969 F.3d 310
6th Cir.2020Background
- Kozerski formed CA Services to bid on VA set-aside construction contracts by falsely using a service-disabled veteran (J.R.) as the company owner.
- CA Services won six contracts; the company performed the work and was paid roughly $11.9 million in total.
- Kozerski pleaded guilty to one count of wire fraud; the plea left loss open between $150,000 and $11.9 million.
- The PSR treated loss as the full contract receipts (~$11.9M); Kozerski proposed loss equal to the aggregate bid spread (≈$248,206).
- The district court credited the bid-spread method, sentenced Kozerski to 1 year and 1 day, and the government appealed the loss calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of "loss" under U.S.S.G. §2B1.1 for procurement fraud | Loss = total amount paid on the fraudulently obtained contracts (no offset for value provided) | Loss = economic harm to intended beneficiaries; offset contract price by value of services (use bid-spread as proxy) | Court affirms district court: apply ordinary offset rule; credit value returned to victim and accept district court's estimate (~$248k) |
| Applicability of the "government benefit rule" (cmt. n.3(F)(ii)) to set-aside procurement contracts | Set-aside contracts are government benefits/entitlements; the rule mandates treating loss as benefit value | Set-aside procurements are conventional procurement for deliverables, not grants/loans/entitlement payments; rule doesn't fit | Rule does not apply here; procurement-specific commentary and offset rule govern |
| Applicability of cmt. n.3(F)(v) (no credit for value of misrepresented goods/services) | Fraudulently obtaining SDVOSB status is like misrepresenting goods/services; no offset allowed | cmt. n.3(F)(v) targets goods or licensed-professional services, not general construction performed by a company | Provision inapplicable to this set-aside construction fraud; offset remains available |
| Whether district court's bid-spread loss estimate was arbitrary | Government: the bid-spread figure is arbitrary and understates loss | Kozerski: the bid-spread reasonably estimates lost profits to intended beneficiaries; court provided explanation | No clear error; district court made a reasoned, permissible estimate and complied with guideline requirement for a reasonable loss estimate |
Key Cases Cited
- United States v. Martin, 796 F.3d 1101 (9th Cir. 2015) (concluding government benefit rule does not apply to set-aside procurement fraud)
- United States v. Harris, 821 F.3d 589 (5th Cir. 2016) (similar holding that government benefit rule inapplicable to procurement set-asides)
- United States v. Nagle, 803 F.3d 167 (3d Cir. 2015) (government benefit rule would not change loss once offsets applied)
- United States v. Maxwell, 579 F.3d 1282 (11th Cir. 2009) (held set-aside contracts could be treated as government benefits)
- United States v. Bikundi, 926 F.3d 761 (D.C. Cir. 2019) (discussing interplay of commentary provisions and offsets)
- United States v. Giovenco, 773 F.3d 866 (7th Cir. 2014) (concluded that commentary could apply to set-aside fraud)
- United States v. Sands, 948 F.3d 709 (6th Cir. 2020) (standard of review: no clear error for district court loss estimates)