United States v. Kenneth Fairley
880 F.3d 198
5th Cir.2018Background
- Kenneth Fairley, executive director of Pinebelt Community Services (a HUD‑certified CHDO), was tried for: (1) conspiracy to commit theft of government funds (18 U.S.C. § 371) and (2–3) two substantive counts of theft/receiving of government funds (18 U.S.C. § 641) arising from HOME program grants for two rehab projects.
- Pinebelt submitted requests for $98,000 (signed by Fairley) and received payment; Pinebelt later paid $72,000 to Interurban (associated with co‑defendant Fletcher). Government alleged Interurban did no work and funds were diverted. Fairley presented contrary evidence that substantial work and reimbursable expenditures occurred.
- At trial the government introduced recorded calls between Fairley and Fletcher; Fletcher had pled earlier. Jury found Fairley guilty on all three counts and the district court sentenced him to 36 months imprisonment (concurrent), restitution, fine, and supervised release.
- The indictment, jury instruction, and verdict form for counts two and three intermingled verbs/elements from § 641’s two paragraphs (theft/convert vs. receive/retain/conceal), omitting the paragraph‑two knowledge element requiring that the defendant know the property was stolen.
- The Fifth Circuit majority vacated counts two and three because the charge, verdict form, and indictment misstated § 641 elements and thus could have permitted conviction on a non‑offense that undercut Fairley’s defense; affirmed the conspiracy conviction and evidentiary and sentencing rulings; remanded for potential resentencing.
Issues
| Issue | Plaintiff's Argument (Government) | Defendant's Argument (Fairley) | Held |
|---|---|---|---|
| Sufficiency of counts 2–3 in indictment (elements of § 641) | Indictment adequately informed defendant; extra verbs are surplusage and tracked trial theory | Indictment combined verbs from § 641’s two paragraphs creating a hybrid that omitted paragraph‑two elements (knowledge of theft/intended conversion) | Rejected as plain‑error: inclusion of extra verbs in indictment was not plain error because they were surplusage and did not prejudice Fairley on that ground |
| Jury instruction & verdict form for counts 2–3 (mixing § 641 paragraphs) | Instructions permissible and government trial theory supported conviction; jury’s crossing out implied unanimous finding of conversion | Instructions conflated theft and receiving prongs, omitted paragraph‑two knowledge requirement, and permitted conviction on a non‑offense, undermining Fairley’s defense | Vacated counts 2–3 for plain error: instruction, verdict form, and indictment together misstated elements and could have changed outcome because Fairley’s defense depended on distinction between receipt and conversion |
| Effect on conspiracy conviction (count 1) | Errors in counts 2–3 do not undermine properly charged conspiracy count | Misstatements in substantive counts necessitate vacatur of conspiracy as well | Affirmed: conspiracy count separately charged theft (paragraph‑one) and instructions/indictment properly tracked theft elements, so conviction stands |
| Admission of recorded calls (coconcelecutor statements) | Statements admissible under Rule 801(d)(2)(E) as made during and in furtherance of continuing joint venture/conspiracy | Statements were post‑conspiracy, adversarial collection efforts, not in furtherance | Affirmed: district court did not abuse discretion; independent evidence supported an ongoing joint venture and calls sought to enforce the agreement, aiding the conspiracy prosecution |
| Sentencing — loss calculation (intended loss) | District court reasonably estimated intended loss by extrapolating from actual contract and intended second contract | Court overstated loss and ignored Fairley’s evidence of higher legitimate expenditures and property value | Affirmed: court’s intended‑loss methodology and credibility choices were reasonable and not clearly erroneous |
| Sentencing — abuse of position of trust (§ 3B1.3) | Enhancement appropriate because Fairley, as CHDO executive director, occupied a fiduciary/trust role relied on by HUD/Hattiesburg | Fairley disputed the enhancement | Affirmed: Fairley occupied a position of trust like reimbursers in other programs and used that role to facilitate the offense |
Key Cases Cited
- Milanovich v. United States, 365 U.S. 551 (distinguishing § 641’s theft and receiving paragraphs)
- Gaudin v. United States, 515 U.S. 506 (jury must find every element beyond a reasonable doubt)
- Olano v. United States, 507 U.S. 725 (plain‑error review framework for unpreserved errors)
- El‑Mezain v. United States, 664 F.3d 467 (conspiracy hearsay exception principles; need for independent evidence)
- United States v. John, 597 F.3d 263 (permitting extrapolation to compute intended loss for sentencing)
- United States v. Hebron, 684 F.3d 554 (standard of review and method for loss calculation at sentencing)