United States v. Adcock, Thomas ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1459
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
THOMAS G. ADCOCK, JR.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Central District of Illinois.
No. 04-CR-30065—Jeanne E. Scott, Judge.
____________
ARGUED JANUARY 16, 2008—DECIDED JULY 16, 2008
____________
Before MANION, WOOD, and SYKES, Circuit Judges.
WOOD, Circuit Judge. For at least a decade, Thomas
Adcock, Jr., worked for a nonprofit corporation in Pana,
Illinois, that provides housing for persons of low income
and senior citizens. His company, the Housing Authority
of Christian County (“HACC”), received most of its funds
from the federal government. Adcock ran into trouble
when, in his capacity as Maintenance Supervisor for
one facility, he orchestrated a contract for painting the
individual units and failed to disclose his own substan-
tial economic interest in that contract. When his involve-
ment in the company to which the contract had been
2 No. 07-1459
awarded came to light, he was indicted and charged
with six counts of wire fraud, three counts of theft of
government funds, three counts of embezzlement of
government funds, two counts of submitting false docu-
ments, and one count of making a false statement. See 18
U.S.C. §§ 1343, 666A, 641, and 1001. The government
dismissed the embezzlement counts, but a jury found
Adcock guilty on the remaining 12 charges. The district
court sentenced him to 21 months in prison and ordered
him to pay $41,174.09 in restitution. We affirm.
I
HACC operates housing facilities throughout Christian
County, Illinois; it relies primarily on funds from the
U.S. Department of Housing and Urban Development
(“HUD”), some of which come in the form of a monthly
subsidy and others as particular grants. Among its funding
sources is a capital grant that requires it to create a five-
year plan for the maintenance of its facilities. Like other
federal grantees, HACC must follow certain federal rules
about spending. Of particular importance for this case are
HUD’s conflict-of-interest regulations, which require
grantees to avoid conflicts in the award and administra-
tion of contracts. No employee, officer, or agent of a
grantee may participate in the selection, the award, or
the administration of a contract supported by federal
funds if a conflict of interest (either direct or indirect)
would be involved. These rules appeared, among other
places, in a series of employee handbooks that HACC
published in 1993, 1996, and 2000. HACC gave copies of
these handbooks to its employees.
Adcock first began working for HACC in 1994, when
he was hired to be the live-in custodian for a facility
No. 07-1459 3
called Pana Towers. In 1997, he was promoted to the
position of Maintenance Supervisor for HACC. In this
new job, he worked with HACC’s Executive Director,
Reva Woolard, her successor, Richard Deere, and the Board
of Commissioners of HACC. As Maintenance Supervisor,
Adcock was responsible for deciding which maintenance
projects needed to be included in the five-year plan. The
plan itself was revised every year and was subject to HUD
approval. After a plan received HUD approval, HUD
funded it by allocating accounts on which HACC was
authorized to draw to pay invoices. The payments were
accomplished through wire transfers of funds from the
United States Treasury to HACC’s bank account in Pana,
Illinois.
From time to time, HUD evaluated the condition of the
apartment units that it was subsidizing. In the course of
these evaluations, it criticized HACC for failing to keep up
with painting its occupied units. Adcock passed this
criticism along to Woolard and told her that his staff
was too busy to undertake the painting. He recommended
that the project should be awarded to an outside con-
tractor, after a bidding process. Woolard agreed to do so.
When HACC opened the bids in March of 1999, one
of the lowest that it found was from a company then
called “A-1 Maintenance.” (Later, the company changed
its name to A+ Maintenance, but we refer to it as A-1.)
Adcock told Woolard and the Assistant Executive Di-
rector that A-1 had been created by Naidean Miller, a
person who had done other community service projects
for HACC. Adcock did not mention that he was actually
the person who had written and submitted the bid in
the name of A-1 Maintenance. He also made no mention
of the fact that he had signed the name of his son, Justin,
4 No. 07-1459
to the contract before he showed it to Miller. The bid
from A-1 listed three references: Adcock himself, Dale
Myers (Adcock’s father-in-law), and Jim Dressen, an
employee in HACC’s maintenance department who was
not aware that his name was being used. Indeed, Dressen
and a few other employees had asked Adcock if they
could bid on the project, but he told them that, as em-
ployees, they were ineligible.
When the A-1 contract was presented to the Board of
Commissioners for its approval on March 30, 1999,
Woolard recommended that it be accepted. Adcock was
present at that meeting. In response to a question from a
Board Member, he falsely represented that Miller was
the owner of A-1. He said nothing about the fact that
either he or any of his family members might have an
interest in the arrangement. Under the contract, A-1
agreed to the following schedule of payments: $190 for
painting an efficiency apartment; $390 for painting a
one-bedroom apartment; and $490 for painting a two-
bedroom apartment.
After the Board awarded the contract to A-1, Adcock
told Miller that his son, Justin, had won the contract, and
that Justin wanted to hire her to perform the actual paint-
ing. She signed a paper agreeing to work as a subcon-
tractor for Justin. Under that agreement, Miller agreed
to accept $190 for painting a one-bedroom apartment
(giving “Justin” a nice $200 profit for that work) and
$240 for a two-bedroom apartment ($250 less than the
amount specified in the A-1 contract). Over the next
two years, Miller painted approximately 132 units for
HACC. Adcock told her which ones to do, and she
then reported back to him, listing the units she had com-
pleted. She was paid by checks signed in the name of
No. 07-1459 5
Justin Adcock, although she dealt only with defendant
Thomas Adcock. Justin was vaguely aware of what was
going on. He painted a few units; he opened a bank
account in the name of A-1 at his father’s request; but
otherwise he paid no attention to the company, since
he was away at college. Woolard at one point wondered
what Justin was doing, because Justin’s name appeared
on the contract and the insurance certificate. Adcock told
her that Justin was just helping out Miller, who could
not obtain insurance in her own name.
Adcock personally typed and submitted all of the
invoices for A-1’s work to HACC. When he submitted an
invoice, HACC’s bookkeeper first ensured that it was
approved, and then took the necessary steps to draw
the funds from HUD. After the funds were wire-trans-
ferred from HUD to HACC’s bank account, the book-
keeper cut a check payable to A-1. Adcock would then
pick up that check and deposit it in the bank account
that Justin had opened for A-1 (to which only Adcock
had access). From April 1999 through March 2001, HACC
paid A-1 $73,060; out of that total, Adcock paid Miller
$27,500. The remaining $45,000 represented his profits
from the deal, although he urges us to recall that he
was performing some administrative functions for A-1
and thus some of that money was remunerative.
Near the end of 2000, all of HACC’s contractors had to
submit a certificate to the U.S. Department of Labor
attesting that they were complying with all applicable
regulations. Adcock prepared and signed each certificate
on file for A-1; his forms did not reflect that he or any of
his family members were involved with the contract.
Instead, the forms continued the fiction that Miller was
the owner of A-1. Miller never saw those forms.
6 No. 07-1459
In March 2001, the Board of Commissioners learned
from some anonymous letters that Adcock was the true
owner of A-1. The Board called him in to address both a
double-billing issue and the alleged conflict during an
executive session, but he denied having any financial
interest in the business. Deere, by then Executive Director,
instructed the bookkeeper to make future payments to
“Naidean Miller Painting.” Shortly thereafter, Adcock
presented an invoice for $6,660, dated March 30, 2001,
in the name of A-1 Maintenance. The bookkeeper pro-
cessed the invoice, but as instructed she made the check
payable to “Naidean Miller Painting.” Knowing that
Miller was in the building that day, she took it per-
sonally to Miller. Miller was surprised in every way:
she knew nothing of the invoice, thought that the amount
was very high, and refused to accept the check. Minutes
later, Adcock picked up the check and asked Miller to
come to his office. There he asked her if she would
sign the check over to him, and she did. Not long there-
after, Miller took over the contract in earnest for a
short time. Happy to be earning so much more money,
she performed under the terms of the A-1 contract until
May or early June 2001, when the contract was cancelled
by HACC.
II
Adcock challenges both his conviction and his sen-
tence on appeal. He asserts that the evidence on the
wire fraud counts was insufficient in two ways: first, it
did not demonstrate that he acted knowingly or inten-
tionally to defraud HACC, and second, the government
failed to prove that he “knowingly caused” a wire trans-
mission. His sentence was too high, he contends, because
No. 07-1459 7
the court should have used the prices specified in the A-1
contract as the best evidence of the market value of the
services that actually were rendered to HACC. He also
argues for other offsets, and he claims that the court
miscalculated the amount of restitution.
A
In United States v. Ratliff-White, we held that “[a] defen-
dant commits wire fraud under 18 U.S.C. § 1343, if she:
(1) participates in a scheme to defraud; (2) intends to
defraud; and (3) causes a wire transmission in furtherance
of the fraudulent scheme.” 493 F.3d 812, 817 (7th Cir. 2007).
In his challenge to his convictions on the six wire fraud
counts, Adcock does not argue that the evidence failed to
support the first of those elements. He claims, however,
that the government did not meet its burden of proving
the second or third. We address these two points in turn.
Adcock’s primary support for the proposition that he
could not have acted with the requisite knowledge or
intent to defraud is essentially that HACC was a hot-
bed of conflicts of interest, and in the face of such wide-
spread malfeasance, he (a mere Maintenance Supervisor)
would have had no way of knowing that his use of A-1
was impermissible. His brief details a depressing tale
of nepotism and self-dealing at HACC, but it also demon-
strates that this evidence was all before the jury. So, on
the one hand, the jury learned that Woolard regularly
granted contracts for the purchase of paint to a hardware
store partly owned by her husband; that Deere (the later
Executive Director) regularly conducted business with
People’s Bank, for which his son was a controller; that the
chair of HACC’s Board of Commissioners also served on
8 No. 07-1459
the Pana City Council as an elected official; that bidding
procedures were regularly mismanaged; and more. On
the other hand, the jury could infer that Adcock had
the employee handbook setting forth the conflict-of-inter-
est rules from the evidence showing that it was distributed
to all employees; it heard that Adcock had informed his
own employees that they were not eligible to bid on the
painting contract; it learned that Adcock repeatedly
misrepresented to the Board the precise relationship
between Miller, his son Justin, and A-1 Maintenance; and
it saw that Adcock filled out the Department of Labor
certificates and failed to disclose his family’s interest in
the contract.
When reviewing a challenge to the sufficiency of the
evidence, our task is not to see whether there is some
evidence that might have supported an acquittal; it is to
decide whether there is any evidence from which the
jury could have found guilt beyond a reasonable doubt.
See United States v. Moore, 115 F.3d 1348, 1363 (7th Cir.
1997). From that perspective, we have no trouble con-
cluding that the jury’s verdict was adequately supported.
The jury was not required to accept Adcock’s argument
that the permissive atmosphere of HACC rendered him
unaware of the HUD regulations or of HACC’s own
policies on conflicts of interest. The evidence we have
just reviewed about the handbook, Adcock’s advice, and
his lies amply supports the opposite conclusion. Adcock
has offered no reason why the jury would not have been
entitled to credit those items of evidence and to draw
negative inferences against Adcock from his extensive
efforts to conceal the true nature of his involvement
with A-1. We could review more of the evidence, but this
is enough to show that the jury’s finding that Adcock in-
tended to defraud HACC was supported by the evidence.
No. 07-1459 9
Adcock’s attack on the third element required for a
wire fraud conviction—that he caused a wire transmis-
sion in furtherance of the scheme—takes too narrow a
view. The government is entitled to prove this element
either by showing that the defendant himself personally
performed the wire transfer or (more commonly) that he
acted with knowledge that the use of a wire would
follow in the ordinary course of business or that such use
could reasonably be foreseen. As we noted in Ratliff-White,
“[a] defendant can ‘cause’ a wire transmission without
personally sending a transmission.” 493 F.3d at 817 (citing
Am. Auto. Accessories, Inc. v. Fishman, 175 F.3d 534, 542
(7th Cir. 1999); United States v. Alexander, 135 F.3d 470, 474
(7th Cir. 1998)). The government argues that its evidence
here showed that the use of the wires was reasonably
foreseeable to someone in Adcock’s position.
The evidence showed that Adcock, as Maintenance
Supervisor, was responsible for working with the Board
to develop the five-year plan, which HACC updated every
year and which HUD funded. As we noted earlier, once
HUD approved the plans, it allocated accounts to fund
them; HACC was then able to draw on those accounts to
pay invoices as they were received. The draws were
accomplished through a series of wire transfers. The
question is whether these wire transfers were reasonably
foreseeable to Adcock. A reasonable person certainly
would have foreseen the need to create some manner
of transferring money from HUD, located in Washington,
D.C., to HACC, located in central Illinois. The days of
Pony Express riders galloping across the countryside
with large satchels of cash are long gone. Shipping cash
by railroad or truck over such a distance is only slightly
less foolhardy. Even if HUD had mailed U.S. Treasury
10 No. 07-1459
checks to HACC in Illinois, those checks would have
had to clear by means of the wires through the interbank
system, before the funds reached an account in Pana.
Here, the jury knew that Adcock was instrumental in
developing the five-year plans, that he held a super-
visory position at HACC, and that he submitted A-1’s
invoices to HACC and waited to hear if the funds had
cleared. This is enough, we believe, to permit the jury to
find that the use of the wires was reasonably foreseeable
to Adcock. Given the standard of review that binds us,
we must reject both of his challenges to the sufficiency
of the evidence.
B
With respect to his sentence, Adcock asserts that the
district court miscalculated the amount of loss for which
he is responsible under U.S. Sentencing Guideline § 2B1.1,
and that the loss calculation should also be reduced for
purposes of the restitution order. The government re-
sponds that Adcock waived the first of these points and
that the district court’s calculations were correct in any
event, whether used for the sentence or the restitution
order.
The Supreme Court has emphasized the difference
between waiver and forfeiture. See United States v. Olano,
507 U.S. 725, 730-34 (1993). There the Court wrote that
“[w]aiver is different from forfeiture. Whereas forfeiture
is the failure to make the timely assertion of a right,
waiver is the ‘intentional relinquishment or abandon-
ment of a known right.’ ” Id. at 733 (quoting Johnson v.
Zerbst, 304 U.S. 458, 464 (1938)). We do not lightly find
waiver, but in this case we think that the record can be
No. 07-1459 11
read in only one way, and that is as a waiver. At the
sentencing hearing, the following colloquy occurred
between Adcock’s counsel and the court:
COUNSEL: Your honor, I think Mr. Kistner did an
excellent job of putting the pre-sentence investiga-
tion together. I think for purposes of the dollar
amount for purposes of criminal liability under the
sentencing guidelines, the calculation is correct.
We would argue and will argue to the Court that
essentially the Government suffered no loss for restitu-
tion purposes. That is that it received value for the
monies expended.
I understand and I believe he correctly states the 41,000
dollar amount puts it within the range of 30 to 70,000
dollars. But my point is as to the objection that ap-
pears on page 23, we don’t have—I’m not with-
drawing it, I’m just advising the Court of what if [sic]
is. I don’t see it as an objection that needs to be fleshed
out.
THE COURT: All right.
COUNSEL: You understand my point, Judge?
THE COURT: You’re arguing it as to the restitution
figure, not for the calculation of amount of loss for
guideline purposes?
COUNSEL: Correct. Because I believe the value
received—in fact, quite frankly, they did it lower than
anyone else could have done it. The Government
received value for it. Now, how they received it and
what was done incorrectly, that’s what we’re arguing.
Do you understand that issue?
THE COURT: Yes, I understand.
12 No. 07-1459
The district court concluded by saying, “There is now
no objection to the amount of loss calculation for loss
purposes,” and it repeated the same point in its written
post-sentencing order.
This is as square a waiver as one could find. As the
government notes, it is almost identical to the waiver
we found in United States v. Sensmeier, 361 F.3d 982, 986-
87 (7th Cir. 2004); see also United States v. Cunningham,
405 F.3d 497, 502 (7th Cir. 2005) (“. . . Cunningham’s
attorney’s affirmative decision to withdraw his objection
to the admission of the pictures as exhibits resulted in a
waiver of any argument that the government failed to
set forth a sufficient foundation for their admission.”).
Adcock offers two ways around this explicit waiver.
First, he attempts to rely on a pro se objection to the cal-
culation of loss in the Presentence Investigation Report.
He included this among 12 pro se objections that he added
to the three that his attorney raised. But the court was
under no obligation to consider that pro se objection, even
if it had been explicit enough to alert the judge to the
argument (and we agree with the district court that it
was not), because Adcock was represented. Adcock also
briefly suggests that counsel rendered ineffective assistance
on this point, since he can imagine no strategic reason why
someone would concede an amount of loss for purposes
of sentencing but try to contest it for restitution. This
argument, however, is too abbreviated for us to assess
counsel’s effectiveness at this stage. Adcock may pursue
this point, if he wishes, in a petition under 28 U.S.C. § 2255.
But as we shall see in a moment, there may well be rea-
sonable strategic reasons why an attorney would pursue a
challenge to a restitution amount without also quibbling
over the loss calculation under the guidelines.
No. 07-1459 13
Turning to the order requiring Adcock to pay HACC
$41,174.09 in restitution, we are met again with a
waiver argument from the government. Here, it com-
plains only that Adcock did not spend much time in his
brief focusing on this issue. Indeed, a speed-reader might
skip right over the five lines that address restitution
directly. But, fairly read, we think that the general argu-
ments Adcock made about the amount of loss were in-
tended to address that calculation both for sentencing
purposes and for restitution purposes. Rather than dis-
miss this point on the ground of waiver on appeal,
we prefer to reach the merits.
At the outset, it is important to note that the definition
of loss for purposes of § 2B1.1(b)(1) is different from the
definition of loss for restitution purposes. Under the
Sentencing Guidelines, the court typically applies the
greater of actual or intended loss. See § 2B1.1(b)(1), cmt.
n.3(A). The comments to § 2B1.1 further specify that “[i]n
a case involving government benefits . . . loss shall be
considered to be not less than the value of the benefits
obtained by unintended recipients or diverted to unin-
tended uses . . . .” Cmt. n.3(F)(ii). Adcock was certainly not
an intended recipient of HACC’s funds, regardless of
whether he might have taken those funds and done
with them something useful for HACC. Thus, it seems to
us that Adcock’s attorney made a reasonable strategic
decision to forego any challenge to the loss calculation
for guidelines purposes.
Because Adcock was convicted of a crime of fraud, he
was subject to the Mandatory Victim Restitution Act of
1996 (“MVRA”), 18 U.S.C. § 3663A(c)(1)(A)(ii). We de-
scribed the scope of that statute in United States v. Havens,
424 F.3d 535 (7th Cir. 2005):
14 No. 07-1459
In the case of an offense resulting in damage to
property, the MVRA requires the defendant to return
the property to the victim or if that is not possible, to
pay the victim an amount equal to the loss of value
of the property. See § 3663A(b)(1). We have noted
that “[t]his measure of relief is less generous than
common law damages, since it does not extend to
consequences beyond the diminution of the value of
the property stolen or damaged.” United States v. Scott,
405 F.3d 615, 618 (7th Cir. 2005). This is because crimi-
nal restitution refers only “to the restoration of some-
thing that the defendant had taken from the plaintiff,
including a profit.” Id. at 619 (citations omitted).
424 F.3d at 537. Adcock argues that he did not take any-
thing from the government. Instead, he points out, HACC
awarded A-1 the painting contract because it was the
low bidder; A-1 painted the apartments; and HACC
paid the agreed price. The contract price established, by
definition, the fair market value of the services that HACC
was seeking. Ergo, Adcock concludes, HACC suffered
no harm.
The district court saw things differently. The record
contained more evidence than that of the prices estab-
lished in the contract between HACC and A-1 of the
value of the services. It contained both the evidence of
the nominal A-1 contract price and the evidence of what
the actual painter, Miller, was willing to accept for the
services she was rendering. Here is how the district court
put it:
The Housing Authority paid 70 some thousand
dollars or thereabouts for this painting contract. The
woman who did all the painting got 29,000 and some
dollars. You really were the force behind A-1 or A+
No. 07-1459 15
maintenance, got the rest. You didn’t do any of the
work. A little bit of money went for paint, a little bit
of money went for insurance, but a whole lot of
money went to you, and you didn’t do the work.
* * *
Well, if Naiden Miller was willing to do the work for
29,000 dollars, if only she had submitted a bid in her
own name, they wouldn’t have paid 70,000 for
what somebody would do for 29,000. They got 29,000
plus of painting, they didn’t get full value. To say that
they got full value says it is okay for you to pocket
38,000 dollars for virtually doing nothing except
pocketing the money through your bank accounts
for A-1.
In the end, the district court concluded that Adcock had
to pay $41,174.09 in restitution to HACC. It reached that
amount by adding up the $38,155.34 that it determined
Adcock had received in the scheme and an additional
$3,018.75 that HACC had to pay for an audit that uncov-
ered his wrongdoing. The $38,155.34 figure, it is worth
noting, is lower than the total Adcock reaped from the
scheme. From April 1999 through March 2001, HACC
paid invoices from A-1 totaling $73,060. Subtracting
the $27,500 that Adcock paid Miller, that leaves $45,000
in profit to Adcock. The extra $7,400 or so was a rea-
sonable amount to hold back for Adcock’s administrative
contributions. HACC paid directly for most of the paint,
and Miller purchased most of her own supplies, and so
there was little need to create an allowance for those
purposes. It was Adcock’s responsibility to present some
evidence to that effect, in response to the government’s
showing, and we can find nothing that undermines the
government’s numbers.
16 No. 07-1459
In a case involving loss of property, like this one, the
MVRA requires the defendant to pay an amount equal to
the value of that which was taken. See 18 U.S.C.
§ 3663A(b)(1)(B). It also requires the court to reimburse
the victim for “other expenses incurred during participa-
tion in the investigation or prosecution of the offense . . . .”
Id. § 3663A(b)(4).
We conclude that the district court’s factual conclusion
that Adcock’s services were minimal in value was not
clearly erroneous. The court reasonably found that the
bulk of the payments HACC made that did not find their
way to Miller were properly the subject of restitution, as
was the cost of the audit.
For these reasons, we AFFIRM the judgment of the dis-
trict court, with respect to both Adcock’s convictions and
his sentence.
USCA-02-C-0072—7-16-08