Vacated by Supreme Court, February 23, 2009
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 07-4103
JOHN ALVIS JACKSON, JR.,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 07-4094
LARRY ANDREW CAREY,
Defendant-Appellant.
Appeals from the United States District Court
for the Western District of Virginia, at Lynchburg.
Norman K. Moon, District Judge.
(6:04-cr-70118)
Argued: January 31, 2008
Decided: May 1, 2008
Before WILLIAMS, Chief Judge, and MOTZ and
KING, Circuit Judges.
Affirmed by published opinion. Judge King wrote the opinion, in
which Chief Judge Williams and Judge Motz joined.
2 UNITED STATES v. JACKSON
COUNSEL
ARGUED: Melissa Windham Friedman, ANDERSON & FRIED-
MAN, Roanoke, Virginia; Joseph Abraham Sanzone, SANZONE &
BAKER, P.C., Lynchburg, Virginia, for Appellants. Thomas Ernest
Booth, UNITED STATES DEPARTMENT OF JUSTICE, Washing-
ton, D.C., for Appellee. ON BRIEF: Anthony F. Anderson, ANDER-
SON & FRIEDMAN, Roanoke, Virginia, for Appellant John Alvis
Jackson. John L. Brownlee, United States Attorney, Jennie M. Waer-
ing, Assistant United States Attorney, OFFICE OF THE UNITED
STATES ATTORNEY, Roanoke, Virginia; Amanda L. Riedel,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellee.
OPINION
KING, Circuit Judge:
John Alvis Jackson, Jr. and Larry Andrew Carey (together, the
"Defendants"), were prosecuted in the Western District of Virginia on
multiple fraud and theft offenses involving a loss of more than $15
million. The Defendants were each convicted by a jury in early 2006
of the following offenses:
• two counts of bank fraud, in contravention of 18 U.S.C.
§ 1344 (the "bank fraud offenses");
• five counts of wire fraud, in violation of 18 U.S.C.
§ 1343 (the "wire fraud offenses");
• a single count of making false statements in documents
required by the Employee Retirement Income Security
Act of 1974 ("ERISA"), in contravention of 18 U.S.C.
§ 1027 (the "ERISA false statement offense");
• two counts of theft from an ERISA-covered pension
plan, in violation of 18 U.S.C. § 664 (the "ERISA theft
offenses"); and,
UNITED STATES v. JACKSON 3
• a single count of theft from a health care benefit pro-
gram, in contravention of 18 U.S.C. § 669 (the "health
care program theft offense").
Jackson was also convicted of conspiracy to commit various federal
offenses, in violation of 18 U.S.C. § 371 (the "conspiracy offense").
In late 2006, Jackson was sentenced to 108 months in prison and
Carey was sentenced to 87 months. These consolidated appeals
ensued.
On appeal, the Defendants present multiple contentions of error.
First, they challenge their convictions on the ERISA theft offenses,
raising the primary issue in this appeal: whether, pursuant to § 664 of
Title 18, unpaid employer ERISA pension plan contributions consti-
tute "assets" of the plan. Second, the Defendants contest the suffi-
ciency of the evidence supporting certain of their convictions. Finally,
they challenge their sentences on several grounds. As explained
below, we reject their contentions and affirm.
I.
A.
On September 15, 2005, a grand jury in the Western District of
Virginia returned an indictment against the Defendants, charging
them with, inter alia, the bank fraud offenses (Counts One and Two),
the wire fraud offenses (Counts Three through Seven), the ERISA
false statement offense (Count Ten), the ERISA theft offenses
(Counts Eleven and Twelve), the health care program theft offense
(Count Thirteen), and the conspiracy offense (Count Fourteen).1 The
1
The indictment alleged two other offenses — bank fraud, in violation
of 18 U.S.C. § 1344 (Count Eight), and money laundering, in violation
of 18 U.S.C. § 1956(a)(1)(B)(i) (Count Nine) — and made a forfeiture
allegation pursuant to 18 U.S.C. §§ 981(a)(1)(C), 982(a)(2) and (7)
(Count Fifteen). Jackson and a third defendant, his daughter, were
charged in Counts Eight and Nine. Jackson’s daughter was never tried
and the charges against her were dismissed. The prosecution dismissed
Counts Eight and Nine against Jackson. Count Fifteen, the forfeiture alle-
gation, was also dismissed.
4 UNITED STATES v. JACKSON
Defendants pleaded not guilty and were tried before a jury over an
eleven-day period in February and March 2006.
The prosecution’s trial evidence consisted primarily of extensive
business records and the testimony of several fact and expert wit-
nesses. Jackson testified on his own behalf, denied involvement in
any criminal activity, and presented six witnesses in support of his
defense. Carey presented expert testimony in his defense, but did not
testify. The trial evidence is summarized below.2
1.
The Burruss Company, a wood products business involved in the
manufacturing of flooring for tractor-trailers and residential homes,
was headquartered in Galax, Virginia, with offices in Lynchburg, Vir-
ginia, and manufacturing plants in Virginia, Tennessee, and Ken-
tucky. Jackson served as President and Chief Executive Officer of
Burruss from 1989 until October 2000. Carey began working for Bur-
russ in 1976 and eventually became its Chief Financial Officer, a
position he held until October 2000.
In 1991, investor Grant Minor Wilson and two others purchased
Burruss. Wilson served as one of Burruss’s directors from 1991
through 1994. In 1995, Wilson created Burruss Holding Company
and exchanged his Burruss stock for the ownership of Burruss Hold-
ing (the "1995 refinance"). Burruss and Burruss Holding then retired
the balance of Burruss’s stock for approximately $14 million pro-
cured by loan from Fleet Capital, and issued a promissory note for
$10 million to buy out the other Burruss shareholders. Burruss, as a
result, became a wholly owned subsidiary of Burruss Holding. Wil-
son, by controlling Burruss Holding, became its primary representa-
tive and dealt directly with Jackson, Burruss’s President and CEO,
and Carey, its CFO.3
2
The facts spelled out herein are drawn from the trial record. We recite
the evidence in the light most favorable to the prosecution, as the prevail-
ing party at trial. See United States v. Bursey, 416 F.3d 301, 304 n.1 (4th
Cir. 2005).
3
Burruss Holding sold part of its shares to other investors, reducing
Wilson’s direct ownership to about 45%. The shares of the other Burruss
Holding investors were held in voting trusts, however, and Wilson had
the right to vote those shares for ten years.
UNITED STATES v. JACKSON 5
The 1995 refinance resulted in a loan agreement that Burruss nego-
tiated with Fleet, dated April 7, 1995. In his newly acquired capacity,
Wilson discussed the Fleet loan agreement extensively with Jackson
and Carey. The loan agreement was asset-based, and Burruss collater-
alized the Fleet loan with its fixed-assets and working-capital. The
fixed-assets portion of the Fleet loan was secured by Burruss’s real
estate, machinery, and equipment, and was initially for $6 million.
Between 1995 and 2000, the Fleet loan agreement was amended mul-
tiple times to increase Burruss’s borrowing capacity under the fixed-
assets portion of the loan. The balance of the fixed-assets portion of
the loan, as of September 28, 2000, reached over $10 million. The
second aspect of the Fleet loan related to Burruss’s working-capital,
and was secured by its accounts receivable and inventory. The
working-capital portion comprised the "lion’s share" of the loan, with
the amount thereof varying from day-to-day. As of September 28,
2000, the principal of the working-capital part of the Fleet loan was
over $25 million, and at other times it exceeded $31 million.
The terms of the Fleet loan agreement required that all of Burruss’s
assets be pledged as collateral. Consequently, any funds received by
Burruss from selling its assets were to be paid to Fleet. Under the loan
agreement, Burruss was entitled to sell only $25,000 worth of equip-
ment annually without Fleet’s approval. In addition to pledging Bur-
russ’s assets as collateral for the Fleet loan, a "support agreement"
required its officers to operate and maintain Burruss in a manner that
would properly support the Fleet loan, and to promptly inform Fleet
of any fraud, conversion, or misapplication of Burruss’s assets, or any
breach of the loan agreement. Wilson, Jackson, and Carey executed
support agreements with respect to the Fleet loan.
2.
By 1996, Burruss began having problems paying its vendors in a
timely fashion and was unable to maintain its inventory and raw
materials. Several of Burruss’s small vendors needed to be paid in a
shorter time frame than the business could accommodate, and thus
declined to sell supplies to it. Jackson discussed with Wilson the cre-
ation of an entity to purchase timber from small vendors and resell it
to Burruss with an industry-standard markup, enabling Burruss to
accumulate and maintain the inventory it needed. Soon thereafter,
6 UNITED STATES v. JACKSON
Jackson and his wife, along with Carey, formed a separate business
called Virginia Wood Products ("VWP"). VWP served as a broker to
secure timber for Burruss and provided it with sixty- to ninety-day
payment terms. Burruss was then able to secure raw materials (pri-
marily timber) through VWP from vendors who would no longer sell
directly to Burruss.
The books and records of Burruss, however, revealed that many of
the small vendors selling to VWP were also continuing to sell sup-
plies to Burruss. Although VWP had no storage facilities and did not
physically handle the timber it purchased for delivery to Burruss —
and even though VWP’s work was actually performed by Burruss
employees — VWP marked-up the price of such timber by 5% to 8%
before reselling it to Burruss. VWP did not typically pay its vendors
any more expeditiously than Burruss did.
In addition to its inventory issues, Burruss had additional difficul-
ties in 1996. One of its most profitable facilities was largely destroyed
by fire, severely impacting Burruss’s profits. In addition, a Canadian
company entered the tractor-trailer flooring business, competing with
Burruss and severely reducing its most profitable component. Burruss
recovered from those difficulties, however, and eventually became an
even larger producer of residential flooring.
In 1998, Jackson asked Wilson for a salary increase and a bonus,
explaining that he had not received either in some time. In response,
Wilson raised Jackson’s salary to $200,000 per year, plus a $50,000
yearly bonus. Wilson agreed that Jackson could draw his bonuses
from a Burruss Holding account maintained at Wachovia Bank in
Lynchburg (the "secret Wachovia account"), in order to conceal pay-
ment of the bonuses from other Burruss personnel. The secret
Wachovia account was not referenced or listed in any of Burruss’s
records, and was thus concealed from Fleet.
3.
Between 1995 and 1999, the Fleet loan agreement was amended at
least eight times to increase Burruss’s borrowing limits. Under the
working-capital portion of the loan agreement, Burruss had a borrow-
ing base of 85% against its eligible accounts receivable, 70% against
UNITED STATES v. JACKSON 7
its raw materials, and 65% against its finished goods. In order to
obtain an advance under the loan agreement, Burruss was obligated
to submit a Borrowing Base Certificate ("BBC") to Fleet, on which
it reported the current status of its inventory and eligible accounts receiv-
able.4 Carey was primarily responsible for preparing the BBCs, and,
in doing so, compiled a list of Burruss’s inventory and eligible
accounts receivable — sometimes from inventory reports and some-
times by fabricating them. A Carey subordinate, Donna Elliott —
Burruss’s office manager and corporate secretary in Galax — actually
completed the BBCs and transmitted them by fax to Fleet in North
Carolina. In response, Fleet wired the advanced funds to a Burruss
account at Wachovia in Lynchburg.5
4.
As Burruss financially deteriorated throughout 1998, Jackson and
Carey began inflating the company’s assets on the BBCs they used to
obtain advances under the Fleet loan. BBCs were inflated in several
ways: (1) by falsely creating inventory from a closed plant; (2) by cre-
ating false invoices for goods that had not been sold; (3) by falsely
overvaluing inventory; and (4) by altering the original dates of
accounts receivable. In carrying out this asset inflation scheme, Jack-
son repeatedly instructed Carey to mischaracterize raw lumber as pur-
chased goods, thereby inflating the BBCs. Jackson also suggested to
Carey that such raw lumber be characterized as finished product, thus
increasing Burruss’s borrowing power. At Carey’s direction, Elliott
faxed false inventory reports and inflated BBCs to Fleet on four occa-
sions in September and October of 2000.6
4
"Inventory," for purposes of the BBCs, meant all of Burruss’s raw
materials and finished goods. "Eligible accounts receivable" meant all of
Burruss’s accounts receivable excluding invoices more than sixty days
past due or ninety days beyond an original date.
5
The Burruss account at Wachovia Bank in Lynchburg was used as
Burruss’s primary operating account. It is separate and distinct from the
secret Wachovia account maintained by Burruss Holding.
6
The false inventory reports and inflated BBCs constitute the underpin-
nings of the wire fraud offenses (Counts Three through Seven).
8 UNITED STATES v. JACKSON
In 1999 and 2000, Jackson sold nine pieces of Burruss’s equip-
ment, valued at a total of approximately $260,000, without notifying
Fleet as required by the loan agreement. Although these assets were
owned by Burruss and pledged to Fleet, the proceeds from the sales
were deposited into the Burruss Holding secret Wachovia account.
Carey largely used the secret Wachovia account for deposits of insur-
ance receipts, tax refunds, and other funds representing assets of Bur-
russ that had been pledged to Fleet. Neither Jackson, Carey, nor any
other Burruss representative notified Fleet that its collateral had been
sold, or that funds representing collateral under the Fleet loan agree-
ment had been deposited in the secret Wachovia account. Jackson and
Carey paid themselves from the secret Wachovia account the sums of
approximately $514,000 and $230,000, respectively, between May
1998 and February 2000. Jackson also directed Carey to pay $68,000
to VWP from the secret Wachovia account, without any supporting
invoices. During that same period, VWP was used to distribute sub-
stantial sums of money from Burruss to Jackson and Carey person-
ally. Between 1997 and 2000, VWP paid Jackson over $473,000, and
Carey over $530,000.
5.
During the relevant period, Burruss maintained three separate
ERISA plans, for both pension and health purposes, that covered most
of its 1200 to 1400 employees. First, Burruss maintained a pension
plan for its non-union salaried employees (the "Company Plan"). Sec-
ond, it maintained a pension plan for its unionized employees (the
"Union Plan").7 Third, Burruss established and utilized a health care
benefit program for its employees (the "Health Plan"). Each of these
ERISA plans was used by the Defendants as a vehicle for carrying out
offenses underlying these appeals. The relevant details of the three
ERISA plans and their relationships to the various offenses are
described further below.
7
The Union Plan was limited to unionized employees working at Bur-
russ’s plant in Alcoa, Tennessee. The contributions to that Plan were
substantially less than those made to the Company Plan.
UNITED STATES v. JACKSON 9
a.
Under the Company Plan, an account was maintained for each eli-
gible participant, and the funds and moneys in each participant’s
account resulted from employer contributions made by Burruss. Bur-
russ was obligated to contribute 3% of the aggregate annual compen-
sation of all eligible participants to the Company Plan. The Company
Plan obligated Burruss to provide each plan participant with an annual
account statement, as of the last day of the calendar year. Pursuant to
an "Adoption Agreement" of 1994, the Company Plan required Bur-
russ to allocate and credit the annual employer contributions to the
proper participant accounts.8
The Union Plan required Burruss to establish a bookkeeping
account for each eligible unionized employee, to pay into each
account the participant’s share of Burruss’s annual Plan contributions,
and to prepare annual participant statements after making the proper
allocations for each Plan Year. The Union Plan defined the "valuation
date" as the "last day of the Plan Year," and gave each participant a
vested and nonforfeited interest in his plan account. J.A. 2872-74.9
The Adoption Agreement defined a Plan Year as twelve consecutive
months ending December 31st, and it required Burruss to contribute
fifteen cents to the account of each plan participant for each hour of
service.
Burruss was designated as the Plan Administrator for the Company
Plan and Carey served as Assistant to the Plan Administrator. Carey
was designated as Plan Administrator for the Union Plan. Jackson and
Carey both performed administrative duties for each of the Plans.
Accordingly, Jackson signed the bargaining agreement with the
union; and both Carey and Jackson signed the Plan contribution
checks. The Trustee for both Plans was Crestar Bank, which was later
renamed SunTrust Bank. Each Plan Administrator possessed the "pri-
mary authority for filing the various reports, forms and returns with
8
The Company Plan and the Union Plan have separate Adoption
Agreements, which establish the Plans and define the terms and condi-
tions thereof.
9
Citations herein to "J.A. ___" refer to the contents of the Joint Appen-
dix filed by the parties in this appeal.
10 UNITED STATES v. JACKSON
the Department of Labor and the Internal Revenue Service." J.A.
2788. For example, Carey, on behalf of the Company Plan, filed a
Form 5500 Annual Return/Report of Employee Benefit Plan for Plan
Year 1997 with the Department of Labor.
As of December 31, 1998, Burruss owed approximately $322,000
to the Company Plan for Plan Year 1998. Pursuant to IRS regulations,
Burruss was entitled to defer its 1998 contribution until its federal
income tax return was due on March 15, 1999, or, if it obtained a fil-
ing extension, until September 15, 1999. On October 15, 1999, Bur-
russ filed its 1998 Form 5500 for the Company Plan with the
Department of Labor, signed by Jackson. On the Form 5500, Jackson
stated that Burruss owed $322,169 to the Company Plan and that it
had made the Plan contribution in that amount. The Form’s question
15(c) required that the sum of any funding deficiency be reported, and
Jackson left the question blank. As of October 15, 1999, however,
Burruss had made no contributions to the Company Plan for Plan
Year 1998.
In early 2000, Frank Dishman, a pension account manager with
Crestar Bank, met with Jackson and Carey concerning Burruss’s
ERISA plan obligations. According to Dishman, Jackson and Carey
believed that "they did not have to make these [contributions], that
they had discontinued making contributions to the plan." J.A. 1527-
29. Dishman advised them that Burruss could cease making its Plan
contributions only by terminating the Plans according to law. Dish-
man also advised the Defendants that Burruss had not made its 1998
Company Plan contribution. In response, Carey falsely asserted that
he had mailed the 1998 contributions for both Plans to Crestar in
December 1999. Dishman, however, advised them that Crestar had
not received any such payments.
Carey thereafter directed Elliott to falsely record, on Burruss’s gen-
eral ledger of March 29, 2000, that Burruss had sent a check to Cre-
star Bank on December 31, 1999, for the 1998 Company and Union
Plan contributions.10 On April 14, 2000, Dishman again advised
10
Contributions for the Company and Union Plans were overdue in
early 2000 and Burruss assertedly combined its annual contributions into
one check.
UNITED STATES v. JACKSON 11
Carey by letter that Crestar had not received the 1998 Company Plan
contribution. On April 18, 2000, however, the Trustee received a Bur-
russ check dated December 20, 1999, signed by Jackson and Carey,
for the 1998 Company and Union Plan contributions. When Dish-
man’s successor from SunTrust Bank, Sybill Wolff, asked Carey
about the late contributions, Carey asserted that he had given the
check to Dishman earlier, who had probably lost it.
Burruss was obligated, for Plan Year 1999, to contribute over
$324,000 to its Company and Union Plans. In 2000, Jackson and
Carey separately observed in the company records that the 1999 con-
tributions to the Plans were due by September 15, 2000, and Jackson
mentioned the possibility of terminating the Company Plan. Wolff
met with Carey in mid-August 2000 and reminded him that the 1999
contributions to the Plans were due by September 15. As that date
approached, Wolff repeatedly called Carey and advised him to make
the 1999 contributions. Although Carey assured her that Burruss
would make those contributions, it never did. Wolff thereafter called
Carey several times concerning the missed payments. Carey avoided
most of those calls. When he did respond, he simply asserted that a
mistake must have been made. Wolff also called Jackson, who
directed her to speak to Carey about the problem. On October 18,
2000, Wolff advised Carey by letter that Burruss had not made its
1999 contributions to the Company and Union Plans, and that Burruss
could be penalized for not making them.
In early September 2000, SunTrust Bank sent Burruss the 1999
individual account statements for the participants of both Plans. Each
statement reflected a participant’s account balance for the Plan Year
ending December 31, 1999, reflecting Burruss’s contribution for that
Plan Year. SunTrust later advised the participants of both Plans that,
although it had mistakenly credited their accounts with accrued bene-
fits for the 1999 Plan Year, an "earnings reversal" had been made
because Burruss "failed to submit the required contribution for the
1999 Plan Year." J.A. 722-30. SunTrust also informed the participants
that "[s]ince the statement you received last year included an accrual
for that contribution, an adjustment has been made on the enclosed
statement to reflect the fact that no contribution was received." Id.
12 UNITED STATES v. JACKSON
b.
As mentioned above, Burruss also maintained an ERISA Health
Plan for its employees, and contracted with the Piedmont Community
Health Plan ("PCHP") to process health care claims. Jackson signed
the PCHP contract on behalf of Burruss, and Carey administered the
Health Plan in conjunction with Jacqueline Mosby, PCHP’s control-
ler. In order to finance the Plan, Burruss made weekly withholdings
from its employees’ earnings for contributions to the Health Plan.
In 2000, Burruss began paying PCHP only part of its employee
withholdings for the Health Plan, resulting in a $698,000 deficiency
by June of that year. On August 1, 2000, Burruss failed to pay PCHP
more than $109,000, even though those moneys and funds had been
withheld from its employees’ earnings for health care contributions.
By early October 2000, PCHP had ceased paying health care claims
under the Health Plan, resulting in substantial unpaid medical
expenses for the covered Burruss employees.11
6.
In June of 2000, Jackson and Carey hired Ray Equi to oversee Bur-
russ’s reporting to Fleet on the BBCs. Equi promptly discovered that
Burruss’s inventory and accounts receivable had been overstated on
the BBCs and, in August 2000, he prepared and directed memoranda
to that effect to both Jackson and Carey. Equi also refused to sign any
inflated BBCs. On August 17, 2000, Equi advised Jackson that Bur-
russ’s inventory and accounts receivable were being overstated, that
Burruss was close to its lending limits on the Fleet loan, and that
much of its inventory and accounts receivable were not loan-eligible.
In August 2000, Carey fired Equi, who later served as a key witness
for the prosecution.12
11
As a result of PCHP’s failure to pay health care claims for Burruss’s
employees, the affected employees became personally liable for their
medical expenses. Ironically, Jackson was forced to pay over $36,000 for
his own heart surgery in October 2000.
12
Other important witnesses for the prosecution included Grant Wil-
son, who controlled Burruss Holding; Donna Elliott, the corporate secre-
tary; and Frank Dishman, of Crestar (SunTrust), the Trustee of the
Company and Union Plans.
UNITED STATES v. JACKSON 13
On October 18, 2000, Wilson and Carey flew to Atlanta for a meet-
ing with Fleet. During the trip, Carey advised Wilson that Burruss
was suffering from inventory shortages and, after the meeting, Wilson
travelled to Galax to examine Burruss’s finances. After examining
Burruss’s records, Wilson ascertained that it had overstated its assets
on the BBCs submitted to Fleet by more than $11 million, and that
Burruss was in serious financial trouble.
On October 24, 2000, Wilson hired Kevin O’Halloran, a crisis
manager from Newbridge Management LLC, to operate Burruss.
O’Halloran and Ralph Brotherton, a CPA, then conducted an exten-
sive review of Burruss’s records. They interviewed Carey repeatedly,
seeking to ascertain Burruss’s true financial condition. Carey admit-
ted that he had intentionally inflated the BBCs submitted to Fleet in
order to obtain working capital for Burruss and to make the business
more attractive to potential buyers. Carey also acknowledged that he
had deposited Burruss’s insurance receipts, tax refunds, and other
funds into the secret Wachovia account. Carey asserted that he had
not made the 1998 and 1999 ERISA contributions to the Company
and Union Plans because there were more pressing expenses due.
Carey explained that Burruss’s financial problems should be resolved
after being sold, and that he expected a personal financial benefit
from the sale.13 Significantly, O’Halloran and Brotherton testified
against the Defendants at trial. Unfortunately, all efforts to sell Bur-
russ failed. Ascertaining that it had no other option, Burruss declared
bankruptcy on November 7, 2000.
B.
At the conclusion of the prosecution’s case-in-chief, and again at
the conclusion of the trial evidence, the Defendants moved for judg-
ments of acquittal. See Fed. R. Crim. P. 29(a) (authorizing motion for
judgment of acquittal after conclusion of prosecution’s case-in-chief
and again at conclusion of all evidence). The court denied these
acquittal motions, however, and the jury found Jackson guilty on all
charges, and Carey guilty on all charges except the conspiracy
offense.
13
Wilson made unsuccessful efforts to sell Burruss in 1999 and 2000.
14 UNITED STATES v. JACKSON
In post-trial proceedings, Jackson and Carey renewed their motions
for judgments of acquittal and also sought, in the alternative, a new
trial. See Fed. R. Crim. P. 29(a) and 33. The district court denied
those requests, explaining its rulings in a Memorandum Opinion filed
on June 7, 2006 (the "Opinion").14 The Opinion’s bases for these rul-
ings, specifying that the various convictions were amply supported by
the evidence and that there was no sound reason for awarding the
Defendants a new trial, included the following:
• On the bank fraud and wire fraud offenses, the evidence
was sufficient to support Jackson’s convictions because
he oversaw the daily operations of Burruss, was Carey’s
superior, was familiar with the borrowing arrangement
with Fleet, had directed Carey to inflate inventory, had
instructed Elliott to overvalue inventory to increase Bur-
russ’s borrowing power, and had been advised by Equi
that the accounts receivable were inflated. See Opinion
3-4.
• On the wire fraud offenses, the evidence supported Jack-
son’s convictions because he "knew of and approved
previous faxes to Fleet, and could foresee that the
inflated [BBCs] would continue to be faxed." Id. at 5.
• On the bank fraud offenses, the court observed that,
although "a bank must be the intended victim of a bank
fraud scheme, it need not be the immediate victim." Id.
at 7. Here Burruss was a victim of the fraud scheme, but
"Fleet suffered the ultimate risk of loss." Id.
• On the ERISA false statement offense, the evidence was
sufficient to sustain Jackson’s conviction because com-
pany policy required him to sign checks above a certain
sum, and he had not sought to correct the 1998 Form
5500 (although he knew that a 1998 Plan contribution
had not been made). Id. at 8.
14
The district court’s Opinion is found at J.A. 2464-81.
UNITED STATES v. JACKSON 15
• The evidence was sufficient to support Carey’s convic-
tion on the false statement offense in Count Ten, in that
he was a co-signer on company checks and had created
false accounting entries to cover-up nonpayment of the
1998 ERISA contributions. Id. at 8-9.
• On the ERISA theft offenses, the employer contributions
to ERISA pension funds became assets of the ERISA
plans when they became due and payable. The Defen-
dants were not required to be fiduciaries of the Plans
because 18 U.S.C. § 664 prohibits "any person" from
committing a § 664 offense, and makes no reference to
fiduciary status. Id. at 10-12.
• Jackson was not entitled to judgment of acquittal on the
ERISA theft offenses because the "handwriting from his
planner and notepads indicat[ed] that he knew the pen-
sion contributions were due," demonstrating his "reck-
less disregard for the interest of the pension plans." Id.
at 12.
• On the health care program theft offense, the govern-
ment, by "showing that funds were withheld from
employee paychecks for contribution to the healthcare
plan," presented sufficient evidence to sustain the Defen-
dants’ convictions. Id. at 13-14.
• On the conspiracy offense, the evidence was sufficient to
establish that Jackson had conspired with Elliot in inflat-
ing the BBCs. Id. at 15.
• Finally, the Defendants’ were not entitled to a new trial,
because the evidence was sufficient to sustain their con-
victions and because they were not prejudiced by the
improper exclusion or admission of evidence. Id. at 16-
17.
C.
The presentence investigation reports (the "PSRs") for Jackson and
Carey calculated their advisory sentencing ranges under the 2000 edi-
16 UNITED STATES v. JACKSON
tion of the Sentencing Guidelines. The PSRs grouped their offenses
and awarded them base offense levels of 4, see USSG § 2B1.1(a), to
which they added the following: two-level increases because the
grouped offenses involved more than minimal planning, id.
§ 2B1.1(b)(4)(A); four-level increases for substantially jeopardizing
the safety and soundness of a financial institution, id.
§ 2B1.1(b)(6)(A); two-level increases for embezzling from ERISA
plans while serving as plan fiduciaries, id. § 3B1.3; and seventeen-
level increases because the loss exceeded $10 million, id.
§ 2B1.1(b)(1)(R). Jackson’s PSR also recommended a two-level
increase because he committed perjury while testifying at trial. Id.
§ 3C1.1. Premised on criminal history categories of I, Jackson’s total
offense level was 31 and his advisory sentencing range was 108 to
135 months, and Carey’s total offense level was 29 and his advisory
sentencing range was 87 to 108 months.
The district court conducted Jackson and Carey’s sentencing hear-
ings on January 3, 2007, and, after largely accepting the PSRs’ rec-
ommendations, the court denied the prosecution’s motion for role-in-
the-offense enhancements against Jackson and Carey. Importantly,
the court also ruled that the PSRs’ recommended seventeen-level
increases for causing a loss exceeding $10 million were applicable.
The Defendants objected to this ruling, contending that the loss calcu-
lations made in the PSRs were incorrect. They asserted that the loss
calculations should reflect only the actual and foreseeable loss, which
was less than $10 million. They also claimed that Burruss and its
assets had been overvalued from the beginning and that the loss suf-
fered by Fleet was due to Burruss’s unforeseeable decision to file for
bankruptcy. The court rejected these contentions and, after weighing
the evidence, the advisory Guidelines ranges, and the 18 U.S.C.
§ 3553(a) sentencing factors, sentenced Jackson and Carey at the bot-
tom of their advisory ranges: 108 and 87 months, respectively. The
Defendants thereafter filed these appeals, and we possess jurisdiction
pursuant to 28 U.S.C. § 1291.
II.
In their consolidated appeals, the Defendants first contend that they
cannot be subjected to criminal liability under § 664 of Title 18 for
the two ERISA theft offenses. Additionally, they contest the suffi-
UNITED STATES v. JACKSON 17
ciency of the evidence to support certain of their convictions. We
address these contentions in turn.15
A.
With respect to their convictions on the ERISA theft offenses in
Counts Eleven and Twelve, the Defendants contend that the district
court erred when it ruled that unpaid employer contributions to the
Company and Union Plans constituted "assets" of the Plans under 18
U.S.C. § 664.16 Specifically, they assert that their convictions on the
ERISA theft offenses must be vacated, as a matter of law, because
"unpaid employer contributions are not assets of a plan until they are
paid into the plan unless the plan documents specifically state other-
wise." Br. of Appellants 28-29. Because the Plan documents fail to
specify that unpaid employer contributions constitute plan assets, the
Defendants maintain that they cannot be guilty of the ERISA theft
15
The Defendants have also raised challenges to their sentences, which
are disposed of in Part III hereof.
16
The primary issue in this appeal relates to whether, under 18 U.S.C.
§ 664, unpaid employer ERISA pension plan contributions constitute
"assets" of the plan. Section 664 provides, in relevant part, that
[a]ny person who embezzles . . . or unlawfully and willfully . . .
converts to his own use . . . any of the moneys, funds . . . or other
assets of any [ERISA plan] shall be fined . . . or imprisoned . . .
or both.
The ERISA theft offenses relate specifically to the Company and Union
Plans. Count Eleven of the indictment, alleges, in pertinent part, as fol-
lows:
That between on or about January 1, 1999 and on or about
March 15, 2000, in the Western District of Virginia, the
[D]efendants, . . . while fiduciaries of the Company Plan, did
embezzle, steal and unlawfully and willfully abstract and convert
to their own use, and to the use of others, an amount not less than
$318,246.27, which constitutes moneys, funds, securities, premi-
ums, credits, property and other assets of the Company Plan, an
employee pension benefit plan subject to [ERISA].
J.A. 59-60. Count Twelve, in operative language that is identical to that
in Count Eleven, relates to the conversion of the moneys and funds of
the Union Plan.
18 UNITED STATES v. JACKSON
offenses. They further contend that, even if the unpaid ERISA contri-
butions were assets of the Company and Union Plans, they cannot be
guilty because they were never fiduciaries of the Plans.
Relying primarily on the Second Circuit’s opinion in United States
v. LaBarbara, 129 F.3d 81 (2d Cir. 1997), the district court ruled that
unpaid employer contributions become "credits" and are ERISA "plan
assets" when they are "due and payable to the plan." Opinion 9-11.
The court deemed irrelevant the Defendants’ claim that they had
never served as fiduciaries of the Plans, because § 664 explicitly
applies to "any person" who steals or embezzles the moneys, funds,
or assets of an ERISA plan. We review de novo a ruling by a district
court on an issue of statutory interpretation. United States v. Green,
436 F.3d 449, 456 (4th Cir. 2006); see also LaBarbara, 129 F.3d at
86, 88 (reviewing de novo district court’s interpretation of statutory
term "assets" under § 664).
1.
In order to prove the ERISA theft offenses, the prosecution was
obligated to establish the elements of § 664, i.e., that Jackson and
Carey (1) committed acts of embezzlement or conversion; (2) that
such acts of embezzlement or conversion involved the moneys, funds,
or assets of an ERISA plan; and (3) that such acts were committed
with the specific intent of depriving the ERISA plan of its moneys,
funds, or assets. See 18 U.S.C. § 664; see also United States v. Whit-
ing, 471 F.3d 792, 800-01 (7th Cir. 2006) (observing that § 664 is
violated when any person willfully or intentionally converts ERISA
funds to his own use or use of another); United States v. Krimsky, 230
F.3d 885, 860 (6th Cir. 2000) (observing that, for conviction under
§ 664, prosecution must prove accused embezzled or converted funds,
moneys, or assets of ERISA plan with specific intent of depriving
plan of such moneys, funds, or assets).17 Although § 664 does not
17
On Counts Eleven and Twelve, the district court instructed the jury,
in a manner consistent with the foregoing authorities, as follows:
Elements which must be proved beyond a reasonable doubt
before a defendant may be found guilty under [§ 664] proscrib-
ing embezzlement are . . . [one,] the defendant fraudulently and
UNITED STATES v. JACKSON 19
explicitly provide that unpaid employer contributions constitute
ERISA plan assets, § 1103 of Title 29 specifies that such assets are
held in trust, and not for the employer’s benefit. The Second Circuit
concluded that, when an ERISA employer has paid wages or salaries
to its employees, it is contractually bound to contribute to any ERISA
plan that it maintains. In its LaBarbara decision, the court decided
that an employer must comply with its contractual obligations to
make contributions to its ERISA plan, and that such a contractual
obligation constitutes an "asset" of the ERISA plan. See 129 F.3d at
88; see also In re Luna, 406 F.3d 1192, 1198-1201 (10th Cir. 2005)
(holding that contractual right to collect unpaid contributions is plan
asset).
Notwithstanding the Defendants’ assertions that Burruss’s unpaid
employer contributions did not constitute assets of the Company and
Union Plans for purposes of the ERISA theft offenses, the relevant
facts and legal principles support the district court’s ruling. When
Burruss established its ERISA pension plans, it bound itself to the
terms thereof. Both Plans mandated annual contributions based upon
hours worked, and wages and salaries paid. Burruss could properly
extricate itself from those ERISA obligations only by proper termina-
tion of the Plans. See 29 U.S.C. § 1103. We thus agree with the dis-
trict court and the Second Circuit, and are satisfied that Burruss’s
unpaid contributions to the Plans constituted the "moneys, funds, or
assets" thereof for purposes of § 664. As a result, the Defendants’
contention in that regard must be rejected.
2.
The Defendants also contend that, even if the unpaid ERISA con-
tributions were assets of the Company and Union Plans, they never-
willfully embezzled, stole, or converted property, money or
funds to his own use or the use of another; [two,] the property,
money, or funds taken belonged to an employee benefit plan
subject to ERISA; [and three,] the defendant acted with the
intent to deprive the pension plan of its funds, with reckless dis-
regard for the interests of the pension plan.
J.A. 2220-21.
20 UNITED STATES v. JACKSON
theless cannot be guilty of the ERISA theft offenses because they
were never fiduciaries of the Plans. The Defendants assert that, in
order for them to be criminally liable under § 664, the prosecution
had to prove that they were such fiduciaries. See Luna, 406 F.3d at
1198, 1201 (observing that for defendant in civil ERISA fraud action
to be personally liable, he must be fiduciary of ERISA plan). Indeed,
as they point out, Counts Eleven and Twelve actually allege that the
Defendants were fiduciaries. See J.A. 59-61 (alleging that Defendants,
"while fiduciaries" of the Plans, embezzled and converted moneys,
funds, and assets of Plans).
The district court ruled against the Defendants on this point, how-
ever, because § 664 plainly applies to "any person" who steals or
embezzles the moneys, funds, or assets of an ERISA Plan. Opinion
11-12. Importantly, the court’s instructions to the jury were consistent
with § 664, and did not mandate a jury finding that either Jackson or
Carey were fiduciaries. Counts Eleven and Twelve, in alleging that
the Defendants were fiduciaries of the Plans, were thus at odds with
the express terms of § 664. Such surplusage does not constitute appel-
late error, however, for at least three reasons. First, the Defendants
did not pursue a variance or surplusage claim in the district court or
on appeal.18 Second, § 664 does not require that an accused be a fidu-
ciary, but is plainly drawn in terms of "any person."
Finally, in these circumstances, the Defendants were shown to be
fiduciaries of the Plans. Under ERISA, a "fiduciary" is a person who
"exercises any authority or control respecting management or disposi-
tion of its assets, . . . or discretionary responsibility" with respect to
18
Because the Defendants have not raised a variance or surplusage
claim on appeal, any such claim has been waived. See Fed. R. App. P.
28(a)(9)(A) (requiring appellant’s brief to contain contentions and rea-
sons for them, with citations to authorities and parts of record relied on);
United States v. Al-Hamdi, 356 F.3d 564, 571 n.8 (4th Cir. 2004)
(observing that contentions not raised in opening brief are waived). Even
if the Defendants had raised such a claim, however, it would not alter the
result here, because the fiduciary allegations of the ERISA theft offenses
were merely surplusage and not error. See Ford v. United States, 273
U.S. 593, 602 (1927) (holding that allegations of indictment unnecessary
to and independent of essential allegations may be ignored).
UNITED STATES v. JACKSON 21
an ERISA plan. 29 U.S.C. § 1002(21)(A). ERISA also provides that
an "administrator" is an example of a fiduciary. Id. § 1002(14)(A).
ERISA defines an "administrator" as "the person specifically so des-
ignated by the terms of the instrument under which the plan is oper-
ated." Id. § 1002(16)(A)(I).
The Defendants contend that SunTrust, rather than either of them,
was the Plan Administrator of the Company and Union Plans. Carey,
however, was expressly named as Plan Administrator in the Union
Plan’s documents, and as Assistant Plan Administrator in the Com-
pany Plan documents. Furthermore, in Phelps v. C.T. Enters., Inc.,
394 F.3d 213, 221 (4th Cir. 2005), we observed that, even though an
officer of a business is not a named fiduciary of an ERISA plan, he
is nevertheless a fiduciary when he assumes plan responsibilities or
exercises control over whether to pay plan contributions. Jackson, as
Burruss’s CEO, was thus a fiduciary of the Company and Union
Plans, because he assumed Plan responsibilities and exercised control
over whether Burruss made its ERISA plan contributions. Under the
undisputed facts, both Jackson and Carey performed administrative
duties associated with the Plans: (1) Jackson signed Form 5500 as
Plan Administrator and sponsor for Plan Year 1998; (2) Carey signed
the Form 5500 as Plan Administrator for Plan Year 1997; (3) Jackson
signed the collective bargaining agreement with the union; and (4)
both Carey and Jackson signed the ERISA plan contribution checks.19
B.
The defendants next challenge the sufficiency of the evidence in
support of certain of their convictions — both defendants challenge
the evidence on a bank fraud offense (Count Two); Jackson chal-
lenges the evidence on the other bank fraud offense (Count One), as
19
The Defendants argue that the Tenth Circuit’s decision in Luna sup-
ports their position on appeal, and that their convictions on the ERISA
theft offenses cannot stand because they were not "acting" as fiduciaries
when they diverted the Plans’ assets to their own use. See Luna, 406 F.3d
at 1203-04 (observing that employers who exercise neither control nor
authority over ERISA plan assets are not fiduciaries of plan). The Defen-
dants’ reliance on Luna is misplaced, however, because it is not control-
ling precedent and is factually distinguishable.
22 UNITED STATES v. JACKSON
well as on each of the wire fraud offenses (Counts Three through
Seven); and Carey challenges the evidence on the ERISA false state-
ment offense (Count Ten). Under our precedent, an appellate review
of a sufficiency issue is only to assess "whether, after viewing the evi-
dence in the light most favorable to the prosecution, any rational trier
of fact could have found the essential elements of the crime beyond
a reasonable doubt." United States v. Young, 248 F.3d 260, 273 (4th
Cir. 2001). We have applied this settled legal principle and carefully
assessed the trial record on the sufficiency of evidence contentions,
as summarized in the Opinion. See supra Part I.B. Premised on this
assessment, we agree with the district court’s analysis of the evidence
sufficiency contentions, as spelled out in its Opinion and summarized
herein. We therefore affirm its rejection of the Defendants’ evidence
sufficiency challenges.
III.
The Defendants also challenge their sentences on several grounds.
Most compellingly, they contend that the district court erred in setting
their offense levels under the Sentencing Guidelines by (1) miscalcu-
lating the applicable fraud-loss amount, and (2) penalizing them for
substantially jeopardizing the safety and soundness of a financial
institution. We assess these issues in turn.
A.
First, the Defendants contend that the district court miscalculated
the fraud-loss amount under section 2B1.1(b) of the Guidelines,
which erroneously resulted in a seventeen-level increase to their
offense levels. The Defendants seek to limit the amount of loss used
for sentencing purposes to what was, in their view, reasonably foresee-
able.20 We review de novo a district court’s interpretation of what
20
The Defendants derive this foreseeability language from commentary
to the 2005 edition of the Guidelines, defining "actual loss" as "the rea-
sonably foreseeable pecuniary harm that resulted from the offense."
USSG § 2B1.1 cmt. n.3 (2005). The Defendants have, however, errone-
ously relied on the 2005 edition of the Guidelines. The PSRs calculated
the Defendants’ recommended sentences based on the 2000 edition, and
the district court largely adopted the PSRs’ recommendations. Although
we review the Defendants’ sentences under the 2000 edition, which does
not contain this same language, we nevertheless consider the Defendants’
foreseeability contention and find it unpersuasive.
UNITED STATES v. JACKSON 23
constitutes a "loss" under the Guidelines, while accepting its loss cal-
culation in the absence of clear error. United States v. Allen, 491 F.3d
178, 193 (4th Cir. 2007). Pursuant to section 2B1.1 cmt. n.2, "loss"
is the value of the property taken, damaged, or destroyed. In calculat-
ing loss, section 2B1.1 cmt. n.3 provides, in pertinent part, that "the
loss need not be determined with precision. The court need only make
a reasonable estimate of the loss, given the available information."
Here, the court determined that the PSRs had accurately calculated
the applicable loss to be greater than $10 million.
The Defendants contend, however, that the extent of the loss result-
ing from their offenses was largely unforeseeable. Their primary basis
for this contention is that the loss suffered by Fleet was unforseeable
because it was actually caused by Burruss’s decision to file bankruptcy.21
In contrast, the prosecution contends that Burruss’s bankruptcy and
Fleet’s loss were foreseeable because the Defendants’ criminal activi-
ties drove Burruss into bankruptcy and deprived Fleet of its collateral.
We are unable to accept the Defendants’ assertion that Burruss’s
decision to file for bankruptcy resulted in an unforseeable loss. As the
jury found, it was the Defendants’ criminal activities and their mis-
management of Burruss that drove Burruss into bankruptcy and
deprived Fleet of its collateral. As a result, the district court did not
err in its findings on the fraud-loss amount.
B.
Next, the Defendants contend that the district court erred in
increasing their offense levels, pursuant to section 2B1.1(b)(6)(A) of
the Guidelines, on the premise that they substantially jeopardized the
safety and soundness of a financial institution (namely, the Company,
Union, and Health Plans). They argue, in this regard, that Burruss did
not qualify as a "large corporation" under the Guidelines; the ERISA
plans in question were not terminated by Jackson’s actions, but rather
21
Jackson was hospitalized on October 12, 2000, and had open-heart
surgery on October 13, 2000. During his hospitalization and recupera-
tion, Wilson discovered that Burruss’s assets had been inflated and hired
O’Halloran to run the company. Incredibly, the Defendants contend that
Jackson’s absence also led to unforseeable losses to Fleet.
24 UNITED STATES v. JACKSON
by the new Plan Administrators; and that the Plans were not jeopar-
dized because, as a result of a settlement in a related civil suit, Jack-
son surrendered his individual account to reimburse the Plans. The
prosecution contends that the Defendants’ "large corporation" argu-
ment is undercut by the $1.4 million loss suffered by the ERISA
Plans, plus the fact that the Plans were jeopardized when the Defen-
dants stole their assets in 1999 to 2000. Finally, the prosecution con-
tends that the Defendants’ argument that they did not terminate the
Plans lacks merit because their criminal activities forced Burruss into
bankruptcy, thus causing the terminations.
The Defendants present no authority to support their claim that
Burruss did not qualify as a "large corporation." The Defendants
derive their "large corporation" assertion from Guidelines section
2B1.1 cmt. n.8, which provides, in pertinent part:
"Union or employee pension fund" and "any health, medi-
cal, or hospital insurance association," as used [in defining
a financial institution], primarily include large pension funds
that serve many individuals (e.g., pension funds of large
national and international organizations, unions, and corpo-
rations doing substantial interstate business), and associa-
tions that undertake to provide pension, disability, or other
benefits (e.g., medical or hospitalization insurance) to large
numbers of persons.
Unfortunately for the Defendants, the evidence satisfies this Guide-
lines provision. The Funds in this case served over half of Burruss’s
1200 to 1400 employees and operated in multiple states, providing
medical and retirement benefits to both union and non-union employ-
ees. And, the moneys and assets the Defendants embezzled from the
Plans amounted to approximately $1.4 million over a two-year period.
Finally, the Guidelines do not specify the "size" that a corporation
must be before its ERISA plan qualifies as a "financial institution."
The Defendants’ contention that the Plans were not jeopardized
because Jackson reimbursed them also lacks merit. The Plans were
jeopardized when moneys belonging to them were diverted for the
Defendants’ self-enrichment. Finally, it is not necessary to the appli-
cation of this enhancement that the Plans be terminated: it is only nec-
UNITED STATES v. JACKSON 25
essary that the Plans be placed in "jeopardy" of termination. See
USSG § 2B1.1 cmt. n.9.22 The Plans were, in any event, ultimately
terminated because of the Defendants’ criminal activities — which
drove Burruss into deep financial difficulty and ultimately resulted in
its bankruptcy. Consequently, the sentencing court did not err in find-
ing that the Defendants substantially jeopardized the safety and
soundness of a financial institution.23
22
According to the Guidelines,
[a]n offense shall be deemed to have "substantially jeopardized
the safety and soundness of a financial institution" if, as a conse-
quence of the offense, the institution became insolvent; substan-
tially reduced benefits to pensioners or insureds; was unable on
demand to refund fully any deposit, payment, or investment; was
so depleted of its assets as to be forced to merge with another
institution in order to continue active operations; or was placed
in substantial jeopardy of any of the above.
USSG § 2B1.1 cmt. n.9 (emphasis added).
23
We are content to summarily reject the Defendants’ other sentencing
contentions. First, the Defendants assert that the Sentencing Guidelines
are unconstitutional because sentencing enhancements may be imposed
on the basis of non-jury factual findings, and mitigating character evi-
dence does not reduce a defendant’s Guidelines sentence. The Supreme
Court has determined however, that the Sixth Amendment is not violated
by an advisory Guidelines regime. See United States v. Booker, 543 U.S.
220, 233, 265 (2005). In any event, the district court properly considered
mitigating character evidence, albeit with respect to the 18 U.S.C.
§ 3553(a) factors, rather than the Guidelines. Finally, the Defendants
maintain that the district court erroneously applied a "presumption of
reasonableness" to sentences within the applicable Guidelines ranges.
Although the Defendants are correct that a district court is not entitled
to apply such a presumption, see United States v. Battle, 499 F.3d 314,
322 (4th Cir. 2007), there is no indication that the district court did so
in this case.
26 UNITED STATES v. JACKSON
IV.
Pursuant to the foregoing, we affirm Jackson’s and Carey’s convic-
tions and sentences.
AFFIRMED