UNITED STATES OF AMERICA, Plaintiff - Appellee, versus JUAN CARLOS BAZANTES, CESAR ARBELAEZ TABARES, Defendants - Appellants.
No. 17-15721
IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
(October 26, 2020)
D.C. Docket No. 1:15-cr-00277-SCJ-JFK-2
[PUBLISH]
Appeals from the United States District Court for the Northern District of Georgia
Before BRANCH, TJOFLAT, and ED CARNES, Circuit Judges.
Two men owned a company that was a second-tier subcontractor on a project to construct a building for a federal agency. They submitted to the agency certified payroll forms containing false, fictitious, and fraudulent statements and entries within the meaning of
Given the elements of the crime, the facts of the case, and the contentions of the defendants, there are two primary questions about the validity of the convictions. One is whether the payroll forms containing the false statements were made or used in a matter within the jurisdiction of the federal agency. The other question is whether the false statements were material. If the answer to either question is no, the convictions must be reversed. If the answer to both questions is yes, the convictions must be affirmed. The answers are “yes” and “yes.”
Arbelaez and Bazantes also challenge their sentences, questioning whether the district court in determining their guidelines ranges properly calculated the loss caused by their crimes. Because the answer to that question is “no,” their sentences must be vacated and their cases remanded for resentencing.
I. THE FACTUAL, STATUTORY, AND REGULATORY BACKGROUND
Cesar Arbelaez Tabares and Juan Carlos Bazantes founded, owned, and managed IWES Contractors, Inc., a drywall contracting company. It acted as a “labor broker,” providing skilled drywall installation workers to construction companies. One of the construction projects IWES provided workers for was a $63 million office building in Atlanta for the Centers for Disease Control and Prevention (CDC), a federal agency.
The Beck Group was the prime contractor on that federal construction project. Beck contracted with Mulkey Enterprises as a first-tier subcontractor that would, among other things, install the drywall. And Mulkey hired IWES as a second-tier subcontractor to provide Mulkey with drywall workers for the job. So IWES was a subcontractor for Mulkey, Mulkey was a subcontractor for Beck, and Beck was the prime contractor for the CDC.
A. The Statutory and Regulatory Background
Federal construction projects are, of course, heavily regulated by a web of statutes and regulations. The Davis-Bacon Act of 1931, for example, requires government contractors and subcontractors to pay their workers at least the prevailing wage in the community where the construction
One subsection of the Copeland Act, which is now codified in
In obedience to the Copeland Act‘s statutory mandate, the Department of Labor adopted
Each contractor or subcontractor engaged in the construction, prosecution, completion, or repair of any public building . . . shall furnish each week a statement with respect to the wages paid each of its employees . . . during the preceding weekly payroll period. This statement shall be executed by the contractor or subcontractor or by an authorized officer or employee of the contractor or subcontractor who
supervises the payment of wages, and shall be on the back of Form WH 347, “Payroll (For Contractors Optional Use)” or on any form with identical wording.
(a) Each weekly statement required under § 3.3 shall be delivered by the contractor or subcontractor . . . to a representative of a Federal or State agency in charge at the site of the building or work . . . . After such examination and check as may be made, such statement, or a copy thereof, shall be kept available, or shall be transmitted together with a report of any violation, in accordance with applicable procedures prescribed by the United States Department of Labor.
(b) Each contractor or subcontractor shall preserve his weekly payroll records for a period of three years from date of completion of the contract. The payroll records shall set out accurately and completely the name and address of each laborer and mechanic, his correct classification, rate of pay, daily and weekly number of hours worked, deductions made, and actual wages paid. Such payroll records shall be made available at all times for inspection by the contracting officer or his authorized representative, and by authorized representatives of the Department of Labor.
Two other regulations implementing both the Copeland Act and the Davis-Bacon Act require federal construction contracts to contain language about weekly payroll records. The first is
The second regulation is
B. The Contracts and the Forms Submitted
Beck‘s contract with the CDC required Beck to collect and submit to the CDC certified payroll records from “all subcontractors” on the CDC project. Beck was also required to ensure that “any subcontractor or lower tier subcontractor performing construction within the United States,” such as IWES, complied with those CDC reporting requirements. Having Beck shoulder the responsibility for gathering and forwarding the reports from subcontractors on the project was consistent with the applicable regulation. See
The contract also provided that if Beck failed to carry out its responsibility to gather and submit the required payroll information, the CDC could withhold funds, terminate the contract, or even debar Beck or the subcontractors, or both, from working on a government contract again. That contract clause was consistent with the applicable regulation. See
To carry out its reporting responsibilities, Beck included in its contract with Mulkey a clause that required Mulkey to submit to Beck not only its own certified payroll records but also those of all of its subcontractors, including IWES. Each week Beck gave to the CDC all of those payroll records, as it was required to do under the contract. Those records included the ones IWES had submitted to Mulkey for submission to Beck. See
The contract between IWES and Mulkey required IWES to submit to Mulkey payroll records in the form of timesheets and invoices for its workers, but the contract did not explicitly require the copies to be certified. But Arbelaez believed that IWES would not get paid unless it submitted certified copies of its payroll records to Mulkey. So IWES certified the weekly payroll records and submitted them using Department of Labor Form WH-347, as recommended in the regulations. See
“THE WILLFUL FALSIFICATION OF ANY OF THE ABOVE STATEMENTS MAY SUBJECT THE CONTRACTOR OR SUBCONTRACTOR TO CIVIL OR CRIMINAL PROSECUTION. SEE SECTION 1001 OF TITLE 18 AND SECTION 231 OF TITLE 31 OF THE UNITED STATES CODE.”
Arbelaez, Bazantes, or an IWES employee they authorized to do so on their behalf signed each of the WH-347 forms certifying that the IWES payroll and other information on it was accurate.
IWES submitted those forms to Mulkey, which submitted them to the general contractor, Beck. Beck submitted those forms to the CDC. In that way the CDC received certified payroll information on a Department of Labor form filled out by, or at the direction of, Arbelaez and Bazantes. At least some of the statements or entries on some of those certified payroll records were “false, fictitious, or fraudulent” within the meaning of
C. The Motive and the Scheme
Motive is not an element of a False Statements Act crime. And it hasn‘t been an element since 1934 when Congress amended the Act to delete the requirement that the false statements be made “for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States.” See United States v. Rodgers, 466 U.S. 475, 477–78 (1984). But Arbelaez and Bazantes did have a motive; they did act with a purpose. Here is what it was.
IWES had been reporting to the IRS that a number of its workers were independent contractors instead of its employees. By doing that IWES avoided having to pay an employer‘s share of payroll taxes on those workers. But Arbelaez and Bazantes did not want the CDC to know that those workers were paid as independent contractors because that might cause the CDC to ask questions, pause payment, or even call in the Department of Labor to investigate. Not only that, but the contract with Mulkey required IWES to: “[m]ake timely payment to its Employees for their weekly wages and provide them with any benefits offered by Employer” and to “[w]ithhold and transmit all federal and state payroll taxes pursuant to the applicable laws, provide unemployment insurance and workers’ compensation insurance and handle any claims under said policies involving its Employees.” The contract didn‘t say anything about IWES treating any workers as independent contractors.
To evade the contractual requirement to treat their employees as employees while appearing to comply, and to keep the CDC from knowing that they were treating some IWES workers as independent contractors, Arbelaez and Bazantes devised a scheme. They had their bookkeeper construct what would have been the payroll with all withholdings, including payroll taxes, taken out of the paychecks as if the workers in question had actually been treated as employees. They then certified, or had certified, that phony payroll as accurate on the DOL Form WH-347 and had it sent to Mulkey who, in turn, passed it along to Beck who submitted it to the CDC. But many of the workers whom Arbelaez and Bazantes reported to the CDC as employees on the certified payroll records were actually treated as independent contractors by IWES.
To make their scheme work, Arbelaez and Bazantes would regularly give their bookkeeper a chart that included each worker‘s weekly pay. The chart included a column titled “RL/FK W2/1099.” In that column beside each worker‘s name was a “W2.REAL” for each real employee (one who was actually treated as an employee) or a “W2.F” for
Arbelaez and Bazantes reported the “W2.F” group of workers to the IRS as independent contractors for tax purposes, which is the net effect of how they were treated when their two paychecks were totaled. The problem is that through the chain of submission from IWES to Mulkey to Beck to the CDC, Arbelaez and Bazantes reported to the CDC the opposite of what they were reporting to the IRS. They certified to the CDC that those same “W2.F” workers were IWES employees, not independent contractors.2 Telling the
II. THE PROCEDURAL HISTORY
Someone complained to the Department of Labor about the two-check system for the W2.F workers. That complaint led to an investigation. And that investigation led to an indictment. Arbelaez and Bazantes were each charged with one count of conspiracy to defraud the United States; with five counts of willful tax fraud; and with six counts of violating
Arbelaez and Bazantes moved to dismiss the six
The case went to trial. At the end of the government‘s case-in-chief Arbelaez and Bazantes moved for a judgment of acquittal, which the court denied. The court also denied their renewed motion for a judgment of acquittal at the close of all evidence. The jury found them not guilty of the tax fraud charges but guilty of conspiring to willfully and knowingly submit false statements in certified payroll records to the CDC in violation of
III. THE TWO CONVICTION ISSUES
The specific part of the False Statements Act that Arbelaez and Bazantes were convicted of violating is codified in
In challenging their convictions, Arbelaez and Bazantes contend, as they have throughout the case, that the prosecution fails on the “within the jurisdiction” element and also on the materiality element. Both contentions are well preserved, but neither is well taken.
A. The “Within the Jurisdiction” Element
We begin with the element that the false document containing the false statement must have been made or used “in any matter within the jurisdiction of the executive . . . branch of the Government of the United States.”
1. The Copeland Act Itself Establishes that the Payroll Records It Requires to be Submitted Are Matters Within the Jurisdiction of the Executive Branch of the Government
Whatever else may be covered by
Here‘s the background for subsection (b). The original Copeland Act was enacted in 1934, and from the beginning it required the adoption of regulations obligating contractors and subcontractors on federal construction projects to submit weekly payroll records. See Copeland Act, ch. 482, § 2, 48 Stat. 948, 948 (1934). At first those records had to be in the form of “sworn affidavit[s].”
And the evidence at trial showed that they made their false statements in Copeland Act payroll records. Which means the motions for judgment of acquittal were also due to be denied to the extent they challenged whether the “within the jurisdiction” element was satisfied.
form of “statement[s]“; affidavits were no longer required. See Pub. L. No. 85-800, § 12(a), 72 Stat. 966, 967 (1958). That provision is now in subsection (a) of
With that 1958 amendment Congress accomplished two things. First, it eased the burden of complying with the Copeland Act‘s weekly payroll reporting requirement by no longer requiring that the reports be in affidavit form. Second, it ensured that false statements in those payroll records were still subject to criminal sanctions even though they were no longer submitted as sworn affidavits. Congress did that by explicitly providing in the Copeland Act that
What does it mean for the statute to say that
The most logical reading of
It would make no sense to conclude that
Of course, the views of a later Congress about what an earlier one meant carry little, if any, weight. See Pitch v. United States, 953 F.3d 1226, 1241 (11th Cir. 2020) (en banc) (“[P]ost-enactment legislative history (a contradiction in terms) is not a legitimate tool of statutory interpretation,’ because by definition it could have had no effect on the congressional vote.“) (quoting Bruesewitz v. Wyeth LLC, 562 U.S. 223, 242 (2011)). But that is not what we are talking about here.
What we are talking about is the power of Congress to amend existing statutes, and that is what Congress did in 1958 when it amended the Copeland Act, but with the wrinkle that one provision had the effect of amending, or at least clarifying, the False Statements Act. In doing that, the 1958 Congress was not expressing its views about what the 1934 Congress meant when it enacted the original Copeland Act. Instead, it was legislating that, at least from that point forward, any statement in a payroll record required to be submitted as part of a federal construction project would be, for
Congress could remove any “within the jurisdiction” issues from
There is one other thing we would add to this discussion. It concerns a point made 35 years ago by then-Judge Antonin Scalia, writing for another court of appeals. In United States v. Hansen, 772 F.2d 940 (D.C. Cir. 1985), he considered the existence of some provisions scattered in various places in the United States Code that state
Another independently adequate, alternative ground for reaching the same result is that Supreme Court precedent dictates it. The Court has instructed us that the term “jurisdiction” is “not [to] be given a narrow or technical meaning for purposes of
And most specifically for our purposes, the Supreme Court has with simple clarity held—not once, but twice—that: “A statutory basis for an agency‘s request for information provides jurisdiction enough to punish fraudulent statements under
The rule that if a statute gives an agency authority to request the records, the agency has “jurisdiction enough to punish fraudulent statements under
The rule applies in this case. As we have explained, the Davis-Bacon Act itself and the Copeland Act itself, and the regulations adopted by the Department of Labor in obedience to directives in those acts, require that each contractor and subcontractor working on federal construction projects make and submit weekly payroll records to the federal agency in charge of the project. See supra pp. 3-6. Those
The payroll records that must be made, used, and submitted on a federal construction project include the worker‘s: correct classification for prevailing wage purposes, hourly wage rate, anticipated fringe benefits, hours worked, deductions from pay, and actual wages paid. See
The regulations also provide that after “such examination and check as may be made” by the federal agency, a copy of the submitted payroll records “shall be kept available, or shall be transmitted together with a report of any violation, in accordance with applicable procedures prescribed by the United States Department of Labor.”
The CDC also had the authority to enforce the payroll reporting requirements itself. If the payroll reports were not filed, the CDC could have withheld funds, terminated the contract, or even taken action leading to the prime contractor or a subcontractor, or both, being debarred—prevented from working on another government construction project for a period of years. See
testified that he would have notified the general contractor, Beck, that there was a problem, and that he also would have withheld payment on the project until Beck “resolved” the issue. And he added that “if they did not correct the problem in an expedient manner, we would automatically contact the Department of Labor and tell them of the problem.”
The Davis-Bacon Act and the Copeland Act, and the regulations implementing them, provided the CDC with a statutory basis for its authority to request, receive, and examine the certified records of the payroll of IWES on the project to construct a $63 million office building for the CDC. That statutory language, as the Supreme Court put it in Bryson and Rodgers, “provides jurisdiction enough” to punish under
But what about the fact that the payroll records for IWES were not submitted directly to the CDC but instead were sent through the contractual chain from IWES to Mulkey to Beck to the CDC? See supra pp. 3, 6-9. That is the route of submission provided in the contracts and in the regulations implementing the statutes. See
Under
The defendant‘s sole defense in Yermian was that he had no knowledge that the private company would transmit to a federal agency his false statements. Id. at 66. The Supreme Court held that did not matter because “lacking from this enactment [
That the prime contractor, Beck, actually handed over to the CDC the false payroll records of IWES does not change the fact that Arbelaez and Bazantes made and used those false records. It does not mean the payroll records of the IWES workers on the CDC construction project were any less a “matter within the jurisdiction” of the CDC. The Supreme Court‘s Yermian decision settles that. Because, as Yermian held, a defendant need not even know that his statements will be transmitted to a federal agency, he surely doesn‘t have to make those statements directly to the federal agency for the jurisdiction element to
3. Our Lowe and Blankenship Decisions
Arbelaez and Bazantes contend that under the prior panel precedent rule two of our earlier decisions prevent us from holding that the IWES payroll records that were submitted to the CDC are “any matter within the jurisdiction” of the CDC for
The two decisions that Arbelaez and Bazantes insist compel us to hold that the payroll records in this case are not a matter within the jurisdiction of the CDC are the Lowe and Blankenship decisions. See Lowe v. United States, 141 F.2d 1005 (5th Cir. 1944); Blankenship, 382 F.3d at 1141. They involved different federal agencies, different statements or records, and different statutes requiring or authorizing the agency to request the statements or records than this case does. The Lowe case involved a shipyard worker who lied to his employer about the number of hours he had worked on a project involving the employer‘s construction of a ship for a federal agency, which in turn reimbursed the employer for its inflated payroll payments. See 141 F.2d at 1006. A panel of this Court held that the worker‘s false statements were not a matter within the jurisdiction of the federal agency under the circumstances of that case. Id.
In the Blankenship case, the principal of a trucking company that had contracted with a state agency to do work made false statements to it. 382 F.3d at 1116. Those statements were about compliance with requirements that were a condition of the state agency receiving highway construction grants from a federal agency. See id. at 1116-18, 1136-41. We held that the false statements were not a matter within the jurisdiction of that federal agency under the circumstances of that case. Id. at 1141.
“Under the well-established prior panel precedent rule of this Circuit, the holding of the first panel to address an issue is the law of this Circuit, thereby binding all subsequent panels unless and
But the prior precedent rule applies only to the actual holdings of prior decisions on issues that were actually decided by the earlier panel. See United States v. Birge, 830 F.3d 1229, 1232 (11th Cir. 2016) (holding that the rule that a panel cannot overrule a prior panel‘s holding applies only to holdings). And “[a]s we have explained time and again: A decision can hold nothing beyond the facts of that case.” Id. at 1233 (cleaned up); accord, e.g., Watts v. Bell South Telecomms., Inc., 316 F.3d 1203, 1207 (11th Cir. 2003) (“Whatever their opinions say, judicial decisions cannot make law beyond the facts of the cases in which those decisions are announced.“); United States v. Aguillard, 217 F.3d 1319, 1321 (11th Cir. 2000) (“The holdings of a prior decision can reach only as far as the facts and circumstances presented to the Court in the case which produced that decision.“). To the extent that an earlier decision is distinguishable from the case at hand, it may be a prior precedent, but it is not one that can dictate the result of the current case under the prior precedent rule. See Scott v. United States, 890 F.3d 1239, 1257 (11th Cir. 2018).
Putting aside any other differences, there is one critically important circumstance in this case that was not present in the Lowe and Blankenship cases that makes all the difference under the prior panel precedent rule. As we have pointed out, the payroll records Arbelaez and Bazantes submitted up the chain to the CDC were submitted under the Copeland Act,
And as we have explained, that means Congress itself has foreclosed any debate about whether statements made or records submitted under the Copeland Act to a federal agency are within the jurisdiction of the federal agency that receives them. See supra pp. 17-23. Congress has commanded that they are. Section
That holding is not inconsistent with either Lowe or Blankenship. Neither of those decisions involved the Copeland Act or any statements or records submitted under that act. Neither of those decisions involved statements or records submitted under an act that specified, as the Copeland Act does in
B. The Materiality of the Payroll Records
Arbelaez and Bazantes contend that the falsified payroll records they created were not material under
1. The Sufficiency of the Indictment
“[T]he sufficiency of an indictment is a legal question that we review de novo.” United States v. Pendergraft, 297 F.3d 1198, 1204 (11th Cir. 2002). In doing so, we consider only the facts alleged in the indictment. United States v. Sharpe, 438 F.3d 1257, 1263 (11th Cir. 2006). An indictment must present the essential elements
The indictment alleged that Arbelaez and Bazantes:
did willfully and knowingly make and use false writings and documents to the CDC, that is, certified payroll forms (DOL Forms WH-347), knowing the same to contain materially false, fictitious, and fraudulent statements and entries in a matter within the jurisdiction of the executive branch of the Government of the United States, by falsely representing on the certified payroll forms submitted to the CDC that employment taxes had been deducted from the wages of certain IWES workers who performed work on the CDC construction project.
(Emphasis added.) That is enough.
Arbelaez and Bazantes argue that because the indictment does not allege that the forms containing the false payroll statements or records were directly addressed to the CDC, the false statements were, as a matter of law, not material.7 That materially misstates the materiality test. Arbelaez and Bazantes rely on language from decisions of this Court and the Supreme Court defining materiality as whether a statement was “capable of influencing[] the decision of the decisionmaking body to which it was addressed.” United States v. Gaudin, 515 U.S. 506, 509 (1995) (emphasis added and quotation marks omitted); accord Kungys v. United States, 485 U.S. 759, 770 (1988); United States v. Boffil-Rivera, 607 F.3d 736, 741 (11th Cir. 2010). But none of those decisions held that a false statement ceases to be material if it is not made directly to the decisionmaking body that it has the potential to influence. In all three of those decisions, the language that Arbelaez and Bazantes rely on is dicta because in each of those cases the statements were made directly to the decisionmaking body or its agents.8
Arbelaez and Bazantes must resort to dicta because our actual holdings foreclose
We have held that the materiality requirement is met if “the false statement has the capability of affecting or influencing the exercise of a government function.” Herring, 916 F.2d at 1547. The false statements that the indictment alleges Arbelaez and Bazantes made were capable of affecting or influencing the exercise of the CDC‘s function of enforcing the Copeland Act. They were capable of that because the false statements in the payroll records covered up the actual manner in which IWES was paying its workers. That is enough to allege that the false statements were material to the CDC for purposes of
2. The Sufficiency of the Evidence
Arbelaez and Bazantes also challenge the district court‘s denial of their renewed Rule 29 motions for judgment of acquittal on the false statement counts. “The district court‘s denial of the motions for a judgment of acquittal will be upheld if a reasonable trier of fact could conclude that the evidence establishes the defendant‘s guilt beyond a reasonable doubt.” United States v. Rodriguez, 218 F.3d 1243, 1244 (11th Cir. 2000). In deciding whether it does, we view the evidence in the light most favorable to the government. Hansen, 262 F.3d at 1236. And unlike a motion to dismiss the indictment, which confines courts to considering the allegations of the indictment, a motion for judgment of acquittal frees courts to look at all of the evidence presented at trial. See United States v. Williams, 390 F.3d 1319, 1323 (11th Cir. 2004).
We don‘t look for evidence that the false statements in the payroll records affected or influenced the CDC‘s actions or decisions. That‘s not necessary because when it comes to materiality, actual effect or influence is not required; capability or potential is enough. Gaudin, 515 U.S. at 509. “The false statement must simply have the capacity to impair or pervert the functioning of a government agency.” United States v. Lichenstein, 610 F.2d 1272, 1278 (5th Cir. 1980); see Herring, 916 F.2d at 1547. “A statement can be material even if it is ignored or never read by the agency receiving the misstatement.” United States v. Diaz, 690 F.2d 1352, 1358 (11th Cir. 1982).
The arguments of Arbelaez and Bazantes rest on the false premise that the false statements in the payroll records they submitted were not material because
The falsified payroll information that was submitted included a certification on a government form that itself indicated the labor was provided for a CDC construction project. And the evidence showed that through the contracting chain of command, the payroll information and certifications were ultimately submitted to the CDC (as the law required them to be).
Other evidence proved that the false payroll information was capable of influencing the CDC, which is the measure of materiality under
In sum, the facts presented at trial proved that the false statements in the payroll records were capable of influencing the CDC. See Boffil-Rivera, 607 F.3d at 741-42. A reasonable fact finder could have found that those false statements were material. See Hansen, 262 F.3d at 1236. And the jury did. The district court did not err in denying the renewed motion for a judgment of acquittal on materiality grounds.
IV. SENTENCING
Arbelaez‘s and Bazantes’ Presentence Investigation Reports assigned a base offense level of 6 under
30 federal projects IWES had been involved in during a two-year period. The PSRs calculated the loss amount by totaling the separate amounts that IWES had earned on all of those projects in which it had submitted false payroll information. Using that uncharged relevant conduct, the PSRs determined there was a $5 million loss to the government, justifying an 18-level enhancement under
The PSRs also added a 2-level enhancement for sophisticated means under
Arbelaez and Bazantes objected to the sentencing calculations on several grounds, but the only one they pursue on appeal is
To calculate their gain, the court began with the $5 million in government contracts in which Arbelaez and Bazantes had submitted falsified payroll records in all of the federal projects. It determined that, after subtracting for overhead, they netted on average 11.5% of the total contract price, which amounted to a gain of approximately $550,000, justifying under
Arbelaez and Bazantes contend that the district court erred in finding that their offenses caused any loss. They argue that they provided the services that the CDC had contracted for (through the prime contractor and the first-tier subcontractor), and because they were presumably the lowest bidder, there was no loss to the CDC. If there was any loss to the CDC, they see it as offset by the services they provided. And if there was no loss to the CDC, they argue that the district court erred by relying on their gain to calculate the offense level. Although we review the district court‘s loss determination only for clear error, we review de novo questions of law about the application of the sentencing guidelines. United States v. Tampas, 493 F.3d 1291, 1303 (11th Cir. 2007).
Section
Arbelaez and Bazantes correctly contend that the government did not prove any loss here. At sentencing and in its
The government also argues that if it were not for the falsified payroll records, the CDC would not have paid IWES—presumably by reducing its payments to the general contractor, who would then have reduced its payments to the first-tier subcontractor, who then would have reduced or stopped its payments to IWES. That argument does not support the government‘s position. Even if the CDC would have stopped payment until IWES properly classified its workers, there would still not have been any loss. The CDC would have paid the same amount and received the same benefit that it did without knowing about the false statements. IWES would have made less profit because the payroll taxes would have cut into its earnings, but that does not figure into whether the CDC had a loss.
And even if the CDC‘s loss was somehow the full amount that it paid to IWES, that amount must be offset by the fair market value of the services that the CDC received. See Campbell, 765 F.3d at 1302. Here the labor is the service that IWES provided. And the government does not contend that the CDC did not receive the full, bargained-for benefit of the labor. Offsetting the CDC‘s loss, which is the cost of the labor, by the fair market value of the labor leaves a net loss of zero. The finding that there was a loss to the CDC was clearly erroneous.12
We have not considered whether gain can be used instead of loss where there is no loss. When interpreting the guidelines we begin, of course, with the text of the guidelines, including the text of the commentary. United States v. Fox, 926 F.3d 1275, 1278 (11th Cir. 2019). The text of the commentary could scarcely be clearer: courts can rely on gain “only if there is a loss but it reasonably cannot be determined.”
The other circuits that have considered the question have also determined that the commentary means exactly what it says. See, e.g., United States v. Robie, 166 F.3d 444, 166 F.3d 444, 455 (2d Cir. 1999). In Robie the defendant worked for a company that printed stamps for the federal government. Id. at 447. Some of the stamps were misprints, so the government ordered them destroyed. Id. But the defendant instead took them and traded them for other valuable stamps worth tens of thousands of dollars. Id. at 448. At sentencing, the district court had adopted the PSR‘s findings that there was no loss to the government when the
Because the district court erroneously applied the
V. CONCLUSION
The convictions of Arbelaez and Bazantes are AFFIRMED. Their sentences are VACATED, and the case is REMANDED for further sentence proceedings consistent with this opinion.
Notes
- PAY on 10/28/12: $1,040
- FICA W/H (Social Security): -$43.68
- MEDICARE W/H: -$15.08
- FEDERAL W/H: -$19.51
- STATE W/H: -$12.75
- CLOCK IN/OUT KEY (employee expense): -$20.00
- Payroll Check: $928.98