Appeals from the United States District Court for the Southern District of Florida. D.C. Docket No. 2:11-cr-14052-KMM-1.
For United States of America, Plaintiff - Appellee: Stephen Schlessinger, Wifredo A. Ferrer, Kathleen Mary Salyer, Anne Ruth Schultz, U.S. Attorney's Office, Miami, FL; Russell R. Killinger, U.S. Attorney's Office, Fort Pierce, FL.
For Jeffrey Wayne Aunspaugh, Defendant - Appellant: Richard Francis Della Fera, Entin & Della Fera, PA, Fort Lauderdale, FL.
For Angela Bryant Aunspaugh, Defendant - Appellant: Jason M. Wandner, Jason M. Wandner, PA, Miami Beach, FL.
Before MARTIN, Circuit Judge, and RESTANI,[*] Judge, and HINKLE,[**] District Judge.
HINKLE, District Judge:
This is an honest-services fraud case. On one view of the evidence, the defendants participated in a classic kickback scheme. On another view, the scheme involved an egregious conflict of interest but no kickback. Under Skilling v. United States, 561 U.S. 358, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010), the defendants' conduct constituted honest-services fraud only on the first view, not the second. Because the jury instructions would have allowed a conviction on either view of the evidence, we vacate the honest-services convictions. We also vacate other convictions that depend on the honest-services convictions. But we uphold convictions for structuring financial transactions not dependent on the honest-services convictions.
A grand jury returned a four-count superseding indictment against the appellants Jeffrey Wayne Aunspaugh and Angela Bryant Aunspaugh, who are husband and wife, together with Christopher Andrew Hale. Count one charged conspiracy to commit mail fraud in violation of 18 U.S.C. § 1349. Count two charged conspiracy to commit money laundering--to launder the proceeds of the mail fraud--in violation of 18 U.S.C. § 1956(h). Count three charged conspiracy to structure financial transactions in violation of the general conspiracy statute, 18 U.S.C. § 371. Count four charged actually structuring transactions in violation of 31 U.S.C. § 5324. Count four also charged that the defendants were subject to the enhanced penalty for structuring while violating another federal law. See 31 U.S.C. § 5324(d)(2).
Mr. Hale pleaded guilty. The Aunspaughs went to trial. The district court denied their motions for judgment of acquittal as asserted both at the close of the government's case and at the close of all the evidence. The court modified the circuit's standard honest-services instruction in light of Skilling, but the Aunspaughs objected, asserting that the instruction as modified still did not comport with Skilling. The court overruled the objection.
The jury convicted the Aunspaughs on all counts and, in response to a special interrogatory, found that the structuring in count four was committed while the Aunspaughs were violating another federal law--that is, while they were committing the honest-services offense. That finding increased the maximum permissible sentence for structuring. The court sentenced each of the Aunspaughs to 63 months in prison, the high end of the guideline range, on each count concurrently, and ordered them to pay restitution. They appeal, asserting that the evidence was insufficient to sustain the convictions, that the honest-services jury instruction was improper, and that the court miscalculated both the amount of loss (used in calculating the guideline range) and restitution. Mr. Hale has separately appealed, challenging only the restitution portion of his sentence. We address his appeal in a separate opinion.
During the period at issue, Glades Electric Cooperative (" GEC" ) provided electrical power in four rural counties in central Florida. GEC had a wholly owned subsidiary, Glades Utility Services, Inc. (" GUS" ), that performed repair and maintenance services for GEC and unrelated entities. GUS performed work using its own equipment and employees but also sometimes hired subcontractors. And GUS allowed its employees to moonlight--to work on projects on their own or as employees of others while not on company time--so long as the work was disclosed to GUS.
Mr. Hale became GUS's general manager in 2005. Before the year was out, he began directing subcontracts to Ener-Phase Electric, Inc., a corporation owned by the Aunspaughs. Mr. Hale was married to Ms. Aunspaugh's sister.
Ener-Phase did not perform the work under the subcontracts but instead hired a GUS employee, Steve Rolen, to do the work. Ener-Phase made secret payments to Mr. Hale for his role in this arrangement. The Aunspaughs say the payments were for the work Mr. Hale did--providing information to Ms. Aunspaugh for her use in preparing invoices to GUS. The government asserts the payments were kickbacks--illegal compensation for steering the work to Ener-Phase. Neither Mr. Hale nor Mr. Rolen disclosed their work for Ener-Phase to anyone else at GUS.
The relationship between GUS and Ener-Phase greatly expanded in the aftermath of Hurricane Wilma. The hurricane crossed GEC's coverage area in October 2005, shifting thousands of wooden utility poles. The Federal Emergency Management Agency approved GEC's application for funds to straighten the poles. GEC assigned the work to GUS, which initially subcontracted with a local engineering firm, Transpower, Inc. Mr. Hale soon replaced that firm with Ener-Phase. Ener-Phase had a license and insurance coverage but otherwise lacked the resources to perform work of this kind. Ener-Phase again hired Mr. Rolen, who did the work using GUS's equipment.
For each of some 4,000 poles he straightened, Mr. Rolen charged Ener-Phase $75. Ener-Phase charged GUS $225. Ener-Phase generally paid Mr. Hale half of its $150 margin per pole. Ener-Phase and Mr. Hale each netted hundreds of thousands of dollars from this arrangement. The Aunspaughs say the payments to Mr. Hale were compensation for work he did overseeing Mr. Rolen and preparing invoices. Mr. Hale testified to the contrary; he said he did not monitor the work or provide any other essential function. The government again says the payments were kickbacks.
Federal law has long made it a crime to participate in a scheme to defraud using the mail, 18 U.S.C. § 1341, or a wire, id. § 1343, or to conspire to commit mail or wire fraud, id. § 1349. Over a period of decades, the courts of appeals interpreted these statutes to include not just schemes to defraud a victim out of money or property but also schemes to defraud an employer of its right to an employee's honest services. See Skilling, 561 U.S. at 400-01 (tracing this history). But in McNally v. United States, 483 U.S. 350, 360, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), the Supreme Court held that the mail-fraud statute was " limited in scope to the protection of property rights." The Court added, " If Congress desires to go further, it must speak more clearly than it has." Id.
Congress responded by enacting 18 U.S.C. § 1346: " For the purposes of this chapter, the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services."
Congress did not define " the intangible right of honest services." In Skilling, the Court rejected the assertion that § 1346 is impermissibly vague, invoking the Court's preference " to construe, not condemn." 561 U.S. at 403. The Court construed the statute to cover only the " solid core" of the honest-services doctrine as it existed prior to McNally. Id. at 407. The Court variously described that core as consisting of cases involving " fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived," id. at 404, or cases involving " offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." Id. at 407. The Court rejected the government's ...