United States v. Arthur Fayne

• Court: Court of Appeals for the Sixth Circuit
• Decided: May 21, 2025
• Docket: 24-3409
• Status: Unpublished

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 25a0259n.06

Case Nos. 24-3262/3409

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED May 21, 2025 ) UNITED STATES OF AMERICA, KELLY L. STEPHENS, Clerk ) Plaintiff-Appellee, ) ) ON APPEAL FROM THE UNITED v. ) STATES DISTRICT COURT FOR ) THE NORTHERN DISTRICT OF ARTHUR FAYNE, ) OHIO Defendant-Appellant. ) ) OPINION

Before: GRIFFIN, NALBANDIAN, and MATHIS, Circuit Judges.

MATHIS, Circuit Judge. Arthur Fayne appeals his convictions and the district court’s

restitution order after a jury convicted him on nine counts of wire fraud. Discerning no error, we

affirm.

I.

Arthur Fayne owned Business Development Concepts, LLC (“BDC”), an Ohio company

that “oversaw construction projects and the purchase of equipment, supplies[,] and inventory for

the projects.” R. 106, PageID 1677. Northeast Ohio Neighborhood Health Services, Inc.

(“NEON”) is an Ohio nonprofit corporation that operated as a “federally qualified health center

network of community health centers and provided primary care[] medical services for adults and

children in . . . Cleveland.” Id. NEON’s for-profit subsidiary is Community Integrated Services,

Inc. (“CIS”). NEON sponsored a project, the East Side Market (“ESM”), “to redevelop a vacant

building into a grocery store/community center in the Glenville neighborhood.” Id. Case Nos. 24-3262/3409, United States v. Fayne

NEON employed BDC to oversee and facilitate the project development. Over the course

of the project, the State of Ohio, the City of Cleveland, and Cuyahoga County provided grants to

NEON. The State of Ohio granted $750,000, the City of Cleveland $867,000, and Cuyahoga

County $500,000. So how was the payment process supposed to work? A contractor would submit

an invoice to Fayne’s company BDC; BDC would forward the invoice to NEON; NEON would

loan money to CIS to fund the invoice; CIS would issue payment to BDC for the contractor’s

work; and BDC would pay the contractor.1 Only the payments to contractors Albert M. Higley

Company (“AMHigley”) and Crescent Digital are relevant here.

AMHigley was the general contractor for the ESM project. Between December 2016 and

January 2018, Fayne regularly diverted payments he obtained from NEON that were intended to

fund AMHigley’s general contracting work on the ESM project. By January 2018, out of

$2,629,740.38 that NEON paid Fayne for AMHigley, Fayne paid AMHigley only $1,870,634.46,

creating a $759,105.92 deficit.

As mentioned above, the money that Fayne received from NEON for AMHigley’s work

was supposed to go directly to AMHigley. At trial, NEON’s president and CEO, Willie Austin,

testified that when he approved the invoice payments, he expected “[a]ny dollar amount on any

invoice that said [AM]Higley, . . . was the expense that would go to [AM]Higley.” Id. at 1858.

And AMHigley’s president and CEO, Gareth Vaughan, anticipated receiving payment within 30

to 45 days after invoicing BDC. In February 2018, when AMHigley was owed around $800,000

for unpaid work, Vaughan repeatedly sought payment from Fayne and, ultimately, AMHigley

sued. NEON believed that AMHigley had been paid at that time because NEON had sent the

payments to BDC. Fayne blamed the funding deficiency on the governmental entities failing to

1 Because NEON and CIS are related entities, we will refer only to NEON funding the ESM project payment scheme.

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provide grants. For several reasons, including a funding shortage and other construction

difficulties, AMHigley stopped work on the ESM project for several months. Shortly after that,

Cuyahoga County contributed $500,000 and NEON then started directly paying AMHigley instead

of passing funding through BDC and Fayne “to expedite the payment so that work could begin

again.” Id. at 1879. In total, NEON directly paid AMHigley approximately $2.3 million for work

on the ESM project. Eventually, Fayne and BDC relinquished their ownership interest in the ESM

project.

Crescent Digital installed audio-visual technology and other electronic equipment for the

ESM facility. At Fayne’s request, NEON obtained an equipment loan for $469,771.64. Crescent

Digital submitted an invoice in the amount of $251,297.24 for its services. Fayne initially paid

the entire invoiced amount to Crescent Digital from the equipment loan, but Crescent Digital’s

CEO Michael Heines sought to return a portion of the payment for work that had yet to be

completed. After subtracting a $35,000 personal loan between Heines and Fayne and a seven-

percent finder’s fee for Fayne, both unapproved and uncommunicated to NEON, Heines returned

$125,923.86 to be repaid upon Crescent Digital’s completion of its work on the ESM project.

Fayne directed Heines to deposit the return payment into his wife’s, Gina Fayne, personal account.

Of the approximately $125,000 deposited into Mrs. Fayne’s account, about $89,500 was

transferred to the BDC bank account, and then there were several cash withdrawals and personal

expenditures from Mrs. Fayne’s account shortly after the deposit. When Crescent Digital

completed its work and requested full payment, Fayne could not provide the $125,923.86, but

insisted he “would get the funds soon.” R. 107, PageID 2027. Fayne again blamed the funding

deficiency on the governmental entities providing grants. Fayne later paid Crescent Digital

$93,559.42 after he was indicted, leaving an outstanding balance of $32,364.44.

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A grand jury indicted Fayne on nine counts of wire fraud, in violation of 18 U.S.C. § 1343

(Counts One through Seven related to AMHigley and Counts Eight and Nine related to Crescent

Digital). Fayne proceeded to trial, and a jury convicted him on all counts. The district court

sentenced Fayne to 18 months’ imprisonment. The district court later conducted a restitution

hearing and ordered Fayne to pay $840,074.96 in restitution—$32,364.44 to Crescent Digital,

$478,704.20 to the City of Cleveland, and $329,006.32 to Cuyahoga County. The district court

found that the City of Cleveland and Cuyahoga County assumed NEON’s losses and were

therefore entitled to restitution.

Fayne now appeals his convictions and the restitution order, raising three claims of error:

(1) that the district erred in the way it resolved several evidentiary issues; (2) whether sufficient

evidence supports his convictions; and (3) whether the district court erred in its restitution award.

II.

Fayne raises several challenges to the district court’s evidentiary rulings. We review the

district court’s evidentiary rulings and limitations on cross-examination for an abuse of discretion.

United States v. Hazelwood, 979 F.3d 398, 408 (6th Cir. 2020) (evidentiary rulings); United States

v. Ralston, 110 F.4th 909, 916 (6th Cir. 2024) (limits on cross-examination). We will reverse a

conviction for an evidentiary error if it “caused more than harmless error.” United States v. Fisher,

648 F.3d 442, 449 (6th Cir. 2011) (quotation omitted); United States v. Kettles, 970 F.3d 637, 643

(6th Cir. 2020). An error is harmless if it “does not affect substantial rights.” Fed. R. Crim. P.

52(a). To that end, we must have a “fair assurance that the verdict was not substantially swayed

by the error.” Kettles, 970 F.3d at 643 (internal quotation marks omitted).

First, Fayne argues that the district court erred by not allowing him to adduce evidence that

AMHigley was eventually paid in full for its work on the ESM project. To the extent that such

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evidence was relevant, any error by the district court was harmless. The error was harmless

because Fayne argued and elicited testimony that AMHigley received full payment for its work.

In his opening statement to the jury, Fayne’s counsel asserted that “all the vendors and contracts

were paid” and that “Fayne still has [a] relationship with . . . the vendors.” R. 106, PageID 1702.

AMHigley’s president and CEO testified, during cross-examination, that AMHigley was “paid in

full.” R. 107, PageID 2015. Additionally, Fayne’s expert witness testified that AMHigley

invoiced approximately $3.8 million for its work on the ESM project, but it was paid

approximately $4.1 million, suggesting that AMHigley was paid more than it billed for its services.

To top it off, Fayne’s counsel reiterated in his closing argument that AMHigley “had been fully

paid.” R. 109, PageID 2476–77. We have a “fair assurance” that the district court’s alleged error

did not substantially sway the jury’s verdict. See Id.

Second, Fayne argues that the district court improperly limited evidence about the charged

offenses to a thirteen-month timeframe from January 2017 to January 2018. He contends that

extending the pertinent timeframe would have allowed him to present evidence that all contractors

for the ESM project were paid in full.

Once again, any error was harmless. Fayne’s counsel, as mentioned above, told the jury

that all vendors and contractors had been paid for their work on the ESM project. NEON’s

president and CEO testified that Fayne did not owe NEON money. And Fayne’s expert testified

that the total payments that AMHigley received from February 2016 to October 2018, a period of

approximately 33 months, exceeded the amount of AMHigley’s invoices.

Third, Fayne argues that the district court improperly limited the testimony of his expert

witness. Fayne submitted his first expert report in August 2023 that detailed how “the spending

and grant reimbursements were appropriate and in accordance with the grant documents.” D. 47

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at p.37. Later, on October 16, 2023, the day before trial, Fayne submitted a supplemental report

that focused more on the transactions between his bank accounts and the total money AMHigley

received in relation to what it invoiced. The district court excluded this report as untimely and

permitted testimony only within the bounds of the first expert report.

Federal Rule of Criminal Procedure 16(b)(1)(C)(ii) requires defendants to provide expert

disclosures “sufficiently before trial to provide a fair opportunity for the government to meet the

defendant’s evidence.” Because Fayne’s supplemental expert report did not comply with this rule,

the district court did not abuse its discretion in limiting the expert testimony to the bounds of the

first expert report. See United States v. Lang, 717 F. App’x 523, 537 (6th Cir. 2017) (upholding a

district court’s decision to bar a defendant’s expert witnesses from testifying as the defendant

failed to comply with Rule 16(b)(1)(C)’s notice requirements for those witnesses).

III.

Fayne next argues that the government failed to present sufficient evidence supporting his

wire-fraud convictions and, therefore, the district court erred in denying his motion for judgment

of acquittal. We review sufficiency-of-the-evidence challenges de novo. United States v.

Shanklin, 924 F.3d 905, 917 (6th Cir. 2019). In assessing the sufficiency of the evidence, we

consider “whether, after viewing the evidence 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.” Musacchio v. United States, 577 U.S. 237, 243 (2016) (quotation omitted). We do not

“reweigh the evidence, reevaluate the credibility of witnesses, or substitute our judgment for that

of the jury.” United States v. Ledbetter, 929 F.3d 338, 353 (6th Cir. 2019) (quotation omitted).

And “we draw all reasonable inferences in support of the jury’s verdict and will reverse a judgment

for insufficient evidence only if the judgment is not supported by substantial and competent

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evidence upon the record as a whole.” United States v. Vichitvongsa, 819 F.3d 260, 270 (6th Cir.

2016) (internal quotation marks omitted). Defendants bringing sufficiency-of-the-evidence

challenges bear a “very heavy burden.” Id. (quotation omitted).

The wire-fraud statute makes it a crime for:

Whoever, having devised . . . any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire . . . in interstate or foreign commerce, any writings . . . for the purpose of executing such scheme or artifice. . . .

18 U.S.C. § 1343. Thus, to convict Fayne of wire fraud, the government had to prove “(1) a

scheme or artifice to defraud; (2) use of interstate wire communications in furtherance of the

scheme; and (3) intent to deprive a victim of money or property.” United States v. Robinson, 99

F.4th 344, 354 (6th Cir. 2024) (quotation and footnote omitted). Fayne does not challenge the

interstate-wire-communications element.

As to the first element, “[a] scheme to defraud includes any plan or course of action by

which someone intends to deprive another . . . by deception of money or property by means of

false or fraudulent pretenses, representations, or promises.” United States v. Daniel, 329 F.3d 480,

485 (6th Cir. 2003) (quotation omitted). This element is “a reflection of moral uprightness, of

fundamental honesty, fair play and right dealing in the general and business life of members of

society.” Robinson, 99 F.4th at 354 (internal quotation marks omitted). To establish the scheme-

to-defraud element, “the government must prove that the defendant said something materially

false,” thereby influencing the decision of a person of “ordinary prudence and comprehension.”

Id. at 354–55 (quotations omitted).

For the intent-to-deprive element, the government needed to prove Fayne’s intent to

defraud by showing his misrepresentations caused NEON to give Fayne money that it would

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otherwise not have in the absence of the fraud. Daniel, 329 F.3d at 487. An intent to deprive may

exist “even if only in the short-term,” id., meaning a “good faith belief that the victim will be

repaid and will sustain no loss is no defense at all,” United States v. Bravata, 636 F. App’x 277,

287–88 (6th Cir. 2016) (quotation omitted). Importantly, “[i]t must also be borne in mind that the

question of intent is generally considered to be one of fact to be resolved by the trier of the facts

. . . and the determination thereof should not be lightly overturned.” United States v. Hopkins, 357

F.2d 14, 18 (6th Cir. 1966) (citations omitted).

The government presented sufficient evidence to convict Fayne of wire fraud for his

conduct diverting payments from NEON intended for AMHigley. At trial, the government

presented evidence that Fayne invoiced NEON for $2,629,740.38 for AMHigley’s work on the

ESM project but only paid $1,870,634.46 to AMHigley. The government showed that Fayne made

several concurrent and substantial personal expenditures immediately after receiving payments

from NEON and that Fayne never fully reimbursed AMHigley for the amount on the invoices.

The government’s wire-fraud theory was as follows. Fayne represented that money was

owed to AMHigley on the invoices he submitted. Based on that representation, NEON paid Fayne

that money believing the indicated amount would reach AMHigley. Fayne did not transfer the

indicated amount to AMHigley. As a result, Fayne’s failure to disburse funds in the manner that

he represented on the invoices amounts to a material misrepresentation that NEON may not have

agreed to in the absence of the misrepresentation. See Daniel, 329 F.3d at 487.

Fayne responds that he never “represented to NEON or CIS that he had already paid the

contractors or that he would immediately pay the subcontractors out of the proceeds of the funds

provided by NEON and CIS.” D. 47 at p.48. And while he maintains that AMHigley was

eventually paid, Fayne did not make those payments. In fact, NEON made up the deficit caused

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by Fayne. So even if Fayne did not represent that he would immediately pay AMHigley, he never

paid AMHigley the amount owed. Thus, any arguments sounding in installment-payment

principles to negate Fayne’s intent to deprive NEON of money must fail.

Further, Fayne contends that he paid other ESM contractors instead of AMHigley. But that

does not diminish his intent to deprive NEON of money because NEON expected that “[a]ny dollar

amount on any invoice that said [AM]Higley, . . . was the expense that would go to [AM]Higley.”

R. 106, PageID 1858. So if the money went somewhere other than AMHigley, a rational jury

could find that Fayne made material misrepresentations to NEON about the destination of the

requested funds.

The government also presented sufficient evidence to support Fayne’s wire-fraud

convictions as to Crescent Digital. The government showed that Fayne directed Crescent Digital’s

owner, Heines, to transfer $125,923.86 to Gina Fayne’s account to be set aside and repaid upon

Crescent Digital’s completion of its work on the ESM project. As a condition for transferring the

advance payment back to Fayne, Heines expected “two equal payments,” with one “closer to

completion” and “the [remaining] balance due after [Crescent Digital] complete[d] all install

work.” R. 87-1, PageID 1278. But Fayne could not pay Crescent Digital the money after it

completed the work. Instead, as the trial evidence showed, shortly after the deposit into Mrs.

Fayne’s account, approximately $89,500 was transferred to the BDC bank account and there were

several cash withdrawals and personal expenditures from the account. Giving the government “the

benefit of all reasonable inferences from the testimony,” United States v. Graham, 622 F.3d 445,

448 (6th Cir. 2010) (quotation omitted), the evidence shows that Heines likely would not have

entrusted Fayne with the conditional return payment had he disclosed his fraudulent plans, see

Daniel, 329 F.3d at 487.

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Fayne contends Heines “voluntarily gave” Fayne’s wife the return payment and that his

“failure to return it upon demand” is not a crime. D. 47 at p.46. But his argument is misguided

and unsupported by caselaw. “A scheme to defraud is not measured by a ‘technical standard,’ but

rather is a ‘reflection of moral uprightness, of fundamental honesty, fair play and right dealing in

the general and business life of members of society.’” United States v. Rathburn, 771 F. App’x

614, 621 (6th Cir. 2019) (quoting United States v. Van Dyke, 605 F.2d 220, 225 (6th Cir. 1979)).

In Rathburn, we held that the defendant made a material misrepresentation when he

supplied specimens positive for HIV and Hepatitis B to medical professionals because the contract

indicated the defendant would provide screening for such diseases. Id. The defendant argued that

he merely agreed to screening the specimens which was “[f]ar from a contractual promise of a

disease-free specimen.” Id. (alteration in original). Applying a “common-sense” standard, we

reasoned that the “ordinary understanding of a promise to ‘test’ and ‘screen’ for HIV and hepatitis

creates a reasonable understanding that [the defendant] would not supply specimens in spite of a

positive result.” Id.

That same rationale applies here. The communications between Fayne and Heines created

a “reasonable understanding” that Fayne would hold funds in escrow with the expectation that he

would remit it upon completion of Crescent Digital’s work. See id. A jury could find that Fayne

acted with the intent to defraud by funneling that money elsewhere immediately after receiving it.

See id. Thus, sufficient evidence supports Fayne’s wire-fraud convictions related to the scheme

to defraud Crescent Digital.

IV.

Finally, Fayne argues that the district court erred with its restitution award. “We review

the propriety of ordering restitution de novo and the amount of restitution ordered for abuse of

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discretion.” United States v. Ruiz-Lopez, 53 F.4th 400, 404 (6th Cir. 2022) (quotation omitted).

“[F]ederal courts have no inherent power to award restitution,” so such orders are proper only if

“authorized by statute.” United States v. Church, 731 F.3d 530, 535 (6th Cir. 2013) (quotation

omitted).

The Mandatory Victims Restitution Act requires that district courts order restitution when

sentencing a defendant convicted of an offense “in which an identifiable victim or victims has

suffered a . . . pecuniary loss.” 18 U.S.C. § 3663A(a)(1), (c)(1)(B). A victim is a person “directly

and proximately harmed as a result of the commission of an offense for which restitution may be

ordered.” Id. § 3663A(a)(2). However, if the victim received compensation from another source

with respect to a loss, the district court must “order that restitution be paid to the person who

provided . . . the compensation.” Id. § 3664(j)(1). The “district court has wide latitude to

determine the amount of a victim’s losses.” United States v. Patel, 711 F. App’x 283, 287 (6th

Cir. 2017) (citing 18 U.S.C. § 3664(f)(1)(A)).

Fayne diverted $759,105.92 from NEON intended for AMHigley. The government claims

Fayne used the funds for personal expenditures; Fayne asserts he used all the money he was given

by NEON for the ESM project. The exact place or entities Fayne directed the diverted funds to

does not matter because Fayne admitted at trial and confirmed at the restitution hearing that he

failed to pay all the money due to AMHigley. NEON eventually made up the deficit owed to

AMHigley. So, NEON essentially paid the $759,105.92 twice: once to Fayne, which he did not

properly remit to AMHigley, and the second time to AMHigley directly. Thus, NEON is a victim

because it was “directly and proximately harmed as a result of” Fayne’s criminal conduct. 18

U.S.C. § 3663A(a)(2). The district court properly ordered restitution because Fayne caused NEON

“pecuniary loss.” Id. § 3663A(a)(1), (c)(1)(B).

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At the time of Fayne’s fraud, NEON received grants from the City of Cleveland and

Cuyahoga County totaling approximately $1.4 million. Because of those grants, NEON claims it

was made whole and Fayne does not owe it any money. But when the City of Cleveland and

Cuyahoga County granted NEON money to pay AMHigley’s invoice a second time, they assumed

NEON’s $759,105.92 loss under 18 U.S.C. § 3664(j)(1). Accordingly, the City of Cleveland and

Cuyahoga County are entitled to the restitution ordered by the district court because they

compensated NEON for its $759,105.92 loss. See id. § 3664(j)(1).

For Crescent Digital, the district court properly calculated the restitution award. Heines

returned $125,923.86 of the advance payment back to Fayne to hold until Crescent Digital

completed its work on the ESM project. After Fayne was indicted, he paid Crescent Digital

$93,559.42, leaving a balance of $32,364.44. At the restitution hearing, the government offered

an invoice from Crescent Digital confirming the outstanding balance. Thus, the district court did

not abuse its discretion in awarding $32,364.44 in restitution to Crescent Digital given the record

evidence.

Fayne offers nothing more than a bare denial. He asserts that Crescent Digital’s restitution

calculation is improper because no evidence connects the invoice relied upon by the district court

to the charged conduct from 2018. Without support and stacked against evidence to the contrary,

Fayne’s argument fails.

V.

For these reasons, we AFFIRM the district court’s judgment.

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