Appellate Case: 23-1192 Document: 010111086158 Date Filed: 07/29/2024 Page: 1 FILED United States Court of Appeals PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS July 29, 2024 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 23-1192
FRANCIS F. JOSEPH,
Defendant - Appellant. _________________________________
Appeal from the United States District Court for the District of Colorado (D.C. No. 1:21-CR-00083-RM-1) _________________________________
Elizabeth A. Franklin-Best, Elizabeth Franklin-Best, P.C., Columbia, South Carolina, for Defendant – Appellant.
John J. Liolos, Trial Attorney (Nicole M. Argentieri, Acting Assistant Attorney General; Lisa H. Miller, Deputy Assistant Attorney General, with him on the brief), Fraud Section, Criminal Division, U.S. Department of Justice, Washington, D.C., for Plaintiff – Appellee. _________________________________
Before McHUGH, MURPHY, and CARSON, Circuit Judges. _________________________________
MURPHY, Circuit Judge. _________________________________
I. Introduction
Dr. Francis Joseph was the founder of Springs Medical Associates (“Springs
Medical”), a medical practice based in Colorado Springs, Colorado. Following an ill- Appellate Case: 23-1192 Document: 010111086158 Date Filed: 07/29/2024 Page: 2
fated corporate governance agreement which installed a new Chief Operating Officer
(“COO”), Joseph concocted a scheme for the alleged purpose of regaining control of
the practice. Between March and June 2020, he submitted several false and
unauthorized applications to federal COVID-19 relief programs on Springs Medical’s
behalf. As a result, Joseph received over $250,000 in federal aid, which he disguised
from Springs Medical leadership and ultimately misspent for personal gain.
In 2023, a jury convicted Joseph of two fraud-based counts. On appeal, he
argues insufficient evidence existed to demonstrate he possessed the requisite intent
to commit the offenses. He also presents several challenges to his trial and sentencing
proceedings, including that the district court improperly (a) limited his cross-
examination and introduction of evidence; (b) admitted expert testimony as lay
testimony; (c) allowed the government to introduce Fed. R. Evid. 404(b)(1)
propensity evidence; (d) declined to provide clarifying jury instructions; and (e)
miscalculated the economic loss under the sentencing guidelines occasioned by his
offenses. This court concludes the record is replete with direct and circumstantial
evidence that Joseph intended to commit fraud through his relief program
applications. Further, except for the district court’s admission of expert testimony in
the guise of lay testimony, which was harmless, the district court neither erred in
sentencing nor abused its discretion in conducting Joseph’s trial. Thus, exercising
jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a), this court affirms
the district court’s judgment.
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II. Background
a. Federal Relief Programs
Joseph completed unauthorized applications for two federally funded relief
programs: the Accelerated and Advance Payment Program (“AAP”); and the
Paycheck Protection Program (“PPP”). In light of the strain caused by the COVID-19
pandemic on national healthcare, the Centers for Medicare and Medicaid Services
(“CMS”) expanded the existing AAP to cover a broader range of Medicare providers.
The program supplied funds to providers who experienced disruptions in Medicare
claim submissions and processing. As long as applicants met basic criteria, AAP
allowed providers to request a loan of up to 100% of Medicare payments for a three-
month period. The loans permitted providers to receive full payment for claims until
the date of recoupment, which began one year following the issuance of the loan.
During this collection period, Medicare automatically offset amounts owed for new
claims to repay the advanced funds.
PPP was authorized by the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act in March 2020 to help businesses weather the unpredictable
economic conditions caused by the pandemic. The loans were facilitated by the Small
Business Administration (“SBA”) and were forgivable if used for the limited
purposes of payroll retention and paying mortgage interest, rent, or utilities. To
obtain a PPP loan, a qualifying business had to submit a signed application from an
authorized representative of the company. Candidates were further required to certify
their acknowledgment of the program rules and provide payroll details. Both PPP and
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AAP loans were processed by third-party lenders, which coordinated with
government entities to ensure applicants were properly approved and received the
correct amount of relief.
b. Factual & Procedural History
Joseph was the founder and managing physician of Springs Medical. He
managed and controlled the practice until January 29, 2020, when Springs Medical
adopted a document entitled “Joint Action by Written Consent of the Directors and
Shareholders of [Springs Medical]” (the “Joint Action Document”). The Joint Action
Document appointed Eric Papalini as Springs Medical’s COO and bestowed upon
him the authority and discretion to “make all actions necessary or desirable related to
the operation of [Springs Medical].” As particularly relevant here, Papalini’s
authority included, “without limitation, the authority to hire and fire employees,
manage [Springs Medical’s] banking accounts, make all decisions regarding [Springs
Medical’s] finances, borrow money in the name of [Springs Medical], make any
contracts, enter into any transactions and make and obtain any commitments on
behalf of [Springs Medical] deemed necessary or appropriate in his sole direction.”
After the Joint Action Document was executed, Joseph retained his shareholder
status, but his day-to-day role was reduced to serving as a physician-employee.
On the same day that Congress signed the CARES Act into law, March 27,
2020, Joseph opened an unauthorized bank account in Springs Medical’s name
(hereafter, the “Unauthorized Bank Account”), making himself the sole signatory.
His actions violated the terms of the Joint Action Document, which vested control of
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practice finances in Papalini. Joseph, however, claimed he opened the Unauthorized
Bank Account because of a dispute with Papalini over his leadership and business
decisions. He took offense to Papalini’s behavior and purportedly considered it wise
to disguise his financial dealings in preparation to oust Papalini from practice
operations.
On or about March 29, 2020, Joseph applied for AAP relief on behalf of
Springs Medical without authorization from Papalini. He requested the maximum
available loan and certified the request was due to billing complications caused by
COVID-19. Notably, evidence presented at trial suggests no such complications were
present at the time Joseph submitted his request. Joseph’s application was approved
and on April 7 the assigned lender made a payment of $86,747.11 to Springs
Medical’s authorized business bank account (hereafter, the “Official Business
Account”). Within twenty-four hours, Joseph transferred $92,000 from this account
to his minor daughter’s bank account, which he controlled.
On April 3, Joseph applied for an unauthorized PPP loan in Springs Medical’s
name. His application listed his personal residence as the business address, used
Springs Medical’s Employer Identification Number (“EIN”), and sought $500,000 in
assistance. He claimed $200,000 in monthly payroll, covering thirty-eight employees.
The selected lender, Fountainhead Commercial Capital (“Fountainhead”), denied
Joseph’s application. It explained that another PPP loan request using Springs
Medical’s EIN had already been submitted. In fact, Springs Medical had previously
tendered an authorized PPP loan application for $253,500.
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Shortly thereafter, Springs Medical’s office manager, Nicole Dennis, learned
Joseph had removed funds from the Official Business Account following his
successful AAP loan application. Dennis called Joseph, requesting he return the
money so the practice could pay its employees. Joseph curtly refused. On April 14,
2020, Papalini terminated Joseph for transferring funds from the Official Business
Account without approval. A week later, on April 21, Joseph filed a state-court civil
lawsuit formally seeking to regain control of the practice. On May 7, 2020, the state
court issued an order declaring that the Joint Action Document governed and Papalini
controlled Springs Medical. Despite the order, Joseph appeared at Springs Medical
on May 28 and attempted to fire Papalini in a last-ditch effort to take over the
practice. Police arrived to diffuse the situation and Joseph left the premises
unsuccessful.
On June 24, 2020, well after he ceded his financial duties and was formally
severed from the practice, Joseph submitted another PPP loan application on behalf
of Springs Medical. He represented himself as owner of the practice and requested
$179,000 in relief. Instead of using Springs Medical’s EIN, Joseph’s application
listed his own social security number. Despite his ouster, he claimed monthly payroll
needs of $72,000, covering thirty-four employees. As to how the funds would be
used, Joseph selected the “other” box on the application. He claims he believed this
selection allowed him to utilize the funds outside the program’s restricted spending
categories. Although he knew otherwise, Joseph also certified that Springs Medical
had not received a prior PPP loan. The loan processor, Kabbage, Inc. (“Kabbage”),
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approved the application and issued $179,000 to the Unauthorized Bank Account
Joseph set up in March. Joseph admitted to ultimately using the money from both
successful loans for his own benefit. After channeling the funds to his personal
accounts, he misspent the relief on a range of goods and services, including vacation,
home improvement, car payments, rent, child support, personal legal expenses, and
adult entertainment.
On March 17, 2021, a federal grand jury charged Joseph with four counts:
embezzlement or theft of health care benefit program funds in violation of 18 U.S.C.
§ 669 (Count One); embezzlement or theft of government property in violation of 18
U.S.C. § 641 (Count Two); wire fraud in violation of 18 U.S.C. § 1343 (Count
Three); and false statements in bankruptcy in violation of 18 U.S.C. § 152(3) (Count
Four). The prosecution voluntarily dismissed Count Four prior to trial. Following a
five-day trial in January 2023, the jury convicted Joseph of Count One, which was
specifically predicated on fraud related to his AAP loan application; and Count
Three, which was based on his misuse of the PPP loan system. The jury acquitted
Joseph of Count Two. Joseph was sentenced to thirty months’ imprisonment,
followed by three years of supervised release. The district court also ordered Joseph
to pay restitution of $86,717.11 to CMS and $179,999 to SBA.
III. Analysis
a. Sufficiency of Evidence
This court reviews the sufficiency of evidence supporting a conviction de
novo. United States v. Anaya, 727 F.3d 1043, 1050 (10th Cir. 2013). “We take the
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evidence—both direct and circumstantial, and reasonable inferences drawn from that
evidence—in the light most favorable to the government and ask only whether a
reasonable jury could find the defendant guilty beyond a reasonable doubt.” Id.
(quotations and alteration omitted).
Count One of Joseph’s indictment required for conviction that he “knowingly
and willfully embezzle[d], st[ole], or otherwise without authority convert[ed] . . . , or
intentionally misapplie[d] any of the moneys, . . . of a health care benefit program.”
18 U.S.C. § 669; United States v. Maynard, 984 F.3d 948, 962 (10th Cir. 2020).
Similarly, Count Three of the indictment for wire fraud required he intentionally
“devise[d] any scheme or artifice to defraud, or . . . obtain[ed] money or property by
means of false or fraudulent pretenses.” 18 U.S.C. § 1343; United States v. Hay, 95
F.4th 1304, 1311 (10th Cir. 2024). Joseph asserts no direct evidence demonstrates he
had intent to defraud or intentionally misapply funds from either federal relief
program at the time he submitted his applications. Instead, Joseph claims his
applications were intended innocently as a means of trying to regain control of
Springs Medical from Papalini.
Given the facts in this case, this court does not disagree with Joseph’s
argument that focus must be on his intent at the time he submitted the applications.
Importantly, however, he provides absolutely no authority to support his apparent
contention that evidence of his actions before and after submitting the applications
are not capable of demonstrating unlawful intent. Rather, “[b]ecause it is difficult to
prove intent to defraud from direct evidence, a jury may consider circumstantial
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evidence of fraudulent intent and draw reasonable inferences therefrom.” United
States v. Bailey, 327 F.3d 1131, 1140 (10th Cir. 2003); see United States v. Magleby,
241 F.3d 1306, 1312 (10th Cir. 2001) (collecting cases for same rule in non-fraud-
based intent crimes); see also United States v. Christy, 916 F.3d 814, 843 (10th Cir.
2019) (highlighting importance of circumstantial evidence for determining intent
under a sufficiency analysis). “[I]ntent may be inferred from evidence that the
defendant attempted to conceal activity” and “[i]ntent to defraud may be inferred
from the defendant’s misrepresentations, knowledge of a false statement as well as
whether the defendant profited or converted money to his own use.” Bailey, 327 F.3d
at 1140 (quotation omitted). It is the totality of the evidence, and the reasonable
inferences drawn therefrom, which supports our sufficiency analysis. See Anaya, 727
F.3d at 1050. “Thus, even when a defendant, as here, denies having the requisite
intent, a jury may disbelieve the defendant if his words and acts in the light of all the
circumstances make his explanation seem improbable.” Magleby, 241 F.3d at 1312
(quotation and alterations omitted).
Robust direct and circumstantial evidence exists to support Joseph’s
convictions on both counts. Contrary to Joseph’s arguments, much of this evidence is
contemporaneous to when he filed his applications. For instance, Joseph made
numerous false certifications on the face of his applications, including that Springs
Medical was suffering Medicare claims processing delays due to COVID-19; that he
was authorized to apply for loans on Springs Medical’s behalf; and that the business
had not previously received a PPP loan. He also set up a fraudulent bank account in
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the practice’s name and moved tens of thousands of dollars from Springs Medical’s
Official Business Account into his daughter’s account for the purpose of concealing
his financial activity. He further attempted to disguise his transactions by using his
home address on relief applications and by applying for funds under his social
security number after learning that using the business’s EIN would prove fatal.
Additionally, it is undisputed that Joseph primarily used the relief money for his own
benefit. In violation of program rules that he certified he understood, he spent
handsomely on personal legal expenses, home improvement, and phone sex
operators, among many other things. His actions were knowingly in violation of the
Joint Action Document and further contravened an ensuing state court order
enforcing that document. The extensive evidence of Joseph’s misrepresentations,
covert financial activity, and self-enrichment from the time of his applications and
thereafter certainly supports a reasonable jury’s conviction on both fraud counts.
Bailey, 327 F.3d at 1140.
b. Cross-Examination & Exhibit Introduction
We review challenges to district court evidentiary rulings for abuse of
discretion. United States v. Silva, 889 F.3d 704, 709 (10th Cir. 2018). An abuse of
discretion occurs when the district court “renders an arbitrary, capricious, whimsical,
or manifestly unreasonable judgment.” Id. (quotation omitted). Under this standard,
“we will not reverse the district court without a definite and firm conviction that the
lower court made a clear error of judgment or exceeded the bounds of permissible
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choice in the circumstances.” United States v. Griffin, 389 F.3d 1100, 1103 (10th Cir.
2004) (quotation omitted).
Joseph argues the district court made two meaningful and improper evidentiary
rulings. First, he asserts the district court inappropriately denied him the opportunity
to fully cross-examine SBA counsel, Mary Beth Cvengros, and Kabbage employee,
Valerie Martin. Specifically, Joseph intended to emphasize on cross that Kabbage
had a practice of inadequately vetting relief applications and, therefore, made it
easier for Joseph to obtain funds without scienter. Joseph further hypothesized that
federal investigation into Kabbage’s due diligence practices impacted its motivation
to participate in the trial. The district court determined Kabbage’s impropriety did not
illustrate or affect Joseph’s underlying mens rea and refused further cross-
examination on the matter. Second, Joseph claims the district court erred in denying
his request to submit an exhibit of Springs Medical’s authorized PPP loan from May
2020. Joseph suggested the exhibit would clarify the extent to which he was aware of
a prior PPP loan when he applied for his second unauthorized loan in June 2020. The
district court denied the introduction of the exhibit because it was not relevant to
determining Joseph’s intent and it risked misleading the jury. Instead, the district
court permitted Joseph to testify to his understanding of the situation without the loan
document for support.
District courts are given “broad discretion to limit the cross-examination” of
witnesses. United States v. Pearson, 798 F.2d 385, 388 (10th Cir. 1986). Here, there
was no “nexus” between Kabbage’s shortcomings as a lender and Joseph’s intent to
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defraud federal relief programs. United States v. Jones, 213 F.3d 1253, 1261 (10th
Cir. 2000); see also United States v. John, 849 F.3d 912, 918 (10th Cir. 2017)
(holding limitation of cross-examination was proper when the proposed questioning
was not “even marginally relevant” to the underlying issue at hand). Kabbage’s
history of imprecise application review and the federal investigation thereof do not
remotely relate to Joseph’s offenses. As the district court noted, it appears the desired
cross-examination would serve only to deflect blame onto the lender. The negligence
of another party “in failing to discover a fraudulent scheme,” however, “is not a
defense to criminal conduct.” United States v. Svete, 556 F.3d 1157, 1167 (11th Cir.
2009) (quotation omitted). Absent a viable connection between Kabbage’s behavior
and Joseph’s fraud, we conclude the district court’s decision to limit the cross-
examination of Cvengros and Martin was not arbitrary.
Similarly, whether to exclude evidence is within the “sound discretion” of the
district court. United States v. Perrault, 995 F.3d 748, 764 (10th Cir. 2021). Here, the
district court reasonably concluded the introduction of the PPP loan exhibit did little
to illuminate Joseph’s state of mind and would serve to support his unrelated theory
that other people were at fault for his actions. See generally United States v. Keck,
643 F.3d 789, 795 (10th Cir. 2011) (upholding exclusion of exhibits on the grounds
of “relevancy, waste of time, and confusion of the jury”). Further, this court struggles
to find any prejudice in the district court’s determination given that Joseph was fully
allowed to present his desired evidence through his own testimony. See id. In turn,
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we conclude the district court did not abuse its discretion by excluding the Springs
Medical PPP loan exhibit.
c. Expert & Lay Testimony
This court reviews a district court’s decision to admit or exclude expert
testimony for abuse of discretion. United States v. Starks, 34 F.4th 1142, 1170 (10th
Cir. 2022); see also Fed. R. Evid. 702 (describing rules governing expert testimony).
Generally, Fed. R. Evid. 701(c) ensures that lay testimony is “not based on scientific,
technical, or other specialized knowledge within the scope of Rule 702.” Lay
witnesses are typically allowed to provide “observations that are common enough
and require a limited amount of expertise, if any.” James River Ins. Co. v. Rapid
Funding, LLC, 658 F.3d 1207, 1214 (10th Cir. 2011) (quotation and alteration
omitted). “The prototypical example” of such evidence “relates to the appearance of
persons or things, identity, the manner of conduct, competency of a person, degrees
of light or darkness, sound, size, weight, distance, and an endless number of items
that cannot be described factually in words apart from inferences.” Id.
At trial, the government offered “certified fraud examiner,” Michael Petron, as
a witness to explain Joseph’s banking transactions. Absent an expert designation, the
district court allowed the prosecution to use Petron as a lay witness, provided he
limited his explanations to relatively rudimentary arithmetic. Although Petron’s
testimony largely relied on addition and subtraction, the scope of his testimony was
broad and its content was detailed. After selecting a “conservative” methodology for
tracking funds, Petron provided an in-depth portrait of “eight or nine” different bank
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accounts based on analysis of “thousands of transactions.” His testimony provided a
thorough summary of how Joseph’s various transactions related to one another and
illustrated how the relief funds went from issuance to being spent on personal
expenses.
When considering math, a lay witness is free to provide testimony that utilizes
“basic arithmetic.” Frappied v. Affinity Gaming Black Hawk, LLC, 966 F.3d 1038,
1057 (10th Cir. 2020) (holding that taking the median of several numbers qualified as
basic); Bryant v. Farmers Ins. Exch., 432 F.3d 1114, 1124 (10th Cir. 2005) (“Taking
a simple average of 103 numbers, though technically a statistical determination, is
not so complex a task that litigants need to hire experts in order to deem the evidence
trustworthy.”). Testimony is no longer lay testimony, however, if it moves beyond
basic mathematics by considering advanced topics or by requiring the selection of a
mathematic methodology. See James River Ins., 658 F.3d at 1214 (“Unlike taking an
average, calculating depreciation requires more than applying basic mathematics.
Technical judgment is required in choosing among different types of depreciation.”);
LifeWise Master Funding v. Telebank, 374 F.3d 917, 929 (10th Cir. 2004)
(classifying “moving averages, compounded growth rates, and S-curves” to be too
technical for lay witness testimony). Still, merely possessing expert knowledge does
not alone require a person to testify as an expert. ORP Surgical, LLC v. Howmedica
Osteonics Corp., 92 F.4th 896, 915 (10th Cir. 2024).
Petron’s testimony went beyond the mathematic analysis permissible for lay
witnesses in both scope and kind. Importantly, to conduct his testimony he had to
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choose between multiple possible methodologies for tracing bank funds. Further, his
testimony was based on a large-scale analysis of thousands of transactions across
several different bank accounts. In Petron’s own words, his testimony became
“increasingly complex” as he described additional funds flowing across various
accounts. This appears to be exactly the type of “technical, or other specialized
knowledge” that is reserved for expert witnesses. Fed. R. Evid. 702(a). Indeed, this
court is doubtful that Petron’s testimony could be deemed within “the realm of
common experience” as is required of lay testimony. United States v. Draine, 26
F.4th 1178, 1188 (10th Cir. 2022) (quotations omitted).
Nonetheless, “[a]n erroneous admission of evidence is harmless unless it had a
substantial influence on the outcome or leaves one in grave doubt as to whether it had
such effect.” United States v. Yeley-Davis, 632 F.3d 673, 685 (10th Cir. 2011)
(quotation omitted). Prejudice is unlikely to arise when the record already contains
evidence encapsulating the erroneous admission. See United States v. Pehrson, 65
F.4th 526, 543–44 (10th Cir. 2023); see also United States v. Charley, 189 F.3d 1251,
1272 (10th Cir. 1999) (“In light of the strength of the properly admitted testimony,
. . . we cannot say that the erroneously admitted portions of the testimony
substantially affected the trial’s outcome.”). Here, bank records displaying Joseph’s
transactions were admitted as exhibits. More substantially, a separate government
witness, Special Agent Cory Rumple, testified at length to the contents of the bank
account records and described in detail the movement of funds through Joseph’s bank
accounts. Agent Rumple’s testimony also covered Joseph’s many expenditures of
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relief funds on personal goods and services. Given that the jury received an
alternative report of Joseph’s financial activity which captured Petron’s testimony,
we conclude the district court’s error of allowing Petron to testify as a lay witness
was harmless.
d. Rule 404(b) Evidence
“We review the district court’s decision to admit evidence under [Fed. R.
Evid.] 404(b) for abuse of discretion.” United States v. Commanche, 577 F.3d 1261,
1266 (10th Cir. 2009). Rule 404(b) forbids evidence of other bad acts to prove a
person’s character, but it allows for such evidence to be admitted for the limited
purposes of “proving motive, opportunity, intent, preparation, plan, knowledge,
identity, absence of mistake, or lack of accident.” Generally, this court considers a
four-factor test when determining the admissibility of evidence under Rule 404(b):
(1) the evidence must be offered for a proper purpose; (2) the evidence must be relevant; (3) the trial court must make a [Fed. R. Evid.] 403 determination of whether the probative value of the similar acts is substantially outweighed by its potential for unfair prejudice; and (4) . . . the trial court shall, upon request, instruct the jury that evidence of similar acts is to be considered only for the proper purpose for which it was admitted.
United States v. Davis, 636 F.3d 1281, 1297 (10th Cir. 2011) (quotation omitted). We
consider the admissibility of evidence under Rule 404(b) to be a “case-specific
inquiry” and rely heavily on the district court’s “broad discretion.” United States v.
Henthorn, 864 F.3d 1241, 1248 (10th Cir. 2017).
At trial, the government sought to introduce evidence that, after the events
underlying the charges set out in the indictment, Joseph withdrew $241,000 in
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Medicare funds from Springs Medical’s Official Business Account without
authorization in November 2020. Given Joseph’s argument that he intended to repay
the federal relief funds he previously took, the prosecution aimed to use his
withdrawal and subsequent failure to repay as evidence that his applications were
intentionally fraudulent. The district court accepted this explanation, determining the
evidence was offered for the relevant purposes of showing Joseph’s intent and lack of
mistake. In its prejudice analysis, however, the district court recognized the
withdrawal’s potential to mislead the jury and, thus, restricted the use of evidence
related to the event. 1 The district court further offered a limiting instruction when the
evidence was presented.
This court cannot identify error at any step of the four-factor test used to
analyze 404(b) rulings. The district court reasonably determined the government’s
proffered purpose was legitimate and relevant to the underlying fraud claims. See
United States v. Mares, 441 F.3d 1152, 1157 (10th Cir. 2006) (“Subsequent acts
evidence is particularly relevant when a defendant’s intent is at issue.”). The
Medicare withdrawal was responsive to Joseph’s defense and helped illustrate his
earlier relief applications were not merely innocent requests he meant to refund when
1 The district court excluded “the introduction of whatever evidence or transcript or recording there is, that establishes that his explanation for [the Medicare funds withdrawal] is a lie . . . in the case in chief.” The court made this determination in part due to the Medicare funds withdrawal being “tied up” with the corresponding bankruptcy proceeding, which was only questionably relevant to Joseph’s criminal proceeding. The court further concluded that allowing additional evidence on the matter could “drift into what is, essentially, propensity evidence.” 17 Appellate Case: 23-1192 Document: 010111086158 Date Filed: 07/29/2024 Page: 18
the opportunity arose. The evidence was further relevant because it occurred in
proximity to the crimes of conviction and was similar in nature to Joseph’s prior
financial misdeeds. See Davis, 636 F.3d at 1298 (noting the probative value of other
acts under Rule 404(b) that are similar in time, place, and nature to the underlying
offenses). The district court also engaged in a prejudice analysis under Rule 403,
which resulted in a restriction of related evidence to prevent jury confusion. Finally,
the district court offered an appropriate and complete limiting instruction when the
evidence was presented at trial. See, e.g., United States v. Cardinas Garcia, 596 F.3d
788, 798 (10th Cir. 2010) (“We presume jurors will conscientiously follow the trial
court’s instructions” (quotation omitted)). Accordingly, we are satisfied that the
district court properly considered all necessary steps in its Rule 404(b) ruling and did
not abuse its discretion in admitting the evidence.
e. Jury Instructions
This court reviews the refusal to give a requested jury instruction for abuse of
discretion and will reverse only if prejudice results from such a refusal. United States
v. Faust, 795 F.3d 1243, 1251 (10th Cir. 2015). “In order to assess whether the court
properly exercised its discretion, we review the jury instructions de novo to
determine whether, as a whole, they accurately state the governing law and provide
the jury with an accurate understanding of the relevant legal standards and factual
issues in the case.” Id. (quotation omitted).
Joseph argues the district court erred by not specifically instructing the jury
that failing to repay a debt is not a crime. He claimed that creating the distinction
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between fraud and debt delinquency was fundamental to his defense. The district
court declined the instruction, concluding that the government did not raise a failure-
to-repay argument and the record did not otherwise support it. The district court
further assured Joseph that it would exclude any argument which indicated
nonpayment constitutes theft.
“[A] defendant is entitled to an instruction if the evidence viewed in his favor
could support the defense.” United States v. Toledo, 739 F.3d 562, 568 (10th Cir.
2014). Here, however, no evidence or argument supported the inclusion of the
instruction. This court is not persuaded the instruction was necessary to Joseph’s
defense when it was unresponsive to any proposed argument, not relevant to the
record, and the district court gave guarantees that any such argument would not be
tolerated. See United States v. Bader, 678 F.3d 858, 873 (10th Cir. 2012) (similarly
rejecting a jury instruction request that related to a “right . . . no way implicated” in
the case). Given the proposed instruction’s complete lack of relevance, Joseph did
not endure any prejudice as a result of its exclusion. The jury was provided “an
accurate understanding” of the case and, therefore, we conclude the district court did
not abuse its discretion in declining Joseph’s request. United States v. Crockett, 435
F.3d 1305, 1314 (10th Cir. 2006). 2
2 Joseph analogizes his case to United States v. Britt, 79 F.4th 1280, 1293 (10th Cir. 2023), which concluded the trial court “abused its discretion in refusing to instruct the jury on imperfect self-defense.” There, this court emphasized the importance of “[g]iving full credence” to the defendant’s testimony when deciding if an instruction is warranted. Id. at 1291. Unlike this case, however, Britt’s jury
19 Appellate Case: 23-1192 Document: 010111086158 Date Filed: 07/29/2024 Page: 20
f. Loss Calculation
“When reviewing a district court’s application of the Sentencing Guidelines,
we review legal questions de novo and we review any factual findings for clear error,
giving due deference to the district court’s application of the guidelines.” United
States v. Craig, 808 F.3d 1249, 1255 (10th Cir. 2015) (quotation omitted). Here,
Joseph challenges whether his first failed PPP loan application from April 2020 was
relevant conduct as defined by U.S.S.G. § 1B1.3(a) 3 and, therefore, whether it should
be included as “intended loss” under U.S.S.G. § 2B1.1(b)(1). The district court
determined the similar nature, close proximity, and shared purpose of Joseph’s first
PPP loan request qualified it as relevant conduct to his later, successful application. It
included Joseph’s $500,000 loan request as intended loss, thereby increasing his
assessment from § 2B1.1(b)(1)(G), covering offenses with losses exceeding
$250,000, to § 2B1.1(b)(1)(H), covering offenses with losses exceeding $550,000. In
turn, Joseph’s offense level increased by two points.
Section 2B1.1(b)(1) contemplates both actual loss and intended loss. U.S.S.G.
§ 2B1.1 cmt. n.3(A). Intended loss includes “the pecuniary harm that the defendant
instruction request was responsive to arguments made at trial and was supported by sufficient evidence. Id. at 1291–92. In contrast, Joseph’s request was not implicated by any argument made by the government, nor was it responsive to the evidence presented at trial. 3 Joseph arguably forfeited this challenge by exclusively arguing on appeal that his prior PPP loan application was not relevant conduct under § 1B1.3(a)(1). The district court, however, made clear it included the failed loan amount under the provisions of § 1B1.3(a)(2). Because we resolve this issue on de novo review, we need not determine if Joseph forfeited his claim.
20 Appellate Case: 23-1192 Document: 010111086158 Date Filed: 07/29/2024 Page: 21
purposely sought to inflict.” Id. at cmt. n.3(A)(ii). “In calculating loss under the
Guidelines, the district court does not limit itself to conduct underlying the offense of
conviction, but rather may consider all of the defendant’s ‘relevant conduct.’” United
States v. Griffith, 584 F.3d 1004, 1011 (10th Cir. 2009). Relevant conduct for
purposes of § 2B1.1(b)(1) includes “all acts and omissions committed . . . by the
defendant” that “were part of the same course of conduct or common scheme or plan
as the offense of conviction.” U.S.S.G. § 1B1.3(a)(1)–(2). 4 A “common scheme” is
generally considered as two or more offenses that are “substantially connected to
each other by at least one common factor, such as common victims, common
accomplices, common purpose, or similar modus operandi.” U.S.S.G. § 1B1.3 cmt.
n.5(B)(i); see also United States v. Damato, 672 F.3d 832, 845 (10th Cir. 2012). The
“same course of conduct” refers to a more flexible set of acts that are “sufficiently
connected or related to each other as to warrant the conclusion that they are part of a
single episode, spree, or ongoing series of offenses.” U.S.S.G. § 1B1.3 at cmt.
n.5(B)(ii); see also United States v. Garcia, 946 F.3d 1191, 1203 (10th Cir. 2020)
(“We have opined that this same-course-of-conduct standard looks to whether the
defendant repeats the same type of criminal activity over time, but does not require
that acts be connected together by common participants or by an overall scheme.”
(quotations omitted)).
4 Section 1B1.3(a)(2) governs “offenses of a character for which § 3D1.2(d) would require grouping of multiple counts.” Intended loss calculation under § 2B1.1(b)(1) is incorporated under § 3D1.2(d).
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This court agrees with the district court’s determination that Joseph’s first
failed PPP loan attempt qualifies as relevant conduct under either the common
scheme or same course of conduct standard. Joseph’s first application was a near
replica of his later submission; it was completed only three months prior to his
second application; it seemingly had the same purpose to defraud relief programs for
his own benefit; and it shared the same victim. See, e.g., United States v. Smith, 705
F.3d 1268, 1275 (10th Cir. 2013) (describing how a fraudulent housing sale based on
fraudulent loan applications amounted to relevant conduct); see also Damato, 672
F.3d at 840–41 (looking favorably on temporal gaps substantially less than one year
in analyzing same course of conduct qualifications). The two offenses are further
correlated because Joseph’s first failed application informed him how to successfully
submit his second. After learning that using Springs Medical’s EIN would result in a
rejected application, Joseph used his own social security number in his second
attempt.
Contrary to Joseph’s arguments, there is no requirement that relevant conduct
result in conviction when evidence fairly supports the presence of a common scheme
or shared course of conduct. See § 1B1.3 cmt. n.5(A) (“Application of this provision
does not require the defendant, in fact, to have been convicted of multiple counts.”);
United States v. Altamirano-Quintero, 511 F.3d 1087, 1095 (10th Cir. 2007)
(“Relevant conduct for sentencing purposes, therefore, comprises more, often much
more, than the offense of conviction itself, and may include uncharged . . . conduct.”
(quotation omitted)). Joseph’s applications were virtually identical in nature and were
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separated by only three months. Thus, we conclude Joseph’s first PPP loan request
was relevant conduct for purposes of the sentencing guidelines, and we perceive no
clear error in the factual findings underlying the determination that he qualifies for an
assessment under § 2B1.1(b)(1)(H). 5
IV. Conclusion
The judgment of the United States District Court for the District of Colorado is
hereby AFFIRMED.
5 On appeal, Joseph additionally argued that the cumulative error doctrine should apply. United States v. Garcia, 74 F.4th 1073, 1130 (10th Cir. 2023) (“Cumulative error is present when the cumulative effect of two or more individually harmless errors has the potential to prejudice a defendant to the same extent as a single reversible error.” (quotation omitted)). Because there was but a single error, there could be no cumulative error.