United States v. Evans Landscaping Inc
1:17-cr-00053
S.D. OhioJul 31, 2019Background
- Defendants (Evans Landscaping, Doug Evans, Jim Bailey) were convicted after trial of conspiracy and wire fraud for using a sham company (Ergon Site Construction LLC) to obtain DBE-certified government contracts under Ohio’s EDGE program; one misprision count was later acquitted.
- Government says loss equals total contract payments obtained through the fraud: $1,970,667.23 (City of Cincinnati) + $880,067.73 (Ohio EDGE) = $2,850,734.96, invoking U.S.S.G. § 2B1.1 application notes for government benefits/regulatory approvals.
- Defendants argue this is procurement fraud where services were actually performed; they request the credit-against-loss rule (U.S.S.G. § 2B1.1 cmt. 3(E)(i)) to reduce loss by fair market value of services rendered, resulting in $0 loss.
- The central Guidelines provision is U.S.S.G. § 2B1.1: loss is the greater of actual or intended loss; application notes distinguish government benefits (grants/loans) from procurement contracts and permit credits for services returned.
- The Sixth Circuit has not resolved the split; other circuits are divided—some apply the government-benefits rule to DBE/affirmative-action contract fraud, others apply the procurement-rule and subtract fair market value of services.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper Guidelines method to calculate loss for DBE/procurement fraud | Apply §2B1.1 application notes for government benefits or regulatory approval; count full contract value as loss | This is procurement fraud; apply general rule and credit fair market value of services rendered (credit-against-loss), possibly yielding $0 loss | Court applied procurement framework: calculate loss as contract price minus fair market value of services (credit-against-loss applies) |
| Whether non-pecuniary/programmatic harms require using full contract value | Gov: programmatic harm supports treating contract value as loss | Defs: non-pecuniary harms are distinct and not included in pecuniary loss under §2B1.1 | Court: non-pecuniary harms exist but Guidelines provide other mechanisms (departures/adjustments); they do not convert non-pecuniary harm into monetary loss under §2B1.1(b)(1) |
Key Cases Cited
- Rosales-Mireles v. United States, 138 S. Ct. 1897 (2018) (district courts must begin with and remain cognizant of the Guidelines during sentencing)
- Peugh v. United States, 569 U.S. 530 (2013) (Guidelines serve as a meaningful benchmark though advisory)
- Bros. Construction Co. of Ohio v. United States, 219 F.3d 300 (4th Cir.) (applied government-benefits approach in DBE-related fraud)
- Leahy v. United States, 464 F.3d 773 (7th Cir.) (applied government-benefits rule for affirmative-action contract fraud)
- Maxwell v. United States, 579 F.3d 1282 (11th Cir.) (applied government-benefits reasoning)
- Nagle v. United States, 803 F.3d 167 (3d Cir.) (rejected government-benefits rule; subtract fair market value of services from contract face value)
- Harris v. United States, 821 F.3d 589 (5th Cir.) (treated procurement fraud under general §2B1.1 rule; subtract services' value)
- Martin v. United States, 796 F.3d 1101 (9th Cir.) (rejected government-benefits rule; applied procurement-loss calculation)
- Crummy v. United States, 249 F. Supp. 3d 475 (D.D.C.) (applied general rule and credit-against-loss; discussed alternative Guidelines mechanisms to account for non-pecuniary programmatic harms)