UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-4106
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ROBERT E. GRAHAM,
Defendant - Appellant,
and
STATE OF WEST VIRGINIA,
Party-in-Interest.
No. 07-4332
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ROBERT E. GRAHAM,
Defendant - Appellant,
and
STATE OF WEST VIRGINIA,
Party-in-Interest.
Appeals from the United States District Court for the Southern
District of West Virginia, at Beckley. David A. Faber, Chief
District Judge. (5:06-cr-00025)
Argued: December 5, 2007 Decided: March 13, 2008
Before MICHAEL and GREGORY, Circuit Judges, and John Preston
BAILEY, United States District Judge for the Northern District of
West Virginia, sitting by designation.
Reversed by unpublished per curiam opinion.
ARGUED: Michael Warren Carey, CAREY, SCOTT & DOUGLAS, P.L.L.C.,
Charleston, West Virginia, for Appellant. Hunter P. Smith, Jr.,
Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Charleston, West Virginia, for Appellee. ON BRIEF: John
A. Kessler, CAREY, SCOTT & DOUGLAS, P.L.L.C., Charleston, West
Virginia, for Appellant. Charles T. Miller, United States
Attorney, Charleston, West Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
After a bench trial, the appellant, Robert E. Graham
(“Graham”) was convicted of stealing $31,129 from his employer, the
Council on Aging, Inc. (“COA”), an agency receiving federal funds,
in violation of 18 U.S.C. § 666(a)(1)(A).1 Graham appeals the
district court’s judgment, contending that (1) there is not
substantial evidence to support his conviction, (2) the district
court clearly erred in considering conduct for which Graham was
acquitted as “relevant conduct” for sentencing purposes, and (3)
the district court improperly ordered forfeiture. After a thorough
review of the evidence, we reverse Graham’s conviction.
1
(a) Whoever, if the circumstance described in subsection (b)
of this section exists--
(1) being an agent of an organization, or of a State, local, or
Indian tribal government, or any agency thereof--
(A) embezzles, steals, obtains by fraud, or otherwise without
authority knowingly converts to the use of any person other than
the rightful owner or intentionally misapplies, property that--
(I) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such
organization, government, or agency...
shall be fined under this title, imprisoned not more than 10 years,
or both.
(b) The circumstance referred to in subsection (a) of this
section is that the organization, government, or agency receives in
any one year period, benefits in excess in $10,000 under a Federal
program involving a grant, contract, subsidy, loan, guarantee,
insurance, or other form of Federal assistance.
3
I.
The facts underlying this dispute are undisputed. For over
two decades, Graham was the Executive Director of two nonprofit
organizations, COA and All Care Home and Community Services, Inc.,
(“All Care”). The organizations worked together to identify and
provide services reimbursed by state and federal programs,
including Medicaid, to qualified recipients. Both COA and All Care
shared the same Board of Directors (“the Board”). Prior to the
Board’s quarterly meetings, Graham would send each board member a
packet of documents that included an agenda for the meeting, the
minutes from the previous board meeting, check registers, program
reports and “Director’s Notes.” Graham wrote the “Director’s
Notes” and the minutes from each meeting.2
Until 2001, Graham did not have a written contract with either
COA or All Care. This changed in December 2001, when Graham
provided the Board with two essentially identical employment
contracts for himself, one for each agency (“twin contracts”). The
Board president signed both contracts. For purposes of this case,
the relevant provision in each of the twin contracts concerned
Graham’s sick leave:
SICK LEAVE/PERSONAL BUSINESS: From the date of
employment sometime around May 1975 till the termination
of employment, Employee shall be entitled to one day per
month of accumulating Sick Leave, beginning on the first
2
Occasionally, there was another person at the meeting who
would take minutes as well.
4
date of Employee’s employment. Sick leave may be
accumulated and carried over from year to year. Sick
leave benefits may be converted into cash compensation if
used for illnesses or upon the termination of this
contract.
(J.A. 955, 961.) In March 2002, Graham prepared an amended
contract between himself and COA that consolidated the twin
contracts into one. The Board president signed the consolidated
contract. In essence, the terms of the consolidated contract
provided Graham with the same cumulative benefits he received under
the twin contract framework. For example, the consolidated
contract combined Graham’s salaries and sick leave from the twin
contracts. The sick leave provision in the consolidated contract,
like the previous twin contracts, only allowed Graham to cash out
his sick leave under two circumstances: illness or termination.
(J.A. 977.)
In preparation for the January 27, 2003, Board meeting, Graham
sent out “Director’s Notes” in which he wrote, in part:
I am requesting to buy out some of my sick leave. It
shows in the books as an accrual. I can already but
[sic] out my vacation.
(J.A. 1001.) The minutes from that Board meeting stated that the
Board unanimously approved Graham’s request to “buy accrued leave.”
(J.A. 1003.) On the same day, Graham cashed out 1200 hours of
accrued sick leave which totaled $106,728 (gross) and $56,953.16
(net). (J.A. 1005-1110.)
5
Subsequently, Graham’s Director’s Notes for the next two board
meetings on March 27, 2003, and May 14, 2003, included the
following identical request to continue buying out his accrued
leave:
I am requesting permission to continuing [sic] buying out
my vacation/annual and sick leave. It shows in the books
as an accrual. I can already but [sic] out my vacation.
(J.A. 1012; 1019.) In the Director’s Notes for the May 14, 2003,
meeting, Graham also added the following line to his request:
“This is the same as the notice from the last Board meeting.”
(J.A. 1019.) The Board approved both requests. Unlike his
previous cash outs in January, Graham did not cash out accrued sick
leave immediately after either of these Board meetings. However,
on June 18, 2003, Graham filed two written requests to cash out a
total of 250 hours of accrued sick leave. (J.A. 1308.) Both
requests were approved by the Treasurer of the Board, Hazel Lusk
(Lusk). Subsequently, Lusk approved three more requests for Graham
to cash out additional accrued sick leave on the following dates:
July 29, 2003 (350 hours), January 14, 2004 (250 hours), February
10, 2004 (100 hours). (J.A. 1308.) The total amount of accrued
sick leave Graham cashed out in 2003 and 2004 was $191,221.81
(gross) and $107,788.56 (net). (J.A. 1308.)
Beginning in January 2003, federal authorities launched an
investigation into COA’s business operations. By March 2003, West
Virginia authorities commenced their own investigation into COA.
6
On March 10, 2004, while West Virginia authorities were in COA’s
office reviewing records, the Board called an emergency meeting
during which Graham’s consolidated contract was revoked although
the Board offered Graham continuing employment under revised terms.
During the meeting, the Board also ordered Graham to repay all the
sick leave he cashed out in 2003. The Board did not demand that
Graham pay back the sick leave Graham cashed out in 2004. On March
11, 2004, Graham repaid COA the net proceeds of the sick leave he
cashed out in 2003 and on March 26, 2004, he repaid COA the net
proceeds of the sick leave he cashed out in 2004.
On July 18, 2006, a federal grand jury returned a second
superceding 39 count indictment against Graham. After pleading not
guilty to all of the charges and waiving his right to a jury trial,
Graham’s bench trial commenced on July 24, 2006. On August 30,
2006, the district court found Graham guilty of Count 14 of the
Second Superceding Indictment, which charged Graham with stealing
$31,129 from COA in 2004 by cashing out his sick leave in violation
of his employment contract and 18 U.S.C. § 666. In addition, the
district court ordered Graham to forfeit $31,129 as proceeds
traceable to the 18 U.S.C. § 666 violation. The district court
acquitted Graham on the remaining 38 counts.3
3
It is worth noting that Count 13 mirrored Count 14, except
that it concerned Graham’s allegedly improper cash outs of accrued
sick leave in 2003. However, because the district court found that
Graham had only violated the consolidated contract by cashing out
his leave in June and July 2003, but not in January 2003, the
7
The Pre-Sentencing Report (PSR) concluded that Graham’s
offense level was 16. Included in that calculation was a +2
adjustment because Graham abused a position of trust that
“facilitated the commission or concealment” of his crime.4
U.S.S.G. § 3B1.3. The PSR stated that this provision was
applicable because the Board “rubber stamped” all of Graham’s
decisions (J.A. 1312) and Graham took advantage of the Board’s
trust in order to facilitate his criminal conduct. Since Graham
had no criminal history points, he was placed in Criminal History
Category I. Based on a total adjusted offense level of 16 and a
Criminal History Category of I, the advisory guideline sentence for
Graham equaled 21-27 months.
The district court adopted the PSR’s finding and sentenced
Graham to 24 months imprisonment, a three year term of supervised
release, and fined him $10,000. In addition, the district court
ordered Graham to forfeit $31,129. Graham timely appealed the
district court’s judgment.
district court found him not guilty as to that count.
4
Despite Graham’s objection to the application of a two point
enhancement for abuse of trust, the district court found that
because of the Board’s vulnerability and the fact that Graham
effectively controlled the Board, the two point adjustment was
proper. In addition, Graham objected to the loss calculation in
the PSR because it included payments in 2003 for which he was
acquitted. The district court denied Graham’s objection, finding
that since the payments Graham received in June and July 2003 were
obtained without Board approval, those incidents were properly
included as relevant conduct for purposes of sentencing.
8
II.
In determining whether sufficient evidence exists to support
a conviction, the appropriate inquiry is whether, taking the
evidence in the light most favorable to the Government, any
reasonable trier of fact could have found the defendant guilty
beyond a reasonable doubt. See e.g., U.S. v. Newsome, 322 F.3d
328, 333 (4th Cir. 2003) (“The standard governing our review is
whether there is substantial evidence, taking the view most
favorable to the Government, to support [the jury verdict] and we
have defined substantial evidence, in the context of a criminal
action, as that evidence which a reasonable finder of fact could
accept as adequate and sufficient to support a conclusion of a
defendant’s guilt beyond a reasonable doubt.” (internal citations
and quotation marks omitted.)) We now apply this standard to the
facts in this case.
In its memorandum order, the district court found Graham
guilty of Count 14 because:
. . . the conclusion is inescapable that Graham cashed in
the sick leave without the approval of his board, knowing
he needed board approval, thereby effectively stealing
the money or converting it to his own use. From the
evidence taken at trial it is clear that defendant, an
employee, took this money from COA without having any
board approval whatsoever. These transactions each
constituted major changes of the sort that required board
approval. The fact that Graham sought board approval for
the earlier cash outs of sick leave is compelling
evidence that he knew such approval was required. Graham
cavalierly disregarded the board and treated large
amounts of COA’s money as if it were his own, diverting
9
it to his personal use and to the detriment of those whom
COA and All-Care were created and funded to serve.
(J.A. 156.) The district court’s holding was motivated by the fact
that on three prior occasions Graham sought the Board’s approval to
cash out accrued sick leave. As a result, the district court
reasoned that Graham knew that he needed board approval for each
instance he cashed out accrued sick leave since the cash outs were
impermissible under the terms of the consolidated contract.
The Government argues that there is substantial evidence to
support the district court’s decision. The Government contends
that the evidence at trial demonstrates that Graham took advantage
of a Board that was comprised of elderly, disabled, and uneducated
men and women who rubber stamped all of his decisions. The
Government argues that Graham should have explicitly informed the
Board about how much sick leave he was actually going to cash out
and made certain that the Board understood that his request was
inconsistent with the terms of his contract.5
5
In support of its argument, the Government also cites to
evidence that the district court did not rely on, including the
fact that Graham used some of the sick leave cash out money to buy
things for his girlfriend. In addition, the Government contends
that cashing out accrued sick leave was inconsistent with the
written policy of COA and that Graham only reimbursed COA after the
media began publishing stories about Graham’s contract with COA.
While these facts may demonstrate that Graham is not eligible for
the priesthood, they are irrelevant so far as the district court’s
determination of guilt is concerned. As the district court
concluded:
The events leading to this indictment are improper and
outrageous and cannot be condoned by the court. Graham
10
In order to convict Graham under 18 U.S.C. § 666, the district
court had to find, beyond a reasonable doubt, that Graham knowingly
stole funds from COA. On this critical matter, we believe both the
district court and the Government reached the wrong conclusion.
Quite simply, Graham’s cash outs in June and July of 2003 and
January and February of 2004 were not contrary to the authority
given to him by the Board. The Board repeatedly authorized Graham
to buy out his accrued sick leave and did not place any
restrictions on the amount of accrued sick leave he could cash out
or the timing of these cash outs. As such, the timing and amount
of the accrued leave cash outs are clearly insufficient for
purposes of establishing Graham’s intent to steal funds from COA.
In addition, the Board’s actions during the March 2004
emergency meeting provide strong circumstantial evidence that it
did not believe Graham violated any Board directives or that he
attempted to bamboozle the Board in order to bilk COA out of
hundreds of thousands of dollars. While the Board did reduce
Graham’s salary and benefits, it did not ask for Graham’s
failed miserably to fulfill his duties as a public
servant, engaging in conduct that squandered public
resources and adopting a life-style that reflected
discredit upon COA and All-Care, their directors and
employees. Bad conduct in and of itself, however, does
not equal criminal conduct. To convict a defendant of a
crime, the Government must establish beyond a reasonable
doubt by competent evidence each and every element of
each and every crime charged.
(J.A. 912.)
11
resignation. In fact, Graham’s salary and benefits were not
reduced as a punitive measure, but rather at the behest of Graham
in order to quell the media maelstrom that had overwhelmed the
organization. (J.A. 1044.) As the Board stated in its summary of
the emergency meeting:
“[t]he Directors of the [COA] are very proud of the
success and growth of the [COA] and believe that Robert
E. Graham has worked diligently and on behalf of the
[COA] for over 25 years and has brought success to the
[COA] and regrets that the press has not emphasized such
accomplishments.”
(J.A. 1044.)
III.
In summary, the salient facts in the instant case, taken in
the light most favorable to the Government are as follows: Graham
received the Board’s permission to cash out an indeterminate amount
of his accrued sick leave. There was nothing in any of the Board’s
decisions that placed any limitations on when and how much accrued
sick leave Graham could cash out. According to COA’s independent
audit, the gross value of Graham’s accrued sick leave as of
September 30, 2002, was $241,167. (J.A. 1087.) The total gross
amount of sick leave Graham cashed out in 2003 and 2004 was
$191,221.81, an amount that he conceivably could have cashed out in
January 2003 without violating any of the Board’s decisions.
Based on these facts, a reasonable trier of fact could not
find, beyond a reasonable doubt, that Graham knowingly stole any
12
money from COA. Graham’s consolidated contract with COA entitled
him to cash out his accrued sick leave upon his termination or due
to illness; however, the Board’s decisions in January, March, and
May of 2003 resulted in a de facto amendment that overrode these
restrictions. In essence, the Board gave Graham the ability to
cash out his accrued sick leave early without any limitation as to
the amount of accrued sick leave he could cash out or a specific
time period when such cash outs had to occur.
In addition, the evidence in the record clearly rebuts any
accusation that Graham was trying to hide his cash outs in
June/July 2003 and January/February 2004 - Graham filled out the
proper leave forms to cash out his accrued sick leave on each
occasion and the Board’s treasurer approved the forms and signed
the checks. The record is replete with minutes, notes, checks, and
records of Graham’s transactions, all of which were open to review
by COA’s independent auditors and COA’s Fiscal Officer.6 Indeed,
the fact that Graham continued to cash out accrued sick leave after
January 2003, the point at which the federal investigation into COA
commenced, provides striking evidence that Graham did not knowingly
steal any money from COA.
While we recognize that the amount of money cashed out by
Graham is substantial, that issue is ultimately irrelevant because
6
In fact, at one point, COA’s Fiscal Officer questioned
Graham’s cash outs, and Graham accurately told her that the Board
had approved the cash outs.
13
Graham had properly accrued all of that sick leave money during his
tenure at COA and All Care. The pertinent question is whether the
Board authorized him to cash out his sick leave in June/July 2003
and January/February 2004. We answer this question in the
affirmative because on this record it is undisputed that the Board
repeatedly authorized Graham to cash out his accrued sick leave
without any limitations.
IV.
Based on the reasoning above, we reverse Graham’s conviction
and sentence and remand to the district court to enter a judgment
of not guilty as to Count 14 of the Second Superceding Indictment.7
REVERSED
7
Because we are reversing Graham’s conviction, it is
unnecessary to address Graham’s remaining contentions.
14