United States v. Richard Shannon , 803 F.3d 778 ( 2015 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATON
File Name: 15a0615n.06
No. 14-1727
UNITED STATES COURT OF APPEALS
FILED
Sep 01, 2015
FOR THE SIXTH CIRCUIT
DEBORAH S. HUNT, Clerk
UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
RICHARD SHANNON, ) COURT FOR THE EASTERN
) DISTRICT OF MICHIGAN
Defendant-Appellant. )
)
BEFORE: KEITH, CLAY, and STRANCH, Circuit Judges.
DAMON J. KEITH, Circuit Judge. Defendant-Appellant, Richard Shannon, appeals
his conviction and sentence stemming from his involvement in a large-scale Medicare fraud
scheme in which twenty-one people were indicted. Shannon was convicted of one count of
conspiracy to commit health care fraud in violation of 18 U.S.C. § 1349 and sentenced to 86
months imprisonment. On appeal, Shannon argues that (1) the district court erred in allowing the
Government to introduce his proffer statements into evidence during trial; and (2) the district
court’s sentence was procedurally unreasonable. We AFFIRM the district court’s ruling
admitting Shannon’s proffer statements. However, because the district court’s sentence failed to
comport with Federal Rule of Criminal Procedure 32(i)(3)(B), we VACATE Shannon’s sentence
and REMAND for resentencing.
No. 14-1727, United States v. Shannon
I. BACKGROUND
On October 26, 2012, a jury found Shannon guilty of one count of conspiracy to commit
health care fraud. On May 13, 2014, Shannon was sentenced to 86 months incarceration. The
circumstances surrounding Shannon’s conviction are as follows:
In 2008, Shannon met Mohammed Shahab, an owner and operator of various health care
agencies in Michigan, through another co-conspirator. Shannon subsequently agreed to work for
Shahab as a “marketer” or “recruiter” for two of Shahab’s home health-care agencies: All
American Home Health Care (“All American”) and Patient Choice Home Health Care (“Patient
Choice”). Both agencies were run by Hassan Akhtar. Shannon’s role required him to obtain
account information and signatures on pre-signed medical notes from Medicare beneficiaries in
exchange for $50-$100 and/or prescription narcotics. Shannon then delivered these pre-signed
notes to the health care agencies where they were fraudulently signed by medical professionals.
The billing staff then billed the Medicare accounts for services that were not rendered. Shannon
was paid $400-$600 for each “patient” he recruited. To disguise their illegal scheme as
legitimate payment for services rendered to Shahab’s agencies, Shahab instructed Shannon to
establish his own company in order to submit invoices to Shahab’s agencies for payment.
Shannon established Shannon Community Liaison, and Richard Shannon Community Liaison, to
receive payment.
On July 13, 2010, an indictment charged Shannon and several others with conspiracy to
commit health care fraud in violation of 18 U.S.C. § 1349. On December 3, 2010, Shannon,
along with counsel, met with the Government to make a proffer statement. Prior to the proffer
statement, Shannon and his attorney were provided with a proffer agreement, also known as a
2
No. 14-1727, United States v. Shannon
Kastigar letter. The agreement was signed by the Government, Shannon, and his defense
counsel. The agreement provided, in relevant part, that:
(2) Except as otherwise specified in this letter, no statement made
by you or your client during this proffer discussion will be offered
against your client in the government’s case-in-chief in any
criminal prosecution of your client for the matters currently under
investigation.
(3) If your client is prosecuted, the government may use your
client’s statements in cross-examining your client, and to rebut any
evidence offered by your client that is inconsistent with the
statements made during this discussion. This is to ensure your
client does not abuse the opportunity for this proffer discussion by
making false or misleading statements, either at the proffer
discussion or at trial.
(R. 496-2, Proffer Agreement, Pg ID 2149). During the proffer session, Shannon made several
inculpatory statements regarding his involvement in the health care fraud conspiracy.
At Shannon’s trial, the Government offered the testimony of Akhtar, who pleaded guilty
and cooperated with the Government. Akhtar testified that he ran Shahab’s clinics, Patient
Choice and All American (R. 622, Trial Transcript, Pg ID 3633), and that he knew Shannon as a
recruiter for these clinics. (Id. at Pg ID 3634). Akhtar testified that he paid Shannon $400 for
every patient Shannon recruited, and that Shannon claimed to pay each patient between $50 and
$100, in addition to prescription pain pills. (Id. at Pg ID 3643, 3640). Akhtar further testified
that he received a call from a patient stating that he had not received money that Shannon
promised to him. (Id. at Pg ID 3637-39). On cross-examination, the following exchange
occurred between Shannon’s counsel and Akhtar:
Q [defense counsel]: Okay. And that’s not firsthand knowledge,
correct? You didn’t see Mr.—Mr. Shannon
paying any patients, correct?
A [Akhtar]: No, sir.
Q [defense counsel]: Okay. And you didn’t direct Mr. Shannon
to pay any patients, correct?
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No. 14-1727, United States v. Shannon
A [Akhtar]: No, sir.
Q [defense counsel]: That was just the rumor going around in the
office, correct?
A [Akhtar]: No.
Q [defense counsel] That wasn’t a rumor?
A [Akhtar] It was not a rumor if patient is calling and
asking that Shannon had me sign the
paperwork and did not give me the money
he promised.
Q [defense counsel] Okay. Well, if he didn’t pay him the money
that he promised, that means he didn’t pay
them, correct?
A [Akhtar] That’s why patient was calling, to get the
money.
Q [defense counsel] Okay. I understand that’s why they were
calling, but they weren’t paid, correct?
A [Akhtar] At that time, yes.
Q [defense counsel] Okay. And you have no firsthand
knowledge of them actually paying the
patient, correct? We’ve already established
that, right?
A [Akhtar] Right, I did not see him because I was in the
office.
(R. 623, Trial Transcript, Pg ID # 3802). On October 16, 2012, in response to this exchange and
Shannon’s questioning of other witnesses, the Government filed its Motion to Use Statements
Made by Defendant Richard Shannon During Proffer Sessions.1 (R. 496, Pg ID # 2140-58). In
its motion, the government asserted that Shannon waived the restrictions on the use of his proffer
statements when Shannon’s counsel “repeatedly attempted to elicit testimony that [was]
inconsistent with [] statements by [Defendant].” The district court found that the defense’s
cross-examination went “too far,” and led to an inference that was inconsistent with Shannon’s
proffer. (R. 674, Trial Transcript at 19, Page ID 5638). The district court granted the
Government’s motion to allow introduction of Shannon’s proffer statements. The jury found
Shannon guilty of one count of conspiracy to commit health care fraud.
1
The Government also asserted that the defense’s cross-examination of other witnesses triggered the
waiver provision of Shannon’s proffer agreement. However, the district court found that the defense’s cross-
examination of these additional witnesses was merely to test the witnesses’ credibility, and thus found no waiver.
Therefore, the waiver issue before this Court pertains only to the cross-examination of Akhtar.
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No. 14-1727, United States v. Shannon
During sentencing, Shannon objected to the Government’s fraud loss calculation.2
Particularly, Shannon disputed the Government’s assertion that he received $186,775.00 from
the conspiracy, contending that at trial, the Government had argued and put forth proof only that
Shannon profited $55,350.00. Using a statistical extrapolation formula, the Government then
calculated the amount of the fraud loss as $1,680,975.00.3 This amount was derived from an
extrapolation of: (1) the total amount paid to Shannon of $186,775.00; (2) divided by an average
payment to Shannon of $500 per patient; and (3) multiplied by the average Medicare payment of
$4,500 per patient episode. While not disputing that it had only put forth evidence of $55,350.00
at trial, the Government countered that, during the sentencing phase, the court was free to
consider evidence of Shannon’s other relevant conduct. Thus, the Government submitted, as an
exhibit to its Sentencing Memorandum a chart purporting to show additional payments to
Shannon. These charts appeared to show that Shannon had actually profited an additional
$131,425.00 from separate, but related, schemes of health care Medicare fraud, bringing his
profit to $186,775.4
The district court accepted the Government’s $1,680,975.00 fraud loss calculation, which
resulted in a 16-point increase and an advisory guideline sentence range of 92-115 months. The
district court sentenced Shannon below the guidelines to 86 months imprisonment. Shannon
appeals.
2
Shannon does not challenge or dispute the government’s fraud loss calculation formula.
3
Shannon’s Presentence Report also attributed $1,680,975 in fraud loss to Shannon.
4
The Government asserts that upon further review, it found that Shannon actually received a total of
$191,175 from the fraud, but that for purposes of sentencing, it would use the amount identified by the Probation
Department in Shannon’s Presentence Report.
5
No. 14-1727, United States v. Shannon
II. DISCUSSION
A. Admission of Proffer Statement
1. Waiver Language
Shannon first argues that the district court erred in allowing the Government to introduce
portions of his proffer statements into evidence. Specifically, Shannon challenges the district
court’s determination that he waived the protections of his proffer agreement by offering
evidence that was inconsistent with his proffer statements. Shannon contends that he did not
“offer any evidence” because he did not “call any witnesses or put on any defense case.”
Appellant Br. 20. The Government, on the other hand, asserts that Shannon waived the
protections of his proffer agreement when he cross-examined Akhtar, thereby eliciting responses
that were inconsistent with his proffer statements. This cross-examination, the Government
argues, amounts to an “offer of evidence.”
In considering this issue, we engage in a two-part analysis. We first look at the terms of
Shannon’s proffer agreement for an interpretation of its contents. The agreement is a “contract
that must be interpreted ‘to give effect to the intent of the parties.’” United States v. Barrow, 400
F.3d 109, 117 (2d Cir. 2005). “Because the interpretation of a contract is generally a question of
law, we first review the first issue de novo.” Id. “If we conclude that the proffer agreement
waiver does apply in this case, our second step is to review for abuse of discretion the district
court’s evidentiary rulings admitting [Shannon’s] proffer statements, and we will not reverse
unless an error affects a ‘substantial right.’” Id. (internal citations omitted).
Generally, statements made by defendants in proffer sessions are inadmissible under Rule
410 of the Federal Rules of Evidence. Barrow, 400 F.3d at 116. The rule states in pertinent part:
Except as otherwise provided in this rule, evidence of the
following is not, in any civil or criminal proceeding, admissible
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No. 14-1727, United States v. Shannon
against the defendant who made the plea or was a participant in the
plea discussions:
(1) a guilty plea that was later withdrawn;
(2) a plea of nolo contendere plea;
(3) a statement made during a proceeding on either of
those pleas under Federal Rule of Criminal Procedure
11 or a comparable state procedure; or
(4) a statement made during plea discussions with an
attorney for the prosecuting authority if the discussions
did not result in a guilty plea or they resulted in a later-
withdrawn guilty plea.
Fed. R. Evid. 410 (emphasis added). However, defendants may waive Rule 410 objections,
“absent evidence that a waiver is unknowing or involuntary.” United States v. Fifer, 206 F.
App’x 502, 509 (6th Cir. 2006); see also United States v. Mezzanatto, 513 U.S. 196, 205 (1995)
(holding that Rule 410 creates “‘a privilege of the defendant,’ and, like other evidentiary
privileges, [it] may be waived or varied at the defendant’s request.”).
The waiver provision at issue here, permitted the Government to use Shannon’s proffer
statements “to rebut any evidence offered by [Shannon] that [was] inconsistent with the
statements made during [the proffer session].” (R. 496-2, Proffer Agreement, Pg ID 2149).
Shannon does not challenge the validity of the proffer agreement; instead, he urges this Court to
find that he did not violate the provisions of the agreement because he did not “offer evidence”
by cross-examining Akhtar. Shannon contends that his cross-examination of Akhtar was simply
a rebuttal of the Government’s direct questioning and was aimed at establishing Akhtar’s lack of
first-hand knowledge about payments to beneficiaries. We find Shannon’s arguments
unpersuasive. While Shannon relies heavily on this argument, guidance from our sister circuits’
precedent is more compelling.
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No. 14-1727, United States v. Shannon
In United States v. Krilich, 159 F.3d 1020 (7th Cir. 1998), the defendant contended that
the waiver provision in his proffer agreement was limited to evidence presented through his own
witnesses, not evidence obtained by cross-examination of the prosecution’s witnesses. 159 F.3d
at 1025. The waiver provision stated:
[S]hould [defendant] subsequently testify contrary to the substance
of the proffer or otherwise present a position inconsistent with the
proffer, nothing shall prevent the government from using the
substance of the proffer at sentencing for any purpose, at trial for
impeachment or in rebuttal testimony, or in a prosecution for
perjury.
Id. at 1024. The Seventh Circuit rejected this argument finding that “[e]vidence is evidence,
whether it comes out on direct or cross-examination.” Id. at 1025. It opined that “[o]ne can
‘otherwise present’ a position through arguments of counsel alone, so it is very easy to see how a
position can be ‘presented’ by evidence developed on cross-examination and elaborated by
counsel.” Id. The court concluded that “[i]ntroduction of the [proffer] statements [] was proper
if either [the defendant’s] testimony, or evidence that he presented through the testimony of
others, contradicted the proffer.” Id. (internal citations omitted) (emphasis added).
In Barrow, 400 F.3d 109, the defendant challenged the district court’s finding that his
counsel’s trial conduct triggered the waiver clause of his proffer agreement. The waiver
provision permitted the government to use the defendant’s proffer statements “‘to rebut any
evidence offered or elicited, or factual assertions made, by or on behalf of [him] at any stage of a
criminal prosecution.’” Id. at 116. The defendant contended that only a “specific or direct
contradiction between his proffer statement and an assertion by counsel” would trigger the
waiver clause. Id. at 117. The Second Circuit disagreed, determining that the waiver’s use of
the words “any evidence” created an expansive waiver, and applied to all evidence, whether
“offered directly or elicited on cross-examination.” Id. at 118 (emphasis added). Finally, in
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No. 14-1727, United States v. Shannon
United States v. Hardwick, 544 F.3d 565 (3d Cir. 2008), the defendant’s proffer agreement
provided that the government could “rebut any evidence or arguments offered on [the
defendant’s] behalf.” 544 F.3d at 570. The Third Circuit determined that the “testimony elicited
from [] witnesses on cross-examination was aimed at inferring that [others], rather than [the
defendant], were responsible for the murders [], contrary to the statements [defendant] made
under the proffer agreement.” Id. at 571 (emphasis added).
Relying on these cases, we agree with the district court that Shannon did offer evidence
when he elicited testimony from Akhtar on cross-examination. Shannon’s argument that he did
not offer any evidence because he did not call any witnesses or put on a defense case is
unconvincing. Evidence is defined as “something (including testimony, documents, and tangible
objects) that tends to prove or disprove the existence of an alleged fact; anything presented to the
senses and offered to prove the existence or nonexistence of a fact.” Black's Law Dictionary
(10th ed. 2014). A party does not offer evidence only by calling its own witnesses or putting on
its own case. Indeed, as noted by the Krilich court, evidence may be offered through cross-
examination. Krilich, 159 F.3d at 1025. And as is consistent with the Barrow court’s
determination, because Shannon’s waiver provision allowed the government to rebut “any
evidence,” this included evidence offered on direct or elicited on cross-examination. Thus, we
reject Shannon’s argument and conclude that the elicitation of testimony from Akhtar on cross-
examination amounted to an “offer of evidence” under the terms of the proffer agreement.
Shannon contends that reliance on these cases is misplaced because the waiver provision
at issue in each of these cases was broader than the waiver provision in the instance case.
Shannon argues that the waiver provisions are distinguishable because an “offer of evidence”
does not equate to an “argument” as used in Hardwick; a “position” as used in Krilich; or
9
No. 14-1727, United States v. Shannon
“elicited evidence” as used in Barrow. Shannon’s argument is unavailing. While the waivers
are not identical, they need not be. All three cases support the general rule that cross-
examination of a witness can amount to an “offer of evidence.”
2. Triggering the Waiver Provision
Having determined that Shannon did offer evidence when he cross-examined Akhtar, we
must now consider whether this evidence was inconsistent with Shannon’s proffer and triggered
the waiver provision. Because this is an evidentiary ruling, we review the district’s court
decision to admit Shannon’s proffer statement for abuse of discretion. United States v.
Henderson, 626 F.3d 326, 333 (6th Cir. 2010). We will not reverse unless an error affects a
“substantial right”—that is, if the error had a “substantial and injurious effect or influence” on
the jury’s verdict. Id. (citation omitted). “[A]n erroneous admission of evidence that does not
affect the ‘substantial rights’ of a party is considered harmless, and should be disregarded.”
United States v. Whittington, 455 F.3d 736, 738 (6th Cir. 2006) (citation omitted).
Shannon asserts that his cross-examination was aimed at challenging the accuracy and
credibility of Akhtar’s testimony. He claims that defense counsel was merely responding to the
testimony elicited by the Government from Akhtar and establishing that Akhtar did not have
first-hand knowledge about the payments to beneficiaries. The district court, however,
concluded that defense counsel’s cross-examination “went too far” and was “problematic.” We
agree.
While Shannon certainly has the constitutional right to confront and question the
witnesses against him, see U.S. Const. amend. VI, “[i]mpeachment of a witness need not be
‘contrary to’ or ‘inconsistent with’ a defendant’s admission of guilt in a bargaining proffer.”
Krilich, 159 F.3d at 1025. “Statements are inconsistent only if the truth of one implies the falsity
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No. 14-1727, United States v. Shannon
of the other.” Id. at 1025-26. In Hardwick, the court rejected the defendant’s contention that his
questioning on cross-examination was “intended only to impeach the credibility of the
Government’s cooperating witnesses and to challenge their recollections of certain events.”
Hardwick, 544 F.3d at 571. The court found no error in the district court’s determination that the
defendant also attempted to challenge his role in the crimes, contrary to his proffer statements.
Id. Accordingly, the court found that the district court did not abuse its discretion in admitting
the defendant’s proffer statements. Id.
Similarly, we find that the testimony elicited from Akhtar was not only aimed at
questioning his credibility and accuracy, but also at inferring that Shannon did not pay
beneficiaries, an inference that is inconsistent with his proffer statements. A review of the trial
transcript shows that, Shannon’s counsel elicited from Akhtar the admission that Akhtar lacked
first-hand knowledge about the payments:
Q [Defense Counsel]: . . . [Y]ou indicated on direct
examination that you had knowledge
of Mr. Shannon paying patients.
You remember that testimony?
A [Akhtar]: Yes, sir.
Q [Defense Counsel]: Okay. And that’s not firsthand
knowledge, correct? You didn’t see
Mr.—Mr. Shannon paying any
patients, correct?
A [Akhtar]: No, sir.
(R. 623, Trial Transcript, Pg ID 3801-02). But Shannon’s counsel did not stop there.
Subsequent questioning was aimed at eliciting testimony from Akhtar that was inconsistent with
Shannon’s proffer—that he did, in fact, pay beneficiaries. Shannon’s counsel attempted to create
the inference that Shannon did not pay beneficiaries at all because some of the beneficiaries
called Akhtar to complain that Shannon had not paid them:
11
No. 14-1727, United States v. Shannon
Q [Defense Counsel]: That was just the rumor going
around in the office, correct?
A [Akhtar]: No.
Q [Defense Counsel]: That wasn’t a rumor?
A [Akhtar]: It was not a rumor if patient is
calling and asking that Shannon had
me sign the paperwork and did not
give me the money he promised.
Q [Defense Counsel]: Okay. Well, if he didn’t give him
the money that he promised, that
means he didn’t pay them, correct?
A [Akhtar]: That’s why patient was calling, to
get the money.
Q [Defense Counsel]: Okay. I understand that’s why they
were calling, but they weren’t paid,
correct?
A [Akhtar]: At that time, yes.
(Id. at 3802) (emphasis added). Counsel’s questions about the payments were not confined to
temporal proximity (i.e., that means he didn’t pay them at that time, correct?); rather, the
questioning shows that counsel was attempting to negate the fact that Shannon had ever paid
beneficiaries—in contradiction to his proffer. Thus, per the waiver provision, the Government
was free to rebut this evidence by introducing Shannon’s proffer statements. We find that the
district court did not abuse its discretion in so concluding.
Shannon also contends that the admission of his proffer statements affected his
substantial rights and denied him a fair trial because the “central theme of [his] defense was to
challenge his knowledge and culpability of the offenses.” Appellant Br. at 26. Shannon claims
that the Government offered little proof that he knew about and intended to participate in the
conspiracy, but then “trumpeted” Shannon’s proffer statements in its closing as evidence of
Shannon’s guilt. See Appellant Br. at 26-27. Having determined that the district court did not
err in admitting Shannon’s proffer statements, we reject this argument. As explained above, it
was not an abuse of discretion for the district court to conclude that Shannon triggered the waiver
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No. 14-1727, United States v. Shannon
provision of his proffer agreement, thereby allowing the Government to use his proffer
statements to rebut the inconsistent evidence that he offered. Shannon, with counsel present,
freely stipulated to the conditional use of his statements by signing the proffer agreement, and he
has not argued that this waiver was made unknowingly or involuntarily.
Accordingly, we conclude that Shannon did offer evidence when he cross-examined
Akhtar, and that this testimonial evidence was inconsistent with his proffer. Consequently, the
district court did not abuse its discretion in admitting Shannon’s proffer statements into evidence.
B. Sentencing
Shannon also argues that his sentence was procedurally unreasonable. Shannon bases his
argument on two assignments of error: (1) that the district court failed to comply with Federal
Rule of Criminal Procedure 32 when it ruled on Shannon’s objection to the fraud loss
calculation; and (2) that the district court erroneously relied on the Government’s relevant
conduct evidence in determining fraud.
We review sentences under a deferential abuse-of-discretion standard. United States v.
Wallace, 597 F.3d 794, 802 (6th Cir. 2010). A court will be deemed to have imposed a
procedurally unreasonable sentence if it “failed to calculate the Guidelines range properly;
treated the Guidelines as mandatory; failed to consider the factors prescribed at 18 U.S.C.
§ 3553(a); based the sentence on clearly erroneous facts; or failed to adequately explain the
sentence.” United States v. Coppenger, 775 F.3d 799, 803 (6th Cir. 2015) (citations omitted).
For purposes of sentencing enhancements under the Guidelines, we review the district court’s
method of calculating loss de novo. United States v. White, 492 F.3d 380, 414 (6th Cir. 2007).
Findings of fact underlying the district court’s loss calculations, however, are reviewed for clear
error. Id. “A finding that the calculations were clearly erroneous will follow only if this Court
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No. 14-1727, United States v. Shannon
‘on the entire evidence is left with the definite and firm conviction that a mistake has been
committed.’” Id. (quoting United States v. Ware, 282 F.3d 902, 907 (6th Cir. 2002)).
In its Sentencing Memorandum and during sentencing, the Government contended that
Shannon had actually profited $186,775.00, contrary to the $55,350.00 it asserted and proved at
trial. The Government contends that it is a well-established principle that a sentencing court may
consider relevant conduct in estimating a loss amount. Thus, the Government asserts, during the
sentencing phase, it was free to introduce, and the district court was free to consider, evidence of
Shannon’s relevant conduct. During the sentencing phase, the Government introduced evidence
that Shannon received additional money recruiting for other Shahab-related health care agencies
and Acure—a Shahab-affiliated health care agency. In the separate prosecution of Acure’s
owner, the Government introduced a chart purporting to show that, in addition to the $55,350.00
Shannon made recruiting for All American and Patient First, he also made $120,975.00
recruiting for Acure and $10,450.00 recruiting for the other Shahab-related entities. During
Shannon’s sentencing phase, the Government re-submitted this same chart with its Sentencing
Memorandum and referred to it during sentencing. The Government never sought to introduce
this chart during Shannon’s trial.
Under § 1B1.3 of the Sentencing Guidelines, “[c]onduct that is not formally charged or is
not an element of the offense of conviction may enter into the determination of the applicable
guideline sentencing range.” United States v. Hill, 79 F.3d 1477, 1481 (6th Cir. 1996) (citing
U.S.S.G. § 1B1.3, background). This “relevant conduct” may be considered if it is “part of the
same course of conduct or common scheme or plan as the offense of conviction.” Hill, 79 F.3d at
1481 (citing U.S.S.G. § 1B1.3(a)(2)). “To qualify as part of a ‘common scheme or plan’ under
the ‘relevant conduct’ guideline, the offenses ‘must be substantially connected to each other by
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No. 14-1727, United States v. Shannon
at least one common factor, such as common victims, common accomplices, common purpose,
or similar modus operandi.’” Hill, 79 F.3d at 1481 (citing U.S.S.G. § 1B1.3, application note
9(A)). Relevant conduct is not limited to conduct for which the defendant has been convicted.
United States v. Maken, 510 F.3d 654, 658 (6th Cir. 2007).
As an initial matter, Shannon contends that admission of the Government’s relevant
conduct evidence was error because the evidence was not a part of the record and the
Government submitted the evidence at sentencing without any foundation. Shannon asserted at
sentencing that some “minimum concern of due process” needed to be met before the
Government would be allowed to introduce the evidence. (R. 705, Sentencing Transcript, Pg ID
6844). But Shannon’s argument disregards our precedent that sentencing judges may engage in
judicial fact-finding and consider evidence under a preponderance of the evidence standard.
United States v. Moncivais, 492 F.3d 652, 665 (6th Cir. 2007) (quoting United States v. Gates,
461 F.3d 703, 708 (6th Cir. 2006) (“[W]e find that judicial fact-finding in sentencing
proceedings using a preponderance of the evidence standard. . . does not violate either Fifth
Amendment due process rights, or the Sixth Amendment right to trial by jury.”). Accordingly,
consideration of relevant conduct evidence during sentencing does not violate a defendant’s due
process rights.
However, failure to actually find facts by a preponderance of the evidence on contested
matters during sentencing is error. Federal Rule of Criminal Procedure 32(i)(3)(B) requires the
district court to rule on “any disputed portion of the presentence report or other controverted
matter,” at sentencing. White, 492 F.3d at 415 (quoting Fed. R. Crim. P. 32(i)(3)(B)). In White,
we stated that the “‘court may not merely summarily adopt the factual findings in the
presentence report or simply declare that the facts are supported by a preponderance of the
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No. 14-1727, United States v. Shannon
evidence.’” Id. (internal citation omitted). Rather, once the defendant raises a dispute regarding
the presentence report during sentencing, the district court must “actually find facts, and it must
do so by a preponderance of the evidence.” Id. at 416 (emphasis in original). And we reiterated
that “literal compliance” with Rule 32 is required “‘for a variety of reasons, such as enhancing
the accuracy of the sentence and the clarity of the record.’” Id. at 415. Furthermore, “[w]hen a
defendant raises a particular[, nonfrivolous] argument in seeking a lower sentence, the record
must reflect both that the district judge considered the defendant’s argument and that the judge
explained the basis for rejecting it.” Wallace, 597 F.3d at 803 (internal quotation marks omitted).
Shannon objected to the Government’s fraud loss calculation during sentencing, arguing
that the Government failed to submit any evidence at trial that he profited in the amount of
$186,775.00. The Government countered that the “fraud loss. . . [was] tied directly to the
amount of payments that were paid to Mr. Shannon directly or to his company. . . ,” and that
“[t]he Court need only make a reasonable estimate of loss.” (R. 705, Sentencing Transcript, Pg
ID 6841). The Government further asserted that the additional profit was a part of Shannon’s
relevant conduct and that the district court was free to consider the additional amount that
Shannon allegedly gained. In response to Shannon’s objection and the Government’s
explanation, the district court stated:
Okay. I’m satisfied that the amount of loss calculated by the
Government of 1.6 million dollars in false payments by
Medicare is the amount of loss that the Court should
consider in this particular case based upon the $186,775 and
the $4,500 per home health care episode, and the Court so
finds.
(R. 705, Sentencing Transcript, Pg ID 6845). We agree with Shannon that the district court erred
in failing to comply with Federal Rule of Criminal Procedure 32(i)(3)(B).
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No. 14-1727, United States v. Shannon
Once Shannon objected to the Government’s fraud loss calculation, the district court was
required to explain its factual findings for determining that Shannon would be held accountable
for the fraud loss amount. The district court not only failed to make any factual findings for this
amount, but failed to do so by a preponderance of the evidence. United States v. Triana, 468
F.3d 308, 321 (6th Cir. 2006) (“Under the Guidelines, the district court is to determine the
amount of loss by a preponderance of the evidence…”). Indeed, the district court failed to even
state whether it accepted the Government’s relevant conduct evidence. While consideration of
relevant conduct evidence may have been appropriate in this case, we make no determination as
to its weight. We conclude only that the district court did not satisfy Rule 32 in determining
Shannon’s fraud loss. Thus, although the district court may have properly relied on the
Government’s relevant conduct evidence, it did not articulate, on the record, its factual findings
proved by a preponderance of the evidence, for attributing the $186,775.00 amount to Shannon.
Accordingly, we must remand the case to the district court for resentencing. See United States v.
Orlando, 281 F.3d 586, 601 (6th Cir. 2002) (“Although the evidence may justify holding
[defendant] accountable for $449,000 of laundered money, the district court’s failure to explain
its factual determination requires us to remand the case for his resentencing.”).
III. CONCLUSION
For the reasons stated above, we AFFIRM the district court’s admission of Shannon’s
proffer statement. However, we VACATE Shannon’s sentence and REMAND for resentencing.
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