USA v. John Bennett
Filing
NOT PRECEDENTIAL OPINION Coram: AMBRO, CHAGARES and FUENTES, Circuit Judges. Total Pages: 11. Judge: FUENTES Authoring.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 16-3405
_______________
UNITED STATES OF AMERICA,
v.
JOHN A. BENNETT,
Appellant
___
On Appeal from the United States District Court
for the District of New Jersey
(2-09-cr-00656-002)
District Judge: The Honorable Susan D. Wigenton
_______________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
November 16, 2016
Before: AMBRO, CHAGARES, and FUENTES, Circuit Judges
(Opinion Filed: April 28, 2017)
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OPINION
_________
FUENTES, Circuit Judge.
Following a three-week jury trial, the defendant John Bennett was convicted of
fraud and conspiracy offenses in connection with a scheme to pay kickbacks and defraud
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
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the U.S. Government. The crimes related to cleanup efforts at a Superfund site in New
Jersey funded by the Environmental Protection Agency (EPA) and supervised by the U.S.
Army Corps of Engineers. Bennett was subsequently sentenced to 63 months in prison
and fines and restitution amounting to just over $3.8 million.
Bennett appeals his conviction and sentence,1 raising eight issues on appeal: (1)
whether the government failed to offer evidence that Bennett made or knew of any
material misrepresentation or acted with fraudulent intent, or intentionally paid kickbacks
to obtain favorable treatment; (2) whether the District Court violated Federal Rule of
Evidence 701 by permitting, over Bennett’s objections, a lay witness for the government,
an Army Corps employee, to testify about the Anti-Kickback Act, that the benefits that
BEI provided to the primary contractor were kickbacks, and that she would expect
subcontractors like BEI to know this; (3) whether the District Court erred in admitting,
over Bennett’s objections, telephone records without live witnesses to authenticate them;
(4) whether the government’s remarks in closing that “[y]ou cannot come into this
country, get a Government funded project, and conveniently fail to pay attention to rules
that apply”2 encouraged the jury to find Bennett guilty because he is a foreigner; (5)
whether the District Court’s jury instructions on the Anti-Kickback Act3 were overly
1
The District Court had subject matter jurisdiction under 18 § U.S.C. 3231. We have
appellate jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742.
2
JA-830.
3
The District Court instructed the jury that “a kickback means any money, fee,
commission, credit, gift, gratuity, thing of value, or compensation of any kind that is
provided to a prime contractor, prime contractor employee, subcontractor, or
subcontractor employee, to improperly obtain or reward favorable treatment in
connection with a prime contract or a subcontract relating to a prime contract. It is not
2
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broad in light of the Supreme Court’s recent decision in McDonnell v. United States,4
interpreting a different term in a different statute, because it reflected too broad an
understanding of quid pro quo, including incidental favors not intended to influence the
official receiving them; (6) whether the cumulative effects of these errors require
reversal; (7) whether Bennett’s sentence is procedurally5 and substantively unreasonable;
and (8) whether the District Court improperly calculated restitution.
We have carefully reviewed the record on appeal and conclude that the issues
raised are without merit, with the possible exception of Bennett’s sufficiency-of-theevidence and restitution arguments. We review these challenges in turn below.
Ultimately, we conclude that these challenges are also without merit, and thus we will
affirm.
I.
We write principally for the parties in this case, and thus briefly summarize the
relevant facts. Bennett was charged as part of a scheme to pay kickbacks and defraud the
government in connection with environmental cleanup efforts at the Federal Creosote
Superfund site in Manville, New Jersey, where the soil had been infected with creosote
waste. Such efforts were funded by the EPA and overseen by the U.S. Army Corps of
Engineers, which in turn hired Sevenson Environmental Services as the primary
enough to find that the defendant gave something of value to build general good will.”
JA-812-13.
4
136 S. Ct. 2355 (2016).
5
Bennett objects to the application of a four-level aggravating enhancement on the basis
that he was an organizer or leader of the criminal scheme; he argues that the government
only showed he was a leader of BEI and not of the scheme.
3
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contractor for the site. Sevenson’s project manager on the site was Gordon McDonald,
whose responsibilities included the hiring of subcontractors. One of the subcontractors
McDonald hired was BEI to treat and dispose of soil; Bennett served as BEI’s chairman
and CEO. Robert Griffiths served as a salesperson and BEI’s primary contact with
Sevenson and McDonald. Zul Tejpar served as vice president of BEI.6
McDonald entered into conspiracies with at least three subcontractors at the
Federal Creosote and another toxic waste site in New Jersey, including BEI. McDonald
and these subcontractors manipulated the bidding process by sharing information about
rivals’ bids and coordinating bids, so that the subcontractors could win their contracts at
inflated prices. In exchange, the subcontractors, including BEI, gave McDonald and other
Sevenson employees gifts such as money, a hockey game, a Mediterranean cruise, a
plasma television, and a wine cooler.
Cleanup work began in 2000 and proceeded in three phases. BEI won a bid in
2000 for soil decontamination work in Phase I; the government did not allege that BEI
paid any kickbacks at this phase. However, the government did allege that BEI did pay
kickbacks in order to win the Phase II contract in 2002. Specifically, Griffiths testified
that McDonald told him that BEI was not the lowest bidder and then asked for a
kickback, and that Griffiths reported this proposal to Bennett, Tejpar, and others. During
a meeting at the sports bar of the Ramada Hotel in Manville, McDonald and Griffiths
agreed to a kickback of $13.50 per ton of soil shipped to BEI, in exchange for which BEI
would be permitted to submit another bid as well as get a “last look” on the other bids
6
Both Griffiths and Tejpar pleaded guilty and testified against Bennett at trial.
4
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submitted. After agreeing to this proposal, BEI submitted a new bid and won the
subcontract.
Griffiths also testified that BEI continued to pay kickbacks to McDonald for the
2003 Phase III subcontract bidding. McDonald showed Griffiths other subcontractors’
bids and BEI again won the bid. However, a losing bidder protested the bid, and the subcontract was re-bid in December 2003. The re-bidding was intended to be a sealed
process in which bids were opened simultaneously in a ceremonial public opening. To get
around these protections, Griffiths prepared around 150 pricing sheets, each one with a
different bid, which he gave to McDonald. Before the public ceremony, McDonald
secretly checked a competitor’s bid to communicate it to Griffiths and ask Griffiths
which bidding sheet to bid. Griffiths testified that he then conferred with Bennett to
submit a bid allowing BEI to win the subcontract within a dollar or two per ton of the
lowest bid.
During this time, Griffiths used 30% of the $13.50 per ton kickback as an
“entertainment fund” to give gifts to Sevenson employees. Griffiths testified that Bennett
approved these expenses. Griffiths also paid kickbacks, totaling roughly $1 million, to a
shell company, General Monitoring or GMEC, owned by McDonald, and testified that
Bennett was aware that these payments were part of the kickback scheme.
After his conviction, Bennett moved for acquittal on all counts under Federal Rule
of Civil Procedure 29 or for a new trial under Federal Rule of Civil Procedure 33. The
District Court denied these motions from the bench.
II.
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“We exercise plenary review over a district court's denial of a motion for judgment
of acquittal based on the sufficiency of the evidence.”7 “The verdict must be sustained if
‘any rational trier of fact could have found proof of guilt beyond a reasonable doubt
based on the available evidence.’”8 In making this determination, we consider the
evidence in the light most favorable to the government.9 Thus, “[t] he burden on a
defendant who raises a challenge to the sufficiency of the evidence is extremely high.”10
Bennett makes two arguments. First, he argues that the government failed to prove
its case as to both counts11 because it failed to prove that he knew of any material
falsehoods. Second, Bennett argues that, as to Count 2,12 the government failed to prove
that Bennett acted with specific intent to defraud the government.13
As to Bennett’s first argument, the government contends that Bennett made
material misrepresentations in the July 8, 2002 Phase II purchase order signed by
7
United States v. Berrios, 676 F.3d 118, 132 (3d Cir. 2012).
Id. (quoting United States v. Silveus, 542 F.3d 993, 1002 (3d Cir. 2008)). See also
United States v. Coleman, 811 F.2d 804, 807 (3d Cir. 1987) (“A verdict will be overruled
only if no reasonable juror could accept the evidence as sufficient to support the
conclusion of the defendant's guilt beyond a reasonable doubt.”)).
9
United States v. Lore, 430 F.3d 190, 204 (3d Cir. 2005).
10
United States v. Iglesias, 535 F.3d 150, 155 (3d Cir. 2008).
11
Bennett was convicted of (1) participating in a conspiracy in violation of 18 U.S.C. §
371 with the objective to provide kickbacks to a prime contractor to improperly obtain
favorable treatment in violation of 41 U.S.C. §§ 53-54 and to commit major fraud against
the EPA in violation of 18 U.S.C. § 1031 (kickback and fraud conspiracy) and (2)
committing major fraud against the United States in violation of 18 U.S.C. § 1031(a).
12
Count 2, the major fraud statute, makes it a crime to “knowingly execute[], or attempt[]
to execute, any scheme or artifice with the intent (1) to defraud the United States; or (2)
to obtain money or property by means of false or fraudulent pretenses, representations, or
promises” in connection with federal contracts worth $1,000,000 or more. 18 U.S.C. §
1031. The government must prove that this falsehood is material. Neder v. United States,
527 U.S. 1, 25 (1999) (mail, bank, and wire fraud statutes).
13
See Bennett’s Brief at 30-44 (discussing both arguments).
8
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Griffiths on behalf of BEI and the subsequent change orders. These orders represented
that BEI would work “in strict compliance with the principal contract documents.”14
These documents in turn contained agreements not to violate the Anti-Kickback Act.
Bennett argues that the government failed to prove at trial that he had seen these
principal contract documents or was aware of these representations. In response, the
government points to testimony by Army Corps witness Mari Shannon that contractors
are required to tell subcontractors like BEI the terms of the principal contract documents,
and testimony by Griffiths that “[w]e were given a booklet of representations and
certifications” that included an explanation of the Anti-Kickback Act.15 Furthermore, the
government points to Griffiths’ testimony that he knew he was not in strict compliance
with the prime contract and that he conferred with Bennett on the bid pricing. From this,
the government argues that the jury could have inferred that Bennett knew the
representation was false. This testimony was sufficient for the jury to conclude that
Bennett made a material misrepresentation.
Second, Bennett argues that the Court should enter a judgment of acquittal as to
Count 2 because the government failed to show that Bennett acted with specific intent to
defraud the government. He argues that the evidence showed that BEI’s Phase II bid
remained identical at $498.50 per ton before and after any alleged kickbacks were paid,
and thus he had no intent to harm the EPA. Thus, “[s]peculation that the absence of a
14
See JA-895.
SA-35 (“Q When you entered into contracts at Federal Creosote, were you provided
with a copy of the Anti-kickback Act? A Yes. Or relevant sections in it. We were given a
booklet of representations and certifications, and either this or parts of this was included
in it. But I do specifically remember this in there.”).
15
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kickback would have translated into a lower bid price is insufficient as a matter of law to
establish fraudulent intent, since a kickback may be paid out of a bidder’s own profit
rather than from the government’s pocket.”16 The government responds by pointing to
testimony by Griffiths and Tejpar that the cost of the kickback was added to overcharge
the EPA.17 The government explains that
BEI was able to add the $13.50 kickback without changing its overall bid price
because McDonald’s manipulations of the bidding process forced other
competitors to raise their new bids. For example, McDonald made the
contamination look as severe as possible to pressure rival bidders to bid higher.
Griffiths explained that McDonald’s manipulations were intended to get [the]
competition to raise their prices. The EPA was harmed because, had the kickback
not been added, BEI’s winning bid would have been $13.50 per ton lower.18
Thus, the District Court properly found that the jury was entitled to credit the
government’s evidence that the second bid included the cost of the kickback.
III.
Bennett contends that the District Court improperly calculated restitution. “We
exercise plenary review over the determination that restitution was lawful, and review the
amount awarded for clear error.”19 The District Court adopted the recommendation of the
presentence report as to restitution, which in turn had adopted the government’s
calculation of the EPA’s loss of $3,808,065.72. This reflects three separate losses: (1) a
Bennett’s Brief at 39.
Gov’t’s Brief at 35 (citing A-184 (testimony of Griffiths that the bid “included a 13.50
increase from our original pricing . . . of kickback”); SA-120 (testimony of Tejpar) (“A:
Rob was able to increase our price because of last look. So he was able to increase it by
$13.50, and he was going to share part of that extra increase with Sevenson and ourselves
and entertainment.”).
18
Gov’t Brief at 36 (internal citations and quotations removed).
19
Akande, 200 F.3d at 138 (citing United States v. Jacobs, 167 F.3d 792, 795 (3d Cir.
1999)).
16
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loss of $13.50 per ton, which reflected a kickback to the primary contractor on the Phase
II contract; (2) a loss of $80 per ton in inflated facility costs on the Phase II contract; and
(3) a loss of $101 per ton, reflecting the difference between the lowest bid and winning
bid that BEI fraudulently submitted to win the Phase III contract.
In his appeal, Bennett opposes this restitution calculation on substantive and
procedural grounds. He argues that the District Court committed procedural error by
imposing restitution without “explaining how the amount of . . . restitution imposed was
related to any loss caused by the conduct underlying the . . . offenses” for which Bennett
was found guilty.20 He further argues that these categories of restitution award are
substantively improper: As to the first category, Bennett argues that because BEI’s bid
did not change before and after the kickback, the kickback came out of BEI’s profits and
did not cause any loss to the EPA. As to the second category, Bennett argues that the
inflated facility cost conduct was not charged, and therefore cannot be included in the
restitution.21 Furthermore, he argues that it did not cause any loss to the EPA. As to the
third category, Bennett argues that again no loss was caused to the EPA, because BEI
submitted the lowest bid in the bidding process.
20
United States v. Furst, 918 F.2d 400, 410 (3d Cir. 1990). See also Akande, 200 F.3d at
143 (“Although judges normally may use any information they possess to enhance a
sentence, restitution is a special case, because the statutes limit restitution to the losses
caused by the offense of conviction. Accordingly, because we look only to the specific
conduct supporting the offense of conviction, the mere fact that the November events
may be factua[lly] connect[ed] to the later conspiracy does not make them legally
relevant.”) (internal citations and quotations omitted).
21
Bennett’s Brief at 85 (citing United States v. Munchak, 527 F. App’x 191, 197-98 (3d
Cir. 2013)).
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In imposing the restitution award at sentencing, the District Court appeared to
consider these arguments. The District Court explained that
[t]here was finally an argument as it relates to the restitution amount that’s being
sought and has been outlined by the Government as it relates to the Environmental
Protection Agency. As indicated, there's been nothing to contest what the number
is. The Government has provided significant documentation not only during the
course of its submissions relating to sentencing but also during the course of the
trial. There were numerous documents and there's extensive evidence as it related
to the amount of money that was in fact -- that the EPA in fact was required to pay
and would not have been required to pay.22
The District Court then imposed the full restitution included in the presentence report and
requested by the government.
Bennett is correct in stating that restitution can only be imposed based on conduct
that is the basis for the conviction23 and that, once the Defendant disputes a basis of the
restitution award included in the presentence report, the District Court must make
specific factual findings as to those disputed facts and whether it will rely on those
disputed facts.24 The District Court found that Bennett did not provide enough
information in his sentencing memorandum to actually dispute the basis of the restitution
award and thus imposed the full restitution award. Unfortunately, Bennett has not
provided us with his sentencing memorandum from which we could evaluate whether the
District Court committed clear error in imposing this restitution award, and this
memorandum is not available on the District Court’s docket. As such, we must affirm the
restitution award.
22
Sentencing Transcript at 60.
Akande, 200 F.3d at 138–39.
24
Furst, 918 F.2d at 406 (citing Fed. R. Crim. P. 32(c)(3)(D)).
23
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IV.
For the foregoing reasons, we will affirm.
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