable
probability that the error affected the outcome of the trial.’” Id.
at 520 (quoting Olano, 507 U.S. at 734). Shulick does not meet
that burden.
“Where there is a clear alternative theory of guilt,
supported by overwhelming evidence, a defendant likely
cannot show that an instruction permitting the jury to convict
on an improper basis was not harmless error.” Id. at 521. Here,
the Government did put forth a clear, unquestionably Kelly-
compliant theory—Shulick actually embezzled contract funds
and used them for his own benefit. In other words, Shulick’s
“aim [was] to obtain money,” a classic property fraud. Kelly,
140 S. Ct. at 1574.
This “alternative theory”—which was the
Government’s primary theory of the case—was well-supported
and compelling. First, the Government presented
overwhelming evidence that Shulick spent only a fraction of
the $2,096,000 he received under the contract on Southwest.
He did not hire promised counseling and security personnel,
understaffed Southwest’s teaching staff, and cut corners on
salaries and benefits. The records demonstrating these facts
were carefully and thoroughly summarized and explained by a
7
To note, we need not presently decide whether Kelly
prohibits instructing the jury that a misapplication of funds
may occur even if the spending still benefits the victim.
Shulick’s claim unquestionably fails under prong three of plain
error review.
29
credible FBI agent, and the deficiencies were repeatedly
confirmed by several former DVHS employees who testified
against Shulick. Even the testimony of Shulick’s witness,
Hamilton, indicated that he spent only $1,186,001 on items
designated for Southwest. 8 This was not the case of a
contractor being a few dollars short here and there.
Next, the Government presented extensive testimonial
and documentary evidence of what happened to the unspent
money. Shulick diverted the funds to co-conspirator Fattah, Jr.,
who took his cut and paid other of Shulick’s obligations,
including expenses entirely unrelated to Southwest and the
School District of Philadelphia. Some payments, for example,
were remitted to cover the costs of running other charter
schools outside of the School District. Others were used to
cover bills, consulting fees, business solicitation services, and
public relations expenses that Shulick incurred to make his
business ventures profitable. These ventures included DVHS
but also his personal law firm, the Law Offices of David T.
Shulick. In short, the Government showed that contract funds
were disbursed in ways which personally benefited Shulick
and Fattah, Jr. and which did not benefit the School District of
8
Hamilton explained an exhibit containing his
summation of all expenditures “specific to” Southwest. App.
4240. The total was $1,186,001. The defense sought to increase
this figure by having Hamilton explain why it would be
appropriate to allocate certain other shared business and non-
Southwest expenses to Shulick’s total expenditures on
Southwest, but as we previously concluded, this was
undisclosed expert testimony properly excluded by the District
Court. See supra Part II.B.3. The admissible evidence plainly
showed that Shulick fell far short of what the budget required
him to spend.
30
Philadelphia in any way. Accordingly, the object of the
conspiracy’s scheme advanced at trial was in fact property—
Shulick took money entrusted to DVHS and embezzled it for
the conspirators’ personal benefit.
This is not a case “where evidence on the valid
alternative theory is relatively weak, the government relies
heavily on the improper theory, and the district court’s
instructions on the improper theory are ‘interwoven’
throughout the jury charge.” Andrews, 681 F.3d at 522. As
described above, there was strong evidence that Shulick
actually converted hundreds of thousands of dollars. The
Government did not heavily rely on the potentially Kelly-
31
violative theory of guilt either. Rather, prosecutors consistently
maintained that Shulick “embezzled” funds for his own gain. 9
The jury charge likewise reflected this core theory. It
identified several Kelly-compliant ways by which Shulick
could be found guilty of misappropriating the money. See App.
4425 (listing “embezzle,” “obtain by fraud,” and “convert”).
The intentional misapplication instruction did not dominate the
9
For example, the prosecution frequently and
consistently described Shulick’s crime as an embezzlement or
theft act in opening and closing arguments. App. 1319-20
(“You’re going to hear that [the contract funds] went into
David Shulick’s pocket . . . Mr. Shulick would put the money
into an account and then use that account like his personal
piggybank, cutting business checks to pay for personal
expenses . . . Now, for his actions, he stands charged with
embezzling”); 1325 (“Now, the first thing Fattah Junior did
was take his own cut. . . . And the remaining 60,000 went to
pay Mr. Shulick’s expenses in other places”); 1330 (“Mr.
Shulick is guilty of embezzlement and conspiracy to
embezzle”); 4276 (“Here is a man who is dedicated to stealing
money”); 4276 (“He embezzled nearly a million dollars”);
4300 (“we’ll move on to the embezzlement”); 4306 (“So, now,
we come to counts 1 and 2, the embezzlement of the school
district funds. The defendant embezzled $1 million . . .”); 4307
(“the defendant is charged in a conspiracy with Mr. Fattah Jr.
to embezzle school district funds. He’s also charged separately,
by himself, in count 2, with embezzling school district
funds.”); 4310 (“It’s criminal agreement . . . [t]o embezzle,
from a federally funded program . . . So what are the elements
of embezzlement?”); 4317 (“There’s money to be stolen
here.”); 4326 (“You should find him guilty of his conspiracy
with Fattah Jr. and with embezzling $1 million”).
32
charge. It was listed once alongside these other statutory
prohibitions—all three of which are unquestionably forms of
property fraud. A “single [challenged] instruction . . . may not
be judged in artificial isolation, but must be viewed in the
context of the overall charge.” United States v. Park, 421 U.S.
658, 674 (1975) (internal quotation marks and citation
omitted). Viewing the charge in its entirety, it is clear that the
disputed line was not interwoven throughout the greater whole,
repeated, or otherwise emphasized. See Andrews, 681 F.3d at
522 (upholding conviction even where “the District Court
[incorrectly] referred to ‘honest services’ on several occasions
in its final instructions,” because the erroneous term was not
“interwoven throughout the jury charge.”). The whole charge
placed far greater emphasis on Shulick as a property taker. See,
e.g., App. 4442 (“Count 2 of the indictment charges the
defendant, David. T. Shulick, with embezzling funds from the
School District of Philadelphia . . .”) (emphasis added). The
District Court also warned the jury “not to single out any one
instruction” but to “consider as a whole all of the instructions.”
App. 4395; see United States v. Bryant, 655 F.3d 232, 247 (3d
Cir. 2011) (rejecting a challenge to the wording of a specific
instruction partly because jury was told “to consider all of the
‘instructions as a whole’”).
This case is not like Kelly, where the prosecution’s
claim of property fraud rested only on a novel theory that the
defendants temporarily “commandeer[ed]” the George
Washington Bridge (despite obviously not stealing the massive
structure) or caused only incidental wage expenses associated
with carrying out their regulatory action. 140 S. Ct. at 1572.
Shulick committed a real, tangible taking of money that was
rightly owed to the School District and the at-risk children of
Southwest. That was the Government’s consistent, chief theory
throughout the trial, and the evidence of this reality was
33
overwhelming. See Cupp v. Naughten, 414 U.S. 141, 147
(1973) (“[A] judgment of conviction is commonly the
culmination of . . . witnesses, argument of counsel, receipt of
exhibits in evidence, and instruction of the jury” so “not only
is the challenged instruction but one of many . . . but the
process of instruction itself is but one of several components
of the trial which may result in the judgment”). Therefore, we
conclude that even if Shulick’s reading of Kelly was correct
and the jury instruction clearly erroneous, he still would have
been convicted of federal program fraud irrespective of the
error.
Further challenging the jury instructions on federal
program theft, Shulick next postulates error when the District
Court refused to instruct on § 666(c), a safe harbor provision
excluding from criminal liability “bona fide salary, wages,
fees, or other compensation paid, or expenses paid or
reimbursed, in the usual course of business.” 18 U.S.C. §
666(c). We review a refusal to give a specific jury instruction
for an abuse of discretion. Friedman, 658 F.3d at 352. A
defendant is entitled to an instruction on a theory of defense “if
(1) he proposes a correct statement of the law; (2) his theory is
supported by the evidence; (3) the theory of defense is not part
of the charge; and (4) the failure to include an instruction of the
defendant’s theory would deny him a fair trial.” United States
v. Hoffecker, 530 F.3d 137, 176 (3d Cir. 2008) (citation
omitted).
Shulick fails to show that his theory is supported by the
evidence. He offers only a cursory, single paragraph as to why
he was entitled to a safe harbor instruction. He says, in effect,
that while his expenditures fell short for certain items in the
34
budget, he exceeded the budget for other items and other of his
spending benefited the School District. However, Shulick cites
no case law in support of his position and, as the Government
aptly notes, he has not even attempted to identify the salary,
wages, fees, compensation, or expenses that would supposedly
fit within the safe harbor. Nor has he provided this missing
information in his reply brief, even after the Government
pointed out the deficiency. See Doeblers’ Pa. Hybrids, Inc. v.
Doebler, 442 F.3d 812, 820 n.8 (3d Cir. 2006) (“Judges are not
like pigs, hunting for truffles buried in the record.”) (internal
quotation marks and citation omitted). The District Court did
not abuse its discretion in declining to provide the instruction.
Shulick asserts several errors in the District Court’s
calculations at sentencing. We review an interpretation of the
sentencing guidelines, including what constitutes loss, de novo,
and factual findings for clear error. United States v. Napier,
273 F.3d 276, 278 (3d Cir. 2001).
He first contends the District Court erred in computing
a fraud loss of $795,735 for the § 666 counts. The District
Court calculated the School District’s loss by subtracting the
amount that Shulick actually spent on various budgeted items
from the amount the budget required him to spend. In
performing this calculation, the Court referenced Note 3(F)(ii)
to Sentencing Guideline § 2B1.1. It provides that “[i]n a case
involving government benefits (e.g., grants, loans, entitlement
program payments),” the loss is “the value of the benefits
obtained by unintended recipients or diverted to unintended
uses, as the case may be.” U.S.S.G. § 2B1.1, cmt. n.3(F)(ii).
Shulick argues that Note 3(F)(ii) does not apply here, and
should not have been relied upon, because DVHS’s
35
management of Southwest was a “fee-for-service business
deal” and not a “a case involving governmental benefits.”
Appellant’s Br. 72-73. The District Court, says Shulick, should
have used the general definition of fraud loss set forth in Note
3(A): “the greater of actual loss or intended loss.” U.S.S.G. §
2B1.1 cmt. n.3(A).
We agree with the Government that whether the moneys
are “governmental benefits” or not does not matter under the
facts of this case and the calculation performed. In calculating
the fraud loss, the District Court properly applied our
precedent, United States v. Nagle, 803 F.3d 167, 180 (3d Cir.
2015). There, we explained that “[w]e need not decide whether
the [disadvantaged business enterprises] program is a
‘government benefit’ and, therefore, whether Note 3(A) or
Note 3(F)(ii) applies.” Id. at 180. “[U]nder either application
note,” we said, “the amount of loss [the defendants] are
responsible for is the face value of the contracts . . . minus the
fair market value of the services . . . provided under the
contracts.” Id. at 180. Nagle confirms that the challenged
computation—the contract’s face value less the value of
services Shulick actually provided—is in fact correct. This
difference constitutes the actual pecuniary loss the School
District suffered when Shulick spent only a fraction of the
contract funds on its students.
Shulick next argues that the District Court erred in
calculating credits against loss. Note 3(E)(i) instructs that the
fraud loss is to “be reduced by the value of the services
rendered by a defendant to the victim.” U.S.S.G. § 2B1.1, cmt.
n.3(E)(i). Shulick claims that the Court reduced the loss figure
by some, but not all, of the value of the services he rendered to
Southwest.
36
It was Shulick’s burden to show that he was entitled to
specific offsets, because the Government made out a prima
facie case of the loss amount. United States v. Jimenez, 513
F.3d 62, 86 (3d Cir. 2008). The District Court held that he
failed to meet that burden. It rejected the calculations of
Shulick’s accounting expert, Hamilton, who allocated to
Southwest (1) 34% of expenditures that also covered Shulick’s
law office and three other schools; (2) DVHS’s income taxes,
accounting expenses, and insurance premiums; (3) substantial
payments to Fattah, Jr.; and (4) a number of payments to
persons not provided for in the Southwest contract, including
the salaries of employees of other schools and a car and
benefits package for DVHS’s bookkeeper, whose
responsibilities also included working on Shulick’s personal
finances. Declining to calculate the offsets as Hamilton
proposed was not clearly erroneous. Shulick simply did not
carry his burden to show that additional money was spent for
the benefit of Southwest.
Lastly, Shulick challenges the District Court’s
restitution and forfeiture calculations. He first argues that the
Mandatory Victims Restitution Act limits restitution to
“pecuniary loss” suffered as a “direct and proximate” result of
the defendant’s conduct. 18 U.S.C. § 3663A(c)(1)(B), (a)(2)).
His argument merely re-ups the same theories which he
unsuccessfully advanced above and which also fail here; the
District Court properly calculated the actual loss suffered
under Nagle. As to forfeiture, Shulick argues the District Court
failed to expressly find that Shulick acquired the funds. But it
did. The Order of Forfeiture states: “Based upon the facts and
arguments set forth in the government’s Memorandum
Regarding Fraud Loss . . . and the record as a whole, the sum
of $649,735.00 represents the value of property the defendant
obtained directly or indirectly . . . .” District Ct. Dkt. #216 at 2.
37
Shulick’s final argument attacks the District Court’s
decision to supplement the record with a binder that defense
expert Hamilton relied upon while testifying at Shulick’s
sentencing. Hamilton brought the binder to the stand with him,
but Shulick’s counsel did not ask about it on direct
examination. When Shulick’s counsel concluded, the District
Court permitted the Government to review the binder and
during cross-examination, the Government questioned
Hamilton about various materials in the binder. Although the
District Court stated that the binder “was referred to, so we may
want to put it in the record,” App. 4658, this was not done at
the time. Instead, the Court instructed Hamilton to provide
prosecutors with a copy of the binder, which they agreed to
accept instead of having it formally entered into the record. A
copy never arrived, so the Government moved to supplement
the record. The District Court granted the motion.
We review the District Court’s decision to supplement
the record for an abuse of discretion. Arrowpoint Capital Corp.
v. Arrowpoint Asset Mgmt., LLC, 793 F.3d 313, 327 n.16 (3d
Cir. 2015). A district court may supplement the record if
“anything material to either party is omitted from or misstated
in the record by error or accident.” Fed. R. App. P. 10(e)(2)(B).
Here, the District Court determined that the binder had been
omitted by error, because the defense had not delivered a copy
as instructed. The binder was material, according to the District
Court, as it contained information supporting the foundation
for Hamilton’s fraud loss calculation—an issue which Shulick
himself raises on appeal. In light of the discretion afforded to
the District Court on this matter, we cannot say that it abused
its discretion in supplementing the record. The binder was not
“new evidence,” having been relied upon by a testifying expert
and specifically referenced by the Government on cross-
38
examination; supplementation was, thus, for the proper
purpose of “correct[ing] inadvertent omission.” In re Adan,
437 F.3d 381, 389 n.3 (3d Cir. 2006).
For the foregoing reasons, we will affirm.
39