United States v. Roy Hebron
684 F.3d 554 (2012)
Rule of Law:
Where a defendant's fraud is so extensive and pervasive that it is not reasonably practicable to separate legitimate claims for government benefits from fraudulent ones, the burden shifts to the defendant to prove which amounts are legitimate; otherwise, a court may treat the entire amount claimed as the intended loss for sentencing purposes.
Facts:
- Roy Hebron was the mayor of Ball, Louisiana.
- After Hurricane Rita in 2005 and Hurricane Gustav in 2008, Hebron, along with the town clerk Brenda Kimball, applied for disaster relief funds from the Federal Emergency Management Agency (FEMA) on behalf of the town.
- An FBI investigation into the Gustav claim for over $309,000 revealed extensive, systemic fraud.
- Specific fraudulent acts included claiming more expensive equipment than was used, billing for employees who performed no manual labor, and falsifying employee timesheets.
- Hebron and Kimball also double-billed FEMA and a separate nonprofit organization for the same dumpster expenses.
- Hebron knowingly submitted fraudulent claims for employee overtime, which was contrary to both town policy and FEMA rules.
- Hebron held a meeting where he openly discussed 'fudging' time, encouraged employees to sign falsified time sheets, and insisted that police mileage reports be inflated.
Procedural Posture:
- Roy Hebron was indicted on three counts in the U.S. District Court.
- Hebron entered into a written plea agreement, pleading guilty to one count of conspiracy to defraud the United States.
- The plea agreement stipulated that the parties agreed the applicable loss amount was less than $200,000.
- A Presentence Report (PSR) was completed, which calculated the loss amount at over $320,000.
- At the sentencing hearing, the government endorsed the PSR's higher loss calculation, contrary to the plea agreement.
- The district court adopted the PSR's calculation and sentenced Hebron to 48 months' imprisonment and restitution.
- Hebron, the appellant, appealed his sentence to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does a district court commit error in its sentencing calculation by treating the entire amount of a government benefit claim as intended loss when a defendant's pervasive fraud makes it impossible to separate legitimate claims from fraudulent ones?
Opinions:
Majority - Judge Jerry E. Smith
No, the district court did not err. When fraud is so extensive and pervasive that it renders the separation of legitimate and fraudulent claims impracticable, the government's burden is met by showing this pervasiveness; the burden then shifts to the defendant to demonstrate the legitimacy of any portion of the claim. Hebron's fraudulent conduct, which involved fabricating nearly every relevant town record, made it impossible to isolate legitimate expenses. Because Hebron failed to provide any evidence or alternative calculation to show what portion of the FEMA claim was legitimate, the district court reasonably treated the entire amount sought for the Gustav cleanup as the intended loss. This approach prevents a defendant from benefiting from their own extensive wrongdoing that thwarts an accurate loss calculation. While the government did breach the plea agreement by advocating for a loss amount higher than stipulated, this error did not affect Hebron's substantial rights under the plain-error standard because the court's sentencing decision was based on the detailed Presentence Report, not the government's arguments.
Analysis:
This decision establishes a significant burden-shifting framework for calculating loss in pervasive fraud cases within the Fifth Circuit. It prevents defendants from using the complexity and scale of their own fraud as a shield against a higher sentence enhancement. By holding that the inability to parse legitimate from fraudulent claims (due to the defendant's actions) allows the entire amount to be treated as loss, the court makes it more difficult for defendants in complex white-collar cases to challenge the government's loss calculations. This ruling aligns the Fifth Circuit with other circuits, such as the Eighth, solidifying a judicial approach that places the onus on the wrongdoer to untangle the mess they created.
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