United States v. Sherry Washington

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0138p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellee, -

UNITED STATES OF AMERICA,

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No. 11-2364

v.

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Defendant-Appellant. -

SHERRY WASHINGTON,

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Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 2:10-cr-20202-3—Paul D. Borman, District Judge.

Argued: November 27, 2012

Decided and Filed: May 14, 2013

Before: NORRIS, GIBBONS, and DONALD, Circuit Judges.

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COUNSEL

ARGUED: Carole M. Stanyar, Plymouth, Michigan, for Appellant. J. Michael Buckley,

UNITED STATES ATTORNEY’S OFFICE, Detroit, Michigan, for Appellee.

ON BRIEF: Carole M. Stanyar, Plymouth, Michigan, for Appellant. J. Michael

Buckley, UNITED STATES ATTORNEY’S OFFICE, Detroit, Michigan, for Appellee.

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OPINION

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BERNICE B. DONALD, Circuit Judge. Sherry Washington appeals her

conviction and sentence for money laundering and conspiracy to commit program fraud

that arose out of her role in a business venture that ostensibly provided “wellness”

services to the Detroit Public School (“DPS”) system. We discern no error in the

sufficiency of the evidence, and we conclude that Washington was not prejudiced by

trial counsel’s errors. We also hold that the district court properly enhanced

1

No. 11-2364 United States v. Washington Page 2

Washington’s sentence based on her leadership or organizer role in the conspiracy and

based on an amount of loss of at least $2.5 million to DPS. Accordingly, we affirm.

I. BACKGROUND

Because the factual nuances assist in our analysis of this appeal, we first review

the evidence in detail.

A. The Government’s Evidence

In 2005, Stephen Hill, the Executive Director of Risk Management for DPS,

invited Washington to submit a proposal for implementing a wellness program for DPS

employees that would, among other things, use “e-Care” software that Hill had already

purchased to generate health assessments for each employee. Washington, along with

her friend Sally Jo Bond and her sister Dr. Gwendolyn Washington, then joined

Associates for Learning (“A4L”), an entity started by her friend Marilyn White.1

On September 6, 2005, A4L submitted a written proposal quoting $150,000 for

a pilot study of the “We Care” wellness program that would cover 2,946 employees

between November 2005 and March 2006. On the same day, A4L submitted an invoice

for $75,000. Hill did not open the program to competitive bidding and the parties signed

no written contract even though it was DPS policy to use a bidding process and negotiate

written contracts.

On September 10, 2005, Hill left the employ of DPS but continued meeting with

Washington to discuss A4L’s business with DPS. Christina Polk-Osumah, Hill’s former

lover and protegee at DPS, requested and approved payment for A4L’s first invoice.2

On October 27, 2005, DPS paid the invoice; the money was distributed to the four

partners the next day, with Washington receiving a slightly smaller share. Payment was

1

Marilyn White and Sally Jo Bond both pleaded guilty to conspiracy to commit program fraud

pursuant to cooperation agreements.

2

Polk-Osumah was charged in the original indictment, but the charges were dropped after her

death in 2010.

No. 11-2364 United States v. Washington Page 3

made by wire transfer even though payment by check, which has more safeguards, was

normal DPS procedure.

Hill testified that he met with Washington in December 2005 to discuss whether

A4L could submit a new and larger invoice. Washington suggested that A4L pay Hill

five percent of the invoice amount, an arrangement the government characterized as a

“token of appreciation” for Hill’s assistance in getting the invoices paid. White and

Bond both testified that Washington and Hill had agreed that A4L could submit invoices

for $1 million. Both said that they thought this was “too much money” and that they did

not think that DPS would pay it.

Nonetheless, A4L submitted a second batch of invoices claiming 3,290 hours of

work at $300 per hour, plus $45,000 for “healthy tools,” “healthy lunches,” and

“incentive bonuses” to be provided to DPS employees, for a total of $1,042,000. As

Washington admits, the invoices were not for work already performed, but for “future

work,” but a DPS employee testified that DPS does not normally pay for future services.

The government characterized these invoices as fraudulent. White testified that A4L had

no system for tracking hours and that the partners simply agreed to bill for a certain

number of hours. Bond testified that she did not know the total number of hours spent

and a spreadsheet she created for a related civil suit showing hours performed by A4L

was “fraudulent.” White also testified that the hours on this spreadsheet had perhaps

been fabricated, and that the true cost of the “healthy tools” and “healthy lunches” listed

in the invoices was not what was billed.

The same day the second batch of invoices was submitted, Polk-Osumah

approved a second payment for $967,000. On January 9, the money was again wire

transferred to the A4L account, and again, the proceeds were immediately distributed to

the four partners. Washington emailed the invoices to Hill, and the remaining $75,000

balance was also wired to the A4L account soon thereafter. Washington sent text

messages to her partners instructing them to put five percent of their share in plain white

envelopes, in cash, as payment for Hill. Hill testified that Washington directed him to

No. 11-2364 United States v. Washington Page 4

meet her privately in various public places to deliver the cash, including a public parking

garage.

On May 11, 2006, A4L submitted a third batch of invoices—one for $1,095,000,

and a second for $1,110,000—but these were not paid immediately. Around June 2006,

Hill returned to DPS as an unpaid Acting Executive Director of Risk Management “on

loan” from his paid employer, an insurance vendor that contracted with DPS. On August

11, 2006, A4L re-submitted the May invoices. That same day, Hill approved payment.

DPS soon wired the full amount in two payments. Again, the money was distributed to

the partners; Washington instructed each to give her five percent of their shares, in cash,

to pass on to Hill.

In February 2007, A4L received a message from DPS employee Anthony

Thornton to “cease going to the schools.” A civil suit and a federal criminal

investigation against A4L soon followed.

B. Washington’s Rebuttal Evidence

Washington, her partners, and Hill all testified that the We Care program was a

legitimate program. There was also some evidence that A4L completed actual work

before DPS halted the program, including making presentations to staff about the health

assessment software, distributing flyers, helping a number of teachers complete health

assessments, and receiving an assessment of schools that cost the district the most

money. A4L also distributed “healthy tools” such as pedometers and healthy lunches,

and partners met weekly with DPS staff. Washington organized a “run/walk” event and

contacted fitness clubs, and Dr. Gwendolyn Washington produced “Ask the Doctor”

videos.

Washington and her partners testified that DPS staff, meaning Hill and Polk-

Osumah, knew they were paying for “future work,” and that the partners understood

advance payments to be standard practice in the Risk Management department of DPS.

They also testified that although A4L did not track hours, the partners had a general idea

of the number of tasks and the amount of time they spent on those tasks. The partners

No. 11-2364 United States v. Washington Page 5

and Hill all testified that wire transfers and unwritten contracts were typical in the Risk

Management department, and the partners requested a contract but that Hill and Polk-

Osumah said they were “working on it.”

Finally, Washington claimed that she was misled by Hill, who was involved in

a variety of criminal schemes with other DPS vendors. According to her, she was

unaware that Hill had returned to work for DPS and she merely paid him a consulting

fee for his advice on DPS protocol and on expanding A4L. She also claimed that the

fees and cash payments were Hill’s idea.

C. Procedural History

Washington was charged with one count of conspiracy to commit program fraud,

in violation of 18 U.S.C. §§ 371 and 666, and one count of conspiracy to commit money

laundering, in violation of 18 U.S.C. § 1956. The jury returned a guilty verdict on both

counts. Washington subsequently filed a motion for a new trial on the basis of

ineffective assistance of trial counsel. The district court removed Washington’s original

attorney as counsel but denied the motion.

At the sentencing hearing, the district court enhanced Washington’s base offense

level by twenty-two levels, finding that Washington was an “organizer or leader” of a

criminal activity that involved at least five other people pursuant to Section 3B1.1 of the

United States Sentencing Guidelines and that the amount of loss to DPS was over

$2.5 million pursuant to Section 2B1.1(b)(1)(J) of the Guidelines. After considering the

factors set forth in 18 U.S.C. § 3553(a), the court granted a downward variance for

Washington’s charitable work and sentenced her to sixty months and eighty-four

months, to be served concurrently.

II. ANALYSIS

A. Sufficiency of the Evidence Claim

Washington claims that the government did not provide sufficient evidence to

support her conviction on either count. When a defendant appeals on the basis that the

No. 11-2364 United States v. Washington Page 6

evidence was insufficient to support a guilty verdict, our role is to ask “whether, after

viewing the evidence in the light most favorable to the prosecution, any rational trier of

fact could have found the essential elements of the crime beyond a reasonable doubt.”

Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original). We do not insert

our own findings of fact; rather we give full credit to the responsibility of the jury to

weigh the evidence, to make credibility determinations, and to draw inferences. Id.

To support a jury verdict that Washington was guilty of money laundering under

18 U.S.C. § 1956(a)(1), the government had to provide sufficient evidence that

Washington conducted a financial transaction with the intent to carry on a “specified

unlawful activity” or with knowledge that the transaction was designed to disguise the

nature of the proceeds of a “specified unlawful activity.”3 Washington’s sole challenge

to the money laundering count is that the evidence is insufficient to prove program fraud,

which the parties agree is the relevant underlying “specified unlawful activity” in this

case. Therefore, we address only program fraud to resolve Washington’s appeal of both

counts.

Program fraud occurs where 1) a person who was an agent of a local government

agency receiving federal funding over $10,000 per year, 2) embezzled, stole or

fraudulently obtained property (including money), 3) the value of which was $5,000 or

more, and 4) which was owned or controlled by the government agency. 18 U.S.C.

§ 666; United States v. Hudson, 491 F.3d 590, 593 (6th Cir. 2007). Washington

challenges only the second element, arguing that the government did not prove beyond

a reasonable doubt that she fraudulently obtained money. However, Washington was

not convicted of program fraud itself, but of conspiracy to commit program fraud. Thus,

the government merely had to prove beyond a reasonable doubt that Washington

knowingly and voluntarily joined a conspiracy that intended to fraudulently obtain

3

The full list of elements the government must prove to support a money laundering verdict under

18 U.S.C. § 1956(a)(1) are as follows: 1) the defendant conducted or attempted to conduct a financial

transaction, 2) the transaction involved money or property that represented the proceeds of a “specified

unlawful activity,” 3) the defendant knew that the money was the proceeds of some form of unlawful

activity, and 4) the defendant did so with the intent to carry on the “specified unlawful activity” or knew

that the transaction was designed in whole or in part to conceal or disguise the nature, location, source,

ownership, or control of the proceeds of the “specified unlawful activity.”

No. 11-2364 United States v. Washington Page 7

money4 and that a member of the conspiracy took at least one overt act in furtherance

of the conspiracy. See 18 U.S.C. § 371.

As we have noted in the past, it can be difficult to obtain direct evidence of

something so internal as intent to commit fraud, so if none is available, we have held that

juries may consider circumstantial evidence and draw reasonable inferences from such

evidence. United States v. Davis, 490 F.3d 541, 549 (6th Cir. 2007) (drawing inferences

from concealment of the activity, misrepresentation, proof of knowledge, and the amount

of profit); see also United States v. Jones, 641 F.3d 706, 710-11 (6th Cir. 2011)

(supporting healthcare and mail fraud convictions with suspicious bills and lack of

records for billed services); United States v. Thompson, Case No. 09-5181, 2012 U.S.

App. LEXIS 19246 at *37-38 (6th Cir. Sept. 11, 2012) (supporting conviction for § 666

fraud with timing of suspect employment relationships between a public agent and

private parties, creation of false receipts, and efforts to make a project appear legitimate).

Here, the government attempted to prove its case with circumstantial facts, asking the

jury to make inferences.

The government provided evidence that 1) A4L billed for work not yet

performed and that DPS did not allow such payments; 2) the arrangement was not

conducted in accordance with DPS policy and procedure; 3) the invoices submitted over

the course of nine months billed for three year’s worth of work; 4) A4L did not track

hours or keep records of work provided, but billed on an hourly basis; 5) the hours in the

invoices were fabricated or at least inflated; 6) at Washington’s instruction, A4L made

cash payments of tens of thousands of dollars to Hill while he was a DPS insider and

personally approving invoices; and 7) A4L immediately distributed almost all the

proceeds to the partners instead of maintaining money in the company account to pay

for expenses. A reasonable jury could infer that Washington, or other members of the

4

To obtain something fraudulently means to use misrepresentations or false promises, including

statements that are known untruths, statements made with reckless disregard for their truth, half-truths, and

the knowing concealment of material facts. 1A Edward J. Devitt et al., Federal Jury Practice and

Instructions, § 16.08 (6th ed. 2012); see also Kenty v. Bank One, 92 F.3d 384 , 389-90 (6th Cir. 1996).

The “intent to defraud” is knowingly acting to deceive and is usually accompanied by a purpose to gain

personal benefit. Devitt, supra, at § 16.07.

No. 11-2364 United States v. Washington Page 8

conspiracy, did not bill for actual hour estimates, but for some made up number of hours

that would support the dollar amount desired. It could also infer that Hill used his inside

influence to circumvent DPS’s normal procedures and that A4L did not perform enough

work in the nine months that the We Care program was operational to indicate a

legitimate intent to complete the work. Considering the evidence of Washington’s role

in generating the invoices, getting the invoices paid, and in making payments to Hill, it

was reasonable for a jury to infer her knowledge and intent.

Washington argues that the jury inferred too much from this circumstantial

evidence because 1) her business partners did not testify that the invoices were

fabricated, 2) billing for future work is not itself fraudulent, and 3) the evidence

regarding advance payments, unwritten contracts and wire transfers was insufficient to

infer fraud where a member of DPS approved the practices. However, her partners also

testified that A4L did not track hours and that they thought the invoices asked for “too

much money.” The invoices were, at a minimum, inaccurate. And the fact that Hill,

himself a member of the alleged conspiracy, approved procedures outside of DPS policy

merely supports the inference of deceit and fraud.

Washington also argues that the jury did not give enough credit to 1) her own

testimony that the We Care program was legitimate and had performed real work, 2) the

testimony of her partners that they intended to perform the work, and 3) her own

testimony that she did not know that Hill was still affiliated with DPS when she made

the cash payments. However, it is the job of the jury, not this court, to weigh the

credibility of a witness and determine whose story is true. Jackson, 443 U.S. at 319. We

will not conduct independent fact-finding where, like here, the jury’s findings were

reasonable.

Viewed in the light most favorable to the prosecution, the government provided

sufficient evidence to support a jury verdict of conspiracy to commit program fraud. As

Washington’s objection to the money laundering count was limited to her objection to

the underlying “specified unlawful activity” of program fraud, that conviction is also

supported.

No. 11-2364 United States v. Washington Page 9

B. Ineffective Assistance of Trial Counsel Claim

Washington next claims that her trial counsel was ineffective because he failed

to present the following exculpatory evidence to the jury: testimony from DPS employee

Lamont Satchel about internal DPS practices, character evidence on Washington’s

volunteerism, and testimony from Kaye Washington that she observed A4L performing

genuine wellness work. All three pieces of evidence were presented after the trial by

Washington’s new counsel.5

Normally, we do not entertain ineffective assistance of counsel claims on direct

appeal because of the lack of record evidence bearing on the question. United States v.

Crowe, 291 F.3d 884, 886 (6th Cir. 2002). However, both parties agree that the record

below is sufficient in this case because both sides briefed the issue when Washington

submitted a motion for a new trial and because Washington has had different counsel

since sentencing. Where the issue is fully briefed and the defendant has new counsel on

appeal, we have addressed such claims on direct appeal. See United States v. Williams,

176 F.3d 301, 312 (6th Cir. 1999). We address it here as well.

We will only find counsel to be constitutionally ineffective if the defendant meets

the heavy burden to show that counsel’s performance meets both prongs under United

States v. Strickland, 466 U.S. 668, 687 (1984). First, counsel’s performance must have

been deficient due to “errors so serious” that, “in light of all the circumstances, the

identified acts or omissions were outside the wide range of professional competent

assistance.” Id. at 687, 690. Second, the deficient performance must have prejudiced

the defense such that there is a reasonable probability that the result would have been

different but for counsel’s errors. Id. at 687, 694.

While we have no doubt that trial counsel might have done well to present the

evidence suggested, we do not conclude that trial counsel’s performance was deficient

for failing to introduce Satchel’s testimony that unwritten contracts and advance

5

Testimony from Satchel was presented with Washington’s motion for a new trial. from Kaye

Washington was presented at sentencing. Evidence on Washington’s community involvement was also

presented at sentencing.

No. 11-2364 United States v. Washington Page 10

payments were not unusual in the Risk Management department and that DPS was

responsible for producing a contract. This evidence was duplicative of White’s and

Bond’s testimony, and exclusion of it is not outside the bounds of reasonable strategy.

See Strickland, 466 U.S. at 690-91 (holding that an attorney’s strategic decisions “are

virtually unchallengeable”). Nor do we conclude that trial counsel was deficient for

failing to present character evidence on Washington’s reputation for “volunteering

tirelessly on behalf of the City’s school children.” It is not clear that such evidence

would have even been admissible under Federal Rule of Evidence (“FRE”) 405 because

the government did not put Washington’s character at issue. However, even if it did,

such character evidence is tangential to the question of guilt. Failing to present such

evidence is hardly outside the bounds of professional norms.

Trial counsel’s failure to present testimony from Kaye Washington, the

appellant’s sister, is a closer issue. Assuming, however, that trial counsel was deficient

for this failure, we do not conclude that the deficiency prejudiced Washington. To find

Washington guilty, the jury had to find that, at minimum, the conspiracy intended to do

something fraudulent, such as inflating the invoices. Kaye Washington’s testimony

would have included information on her assessment and strategic planning report of the

We Care program and her observations of A4L’s genuine wellness work for a one-month

period. This could have undermined the government’s arguments that A4L did not

intend to perform the work billed. However, the testimony regarding the cash payments

to Hill and the secrecy surrounding it, which suggested fraudulent activity, was so

substantial that Kaye Washington’s testimony probably would not have changed the jury

verdict. Additionally, Kaye Washington’s relationship to the appellant may well have

undermined her testimony. Therefore, under Strickland, trial counsel cannot be found

constitutionally ineffective for this omission. See also Ross v. United States, 339 F.3d

483, 495 (6th Cir. 2003) (finding no ineffective assistance for lack of prejudice alone).

No. 11-2364 United States v. Washington Page 11

C. Sentencing Enhancement Claims

Washington raises a procedural reasonableness challenge to the district court’s

sentencing decision, arguing that the court erred by applying two sentencing

enhancements. We address each in turn.

1.) Organizer or Leadership Role

Washington first challenges the district court’s decision to apply the Section

3B1.1(a) enhancement of the Guidelines, adding four levels to her base offense level for

her “organizer or leadership role.” The standard of review for the decision to apply a

Section 3B1.1 enhancement for an organizer or leadership role is unresolved in this

circuit. United States v. Castilla-Lugo, 699 F.3d 454, 459 (6th Cir. 2012). Traditionally,

legal conclusions are reviewed de novo and factual findings are reviewed for clear error.

Id. However, since the Supreme Court’s holding in Buford v. United States, 532 U.S.

59, 66 (2001), that review of sentencing enhancements under Section 4B1.2 of the

Guidelines is subject to deferential, rather than de novo, review “in light of the fact

bound nature of the legal decision,” we have repeatedly signaled that the standard of

review for Section 3B1.1 is in question. Id. (noting that the standard is unresolved and

declining to clarify); United States v. Vasquez, 560 F.3d 461, 473 (6th Cir. 2009) (same);

United States v. Moncivais, 492 F.3d 652, 660 (6th Cir. 2007) (same); United States v.

McDaniel, 398 F.3d 540, 552 n.10 (6th Cir. 2005) (same); United States v. Henley,

360 F.3d 509, 516 (6th Cir. 2004) (same). As the standard of review has been

unresolved for over a decade, we take this opportunity to clarify it now.

In Buford, the legal question was whether the district court erred in determining

that an offender’s prior convictions were not “related” enough to be consolidated for

sentencing purposes under Section 4B1.2(c) of the Guidelines. 532 U.S. at 60-61. The

question was not an underlying factual finding, but rather the legal conclusion that

certain prior convictions were not “functionally consolidated.” Id. at 63. The Supreme

Court determined that the district court had certain institutional advantages in resolving

the legal question, such as its expertise in classifying prior convictions and its closer

No. 11-2364 United States v. Washington Page 12

understanding of the factual nuances of the case. Id. at 64-65. While the legal

conclusion that a person is an organizer or leader under Section 3B1.1 is less procedural

in nature than the Section 4B1.2(c) question, a Section 3B1.1 enhancement nonetheless

depends on a number of factual nuances that a district court is better positioned to

evaluate. The trial judge is most familiar with the facts and is best situated to determine

whether someone is or is not a “leader” of a conspiracy that the jury found existed.

Deferring to this advantage is appropriate. Accordingly, we hold that, under the

reasoning in Buford, review of the legal conclusion that a person is an organizer or

leader under Section 3B1.1 is also deferential. See also United States v. Webb, 335 F.3d

534, 538 (6th Cir. 2003) (extending the Buford deferential standard to review of Section

3E1.1 enhancements).

Having resolved the standard of review, we now turn to the enhancement itself.

Section 3B1.1(a) of the Guidelines calls for a sentencing enhancement when the

defendant “was an organizer or leader of a criminal activity that involved five or more

participants.” A defendant only needs to be a leader of “one or more other participants”

to qualify for the enhancement. SENTENCING GUIDELINES MANUAL § 3B1.1 cmt. 2; see

United States v. Baker, 559 F.3d 443, 449 (6th Cir. 2009). The Application Notes

include a non-exhaustive list of factors a court can use to distinguish between one who

is an “organizer or leader” from one who is merely a “manager or supervisor” to whom

a less severe enhancement would apply: “the exercise of decision making authority, the

nature of participation in the commission of the offense, the recruitment of accomplices,

the claimed right to a larger share of the fruits of the crime, the degree of participation

in planning or organizing the offense, the nature and scope of the illegal activity, and the

degree of control and authority exercised over others.” SENTENCING GUIDELINES

MANUAL § 3B1.1 cmt. 4; see also id. § 3B1.1(b) (providing for only a three level

enhancement for a “manager or supervisor” of the conspiracy).

The heart of the government’s case was a surreptitious arrangement in which

Washington suggested, agreed to, and organized surreptitious cash payments to a DPS

insider who exerted his influence to get invoices paid—invoices that were at least

No. 11-2364 United States v. Washington Page 13

inflated at Washington’s suggestion. The district court is in the best position to know

whether Washington was a leader or organizer under Section 3B1.1 given the evidence

presented and the nature of the conspiracy. Any question as to the truth of the evidence

is an underlying credibility issue also appropriate for the district court. See Jackson,

443 U.S. at 319. While Washington may or may not have been a leader in the business,

it was not unreasonable for the district court to conclude that Washington was a leader

or organizer of the conspiracy. SENTENCING GUIDELINES MANUAL § 3B1.1(a) (requiring

that the defendant be an organizer or leader “of a criminal activity,” here the conspiracy).

It may be true that Hill or someone else was also a leader of the conspiracy, but this

does not undermine the district court’s conclusion because more than one person can be

an organizer or leader. See SENTENCING GUIDELINES MANUAL § 3B1.1 cmt. 4.

Accordingly, we defer to that conclusion.

2.) Loss Calculation

Washington next challenges the district court’s decision to apply an eighteen-

level enhancement under Section 2B1.1(b)(1)(J) of the Guidelines for an amount of loss

to DPS of between $2.5 million and $7 million. We review the district court’s

calculation of the “amount of loss” for clear error, but consider the methodology behind

it de novo. United States v. Poulsen, 655 F.3d 492, 512-13 (6th Cir. 2011). The

prosecution has the burden to prove by a preponderance of the evidence that the

enhancement applies. United States v. Dupree, 323 F.3d 480, 491 (6th Cir. 2003).

The relevant amount of loss for a Section 2B1.1 enhancement is the greater of

the actual loss, defined as the reasonably foreseeable pecuniary harm that resulted from

the offense, or the intended loss to the victim. SENTENCING GUIDELINES MANUAL

§ 2B1.1 cmt. 3(A). The district court’s duty is to make a reasonable estimate of the loss.

SENTENCING GUIDELINES MANUAL § 2B1.1 cmt. 3(C). However, that loss is to be

reduced by the fair market value of actual services rendered to the victim. SENTENCING

GUIDELINES MANUAL § 2B1.1 cmt. 3(E). Whether the district court appropriately

reduced the amount of loss by the value of services provided is the relevant inquiry on

appeal.

No. 11-2364 United States v. Washington Page 14

Washington argued below, as she does here, that A4L performed actual work and

that it would have completed the work billed if DPS had not halted the project. The

government argued then, as it does now, that though A4L may have performed some

tasks, the actual loss to DPS was the entire $3.2 million that it paid to A4L because the

entire We Care program was a sham. After hearing both sides, the district court then

made the following findings and conclusion:

The Court finds that there is evidence of more than two and a half million

dollars of loss to the public schools through this fraudulent scheme, that

no records were kept, there was no contract, there were kickbacks, there

was cash, secretive cash, and so for both [Guidelines and restitution]

purposes the Court believes that there is more than $2.5 million loss

involved in this.

We should note first that the district court did not find that the amount of loss

was the entire $3.32 million, but only that the loss was at least $2.5 million, enough to

exceed the threshold for the amount of loss range in Section 2B1.1(b)(1)(J). Even so,

Washington argues that the court should have reduced the amount of loss further,

according to the fair market value of the work A4L performed, which included giving

seminars on using the health assessment software to teachers, distributing flyers, and

assisting teachers with their health assessments. However, Washington does not explain

how the court could have made a more detailed calculation of the value of work

performed, given that A4L did not keep records of hours or work completed. The

government met its burden to prove that DPS paid $3.32 million to A4L. Counsel for

Washington admitted during oral argument that Washington had the burden of proving

the specific value by which that amount should be reduced. We agree. The district

court’s obligation is only to “make a reasonable estimate of the loss” “based on available

information . . . as appropriate and practicable under the circumstances.” SENTENCING

GUIDELINES MANUAL § 2B1.1 cmt. 3(C). Washington provided no estimates of the

value of the work completed other than the hourly rates in the invoices that were found

to be fraudulent. As a result, the district court was justified in making an estimate based

on available information. Indeed, it would have been justified in finding the amount of

No. 11-2364 United States v. Washington Page 15

loss to be the entire $3.32 million because it found that the entire wellness program was

a sham.

Washington also makes an argument that DPS’s decision to halt the program was

the true proximate cause of the loss because A4L would have otherwise completed the

work. This argument is unconvincing. It is reasonably foreseeable that a client who

receives fraudulent invoices will eventually terminate the program and, therefore, the

fraud is the proximate cause of any loss associated with the termination. The district

court did not err in applying this sentencing enhancement.

III. CONCLUSION

For the foregoing reasons, we affirm Washington’s conviction and sentence.