United States v. Osuji

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 08-5207

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

PAUL OSUJI,

Defendant - Appellant.

No. 08-5209

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

TAMARA VARNADO,

Defendant - Appellant.

Appeals from the United States District Court for the Western
District of North Carolina, at Charlotte. Lacy H. Thornburg,
District Judge. (3:06-cr-00415-LHT-1; 3:06-cr-00415-LHT-2)

Argued: September 21, 2010 Decided: January 21, 2011

Before WYNN, Circuit Judge, HAMILTON, Senior Circuit Judge, and
Mark S. DAVIS, United States District Judge for the Eastern
District of Virginia, sitting by designation.
Affirmed in part, vacated in part, and remanded with
instructions by unpublished opinion. Judge Wynn wrote the
opinion, in which Senior Judge Hamilton and Judge Davis
concurred.

ARGUED: Ann Loraine Hester, FEDERAL DEFENDERS OF WESTERN NORTH
CAROLINA, INC., Charlotte, North Carolina; Matthew McGavock
Robinson, ROBINSON & BRANDT, PSC, Covington, Kentucky, for
Appellants. Melissa Louise Rikard, OFFICE OF THE UNITED STATES
ATTORNEY, Charlotte, North Carolina, for Appellee. ON BRIEF:
Claire J. Rauscher, Executive Director, Kevin A. Tate, FEDERAL
DEFENDERS OF WESTERN NORTH CAROLINA, INC., Charlotte, North
Carolina, for Appellant Tamara Varnado. Edward R. Ryan, United
States Attorney, Charlotte, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

2
WYNN, Circuit Judge:

A federal jury convicted Paul Osuji and Tamara Varnado

(“Defendants”) of one count of conspiracy to defraud a health

care benefit program in violation of 18 U.S.C. §§ 1347 & 1349;

nine counts of aiding and abetting health care fraud in

violation of 18 U.S.C. §§ 2 & 1347; one count of conspiracy to

commit money laundering in violation of 18 U.S.C.

§§ 1956(a)(1)(A)(i) & 1956(h); and seven counts of aiding and

abetting money laundering in violation of 18 U.S.C. §§ 2 &

1956(a)(1)(A)(i). Defendants appeal their convictions and

sentences. We conclude that the district court did not err by

refusing to appoint Osuji new counsel shortly before the trial

of this complex case, allowing the government to call a witness

who asserted her Fifth Amendment privilege before the jury, or

instructing the jury using the words “statute violated.”

Further, the jury had substantial evidence to support its health

care fraud and money laundering verdicts. However, we hold that

the district court erred in refusing to instruct the jury on

venue, and that proof of venue is insufficient regarding several

of Varnado’s money laundering convictions. The district court

also erred in applying an incorrect base level when calculating

Defendants’ sentences. We therefore affirm in part, vacate in

part, and remand.

3
 I.

This case arises from an alleged fraudulent scheme to

obtain Medicare reimbursements for motorized wheelchairs.

[U.S.Br.4] Defendant Paul Osuji owned and operated Chimatex, a

Medicare-authorized durable medical equipment (“DME”) supplier

in North Carolina. Defendant Tamara Varnado owned Medisource

2000, a Texas delivery company for Chimatex’s DME. Defendants

worked with Prince Yellowe, an unindicted co-conspirator who

pled guilty to health care fraud in Texas. Defendants also

worked with Dr. Linda Morgan, another unindicted co-conspirator

who signed fraudulent Certificates of Medical Necessity (“CMN”s)

in exchange for cash. The government alleged that Defendants

fraudulently claimed approximately $2.5 million for wheelchair

reimbursements, and that Medicare paid approximately $1.3

million.

At trial, Yellowe testified against Defendants and

explained how the scheme operated. Recruiters, or “runners,”

found beneficiaries and collected information including their

Medicare numbers. The runners provided the information to

either First Choice Billing, Yellowe’s company, or Medisource.

First Choice and Medisource were operated from the same location

and were, for practical purposes, interchangeable. First Choice

and Medisource submitted motorized wheelchair claims to Medicare

using First Choice’s billing number and Chimatex’s supplier

4
number. When claims were approved, Medicare mailed

reimbursement checks to Chimatex in Charlotte, North Carolina.

Chimatex then remitted money to Medisource under a profit

sharing agreement. Medisource followed up with paperwork,

including obtaining CMNs with Morgan’s signature. Medisource

then purchased scooters—not motorized wheelchairs, which cost

substantially more—from a DME wholesale supplier in Houston,

Texas and delivered the scooters to the beneficiaries.

The government subpoenaed Morgan to testify against

Defendants. On the third day of trial, Morgan’s lawyer told the

district court that Morgan would assert her Fifth Amendment

right not to testify. The judge said that when Morgan was

called, he would excuse the jury to explain her rights to her.

When Morgan was called the next day, however, the judge did not

excuse the jury. Morgan stated her name, and then the judge

asked her whether she intended to assert her Fifth Amendment

privilege. Morgan said she would. The judge excused her and

directed the government to call its next witness. At Osuji’s

request, the district court instructed the jury not to draw any

inferences from Morgan’s invocation of her privilege.

At the close of the government’s evidence and again at the

close of trial, Defendants moved for a judgment of acquittal.

The district court denied those motions. The district court

also denied Varnado’s request for an instruction on venue. The

5
district court then instructed the jury, after which Varnado

objected to the wording of headings on several pages of the

instructions. The headings included the caption “statute

violated” instead of the caption Varnado preferred, “statute

charged.” The court noted the objection but concluded that it

was unlikely that the jury would be misled by the captions.

On January 15, 2008, the jury returned guilty verdicts on

all counts against both Defendants. The district court

sentenced Osuji to 211 months’ imprisonment followed by three

years of supervised release, and ordered Osuji to pay

$1,208,256.53 in restitution. The district court sentenced

Varnado to 63 months’ imprisonment followed by three years of

supervised release, and ordered Varnado to pay $1,208,256.53 in

restitution. Defendants appealed both their convictions and

sentences.

II.

We first address Osuji’s argument that the district court

erred in failing to grant him new counsel. He argues that he

timely requested new counsel and that communication with his

attorney had completely broken down. We discern no error in the

district court’s refusal to grant Osuji new counsel.

The Sixth Amendment to the United States Constitution

guarantees that “[i]n all criminal prosecutions, the accused

6
shall enjoy the right ... to have the Assistance of Counsel for

his defense.” U.S. Const. amend. VI. A defendant’s right to

have a lawyer of his own choosing is an essential element of the

Sixth Amendment right to assistance of counsel. United States

v. Gallop, 838 F.2d 105, 107 (4th Cir. 1988). A defendant’s

right to choose a lawyer is, however, not absolute. United

States v. Mullen, 32 F.3d 891, 895 (4th Cir. 1994). Rather,

“[s]uch right must not obstruct orderly judicial procedure and

deprive courts of the exercise of their inherent power to

control the administration of justice.” Gallop, 838 F.2d at

108. Further, an indigent defendant must show good cause for a

new appointed lawyer. Id.

We review the district court’s determination of whether a

defendant’s motion for substitution of counsel should be granted

under the abuse of discretion standard. Mullen, 32 F.3d at 895.

In evaluating whether the court abused its discretion in denying

a defendant’s motion for substitution of counsel, this Court

considers three factors: (1) the timeliness of the motion; (2)

the adequacy of the court’s inquiry into the defendant’s

complaint; and (3) whether the conflict between the attorney and

the client was so great that it “resulted in total lack of

communication preventing an adequate defense.” Id.

Regarding the timeliness of Osuji’s motion, the record

shows that a magistrate judge conducted a hearing and properly

7
concluded that Osuji’s pre-trial motion for substitution of

counsel was untimely. The case was over a year old, and the

motion was made about a month before trial was set to begin. We

agree with the determination that Osuji’s motion for new counsel

was untimely. See, e.g., Gallop, 838 F.2d 105 (affirming denial

of motion for substitution of counsel made five days before

trial); United States v. Williams, 176 F.3d 301 (6th Cir. 1999)

(affirming denial of motion for substitution of counsel made two

weeks before trial in complex multidefendant conspiracy case). 1

Regarding the adequacy of the district court’s inquiry,

Osuji does not argue that the extensive pretrial inquiry into

his substitution motion was insufficient. Rather, he contends

that the district court failed to inquire adequately when the

issue was again raised at trial. Osuji did not, however, make a

second motion to substitute counsel. Rather, Osuji’s counsel

simply informed the court that Osuji wished to address the issue

at the appropriate time. But neither Osuji nor the district

court ever followed up. Under these circumstances, the district

court did not abuse its discretion when it did not conduct a

second inquiry.

1
Osuji does not argue that a mid-trial motion for
substitution, had one been made, would have been timely.

8
 Finally, regarding whether the conflict between Osuji and

his counsel was so great that it resulted in a total lack of

communication preventing an adequate defense, the record does

not support Osuji’s claim that communication between himself and

his attorney completely broke down. The record instead shows

that Osuji’s counsel cross-examined every government witness,

argued numerous objections and motions, and conducted an

appropriate direct examination of Osuji when he testified in his

own defense. Under these circumstances, the district court did

not abuse its discretion in denying Osuji’s motion to substitute

counsel. See United States v. Hanley, 974 F.2d 14, 17 (4th Cir.

1992) (holding counsel’s vigorous defense at trial indicated a

lack of complete communication breakdown).

III.

We next address both Defendants’ argument that the jury

lacked sufficient evidence to convict them of health care fraud,

conspiracy to commit health care fraud, money laundering, and

conspiracy to commit money laundering. Defendants contend that

the government failed to show that they intended to commit fraud

or that they knew that the money they received came from an

illegal source. We disagree.

“A jury’s verdict must be upheld on appeal if there is

substantial evidence in the record to support it.” United

9
States v. Foster, 507 F.3d 233, 244 (4th Cir. 2007). In

determining whether the evidence is substantial, we must view

the evidence in the light most favorable to the government and

ensure that there is sufficient evidence to allow a reasonable

fact finder to conclude that the defendant is guilty beyond a

reasonable doubt. Id. The uncorroborated testimony of an

accomplice can alone sustain a conviction. United States v.

Wilson, 115 F.3d 1185, 1190 (4th Cir. 1997). And we assume that

the jury resolved all contradicting evidence in the government’s

favor. Foster, 507 F.3d at 245.

Defendants first challenge the sufficiency of the evidence

regarding aiding and abetting health care fraud and conspiracy

to commit health care fraud. A person commits health care fraud

when he:

knowingly and willfully executes, or attempts to
execute, a scheme or artifice-- (1) to defraud any
health care benefit program; or (2) to obtain, by
means of false or fraudulent pretenses,
representations, or promises, any of the money or
property owned by, or under the custody or control of,
any health care benefit program . . . .

18 U.S.C. § 1347. Whoever aids and abets in the commission of

health care fraud is punishable as a principal. 18 U.S.C. § 2.

“A defendant is guilty of aiding and abetting if he has

‘knowingly associated himself with and participated in the

criminal venture.’” United States v. Burgos, 94 F.3d 849, 873

(4th Cir. 1996) (quoting United States v. Winstead, 708 F.2d

10
925, 927 (4th Cir. 1983)). To prove association, the government

must establish that the defendant was “cognizant of the

principal’s criminal intent and the lawlessness of his

activity.” Id.

The elements of a conspiracy offense are: “an agreement

among the defendants to do something which the law prohibits;

knowing and willing participation by the defendants in the

agreement; and an overt act by the defendants in furtherance” of

the agreement’s purpose. United States v. Hedgepeth, 418 F.3d

411, 420 (4th Cir. 2005) (internal quotation marks and citation

omitted). A conspiracy need not be proven by direct evidence;

it may be inferred from the facts and circumstances of the case.

United States v. Laughman, 618 F.2d 1067, 1074 (4th Cir. 1980).

In this case, Osuji contends that the government presented

no evidence that he knew of Yellowe’s fraud or that he entered

into any agreement with the intent to commit fraud. At trial,

however, Yellowe testified that he and Osuji had an agreement

and that Osuji knew not only that a fraud was being conducted

but how it was being conducted:

Q. Let’s talk about everyone’s role now in the scheme.
Mr. Osuji, what role did he play?

A. He was a partner, I mean, based on all I have said.
You know, we had a profit sharing. As the evidence
that was admitted from his office states, that we have
an understanding to get this patient information,
share the profit 50/50 after cost.

11
 . . . .

Q. But based on your conversation with him, he was
certainly aware of how the fraud was conducted?

A. Correct. He was aware of everything we did, yes.

Taken in the light most favorable to the government, this

evidence is sufficient to show that Osuji knew of Yellowe’s

fraud and entered into an agreement with the intent to commit

fraud. See United States v. Baker, 985 F.2d 1248 (4th Cir.

1993) (affirming a conspiracy conviction based on an

accomplice’s testimony).

Likewise, Varnado argues that the government presented no

evidence that she acted with knowledge that Yellowe was

defrauding Medicare. But at trial, Yellowe testified that

Varnado knew exactly how the scheme worked:

Q. Did [Varnado] understand how your business
operated? Did you communicate that to her?

A. Yes. . . .

. . . .

Q. And you also had communicated to her that there was
profit potential involved in this particular type of
business where you bill for the [motorized wheelchair]
regardless of what’s provided?

A. She actually knew exactly how I run my operation,
yes.

Q. Is that because you had discussed that with her?

A. Yes.

12
Varnado asserts that, while she may have known of Yellowe’s

previous fraud, there was no evidence that she knew the new

business would be run fraudulently. Yellowe testified, however,

that he discussed with Varnado the possibility of continuing the

fraud by setting up another supplier. Yellowe stated that

Varnado had agreed to “put the next fraudulent entity in her

name.” Yellowe also told Varnado that he was probably going to

jail. Taken in the light most favorable to the government, this

evidence is sufficient to show that Varnado knew that Yellowe

was defrauding Medicare.

Finally, both Defendants challenge the sufficiency of the

evidence regarding money laundering and conspiracy to commit the

same. A person commits promotion money laundering when he:

knowing that the property involved in a financial
transaction represents the proceeds of some form of
unlawful activity, conducts or attempts to conduct
such a financial transaction which in fact involves
the proceeds of specified unlawful activity . . . with
the intent to promote the carrying on of specified
unlawful activity . . . .

18 U.S.C. § 1956 (a)(1)(A)(i). For the jury to convict on the

money laundering conspiracy charge, “the prosecution was obliged

to prove that (1) a conspiracy to commit promotion money

laundering was in existence, and (2) that during the conspiracy,

the defendant knew that the proceeds used to further . . .

illicit operations had been derived from an illegal activity,

13
and knowingly joined in the conspiracy.” United States v.

Alerre, 430 F.3d 681, 693-94 (4th Cir. 2005).

Defendants contend that neither Osuji nor Varnado knew that

the financial transactions were “anything other than legitimate

transactions undertaken in furtherance of a lawful medical

equipment business.” But the evidence considered above, taken

in the light most favorable to the government, shows that both

Defendants knowingly participated in a fraudulent scheme and

knew that the transactions furthered that scheme. See Alerre,

430 F.3d at 695 (affirming conviction based on testimony of a

co-conspirator).

IV.

Defendants next argue that the district court erred by

allowing the government to call an unindicted co-conspirator to

the stand to assert her Fifth Amendment privilege before the

jury. We disagree.

When a government witness invokes a testimonial privilege,

it may constitute reversible error under two circumstances. The

first is “‘when the Government makes a conscious and flagrant

attempt to build its case out of inferences arising from use of

the testimonial privilege.’” United States v. Johnson, 587 F.3d

625, 631 (4th Cir. 2009) (quoting Namet v. United States, 373

U.S. 179, 186-87 (1963)), cert. denied sub nom. Martin v. United

14
States, 130 S. Ct. 2128 (2010). The second is when “inferences

from a witness’ refusal to answer added critical weight to the

prosecution’s case in a form not subject to cross-examination,

and thus unfairly prejudiced the defendant.” Id. “And even when

the objectionable inferences might have been found prejudicial,

it has been held that instructions to the jury to disregard them

sufficiently cured the error.” Namet, 373 U.S. at 187.

In this case, Defendants argue that the inferences that the

jury could have drawn from Morgan’s invocation of her Fifth

Amendment privilege added critical weight to the prosecution’s

case. Specifically, Defendants argue that Morgan’s invocation

of her right not to testify corroborated Yellowe’s accusation

that Morgan received money and blank prescriptions. Defendants

overlook the fact that other testimony at trial established

Morgan’s complicity. Indeed, a witness from Medicare testified

that Morgan was listed as the referring physician on the

fraudulent claims. While Morgan’s testimony could have damaged

Varnado’s assertions of innocence, it is hard to imagine how her

refusal to testify substantiated Yellowe’s accusations. Thus,

any potential inferences from Morgan’s assertion of her Fifth

Amendment privilege did not add critical weight to the

government’s case. Moreover, at Osuji’s request, the district

court instructed the jury not to draw any inferences from

Morgan’s invocation of her Fifth Amendment privilege. We

15
presume that the jury followed that instruction (Johnson, 587

F.3d at 631) and hold that the instruction sufficiently cured

any potential error in allowing Morgan to invoke her privilege

before the jury.

V.

Defendants next argue that the district court erred in

refusing to give Varnado’s requested instruction on venue.

Proper venue in a criminal case is a constitutional right

secured by Article III, Section 2 and by the Sixth Amendment of

the United States Constitution. 2 United States v. Bowens, 224

F.3d 302, 308 (4th Cir. 2000) (citing U.S. Const. art. III, § 2,

cl. 3 (“The Trial of all Crimes ... shall be held in the State

where the said Crimes shall have been committed.”) and U.S.

Const. amend. VI (providing a criminal defendant with the right

to a trial “by an impartial jury of the State and district

wherein the crime shall have been committed”)); see also Fed. R.

Crim. P. 18 (“Except as otherwise permitted by statute or these

rules, the prosecution shall be had in a district in which the

2
“Strictly speaking the former constitutional provision is
a venue provision, since it fixes the place of trial, while the
latter is a vicinage provision, since it deals with the place
from which the jurors are to be selected.” 2 Charles Alan
Wright & Peter J. Henning, Federal Practice and Procedure § 301
(4th ed. 2009).

16
offense was committed.”). When a defendant is charged with more

than one count, venue must be proper on each count. Bowens, 224

F.3d at 308. The government must prove venue by a preponderance

of the evidence. Id.

We addressed the question of when venue is properly “in

issue” so as to raise a question of fact for the jury in United

States v. Martinez, 901 F.2d 374, 376 (4th Cir. 1990). In that

case, we followed the approach taken by the Eighth Circuit in

United States v. Moeckly, 769 F.2d 453, 461 (8th Cir. 1985). 3 We

held that venue is in issue when “the jury was able to convict

the defendant[s] of the offenses charged without an implicit

finding that the acts used to establish venue had been proven.”

Martinez, 901 F.2d at 376. However, “proof of venue may be so

clear that failure to instruct on the issue is not reversible

error.” Id.

Varnado asserts that her case involves a multi-district

conspiracy, with acts alleged to have occurred in Texas, South

Carolina, and North Carolina. Varnado notes that five of the

seven counts of money laundering are based on transactions that

took place entirely in Texas. Varnado contends that it is

impossible to determine from the instructions and verdict here

3
In fact, the Fourth Circuit followed a similar approach
before adopting Moeckly in United States v. Griley, 814 F.2d
967, 974 (4th Cir. 1987).

17
whether the jury found that any part of her alleged offenses

took place in the Western District of North Carolina.

Under 18 U.S.C. § 1956(i), venue for money laundering is

proper in:

(A) any district in which the financial or monetary
transaction is conducted; or

(B) any district where a prosecution for the
underlying specified unlawful activity could be
brought, if the defendant participated in the transfer
of the proceeds of the specified unlawful activity
from that district to the district where the financial
or monetary transaction is conducted.

18 U.S.C. § 1956(i).

Here, the district court instructed the jury on the money

laundering charges without mentioning the location of the

alleged transactions. Indeed, the district court’s only

allusion to venue was a passing reference to “the time and place

described in the indictment.” The indictment alleged that

Defendants engaged in promotion money laundering “within the

Western District of North Carolina and the Southern District of

Texas, Houston Division.”

Given the district court’s instructions, the jury could

have found Varnado guilty of money laundering without finding

that she “participated in the transfer of the proceeds of the

specified unlawful activity from [the Western District of North

Carolina] to the district where the financial or monetary

transaction [was] conducted.” 18 U.S.C. § 1956 (i). In other

18
words, the jury was able to convict Varnado of the offenses

charged “without an implicit finding that the acts used to

establish venue had been proven.” Martinez, 901 F.2d at 376.

The district court therefore erred in not instructing the jury

on venue. To determine whether the error was harmless, we must

evaluate the government’s proof of each money laundering count

against Varnado.

Count fourteen alleges a wire transfer from Osuji to

Medisource “as payment towards Defendants’ profit sharing

agreement.” Count seventeen alleges that Osuji purchased a

Cashiers check made payable to Medisource as payment toward

Defendants’ profit sharing agreement. Regarding these counts,

the evidence offered at trial supports a finding of venue in the

Western District of North Carolina. In describing the operation

of the scheme, Yellowe testified that Varnado was responsible

for billing Medicare using First Choice’s billing number and

Chimatex’s supplier number. Once Medicare sent the

reimbursement to Osuji in Charlotte, North Carolina, Osuji would

remit part of the profit to Medisource’s account, over which

Varnado held sole signatory authority. Varnado then completed

the paperwork necessary to substantiate the claims. Because

this evidence showed that Varnado “participated in the transfer

of the proceeds” on counts fourteen and seventeen (18 U.S.C.

19
§ 1956(i)), the district court’s failure to instruct on venue

was not reversible error.

Regarding the remaining counts of money laundering,

however, the evidence of venue is not as compelling. All the

other money laundering counts describe transactions that took

place in Texas, including Varnado’s purchasing a Cashiers check

payable to a DME supply company, depositing and cashing personal

checks, and issuing a check for delivery of DME. The government

showed that Varnado handled money in Texas but did not prove

that Varnado transferred any funds relating to those counts.

And evidence of handling money only in Texas alone is

insufficient to support a finding of venue in the Western

District of North Carolina. See United States v. Cabrales, 524

U.S. 1, 8 (1998) (rejecting argument that venue is appropriate

for money laundering without evidence of transportation of

funds); United States v. Stewart, 256 F.3d 231, 240 (4th Cir.

2001) (deeming evidence insufficient to establish venue for

money laundering in Virginia where defendant “handled money only

in California and was not responsible for or charged with the

transportation of the money from Virginia to California”). The

error in not instructing on venue was not harmless with regard

to these counts. We therefore must vacate Varnado’s conviction

on counts twelve, thirteen, fifteen, sixteen, and eighteen.

20
 VI.

We turn next to Defendants’ argument that the district

court erred in giving the jury instructions that read “statute

violated.” Defendants assert that this instruction

impermissibly directed the jury to return a guilty verdict. We

disagree.

A trial court may not direct the jury to find a defendant

guilty. United States v. Martin Linen Supply Co., 430 U.S. 564,

572-73 (1977). “In reviewing jury instructions, we ‘accord the

district court much discretion and will not reverse provided

that the instructions, taken as a whole, adequately state the

controlling law.’” United States v. Wills, 346 F.3d 476, 492

(4th Cir. 2003) (quoting Teague v. Bakker, 35 F.3d 978, 985 (4th

Cir. 1994)).

In this case, the district court read the instructions to

the jury and provided the jurors with a written copy of the

instructions. Although the district court did not read this

portion of the instructions to the jury, the copy provided

entitled the instructions on each alleged offense “statute

violated.” While including in the written instructions’ heading

the language “statute violated” may have been suggestive, it did

not direct a guilty verdict. On the contrary, the district

court properly instructed the jury that the government bore the

burden of proving guilt beyond a reasonable doubt. The district

21
court’s instructions, taken as a whole, adequately stated the

controlling law, and Defendants are not entitled to reversal on

this basis. See Hanley, 974 F.2d at 17-18 (affirming

defendant’s conviction where jury instructions on burden of

proof were, taken as a whole, correct despite judge’s having

told jury to find defendant guilty if it found that reasonable

doubt existed).

VII.

Finally, we turn to Defendants’ argument that the district

court plainly erred by incorrectly calculating their offense

levels under the Sentencing Guidelines. The government concedes

that the district court erred in calculating Defendants’ base

offense level, but contends that Defendants have not shown that

the error affected their substantial rights.

“In reviewing any sentence, ‘whether inside, just outside,

or significantly outside the Guidelines range,’ we apply a

‘deferential abuse-of-discretion standard.’” United States v.

Carter, 564 F.3d 325, 328 (4th Cir. 2009) (quoting Gall v.

United States, 552 U.S. 38, 40 (2007)). We first consider

whether the district court committed any significant procedural

error, such as improperly calculating the guidelines range.

United States v. Evans, 526 F.3d 155, 161 (4th Cir. 2008), cert.

denied, 129 S.Ct. 476 (2008). And when a party has failed to

22
preserve his challenge to procedural sentencing errors, we

review for plain error only. United States v. Lynn, 592 F.3d

572, 576-77 (4th Cir. 2010). To establish plain error, an

appellant must show that an error (1) was made, (2) is clear,

and (3) affects a substantial right. United States v.

Massenburg, 564 F.3d 337, 342-43 (4th Cir. 2009). “Even if an

appellant makes this three-part showing, an appellate court may

exercise its discretion to correct the error only if it

‘seriously affects the fairness, integrity or reputation of

judicial proceedings.’” Lynn, 592 F.3d at 577 (quoting

Massenburg, 564 F.3d at 343).

Here, the jury convicted Defendants of money laundering in

violation of 18 U.S.C. § 1956, which is sentenced under United

States Sentencing Guideline (“U.S.S.G.”) § 2S1.1. That

provision of the Sentencing Guidelines says that the base

offense level shall be the offense level for the underlying

offense from which the laundered funds were derived (subject to

conditions not contested here). U.S.S.G. 2S1.1(a)(1). The

underlying offense was health care fraud in violation of 18

U.S.C. § 1347, which is sentenced under U.S.S.G. § 2B1.1. That

provision provides for a base offense level of seven “if (A) the

defendant was convicted of an offense referenced to this

guideline, and (B) that offense of conviction has a statutory

maximum term of imprisonment of 20 years or more[.]” U.S.S.G.

23
§ 2B1.1(a)(1). Otherwise the base offense level is six.

U.S.S.G. § 2B1.1(a)(2).

As the probation officer noted in Defendants’ pre-sentence

reports, the violations of 18 U.S.C. § 1347 subjected Defendants

to a maximum term of ten years’ imprisonment. Only the money

laundering convictions carried a twenty-year statutory maximum.

But the money laundering offense was not “referenced to this

guideline” under U.S.S.G. § 2B1.1(a)(1). 4 Therefore, under

U.S.S.G. § 2B1.1(a), the correct base offense level was six, not

seven, which the district court used here.

The government concedes that the district court should have

used a base offense level of six instead of seven. Regarding

Osuji, the government recognizes that his 211-month sentence was

one month outside the applicable guideline range. The

government nevertheless contends that Osuji has not shown

prejudicial error. We disagree and conclude that the district

court plainly erred in failing properly to calculate Osuji’s

base offense level and that the error affected Osuji’s

substantial rights. See United States v. Godwin, 253 F.3d 784,

4
An offense is “referenced to this guideline” if “this
guideline is the applicable Chapter Two guideline determined
under the provisions of § 1B1.2 (Applicable Guidelines) for the
offense of conviction[.]” U.S.S.G. § 2B1.1 Application Note
2(A). Money laundering in violation of 18 U.S.C. § 1956 is not
referenced to § 2B1.1. See U.S.S.G. Appendix A.

24
789 (4th Cir. 2001) (holding that resentencing was required

where the district court used an incorrect, higher base level).

Because the district court must resentence Osuji, we need not

reach Osuji’s other arguments about his sentence. See United

States v. Llamas, 599 F.3d 381, 387 n.6 (4th Cir. 2010) (not

reaching defendant’s alternative sentencing arguments).

Regarding Varnado, the record shows that her 63-month

sentence falls within the properly calculated guideline range.

We are persuaded, however, that Varnado is also entitled to

resentencing. In Gall, 552 U.S. at 40, the Supreme Court

explained that a district court must begin the sentencing

process by correctly calculating the appropriate guidelines

range. The error in this case therefore appears to be plain.

Regarding whether the error affected Varnado’s substantial

rights, we are cognizant of the fact that the district court

granted Varnado a variance/departure and sentenced Varnado to

the low end of the improperly calculated guideline range (within

a window of 63 to 78 months). It is reasonable to presume that

the district court might have imposed a lower sentence had it

been aware of the correct guidelines range. We therefore hold

that Varnado is entitled to resentencing. See United States v.

McCrary, 887 F.2d 485, 489 (4th Cir. 1989) (holding that

defendant should be resentenced where district court imposed a

sentence under an erroneously calculated guidelines range—even

25
where the sentence imposed fell within the correct range).

Because the district court must resentence Varnado, we need not

reach her other arguments about her sentence. 5 Llamas, 599 F.3d

at 387 n.6.

VIII.

In conclusion, we affirm Osuji’s conviction. We affirm

Varnado’s conviction except as to counts twelve, thirteen,

fifteen, sixteen, and eighteen. We vacate her conviction on

those counts because the district court erred in refusing to

instruct the jury on venue and the error was not harmless. We

also vacate both Defendants’ sentences because the district

court erred in applying an incorrect base level when calculating

the sentences. We remand the case to the district court for

resentencing under the correctly calculated guidelines range.

AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS

5
Varnado argues, for example, that the district court erred
in applying an enhancement pursuant to section 3B1.1 for being
an organizer, leader, manager or supervisor of the money
laundering offense. See U.S.S.G. § 3B1.1. We are concerned
that there may have been insufficient evidence to support this
enhancement. We reserve ruling on the matter, however, in order
to give the parties and the district court the opportunity to
reexamine the issue at resentencing.

26