James Burkhart v. United States ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-2009
JAMES BURKHART,
Petitioner-Appellant,
v.
UNITED STATES OF AMERICA,
Respondent-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:18-cv-04013 — Tanya Walton Pratt, Chief Judge.
____________________
ARGUED JANUARY 6, 2022 — DECIDED MARCH 7, 2022
____________________
Before SYKES, Chief Judge, and ROVNER and SCUDDER, Cir-
cuit Judges.
SCUDDER, Circuit Judge. James Burkhart was the CEO of
American Senior Communities, LLC, a private company that
manages and operates nursing homes and long-term care fa-
cilities in Indiana. Burkhart orchestrated an extensive conspir-
acy exploiting the company’s operations and business rela-
tionships for personal gain. He ultimately pled guilty to fraud
and money laundering charges and received a below-
2 No. 21-2009
Guidelines sentence. He later brought this habeas action, con-
tending that his defense counsel, Barnes & Thornburg LLP,
provided constitutionally deficient representation because
the firm also represented Health and Hospital Corporation of
Marion County, one of the victims of the fraudulent scheme.
Everyone agrees that Barnes & Thornburg labored under an
actual conflict of interest. But the district court was right to
conclude that this conflict did not adversely affect Burkhart’s
representation, so we affirm.
I
A
Health and Hospital Corporation (“HHC”) is a municipal
corporation that serves as the certified operator of nursing
homes and long-term care facilities in Indiana. HHC con-
tracted with American Senior Communities (“ASC”) to man-
age these facilities. In this role, ASC had autonomy in select-
ing, contracting with, and paying vendors to run the nursing
facilities. As part of this arrangement, ASC used HHC funds
to manage the facilities, including by writing checks and mak-
ing payments that drew directly on HHC’s bank accounts.
Medicare and Medicaid supplied the vast majority of the
funds HHC used to pay ASC expenses.
For nearly six years, from 2009 to 2015, Burkhart, the then-
CEO of ASC, and others abused the company’s operations for
their own personal gain. They orchestrated a scheme to fun-
nel money to themselves by causing ASC’s vendors (or
Burkhart-controlled entities purporting to be vendors) to in-
flate their invoices and kick back the inflated profits or by re-
quiring vendors to pay kickbacks to do business with ASC.
This scheme inflicted financial losses on Indiana’s Medicaid
No. 21-2009 3
program, ASC, and HHC. In time, law enforcement detected
the wrongdoing and commenced a criminal investigation.
On September 15, 2015, federal agents executed a search
warrant at Burkhart’s home in Carmel, Indiana. While the
search was underway, Burkhart called lawyers at Faegre
Baker Daniels LLP. In discussing the situation, the Faegre
lawyers told Burkhart that the firm was unable to represent
him because of a conflict with HHC. The Faegre attorneys
then referred Burkhart to Larry Mackey, an accomplished
trial lawyer at Barnes & Thornburg in Indianapolis.
Burkhart signed an engagement letter with Barnes &
Thornburg on September 21, 2015. The letter never mentioned
that HHC was a client of the firm.
Upon being retained, Barnes & Thornburg turned to in-
vestigating and evaluating Burkhart’s potential criminal ex-
posure. Larry Mackey and his team worked with Burkhart to
identify potential witnesses; reviewed each transaction with
any entity financially related to Burkhart, his family mem-
bers, or his friends that involved HHC or ASC; and hired ex-
perts and consultants to review whether those transactions
occurred on terms and conditions reflecting fair market value.
Barnes & Thornburg also worked to dissuade the government
from filing charges. But these efforts ultimately proved un-
successful.
In October 2016 a grand jury returned a 32-count indict-
ment against Burkhart and three others for their role in the
alleged scheme to defraud HHC, ASC, and Indiana Medicaid.
Burkhart’s co-defendants included ASC’s Chief Operating
Officer Daniel Benson, long-time Burkhart business associate
Steven Ganote, and Burkhart’s younger brother, Joshua
4 No. 21-2009
Burkhart, whom Burkhart brought into several inflated-in-
voice schemes.
In the wake of the indictment, Barnes & Thornburg turned
to mounting a trial defense. The firm explored at least 21 ar-
guments, focusing chiefly on finding a way to negate the in-
tent element of the charged offenses. The firm reviewed the
government’s discovery production; interviewed potential
witnesses; engaged three expert witnesses; prepared to call
many other defense witnesses, including Burkhart; assembled
approximately 1,100 trial exhibits; drafted cross-examination
outlines of anticipated government witnesses; researched and
prepared jury instructions; and even drafted a version of an
opening statement. Barnes & Thornburg also conducted three
mock jury exercises, all of which resulted in unanimous votes
to convict Burkhart. Suffice it to say Barnes & Thornburg had
an uphill defense on their hands.
B
A major development occurred in November 2017, two
months before the scheduled start of trial. It was then that
Burkhart’s co-defendant and younger brother, Joshua, pled
guilty and agreed to cooperate with the government. Barnes
& Thornburg recognized the significance of this event—
Burkhart’s own brother would take the witness stand and tes-
tify in open court against him. This development caused
Larry Mackey to explore the possibility of resolving the case
with the government. When those efforts failed to pan out, the
final push of trial preparations began. Trial remained sched-
uled for January 2018.
The situation worsened for Burkhart three weeks later
when two other defendants, Daniel Benson and Steven
No. 21-2009 5
Ganote, also pleaded guilty and agreed to cooperate with the
government. At that point, Mackey saw the writing on the
wall. He emailed Burkhart and advised that it was “[t]ime for
considering [a] new grand plan strategy” because Benson’s
anticipated testimony would be “very damaging to him and
to you.” Plea negotiations then began in earnest.
Barnes & Thornburg spent a week negotiating with the
government over Sentencing Guidelines stipulations, forfei-
ture and restitution, and the factual basis for Burkhart’s guilty
plea. These negotiations culminated in Burkhart and the gov-
ernment reaching an agreement on the terms and conditions
of a plea.
Burkhart pled guilty on January 10, 2018. He pled to three
counts—(1) conspiracy to commit mail, wire, and healthcare
fraud (18 U.S.C. § 1349); (2) conspiracy to violate the Anti-
Kickback Statute (18 U.S.C. § 371); and (3) money laundering
(18 U.S.C. § 1956(a)(1)(B)(i))—and the government agreed to
dismiss the remaining 17 counts. The district court calculated
Burkhart’s advisory Guidelines range to be 121–151 months’
imprisonment and sentenced him to 114 months, crediting the
remorse Burkhart showed at sentencing.
It was after sentencing that Barnes & Thornburg’s conflict
of interest entered the picture and triggered these proceed-
ings.
C
Dating to at least 2003, Barnes & Thornburg represented
HHC in many matters, ranging from lobbying engagements
to white collar investigations and civil litigation. By way of
example, Mackey and other core members of Burkhart’s de-
fense team had defended a False Claims Act case involving
6 No. 21-2009
allegations that HHC and Matthew Gutwein, its CEO, made
misrepresentations to the federal government to increase its
payouts under a particular program. After agreeing to repre-
sent Burkhart, Barnes & Thornburg took on a new represen-
tation of HHC in a whistleblower retaliation suit where an
employee alleged that she was discharged for reporting that
HHC submitted false bills.
Burkhart knew none of this throughout his criminal case—
not at the outset and not along the way as Barnes & Thorn-
burg continued to represent him. He learned of the conflict
after being sentenced based on his diligence through online
research. Understandably troubled, Burkhart turned to pur-
suing post-conviction relief.
D
In December 2018 Burkhart invoked 28 U.S.C. § 2255 and
alleged that Barnes & Thornburg’s conflict of interest violated
his Sixth Amendment right to effective counsel. He requested
an evidentiary hearing. Extensive discovery then ensued—no
doubt because Burkhart waived his attorney-client privilege
with Barnes & Thornburg.
The district court did not hesitate to find that Barnes &
Thornburg operated under an actual conflict of interest. But
the district court did have trouble seeing any adverse effect
on Burkhart’s representation that rendered the firm’s perfor-
mance constitutionally deficient. Rather, the deficiencies
claimed by Burkhart were inconsistent with the record. In-
deed, the district court found that Barnes & Thornburg acted
diligently and carefully in defending Burkhart. In particular,
“the record conclusively reflect[ed]” that the firm “thor-
oughly prepared a mens rea defense on Burkhart’s behalf” by
No. 21-2009 7
planning to contend that Burkhart did not intend to defraud
anybody.
Similarly, the district court rejected Burkhart’s contention
that Barnes & Thornburg pulled punches in its planned cross-
examination of Matthew Gutwein, HHC’s CEO. The district
court reasoned that attempting to implicate Gutwein in a po-
tentially fraudulent scheme involving inflated invoices that
would have benefited Burkhart was “not a plausible alterna-
tive” “because Burkhart himself participated in the arrange-
ment and stood to receive $4.1 million as a result.” Further,
the evidence would serve to undercut Gutwein’s credibility,
which in turn “could have undermined Burkhart’s strategy to
elicit testimony about his mens rea defense through Gutwein.”
The district court also recognized that Barnes & Thornburg
stood ready to impeach Gutwein with prior inconsistent state-
ments if his testimony at trial diverged from his prior state-
ments made to the FBI.
The district court further found that Barnes & Thornburg
did not shade its advice to Burkhart to induce him to plead
guilty. Rather, “the record conclusively reflects that B&T’s ad-
vice to Burkhart to plead guilty was based on the evidence
against him, including the very damaging recorded conversa-
tions and potential testimony of his co-defendants who had
already pled guilty.” The district court highlighted how the
“final plea agreement included not only concessions from the
Government in the Factual Basis, . . . but it also gave Burkhart
the ability to argue at sentencing for a lower Guidelines
range” because of “a significantly lower loss amount (and res-
titution amount) than the Government was contending.” All
of this, the district court added, helped Burkhart while also
potentially causing HHC to collect less in restitution.
8 No. 21-2009
In the end, then, the district court denied Burkhart’s § 2255
motion and accompanying request for an evidentiary hearing.
II
Our review proceeds along two tracks. We take our own
independent look at the district court’s legal conclusions and
will reverse the factual findings only if they reflect clear error.
See United States v. Coscia, 4 F.4th 454, 474 (7th Cir. 2021).
A
The Sixth Amendment guarantees criminal defendants
not only the right to the effective assistance of counsel, but
also the “correlative right to representation that is free from
conflicts of interest.” Wood v. Georgia, 450 U.S. 261, 271 (1981).
The Supreme Court’s 1980 decision in Cuyler v. Sullivan, 446
U.S. 335, supplies the framework governing Burkhart’s claim.
First, Burkhart “must demonstrate . . . an actual conflict of
interest.” Id. at 348. Nobody disputes that Barnes & Thorn-
burg was conflicted in its representation of Burkhart. The
question is not close.
Second, Burkhart must further establish that the conflict
“adversely affected his lawyer’s performance.” Id. “An ad-
verse effect can be demonstrated by showing that but for the
attorney’s actual conflict of interest, there is a reasonable like-
lihood that counsel’s performance somehow would have
been different.” Coscia, 4 F.4th at 475 (cleaned up). Put another
way, “[t]he defendant must show ‘specific instances where
[his] attorney could have, and would have, done something
different.’” United States v. Grayson Enters., Inc., 950 F.3d 386,
398 (7th Cir. 2020) (quoting Griffin v. McVicar, 84 F.3d 880, 887
(7th Cir. 1996)). This something different must be a “plausible
alternative to the strategy actually pursued at trial,” though it
No. 21-2009 9
need not be a “winning” strategy. Id. at 399. Although not as
difficult to meet as the standard for prejudice for typical inef-
fective assistance of counsel claims, demonstrating an adverse
effect “is nevertheless a significant burden.” Coscia, 4 F.4th at
475.
Burkhart begs to differ with this second requirement. He
invites us to conclude that the necessity of showing a plausi-
ble alternative strategy applies only where, unlike here, a law-
yer represents two criminal defendants in the same trial. We
decline to do so. There can be no “reasonable likelihood” that
counsel would have done something different, id., if the alter-
native defense strategy was implausible. Similarly, the re-
quirement that a defendant show specific instances where
counsel both could have and would have pursued an alterna-
tive strategy, Grayson Enters., 950 F.3d at 398, has an implicit
plausibility requirement: the law does not require defense
counsel to pursue hypothetical strategies with no on-the-
ground plausibility in the realities of the prosecution facing a
defendant.
Because Burkhart resolved his case by plea, our inquiry
takes on an added level of refinement. To show an adverse
effect on the plea decision, “a petitioner who pleaded guilty
upon the advice of an attorney with a conflict of interest is not
required to demonstrate that he would have decided against
pleading guilty had he been represented by a conflict-free at-
torney.” Hall v. United States, 371 F.3d 969, 974 (7th Cir. 2004).
Likewise, a petitioner does not “need to establish that a con-
flict-free attorney would have advised against pleading
guilty.” Id. The proper focus is instead “on whether the de-
fense counsel’s conflict affected his actions and the defend-
ant’s decision to plead guilty, not whether another attorney
10 No. 21-2009
without conflict would have made the same recommenda-
tion.” Id. (citing Thomas v. Foltz, 818 F.2d 476, 483 (6th Cir.
1987)).
B
The district court applied this exact framework and took
great care in considering whether Barnes & Thornburg’s con-
flict adversely affected the firm’s representation of Burkhart.
At every turn, we agree with the district court’s rejection of
Burkhart’s contentions.
1
The district court was right to conclude that nothing in the
record shows that Barnes & Thornburg improperly shaded its
advice to induce Burkhart to plead guilty. To the contrary, the
advice reflected a reasonable response to the dire circum-
stances facing Burkhart.
Perhaps above all else, Barnes & Thornburg clearly saw
the insurmountable hurdle Burkhart faced in the prosecu-
tion—the strength of the government’s case. To our eyes, too,
the evidence of Burkhart’s guilt was overwhelming, includ-
ing:
• secret recordings capturing Burkhart discuss-
ing the fraudulent scheme with vendors;
• testimony from third-party vendors who had
been asked by Burkhart and his co-conspira-
tors to inflate invoices;
• records from search warrants documenting
the fraudulent misconduct, including the in-
flated invoices themselves;
No. 21-2009 11
• emails among and between Burkhart and his
co-conspirators discussing the scheme; and
• financial records showing the flow of money
from vendors to shell companies for personal
purchases by Burkhart and others.
This evidence was so damaging that three mock juries
voted unanimously to convict Burkhart. In reaching these
conclusions, the mock jurors expressed little sympathy to-
ward Burkhart, reacting instead with “anger” and “disgust”
at his conduct and describing him as “manipulative,”
“greedy,” “sneaky,” a “crook,” and a “thief.”
But there was more. Remember what happened two
months before trial. Burkhart’s chances of beating the govern-
ment’s case grew especially bleak when ASC Chief Operating
Officer Daniel Benson, long-time business associate Steven
Ganote, and Burkhart’s younger brother pled guilty and
agreed to testify as government witnesses. Mackey—a lawyer
with extensive trial experience—did not miss the significance
of this development. Upon seeing these additional guilty
pleas with accompanying cooperation agreements,
Burkhart’s legal team recognized that it was “[t]ime for con-
sidering [a] new grand plan strategy.” It was then that they
advised Burkhart to plead guilty.
Burkhart wants to sidestep this conclusion by redirecting
our attention away from the strength of the government’s ev-
idence to lesser points. He contends that Barnes & Thornburg
improperly shaded and compromised its advice to secure ad-
ditional restitution for HHC and avoid exposing the com-
pany’s potential misconduct. The district court read the rec-
ord differently. We do too.
12 No. 21-2009
If Burkhart is right Barnes & Thornburg’s conflict created
this incentive, he misses the mark when urging the conclusion
that the firm then acted in concrete ways that harmed his de-
fense. In no uncertain terms, the record shows that Barnes &
Thornburg undertook nearly two and a half years of work on
Burkhart’s behalf, which included moving to dismiss charges,
hiring multiple experts, exploring multiple defenses, devel-
oping trial exhibits, issuing trial subpoenas, and conducting
three mock jury exercises. The firm also positioned itself to
present HHC’s alleged misconduct to the jury. And Barnes &
Thornburg was still working diligently on Burkhart’s defense
two weeks before he signed the plea agreement. On this rec-
ord, the district court did not clearly err in concluding that
Barnes & Thornburg would not have undertaken such exten-
sive trial preparations if its plan all along was to coax an elev-
enth-hour plea.
The same diligence manifested itself in the plea negotia-
tions. Barnes & Thornburg took care to ensure that Burkhart
would be able to argue for a lower Guidelines range on the
basis that the government overstated HHC’s losses. This ar-
gument, if successful, would have resulted in HHC receiving
less in restitution.
Barnes & Thornburg’s efforts yielded tangible benefits for
Burkhart. By pleading guilty, he was able to receive ac-
ceptance of responsibility credit and, in turn, a lower advisory
Guidelines range. He also was able to present himself in a
more favorable light at sentencing by emphasizing his re-
morse and underscoring his good works in the community.
The district court committed no error in rejecting the conten-
tion that Barnes & Thornburg’s conflict of interest—and not
the overall strength of the government’s case and the
No. 21-2009 13
weakness of possible defenses—is what came to shape the
firm’s advice that Burkhart avoid trial.
2
Nor do we see error in the district court’s conclusion that
attempting to impeach Matthew Gutwein, HHC’s CEO, by
implicating HHC in another potentially fraudulent scheme
that would have benefited Burkhart was not a plausible alter-
native strategy.
This point requires some unpacking. Burkhart explains
that this other scheme proceeded as follows: HHC entered
into lease agreements with an entity named Formation Capi-
tal for additional properties from which it could run nursing
homes. As part of negotiating these leases, HHC sought a put
agreement, which would allow it to assign its rights and obli-
gations under the leases to a third-party company owned by
Burkhart. HHC then allegedly paid extra “rent” to Formation
Capital, which would, in turn, enter into a “Consulting Agree-
ment” with Burkhart and pass this “rent” to him as additional
compensation for serving as party to whom the leases would
be put.
The district court was right to see this Formation Capital
ordeal as an implausible defense strategy. First, putting this
evidence before the jury would have directly implicated
Burkhart in other transactions the jury could have seen as
fraudulent. Raising this matter would have painted Burkhart
in a worse light before the jury and ran the risk of new crimi-
nal charges befalling him. Barnes & Thornburg and Burkhart
both saw this risk, with the firm explaining that the “defense
team had been concerned pre-indictment and discussed with
Mr. Burkhart that the government might charge Mr. Burkhart
14 No. 21-2009
with one or more criminal offenses related to the put transac-
tion. Having avoided indictment on this issue, it was contrary
to Mr. Burkhart’s interests to suggest the government should
reconsider that decision.” Right to it, Barnes & Thornburg
chose not to risk Burkhart throwing a boomerang at trial.
Second, this potential deployment of the Formation Capital
transaction was at odds with Burkhart’s intended defense at
trial. The Formation Capital arrangement—because of the
way the put would have ultimately operated—effectively ren-
dered Burkhart a contingent owner of the nursing homes.
Burkhart planned to use the fact of him having financial skin
in the game with the nursing homes to argue that he would
not have taken steps to defraud those same nursing homes.
This reasoning and line of argument factored prominently in
Burkhart’s defense, including Barnes & Thornburg’s draft
opening statement.
Third, the district court likewise recognized that attempt-
ing to impeach HHC CEO Gutwein with the Formation Cap-
ital transaction under Federal Rule of Evidence 608(b) (as-
suming it was otherwise admissible) was not a plausible strat-
egy. Doing so would have undermined Burkhart’s planned
trial defense. All along Burkhart had described Gutwein as
“the key witness” to presenting his mens rea defense. Impli-
cating Gutwein in a potentially fraudulent scheme would
have hurt—not helped—his credibility as a witness, thereby
undercutting Burkhart’s defense. There was no clear error in
the district court seeing the circumstances this exact way.
No. 21-2009 15
3
The record likewise reflects that the district court did not
clearly err in finding that Barnes & Thornburg was prepared
to present a mens rea defense. Burkhart’s trial plan was to
show that he lacked the intent to defraud HHC because its
owners, the Jackson family, also held undisclosed financial in-
terests in its vendors. Because this practice allegedly perme-
ated the industry, Burkhart intended to argue at trial that he
believed he was acting lawfully in not disclosing his owner-
ship interests and that HHC was not actually victimized by
the scheme. Burkhart would have presented this defense pri-
marily through the testimony of Gutwein, who previously
told the FBI that the Jacksons had not disclosed their financial
interest in HHC vendors.
This contention is belied by the record. Indeed, Burkhart
himself admitted in his deposition that “I believe B&T was at-
tempting to prepare a mens rea defense.” This belief is well
founded because there exist several references to a mens rea
defense in Barnes & Thornburg’s draft opening statement as
it existed ten days before the guilty plea; the cross-examina-
tion outlines for Frank Jackson, one of HHC’s owners, and
Gutwein; the mock jury exercises; and Burkhart’s draft direct-
examination outline that he himself edited. Given the totality
of this evidence, it cannot be said that the mens rea defense
went unattended to. Instead, it would have likely been the fo-
cus of a trial had Burkhart not pled guilty.
4
Finally, the district court did not clearly err in concluding
that Barnes & Thornburg prepared itself to vigorously cross-
examine Gutwein. The firm’s draft cross-examination outline
16 No. 21-2009
included a series of questions about the Jackson family’s own-
ership interest in vendors that cited as support Gutwein’s
prior statements to the FBI. The firm was therefore prepared
itself to impeach Gutwein with these prior statements were
he to testify inconsistently at trial.
Far from Burkhart’s suggestion that Barnes & Thornburg
planned to pull punches during the cross-examination, the
firm prepared searching and probing questioning of Gutwein.
If anything, the planned examination was overly aggressive,
as it included questions designed to expose personal and em-
barrassing misconduct by Gutwein.
Bringing this all together, we see no clear error in any of
the district court’s factual findings. Although there existed an
actual conflict, it did not result in any adverse effect on
Burkhart’s representation.
III
We close by addressing the district court’s denial of an ev-
identiary hearing. We see no abuse of discretion here. See
Coscia, 4 F.4th at 481–82 (citing Kafo v. United States, 467 F.3d
1063, 1067 (7th Cir. 2006)).
A district court has the discretion to deny a habeas peti-
tioner an evidentiary hearing if “the motion and the files and
records of the case conclusively show that the prisoner is en-
titled to no relief,” 28 U.S.C. § 2255(b), or “if the petitioner
makes conclusory or speculative allegations rather than spe-
cific factual allegations.” Coscia, 4 F.4th at 482 (quoting Daniels
v. United States, 54 F.3d 290, 293 (7th Cir. 1995)).
These criteria are both satisfied here. The parties under-
took extensive discovery, which included both Burkhart and
Barnes & Thornburg producing massive volumes of
No. 21-2009 17
documents, lengthy interrogatory responses, and Burkhart
being deposed. This discovery provided the district court
with a sufficient basis to make informed findings on
Burkhart’s motion because it showed that Burkhart lacked ev-
idence that Barnes & Thornburg’s conflict had an adverse ef-
fect on his representation.
Burkhart’s supposition that the testimony of his former at-
torneys, including Larry Mackey, may have bolstered his ar-
gument is not enough to require a hearing. See id.; see also
Aleman v. United States, 878 F.2d 1009, 1013 (7th Cir. 1989)
(concluding that there was no need for an evidentiary hearing
when the petitioner “offer[ed] conjecture, not facts” that cer-
tain witnesses were informants). This is especially so because
Burkhart took no steps to depose his former attorneys, despite
having the ability to do so, and the contemporaneous evi-
dence aligns with Barnes & Thornburg’s interrogatory re-
sponses.
* * *
In denying Burkhart’s petition, the district court took con-
siderable care with the robust factual record assembled by the
parties. And, in the end, the district court leaned into its dili-
gence to conclude both that an evidentiary hearing was un-
necessary and that Burkhart’s claim failed on the merits. We
AFFIRM.