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United States of America v. Ashley andrews

June 4, 2012

UNITED STATES OF AMERICA
v.
ASHLEY ANDREWS, APPELLANT



On Appeal from the District Court of the Virgin Islands - Appellate Division Division of St. Thomas (D.C. No. 3-04-cr-00038-002) District Judge: Honorable Juan R. Sanchez

The opinion of the court was delivered by: Fisher, Circuit Judge.

PRECEDENTIAL

Argued December 5, 2011

Before: FISHER, GREENAWAY, JR. and ROTH, Circuit Judges.

OPINION OF THE COURT

Ashley Andrews ("Andrews") was convicted of one count of conspiracy, in violation of 18 U.S.C. § 371, four counts of wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 2, one count of program fraud, in violation of 18 U.S.C. §§ 666(a)(1)(B) and 2, one count of making a false claim upon the Government of the Virgin Islands, in violation of 14 V.I.C. § 843(4), and one count of inducing a conflict of interest, in violation of 3 V.I.C. §§ 1102, 1103, and 1107. Andrews appeals his judgment of conviction and sentence. For the reasons set forth below, we will affirm the judgment of conviction, vacate the judgment of sentence on Counts One through Six, and remand to the District Court for resentencing.

I.

In 1985, the Government of the Virgin Islands ("GVI") and the United States entered into a consent decree in the District Court of the Virgin Islands, pursuant to which the GVI was to make improvements to its sewage system. For over fifteen years, the GVI failed to make the necessary repairs. In October 2001, the District Court held a hearing, requiring the GVI to show cause why it should not be held in contempt for failure to comply with the consent decree. Around this time, Ohanio Harris ("Harris"), who, in his capacity as Special Assistant to the Governor of the Virgin Islands, was responsible for handling issues regarding the sewage system, began to promote Andrews as a contractor who could repair the sewage system. Andrews had created a construction company called Global Resources Management ("GRM") in 2001. GRM, however, could not obtain the sewer repair contract without a Virgin Islands business license. Because a "tax clearance" letter was required before such a license could be issued, and Andrews could not obtain a "tax clearance" letter on his own, when GRM applied for the license in late February 2002, Harris was listed as the president of GRM on the application. Prior to February 2002, Andrews had served as president of GRM, and on or about March 8, 2002, Andrews again replaced Harris as president of GRM.

On March 1, 2002, Harris and Andrews traveled to Tortola, British Virgin Islands to meet with representatives of the Berger Group, an American engineering firm. At this meeting, Harris, who was introduced as the Special Assistant to the Governor, vouched for Andrews, stating that Andrews had organized local contractors to work as subcontractors for large firms. Harris also indicated that he could arrange a meeting with the Governor to discuss awarding the sewage system contract to the Berger Group. Harris testified that after this meeting, he and Andrews went to a hotel, and Andrews paid him $2,500 in cash. The payment, Harris explained, was "for what [he] ha[d] done for [Andrews]." Harris deposited the check into his bank account and then used the money to make a mortgage payment on his home.

Around this time, Harris began to hold himself out as a liaison between GRM and Andrews, and the Virgin Islands Department of Public Works ("DPW"). Harris arranged a meeting between the Governor and Andrews to discuss the sewer repair work. After this meeting, Andrews asked Harris to help him get the contract, and Harris replied that he would "see what [he] c[ould] do." Harris testified that in exchange for his assistance in obtaining the contract, Andrews agreed that he would hire Harris to work at GRM after Harris retired from government service. On March 24, 2002, Harris again traveled to Tortola to meet with Andrews and representatives from the Berger Group. Harris testified that he told Andrews that he expected to be compensated for whatever assistance he provided, and Andrews assured him that he would be paid. Harris subsequently set up additional meetings between Andrews, the Governor, and other GVI officials. At some point, GRM submitted a $3.6 million bid for the sewer repair work. The Governor testified that Harris told him "that [GRM] was a company that we should look at and see if they can do the job." The sewage system repair contract was not advertised, and there were no other contractors bidding for the project, despite the fact that, even in emergency situations, there were generally three bidders. Wayne Callwood ("Callwood"), the Commissioner of DPW, testified that "[b]asically, this project was sole-sourced to GRM."

The GVI tentatively accepted GRM's bid in October 2002, on the condition that GRM procured a performance bond and a payment bond, each for 100 percent of the contract price ($3.6 million). On October 7, Campbell Malone ("Malone"), a Certified Public Accountant acting on behalf of GRM, contacted Alan Feuerstein ("Feuerstein"), a New York attorney, for assistance in obtaining the bonds. Feuerstein put Malone in touch with Wayne Price ("Price"), a surety bond manager at Melwain Enterprises, in Long Island, New York. On October 10, Price faxed Malone, who was in the Virgin Islands, a collection of bond application paperwork. Price sent additional bond-related paperwork to Malone on October 11 (fax) and October 17 (email).

On October 18, Malone emailed Price a completed bond application package, which was signed by Andrews. This application contained numerous false representations, including statements that: (1) Andrews was divorced; (2) Andrews owned a home valued at $720,000, when, in fact, his daughters owned the home; (3) Andrews had a one- third interest in a $150,000 property located at 113 Estate Grove Place, St. Croix; (4) Andrews had $7,000 in cash on deposit at the Banco Popular as of September 30, 2002; and (5) Andrews had stock in GRM worth $600,000. In the "work on hand" section of the application, which asked for a list of all of the contracts that GRM had secured but not yet completed, Malone and Andrews listed the following five "contracts" worth a total of $26 million: (1) a professional services contract worth $1.5 million; (2) a contract with the GVI for sewage system repair in the amount of $7.5 million, twice the price of the actual contract; (3) a construction management services contract for Peebles Hospital in the British Virgin Islands valued at $1 million; (4) a development contract worth $12 million; and (5) "work on hand" for processing municipal garbage. At trial, the Government proved that none of these contracts had been obtained. Additionally, the bond application falsely stated that:

(1) GRM and its owners were not involved in any litigation, whereas Andrews was in the midst of a lawsuit related to another company that he owned; (2) GRM had a $350,000 "investment" in an affiliate, which in reality was worthless; and (3) that Robert Jarnis was a director of GRM, when he actually worked for the Berger Group in Massachusetts.

GRM had difficulty obtaining the bonds without a construction contract signed by the Governor. Accordingly, the Virgin Islands Attorney General advised the Governor to sign the contract, on the condition that no Notice to Proceed would be issued by the Department of Property and Procurement ("P&P") until GRM successfully obtained the bonds. The Governor signed the sewer system repair contract on December 20, 2002.

On January 23, 2003, the United States filed a motion to enjoin the enforcement of the contract. On January 28, before GRM was able to obtain the required bonds and before any Notice to Proceed was issued, the Governor terminated the contract. The GVI subsequently asked the District Court to remove the injunction, but the District Court refused, and enjoined the GVI from re-contracting with GRM. United States v. Gov't of Virgin Islands, 248 F. Supp. 2d 420 (D.V.I. 2003), affirmed in part and vacated in part by United States v. Gov't of Virgin Islands, 363 F.3d 276 (3d Cir. 2004).

On June 12, 2003, Andrews submitted to the GVI a $748,304.92 post-termination claim, seeking payment for the time and resources GRM had expended preparing its bid. This claim included numerous false statements and duplicate charges. Moreover, as evidence adduced at trial established, Andrews's entire scheme was fraudulent. Callwood testified that "to the best of [his] knowledge, [GRM was not] capable of doing construction work."

Andrews, Harris, and Malone were indicted on February 20, 2004. The grand jury returned a Second Superseding Indictment ("Second Superseding Indictment" or "Indictment") on June 10, 2004, which charged Andrews with one count of conspiracy, in violation of 18 U.S.C. § 371 (Count One), four counts of wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 2 (Counts Two through Five), one count of program fraud, in violation of 18 U.S.C. §§ 666(a)(1)(B) and 2 (Count Six), one count of fraudulent claims upon the Government of the Virgin Islands, in violation of 14 V.I.C. § 843(4) (Count Seven), and one count of inducing a conflict of interest, in violation of 3 V.I.C. §§ 1102, 1103, and 1107 (Count Eight). Harris pled guilty, and Malone and Andrews went to trial. They were initially tried on the charges in the Second Superseding Indictment in May 2006, but the jury was unable to reach a verdict. They were re-tried beginning in August 2006, and on September 20, 2006, the jury convicted Andrews on all charges. On January 19, 2011, the District Court sentenced Andrews to 151 months' imprisonment on Counts One through Six, to be followed by three years of supervised release.*fn1 The District Court also imposed a $17,500 fine. The District Court sentenced Andrews to two years' imprisonment on Counts Seven and Eight, to be served concurrently with the sentence on Counts One through Six. Andrews filed a timely notice of appeal.*fn2

On appeal, Andrews raises three arguments. First, he argues that after the Supreme Court's decision in Skilling v. United States, 130 S. Ct. 2896 (2010), the District Court's instruction to the jury on honest services fraud under 18 U.S.C. § 1346 was erroneous, and prejudice from the error spilled over to the other charges against him. Second, he contends that the evidence was insufficient to sustain his convictions for wire fraud (Counts Two through Five), program fraud (Count Six), and inducing a conflict of interest (Count Eight). Finally, Andrews maintains that the District Court improperly instructed the jury on Count Seven.*fn3

In April 2011, Andrews filed a motion for release pending appeal, in which he argued that his appeal raised several substantial questions of law, likely to result in reversal of his conviction, a new trial, a non-custodial sentence, or a shorter term of imprisonment. On September 6, 2011, the District Court denied his motion. United States v. Andrews, No. 04-38-2, 2011 WL 3903229, at *5 (D.V.I. Sept. 6, 2011).

II.

The District Court had jurisdiction under 48 U.S.C. § 1612 and 18 U.S.C. § 3231, and we have appellate jurisdiction pursuant to 28 U.S.C. § 1291. Where there were no legal grounds for challenging an instruction at the time it was given, but such grounds have arisen, due to the articulation of a new rule of law between the time of conviction and the time of appeal, we review for plain error. Johnson v. United States, 520 U.S. 461, 464-68 (1997); United States v. West Indies Transp., Inc., 127 F.3d 299, 305 (3d Cir. 1997). Accordingly, we review Andrews's challenge to the honest services fraud portion of the jury instructions for plain error. United States v. Riley, 621 F.3d 312, 321-22 (3d Cir. 2010).*fn4 We also review his challenge to the jury instruction on Count Seven for plain error. Under plain error review, we may correct an error not raised at trial only if the appellant demonstrates that: (1) there was an error; (2) the error is clear or obvious; and (3) "the error 'affected the appellant's substantial rights, which in the ordinary case means' it 'affected the outcome of the district court proceedings.'" Id. at 322 (quoting United States v. Marcus, 130 S. Ct. 2159, 2164 (2010)). "If all three conditions are met, an appellate court may then exercise its discretion to notice a forfeited error, but only if . . . the error seriously affect[s] the fairness, integrity, or public reputation of the judicial proceedings." Johnson, 520 U.S. at 467 (internal marks and citations omitted). Andrews bears the burden of showing that the error affected his substantial rights. United States v. Olano, 507 U.S. 725, 734 (1993).

"In reviewing a challenge to the sufficiency of the evidence, we apply a particularly deferential standard of review." United States v. Reyeros, 537 F.3d 270, 277 (3d Cir. 2008) (internal marks and citations omitted). We must "view the evidence in the light most favorable to the Government and sustain the verdict if any rational juror could have found the elements of the crime beyond a reasonable doubt." Id. (internal marks and citation omitted).

III.

A.

Andrews first contends that references to honest services fraud in the Second Superseding Indictment and in the District Court's instructions to the jury constituted reversible error. We disagree. As we explain below, although Skilling rendered the jury instructions improper, the error did not affect Andrews's substantial rights, and thus does not require reversal.

To prove wire fraud, the Government must establish "(1) the defendant's knowing and willful participation in a scheme or artifice to defraud, (2) with the specific intent to defraud, and (3) the use of . . . interstate wire communications in furtherance of the scheme." United States v. Antico, 275 F.3d 245, 261 (3d Cir. 2001) (citation omitted), abrogated on other grounds by Skilling v. United States, 130 S. Ct. 2896 (2010). Under 18 U.S.C. § 1346, "the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." In Skilling, the Supreme Court considered the scope and constitutionality of § 1346, and held that the statute criminalizes only "fraudulent schemes to deprive another of honest services through bribes or kickbacks." 130 S. Ct. at 2928, 2931. The Court rejected an argument by the government that § 1346 also covers "undisclosed self-dealing by a public official . . . [such as] the taking of official action by the [official] that furthers his own undisclosed financial interests while purporting to act in the interests of those to whom he owes a fiduciary duty." Id. at 2932. Such an interpretation, the Court explained, would render the statute unconstitutionally vague. Id. at 2931. Accordingly, a district court's failure to limit honest services fraud to schemes involving bribes or kickbacks now constitutes legal error. Riley, 621 F.3d at 323.*fn5

1.

The first step in our plain error analysis requires us to determine whether references to honest services fraud in the Indictment and in the District Court's instructions constituted Skilling error.*fn6 The Government concedes that the original version of the Indictment explicitly charged Andrews with honest services fraud. The conspiracy count (Count One) alleged that Andrews "knowingly devise[d] a scheme and artifice to defraud and for obtaining money and property and to deprive another of the intangible right of honest services." The wire fraud counts (Counts Two through Five) alleged that Andrews "deprive[d] another of the intangible right of honest services" and "defraud[ed] the Virgin Islands government and its residents of honest services." The Government pursued both theories at trial, and in his closing argument, the prosecutor explained that the Government's "alternative theory [was that] the scheme and artifice to defraud included the deprival of the Government and the people of the Virgin Islands of the honest services of Ohanio Harris."

However, the Government emphasizes that the Indictment was redacted before the jury was charged, and all references to "honest services" in the wire fraud counts were removed.*fn7 The Government further notes that the District Court charged the jury consistent with the redacted version of the Indictment; in explaining the elements of wire fraud to the jury, the District Court did not mention "honest services," and stated that the first element of the wire fraud counts required proof "[t]hat the defendant knowingly devised or participated in a scheme to defraud, or to obtain money or property by materially false or fraudulent pretenses, representations, promises or omissions." (emphasis added). Accordingly, the Government argues that Andrews was charged only with tangible rights wire fraud, that is, a scheme or artifice to fraudulently obtain money or property from the GVI, and thus, there was no Skilling error.

We disagree.

Although the District Court may have intended to narrow the Indictment to remove the honest services fraud theory, there were sufficient references to "honest services" in the redacted version of the Indictment and in the District Court's jury instructions to lead a jury to believe that Andrews was charged with honest services fraud. First, the "Introduction" section of the redacted Indictment stated that "Ohanio Harris had a duty to uphold the laws of the ...


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