United States v. Head ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 94-5858
TONEY HEAD, JR.,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
No. 94-5859
T. HEAD AND COMPANY,
INCORPORATED,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v. No. 94-5906
TONEY HEAD, JR.,
Defendant-Appellee.
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v. No. 94-5907
TONEY HEAD, JR.,
Defendant-Appellee.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(CR-94-198)
Argued: September 29, 1995
Decided: February 12, 1996
Before HALL and NIEMEYER, Circuit Judges, and BEATY,
United States District Judge for the Middle District
of North Carolina, sitting by designation.
_________________________________________________________________
Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Robert Kenly Webster, Thomas Charles Hill, SHAW,
PITTMAN, POTTS & TROWBRIDGE, Washington, D.C., for
Appellants. Daniel Locke Bell, II, Assistant United States Attorney,
Vincent L. Gambale, Assistant United States Attorney, Alexandria,
Virginia, for Appellee. ON BRIEF: Michael J. McCue, SHAW,
PITTMAN, POTTS & TROWBRIDGE, Washington, D.C., for
Appellants. Helen F. Fahey, United States Attorney, Alexandria, Vir-
ginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
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OPINION
PER CURIAM:
Toney Head, Jr. (Head) and T. Head & Co., Inc. (THI), a company
owned and controlled by Head, were convicted on 41 counts of mak-
ing false claims to the EPA, in violation of 18 U.S.C. § 287. They
were found guilty of padding time records and inflating labor costs
which they charged to a contract with the EPA. Head was sentenced
to four months in a half-way house and four months home detention
and ordered to pay $18,515 restitution. THI was fined $10,000.
In their appeal, Head and THI contend (1) that they were deprived
of a fair trial because the district court allowed the jury to consider
"highly prejudicial evidence related exclusively to invalidated or dis-
missed counts" and (2) that the district court erred in refusing to grant
their motion for judgment of acquittal on counts 22 and 23 because
of an insufficiency of evidence. In a cross-appeal, the government
contends that the district court erred in rejecting sentencing enhance-
ments for Head's role in the offense and his obstruction of justice.
For the reasons that follow, we affirm the convictions on counts 2
through 21 and 24 through 42; reverse the convictions on counts 22
and 23; and remand the case for resentencing.
I
Head and THI were indicted in 51 counts of improperly charging
labor costs and indirect expenses to a consulting contract they were
performing for the EPA. Count 1 charged the two defendants with
conspiracy to defraud the government; counts 2 through 42 charged
the defendants with padding time-sheets and making false claims for
labor costs in violation of 18 U.S.C. § 287; counts 43 through 46
charged the defendants with making false statements in violation of
18 U.S.C. § 1001 and counts 47 through 51 charged the defendants
with obstructing a federal audit in violation of 18 U.S.C. § 1516.
Counts 43 through 51 detailed the defendants' alleged efforts to bill
the EPA for indirect costs not properly chargeable to the contact,
including a fur coat, jewelry, wedding expenses, personal meals, and
3
personal trips. Although the government voluntarily dismissed count
50 before trial, evidence on the remaining indirect cost counts (counts
43-49, 51) was presented to the jury. As part of its proof, the govern-
ment introduced evidence relating to Head's "lavish lifestyle," the
costs of which, the government contended, Head had improperly
charged to the EPA. At the end of the government's case the district
court dismissed, for lack of sufficient evidence, all charges relating to
indirect costs except those relating to expenses submitted for personal
trips. While the jury convicted Head and THI of all of the direct costs
claims involving the submission of inflated labor costs, counts 2
through 42, it acquitted them of the conspiracy alleged in count 1 and
of all remaining counts charging the improper submission for pay-
ment of indirect costs and expenses.
Head and THI filed a motion for a new trial, contending that the
evidence presented by the government in connection with the dis-
missed counts and the counts on which they were acquitted spilled
over and therefore unfairly prejudiced them with respect to the
remaining direct cost counts involving inflated labor costs. The dis-
trict court denied the motion, and this appeal followed.
Head and THI contend that the district court abused its discretion
in denying their new trial motion, arguing that even though the district
court gave a limiting instruction, such an instruction could not "have
erased the taint of the highly prejudicial and inflammatory evidence
on the indirect cost issues." In support of their position they rely
mainly on United States v. Rooney, 37 F.3d 847, 855, (2d Cir 1994)
("When an appellate court reverses some but not all counts of a multi-
count conviction, the court must determine if prejudicial spillover
from evidence introduced in support of the reversed count requires the
remaining convictions to be upset.").
The issue of whether to grant a new trial is firmly committed to the
discretion of the trial court. See Fed. R. Crim. P. 33; Hawkins v.
United States, 244 F.2d 854, 856 (4th Cir. 1957). Accordingly, we
review the district court's decision for abuse of that discretion. See
United States v. Arrington, 757 F.2d 1484, 1486 (4th Cir. 1985).
In denying the motion for a new trial, the district court carefully
considered the argument about the spillover effect and found that the
4
jury was able to separate the evidence and properly evaluate it in con-
nection with the count to which the evidence was relevant. The dis-
trict judge stated,
I am satisfied again, the way the verdict . . . came in, [the
jury] had no problem . . . parsing out the indirect from the
direct costs. That's what they focused on. They didn't find
the two trips. And as I said, I think the evidence on the two
trips was solidly there. But I am denying the motion, and we
will go forward with the sentencing as scheduled.
The district judge was personally able to observe the tone and tenor
of the proceedings, and our review of the record satisfies us that the
court did not abuse its discretion. This case is unlike Rooney, on
which Head and THI rely, where the court could not make the find-
ings that the district court made in this case that the jury was able to
distinguish the counts. Moreover, in Rooney the district court did not
have the opportunity to instruct the jury on how to deal with multiple
counts.
Head argues that the district court exacerbated the prejudice result-
ing from evidence of his "lavish lifestyle" because it failed to instruct
the jury unequivocally that it was not permitted to consider evidence
pertaining to the dismissed counts. In instructing the jury, the court
explained, "The essence of your focus is going to be on whether or
not the direct labor costs [and the two personal trip expenditures]
were fraudulently or falsely presented to the Government . . . . Some
of the other expenditures that you heard a lot about are no longer a
part of this case, and you need not focus your attention or be con-
cerned about them." Head and THI complain essentially that these
instructions were not sufficiently clear. We note, however, that the
jury acquitted Head and THI on all claims that they were improperly
charging the EPA for the costs of Head's lavish lifestyle. We also
note that the jury's verdict as a whole is not inconsistent with the
court's instruction that the jury need not consider evidence pertaining
to charges that had been dropped from the case. While the formula-
tion of the instruction to which the defendants object may not have
perfectly matched their conception of the case, our review of the
record as a whole satisfies us that the jury was adequately instructed.
5
See generally United States v. Lowe, 65 F.3d 1137, 1146 (4th Cir.
1995).
Finally, we must point out that the record contains no evidence of
bad faith on the part of the government in charging Head and THI in
one indictment and in presenting evidence on all counts submitted to
the jury. Federal Rule of Criminal Procedure 8 allows the government
to charge in a single indictment, "[t]wo or more offenses . . . based
on . . . two or more acts or transactions . . . constituting parts of a
common scheme or plan." All of the government's allegations related
to a single contractual relationship between the defendant and the
EPA. Moreover, the indirect cost counts were not frivolous. In deny-
ing the defendant's motion for a new trial, the district court observed:
The two remaining indirect cost counts that I left in involv-
ing the two trips, I have to tell you, if it were a bench trial,
I would have found your client guilty. I think the evidence
was solid on those two counts.
We conclude that the district court did not abuse its discretion in
refusing to grant a new trial.
II
Head also argues that the evidence was insufficient to support the
jury's verdict on counts 22 and 23. The government agrees. In its
brief, it states, "To cut to the chase, our review of the record shows
that this argument has merit, and we agree that the trial evidence was
too thin to sustain the convictions on counts 22 and 23."
Our review of the record supports the position taken by the parties.
Accordingly, the convictions on counts 22 and 23 must be reversed.
On remand, we direct the district court to enter judgment of acquittal
on those counts and to make the necessary adjustments in the sen-
tences of both Head and THI.
III
On its cross-appeal, the government contends that the district court
improperly refused to enhance Head's sentence for his role in the
6
offense and for obstruction of justice. We review the district court's
findings of fact for clear error, see United States v. Sheffer, 896 F.2d
842, 846 (4th Cir.), cert. denied, 498 U.S. 838 (1990), but examine
its interpretation of the Sentencing Guidelines de novo, see United
States v. Daughtrey, 874 F.2d 213, 217-18 (4th Cir. 1989).
The Pre-Sentence Report noted that Head "directed at least four
people to falsify their time sheets so that THI received payment from
EPA that it had not earned. The testimony indicates that only Mr.
Head and his company stood to gain from this action, and that none
of the employees . . . received any financial reward." The report rec-
ommended a four-level enhancement on the ground that Head was an
organizer or leader of a criminal activity involving five or more par-
ticipants. See U.S.S.G. § 3B1.1(a).
The district court rejected the recommendation of the Pre-Sentence
Report, apparently concluding that such an enhancement was not
available when only one defendant was involved. As the district judge
stated, "This case involves one and only one defendant, Mr. Head.
And I don't find, therefore, that in this particular case an enhancement
of this sort or adjustment of this sort is appropriate."
We conclude that the district court erred in refusing to consider an
enhancement for Head's role in the offense on the basis that only one
defendant was involved. The enhancement is based not on the number
of defendants in the case but on whether the defendant was an orga-
nizer or leader of an activity that involved "five or more participants."
A "participant" need not be named as a defendant and often is not. See
United States v. Fells, 920 F.2d 1179, 1182-83 (4th Cir. 1990) (17
unidentified "lower level distributors" used by the defendant to mar-
ket illegal drugs were properly considered "participants" for purposes
of U.S.S.G § 3B1.1(a)), cert. denied, 501 U.S. 1219 (1991); United
States v. Falesbork, 5 F.3d 715, 722 (4th Cir. 1993) (presence of
unidentified participants in drug operation supports enhancement).
Accordingly, we vacate Head's sentence and instruct the district court
to consider Head's role in the offense under the appropriate legal
standard.
Addressing the government's claim that the district court erred in
enhancing Head's sentence for obstruction of justice, we note that an
7
enhancement for obstruction of justice is not required every time a
defendant testifies on his own behalf and is convicted. See United
States v. Smith, 62 F.3d 641, 647 n.3 (4th Cir. 1995). In this case the
district court found that "[t]here is certainly some dispute between the
defendant's version of what happened and the witness's version of
what happened. And the jury chose, as is their right, to make a credi-
bility finding." The court indicated, however, that it was unwilling to
find that the defendant committed perjury and thereby obstructed jus-
tice. We cannot conclude that the court's finding in this regard is
clearly erroneous.
IV
In sum, we affirm the convictions on counts 2 through 21 and 24
through 42; we reverse the convictions on counts 22 and 23; and we
remand this case to the district court for resentencing to take into
account the reversed counts and to consider, under the appropriate
standard, Head's role in the offense.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
8