United States v. Alan Butler

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-4417
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ALAN L. BUTLER,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Henry E. Hudson, District
Judge. (3:12-cr-00192-HEH-1)
Argued: May 15, 2014 Decided: July 3, 2014
Before GREGORY, AGEE, and KEENAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Gregory and Judge Agee joined.
ARGUED: William H. Burgess, IV, KIRKLAND & ELLIS, LLP,
Washington, D.C., for Appellant. Jamie L. Mickelson, OFFICE OF
THE UNITED STATES ATTORNEY, Atlanta, Georgia, for Appellee. ON
BRIEF: Dana J. Boente, Acting United States Attorney,
Alexandria, Virginia, Gurney Wingate Grant II, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:
Alan L. Butler pleaded guilty to conspiracy to commit mail
fraud, in violation of 18 U.S.C. § 1349, based on his conduct of
awarding construction contracts in the name of his employer to
companies in which Butler had an ownership interest. On appeal,
Butler argues that the district court overstated the loss to his
employer resulting from the fraud by failing to award a setoff
for the value of Butler’s personal labor. Based on this
assigned error, Butler challenges the court’s application of a
14-level sentencing enhancement related to loss, as well as the
court’s forfeiture order in the amount of $864,914.61.
Upon our review, we conclude that the district court did
not err in calculating the loss amount on which the sentencing
enhancement and the forfeiture order were based, because any
labor performed by Butler during the scheme did not provide
legitimate value to his employer. Accordingly, we affirm the
district court’s judgment.
I.
From 2002 through 2011, Butler worked as the vice president
and director of construction for CH Construction, LLC (CHC), a
Virginia corporation that developed residential real estate in
Virginia and North Carolina. In his position with CHC, Butler
was responsible for managing CHC’s construction projects,
2
adhering to established budgets, obtaining bids from
subcontractors, and selecting and overseeing subcontractors.
In 2004, Butler and his co-conspirator formed a business in
Virginia known as Valley Construction Corps (Valley). In 2011,
Butler formed another business in Virginia known as ACT
Resources and Remediation, LLC (ACT). Between 2004 and 2011,
Butler, on behalf of CHC, entered into contracts with Valley and
ACT for the performance of exterior stonework and other
construction-related work. During this time, Butler concealed
from CHC and its owner, Roger Glover, Butler’s ownership of
Valley and ACT. Butler also concealed from CHC the fact that
Valley and ACT had hired other subcontractors to complete the
work for CHC. By charging CHC a higher price for the work than
Valley and ACT paid to the subcontractors who performed the
work, Butler profited personally from these arrangements.
In December 2012, a grand jury returned a one-count
indictment against Butler charging him with conspiracy to commit
mail fraud. 1 The indictment also included a forfeiture
1
The mail fraud statute, 18 U.S.C. § 1341, prohibits
conduct that, through use of the mail, entails a scheme to
defraud, or to obtain “money or property by means of false or
fraudulent pretenses, representations, or promises.” We have
set forth the elements of mail fraud as “(1) the existence of a
scheme to defraud, and (2) the mailing of a letter, etc., for
the purposes of executing the scheme.” United States v.
Vinyard, 266 F.3d 320, 326 (4th Cir. 2001) (citation omitted).
3
allegation. In January 2013, the district court accepted
Butler’s guilty plea and entered a judgment of conviction.
The probation officer who prepared Butler’s presentence
report (PSR) calculated a total offense level of 20, which
included a 14-level enhancement based on a loss to CHC in an
amount exceeding $800,000. The enhancement was applied in
accordance with United States Sentencing Guidelines (U.S.S.G.)
§ 2B1.1(b)(1)(H), which governs fraud offenses resulting in
monetary losses to the victim in amounts between $400,000 and
$1,000,000. As a result of this enhancement, the probation
officer recommended an advisory Guidelines range of 33 to 41
months’ imprisonment.
Butler objected to the recommended enhancement and argued
that the asserted loss amount failed to include a credit for the
labor that he personally performed on behalf of Valley and ACT.
In response, the government contended that CHC’s pecuniary loss
was $864,914.61, which amount represented the difference between
CHC’s payments to Valley and ACT and the money that those
businesses paid to the subcontractors actually performing the
work.
At a sentencing hearing, the district court received
testimony from several witnesses, including Butler. The
government presented the testimony of Special Agent David
Hulser, a certified public accountant for the Federal Bureau of
4
Investigation who participated in the investigation of the case.
During this investigation, Hulser reviewed Butler’s personal
bank statements and tax records, as well as the statements and
records of Valley and ACT.
After examining these documents, Hulser determined that
Valley and ACT received a total of more than $1.6 million from
CHC. Hulser also calculated that Valley and ACT had expended a
total of about $775,000 for labor performed by subcontractors.
By subtracting these costs from CHC’s total payments to Valley
and ACT, Hulser concluded that Butler, through Valley and ACT,
had “overbilled” CHC by $864,914.61.
The government also presented the testimony of CHC’s owner,
Roger Glover. He testified that after Butler’s fraud was
discovered, CHC continued to do business directly with
Environmental StoneWorks (ESW), one of the same subcontractors
hired by Valley to perform certain stonework. Glover stated
that ESW performed the same work that CHC previously had hired
Valley to perform, at roughly one-third the amount that Valley
had charged to CHC. A representative of ESW corroborated this
testimony, and also stated that ESW charged about the same price
for its work performed directly for CHC as the price it charged
to Valley.
Butler testified that, generally, the prices charged by
Valley and ACT to CHC were equal to, or less than, the estimates
5
submitted by other bidding companies. He also stated that when
he formed Valley, he intended not only to profit personally, but
also to provide a benefit to CHC by providing quality work that
eventually would result in improved sales.
Butler also submitted as evidence a report prepared by a
construction consultant, who did not testify at the hearing. In
the consultant’s report, which was based on information provided
by Butler, the consultant analyzed the fair market value of
Valley’s work for CHC, and calculated the value of Butler’s
“unbilled” labor and other expenses relating to his work on
Valley’s projects for CHC. The consultant concluded that the
overall price that CHC paid Valley over eight years was
$55,243.89 below the fair market value of the work that was
performed on CHC’s behalf.
At the conclusion of the sentencing hearing, the district
court overruled Butler’s objection to the loss amount stated in
the PSR, and applied the 14-level enhancement. The court
sentenced Butler to serve a term of 36 months’ imprisonment, and
ordered him to pay restitution in the amount of $864,914.61.
Several days later, the court held a hearing on the
government’s motion seeking an order of forfeiture. At the
hearing, Butler argued that a portion of his labor and certain
out-of-pocket expenses qualified as “direct costs” that should
reduce the total amount attributable to the fraud by
6
$339,246.57. The court declined to offset this requested
amount, but credited Butler for certain documented expenses that
the government already had factored into its loss and forfeiture
calculations. The court entered a final order of forfeiture in
the amount of $864,914.61, which amount the court found
represented the “net proceeds” fraudulently obtained by Butler.
Butler timely filed this appeal.
II.
On appeal, Butler asserts that the court erred in applying
the 14-level sentencing enhancement, and in entering the
forfeiture order in the amount of $864,914.61. 2 Butler does not
dispute that the district court’s calculations of loss and
forfeiture amounts accurately represented the difference between
2
In his brief, Butler also argues that the court’s order of
restitution was based on an erroneous loss calculation.
However, Butler’s argument lacks merit because it fails to
address the statutes governing restitution in this case, which
require a court to order that a defendant “make restitution to
the victim of the offense” in the “full amount” of the victim’s
losses. 18 U.S.C. §§ 3663A(a)(1), 3664(f)(1)(A). Unlike the
Guidelines and the forfeiture statute relied on by Butler, these
restitution statutes do not contain a particular provision
allowing a court to award a setoff in calculating the amount of
restitution owed. Nevertheless, to the extent that Butler is
challenging the court’s restitution order, we conclude for the
reasons stated more fully in this opinion that the district
court did not abuse its discretion in awarding restitution in
the amount of $864,914.61. See United States v. Llamas, 599
F.3d 381, 387 (4th Cir. 2010).
7
CHC’s payments to Valley and ACT and their payments to
subcontractors. Instead, Butler contends that his personal
labor provided legitimate value to CHC warranting a setoff in
both the calculated loss amount and the forfeiture amount. We
disagree with Butler’s argument.
Initially, we observe that Butler relies on two distinct
setoff provisions described below, one relating to a sentencing
enhancement involving loss amount and one applicable to
forfeiture. Nonetheless, Butler’s argument presents the single
analytical question whether his alleged “unbilled” labor
provided legitimate value to CHC, thereby requiring a reduction
in the court’s calculation of loss and forfeiture amounts.
We review for clear error the district court’s factual
findings relating to these calculations. United States v.
Vinyard, 266 F.3d 320, 332 (4th Cir. 2001) (reviewing district
court’s loss determination under the Guidelines for clear
error); United States v. Oregon, 671 F.3d 484, 490 (4th Cir.
2012) (reviewing, in criminal forfeiture context, a court’s
findings of fact for clear error). We examine de novo the
district court’s legal interpretation of the Sentencing
Guidelines and the forfeiture statute. See United States v.
Steffen, 741 F.3d 411, 414 (4th Cir. 2013); Oregon, 671 F.3d at
490.
8
When calculating a loss amount for purposes of a sentencing
enhancement, a district court is required to make a “reasonable
estimate” of the loss amount sustained by the fraud victim based
on the evidence presented. U.S.S.G. § 2B1.1 cmt. n.3 (C). In
accordance with this provision, the court’s estimate of loss
amount must include a reduction for the value of any property or
collateral returned to the victim, or the value of services
rendered to the victim. U.S.S.G. § 2B1.1 cmt. n.3 (E)(i).
In determining a forfeiture amount, a district court first
must find that there is a sufficient nexus between the
forfeiture calculation and the crime. United States v. Martin,
662 F.3d 301, 307 (4th Cir. 2011) (citing Fed. R. Crim. P.
32.2(b)(1)(A)). Under 18 U.S.C. § 981(a)(1)(C), property is
subject to forfeiture when the property is “derived from
proceeds traceable” to the criminal offense. When a “case[]
involv[es] . . . lawful services” that are “provided in an
illegal manner,” proceeds subject to forfeiture should be offset
by the “direct costs incurred in providing the goods or
services,” thereby yielding “net proceeds.” 18 U.S.C.
§ 981(a)(2)(B).
In the present case, the district court engaged in the same
analysis for calculating both the loss amount and the forfeiture
amount. That calculation was based on the total amount that CHC
9
paid to Valley and ACT, minus the cost of the legitimate work
performed by their subcontractors.
Although the district court assumed, without deciding, that
Butler performed the labor he claimed, the court declined to
allow a further reduction for that labor. The court held that
Butler’s labor was part of the fraud scheme and, therefore, did
not represent “legitimate” value received by CHC. We agree with
the court’s conclusion.
The essential components of Butler’s seven-year fraud
scheme during his employment with CHC were his acts concealing
his ownership of Valley and ACT, and his conduct concealing his
involvement with the contracts awarded to those companies.
Butler admitted that he took “significant steps” to hide from
CHC and Glover his ownership interest in Valley and ACT,
including his action of obtaining false signatures on contracts
that his companies executed with CHC. Without concealing his
active participation in Valley and ACT, Butler could not have
executed the fraud scheme.
As the district court recognized, the work performed by the
third party subcontractors at the direction of Valley and ACT
unquestionably provided legitimate value to CHC. Those
subcontractors performed construction work at market value
without any knowledge of, or involvement in, Butler’s scheme.
In contrast, all the work that Butler performed was done with
10
the purpose of increasing the benefit he received from
performance of the fraudulent contracts.
Although Butler’s “unbilled” labor did not involve the
performance of services that were unlawful per se, we must
consider the value of that labor within the context of its
purpose in furthering Butler’s criminal enterprise. Because
Butler performed this labor to facilitate completion of the
fraudulent contracts, and to perpetuate a scheme that required
concealment of his interest in Valley and ACT, his labor
necessarily constituted “unlawful services” and did not provide
CHC any legitimate value. 3
Under these circumstances, Butler was not entitled to a
credit for any value of his labor, which was an essential
component of the fraud scheme. See generally United States v.
Hartstein, 500 F.3d 790, 800 (8th Cir. 2007) (sentencing court
may refuse to credit defendant’s repayments when they relate
solely to the illegal purpose of continuing the scheme); United
States v. Ciccone, 219 F.3d 1078, 1087 (9th Cir. 2000) (court
3
The district court found on other grounds that any labor
performed by Butler did not provide legitimate value to CHC.
The court framed its analysis, in part, on its finding that
Butler’s employment with CHC required him to perform labor
relating to Valley and ACT’s subcontracts. However, we are
“entitled to affirm on any ground appearing in the record,
including theories not relied upon or rejected by the district
court.” United States v. McHan, 386 F.3d 620, 623 (4th Cir.
2004) (citation and internal quotation marks omitted).
11
need not credit a defendant for services that permitted the
fraudulent scheme to continue). Thus, the district court
properly refused Butler’s request that effectively would have
rewarded him further for his criminal conduct. We therefore
hold that the district court did not err in denying Butler’s
claim for a setoff from the loss amount and a reduction in the
award of forfeiture, based on the “fair market value” of any
services that he rendered. Accordingly, the court likewise did
not err by applying the sentencing enhancement and in entering
an order of forfeiture in the amount of $864,914.61. 4
III.
For these reasons, we affirm Butler’s sentence and the
district court’s forfeiture judgment.
AFFIRMED
4
In his brief, Butler challenges the district court’s
authority to enter a forfeiture money judgment in a criminal
case. However, before oral argument in the present case, we
issued our decision in United States v. Blackman, 746 F.3d 137,
144 (4th Cir. 2014), in which we concluded that forfeiture money
judgments in criminal cases are not only permissible but are
required when the defendant has spent or divested himself (to
the exclusion of the victim) of the gains at issue.
Accordingly, as later acknowledged by Butler during oral
argument, Butler’s contention is foreclosed by our decision in
Blackman.
12