United States v. Andrew Melton

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-3103
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Andrew Thurman Melton
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
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Submitted: March 10, 2017
Filed: August 31, 2017
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Before RILEY,1 Chief Judge, GRUENDER, Circuit Judge, and SCHREIER,2 District
Judge.
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RILEY, Chief Judge.
1
The Honorable William Jay Riley stepped down as Chief Judge of the United
States Court of Appeals for the Eighth Circuit at the close of business on March 10,
2017. He has been succeeded by the Honorable Lavenski R. Smith.
2
The Honorable Karen E. Schreier, United States District Judge for the District
of South Dakota, sitting by designation.
A jury found Andrew Melton guilty of twelve counts of mail fraud and five
counts of failure to pay employment taxes. See 18 U.S.C § 1341; 26 U.S.C. § 7202.
The district court3 sentenced Melton to seven years in prison. Melton appeals his
convictions and sentence. We affirm. See 28 U.S.C. § 1291 (appellate jurisdiction).
I. BACKGROUND
A. Factual History
1. Mail Fraud and Payroll Tax Schemes
In 1998, an Arkansas state court issued a $73,000 judgment against Melton for
his failure to pay an interior design firm for its work on his home in Little Rock.
Some time after, Melton moved to Texas, having made no payments on the judgment.
In September 2005, Melton became chief financial officer of ThermoEnergy
Corporation, a publicly traded corporation headquartered in Little Rock, focused on
licensing clean water technologies and water purification systems. Gary Mertins, the
designer whom Melton had shorted, received word Melton was back in Arkansas and
asked his brother and attorney, William Mertins, to help him collect the 1998
judgment. William Mertins filed a writ of garnishment regarding the 1998 judgment,
which at the time had grown to over $127,000 with interest.
In July 2006, two Pulaski County, Arkansas, sheriff deputies arrived at
ThermoEnergy with a writ of execution for the garnishment of Melton’s wages.
Melton was not in the office, and instead, the garnishment was served on David
Cossey, ThermoEnergy’s chief executive officer. Cossey later approached Melton
about the garnishment, and Melton told Cossey he would “take care of it.” Cossey
assumed this meant Melton would deduct the payments toward the garnishment from
his paycheck because, as chief financial officer, Melton controlled ThermoEnergy’s
budget and payroll. Not long after, Mertins Law Firm began receiving checks for
3
The Honorable Billy Roy Wilson, United States District Judge for the Eastern
District of Arkansas.
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approximately $3,000 each month in service of Melton’s garnishment.4 Cossey and
Melton did not discuss the garnishment again until 2009.
In addition to managing ThermoEnergy’s payroll, Melton was responsible for
“oversee[ing] all [the company’s] financial operations” and collecting, accounting for,
and filing federal and state taxes related to payroll. In December 2008, an outside
auditor from an accounting firm was conducting an annual audit when he noticed
ThermoEnergy’s payroll tax liability was much higher than in the years 2005, 2006,
and 2007. The auditor, Michael Barron, sent ThermoEnergy’s controller, Shelley
Cline, an email about the liability. Cline sent Barron the details of the monthly
entries into ThermoEnergy’s payroll liability account. Over the next three months,
Barron worked with Cline as he tried, and failed, to obtain necessary documentation
from ThermoEnergy. With an audit deadline approaching, Barron eventually reached
out to Melton directly on two separate occasions.
On April 6, 2009, Barron sent Melton an email concerning the payroll tax
liability. To complete his audit, Barron needed some kind of documentation from the
Internal Revenue Service (IRS), and he was becoming concerned about potential
penalties and fines. On April 14, 2009, the day before the deadline for late filing with
the Securities Exchange Commission, Melton sent Barron a memorandum. The
memorandum represented that Melton had been in “several discussions with the IRS”
and was negotiating a payment plan to become current with the payroll tax liability.
At some point around April 15, Barron and his boss Bill Kemp went to
ThermoEnergy’s office. Barron, Kemp, Cossey, ThermoEnergy attorney Gary
Barket, and Melton met to address the payroll tax liability. Melton was asked to
provide copies of IRS Forms 940 and 941, the forms used for filing payroll taxes, to
verify he had paid and filed ThermoEnergy’s payroll taxes. Throughout the meeting,
4
The checks were sent by mail or by overnight FedEx or UPS.
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Melton left and returned with a series of purported IRS forms that Melton claimed he
had filed during the years 2006, 2007, 2008, and 2009. The documents, all signed
and dated, were printed on forms that had the year 2009 scratched off in the upper
corner. According to Barron, it was “very apparent” Melton was completing the
forms “right then.” On May 21, Barron sent Melton an email asking why he could
not find corresponding documentation in ThermoEnergy’s account for an alleged
payroll tax payment. Melton responded and told Barron, “I gave you the wrong copy,
there was no payment, I have correct copies for you.”
On May 28, 2009, ThermoEnergy’s board of directors held an emergency
meeting to address the payroll tax liability. The board authorized hiring an outside
forensic auditing firm to investigate further and assess ThermoEnergy’s potential civil
and criminal liabilities. Over the next two months, the board entered into a series of
resolutions limiting Melton’s duties and authority, which included removing him
from company accounts.
Also on May 28, 2009, Barron was at ThermoEnergy working on the audit
when he discovered a check for $9,350 issued to Mertins Law Firm. Barron scanned
through the prior year’s audit and found eleven payments for $3,102.80 each made
to Mertins Law Firm. One of the checks was marked “garnishment.” Barron asked
Cossey about the payments, and Cossey told Barron about the garnishment on
Melton’s wages. Barron looked into Melton’s payroll records, but found no
indication of a garnishment. Barron discovered these routine payments to Mertins
Law Firm were being classified as a legal expense of ThermoEnergy’s. The board of
directors ultimately ordered Melton to resign from ThermoEnergy by August 3, 2009.
2. Forensic Audit and Federal Investigation
ThermoEnergy enlisted certified public accountant Jeffrey Roberts to conduct
a forensic audit investigation. On June 26, 2009, Roberts interviewed Melton.
Melton told Roberts he had filed ThermoEnergy’s payroll taxes “just maybe a month
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or two after their actual due dates.” Melton informed Roberts that ThermoEnergy had
a cash flow problem, and ThermoEnergy “had been dancing around it for years with
the IRS and they didn’t keep the notices they were sending.” Roberts asked why
Melton could not find documentation indicating the taxes had been filed with the IRS,
and Melton speculated the forms had been misplaced because ThermoEnergy had
recently moved office locations. Roberts also asked Melton about money Melton had
taken from ThermoEnergy, such as checks Melton wrote made payable to cash,
personal charges Melton made to his company credit card, and extensive travel
charged to ThermoEnergy. Melton claimed he had paid for company expenses out
of his own pocket, and the disbursements to himself were reimbursements for those
charges, but Melton did not provide receipts or documentation of those alleged
business-related expenses paid by him personally.
In February 2011, the Federal Bureau of Investigation (FBI) received
information prompting an investigation into Melton. In January and October 2012,
FBI Special Agent Shaun Roth and IRS Special Agent Erica Williams conducted
interviews with Melton. Melton alleged he had spent $800,000 of his own money to
pay for ThermoEnergy-related expenses, and ThermoEnergy still owed him
approximately $150,000 in reimbursement for those expenses. Melton said he would
provide receipts and documentation of his expenses, but never did.
As for the payroll tax liability, Melton alleged Cossey, Cline, and a member of
the ThermoEnergy board knew payroll taxes were not being paid. During the first
interview, Melton claimed he had met with a representative from the IRS at the
federal building in Little Rock, but during his second interview he admitted this was
untrue, and he had never spoken with anyone from the IRS. When the agents
confronted Melton with the memorandum he had sent Barron stating he had been
negotiating with the IRS, Melton admitted he created the document so Barron could
complete his audit. Melton also told the agents that the Forms 940 and 941 he had
given Barron were printed on forms created in 2009 only because he had not saved
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the originals. The agents inquired about entries made into ThermoEnergy’s ledgers
so it appeared as if ThermoEnergy had made payroll tax payments, but Melton stated
he could not recall making such entries.
B. Prior Proceedings
In February 2013, a federal grand jury charged Melton with twelve counts of
mail fraud, each count based on a separate check written to Mertins Law Firm in 2008
and 2009. In April 2014, the grand jury returned a superseding indictment adding
five counts of failure to pay withholding taxes. See 18 U.S.C. § 1341; 26 U.S.C.
§ 7202. Melton pled not guilty.
At trial, the government explained it intended to prove (1) Melton fraudulently
took ThermoEnergy’s money to pay his personal debt, and (2) Melton willfully failed
to pay ThermoEnergy’s payroll taxes in 2008 and the first quarter of 2009. The
government called Cossey, Barron, Roberts, Special Agent Roth, and Special Agent
Williams, among others. Cossey testified he did not approve Melton paying his
personal debt with ThermoEnergy funds and stated he did not know the payroll taxes
were unpaid until the audit revealed as much. Over Melton’s objections, the district
court received into evidence minutes from ThermoEnergy’s board meetings; emails
among Barron, Cline, Melton, and Cossey; Barron’s audit report; and Roberts’
forensic audit report. At the close of the government’s case, Melton moved for
judgment of acquittal, which the district court denied.
Melton testified in his defense. Melton admitted the payroll taxes were not
paid on time. Melton claimed ThermoEnergy owed him money because, due to the
company’s cash flow problem, he was forced to pay employees out of his own pocket,
and so he would in turn “get cash back from the company when we had cash
available.” Melton acknowledged it was improper to pay his personal debt with
money taken from ThermoEnergy’s legal expense account, but claimed he did so
because ThermoEnergy had not reimbursed him for about 75 trips he had taken from
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Dallas to Little Rock before he permanently moved back to Little Rock, and he
“didn’t do it properly” because he “was so busy.” Melton stated he recorded each of
those distributions to Mertins Law Firm and “wasn’t trying to hide anything.”
At the close of the evidence, Melton renewed his motion for judgment of
acquittal, which was again denied. The jury returned a guilty verdict on all seventeen
counts.
For sentencing, the district court adopted the findings in Melton’s presentence
investigation report. The district court applied a two-level enhancement for the use
of sophisticated means, a four-level enhancement because Melton’s crimes
endangered the solvency of a publicly traded company, a two-level enhancement
because Melton held a position of public trust, and a two-level enhancement for
obstruction of justice. See United States Sentencing Guidelines (U.S.S.G. or
Guidelines) §§ 2B1.1(b)(1)(I), 2B1.1(b)(10)(C), 2B1.1(b)(16)(B)(ii)(I), 3B1.3,
3C1.1.5 The district court determined Melton’s advisory sentencing range under the
Guidelines was 135-168 months. The government agreed a seven-year sentence was
reasonable, and the district court sentenced Melton to 84 months on the mail fraud
counts and 60 months on the failure to pay withholding tax counts, to run
concurrently.
II. DISCUSSION
A. Evidentiary Rulings
Melton argues the district court abused its discretion by admitting into evidence
the following: (1) minutes from three emergency board meetings during 2009,
(2) emails among Cline, Barron, Melton, and Cossey, and (3) audit and forensic audit
5
The presentence investigation report used the 2008 version of the Guidelines.
Neither party contests this point. We cite to the 2016 version because there is no
material difference between the versions.
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reports. We review the district court’s admission of evidence for an abuse of
discretion, affording “‘deference to the district judge who saw and heard the
evidence.’” United States v. Two Elk, 536 F.3d 890, 900 (8th Cir. 2008) (quoting
United States v. Davidson, 449 F.3d 849, 853 (8th Cir. 2006)). “An evidentiary
ruling is harmless if the substantial rights of the defendant were unaffected, and the
error had no, or only a slight, influence on the verdict.” United States v. Worman,
622 F.3d 969, 976 (8th Cir. 2010).
1. Board Meeting Minutes
During Cossey’s direct examination, the government introduced the minutes
from ThermoEnergy’s emergency board meetings on May 28, June 5, and July 31,
2009. As foundation, Cossey testified it was a regular practice of ThermoEnergy to
keep minutes taken at meetings of the board of directors, and the minutes were
prepared by ThermoEnergy’s outside corporate counsel. Cossey verified the minutes
were correct and accurate based on his personal recollection. The government moved
to admit the first set of minutes, and Melton objected, arguing the evidence
“invade[d] the province of the jury by saying that they’ve uncovered evidence of
illegal acts on the part of Mr. Melton.” The May 28 and June 5 minutes both stated
the accounting firm had discovered evidence of disbursements that may have been
“illegal acts on the part of . . . Melton,” and the July 31 minutes stated Melton “has
committed material violations of law.”
The government offered to redact references to legal conclusions but
maintained the exhibits were admissible under the business-records exception to
hearsay. See Fed. R. Evid. 803(6). The district court dismissed the jury and heard
further argument from the parties. The government again asserted the exhibits were
admissible, to which the district court responded, “No doubt about it being part of a
business record, but . . . there could be all kinds of things in a business record that’s
admissible, but there’s some inadmissible portions of it.” The district court decided
the evidence was “probably admissible,” and asked Melton’s counsel if he would like
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a limiting instruction to be given to the jury. Melton’s counsel requested a limiting
instruction, but did not ask for any redactions, and again argued the evidence should
not be admitted because it contained prejudicial conclusions of law. The district
court overruled the objection, assumed the parties held similar positions in regard to
the other two sets of minutes, and ruled these exhibits admissible as well. Before
publishing the first exhibit, the district court gave the following limiting instruction
to the jury:
[Exhibit] Number 9, ladies and gentlemen of the jury, will have some
potential findings that there might have been violations of the law. That
does not mean that there were violations of the law. You’ll decide
whether there were violations of the law based on the specific
indictment that’s brought here for you to consider. This shows what was
brought to the attention of the Board and will explain in part some
action they have taken.
Though the district court did not repeat the instruction before publishing the next two
exhibits, it referred the jury to the “[s]ame admonition with the alleged violations that
may be mentioned in the exhibit.” The minutes were not redacted in any way.
Melton argues, even if these minutes were admissible under the business-
records exception to hearsay, the references to illegal acts were unduly prejudicial.
See Fed. R. Evid. 403. We agree the minutes were admissible business records, but
share Melton’s concern regarding their prejudicial effect. Yet, we “give[] broad
deference to a district court’s determination under Rule 403,” and we “‘do not
reweigh the value of the material against its potential for harm to the defendant, but
determine only whether the district judge abused its discretion in admitting it.’”
United States v. Loveless, 139 F.3d 587, 592 (8th Cir. 1998) (quoting United States
v. Holmes, 822 F.2d 802, 806 (8th Cir. 1987)). The brief references to illegal conduct
were only in a few sentences of the total nine pages of these three exhibits, and the
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minutes contained relevant specific information regarding the actions and resolutions
of ThermoEnergy’s board of directors.
Importantly, although the government offered to redact those challenged
references, the record shows Melton did not pursue the government’s offer to redact
the references to illegal conduct. Without acceptance of the redaction, the district
court provided a sufficient limiting instruction to the jury. See United States v.
Walker, 470 F.3d 1271, 1275 (8th Cir. 2006) (“[A] limiting instruction diminishes the
danger of unfair prejudice arising from the admission of the evidence.”); see also
Loveless, 139 F.3d at 593. The district court did not abuse its discretion.
2. Emails
Melton next argues four emails contained inadmissible hearsay. The first email
was from Barron to Cline, in late December 2008 following Barron’s discovery of the
sizeable payroll tax liability, asking Cline to provide details of the payroll tax liability
account. Melton objected to the email’s admission as hearsay. The government
withdrew its request for admission of the exhibit, explaining it would instead ask
Barron about its contents because Barron was presently under examination. The
second email was Cline’s response to Barron. Over another hearsay objection, the
district court admitted the email because the government proffered Cline would later
testify about the emails’ content. Barron read part of the exhibit, stating the email
indicated Cline had “ask[ed] [Melton] about [the payroll liability] and he said that he
will pay it by the end of the year” and included an attachment of a payroll record.
The government only referred to the third and fourth emails in its examination of
Barron and did not offer them into evidence. The third email was from Barron to
Melton and Cline and listed items Barron needed from Melton to complete his audit.
The fourth email, from Barron to Melton and Cossey, had the subject line “Possible
Illegal Acts” and contained an attached memorandum summarizing the issues
discovered during Barron’s audit.
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During the next recess, the district court discussed the objections with the
parties outside the presence of the jury. The government moved to withdraw the first
email from Barron to Cline and the second email from Cline to Barron, and the
district court struck them from the record. The district court then stated it was “going
to reverse [itself] again” on the emails from Barron to Melton and Cline and from
Barron to Cline and Cossey, considering them “admitted.” The government then
formally offered into evidence these emails, to which the district court responded,
“I’m going to leave them in.”
It is unclear to us which of these emails remained in evidence. It is clear to us,
however, regardless of whether the emails constituted inadmissable hearsay, their
combined significance was minor. “An error admitting hearsay testimony ‘that does
not affect substantial rights must be disregarded.’” United States v. Tenerelli, 614
F.3d 764, 771 (8th Cir. 2010) (quoting Fed. R. Crim. P. 52(a)). These emails were
inconsequential in the overall trial and did not affect the verdict. See Worman, 622
F.3d at 976.
3. Audit Reports
During the government’s re-examination of Barron, he discussed a report he
completed for ThermoEnergy’s board of directors on September 30, 2009. The report
communicated the results of the 2008 audit, which recommended diversifying
Melton’s duties as chief financial officer because the “lack of segregation of duties
in this area allowed [Melton] to make unauthorized disbursements for personal
expenses and to pay a garnishment order with Company funds payable to a law firm
instead of deducting the funds from his net pay.” Barron testified the report was “the
required communication letter to the audit committee of the Board of Directors
required by the CPA reporting standards to be issued annually after an audit of a
corporation.” Melton objected, arguing, “This would have been done after Mr.
Melton left the company.” The district court admitted the report.
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“‘To preserve an error for appellate review, an objection must be timely and
must clearly stat[e] the grounds for the objection. Errors not properly preserved are
reviewed only for plain error.’” United States v. Price, 851 F.3d 824, 826 (8th Cir.
2017) (per curiam) (alteration in original) (quoting United States v. Pirani, 406 F.3d
543, 549 (8th Cir. 2005) (en banc)). Because’s Melton’s trial objection failed to state
clear grounds, we review for plain error. See Fed. R. Crim. P. 52(b); Pirani, 406 F.3d
at 549.
The fact that Barron discovered significant irregularities does not render the
report inadmissible under Fed. R. Evid. 803(6). See Cullen v. United States, 408 F.2d
1178, 1179-80 (8th Cir. 1969) (concluding audit records calculating amounts lost
after a bank robbery were admissible because the fact that “such recording may occur
after an unusual event such as a bank robbery does not alter the fact that the records
were prepared in a regular manner”). But see Paddack v. Dave Christensen, Inc., 745
F.2d 1254, 1258-59 (9th Cir. 1984) (holding audit reports generated only after a
suspected deficiency were not prepared in the course of regularly conducted
business). As Barron explained, he prepared the report as part of his annual audit
duties for ThermoEnergy. Any resulting prejudice arising from its conclusions and
recommendations did not affect Melton’s substantial rights because Barron had
already explained the results of his audit in his testimony—specifically, by expressing
to the jury his concern that Melton was violating the law. See Fed. R. Evid. 403.
More concerning was the admission of Roberts’ audit report which he prepared
for the board of directors. The report contained an executive summary of the
investigation into Melton’s credit card charges to ThermoEnergy, expense
reimbursements to himself, payments made toward his personal garnishment, and
failure to file and pay ThermoEnergy’s payroll taxes. Melton objected on the grounds
of hearsay. The district court overruled Melton’s objection and admitted the report.
Melton contends the report fell outside the business-records exception to hearsay
because it was prepared to determine the extent of ThermoEnergy’s liability in
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anticipation of litigation. We agree the report should not have been admitted under
Fed. R. Evid. 803(6). The report was not a record of a regularly conducted activity,
because it was created for the purpose of determining the legal implications of
Melton’s conduct.
Nonetheless, we conclude the district court’s abuse of discretion did not result
in reversible error. Although the report itself contained Roberts’ written conclusions,
his testimony at trial relayed his conversations with Melton during his investigation,
and the report summarizing his testimony was cumulative. “‘Improper admission of
evidence which is cumulative of matters shown by admissible evidence is harmless
error.’” Davis v. White, 858 F.3d 1155, 1159 (8th Cir. 2017) (quoting Wilson v. City
of Des Moines, 442 F.3d 637, 644 (8th Cir. 2006)); see also United States v.
Londondio, 420 F.3d 777, 789 (8th Cir. 2005) (“The admission of hearsay evidence
that is cumulative of earlier trial testimony by the declarant . . . is not likely to
influence the jury and is therefore harmless error.”). Melton’s substantial rights were
not affected by the report’s admission.
B. Government’s Closing Argument
Melton asserts a new trial should be granted because the government’s remarks
during closing affected his right to a fair trial. Because Melton did not object on
those grounds during trial, we review for plain error. See United States v. White, 241
F.3d 1015, 1023 (8th Cir. 2001). The burden is on Melton to demonstrate the district
court plainly erred by allowing the government’s comments. See id. “We will
reverse an improper remark during closing argument without an objection only under
‘exceptional circumstances.’” United States v. Branch, 591 F.3d 602, 609 (8th Cir.
2009) (quoting United States v. Eldridge, 984 F.2d 943, 947 (8th Cir. 1993)).
Reversal for prosecutorial misconduct requires proof that “‘the prosecutor’s remarks
were improper,’” and “‘such remarks prejudiced the defendant’s rights in obtaining
a fair trial.’” Id. (quoting United States v. Bentley, 561 F.3d 803, 809 (8th Cir.
2009)).
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Melton calls our attention to several statements made during closing. Referring
to Melton’s testimony, counsel for the government remarked, “His lips are moving,
things are going through his brain coming out his mouth and it’s just flat out lies.
That pretty much typifies Mr. Melton.” Counsel repeated he believed Melton was
lying, and Melton was selling “magic” on the stand. Counsel also called Melton’s
testimony “silly” and “made up,” and remarked, “there is just arrogance flowing from
that man [Melton] right there.” Near the end of his closing, counsel concluded: “The
evidence is Andrew Melton is lying. . . . It’s amazing what that man got up there and
testified about and lied to you. . . . That man right there is guilty. Convict him.”
While these comments taken together and out of context arguably may be
inappropriate for a federal government prosecutor, we liken their effect to those
discussed in United States v. White, where we determined the prosecutor’s comments
were “questionable,” but did “not rise to the level of plain error affecting [the
defendant’s] substantial rights.” White, 241 F.3d at 1023. In White, under plain error
review, the defendant challenged the prosecutor’s statements that the defendant was
“‘lying bold face to you,’” and “‘tried to lie to you,’” by suggesting he had not used
drugs for several decades. Id. at 1022-23. The prosecutor also stated, “‘If he can
suggest to the government that witnesses are willing to lie, what kind of lies do you
think he would tell in order to evade responsibility entirely?’” Id. at 1023. We
determined the comments did not warrant reversal because the prosecutor “outlined
the evidence and highlighted the reasons he believed [the defendant’s] testimony was
not credible,” and “we [chose] not to employ the discretion conferred by Rule 52(b)”
because it was not “a miscarriage of justice.” Id. (citation omitted); see also Fed. R.
Crim. P. 52(b). We reasoned it was “permissible for a prosecutor to interpret the
evidence as indicating that the defendant [was] not telling the truth.” Id. “So long
as prosecutors do not stray from the evidence and the reasonable inferences that may
be drawn from it, they, no less than defense counsel, are free to use colorful and
forceful language in their arguments to the jury.” United States v. Robinson, 110
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F.3d 1320, 1327 (8th Cir.1997); cf. United States v. Holmes, 413 F.3d 770, 775 (8th
Cir. 2005) (holding the prosecutor’s closing comments implying defense counsel was
“conspiring with the defendant to fabricate testimony” were “highly improper because
they improperly encourage the jury to focus on the conduct and role of [the
defendant’s] attorney rather than on the evidence of [the defendant’s] guilt”); United
States v. Johnson, 968 F.2d 768, 772 (8th Cir. 1992) (granting a new trial where
closing remarks improperly ignited “fear and concern engendered by the national
drug epidemic”).
Here, the government’s case hinged on whether the jury believed Melton’s
defense. Once the payroll tax liability was discovered, Melton told a series of stories
in an attempt to keep up appearances. At their core, the challenged prosecution
comments attacked Melton’s testimony, a fair topic for closing remarks. See United
States v. Frokjer, 415 F.3d 865, 874 (8th Cir. 2005) (holding “there is nothing wrong
with the prosecutor arguing that the evidence proved that [the defendant] was lying”
where the charge involved making false statements). Any error in the government’s
statements was not a miscarriage of justice. The evidence of guilt was
“‘overwhelming,’” and therefore “‘an improper argument is less likely to affect the
jury verdict.’” United States v. Barrera, 628 F.3d 1004, 1008 (8th Cir. 2011) (quoting
Johnson, 968 F.2d at 772). We do not exercise our Rule 52(b) discretion to recognize
any plain error.
C. Motion for Judgment of Acquittal
Melton appeals the district court’s denial of his motion for judgment of
acquittal on the mail fraud counts. We review de novo whether the evidence was
sufficient to sustain the convictions. See United States v. Bennett, 765 F.3d 887, 895
(8th Cir. 2014). “‘Evidence is sufficient to sustain a conviction if, when viewed in
the light most favorable to the government, it offers substantial support for the
verdict.’” United States v. McKanry, 628 F.3d 1010, 1016 (8th Cir. 2011) (quoting
United States v. Clay, 618 F.3d 946, 950 (8th Cir. 2010) (per curiam)). Viewing the
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evidence in the light most favorable to the government, and accepting reasonable
inferences in favor of the jury’s verdict, we will affirm unless “‘no reasonable jury
could have found [the defendant] guilty.’” Bennett, 765 F.3d at 895 (alteration in
original) (quoting United States v. Chatmon, 742 F.3d 350, 352 (8th Cir. 2014)).
The crime of mail fraud essentially contains four elements: (1) a scheme to
defraud through false representations, (2) intent to defraud, (3) reasonable
foreseeability the mail would be used, and (4) the mail was actually used. See United
States v. Bryant, 606 F.3d 912, 917 (8th Cir. 2010); see also United States v. Easton,
54 F. App’x 242, 243 (8th Cir. 2002) (unpublished per curiam).
Melton contends the evidence was insufficient to support his mail fraud
convictions because the payments he made to satisfy his personal debt were not a
fraudulent scheme and the government did not prove he intended to defraud
ThermoEnergy. As chief financial officer, Melton was entrusted with complete
responsibility of ThermoEnergy’s finances and payroll. Rather than deduct the
garnishment payments from his personal salary and apply them toward his personal
debt, as Melton admitted he knew he should do, Melton directly diverted funds from
ThermoEnergy’s legal expense account for his personal benefit, knowing he
possessed sole control over the financial operations.
Melton argues it was “lack of diligence” on the part of the ThermoEnergy, its
audit committee, and its public accounting firm—“not [his own] deliberate
deceit”—that “caused the payments to Mertins Law Firm to go unnoticed.” Melton
testified ThermoEnergy’s annual legal expenses were usually between $350,000 and
$600,000, and the comparative amount of each garnishment check was “minor.” The
jury could have inferred Melton knew the relatively small garnishment payments
between $3,000 and $9,000 would go unnoticed among the auditors. The payroll set
up between Melton and Cline, whom Melton hired in 2006, also supports the
inference Melton intended to keep the payments to Mertins Law Firm hidden. Melton
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maintained an older version of QuickBooks, the accounting software he and Cline
used, so they could not share documents electronically. Instead, Melton would print
physical copies of records and give them to Cline to enter manually into her version
of the accounting software, and Cline could not verify the information from Melton.
Only Melton’s version of QuickBooks had a “payroll module” activated, so Cline had
no ability to print company checks. Although Melton contends ThermoEnergy owed
him “in excess of a couple hundred thousand dollars for unpaid salary, deferred
compensation, and unreimbursed expenses,” the jury was free to discredit Melton’s
testimony and conclude he intentionally defrauded ThermoEnergy. See United States
v. Louper-Morris, 672 F.3d 539, 556 (8th Cir. 2012) (“‘Fraudulent intent need not be
proved directly and can be inferred from the facts and circumstances surrounding a
defendant’s actions.’” (quoting United States v. Flynn, 196 F.3d 927, 929 (8th Cir.
1999))). Melton’s unauthorized actions demonstrate a pattern designed to conceal his
use of company funds to pay his personal debt.
D. Right to a Fair Trial
Melton argues the cumulative effects of these errors deprived him of his
constitutional right to a fair trial. “We may reverse where the case as a whole
presents an image of unfairness that has resulted in the deprivation of a defendant’s
constitutional rights, even though none of the claimed errors is itself sufficient to
require reversal.” United States v. Mann, 701 F.3d 274, 311 (8th Cir. 2012) (citation
omitted). “This court will not reverse based upon the cumulative effect of errors
unless there is substantial prejudice to the defendant.” United States v. Anwar, 428
F.3d 1102, 1115 (8th Cir. 2005). The cumulative effect of any errors here did not
substantially affect Melton’s right to a fair trial, and we will not reverse on that basis.
E. Sentence Enhancements
Melton challenges his seven-year sentence, arguing the district court committed
procedural error by applying three specific offense enhancements. “‘[W]e review a
district court’s factual findings for clear error and its interpretation and application
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of the guidelines de novo.’” United States v. Timberlake, 679 F.3d 1008, 1011 (8th
Cir. 2012) (quoting Bryant, 606 F.3d at 918). “We also note that ‘sentencing judges
are required to find sentence-enhancing facts only by a preponderance of the
evidence.’” United States v. Norwood, 774 F.3d 476, 479 (8th Cir. 2014) (per
curiam) (quoting United States v. Scott, 448 F.3d 1040, 1043 (8th Cir. 2006)).
1. Sophisticated Means
The district court applied a two-level enhancement to Melton’s offense level
for the use of sophisticated means. See U.S.S.G. § 2B1.1(b)(10)(C). The Guidelines
define “sophisticated means” as “especially complex or especially intricate offense
conduct pertaining to the execution or concealment of an offense.” Id. cmt. n.9(B).
“The sophisticated-means enhancement is proper when the offense conduct, viewed
as a whole, ‘was notably more intricate than that of the garden-variety [offense].’”
United States v. Jenkins, 578 F.3d 745, 751 (8th Cir. 2009) (alteration in original)
(quoting United States v. Hance, 501 F.3d 900, 909 (8th Cir. 2007)). “‘Repetitive and
coordinated conduct, though no one step is particularly complicated, can be a
sophisticated scheme.’” Id. (quoting United States v. Finck, 407 F.3d 908, 915 (8th
Cir. 2005)).
The district court did not clearly err by finding Melton employed sophisticated
means. To conceal ThermoEnergy’s payroll tax liability, Melton made false entries
into ThermoEnergy’s ledgers and kept Cline from accessing the data by maintaining
a different version of their accounting software. After Barron discovered the payroll
tax liability, Melton attempted to conceal his scheme further by writing a
memorandum to Barron falsely informing him he was working with the IRS, and then
presenting doctored IRS Forms to Barron and Cossey alleging he had paid the taxes.
Melton’s mail fraud scheme also was sophisticated because Melton’s conduct, which
lasted over a period of four years, was repetitive and coordinated. Abusing his
authority as chief financial officer, Melton concealed the garnishment payments.
Melton recorded the payments in ThermoEnergy’s ledger yet acknowledged they
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were comparatively minor, and thus likely would go undetected. Melton consistently
mischaracterized the payments in a way he suspected would remain unnoticed.
2. Endangerment of Financial Security
The district court also applied a four-level sentence enhancement because it
found Melton’s crimes “substantially endangered the solvency or financial security
of an organization that, at any time during the offense, was a publicly traded
company.” U.S.S.G. § 2B1.1(b)(16)(B)(ii)(I). Melton claims ThermoEnergy’s
financial hardship was not a result of his own conduct because almost every witness
testified ThermoEnergy constantly had revenue problems.
According to Cline, payroll checks frequently bounced, and ThermoEnergy
went without paying executives for several months because ThermoEnergy needed
funding from potential investors. While the government agrees there “[c]ertainly”
were other factors affecting the financial security of ThermoEnergy, Melton’s crimes
left ThermoEnergy with an “unforeseen $2,000,000 liability, and the public effects
of a crooked CFO on [ThermoEnergy’s] reputation.” Cossey, who retired from
ThermoEnergy in 2011, stated that to his knowledge ThermoEnergy now operated
only as a “virtual company” with no employees. Arthur Reynolds, who was interim
chief executive officer of ThermoEnergy from August 3, 2009 until November 2010,
testified, “key investors were not willing to put more money in until [the payroll tax
liability] matter was clarified and resolved.” Though Melton was not solely
responsible for ThermoEnergy’s financial hardship, given the effect of his crimes on
the security and future of the organization, the district court did not err in applying
this enhancement. See United States v. Wheeler, 412 F.3d 979, 981 (8th Cir. 2005)
(upholding the application of an enhancement for endangering the financial security
of a corporation where the defendant’s conduct “adversely affected the company’s
viability, profitability, and ability to staff the business” and nearly forced the
corporation into bankruptcy (internal quotation marks omitted)).
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3. Obstruction of Justice
Lastly, Melton challenges the district court’s finding that he obstructed justice
under U.S.S.G. § 3C1.1. The district court may apply a two-level sentence
enhancement for obstruction of justice if “the defendant willfully obstructed or
impeded, or attempted to obstruct or impede, the administration of justice with
respect to the investigation, prosecution, or sentencing of the instant offense of
conviction.” Id. One of the ways in which a defendant obstructs justice is by
“providing a materially false statement to a law enforcement officer that significantly
obstructed or impeded the official investigation or prosecution of the instant offense.”
Id. cmt. n.4(G).
Melton argues the government “did not meet its burden of proof” because it
“did not assert, nor was it proven, that the statements provided by Mr. Melton were
material and they significantly obstructed or impeded the official investigation or
prosecution of the case.” The evidence demonstrates otherwise. On two separate
occasions, Melton spoke with Special Agent Roth and Special Agent Williams. In
each interview, Melton obfuscated the truth, forcing the agents to expend additional
time and resources investigating Melton’s statements. Melton told the agents he had
met with an individual from the IRS, which he later admitted was untrue. Melton
advised the agents Cossey knew the payroll taxes were not being paid, but Cossey
denied that allegation at trial. Melton said he would provide the agents with
documentation of his expenses for ThermoEnergy, but never did. Melton claimed he
did not remember making any false entries in ThermoEnergy’s ledgers to make the
ledgers appear as if ThermoEnergy had paid its taxes. Based on this testimony, we
find no clear error. See United States v. Montanari, 863 F.3d 775, 780-81 (8th Cir.
2017) (affirming obstruction-of-justice enhancement based on false statements made
during interview with IRS agent).
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III. CONCLUSION
The convictions and sentence are affirmed.
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