The opinion
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-13217
________________________
D.C. Docket No. 8:11-cr-00324-VMC-TGW-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
EDUARDO BLANCHET,
Defendant-Appellant.
________________________
No. 12-13256
________________________
D.C. Docket No. 8:11-cr-00324-VMC-TGW-2
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DANIEL GUILLAN,
Defendant-Appellant.
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________________________
Appeals from the United States District Court
for the Middle District of Florida
________________________
(May 21, 2013)
Before HULL and ANDERSON, Circuit Judges, and SCHLESINGER, * District
Judge.
PER CURIAM:
Defendants Eduardo Blanchet and Daniel Guillan appeal their convictions
and 36-month sentences of imprisonment for (1) one count of conspiracy to
defraud the United States, in violation of 18 U.S.C. § 371, and (2) five counts of
wire fraud, in violation of 18 U.S.C. §§ 1343 and 2. After review and oral
argument, we affirm both Defendants’ convictions and sentences.
I. BACKGROUND
Defendants Blanchet’s and Guillan’s convictions arise out of their
company’s procurement of a $100 million, small business set-aside contract with
the federal government in 2007. The contract was for the provision of foreign
language instruction services to the United States Special Operations Command
(“SOCOM”). The core of the fraud in this case is that Blanchet and Guillan’s
company did not meet the necessary federal standards to be considered a small
business. Both Defendants participated in misrepresenting to or concealing from
*
Honorable Harvey E. Schlesinger, United States District Judge for the Middle District of
Florida, sitting by designation.
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the government material facts about their company’s affiliation with another, larger
company, both in the initial bid and during the government’s later investigation.
On February 13, 2012, a jury trial began as to both Blanchet and Guillan,
and at the close of the trial, the jury found Blanchet and Guillan guilty on all six
counts. We recount the trial evidence, which included extensive documentary and
testimonial evidence that we construe in the light most favorable to the jury’s
guilty verdict, in setting out the essential facts of this case.
A. The 2002 Contract & BIB Consultants, Inc.
In September 2002, SOCOM awarded to BIB Consultants, Inc. (“BIB”), a
contract for the provision of foreign language and cultural training to military
personnel (the “2002 Contract”). Defendant Blanchet and his wife, Silvia Mira,
formed BIB in June 1996, and each owned half of the company’s shares at the time
of formation. At the time BIB was awarded the 2002 Contract, Defendant
Blanchet was the president of BIB while Defendant Guillan served as BIB’s
vice-president and registered agent, and both Defendants participated in the
negotiations with SOCOM on BIB’s behalf. 1 This 2002 Contract extended for a
period of five years and had a ceiling of $50 million.
1
In 2003, Guillan and his wife assumed positions as president and vice-president of BIB
and each received 1,000 shares of BIB stock. Ostensibly, this change occurred in connection
with a contract award that is not the subject of this appeal. That contract required that the
company that obtained the contract have officers who were U.S. citizens. Guillan and his wife
were U.S. citizens, while at the time of the award, Blanchet and Mira were non-citizens. On
January 1, 2006, Guillan and his wife stepped down from their positions as officers of BIB and
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Pursuant to a decision made by SOCOM’s contracting officer, who for this
2002 Contract was Karene Spurlin, SOCOM designated the 2002 Contract as a
“small business set-aside.” To promote the growth of small businesses, SOCOM
contracting officers had the discretion to designate certain contracts as being
exclusively open for bid and performance by small businesses, with the small
businesses being required to self-certify that they met certain criteria regarding
their size, ownership, and affiliations with other business entities. After the
business self-certified that it met the small-business requirements, the contracting
officer would review the bid for any irregularities. If the contracting officer
questioned the bid, she could refer the matter to the Small Business Administration
(“SBA”) for further investigation. As a result of BIB’s performance under the
2002 Contract, BIB became too large to obtain subsequent small business set-aside
contracts from SOCOM.
To obtain working capital and to enable BIB to perform under the 2002
Contract, Blanchet obtained a “factoring” credit arrangement with a local central
Florida bank, BankFirst. Under this arrangement, which lasted for approximately
one year, BankFirst received an assignment of BIB’s right to payment under the
2002 Contract and, in exchange, BankFirst loaned money to BIB. The BankFirst-
BIB loan was repaid as SOCOM made payments under the 2002 Contract.
Blanchet, Mira, and Luke Farkas, a BIB employee to whom Guillan’s wife had sold all of her
BIB stock, became BIB’s sole officers.
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B. Formation and Initial Organization of MiLanguages
After it was awarded the 2002 Contract, BIB began providing foreign
language training at various military installations. At Fort Campbell, Kentucky,
BIB subcontracted its contractual foreign language training obligations to Berlitz
International. At some point during the 2002 Contract term, SOCOM informed
Blanchet or Guillan that it was dissatisfied with Berlitz’s performance at Fort
Campbell.
In September 2004, Guillan formed a new company called MiLanguages.
Guillan initially owned all of MiLanguages’s stock and was the company’s
president and registered agent. Guillan later signed a stock purchase and sale
agreement granting Blanchet and Blanchet’s wife, Silvia Mira, the right to
purchase MiLanguages’s stock. It is unclear whether Blanchet or his wife ever
executed this agreement, however.
On December 27, 2004, MiLanguages entered into a subcontract with BIB
under which MiLanguages agreed to take over the provision of foreign language
services at Fort Campbell as of January 1, 2005. Blanchet signed the subcontract
on BIB’s behalf and Guillan signed the subcontract for MiLanguages.
On January 4, 2005, MiLanguages opened an account at BankFirst.
Blanchet and Guillan were the only authorized signatories for MiLanguages’s
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BankFirst account. The first deposit into this account was a $50,000 check from
BIB, and BIB also provided overdraft protection on this account. 2
In November 2006, Blanchet contacted attorney Ralph Hadley, III, who had
previously provided legal services for BIB and Blanchet—both personally and
related to Blanchet’s businesses. At this time, Blanchet was serving as the
president of BIB and the Director of Government Contracting for MiLanguages,
while Guillan owned MiLanguages and was BIB’s Director of Government
Contracting. Although Hadley was not familiar with the exact particulars of the
relationships between BIB, MiLanguages, and the Defendants or the details of the
2002 Contract, Hadley was generally aware that MiLanguages did subcontracting
work for BIB.
In an e-mail, Blanchet requested that Hadley draft an employment contract
between MiLanguages and Guillan, despite the fact that Guillan was the current
owner of MiLanguages. This employment contract was contingent on
MiLanguages obtaining a future contract from SOCOM. In the e-mail, Blanchet
asked Hadley whether BIB or MiLanguages should sign the contract, “considering
the legal situation” between the two business entities and in light of the fact that
“in reality [BIB] is the one, but [Guillan] will be hired by MiLanguages.”
Essentially, Hadley did not understand why Blanchet was writing to him about a
2
MiLanguages later repaid a $50,000 sum to Blanchet, with a check signed by Guillan, on
December 5, 2008.
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contract between Guillan and a company Guillan owned, but he “assume[d] [it
was] because that was a discussion that the two of them had together between
themselves. . . . They had private meetings and discussions to which [he] was not
privy.” When Hadley drafted the employment contract between MiLanguages and
Guillan, Hadley billed BIB for the work he did on MiLanguages’s behalf.
C. MiLanguages Transferred to a New Owner
Around this same time—the later months of 2006—the Defendants
discussed with Hadley their desire to find someone with a strong foreign language
and teaching background to head up MiLanguages and assist MiLanguages in
bidding on future SOCOM contracts. Hadley recommended Edward Borsoi, a
retired college professor whom Hadley knew and who lived nearby. After
discussing the Defendants’ request with Borsoi, Hadley arranged for the
Defendants and Blanchet’s wife, Mira, to meet with Borsoi at Hadley’s office.
At this meeting, Hadley explained to Borsoi that the Defendants “had a
business of providing foreign language instruction and that they had been very
successful,” but that their success led to their business growing too big to obtain
new government contracts. Consequently, “the only way to apply for the
[g]overnment contract would be for a new company to apply or a new restructuring
of the old company,” and Hadley asked Borsoi if he would be willing to have the
stock shares of the new company placed in his name. Borsoi agreed to become the
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sole stockholder and president of MiLanguages in exchange for a monthly stipend
of $1500, but beyond accepting this role, Borsoi did not provide money or other
consideration to Guillan in exchange for all of the shares of MiLanguages. Borsoi
stated that he agreed to take on this role because he “was a retired guy. And retired
people look for things to do. . . . [he] thought [he] would learn something. . . . it
looked like a mutually . . . beneficial arrangement.” At the meeting, neither of the
Defendants asked Borsoi about his background or qualifications.
Hadley drew up the necessary paperwork and Borsoi signed it, and effective
January 1, 2007, Borsoi became the owner of MiLanguages via a stock transfer
from Guillan. However, Borsoi was not involved in the day-to-day operations of
MiLanguages, could not sell his MiLanguages stock, and would sign documents
for MiLanguages that were presented to him without really reading them. Borsoi
did not consider himself to be the actual owner of MiLanguages, as he did not have
his own office at MiLanguages, never spent any of MiLanguages’s money or drew
on the company’s bank account. Neither Blanchet nor Guillan asked for Borsoi’s
permission to draw on MiLanguages’s line of credit. In addition, Borsoi did not
know how many, if any, contracts MiLanguages entered into during his tenure as
president. The business decisions and “all the operations” for MiLanguages were
handled by either Blanchet or Guillan, including subcontracting and personnel
decisions.
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D. MiLanguages’s Bid for the 2007 SOCOM Follow-On Contract
The 2002 Contract between BIB and SOCOM was scheduled to expire in
2007, and as noted previously, BIB had grown too large to obtain future small
business set-aside contracts from SOCOM. In light of the expiring 2002 Contract,
Defendant Guillan hired Starr Solutions to assist MiLanguages in putting together
a bid for a 2007 follow-on contract likely to be offered by SOCOM (the “2007
Contract”). 3 Vicky Strycharske, the owner of Starr Solutions, had assisted BIB
with its bid for the 2002 Contract and had performed other bid and proposal-
writing work for BIB and Berlitz International since 2002.
In the early stages of the bid-development process, Strycharske suggested
that both BIB and MiLanguages prepare to submit bids on the 2007 Contract
because SOCOM had not determined whether the 2007 Contract was going to be a
small business set-aside. However, Strycharske and her company were hired by
MiLanguages, and Guillan made it clear that Strycharske was working for
MiLanguages, a company that he told Strycharske that he owned. Guillan signed
the checks paying Starr for work she performed on MiLanguages’s behalf.
Strycharske never had any interaction with Borsoi, although at one point while she
3
The term “follow-on contract” was used by SOCOM and the parties in this appeal to
describe a situation where a prior contract term was expiring, but SOCOM wanted to continue to
receive services.
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was still working for MiLanguages, Guillan told her that Borsoi owned the
company.
After Starr was retained by MiLanguages, Blanchet met with Strycharske
and expressed to her that “[h]e was angry that [Guillan] thought that MiLanguages
was his company” and that “he had been very good to [Guillan], that he’d made
him a wealthy man. . . . He also said that it was . . . his [i.e., Blanchet’s] money.”
Blanchet did not specifically indicate why he was upset about MiLanguages or
Guillan during that meeting, but Strycharske understood his anger to be directed at
an issue about “the ownership of MiLanguages.” Guillan continued to serve as the
Director of Government Contracting for BIB while MiLanguages was preparing to
bid for the 2007 Contract.
During this pre-bid phase, Guillan asked Spurlin (who was still serving as
SOCOM’s contracting officer) whether the 2007 Contract, like the 2002 Contract,
would be set aside for small businesses. Spurlin told Guillan that once SOCOM
designated a contract as a small business set-aside, “it normally stays set-aside for
small business.” Guillan also asked whether BIB would be eligible to bid on the
2007 Contract if the contract was a small business set-aside, and Spurlin told him
BIB would not be eligible because BIB “would have exceeded the small business
dollar threshold.”
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In November 2006, Blanchet and Guillan both attended SOCOM’s “industry
day,” which was a gathering of potential bidders for the 2007 Contract. Blanchet
represented BIB, and Guillan represented MiLanguages at this meeting.
On January 8, 2007, SOCOM released online a “pre-solicitation notice” for
the 2007 Contract. This notice indicated that the forthcoming contract was for the
provision of foreign language training and would be “a hundred percent set-aside
for small business . . . . and the size standard is $6.5 million,” meaning that
companies that wanted to bid on the contract could not do more than $6.5 million
in business either that year or in total. The notice also indicated that the contract
would extend for “a base year with four option periods” and have a ceiling of $100
million.
After SOCOM issued this notice, in early 2007 Strycharske began preparing
MiLanguages’s bid for the 2007 Contract. On January 25, 2007, Guillan sent an e-
mail about MiLanguages’s bid to “[the] whole team,” including Strycharske (but
not Borsoi). In this e-mail, Guillan indicated that because the 2007 Contract was
set aside for small businesses, “MiLanguages will lead,” i.e., would be the prime
contractor, and that other affiliated companies would be subcontractors.4 In
4
According to Spurlin’s trial testimony, under the federal regulations governing small
business set-aside contracts, a small business that was awarded such a contract could legally
subcontract out up to 49 percent of the contract work to a larger company.
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preparing MiLanguages’s bid for the 2007 Contract, Strycharske coordinated with
Blanchet, Guillan, and other team members.
On February 26, 2007, MiLanguages submitted its bid for the 2007 Contract
to SOCOM. In its bid, MiLanguages confirmed that it was “a small business.”
MiLanguages’s bid also stated that (1) several current or former BIB or Berlitz
employees would work for MiLanguages if MiLanguages was awarded the 2007
Contract; and (2) BIB and Berlitz would be among the subcontractors
MiLanguages was planning to hire. During the pendency of its bid, MiLanguages
clearly and repeatedly identified Guillan as its Director for Government
Contracting and primary contact person concerning the bid, despite the fact that
Guillan would not officially assume his role as Director until July 16, 2007.
A month after MiLanguages submitted its bid, SOCOM sent MiLanguages a
letter, addressed to Borsoi, explaining that MiLanguages was selected to move past
the initial round of consideration and that there were potential weaknesses in
MiLanguages’s bid that SOCOM would like to see addressed by April 11, 2007.
After MiLanguages complied with SOCOM’s request to modify its bid, SOCOM
sent Borsoi another letter inviting MiLanguages to make an “oral proposal” or
“pitch” on April 18, 2007.
Strycharske worked with Guillan to prepare for the April 18 pitch meeting
with SOCOM. Guillan, along with Luke Farkas and David Wedel (two
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BIB/Berlitz employees who were planning to transition to MiLanguages in the
event that MiLanguages was awarded the contract), gave the oral presentation at
SOCOM on April 18.
On May 8, 2007, after reviewing all of the bids, SOCOM conditionally
recommended that the 2007 Contract be awarded to MiLanguages. SOCOM
indicated in the recommendation that MiLanguages had identified itself as a small
business in the federal Central Contractor Register and was qualified to obtain and
perform the contract.
Around the time that SOCOM conditionally recommended that
MiLanguages receive the 2007 Contract, Blanchet approached BankFirst to inquire
about opening a line of credit for MiLanguages to “assist with an upcoming
[g]overnment contract.” BankFirst’s managers understood that (1) BIB could not
receive the 2007 Contract because it had “grown too big after the [2002]
[C]ontract”; (2) the 2007 Contract would be “housed under a new company called
MiLanguages”; (3) the Defendants would be MiLanguages’s “primary operators”
even though Borsoi technically owned MiLanguages “on paper”; and (4) Blanchet
would be the “hands-on” manager of MiLanguages. In addition, although the
BankFirst managers knew Borsoi owned and was president of MiLanguages, they
never met him or transacted MiLanguages business with him.
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E. The SBA Size Determination
In June 2007, two unsuccessful bidder companies protested SOCOM’s
conditional award of the 2007 Contract to MiLanguages, asserting in their protests
that MiLanguages was not a small business. Although the two protesting
companies had been eliminated from consideration for unknown reasons during
SOCOM’s review of all the bids, SOCOM withheld the award of the 2007
Contract to MiLanguages in order to have a “formal size determination”
performed. Contracting Officer Spurlin referred the protests and the request for a
size determination to the regional Small Business Administration (“SBA”) office
in Atlanta, Georgia, because it was the SBA, not SOCOM, that would make the
ultimate determination regarding MiLanguages’s size. 5
Guillan contacted Strycharske about the size protests, and Strycharske
recommended that MiLanguages retain an attorney, Amy O’Sullivan, to represent
it during the SBA size determination process. Strycharske reached out to
O’Sullivan on MiLanguages’s behalf, with Guillan’s consent, and O’Sullivan
agreed to represent MiLanguages.
5
An SBA size determination is a broad-based, adversarial, and “fact specific process,”
similar to litigation, that is initiated when a size protest is filed. During the size determination,
the SBA considers numerous factors, including, inter alia: ownership and control of the
company; compensation structure; the number of employees; financial, managerial, employment,
or other affiliations with other companies; the company’s use of subcontracting; and the
individuals who prepared the bid. In addition to these specifically enumerated factors, the SBA
also considers “all of the relevant facts under . . . a totality of the circumstances test.” A
company’s size is set at the time it files its bid.
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Although Blanchet informed Borsoi about the size protests, Borsoi was not
involved in hiring O’Sullivan and he “never heard a word from anyone about . . .
the response to the [protests].” Borsoi also did not remember signing documents
or knowing the content of the documents that MiLanguages submitted during the
size determination, although his signature was on several of MiLanguages’s
submissions.
In addition, attorney Hadley was not familiar with the SBA regulations
governing small businesses, or with government contracting in general, and Hadley
did not substantively participate in the size determination process either (although
he was kept informed by Blanchet and Guillan). Hadley’s involvement in the size
determination process was primarily administrative: he reviewed O’Sullivan’s
retainer and helped set up her relationship with MiLanguages, arranged for
O’Sullivan’s bills to be passed through his firm to MiLanguages, and helped
MiLanguages respond to O’Sullivan’s requests for information to send to the SBA.
During the SBA size determination, attorney O’Sullivan’s primary contact
point was Guillan, who provided her with much of the information that she
eventually transmitted on MiLanguages’s behalf to the SBA. O’Sullivan also
communicated with Strycharske, Hadley, and Defendant Blanchet to obtain
information to respond to the SBA. O’Sullivan understood, from her
correspondence with the Defendants, that Blanchet “had no role in MiLanguages”
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and that Guillan “wanted to continue doing . . . language instruction but he didn’t
want to be involved with the day-to-day responsibilities of running a company.”
Moreover, Guillan told attorney O’Sullivan that MiLanguages was “exclusively in
charge of preparing” its bid (in consultation with Strycharske) and did not receive
financial or other assistance from BIB or any other company. Guillan also helped
draft and signed several declarations that would ultimately be filed in response to
the SBA’s inquiry.
Steve Smithfield was the SBA employee responsible for handling the size
determination. On June 20, 2007, Smithfield sent MiLanguages a letter, addressed
to Borsoi and Guillan, informing MiLanguages of the protest and asking
MiLanguages to provide certain information to aid in the size determination.
On June 26, 2007, MiLanguages submitted an SBA Form 355 in response to
the SBA’s inquiry. Form 355, which is signed under penalty of perjury, includes
“a laundry list of questions” about ownership, control, affiliations, and other
factors the SBA takes into account in making a size determination. Because the
SBA must make a decision as to a company’s size within a short period of time
(usually within 10 days) and it cannot perform its own independent investigation,
the SBA must rely on the information self-reported by the company that is the
subject of the protest in making the size determination.
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In its Form 355, MiLanguages listed BIB as an “alleged, acknowledged, or
possible affiliate.” MiLanguages also represented, inter alia, that:
(1) MiLanguages’s owners, officers, directors, key employees, and
supervisors had never been employed by or performed similar work for BIB;
(2) BIB had not helped MiLanguages prepare its bid;
(3) the only past or current financial obligations between MiLanguages and
BIB were exclusively those financial obligations, including “Accounts
Payable [and] Accounts Receivable,” that were ongoing as a result of
MiLanguages’s status as a subcontractor on the 2002 Contract;
(4) no individuals who were not owners, officers, directors, employees,
partners, or principal stockholders of MiLanguages had signed (or were
expected to sign) documents to facilitate MiLanguages’s ability to receive
indemnifications or credit guarantees;
(5) BIB had not helped MiLanguages arrange subcontractors for the follow-
on contract;
(6) MiLanguages had not discussed with BIB “the specific terms or
conditions” of the 2007 Contract “prior to bid opening”; and
(7) BIB would suffer no financial impact if MiLanguages were terminated
from the 2007 Contract.
One day after submitting the Form 355 for MiLanguages, attorney
O’Sullivan further responded to the SBA’s inquiry by forwarding additional
information and a declaration by Guillan to the SBA. Guillan’s declaration was
primarily focused on the relationship between BIB and MiLanguages, because the
protesting companies had raised a question as to the companies’ affiliations with
each other.
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In his declaration, Guillan stated, inter alia, that he had sold all of his
MiLanguages shares to Borsoi in an “arm’s length” transaction that was effective
January 1, 2007. The sale “was for fair and reasonable consideration” and after
that date, Guillan did not stay on as an employee with MiLanguages. Guillan
explained that he sold his shares to Borsoi in order “to continue working in the
[language instruction] industry without the additional oversight and executive
responsibilities.”
Guillan also represented that on the date MiLanguages filed its bid for the
2007 Contract and self-certified that it was a small business, Guillan’s
responsibilities as a “facility security officer” for MiLanguages involved “purely
administrative responsibilities … and [gave him] no control over the corporate
governance or decisionmaking of MiLanguages.” In addition, the declaration
stated that “MiLanguages does not, and never has, received financial assistance of
any kind from BIB.”
On June 29 and July 6, 2007, the SBA’s Smithfield sent attorney O’Sullivan
e-mails asking her to provide additional information about: (1) Guillan’s marital
status (including whether Guillan and his wife had helped Borsoi prepare
MiLanguages’s bid), (2) Guillan’s income; (3) Guillan’s employment history and
relationships with BIB and MiLanguages; (4) Borsoi’s qualifications and
compensation for the work he performed for MiLanguages; (5) whether
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MiLanguages and BIB shared office space or other facilities; and (7) whether or
how much work under the 2007 Contract would be performed by BIB as a
subcontractor versus MiLanguages as the prime contractor. O’Sullivan forwarded
these e-mails to Blanchet and Guillan during her attempts to obtain the information
necessary to answer Smithfield’s inquiries.
O’Sullivan responded piecemeal to Smithfield’s requests, and her responsive
materials included a second declaration by Guillan. In this second declaration,
Guillan represented that he had agreed to serve as MiLanguages’s facility security
officer, pursuant to a consulting agreement, until MiLanguages could find another
person to take over the job. Guillan’s consulting services were “minimal in nature
and generally require[d] less than one hour per week,” and he had not “received
any compensation from MiLanguages pursuant to [his] consulting agreement.”
Guillan’s declaration also stated that since April 2005, MiLanguages and BIB had
not shared office space. At trial, the SBA’s Smithfield testified that “the way
[MiLanguages’s response] was written,” he did not believe that MiLanguages was
“dependent upon” Guillan.
On July 10, 2007, in response to concerns raised internally at the SBA about
Guillan’s role in preparing MiLanguages’s bid, Smithfield sent O’Sullivan another
e-mail asking for details about Guillan’s role in putting MiLanguages’s bid
together and what experience Borsoi had in bidding on government contracts.
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Because the SBA’s 10-day size determination deadline was approaching,
Smithfield asked O’Sullivan to respond that day.
In response, O’Sullivan sent Smithfield an e-mail stating that although she
was still trying to locate Guillan or Borsoi to obtain further details, MiLanguages
had been responsible for preparing its own bid for the 2007 Contract, and that
Borsoi had hired Strycharske to advise MiLanguages. O’Sullivan also inquired
whether her response was sufficient. Smithfield responded, “I think that covers it.”
Meanwhile, O’Sullivan sent Blanchet, Guillan, and Hadley a copy of her responses
to Smithfield’s inquires, but they did not contact her to correct any information in
the response.
In July 2007, Blanchet sent an e-mail to Spurlin, who at that point was no
longer serving as SOCOM’s contracting officer. Blanchet forwarded to Spurlin
some of the Smithfield–O’Sullivan correspondence, complaining about SBA’s
questions and making a “worried request” for assistance. Because she was no
longer with SOCOM, Spurlin could not provide Blanchet any assistance.
The SBA’s Smithfield ultimately recommended, based on the information
provided by O’Sullivan on MiLanguages’s behalf, that MiLanguages be
considered a small business and that the size protest be denied. In his
recommendation, dated July 10, 2007, Smithfield analyzed a number of factors that
contributed to the size determination under the “totality of the circumstances” rule.
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These factors were that: (1) MiLanguages was not newly organized, as it had been
in business for more than three years; (2) MiLanguages was capable of performing
contracts and had performed some contracts without BIB’s assistance; (3) Guillan
was not an owner or officer of either MiLanguages or BIB, and he could not
exercise control over either company; (4) MiLanguages had received no financial
assistance from BIB; (5) there was no overlapping ownership between
MiLanguages and BIB; and (6) MiLanguages had received no technical assistance
in preparing its bid for the 2007 Contract from BIB or Guillan.
F. Award of 2007 Contract to MiLanguages
Following the SBA’s resolution of the size protest, on July 13, 2007, Charles
Bright, who was then serving as SOCOM’s contracting officer, signed the 2007
Contract with MiLanguages. Bright sent MiLanguages a letter confirming the
award and explaining that SOCOM would schedule a post-award conference
regarding the contract. SOCOM confirmed the award of the 2007 Contract to
MiLanguages after the SBA concluded that MiLanguages satisfied the small
business criteria; without the SBA’s confirmation, SOCOM would have been
unable to award the contract to MiLanguages. Although Borsoi’s signature
appeared on the 2007 Contract for MiLanguages, SOCOM corresponded with
Guillan to obtain Borsoi’s signature. On July 16, 2007, Guillan became
MiLanguages’s Director of Government Contracting. On MiLanguages’s behalf,
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Guillan, along with Borsoi and another individual, attended the post-award
conference with SOCOM personnel on August 1, 2007.
On August 15, 2007, BankFirst approved a $600,000 line of credit for
MiLanguages, which Defendant Blanchet had requested several months earlier.
When BankFirst approved the line of credit, it did so in part because it understood
that Blanchet and his wife owned the holding company that owned the building in
which MiLanguages was located. Although Borsoi’s signature appears on the
initiating documents for the line of credit, Blanchet personally guaranteed the line,
and BankFirst considered it important to its relationship with MiLanguages that
Blanchet had an exclusive stock purchase agreement with Borsoi, because “it was
important to know that [Blanchet] in our mind had control of the company.”
In accepting Blanchet as the guarantor, BankFirst also made an exception to
its underwriting policy, which ordinarily would have required MiLanguages’s
putative owner, Borsoi, to be the guarantor. Here, however, BankFirst recognized
that Borsoi “didn’t add financial strength to the credit.” BankFirst made the
exception because MiLanguages’s line of credit would be secured by both
Blanchet’s guarantee and ample collateral, the loan involved a federal government
contract, Blanchet had over $2 million in other accounts at BankFirst, and because
Blanchet was “an integral part of the business operations.”
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G. Payments Made to MiLanguages under the 2007 Contract & Seizure of
MiLanguages’s BankFirst Operating Account
Following SOCOM’s award of the 2007 Contract to MiLanguages, and
consistent with MiLanguages’s bid for that contract, Daniel Guillan and other BIB
employees who had committed to joining MiLanguages resigned as employees of
BIB and became employed by MiLanguages.
In performing under the 2007 Contract, MiLanguages was permitted to
submit invoices to SOCOM every two weeks. SOCOM paid MiLanguages
through the Defense Finance and Accounting Service (“DFAS”). To generate a
payment, DFAS required three pieces of information: a valid contract signed by a
contracting officer (here, the 2007 Contract), an invoice or billing statement from
MiLanguages, and a receipt and acceptance from SOCOM indicating that the work
had been performed. Some 99.5 percent of all DFAS payments to defense
contractors are made by electronic funds transfer. DFAS payments to
MiLanguages under the 2007 Contract originated at the DFAS office in Columbus,
Ohio, and were then transmitted through the Federal Reserve Bank in Atlanta,
Georgia, before being transmitted again to MiLanguages’s BankFirst account in
central Florida.
During the term of the 2007 Contract, SOCOM paid MiLanguages about
$98.6 million through DFAS. The payments included electronic funds transfers to
MiLanguages’s operating account on July 15, 2010 ($141,246.99), November 10,
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2010 ($184,549.68), December 2, 2010 ($208,507.66), December 16, 2010
($283,886.37), and February 24, 2011 ($366,013.07). These transfers formed the
basis of the five substantive wire fraud charges against each Defendant.
From 2006 through 2010, MiLanguages paid Guillan about $4.4 million in
base pay and other compensation. And, between 2007 and 2010, MiLanguages
paid about $7.4 million to Blanchet or to accounts, entities, or interests controlled
by him. Moreover, before and after the follow-on contract, and for a variety of
putative purposes, large sums of money moved between MiLanguages’s accounts
(including the line of credit guaranteed by Blanchet) and accounts controlled by
Blanchet, Guillan, their families, and other business entities controlled by those
individuals. Borsoi, who remained the putative owner and president of
MiLanguages during the duration of the 2007 Contract term, received a total of
only $63,000, paid in a series of monthly $1,500 checks signed by Guillan.
The resolution of the SBA size protest was not the end of the government’s
investigation into MiLanguages. At some point during the 2007 Contract term, the
Defense Criminal Investigative Service began reviewing SOCOM’s award of the
2007 Contract to MiLanguages. This investigation, which was ongoing during
MiLanguages’s performance of the 2007 Contract, culminated in the issuance of a
seizure warrant for MiLanguages’s operating account at BankFirst in July 2010.
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The Defendants and the government agreed to the following stipulation
concerning the government’s seizure of MiLanguages’s operating account at
BankFirst, which was read to the jury at the Defendants’ trial:
On July 14th, 2010 a seizure warrant was authorized relating to the
MiLanguages operating account with BankFIRST. . . .On July 15th,
2010 that seizure warrant was executed against the MiLanguages
operating account. After the seizure warrant was executed, the
Department of Defense, SOCOM, continued to pay money into the
MiLanguages operating account to fund MiLanguages[’s]
performance under the SOCOM contract which is the subject of this
action. MiLanguages continued to perform under the SOCOM
contract at issue in this action until October 23rd, 2011.
After the seizure warrant was executed, BankFirst elected to keep
MiLanguages’s account open “[b]ased upon a number of circumstances.”
BankFirst was not compelled by the government to keep the account open.
II. PROCEDURAL HISTORY
Blanchet and Guillan were charged in a six-count indictment filed on June
21, 2011. The indictment charged both Defendants with conspiring to defraud the
United States and to commit wire fraud against the United States, in violation of 18
U.S.C. § 371 (Count 1), and five substantive counts of wire fraud, in violation of
18 U.S.C. §§ 1343 and 2 (Counts 2 through 6). The substantive wire fraud charges
were based on the five individual wire transfers that occurred on July 15,
November 10, and December 2 and 16, 2010, and February 24, 2011. These
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transfers were initiated by SOCOM as payments to MiLanguages for its
performance under the 2007 Contract. 6
The Defendants were tried jointly in a trial that spanned several weeks. At
the conclusion of the trial, the jury returned guilty verdicts as to Defendants
Blanchet and Guillan on all six counts of the indictment. At a separate sentencing
hearing, the district court imposed identical 36-month sentences of imprisonment
on each Defendant. Both Defendants then appealed.
III. DISCUSSION
A. Denial of the Defendants’ Joint Motion for Judgment of Acquittal—
Sufficiency of the Evidence
The Defendants argue that the district court erred in denying their joint
motion for judgment of acquittal because (1) on the conspiracy counts, no
reasonable trier of fact could have found that they formed an agreement to achieve
an unlawful objective, and (2) on the wire fraud counts, no reasonable trier of fact
could have found that they engaged in wire transmissions for the purpose of
executing a scheme to defraud.7
6
The indictment also contained separate forfeiture allegations that are not at issue in this
appeal.
7
We review de novo the district court’s denial of a motion for judgment of
acquittal, viewing the evidence in the light most favorable to the government and making all
reasonable inferences and credibility choices in favor of the jury’s verdict. United States v.
Descent, 292 F.3d 703, 706 (11th Cir. 2002). To uphold the denial of the motion, we must
determine “that a reasonable fact-finder could conclude that the evidence established the
defendant’s guilt beyond a reasonable doubt.” Id. (internal quotation mark omitted). “It is not
enough for a defendant to put forth a reasonable hypothesis of innocence, because the issue is not
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In this case the evidence, taken in the light most favorable to the
government, reveals that Defendants Blanchet and Guillan willfully conspired with
to obtain the 2007 Contract through fraud and to misrepresent MiLanguages’s
affiliation with BIB during the SBA size determination. The evidence also
demonstrates that the Defendants knowingly caused to be sent and received the
proceeds from their illicitly-obtained contract over the interstate wires, through
MiLanguages’s account at BankFirst, on each of the five dates charged in the
indictment. We now explain how the evidence supports the Defendants’
convictions.
1. Sufficiency of the Evidence: Conspiracy Count
To obtain a conspiracy conviction under 18 U.S.C. § 371, “the [g]overnment
must prove (1) that an agreement existed between two or more persons to commit a
crime; (2) that the defendant[s] knowingly and voluntarily joined or participated in
the conspiracy; and (3) a conspirator performed an overt act in furtherance of the
agreement.” United States v. Ndiaye, 434 F.3d 1270, 1294 (11th Cir. 2006). The
existence of a conspiracy may be proven by circumstantial evidence, including
“inferences from the conduct of the alleged participants or from circumstantial
evidence of the scheme.” United States v. Silvestri, 409 F.3d 1311, 1328 (11th
Cir. 2005) (internal quotation marks omitted). “Direct evidence of an agreement to
whether a jury reasonably could have acquitted but whether it reasonably could have found guilt
beyond a reasonable doubt.” United States v. Thompson, 473 F.3d 1137, 1142 (11th Cir. 2006).
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join a criminal conspiracy is rare, so a defendant’s assent can be inferred from acts
furthering the conspiracy’s purpose. The government is not required to prove that
each alleged conspirator knew all the details of the conspiracy; it is enough to
establish that a defendant knew the essentials of the conspiracy.” United States v.
Mulherin, 710 F.2d 731, 738 (11th Cir. 1983) (internal citations omitted).
The alleged objects of the Defendants’ conspiracy were (1) to defraud the
United States, specifically SOCOM, in connection with MiLanguages’s bidding on
and receiving the 2007 Contract, (2) to defraud the United States, specifically the
SBA, in connection with the SBA’s size determination, and (3) to commit wire
fraud against the United States. The indictment further alleged that the conspiracy
began as early as in or about August 2004 and continued at least through in or
about July 2007.
Here, both direct and circumstantial evidence, viewed in the light most
favorable to the verdict and making all reasonable inferences and credibility
choices in the government’s favor, amply supports the jury’s verdict that the
Defendants agreed to engage in a scheme to defraud the United States and commit
wire fraud against the United States. The evidence demonstrates that both
Defendants were experienced government contractors who had played key roles in
obtaining and performing BIB’s 2002 Contract. They knew the mechanics of the
government contract bid and procurement process, and they knew that as a result
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of its performance of the 2002 Contract, BIB was too large to receive future small
business set-aside contracts.
The Defendants formed MiLanguages in 2004. Regardless of whether they
agreed at the time of MiLanguages’s formation to use MiLanguages as a vehicle
through which to obtain future small business set-aside contracts, the fact is that
this is precisely what the Defendants eventually did once SOCOM announced its
plans for a follow-on contract in late 2006. On this point, the evidence shows that
the Defendants, at this time, began to fashion MiLanguages into a potential vehicle
by outwardly divesting their control over the company while maintaining actual
control behind the scenes. The Defendants installed a nominee owner, Borsoi, who
had no business or government-contracting experience and who was uninvolved in
the day-to-day operations of MiLanguages. The Defendants controlled
MiLanguages’s sizable bank account and stock. For example, they told Borsoi he
could only sell the stock back to Guillan if he chose to sell it at all. Borsoi’s
testimony makes clear that he was the president and owner of MiLanguages in
name only, participating in the company’s affairs and signing documents only
when prompted to do so by Defendant Guillan.
To help prepare MiLanguages’s bid for the 2007 Contract, Defendant
Guillan hired a bid consultant (Strycharske) who had worked with BIB on other
bids (including BIB’s successful bid for the 2002 SOCOM contract) but who did
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not advise either Defendant about whether MiLanguages was a small business for
purposes of the eligibility criteria. Nor could attorney Hadley offer this advice, as
he testified that he was wholly unfamiliar with SBA size regulations or the SBA
size determination process. In short, at the time MiLanguages submitted its bid for
the 2007 Contract, a bid that contained significant and material omissions and
misstatements about the relationships between MiLanguages, BIB, and the
Defendants, the Defendants had not solicited any legal opinion as to whether
MiLanguages actually qualified as a small business.
Then, following the size protest and the SBA’s initiation of a size
determination, the Defendants, rather than fully disclosing all of the material facts
to attorney O’Sullivan, misled O’Sullivan and caused her to submit additional false
and misleading information to the SBA. Included in the information submitted to
the SBA were numerous misstatements about the relationships between
MiLanguages, BIB, and the Defendants. Material misrepresentations made to the
SBA included the following statements:
(1) MiLanguages’s owners, officers, directors, key employees, and
supervisors had never been employed by or performed similar work for BIB.
(Defendant Guillan was a previous BIB employee who had performed work
for BIB similar to the work he would perform for MiLanguages regarding
government contracting.)
(2) No affiliate, including BIB, had helped MiLanguages prepare its bid.
(Defendant Blanchet’s participation on BIB’s behalf in preparing
MiLanguages’s bid, including discussing subcontracting arrangements and
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helping obtain contingent financing for MiLanguages, all contradict this
assertion.)
(3) The only past or current financial obligations between MiLanguages and
BIB were exclusively those financial obligations, including “Accounts
Payable [and] Accounts Receivable,” that were ongoing as a result of
MiLanguages’s status as a subcontractor on the 2002 Contract.
(MiLanguages failed to mention anything about BIB providing startup
money to MiLanguages that had not been repaid and providing overdraft
protection on MiLanguages’s operating account.)
(4) Only individuals who were owners, officers, directors, employees,
partners, or principal stockholders of MiLanguages had signed (or were
expected to sign) documents to facilitate MiLanguages’s ability to receive
indemnifications or credit guarantees. (Defendant Blanchet, who was not an
officer or director or otherwise officially affiliated with MiLanguages,
within 30 days after this statement was made to the SBA, signed off on a
$600,000 line of credit for MiLanguages that he personally guaranteed.)
(5) Defendant Guillan’s sale of his MiLanguages stock was to Borsoi for fair
and reasonable consideration at arms’ length. (Borsoi did not buy the stock
for money or other valuable consideration and did not become involved
more than nominally in the operation of MiLanguages after his acquisition
of the stock.)
(6) Defendant Guillan sold his shares to Borsoi to remain active in the
industry without the extra work of running a business. (After the “sale,”
Guillan came to Borsoi for signatures, worked on MiLanguages’s proposal
for the 2007 Contract, and was otherwise heavily involved in the day-to-day
operations of MiLanguages, while Borsoi played no substantial role.)
In applying for MiLanguages’s credit line, Blanchet told BankFirst a story
that was much closer to the truth about the relationship between the companies and
the Defendants. Additionally, in performing the fraudulently obtained contract, the
Defendants received millions of dollars in compensation while Borsoi—
MiLanguages’s putative owner and president—received only $63,000. And,
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throughout this period, the Defendants repeatedly used or caused to be used wire
transmissions (including phone calls and e-mails) in furtherance of their fraud.
On this record, a reasonable jury readily could have found the Defendants
guilty of the charged conspiracy.
2. Sufficiency of the Evidence: Wire Fraud Counts
The Defendants’ primary contention as to the wire fraud counts goes to the
government’s role in each of the charged wire transfers: namely, due to the
government’s seizure of MiLanguages’s BankFirst operating account prior to the
dates of the charged transfers, no reasonable jury could have found that the
Defendants were engaged in a scheme to defraud the government at that time. The
Defendants also raise estoppel and entrapment-by-estoppel arguments.
“The elements of mail and wire fraud are: (1) intentional participation in a
scheme to defraud, and, (2) the use of the interstate mails or wires in furtherance of
that scheme.” United States v. Maxwell, 579 F.3d 1282, 1299 (11th Cir. 2009)
(citing United States v. Hasson, 333 F.3d 1264, 1270 and n. 7 (11th Cir. 2003);
United States v. Ellington, 348 F.3d 984, 990 (11th Cir. 2003)). “A scheme to
defraud requires proof of a material misrepresentation, or the omission or
concealment of a material fact calculated to deceive another out of money or
property.” Maxwell, 579 F.3d at 1299. A misrepresentation is material if it has “a
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natural tendency to influence, or [is] capable of influencing, the decision maker to
whom it is addressed.” Hasson, 333 F.3d at 1271.
“An interstate wire transmission is for the purpose of executing the scheme
to defraud if it is incident to an essential part of the scheme or a step in the plot.”
Id. at 1272–73 (internal quotation marks omitted). “Section 1343 targets not the
defendant’s creation of a scheme to defraud, but the defendant’s execution of a
scheme to defraud.” United States v. Williams, 527 F.3d 1235, 1241 (11th Cir.
2008). Therefore, “it punishes each interstate wire transmission that carries out
that scheme.” Id.
Here, the Defendants plainly knew, or could reasonably foresee, that use of
the wires would follow from their submission of the invoices to SOCOM. First,
the evidence established that the Defendants were experienced government
contractors who had dealt with military contracting, and the military’s payment
system, in the past. Second, the use of the wires to transfer payments was
prompted by MiLanguages’s submission of invoices for work performed—indeed,
the very purpose of their invoices was to obtain payment by wire transfer. Thus,
the Defendants caused the charged wire transfers, which clearly furthered their
scheme. See Pereira v. United States, 347 U.S. 1, 8–9, 74 S. Ct. 358, 363 (1954) (a
person causes use of mail if he acts knowing that use of mail will follow or if he
can reasonably foresee use of mail); Maxwell, 579 F.3d at 1299–1301 (11th Cir.
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2009) (upholding wire fraud conviction where defendant received payments on
fraudulently obtained government contract).
We addressed the “material misrepresentation[s]” made by the Defendants
above, and will not separately restate the various misstatements made by the
Defendants in the course of MiLanguages’s bid on and performance of (including
during the SBA’s size determination) the 2007 Contract.
As to Count 2, which charged a wire transfer from DFAS to MiLanguages
on July 15, 2010 (the day the seizure warrant was executed), a reasonable jury
could easily find that the conduct that precipitated the transfer occurred before the
execution of the warrant. Indeed, trial testimony established that MiLanguages
incurred expenses before SOCOM paid for them, MiLanguages sent bi-weekly
invoices to SOCOM, and DFAS did not pay MiLanguages until SOCOM approved
the payments for work performed.
Moreover, the evidence abundantly established that all of the charged wire
transfers furthered the Defendants’ scheme. Each one moved money from DFAS
to MiLanguages’s account after MiLanguages sent SOCOM an invoice under the
2007 Contract. As the evidence established and the jury found, the Defendants
obtained that contract fraudulently. Neither the government’s criminal
investigation—which was conducted by a separate part of the government (the
U.S. Attorney) than the part of the government for which contractual services were
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performed (the military)—nor execution of the seizure warrant terminated the 2007
Contract. There is no evidence to suggest that the government even could have
terminated the 2007 Contract at that point, prior to the resolution of the criminal
proceedings against the Defendants.
Indeed, when the seizure warrant was executed on July 15, 2010, the 2007
Contract, which had a five-year term, was still two years short of full performance,
and no criminal charges had yet been brought against anyone associated with that
contract. Although the Defendants contend that their scheme “terminated” when
the criminal investigation began, SOCOM was not involved in that investigation
and had no reason or ability to disregard its obligations under the contract with
MiLanguages, which continued to submit invoices to SOCOM while the
investigation was ongoing. Thus, despite the ongoing investigation, SOCOM
remained obligated to pay for services rendered under the fraudulently obtained
contract which, we note, had not yet been determined to be fraudulently obtained at
that point. The mere initiation of a criminal investigation does not end a fraud
scheme where the defendant continues to pursue the scheme. See, e.g., United
States v. Hill, 643 F.3d 807, 825 (11th Cir. 2011), cert. denied, 132 S. Ct. 1988
(2012) (the defendant continued to fraudulently “flip” houses despite knowing that
IRS had begun a criminal investigation for which he was receiving subpoenas).
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In addition, we find the Defendants’ arguments concerning estoppel and
entrapment-by-estoppel are wholly without merit. To justify an entrapment-by-
estoppel defense, “a defendant must actually rely on a point of law misrepresented
by an official of the state; and such reliance must be objectively reasonable. . . .”
United States v. Eaton, 179 F.3d 1328, 1332 (11th Cir. 1999) (internal quotation
marks omitted). In this case, the Defendants proffered no evidence suggesting that
they asked, or that any official told them, that it was legal for them to lie to
SOCOM and the SBA for purposes of securing a $100 million government
contract and then to accept payments from DFAS on that fraudulently obtained
contract. Therefore, the Defendants’ requests for the challenged wire transfers were
at their peril.
We also decline the Defendants’ request to expand the theory of equitable
estoppel such that it would apply to this case. Simply put, while the government
may have seized MiLanguages’s operating account and controlled payments
coming out of that account during the period in which the charged wire transfers
occurred (and during which negotiations between the government and the
Defendants as to the resolution of this case were ongoing), the government never
told MiLanguages that it was required to continue submitting invoices and
receiving payments under a contract that, it turns out, MiLanguages obtained by
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fraud. There was no approval or ratification of the Defendants’ fraudulent scheme,
express, implied, or otherwise.
In sum, we conclude that the district court did not err in denying the
Defendants’ joint motion for a judgment of acquittal, as sufficient evidence amply
supports both Defendants’ convictions for conspiracy to defraud the United States
and for five counts of wire fraud.
B. Trial Testimony Issues
1. Jon Kane’s Proposed Trial Testimony
The Defendants next assert that the district court erred by limiting the
introduction of certain testimony, which impeded their ability to present a defense
as to the intent element of the wire fraud charges, in violation of their
constitutional rights to a fair trial.
Specifically, the Defendants sought to introduce testimony by Jon Kane,
counsel for BankFirst, related to the government’s involvement in the wire
transfers that were the subject of the five substantive wire fraud counts. The
government objected to Kane’s testimony on various grounds, and outside of the
presence of the jury, the Defendants proffered Kane’s testimony.
In pertinent part, Kane was prepared to testify that he was retained by
BankFirst after the government executed a seizure warrant on MiLanguages’s
BankFirst operating account. BankFirst had questions about how to handle the
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account, and Kane’s primary role was to “deal with the [g]overnment and the flow
of money to . . . MiLanguages[’s] account” on BankFirst’s behalf over a one-year
period of time that began when the government seized the account and continued
while negotiations with the Defendants over the resolution of this criminal case
were ongoing.
Kane would also testify that he had asked the government for advice about
whether BankFirst should close MiLanguages’s account after the seizure, that he
and the government had agreed that SOCOM funds would continue to flow into the
account but could not be released to MiLanguages without the government’s
approval, that the United States could “seize the account at any time” based on the
warrant, and that defense counsel had not participated in those discussions.
The government argued that Kane’s testimony might impermissibly suggest
that the government had somehow abetted or approved the wire fraud because it
allowed MiLanguages to continue to receive payments into the BankFirst account
after the account was seized by the government pursuant to a warrant. The
government also contended that because it had entered into a stipulation with the
Defendants, which informed the jury of these facts, Kane’s testimony was
irrelevant.
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After hearing argument from the parties, the district court sustained the
government’s objection, determining that Kane’s challenged testimony was
irrelevant, would be more prejudicial than probative, and would confuse the jury.
We review a district court’s exclusion of defense evidence at trial for an
abuse of discretion. United States v. Todd, 108 F.3d 1329, 1331–32 (11th Cir.
1997). However, when the district court’s evidentiary rulings rise to the level of
depriving a defendant of his constitutional right to present a defense, such rulings
amount to constitutional error. See Chambers v. Mississippi, 410 U.S. 284, 302–
03, 93 S. Ct. 1038, 1049 (1973).
A defendant’s right under the Fifth and Sixth Amendments to present a
defense “‘is violated when the evidence excluded is material in the sense of a
crucial, critical, highly significant factor.’” United States v. Hurn, 368 F.3d 1359,
1363 (11th Cir. 2004) (quoting United States v. Ramos, 933 F.2d 968, 974 (11th
Cir. 1991)). “In assessing a defendant’s claims under the Fifth and Sixth
Amendments to call witnesses in [his] defense,” we first determine “whether this
right was actually violated, [and] then turn to whether this error was ‘harmless
beyond a reasonable doubt’ under Chapman v. California, 386 U.S. 18, 24, 87 S.
Ct. 824, 828 . . . (1967).” Hurn, 368 F.3d at 1362–63.
Given the stipulation that was read to the jury, and that other evidence was
actually admitted showing that the five wire transfers all occurred after the
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government seized MiLanguages’s BankFirst account, the Defendants have not
shown Kane’s additional testimony was so “crucial, critical, [or] highly
significant” to their defense that its exclusion actually rose to the level of a
constitutional violation. See Ramos, 933 F.2d at 974. Kane’s testimony as to the
government’s role on the back end of the charged wire transfers was cumulative of
the stipulation, which established that (1) the charged wire transfers occurred after
the government seized MiLanguages’s account, and (2) the government continued
to permit MiLanguages to perform under the 2007 Contract until October 2011.
Whatever advice Kane received from the government concerning what BankFirst
should do with MiLanguages’s operating account was not relevant to any of the
elements of the charged offenses because this advice was not given to either
Defendant, nor did this advice constitute an endorsement of the Defendants’
scheme.
What the Defendants essentially argue is that, despite their submission of
MiLanguages invoices and requests for payment for work that was actually
performed under the 2007 Contract, the government should have prevented the
wire fraud by stopping payments under the 2007 Contract, in effect saving the
Defendants from their own fraud. This argument is wholly without merit. Even if,
as Kane’s proffered testimony would indicate, the government did not require
BankFirst to close MiLanguages’s account or otherwise prevent withdrawals from
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that account, the substantive wire fraud offenses were complete when DFAS
transferred payments to MiLanguages for its work under the fraudulently-obtained
2007 Contract from Columbus through Atlanta to central Florida. Whether the
Defendants could then draw funds from MiLanguages’s BankFirst account is
immaterial.
Thus, we conclude that the Defendants have not shown that the district court
erroneously excluded Kane’s testimony. 8
2. Kenneth Dodds’s Trial Testimony
The Defendants next argue that the district court abused its discretion by
allowing Kenneth Dodds, the SBA’s Director of Government Contracting, to
testify about SBA’s procedures and regulations concerning size determinations and
investigations.
During its case-in-chief, and in addition to more than a dozen other
witnesses, the government called the SBA’s Dodds for the purpose of having him
provide a “general overview” of the SBA’s size determination process and other
“foundational concepts for [the] SBA” based on his personal experience. The
Defendants objected to Dodds’s testimony because Dodds was not personally
involved in the MiLanguages size determination and was not disclosed or qualified
8
Furthermore, because the district court did not abuse its discretion with regard to the
limitations placed on Kane’s testimony, the Defendants’ argument concerning the district court’s
denial of their motion for a new trial, to the extent such motion was based on the exclusion of
Kane’s testimony, is without merit.
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as an expert witness. After hearing argument from the Defendants and the
government, the district court overruled the Defendants’ objection to Dodds’s
testimony, concluding that Dodds could testify as to the SBA’s “background and
procedures” and that the Defendants’ arguments went more “to the weight of
[Dodds’s testimony], not to its admissibility.”
At trial, Dodds, who had been with the SBA for 14 years, testified as to the
SBA’s mission and organizational structure, how the SBA receives size protests
and conducts size determinations, and that, in his role as Director of Government
Contracting, his office was responsible for setting the “size standards by which the
[g]overnment measures what a small business is,” writing “regulations that
determine what a small business is,” and “issu[ing] decisions that decide what a
small business is.” On cross-examination, defense counsel questioned Dodds as to
any role he played in the MiLanguages size determination, and he confirmed that
while Dodds was familiar with the size determination process, he had not been
involved with or supervised the MiLanguages size determination.
“According to Federal Rule of Evidence 701, a lay witness may offer
opinions that are: ‘(a) rationally based on the perception of the witness, (b) helpful
to a clear understanding of the witness’ testimony or the determination of a fact in
issue, and (c) not based on scientific, technical, or other specialized knowledge
within the scope of Rule 702.’ ” Hill, 643 F.3d at 840–41 (quoting Fed. R. Evid.
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701). “[A]s we have held, however, Rule 701 does not prohibit lay witnesses from
testifying based on particularized knowledge gained from their own personal
experiences.” Id. at 841.
Here, Dodds’s testimony was based on his own particularized, personal
knowledge about the SBA, which he acquired over his 14 years of working for the
SBA and having personal involvement in the SBA’s procedures. His testimony
was also helpful in understanding Smithfield’s more specific testimony about
MiLanguages’s size determination process, the procedural context of that process,
and the factors Smithfield evaluated in making his recommendation. Because
Dodds offered no testimony about the specifics of this case, he could not, as the
Defendants contend he did, suggest that the Defendants were involved in “sham”
practices based on the information they reported to the SBA. Dodds’s testimony
was not expert testimony, and the district court properly refused to require that the
government comply with the requirements for the admission of expert testimony
before permitting Dodds to testify. See Fed. R. Evid. 702 (“A witness who is
qualified as an expert by knowledge, skill, experience, training, or education may
testify in the form of an opinion or otherwise if” the witness and his testimony
meet certain criteria).
Because “Rule 701 does not prohibit lay witnesses [like Dodds] from
testifying based on particularized knowledge gained from their own personal
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experiences,” and Dodds did not offer expert testimony, the district court did not
abuse its discretion in permitting Dodds to testify without being qualified as an
expert. See Hill, 643 F.3d at 841.
C. Jury Instructions
The Defendants also argue that the district court erred in refusing to give two
of their requested jury instructions: a more detailed instruction on good faith as a
defense to willfulness, and an instruction defining the phrase “material fact” as it
related to the charge of conspiring to defraud the United States.
At trial, the Defendants requested a special jury instruction regarding good
faith as a defense to willfulness—Eleventh Circuit Pattern Criminal Special Jury
Instruction No. 9—that is ordinarily used in criminal tax cases. 9 The government
requested a different good faith instruction—Eleventh Circuit Pattern Criminal
9
This instruction requested by the Defendants reads as follows:
Good-Faith is a complete defense to the charge(s) in the indictment since
good-faith on the part of the Defendants is inconsistent with willfulness, and
willfulness is an essential part of the charges. If the Defendant acted in good faith,
sincerely believing himself to be exempt by the law [from] the withholding of
information from the SBA, then the Defendant did not intentionally violate a
known legal duty—that is, the Defendant did not act “willfully.” The burden of
proof is not on the Defendant to prove good-faith intent because the Defendant
does not need to prove anything. The Government must establish beyond a
reasonable doubt that the Defendant acted willfully as charged.
Intent and motive must not be confused. “Motive” is what prompts a
person to act.” It is why the person acts.
“Intent” refers to the state of mind with which the act is done.
If you find beyond a reasonable doubt that the Defendant specifically
intended to do something that is against the law and voluntarily committed the
acts that make up the crime, then the element of “willfulness” is satisfied, even if
the Defendant believed that ultimate good would result.
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Special Jury Instruction No.17—that is applicable to any “charge that requires
intent to defraud.”10
In requesting Instruction No. 9, Defendants’ counsel acknowledged that
“this is not a tax fraud case, but given the specialized regulations, that’s why the
[D]efendants believed [Instruction No. 9 was] appropriate.” The district court
denied the Defendants’ request to use Instruction No. 9 and granted the
government’s request to use Instruction No. 17, on the grounds that Instruction
No. 9 would be “confusing to the jury.”
The Defendants also requested that the district court read the jury a modified
version of Eleventh Circuit Pattern Jury Instruction 13.6, which addresses the
charge of conspiracy to defraud the United States under 18 U.S.C. § 371. 11 The
10
The instruction requested by the government reads as follows:
“Good faith” is a complete defense to a charge that requires intent to
defraud. A defendant isn’t required to prove good faith. The Government must
prove intent to defraud beyond a reasonable doubt.
An honestly held opinion or an honestly formed belief cannot be
fraudulent intent—even if the opinion or belief is mistaken. Similarly, evidence of
a mistake in judgment, an error in management, or carelessness can’t establish
fraudulent intent.
But an honest belief that a business venture would ultimately succeed
doesn’t constitute good faith if the Defendant intended to deceive others by
making representations the Defendant knew to be false or fraudulent.
11
Instruction No. 13.6, which the district court read to the jury without
modification, reads as follows:
It’s a Federal crime for anyone to conspire or agree with someone else to
do something that would be another Federal crime if it was actually carried out or
to defraud the United States or any of its agencies.
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Defendants’ proposed modification was to add to the instruction the following
details concerning false statements and materiality:
Some of the overt acts charged in the indictment involve false
statements of material fact. A material fact is an important fact—not
some unimportant or trivial detail—that has a natural tendency to
influence or is capable of influencing a decision of a department or
agency in reaching a required decision.
A statement or representation is “false” if it is about a material
fact that the speaker knows is untrue or makes with reckless
indifference to the truth, and makes with the intent to defraud. A
statement or representation may be “false” when it is a half truth, or
To “defraud” the United States means to cheat the Government out of
property or money or to interfere with any of its lawful governmental functions by
deceit, craft, or trickery.
A “conspiracy” is an agreement by two or more persons to commit an
unlawful act. In other words, it is a kind of partnership for criminal purposes.
Every member of the conspiracy becomes the agent or partner of every other
member.
The Government does not have to prove that all the people named in the
indictment were members of the plan, or that those who were members made any
kind of formal agreement. The heart of a conspiracy is the making of the unlawful
plan itself, so the Government does not have to prove that the conspirators
succeeded in carrying out the plan.
The Government does not have to prove that the members planned
together all the details of the plan or the “overt acts” that the indictment charges
would be carried out in an effort to commit the intended crime.
A Defendant can be found guilty of this crime only if all the following
facts are proved beyond a reasonable doubt:
(1) Two or more people in some way agreed to try to accomplish a
shared and unlawful plan;
(2) the Defendant knew the unlawful purpose of the plan and willfully
joined in it;
(3) during the conspiracy, one of the conspirators knowingly engaged
in at least one overt act described in the indictment; and
(4) the overt act was knowingly committed at or about the time alleged
and with the purpose of carrying out or accomplishing some object
of the conspiracy.
An “overt act” is any transaction or event, even one which may be entirely
innocent when viewed alone, that a conspirator commits to accomplish some
object of the conspiracy.
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effectively conceals a material fact, and is made with the intent to
defraud.
The district court denied the Defendants’ request to add this language to
Instruction No. 13.6 on the grounds that it could confuse the jury. In addition, the
district court defined “false or fraudulent,” “material,” and “material fact” in these
terms when instructing the jury on the substantive wire fraud counts:
A statement or representation is false or fraudulent if it is about
a material fact that the speaker knows is untrue or makes with reckless
indifference to the truth, and makes with the intent to defraud.
A statement or representation may be false or fraudulent when
it is a half truth, or effectively conceals a material fact, and is made
with the intent to defraud.
A “material fact” is an important fact that a reasonable person
would use to decide whether to do or not to do something. A fact is
material if it has the capacity or natural tendency to influence a
person’s decision. It doesn’t matter whether the decisionmaker
actually relied on the statement or knew or should have known that
the statement was false.
“We review a district court’s refusal to give a requested jury instruction for
abuse of discretion.” United States v. Fulford, 267 F.3d 1241, 1245 (11th Cir.
2001) (internal quotations and citations omitted). “Under this standard, we
examine whether the jury charges, considered as a whole, sufficiently instructed
the jury so that the jurors understood the issues and were not misled.” Id. (internal
quotation marks omitted). We will find reversible error only if: “(1) the requested
instruction correctly stated the law; (2) the actual charge to the jury did not
substantially cover the proposed instruction; and (3) the failure to give the
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instruction substantially impaired the defendant’s ability to prepare an effective
defense.” Id. While a district court judge is “vested with broad discretion in
formulating [the] charge to the jury so long as it accurately reflects the law and the
facts,” United States v. Silverman, 745 F.2d 1386, 1395 (11th Cir. 1984), a
“defendant is entitled to have presented instructions relating to a theory of defense
for which there is any foundation in the evidence, even though the evidence may
be weak, insufficient, inconsistent, or of doubtful credibility,” United States v.
Lively, 803 F.2d 1124, 1126 (11th Cir. 1986) (internal quotation marks omitted).
The district court did not abuse its discretion by giving Instruction No. 17
rather than Instruction No. 9. Although the Defendants contend that their proposed
instruction “provide[d] a more detailed instruction on the element of willfulness
and when a defendant’s good faith will serve as a defense to crimes which have
willfulness as an essential element,” the district court’s instructions, taken together,
sufficiently explained the Defendants’ good faith defense. This is particularly true
when Instruction No. 17, which was read to the jury, is considered in conjunction
with the district court’s other instructions, which required the jury to find that the
Defendants had acted “knowingly” and “willfully” and that “[u]nlawful intent has
not been proved if a [D]efendant before acting made a full and complete good faith
report of all material facts to an attorney. . . and reasonably relied upon that advice
in good faith.” See Fulford, 267 F.3d at 1245 (jury instructions must be
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“considered as a whole” in determining whether the district court “sufficiently
instructed the jury”).
The district court separately defined “knowingly” as “an act . . . done
voluntarily and intentionally and not because of a mistake or by accident,” and it
defined “willfully” as “committed voluntarily and purposely with the intent to do
something that the law forbids, that is, with the bad purpose to disobey or disregard
the law.” The instructions, taken as a whole, thus covered the concepts of good
faith and willfulness, concepts which the Defendants contend justified the giving
of Instruction No. 9. In addition, Instruction No. 17 more clearly aligned with the
facts at issue in this case than did Instruction No. 9, and the district court did not
abuse its discretion in concluding that instructing the jury in the manner requested
by the Defendants ran the risk of confusing the jury with an extraneous instruction
on the concept of motive.
Nor did the district court abuse its discretion in denying the Defendants’
request to instruct the jury using the modified conspiracy Instruction 13.6 with the
additional definitions. These terms were defined in nearly identical terms in the
district court’s instructions to the jury on the elements of wire fraud, and as such,
the Defendants’ modified Instruction 13.6 was merely cumulative of the district
court’s other instructions. See Fulford, 267 F.3d at 1245.
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D. Reasonableness of Defendants’ Sentences
Finally, the Defendants argue that their identical 36-month, below-guideline
range sentences are procedurally unreasonable because the district court
improperly calculated the loss for which they were accountable, and thus,
erroneously calculated their adjusted offense levels under the Sentencing
Guidelines.
Prior to the Defendants’ sentencing hearing, the U.S. Probation Office
prepared a presentence investigation report (“PSI”) for each Defendant. The
probation officer grouped all of six of each Defendant’s counts of conviction
together and calculated a base offense level of seven, pursuant to U.S.S.G.
§ 2B1.1(a)(1). Because the total intended loss from the Defendants’ fraudulent
scheme was $100 million (the ceiling for the 2007 Contract), the probation officer
imposed a 24-level increase, pursuant to U.S.S.G. § 2B1.1(b)(1)(M). With a
criminal history category of I and a total offense level of 31, each Defendant’s total
adjusted guideline range was 108 to 135 months’ imprisonment.
The Defendants objected to the loss amount calculated in the PSI because
(1) there was no actual harm to or loss sustained by the government, and (2) they
did not intend to harm SOCOM, as they intended for the terms of the contract to be
fully and satisfactorily performed. The probation officer responded by stating that,
for government benefits fraud, U.S.S.G. § 2B1.1, cmt. (n.3(F)(ii)) stated that the
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loss was no less than the “value of the benefits obtained by unintended recipients
or diverted to unintended uses.” Citing United States v.Maxwell, 579 F.3d 1282
(11th Cir. 2009), the probation officer noted that this Court had applied this rule
for calculating loss in government benefits fraud cases to calculating loss in cases
of preferential contracting fraud. Because in this case MiLanguages procured the
$100 million small business set-aside contract through fraud, the loss amount was
no less than $100 million, pursuant to Maxwell and § 2B1.1, cmt. (n.3(F)(ii)).
At sentencing, after hearing argument from both Defendants and the
government, the district court overruled the Defendants’ amount-of-loss objection
and adopted the calculation of the loss amount and guideline ranges as stated in the
PSIs. The court noted that it had relied on Maxwell, which was “loud and clear as
to how these losses are to be calculated,” to determine that the appropriate amount
of loss here was the entire, $100 million value of the contract that was diverted to
an ineligible recipient, MiLanguages. Accordingly, each Defendant’s total
adjusted guideline range was 108 to 135 months’ imprisonment.
The district court then sentenced each Defendant to 36 months’
imprisonment on each count, with the sentences to run concurrently. The district
court, in explaining its sentencing decision, noted that although the loss amount of
$100 million was correct, that loss amount and the Defendants’ adjusted guideline
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ranges overrepresented the seriousness of the Defendants’ offenses, such that a
sentence below the range was appropriate.
We review the reasonableness of a sentence for abuse of discretion using a
two-step process. United States v. Pugh, 515 F.3d 1179, 1190 (11th Cir. 2008).
We look first at whether the district court committed any significant procedural
error, such as miscalculating the advisory guidelines range, treating the guidelines
as mandatory, failing to consider the 18 U.S.C. § 3553(a) factors, selecting a
sentence based on clearly erroneous facts, or failing to explain adequately the
chosen sentence.12 Id.
The Sentencing Guidelines provide that the offense level should be
increased based on the amount of loss involved. U.S.S.G. § 2B1.1(b)(1).
Generally, the loss is the greater of the actual or intended loss, where actual loss is
the “reasonably foreseeable pecuniary harm that resulted from the offense” and
intended loss is the “pecuniary harm that was intended to result from the offense.”
Id. § 2B 1.1, cmt. (n.3(A)(i)–(ii)).
The Commentary to the Guidelines provides that, in cases involving
procurement fraud, the reasonably foreseeable pecuniary harm includes “the
reasonably foreseeable administrative costs to the government and other
12
While we would ordinarily next assess whether the Defendants’ sentences are
substantively reasonable in light of the § 3553(a) factors, the Defendants have not raised any
argument with regard to the substantive reasonableness of their sentences, and thus, they have
waived any argument as to this issue.
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participants of repeating or correcting the procurement action affected,” in addition
to any increased costs to procure the service involved that were reasonably
foreseeable. Id. § 2B1.1, cmt. n.3(A)(v)(II)). However, if there is a loss, but the
loss cannot reasonably be determined, the alternative measure of loss is “the gain
that resulted from the offense.” Id. § 2B1.l, cmt. (n.3(B)). Furthermore, in cases
involving government benefits, including grants, loans, and entitlement programs,
“loss shall be considered to be not less than the value of the benefits obtained by
unintended recipients or diverted to unintended uses.” Id. § 2B1.1, cmt.
(n.3(F)(ii)).
In United States v. Maxwell, the defendant participated in a fraudulent
scheme to obtain construction contracts set aside for socially and economically
disadvantaged companies through the Community Small Business Enterprise
(“CSBE”) program and the Disadvantaged Business Enterprises (“DBE”) program.
Maxwell, 579 F.3d at 1287–88. The CSBE program set aside a certain percentage
of Miami-Dade County’s construction work for qualifying small, local businesses.
Id. at 1288. This Court concluded that the CSBE and the DBE programs at issue
were government-benefits programs under § 2B1.1, noting that the primary
purpose of those programs was to help small minority-owned businesses develop
and grow, create new jobs, and overcome the effects of past discrimination in the
construction industry. Id. at 1306. This Court noted that, unlike in standard
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construction contracts, the contracts at issue in Maxwell focused “mainly on who is
doing the work.” Id. This Court went on to approve the reasoning contained in
other circuits’ decisions which stated that the DBE and similar programs were
entitlement program payments because they were affirmative action programs that
gave exclusive opportunities to certain minority and women owned businesses. Id.
As such, the appropriate amount of loss was the entire value of the CBSE and DBE
contracts that were diverted to the unintended recipient. Id.
Congress’s policy is that small businesses be awarded “a fair proportion of
the total purchases and contracts” from the federal government. 41 U.S.C. § 3104.
Further, Congress has declared that the government “should aid, counsel, assist,
and protect” small businesses to ensure that a fair proportion of the government’s
total purchases and contracts for goods and services be placed with small business
enterprises. 15 U.S.C. § 631(a).
Here, given Maxwell, the Defendants have not shown that the district court
erred by determining that the appropriate loss amount was the entire amount of the
contract at issue, $100 million, such that the 24-level increase was appropriate.
Specifically, the small business set-aside contract at issue in this case was set aside
to provide exclusive opportunities to small businesses, just as the DBE and CBSE
contracts in Maxwell were set aside to provide opportunities to minorities and
women. See Maxwell, 579 F.3d at 1306. Despite the Defendants’ argument that
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the government benefitted from the contract rather than losing from it, Congress
has emphasized that there is a concern in ensuring that small businesses have a fair
proportion of federal contracts because of the benefit that the nation receives from
having a strong class of small businesses. See 15 U.S.C. § 631(a); Maxwell, 579
F.3d at 1306. By defrauding the government to obtain the contract, the Defendants
prevented the government from awarding the contract to a legitimate small
business, and therefore, deprived other small businesses of the ability to obtain this
contract.
Because of the similarities between the programs and criminal conduct at
issue in Maxwell and the small business program and criminal conduct at issue
here, the Defendants’ argument that Maxwell is distinguishable because it did not
involve a small business program is without merit. Therefore, the district court
correctly applied this Court’s holding from Maxwell: the amount of loss in cases
involving government benefits programs equals the entire amount of the contract at
issue. See Maxwell, 579 F.3d at 1306. As such, the district court did not err here
by attributing the entire amount of the contract at issue—$100 million—to the
Defendants as loss, and applying a corresponding 24-level increase to their offense
levels.
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IV. CONCLUSION
In light of the foregoing, and following our review of the record and oral
argument in this case, we find no reversible error and affirm the convictions and
sentences of Defendants Blanchet and Guillan.13
AFFIRMED.
13
Because the Defendants have not established that the district court committed any
reversible error, they consequently cannot establish cumulative error necessitating the reversal of
their convictions. United States v. Khanani, 502 F.3d 1281, 1295 (11th Cir. 2007).
56