US v. Alan Butler

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 3:12-cr-00192-HEH-1 Copies to all parties and the district court/agency. [999388804].. [13-4417]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-4417

UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ALAN L. BUTLER,
Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.
Henry E. Hudson, District
Judge. (3:12-cr-00192-HEH-1)

Argued:

May 15, 2014

Decided:

July 3, 2014

Before GREGORY, AGEE, and KEENAN, Circuit Judges.

Affirmed by unpublished opinion.
Judge Keenan wrote
opinion, in which Judge Gregory and Judge Agee joined.

the

ARGUED: William H. Burgess, IV, KIRKLAND & ELLIS, LLP,
Washington, D.C., for Appellant. Jamie L. Mickelson, OFFICE OF
THE UNITED STATES ATTORNEY, Atlanta, Georgia, for Appellee. ON
BRIEF:
Dana
J.
Boente,
Acting
United
States
Attorney,
Alexandria, Virginia, Gurney Wingate Grant II, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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BARBARA MILANO KEENAN, Circuit Judge:
Alan L. Butler pleaded guilty to conspiracy to commit mail
fraud, in violation of 18 U.S.C. § 1349, based on his conduct of
awarding construction contracts in the name of his employer to
companies in which Butler had an ownership interest.

On appeal,

Butler argues that the district court overstated the loss to his
employer resulting from the fraud by failing to award a setoff
for

the

value

of

Butler’s

personal

labor.

Based

on

this

assigned error, Butler challenges the court’s application of a
14-level sentencing enhancement related to loss, as well as the
court’s forfeiture order in the amount of $864,914.61.
Upon our review, we conclude that the district court did
not err in calculating the loss amount on which the sentencing
enhancement and the forfeiture order were based, because any
labor

performed

by

Butler

during

legitimate value to his employer.

the

scheme

did

not

provide

Accordingly, we affirm the

district court’s judgment.

I.
From 2002 through 2011, Butler worked as the vice president
and director of construction for CH Construction, LLC (CHC), a
Virginia corporation that developed residential real estate in
Virginia and North Carolina.
was

responsible

for

In his position with CHC, Butler

managing

CHC’s
2

construction

projects,

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adhering

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to

established

subcontractors,

and

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budgets,

selecting

and

obtaining

overseeing

bids

from

subcontractors.

In 2004, Butler and his co-conspirator formed a business in
Virginia known as Valley Construction Corps (Valley).
Butler

formed

another

business

in

Virginia

Resources and Remediation, LLC (ACT).

In 2011,

known

as

ACT

Between 2004 and 2011,

Butler, on behalf of CHC, entered into contracts with Valley and
ACT

for

the

performance

of

construction-related work.
from

CHC

and

its

Valley and ACT.

owner,

exterior

stonework

and

other

During this time, Butler concealed
Roger

Glover,

Butler’s

ownership

of

Butler also concealed from CHC the fact that

Valley and ACT had hired other subcontractors to complete the
work for CHC.
Valley and

ACT

By charging CHC a higher price for the work than
paid

to

the

subcontractors

who

performed

the

work, Butler profited personally from these arrangements.
In

December

2012,

a

grand

jury

returned

a

one-count

indictment against Butler charging him with conspiracy to commit
fraud. 1

mail

The

indictment

1

also

included

a

forfeiture

The mail fraud statute, 18 U.S.C. § 1341, prohibits
conduct that, through use of the mail, entails a scheme to
defraud, or to obtain “money or property by means of false or
fraudulent pretenses, representations, or promises.”
We have
set forth the elements of mail fraud as “(1) the existence of a
scheme to defraud, and (2) the mailing of a letter, etc., for
the purposes of executing the scheme.”
United States v.
Vinyard, 266 F.3d 320, 326 (4th Cir. 2001) (citation omitted).

3

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allegation.
Butler’s
The
report

January

In

guilty

the

plea

probation

(PSR)

Pg: 4 of 12

2013,

and

entered

officer

calculated

a

who

district

court

judgment

of

conviction.

Butler’s

presentence

a

prepared

total

offense

level

of

accepted

20,

which

included a 14-level enhancement based on a loss to CHC in an
amount

exceeding

$800,000.

The

enhancement

was

applied

in

accordance with United States Sentencing Guidelines (U.S.S.G.)
§ 2B1.1(b)(1)(H),

which

governs

fraud

offenses

resulting

in

monetary losses to the victim in amounts between $400,000 and
$1,000,000.

As

a

result

of

this

enhancement,

the

probation

officer recommended an advisory Guidelines range of 33 to 41
months’ imprisonment.
Butler objected to the recommended enhancement and argued
that the asserted loss amount failed to include a credit for the
labor that he personally performed on behalf of Valley and ACT.
In response, the government contended that CHC’s pecuniary loss
was $864,914.61, which amount represented the difference between
CHC’s

payments

to

Valley

and

ACT

and

the

money

that

those

businesses paid to the subcontractors actually performing the
work.
At

a

testimony
government

sentencing
from

hearing,

several

presented

the

the

witnesses,
testimony

district
including
of

court

received

Butler.

Special

Agent

The
David

Hulser, a certified public accountant for the Federal Bureau of
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Investigation who participated in the investigation of the case.
During

this

investigation,

Hulser

reviewed

Butler’s

personal

bank statements and tax records, as well as the statements and
records of Valley and ACT.
After

examining

these

documents,

Hulser

determined

that

Valley and ACT received a total of more than $1.6 million from
CHC.

Hulser also calculated that Valley and ACT had expended a

total of about $775,000 for labor performed by subcontractors.
By subtracting these costs from CHC’s total payments to Valley
and ACT, Hulser concluded that Butler, through Valley and ACT,
had “overbilled” CHC by $864,914.61.
The government also presented the testimony of CHC’s owner,
Roger

Glover.

discovered,

CHC

He

testified

continued

that
to

do

after

Butler’s

business

fraud

directly

was
with

Environmental StoneWorks (ESW), one of the same subcontractors
hired by Valley to perform certain stonework.

Glover stated

that ESW performed the same work that CHC previously had hired
Valley to perform, at roughly one-third the amount that Valley
had charged to CHC.

A representative of ESW corroborated this

testimony, and also stated that ESW charged about the same price
for its work performed directly for CHC as the price it charged
to Valley.
Butler

testified

that,

generally,

the

prices

charged

by

Valley and ACT to CHC were equal to, or less than, the estimates
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submitted by other bidding companies.

He also stated that when

he formed Valley, he intended not only to profit personally, but
also to provide a benefit to CHC by providing quality work that
eventually would result in improved sales.
Butler also submitted as evidence a report prepared by a
construction consultant, who did not testify at the hearing.

In

the consultant’s report, which was based on information provided
by

Butler,

Valley’s

the

work

“unbilled”

consultant
for

labor

CHC,
and

analyzed

and

other

price

that

CHC

calculated
expenses

Valley’s projects for CHC.
overall

the

fair
the

market

value

relating

to

value

of

of

Butler’s

his

work

on

The consultant concluded that the
paid

Valley

over

eight

years

was

$55,243.89 below the fair market value of the work that was
performed on CHC’s behalf.
At the conclusion of the sentencing hearing, the district
court overruled Butler’s objection to the loss amount stated in
the

PSR,

and

applied

the

14-level

enhancement.

The

court

sentenced Butler to serve a term of 36 months’ imprisonment, and
ordered him to pay restitution in the amount of $864,914.61.
Several
government’s

days
motion

later,

the

seeking

court

an

order

held
of

a

hearing

forfeiture.

on

the

At

the

hearing, Butler argued that a portion of his labor and certain
out-of-pocket expenses qualified as “direct costs” that should
reduce

the

total

amount

attributable
6

to

the

fraud

by

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$339,246.57.

The

court

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declined

to

offset

this

requested

amount, but credited Butler for certain documented expenses that
the government already had factored into its loss and forfeiture
calculations.
the

amount

The court entered a final order of forfeiture in
of

$864,914.61,

which

amount

the

court

found

represented the “net proceeds” fraudulently obtained by Butler.
Butler timely filed this appeal.

II.
On appeal, Butler asserts that the court erred in applying
the

14-level

sentencing

enhancement,

and

in

forfeiture order in the amount of $864,914.61. 2
dispute

that

the

district

court’s

entering

the

Butler does not

calculations

of

loss

and

forfeiture amounts accurately represented the difference between

2

In his brief, Butler also argues that the court’s order of
restitution was based on an erroneous loss calculation.
However, Butler’s argument lacks merit because it fails to
address the statutes governing restitution in this case, which
require a court to order that a defendant “make restitution to
the victim of the offense” in the “full amount” of the victim’s
losses.
18 U.S.C. §§ 3663A(a)(1), 3664(f)(1)(A).
Unlike the
Guidelines and the forfeiture statute relied on by Butler, these
restitution statutes do not contain a particular provision
allowing a court to award a setoff in calculating the amount of
restitution owed.
Nevertheless, to the extent that Butler is
challenging the court’s restitution order, we conclude for the
reasons stated more fully in this opinion that the district
court did not abuse its discretion in awarding restitution in
the amount of $864,914.61.
See United States v. Llamas, 599
F.3d 381, 387 (4th Cir. 2010).

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CHC’s

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payments

to

subcontractors.

Valley

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and

Instead,

ACT

Butler

and

their

contends

that

payments
his

to

personal

labor provided legitimate value to CHC warranting a setoff in
both the calculated loss amount and the forfeiture amount.

We

disagree with Butler’s argument.
Initially, we observe that Butler relies on two distinct
setoff provisions described below, one relating to a sentencing
enhancement

involving

forfeiture.

Nonetheless, Butler’s argument presents the single

analytical

question

loss

amount

whether

his

and

one

alleged

applicable

“unbilled”

to

labor

provided legitimate value to CHC, thereby requiring a reduction
in the court’s calculation of loss and forfeiture amounts.
We review for clear error the district court’s factual
findings

relating

to

these

calculations.

United

States

v.

Vinyard, 266 F.3d 320, 332 (4th Cir. 2001) (reviewing district
court’s

loss

determination

under

the

Guidelines

for

clear

error); United States v. Oregon, 671 F.3d 484, 490 (4th Cir.
2012)

(reviewing,

in

criminal

forfeiture

findings of fact for clear error).
district

court’s

legal

a

court’s

We examine de novo the

interpretation

Guidelines and the forfeiture statute.

context,

of

the

Sentencing

See United States v.

Steffen, 741 F.3d 411, 414 (4th Cir. 2013); Oregon, 671 F.3d at
490.

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When calculating a loss amount for purposes of a sentencing
enhancement, a district court is required to make a “reasonable
estimate” of the loss amount sustained by the fraud victim based
on the evidence presented.

U.S.S.G. § 2B1.1 cmt. n.3 (C).

In

accordance with this provision, the court’s estimate of loss
amount must include a reduction for the value of any property or
collateral

returned

to

rendered to the victim.

the

victim,

or

the

value

of

services

U.S.S.G. § 2B1.1 cmt. n.3 (E)(i).

In determining a forfeiture amount, a district court first
must

find

that

there

is

a

sufficient

forfeiture calculation and the crime.

nexus

between

the

United States v. Martin,

662 F.3d 301, 307 (4th Cir. 2011) (citing Fed. R. Crim. P.
32.2(b)(1)(A)).
subject

to

Under

forfeiture

18

U.S.C.

when

§ 981(a)(1)(C),

the

property

is

proceeds traceable” to the criminal offense.
involv[es]

.

.

.

lawful

services”

that

are

property

“derived

is

from

When a “case[]
“provided

in

an

illegal manner,” proceeds subject to forfeiture should be offset
by

the

“direct

services,”

costs

thereby

incurred

yielding

in

“net

providing
proceeds.”

the

goods
18

or

U.S.C.

§ 981(a)(2)(B).
In the present case, the district court engaged in the same
analysis for calculating both the loss amount and the forfeiture
amount.

That calculation was based on the total amount that CHC

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paid to Valley and ACT, minus the cost of the legitimate work
performed by their subcontractors.
Although the district court assumed, without deciding, that
Butler performed the labor he claimed, the court declined to
allow a further reduction for that labor.

The court held that

Butler’s labor was part of the fraud scheme and, therefore, did
not represent “legitimate” value received by CHC.

We agree with

the court’s conclusion.
The

essential

components

of

Butler’s

seven-year

fraud

scheme during his employment with CHC were his acts concealing
his ownership of Valley and ACT, and his conduct concealing his
involvement

with

the

contracts

awarded

to

those

companies.

Butler admitted that he took “significant steps” to hide from
CHC

and

Glover

his

ownership

interest

in

Valley

and

ACT,

including his action of obtaining false signatures on contracts
that his companies executed with CHC.

Without concealing his

active participation in Valley and ACT, Butler could not have
executed the fraud scheme.
As the district court recognized, the work performed by the
third party subcontractors at the direction of Valley and ACT
unquestionably

provided

legitimate

value

subcontractors

performed

construction

work

to
at

CHC.
market

Those
value

without any knowledge of, or involvement in, Butler’s scheme.
In contrast, all the work that Butler performed was done with
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purpose

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of

increasing

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the

benefit

he

received

from

performance of the fraudulent contracts.
Although
performance
consider
purpose
Butler

of

the
in

Butler’s

“unbilled”

services

value

of

furthering

performed

this

that
that

labor

were
labor

Butler’s
labor

not

unlawful
within

criminal

to

did

per

the

involve
se,

we

context

enterprise.

facilitate

the
must

of

its

Because

completion

of

the

fraudulent contracts, and to perpetuate a scheme that required
concealment

of

his

interest

in

Valley

and

ACT,

his

labor

necessarily constituted “unlawful services” and did not provide
CHC any legitimate value. 3
Under these circumstances, Butler was not entitled to a
credit

for

any

value

of

his

labor,

component of the fraud scheme.

which

was

an

essential

See generally United States v.

Hartstein, 500 F.3d 790, 800 (8th Cir. 2007) (sentencing court
may refuse to credit defendant’s repayments when they relate
solely to the illegal purpose of continuing the scheme); United
States v. Ciccone, 219 F.3d 1078, 1087 (9th Cir. 2000) (court
3

The district court found on other grounds that any labor
performed by Butler did not provide legitimate value to CHC.
The court framed its analysis, in part, on its finding that
Butler’s employment with CHC required him to perform labor
relating to Valley and ACT’s subcontracts.
However, we are
“entitled to affirm on any ground appearing in the record,
including theories not relied upon or rejected by the district
court.”
United States v. McHan, 386 F.3d 620, 623 (4th Cir.
2004) (citation and internal quotation marks omitted).

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need

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not

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credit

fraudulent

a

scheme

defendant
to

Pg: 12 of 12

for

services

continue).

Thus,

that
the

permitted
district

the

court

properly refused Butler’s request that effectively would have
rewarded him further for his criminal conduct.

We therefore

hold that the district court did not err in denying Butler’s
claim for a setoff from the loss amount and a reduction in the
award of forfeiture, based on the “fair market value” of any
services that he rendered.

Accordingly, the court likewise did

not err by applying the sentencing enhancement and in entering
an order of forfeiture in the amount of $864,914.61. 4

III.
For

these

reasons,

we

affirm

Butler’s

sentence

and

the

district court’s forfeiture judgment.
AFFIRMED

4

In his brief, Butler challenges the district court’s
authority to enter a forfeiture money judgment in a criminal
case.
However, before oral argument in the present case, we
issued our decision in United States v. Blackman, 746 F.3d 137,
144 (4th Cir. 2014), in which we concluded that forfeiture money
judgments in criminal cases are not only permissible but are
required when the defendant has spent or divested himself (to
the
exclusion
of
the
victim)
of
the
gains
at
issue.
Accordingly, as later acknowledged by Butler during oral
argument, Butler’s contention is foreclosed by our decision in
Blackman.

12