United States v. Franklin v. Fennell

In the
United States Court of Appeals
For the Seventh Circuit
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No. 18-1969
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
FRANKLIN V. FENNELL,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Terre Haute Division.
No. 2:16-CR-00028-001 — Jane E. Magnus-Stinson, Chief Judge.
____________________
ARGUED APRIL 24, 2019 — DECIDED MAY 30, 2019
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Before KANNE, HAMILTON, and ST. EVE, Circuit Judges.
HAMILTON, Circuit Judge. In federal criminal law, the
amount of restitution for a fraud conviction depends on the
victims’ actual losses, regardless of whether the defendant in-
tended larger losses. When imposing restitution, the district
court must say enough about its loss calculation, under all the
circumstances, to permit meaningful review. One mechanism
for meeting those requirements is 18 U.S.C. § 3664(a), which
2 No. 18-1969
permits the court to order a detailed accounting by a proba-
tion officer.
Here, the evidence at Franklin Fennell’s trial showed an
actual loss amount of $110,600 in kickbacks that he and a co-
defendant received for steering government contracts to a fa-
vored bidder. The presentence investigation report recited
that amount as restitution, which the district court imposed,
but the court referred to that amount orally as the “intended”
loss. Fennell now seeks a remand, insisting that § 3664(a) re-
quires that the presentence report contain its own detailed ac-
counting rather than incorporate the trial evidence by refer-
ence, and that the district court erred by imposing restitution
for intended loss instead of actual loss. We affirm. There was
no plain error in the district court’s restitution calculation,
and despite the mistaken oral reference to intended loss, the
record shows beyond reasonable dispute that the amount
awarded was the victim’s actual loss.
I. Factual Background and Procedural History
Fennell was the facilities and transportation director for
the Vigo County School Corporation in Indiana. In that role,
he submitted requests for maintenance work to the school dis-
trict, which then authorized vendors to complete the work
and paid them on completion.
Fennell and co-defendant Frank Shahadey, a district secu-
rity officer, invited vendor Mike Pick to submit inflated esti-
mates and invoices for recurring projects, like tree trimming
and tree removal, in exchange for kickbacks. Fennell himself
would award the contract to Pick on behalf of the district.
Sometimes, the maintenance projects were wholly fictitious.
No. 18-1969 3
When Pick received a payment, he deposited the check
and withdrew cash from those funds to pay kickbacks to Fen-
nell and Shahadey. Pick performed approximately 58 jobs for
the district. For most of those jobs, Fennell and Shahadey
jointly received kickbacks ranging from $500 to $9,000 per in-
voice. Pick later cooperated with the FBI to record phone calls
and meetings with Shahadey and Fennell.
At trial, an FBI agent testified about her analysis of the
amounts embezzled, based on Pick’s testimony, work orders,
initial estimates, purchase requisitions, invoices, and bank
statements. To summarize the voluminous records, the agent
created a chart labeled Exhibit 37-2. She itemized each invoice
attributed to Pick from 2014 to 2016, detailing the dates,
amounts charged, and kickbacks paid to Fennell and Sha-
hadey.
The agent testified that Pick’s kickback payments to Fen-
nell and Shahadey totaled $110,600. To calculate the kickback
from each invoice, the agent relied on Pick’s interviews with
the FBI about the amount he withdrew each time to pay the
defendants, on bank statements of his withdrawals, and on
audio recordings and surveillance of money exchanges be-
tween Pick and the defendants.
The jury found Fennell guilty on all nine charged counts
of wire fraud, 18 U.S.C. § 1343, one count of theft of govern-
ment funds, § 666, and two counts of making false statements
to the FBI during the investigation, § 1001(a)(2). In the presen-
tence report, the probation officer recommended $110,600 of
restitution (the kickback amount from trial) under 18 U.S.C.
§ 3663A(c)(1)(A)(ii). Fennell objected generally to the presen-
tence report, disputing “all findings of fact regarding loss and
culpability,” citing the “arbitrary nature” of the estimated
4 No. 18-1969
loss, and asserting that the school district’s loss was less than
$95,000 (and thus warranted a lower total offense level under
the Sentencing Guidelines). But, critical to this appeal, Fennell
did not request a complete accounting under § 3664(a).
At the sentencing hearing, the parties debated the restitu-
tion amount in general terms. Fennell said that “haphazard
accounting” and unreliable records from Pick marred the loss
calculation. He also argued that the correct loss amount was
between $40,000 and $95,000, as that range had been stipu-
lated as part of Shahadey’s earlier guilty plea. The govern-
ment responded that it had uncovered additional losses in
preparing for Fennell’s trial; it again furnished the court with
Exhibit 37-2, detailing the kickback payments the agent had
summarized at trial.
The court sentenced Fennell to 24 months in prison. As for
restitution, the court cited its recollection of the evidence and
the “complete jury verdict in favor of the Government’s case”
and found that the government had offered evidence “be-
yond a preponderance” to support the “intended” loss
amount of $110,600 in restitution, for which Fennell was
jointly and severally liable.
II. Analysis
On appeal, Fennell contends that 18 U.S.C. § 3664(a) re-
quired the probation officer to provide a complete accounting
of the restitution amount, backed by detailed findings and
documentary evidence. In Fennell’s view, the presentence re-
port here does not meet the statutory requirement because (a)
it is not complete and self-contained, in that it rests on more
detailed trial evidence not reiterated in the presentence
No. 18-1969 5
report, and (b) the restitution amount was not calculated by a
probation officer or subjected to renewed adversarial vetting.
When a defendant raises such issues in the district court,
we review the district court’s authority to order restitution de
novo and its calculation of the restitution amount for abuse of
discretion. United States v. Berkowitz, 732 F.3d 850, 852 (7th Cir.
2013). But here, Fennell must clear the higher hurdle of plain-
error review because he failed to raise specific objections to
the presentence report and the restitution amount in the dis-
trict court. See id. He objected only generally to the “findings
of fact regarding loss and culpability,” “the arbitrary nature”
of the loss calculation, and witnesses’ “haphazard” account-
ing, without saying why he characterized the evidence this
way. He did not invoke § 3664(a) or its complete-accounting
mechanism.
On appeal, his contentions have a “different flavor”—i.e.,
that the court supposedly shirked its statutory duty to secure
a complete accounting. See Berkowitz, 732 F.3d at 852–53 (ap-
plying plain-error review to new appellate challenges to res-
titution order). Because these arguments are different in kind
from those raised in the district court, we will overturn the
district court’s calculation only if we find an error that likely
deprived Fennell of his substantial rights and had a signifi-
cant chance of affecting the outcome.
Our review of the record and Fennell’s contentions reveals
no such error. Fennell argues that a more detailed accounting
of restitution is always required at sentencing, but he does not
show—and we do not find—that a comprehensive presen-
tence report would have produced a different restitution
amount in this case. Repetitive findings are unnecessary if the
presentence report and trial record as a whole support the
6 No. 18-1969
court’s conclusions by a preponderance of the evidence.
See United States v. Hassebrock, 663 F.3d 906, 925 (7th Cir.
2011). Where, as here, the government’s sentencing theory
and evidence are the same as they were at trial, and where
there is only one victim to account for (i.e., the school district),
it is hard to see value in requiring the district court, without a
more specific objection or demand, to provide a more detailed
independent discussion to justify reaching the same figure in
the presentence report.
Moreover, it was Fennell’s burden to demonstrate the un-
reliability of the presentence report, and “a simple denial of
its accuracy does not discharge this burden.” United States
v. Scalzo, 764 F.3d 739, 745 (7th Cir. 2014); see also United
States v. Artley, 489 F.3d 813, 821 (7th Cir. 2007) (challenges to
drug quantity in presentence report). Given Fennell’s failures
to invoke § 3664(a), to furnish any evidence, or to raise spe-
cific challenges to the presentence report or the agent’s sum-
mary chart, the district court did not commit a plain error af-
fecting Fennell’s substantial rights when it relied on the
presentence report and trial evidence without a “lengthy dis-
cussion of the restitution order.” Berkowitz, 732 F.3d at 854;
see also Hassebrock, 663 F.3d at 925–26.
Fennell also seizes on the district court’s oral reference to
the “intended” rather than “actual” loss when it discussed
restitution. The statute indeed requires that the restitution be
based on the loss amount that the defendant actually caused,
even if some greater sum was intended. See United States
v. Rhodes, 330 F.3d 949, 953 (7th Cir. 2003). The government
responds, persuasively, that in context, the reference to “in-
tended loss” was surely a slip of the tongue. In any event, the
record makes immaterial any failure to mark the distinction
No. 18-1969 7
between “intended” and “actual” loss. The FBI agent calcu-
lated that $110,600 represented the “kickback amount” that
Fennell and his co-conspirator received from the school dis-
trict, i.e., the district’s actual loss asserted and proven by the
government. (We express no view on whether the victim’s ac-
tual loss was limited to the amount of the kickbacks.) There is
no gulf here between the actual and intended loss. And the
amount ordered by the district court is the only one with rec-
ord support.
The judgment of the district court is AFFIRMED.