NOT RECOMMENDED FOR PUBLICATION File Name: 19a0476n.06
No. 18-3620
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED Sep 11, 2019 UNITED STATES OF AMERICA, ) DEBORAH S. HUNT, Clerk ) Plaintiff-Appellee, ) ) ON APPEAL FROM THE v. ) UNITED STATES DISTRICT ) COURT FOR THE JAMES D. MOODY, ) NORTHERN DISTRICT OF ) OHIO Defendant-Appellant. ) )
BEFORE: BOGGS, BATCHELDER, and STRANCH, Circuit Judges.
BOGGS, Circuit Judge. This case arises out of a fraud masterminded by Daniel Morris.
One witness described Morris as “a male Mother T[e]resa.” Instead of giving charity to the poor
of Kolkata, he gave cash, houses, and cars to his employees and associates in Toledo, Ohio. He
paid for these gifts by defrauding the government. Morris was the general manager of a company
called BRIDGES, which had contracts to give job training to recipients of Temporary Assistance
to Needy Families. BRIDGES did provide the training, but Morris overbilled for its services by at
least $3.5 million.
One recipient of Morris’s largesse—almost $560,000 of it—was James Moody, the sole
owner of BRIDGES. Moody received purported dividends, paychecks and health insurance for a
no-show job, money for a vacation, and cash infusions for his struggling real-estate business. All
of this money came out of corporate checking accounts owned by BRIDGES. After the IRS No. 18-3620, United States v. Moody
discovered the overbilling, a jury convicted Moody of conspiracy, federal-program fraud, and
money laundering.
On appeal, Moody contends that the district court abused its discretion by denying his
motion to admit expert testimony. He also challenges the sufficiency of the evidence. Finally, he
argues that his sentence is procedurally unreasonable. Finding these arguments unpersuasive, we
affirm.
I. Background
BRIDGES opened for business in 2001. Moody invested $50,000 to start the company, and
by the time of the events at issue in this case, he was its sole owner. But he “made . . . clear from
the get go that [he] did not want to have any kind of role” in its day-to-day operations. Instead,
Morris served as general manager, and his job “was to run everything.”
From 2004 to 2015, BRIDGES entered into 17 contracts with the Lucas County, Ohio,
Department of Job and Family Services worth about $15.7 million. These contracts related to
TANF, a cash-assistance program for certain low-income households. The federal Department of
Health and Human Services funds TANF by giving block grants to the states. In Ohio, the state
passes the money to county agencies, which administer the program. Lucas County hired
BRIDGES to help TANF recipients find and train for jobs.
BRIDGES was a for-profit company, but its contracts with Lucas County prohibited it from
making a profit on its TANF business. Instead of fixing fees in advance, the contracts required
BRIDGES to pay its own expenses and periodically request reimbursement from the county for
the actual cost of its programs.
This is where the fraud happened. BRIDGES did real work, but Morris inflated the
reimbursement requests. He invented “ghost employees,” overstating the company’s payroll
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expenses, and he also exaggerated his real employees’ transportation expenses. To survive annual
audits by the county, Morris ordered his accountant to keep “a separate set of books.” For further
documentation, Morris and the bookkeeper falsified bank records, audit reports, and board-
meeting minutes. They also created fake time sheets and mileage reports. Morris admitted at trial
that his purpose was to make a profit on the supposedly not-for-profit TANF contracts.
Morris got caught because of a parallel tax-fraud scheme. He withheld payroll taxes from
BRIDGES employees’ paychecks and pocketed the money instead of remitting it to the Treasury.
The IRS found out; its investigation soon uncovered the overbilling scheme. The IRS also learned
that Morris had passed a hefty share of the overbilling proceeds on to Moody.
The payments to Moody totaled $559,806.12, and they fell into four categories.
o Salary: Moody was not a BRIDGES employee and he did no work for the company, but Morris put him on the payroll anyway. Moody’s salary for his no-show job was about $70,000 per year, plus health insurance. Later, the paychecks went to Moody’s wife instead; she also did no work for the company. These payments totaled $396,198.79, and they only stopped when BRIDGES lost its TANF contracts and shut down. o Dividends: Moody received several checks from a BRIDGES account, totaling at least $17,000, that were labeled as dividends. He accepted these checks even though dividends to shareholders were not a reimbursable expense under the not-for-profit TANF contracts.
o Real estate: Moody’s primary business was another company he owned, Flex Realty. “[W]hen things started getting rough in the real estate industry, and Flex Realty was having some trouble,” Morris used BRIDGES money to “help[ ] [Moody] with his cash flow,” to the tune of $14,600. Morris gave Moody more BRIDGES money so that the pair could buy an apartment building as a joint investment. According to Moody, these payments were loans, not gifts, but there were no written agreements, and he never paid Morris back for his share of the apartment building.
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o Miscellaneous personal expenses: Morris used BRIDGES money to help Moody pay for a vacation in Africa and to cover some of Moody’s legal fees when the IRS investigation began.
A grand jury returned a 29-count indictment against BRIDGES, Morris, Moody, and co-
defendants Victoria Hawkins and Angela Bowser. (We address Hawkins’s and Bowser’s appeals,
Nos. 18–3497 and 18–3499, in separate opinions.) Morris pled guilty to reduced charges. The
district court dismissed the charges against BRIDGES on the government’s motion. Moody went
to trial (along with Hawkins and Bowser). The jury convicted him of:
Count(s) Offense Statute 1 Conspiracy to commit program fraud and 18 U.S.C. § 371 mail fraud 2 Program fraud 18 U.S.C. § 666(a)(1)(A) 13 Money-laundering conspiracy 18 U.S.C. §§ 1956(a)(1)(B)(i), 1956(h), 1957(a) 20–22 Money laundering 18 U.S.C. § 1956(a)(1)(B)(i)
The district court sentenced Moody to five and a half years in prison.
II. Excluded Expert Testimony
At trial, Moody moved to call Garth Tebay, a CPA, as an expert witness. The district court
denied his motion, concluding that Tebay’s proposed testimony was “untethered . . . to the facts of
this case,” and therefore “neither relevant nor reliable.” Moody argues that this was an abuse of
discretion. We disagree.
When a litigant wants to introduce expert testimony, the district court has “a gatekeeping
role” and must ensure that the proposed testimony “both rests on a reliable foundation and is
relevant to the task at hand.” Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 597 (1993).
Expert testimony is admissible if, as relevant here:
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1. “the expert’s . . . specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue,”
2. “the testimony is based on sufficient facts or data,” and
3. “the expert has reliably applied the principles and methods to the facts of the case.”
Fed. R. Evid. 702(a)–(b), (d).
“The question before the trial court was specific, not general. The trial court had to decide
whether this particular expert had sufficient specialized knowledge to assist the jurors in deciding
the particular issues in the case.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 156 (1999) (cleaned
up). Put another way, Rule 702 “requires a valid . . . connection to the pertinent inquiry as a
precondition to admissibility.” Daubert, 509 U.S. at 592. Tebay’s proposed testimony was
insufficiently connected to the facts and issues in this case, so the district court did not abuse its
discretion by excluding it. The proposed testimony covered three topics, which we will discuss in
turn.
A
Tebay first would have testified about “the reasonable expectations of the sole owner of a
small, for profit, C Corp.” He planned to opine that “on average, people who invest in small,
closely-held companies make a lot [of] money on their investment,” and therefore “it was not fishy
that Moody got money from BRIDGES for other than his labors.” But the fishiness of Moody’s
arrangement depends on the legitimacy of the company’s profits and the terms of its contracts, and
there is no indication in the record that Tebay read those contracts or knew the details of the
business. No matter how good an accountant he is, Tebay’s opinion would not have been “based
on sufficient facts or data,” so it was inadmissible. Fed. R. Evid. 702(b). See also Gen. Elec. Co.
v. Joiner, 522 U.S. 136, 146 (1997) (“A court may conclude that there is simply too great an
analytical gap between the data and the opinion proffered.”).
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Moody also failed to establish the relevance of Tebay’s statement that on average, small-
business owners profit from their investments. Moody’s defense centered on his own subjective
expectations about his investment in BRIDGES. He claimed that he anticipated making a profit,
and he did not know that BRIDGES was only supposed to be reimbursed for its actual costs, so he
did not find it suspicious when he received infusions of company cash. Tebay would have testified
about something different: the hypothetical expectations of the average small-business owner.
Tebay’s proposed testimony did not address “[t]he particular issue in this case,” so it was
inadmissible. Kumho Tire, 526 U.S. at 157. See also Naeem v. McKesson Drug Co., 444 F.3d 593,
608 (7th Cir. 2006) (holding expert testimony inadmissible where it “appeared to be general
observations regarding what is normal or usual business practice” and was “not tied to specific
portions” of the other evidence in the case).
B
Next, Tebay planned to testify about “the average return on a $50,000 investment in
companies in the Vocational Rehabilitative Services industry operating in the State of Ohio” or
elsewhere in the Midwest “during the relevant time period.” The amount of money Moody got
from BRIDGES “did not exceed the rate of return of the average investor in this industry sector.”
Again, Tebay’s analysis was not connected to Moody’s own expectations about his investment in
BRIDGES. Moody wanted the jury to make the following chain of inferences:
1. The average return on a $50,000 investment in a Midwestern vocational-rehabilitation company during the relevant time period was n dollars per year.
2. Moody believed that BRIDGES was comparable to the average company in this comparison group.
3. Therefore, Moody expected his investment in BRIDGES to also return n dollars per year.
4. BRIDGES paid Moody n dollars per year or less.
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5. Because the money he received from BRIDGES did not exceed his expected return, Moody did not know or suspect the payments to be fraudulent.
Tebay’s testimony would have established Step 1 in this chain. The problem is that Moody’s own
testimony (along with the rest of the evidence in the record) failed to fill in Steps 2, 3, and 5.
Moody never testified that he knew or cared how much the comparator companies made. In fact,
because his day job was in real estate, he knew very little about the industry BRIDGES operated
in. He simply claimed that he expected his investment in BRIDGES to be profitable.
Consequently, this part of Tebay’s proposed testimony lacked foundation. Connecting his
industry-average calculations to Moody’s subjective expectations required “a leap of faith.”
Tamraz v. Lincoln Elec. Co., 620 F.3d 665, 670 (6th Cir. 2010). Without Moody’s testimony to
fill in the missing steps, Tebay’s proposed testimony was merely “a plausible hypothesis,” and
therefore was inadmissible. Ibid.
Moody argues that the industry-average calculations were “as specific as” the law “would
allow.” He points out that expert witnesses in criminal cases “must not state an opinion about
whether the defendant did or did not have a mental state or condition that constitutes an element
of the crime.” Fed. R. Evid. 704(b). Moody seems to think Rule 704(b) limits expert testimony in
criminal cases to general theories, making civil cases like Daubert, Kumho Tire, and Tamraz
inapplicable.
Not so. Rule 704(b) does not override Rule 702’s requirements of relevance and reliability;
it just forbids experts from opining on the ultimate issue of a criminal defendant’s mens rea. So,
for example, a defense expert in a program-fraud case cannot testify that the defendant “lacked an
intent to defraud.” United States v. Frost, 125 F.3d 346, 383 (6th Cir. 1997). But she can testify
that the defendant’s billing practices “made it obvious what he was doing.” Ibid. Similarly, in a
money-laundering case, a government expert may testify that “the effect of a transaction is to
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conceal,” but not that “it was done with an intent to conceal the true nature and disposition of the
funds.” United States v. Warshak, 631 F.3d 266, 324 (6th Cir. 2010). In both examples, the
permissible testimony is still connected to a “particular issue in [the] case.” Kumho Tire, 526 U.S.
at 157. Tebay’s calculations were not, so the district court did not abuse its discretion by excluding
them.
C
The final subject of Tebay’s proposed testimony was “the tax consequences of taking
distributions of profits in the form of salary.” This, too, was inadmissible, because there was no
evidence that these “tax consequences” were the reason for any of the transactions at issue in
Moody’s trial.
While Moody received some checks labeled as “dividends” from BRIDGES, Morris
switched to paying him a salary, even though he was not a BRIDGES employee. This practice “is
not proper from a corporate governance or tax perspective,” as Moody concedes. In closing, the
government went further: It portrayed Moody’s “paycheck for a no-show job” as evidence that he
knew about Morris’s fraud.
Tebay’s proposed testimony was meant to rebut this argument. He would have explained
that salaries “can be deducted from income on the corporate tax return,” and so are only taxed
once, while profits distributed as dividends are taxed twice, once as corporate income and once as
personal income. Thus, Moody claims, there was “a tax savings motive” for putting him on the
BRIDGES payroll, and the arrangement does not imply that he knew about Morris’s overbilling.
This argument fails because nothing in the record suggests that these tax considerations
were actually the reason Moody received BRIDGES paychecks. This makes the proposed
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testimony inadmissible—it would have been “irrelevant, confusing, and perhaps even misleading.”
United States v. Kokenis, 662 F.3d 919, 927 (7th Cir. 2011).
Kokenis is quite similar to this case. The defendant owned a business that “explored for oil
and natural gas.” Id. at 922. He misreported some of his profitable sales as liabilities, and he was
convicted of filing false income-tax returns. Id. at 921–23. “At trial [he] wanted to argue that he
had a good-faith belief that he wasn’t violating the tax laws.” Id. at 926. To support this defense,
he sought to introduce expert testimony from “a tax accounting professor,” who would have
explained that “the pool of capital theory” makes it permissible to characterize “certain sales of
working interests in oil and gas development projects” in the way the defendant did. Id. at 926–
27. But the professor “did not offer any opinion that the theory was applicable to any transaction
in this case,” and the defendant “offered no evidence that he actually relied on the pooling capital
theory” in preparing the returns at issue. Id. at 927.
The district court excluded the professor’s proposed testimony, and the Seventh Circuit
affirmed. Ibid. It explained that “[o]ffering testimony on a theory in general, without tying it to the
case on trial[,] is insufficient.” Ibid. That is exactly what Moody tried to do here: He offered expert
testimony on a general theory of why a shareholder might receive a paycheck instead of a dividend,
without tying that theory to the facts of this case. Moody “offered no evidence that he” or anyone
at BRIDGES “actually relied on” the double-taxation theory. Ibid. Consequently, Tebay’s
proposed testimony about the theory “was properly excluded.” Ibid.
III. Sufficiency of the Evidence
The government needed to prove that Moody knew about the fraudulent origins of the
money he accepted. But when he testified at trial, he claimed complete ignorance of the finances
of BRIDGES, and neither Morris nor the company’s bookkeeper implicated him in the overbilling
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and document-forging. Thus, Moody contends, the evidence of knowledge is insufficient to sustain
his convictions. We disagree.
In sufficiency-of-the-evidence challenges, “the relevant question is 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.” Jackson v. Virginia,
443 U.S. 307, 319 (1979). It is the jury’s job, not ours, “to resolve conflicts in the testimony, to
weigh the evidence, and to draw reasonable inferences from basic facts to ultimate facts.” Ibid.
Each of the charged offenses has a knowledge element. Conspiracy requires proof that the
defendant “knowingly joined an agreement to commit” a crime. United States v. Phillips, 872 F.3d
803, 806 (6th Cir. 2017). The program-fraud statute applies to a defendant who “embezzles, steals,
obtains by fraud, or otherwise without authority knowingly converts to the use of any person other
than the rightful owner” government funds or property. 18 U.S.C. § 666(a)(1)(A) (emphasis
added). Money-laundering conspiracy requires proof that the defendant “knowingly and
voluntarily joined” the agreement. R. 161 at 2412 (so instructing the jury). The substantive money-
laundering offense applies if the defendant engages in certain transactions “knowing that the
property involved . . . represents the proceeds of some form of unlawful activity,” 18 U.S.C.
§ 1956(a)(1), while also “knowing that the transaction is designed . . . to conceal or disguise the
[unlawful] nature” of the proceeds. Id. § 1956(a)(1)(B)(i).
As Moody points out, the government introduced no direct evidence that he knew about
the overbilling. Moody testified that “Dan Morris . . . r[a]n everything,” and he claimed he “had
no idea . . . how BRIDGES worked.” He specifically denied knowing that BRIDGES was only
allowed to bill for its actual costs. Morris testified that he never told Moody what he was up to.
Moody did not prepare the inflated invoices and budgets or deal with the county on financial
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matters. He was not involved in keeping a second set of books or forging financial records, either;
that was Morris and the bookkeeper. And he had no signature authority on the relevant bank
accounts. Thus, a reasonable juror could have voted to acquit Moody.
But it does not follow that no reasonable juror could have voted to convict him. “As we
have noted in the past, it can be difficult to obtain direct evidence of something so internal as intent
to commit fraud.” United States v. Washington, 715 F.3d 975, 980 (6th Cir. 2013). Jurors are
therefore free to “consider circumstantial evidence and draw reasonable inferences from” it. Ibid.
Jurors may also “view [a testifying defendant’s] demeanor and judge his credibility”; on appeal,
“[w]e are loath to override their conclusion.” United States v. Davis, 490 F.3d 541, 550 (6th Cir.
2007).
“[A]fter viewing the evidence in the light most favorable to the prosecution,” a reasonable
juror could have found sufficient evidence of Moody’s knowledge. Jackson, 443 U.S. at 319. First,
Moody received large sums of money, unrelated to BRIDGES business but straight out of
BRIDGES bank accounts, for years. He and his wife received paychecks, even though, as he later
testified, neither of them worked at BRIDGES. His real-estate company also received payments,
even though it had no business relationship with BRIDGES. And he received money for a vacation
and an investment property, even though these expenses were unmistakably purely personal. This
added up to nearly $560,000—none of it connected to any legitimate, reimbursable business
expense.
This alone is sufficient circumstantial evidence that Moody knew about the fraud. See, e.g.,
United States v. Dodson, 817 F.3d 607, 610 (8th Cir. 2016) (holding that evidence of knowledge
was sufficient in another program-fraud case where the defendant was not directly involved in the
overbilling scheme—in part because he “cashed checks for work he knew he did not do . . . from
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an organization he had never worked for”); United States v. Weaver, 220 F. App’x 88, 91–92 (3d
Cir. 2007) (holding, in a wire-fraud case, that the defendant’s receipt of paychecks for a no-show
job was sufficient evidence of specific intent to defraud).
Second, Moody continued accepting these payments for four years after the IRS began
investigating BRIDGES—without once inquiring into their legitimacy or source. The IRS
investigation began in June 2010. On July 28, 2010, Revenue Officer Janet Kimple interviewed
Moody. She gave him a letter explaining that BRIDGES was “not making [its] tax deposits.”
Moody met with the IRS again on October 29, 2010, and Kimple again confronted him about the
unpaid payroll taxes. These were significant events for Moody: “The IRS showed up at the door
and demanded $1,000,000 on the spot. That got [his] attention. . . . [He] was stunned.” And Moody
had known since 2001, when he first met Morris and started BRIDGES, that Morris had “had tax
problems” in the past. That is why the company was incorporated in Moody’s name rather than
Morris’s. So Moody confronted Morris and hired a lawyer. But he did not stop accepting a salary
for a no-show job and reimbursements for personal expenses. He continued cashing BRIDGES
checks for another four years, stopping only in December 2014, a few months before BRIDGES
lost its TANF contracts and shut down.
A reasonable juror could have inferred from all this that Moody “deliberately ignored a
high probability that the money obtained from BRIDGES was procured by fraud.” This was
enough to “find that he . . . had the required knowledge.” R. 161 at 2356–57 (so instructing the
jury). See also United States v. Reeves, 636 F. App’x 350, 354 (6th Cir. 2016) (“The fact that she
neglected to take corrective action upon learning about the fraudulent scheme also provided a
reasonable basis to disbelieve her claim that she was ignorant [of] the fraud being perpetrated.”).
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Third, Moody made false statements to the IRS about his and his wife’s roles in BRIDGES,
in a way that made their no-show paychecks appear justified. In his July 2010 interview with
Kimple, Moody insisted that “he was just a shareholder,” and at their second meeting in October
2010, he repeated that “[h]e was just an investor.” But he changed his story once the IRS’s criminal
investigators took over the case. In June 2012, Special Agent Dean Martin interviewed Moody.
Moody “said that he worked at BRIDGES, and he was compensated for his services there.” He
told Martin that his role “was strategic planning and job development . . . he would use his business
contacts” to place BRIDGES clients with prospective employers. He also said his wife worked at
BRIDGES, performing similar duties. In fact, Moody was not a BRIDGES employee; nor was his
wife. As Moody explained at trial, by the time of the events at issue, he was just a passive investor,
and his wife was “a homemaker.”
A reasonable juror could have inferred from Moody’s false statements that he knew about
the fraud and “sought to conceal his own wrongful acts.” Davis, 490 F.3d at 550. See also Dodson,
817 F.3d at 610 (holding evidence of knowledge to be sufficient where the defendant, who received
paychecks “from an organization he had never worked for[,] . . . lied to an investigator about doing
the work,” describing in detail “the work he supposedly did”).
Fourth, the jury did not have to believe Moody’s self-serving claims of ignorance about
the contracts and finances of BRIDGES. Moody testified that he was not familiar with the terms
of the contracts and had no idea they forbade the payments he accepted. But he also admitted on
cross examination that in his real-estate business, he read the contracts for transactions he was
involved in, advised his clients to do the same, and that this is what a good businessman would do.
Moreover, in the early days of BRIDGES, Moody was responsible for the company’s finances. He
controlled the corporate checkbook and paid the rent and salaries. The jury had “an opportunity to
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view his demeanor and judge his credibility.” Davis, 490 F.3d at 550. It did not have to credit his
story, and it reasonably could have found that he still took an interest in the BRIDGES contracts
and budget. After all, he owned 100 percent of the company.
For these four reasons, viewed in the light most favorable to the government, the evidence
of knowledge is sufficient to sustain Moody’s conviction.
IV. Sentence
Finally, Moody argues that the district court miscalculated the Guidelines range, rendering
his five-and-a-half-year sentence procedurally unreasonable. See Gall v. United States, 552 U.S.
38, 51 (2007). The main factor in the Guidelines calculation was the size of the financial loss
attributable to Moody. The district court found him responsible for about $3.5 million, the amount
diverted by the entire overbilling scheme (including the payments to his co-defendants Hawkins
and Bowser). This yielded a Guidelines range of 63 to 78 months in prison. Moody contends that
he is only responsible for $550,000, the amount he and his wife personally received (with a few
deductions). This would have reduced his Guidelines range to 33 to 41 months.
We see no clear error in the district court’s calculation.
In fraud cases, the Sentencing Guidelines provide for various enhancements based on the
amount of loss. U.S.S.G. § 2B1.1(b). In calculating the loss, the district court considers the
defendant’s “relevant conduct,” including, “in the case of a jointly undertaken criminal activity”
such as a conspiracy, “all acts and omissions of others that were . . . within the scope of the jointly
undertaken criminal activity, in furtherance of that criminal activity, and reasonably foreseeable
in connection with that criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B) (internal numbering
omitted).
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“[W]hether conduct constitutes ‘relevant conduct’ under . . . § 1B1.3(a)(1)(B) is reviewed
de novo, while the underlying factual findings regarding whether that conduct is ‘within the scope’
of, ‘in furtherance’ of, and ‘reasonably foreseeable’ in connection with jointly undertaken criminal
activity are reviewed for clear error.” United States v. Donadeo, 910 F.3d 886, 893 (6th Cir. 2018).
The primary issue in this case is the scope of Moody’s jointly undertaken criminal activity.
“Significantly, this is not necessarily the same as the scope of the entire conspiracy.” Id. at 894–
95 (cleaned up). After Moody was sentenced but before appellate briefing concluded, Donadeo set
out six “factors relevant to determining the scope of the criminal activity that a defendant agreed
to jointly undertake”:
o The existence of a single scheme, o Similarities in modus operandi, o Coordination of activities among schemers, o Pooling of resources or profits, o The defendant’s knowledge of the scope of the scheme, o The length and degree of the defendant’s participation in the scheme.
Id. at 895.
Although it was decided after Moody’s sentencing, Donadeo governs his appeal. See, e.g.,
Bradley v. Sch. Bd. of City of Richmond, 416 U.S. 696, 711 (1974) (“[A] court is to apply the law
in effect at the time it renders its decision, unless doing so would result in manifest injustice or
there is statutory direction or legislative history to the contrary.”); United States v. Schooner
Peggy, 5 U.S. (1 Cranch) 103, 110 (1801) (Marshall, C.J.) (“[I]f subsequent to the judgment and
before the decision of the appellate court, a law intervenes and positively changes the rule which
governs, the law must be obeyed, or its obligation denied.”).
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We find it unnecessary to remand for the district court to analyze Donadeo’s six factors in
the first instance. Neither Moody nor the government requests a limited remand for this purpose.1
Compare United States v. Afriyie, No. 17-2444, 2019 WL 2909164, at *8 (2d Cir. July 8, 2019)
(remanding for recalculation of restitution in light of post-sentencing caselaw, where the defendant
requested a remand and the government “consent[ed]”). Also, while Donadeo endeavored to “state
more clearly what is relevant to determining the scope of the criminal activity that a defendant
agreed to jointly undertake,” it did not explicitly change the law. 910 F.3d at 895. Donadeo
acknowledged that “without articulating them, we have frequently relied on” the six factors in
previous opinions. Ibid.; see id. n.5 (collecting cases). Finally, Moody and the government
addressed many of the same concepts in their sentencing memoranda and at the sentencing hearing,
and the district court’s explanation of its Guidelines calculation was clear enough “to allow for
meaningful appellate review” under the Donadeo framework.2 Gall, 552 U.S. at 50.
The first Donadeo factor is “the existence of a single scheme.” 910 F.3d at 895. This factor
supports the district court’s finding that Moody is accountable for the entire $3.5 million loss. The
overbilling scheme “had a single, unlawful objective—to obtain as much money from [the TANF
program] as possible.” Id. at 896.
The second factor is “similarities in modus operandi.” Id. at 895. This factor also supports
the district court’s finding. Moody, Morris, Hawkins, and Bowser “all defrauded [TANF] in the
1 At oral argument, the government opposed a remand, arguing that Donadeo clarified the law but did not change it, and that the district court properly applied the relevant Guidelines provisions and addressed many of the same concepts as Donadeo. Moody argued that the district court erred with or without Donadeo. 2 Moody argues that the district court failed to explain the basis for its findings regarding the scope of his jointly undertaken criminal activity. A sentencing court always has an “obligation . . . to communicate clearly its rationale for imposing the specific sentence.” United States v. Richardson, 437 F.3d 550, 554 (6th Cir. 2006). But not every case calls for a “lengthy explanation.” Rita v. United States, 551 U.S. 338, 356 (2007). Here, the district court made numerous factual findings on the record, and the transcript of the sentencing hearing makes its rationale clear.
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exact same manner[,]” by accepting overbilled funds out of BRIDGES accounts and using the
money for personal expenses. Id. at 896.
The third factor is “coordination of activities among schemers.” Id. at 895. This factor
supports Moody’s argument that he is only accountable for the money he and his wife accepted.
There is no evidence of coordination between Moody, Hawkins, and Bowser. All three coordinated
with Morris, but not with each other. This contrasts with Donadeo, where two of the defendants
“jointly established and owned” a shell company, and “once the scheme was discovered, the entire
group . . . met . . . to discuss how to respond to the inevitable police investigation.” Id. at 897.
The fourth factor, “pooling of resources or profits,” also supports Moody’s argument. Id.
at 895. There is no evidence that he benefited from Morris’s payments to Hawkins and Bowser—
unlike in Donadeo, where two of the defendants “jointly established and owned” a shell company,
deposited embezzled money in a shared bank account, and used the shared account “to fund check
and debit card purchases.” Id. at 897.
The fifth factor is Moody’s “knowledge of the scope of the scheme.” Id. at 895. While
there is no direct evidence that Moody knew about Morris’s payments to others, the district court
pointed to significant circumstantial evidence at the sentencing hearing. It noted that:
o “Mr. Moody is a businessman . . . who deals with contracts and who was a self- proclaimed entrepreneur.” o Moody “invested $50,000 as seed money for BRIDGES after meeting with [Morris], whom he knew to have had . . . prior problems with the IRS.” o “As a sole shareholder, he should have been aware of annual meetings and a board of directors, but there were no meetings and there was no board.”
For these reasons, the district court found that Moody knew “or should have . . . known” about the
full extent of Morris’s overbilling: “You had to know money was being hidden from Job and
Family Services . . . certainly the money that you took and that Morris took, and . . . you should
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have known other monies were being taken as well.” This may not have been the only possible
finding, but circumstantial evidence in the record supports it.
The sixth factor is the “length and degree of the defendant’s participation in the scheme.”
Donadeo, 910 F.3d at 895. This factor also supports the district court’s finding. Moody participated
in the scheme from 2006 to 2014, longer than Hawkins (2010–2014) and Bowser (2010–2015).
And, like the defendant in Donadeo, Moody “played a ‘middle of the tier’ role in the scheme.” Id.
at 898. As the district court noted, Moody was “an owner—the sole owner—and the only person
who collected so-called dividends.” Hawkins and Bowser, on the other hand, “had more limited
roles in the company.”
In sum, the Donadeo factors lend sufficient (though not unequivocal) support to the district
court’s finding that Moody was responsible for $3.5 million in losses. We acknowledge that this
case does not involve a classic hub-and-spoke conspiracy, in which “concerted action was
contemplated and invited” and each participant “knew that cooperation was essential to successful
operation of the plan.” Interstate Circuit v. United States, 306 U.S. 208, 226 (1939). The district
court could reasonably have relied on the lack of coordination and sharing of resources and profits
to hold Moody responsible for only the money he accepted. See U.S.S.G. § 1B1.3, comment.
(n.4(C)(vi)). But “to be clearly erroneous . . . a decision must strike us as more than just maybe or
probably wrong; it must strike us as wrong with the force of a five-week-old, unrefrigerated dead
fish.” United States v. Perry, 908 F.2d 56, 58 (6th Cir. 1990) (cleaned up). The district court’s
finding regarding the scope of Moody’s jointly undertaken criminal activity does not rise to this
level.
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Finally, Moody points out a factual error in the district court’s explanation of his sentence.
After BRIDGES shut down, Moody tried to start a new company to bid on more TANF contracts.
The district court stated that Moody “attempted to form . . . another company with Morris.” In fact,
there is no evidence in the record that Morris was involved in Moody’s effort. “[S]electing a
sentence based on clearly erroneous facts” is a “significant procedural error.” Gall, 552 U.S. at 51.
Here, however, our review of the sentencing transcript gives no inkling that Moody’s post-
BRIDGES activities were the basis for the district court’s choice of sentence. Instead, the court
appears to have made an isolated mistake about a collateral matter while summarizing the trial
evidence.
V. Conclusion
For these reasons, we AFFIRM Moody’s conviction and sentence.
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