17‐229‐cr United States v. Lees

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 13th day of March, two thousand eighteen.

PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

UNITED STATES OF AMERICA, Appellee,

v. 17‐229‐cr

MICHAEL BARNETT and KEVIN DICELLO, Defendants, v.

ROBERT LEES, Defendant‐Appellant.

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FOR APPELLEE: WON S. SHIN, Assistant United States Attorney (Michael D. Maimin, Anna M. Skotko, Assistant United States Attorneys, on the brief), for Geoffrey S. Berman, United States Attorney for the Southern District of New York, New York, New York.

FOR DEFENDANT‐APPELLANT: ERIC M. CREIZMAN, Creizman PLLC, New York, New York.

Appeal from the United States District Court for the Southern District of

New York (Karas, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Defendant‐appellant Robert Lees was convicted, after a jury trial, of

conspiracy and other charges related to his involvement in a housing development

kickback scheme. Lees now appeals from the district courtʹs judgment of conviction,

entered January 9, 2017, sentencing him to 50 monthsʹ imprisonment and three yearsʹ

supervised release. On appeal, Lees argues that (1) the Government violated its

disclosure obligations by failing to obtain or produce certain interview memoranda;

(2) the district court erred in admitting certain e‐mails as evidence at trial; and (3) his

sentence was procedurally and substantively unreasonable. We assume the partiesʹ

familiarity with the underlying facts, procedural history, and issues on appeal.

Lees served as a regional vice president and then divisional president of

Universal Forest Products (ʺUFPʺ), a publicly traded company that manufactured ‐ 2 ‐

housing supplies and building materials and owned various consumer products

companies. In 2009, UFPʹs subsidiary, Shawnlee Construction, was hired by a general

contractor, JK Scanlan, to provide carpentry and framing work for Vineyard Commons,

a housing development project in Ulster County, New York. Kevin DiCello, a Vice

President of Operations at UFP, was Shawnleeʹs/UFCʹs primary contact for the project.

DiCello directly reported to Lees.

The kickback scheme (the ʺShady Dealʺ)1 operated as follows: Shawnlee

inflated its bid for carpentry and framing work, and that inflated contract price was

then submitted to the Federal Housing Administration (the ʺFHAʺ), the United States

Department of Housing and Urban Development (ʺHUDʺ), and Love Funding, a private

lender, as part of an application for a HUD‐insured mortgage loan. When Love

Funding paid the full contract price, Shawnlee/UFP and JK Scanlan then kicked the

inflated funds ‐‐ approximately $865,000 ‐‐ back to Michael Barnett, the project

developer.

The evidence at trial showed that Lees participated in the scheme by,

among other things, approving UFPʹs participation in the Shady Deal, directing DiCello

to structure the Shady Deal so as to avoid scrutiny by tax authorities, and agreeing with

1 Both parties refer to the kickback scheme as the ʺShady Deal,ʺ and thus we adopt that term of reference in this appeal.

‐ 3 ‐ others to secure additional capital and conceal payments related to the Shady Deal by

transferring funds through unrelated entities.

On May 20, 2016, Lees was convicted, after a jury trial, of conspiracy, mail

fraud, making false statements in loan and credit applications, and engaging in

monetary transactions in property derived from specified unlawful activity.

Lees appeared for sentencing on December 15, 2016. Lees had a total

offense level of 33, a criminal history category of I, and an applicable Guidelines range

of 135 to 168 monthsʹ imprisonment. At sentencing, however, Lees objected to the

application of three sentencing enhancements in his Guidelines calculation: (1) an

aggravating role enhancement because Lees was a ʺmanager or supervisorʺ and the

scheme involved at least five participants, U.S.S.G. § 3B1.1(b); (2) a securities violation

enhancement based on Leesʹs status as a divisional president of UFP, U.S.S.G. §

2B1.1(b)(19)(A)(i); and (3) an obstruction of justice enhancement based on the district

courtʹs finding that Lees had committed perjury at trial, U.S.S.G. § 3C1.1. The district

court overruled Leesʹs objections to the enhancements, and concluded that although

there was some ʺoverlapʺ between the aggravating role and securities violation

enhancements, both were ʺappropriateʺ in Leesʹs case. App. 1378‐79.

‐ 4 ‐ The district court then sentenced Lees to 50 monthsʹ imprisonment and

three yearsʹ supervised release.2 In imposing the below‐Guidelines sentence, the

district court stated that it had considered numerous factors, including that Lees had

ʺled an exemplary life,ʺ App. 1373, the sentence would significantly impact his family,

Lees did not profit from the scheme, and Lees posed no risk of recidivism. The district

court also acknowledged that in applying the role and securities violation

enhancements, ʺthere[ ] [was] a little bit of double counting,ʺ App. 1339, and the

ʺoverlapʺ between the sentencing enhancements ʺtip[ped] the scales a little bit higher

than they should be,ʺ App. 1378‐79.

1. Disclosure Obligations

Lees first argues that the Government violated its obligations under Brady

v. Maryland,

(1963), Giglio v. United States,

(1972), and the Jencks

Act,

, because it failed to produce or obtain interview memoranda of

UFPʹs general counsel, Matt Missad, that were allegedly compiled by UFPʹs outside

counsel during an internal investigation of the Shady Deal. Lees claims that the

interview memoranda could have contained exculpatory statements about his

involvement in the Shady Deal or provided impeachment material for trial witnesses.

2 The court also imposed $865,000 in restitution, $865,00 in forfeiture, and a $400 mandatory special assessment.

‐ 5 ‐ Where, as here, a Brady, Giglio, or Jencks Act claim is raised in a motion for

a new trial, the denial of that motion is reviewed for abuse of discretion. In re Terrorist

Bombings of U.S. Embassies in E. Africa,

(2d Cir. 2008).3

We are not persuaded that the Government violated its disclosure

obligations. It is unclear from the record whether UFPʹs counsel actually interviewed

Missad. Assuming Missad was interviewed, the Government did not possess those

interview notes or memoranda, and was therefore not required to produce them. See,

e.g.,

(b) (Jencks Act obligation applies to prior related statements of a

witness ʺin the possession of the United Statesʺ) (emphasis added); United States v. Coppa,

(2d Cir. 2001) (prosecutors have a duty to ʺactively seek Brady material

[for disclosure to the defendant] . . . in the files of related agencies reasonably expected to

have possession of such informationʺ (emphasis added)). We therefore agree with the

district court that ʺthere really isnʹt any basis on the facts of this case or any controlling

legal authority that suggests [ ] that the government was in possession or in custody or

control of the [UFP] documents.ʺ App. 1318. Moreover, Leesʹs counsel conceded at oral

3 Lees did not raise his Brady, Giglio, and Jencks Act arguments in his motion for a new trial. Instead, he argued that his counsel was ineffective for failing to request Missad interview materials. Where a defendant fails properly to object before the district court, on appeal his claim is reviewed only for plain error. See, e.g., United States v. Ubiera,

(2d Cir. 2007) (reviewing claim for plain error where defendant objected but ʺraise[d] a substantially different argument on appealʺ). We need not decide which standard applies, however, because even under ʺabuse of discretionʺ review, we agree that the Government was not obligated to obtain or produce the interview memoranda.

‐ 6 ‐ argument that the Government was not in actual or constructive possession of the

documents he predicates his claims on. This concession ends the discussion.

Lees also cites no authority that supports his assertion that the

Government was required to obtain the interview memoranda by asking UFPʹs outside

counsel to waive its attorney‐client privilege over documents from UFPʹs internal

investigation. See, e.g., U.S. Attorneysʹ Manual 9‐28.710 (explaining that ʺa corporation

remains free to convey . . . attorney‐client communications or work product ‐‐ if and

only if the corporation voluntarily chooses to do so ‐‐ [but] prosecutors should not ask

for such waivers and are directed not to do soʺ).

2. Evidence Admitted at Trial

Second, Lees argues that the district court improperly admitted two

e‐mails as ʺco‐conspirator statements.ʺ He specifically argues that the e‐mails were

inadmissible as co‐conspirator statements because (1) there was no ʺillicit schemeʺ to

which Lees and Missad agreed, and (2) even if Missad was aware of the Shady Deal, he

did not participate in the conspiracy. Def.‐Appellantʹs Br. 29 (emphasis omitted).

The admission of co‐conspirator statements under Federal Rule of

Evidence 801(d)(2)(E) is ordinarily reviewed for ʺclear error,ʺ but when a defendant

does not object at trial, this Courtʹs review ʺis limited to plain error.ʺ United States v.

Coppola,

, 246 & n.20 (2d Cir. 2012).

‐ 7 ‐ We are not persuaded that the district court plainly erred by admitting the

e‐mails. The record sufficiently establishes that Missad was a co‐conspirator and knew

about, participated in, and conspired in furthering the Shady Deal by, among other

things, actively working to move a letter of credit to Barnett and ensuring the letter

reflected the fraudulently inflated contract price. See United States v. Heinemann,

, 92 n.2 (2d Cir. 1986) (ʺThere is, of course, no requirement that each co‐

conspirator participate in every phase of an evolving conspiracy, as long as each was

aware that the conspiracy did not begin and end with his own activities.ʺ).

3. Procedural and Substantive Reasonableness

Lees also argues that his sentence was procedurally unreasonable. He

asserts that (1) the three‐level role enhancement should not have been applied because

he was not a manager or supervisor of the criminal scheme; and (2) the district courtʹs

application of the role enhancement and the securities violation enhancement

constituted impermissible double‐counting. He further argues that his sentence is

substantively unreasonable because there was an unwarranted disparity between his

50‐month sentence and Barnettʹs 37‐month sentence and DiCelloʹs sentence of time

served.

None of these arguments is persuasive. First, that DiCello took

independent actions in development and furtherance of the scheme does not mean Lees

was not a manager or supervisor for purposes of applying the enhancement. United

‐ 8 ‐ States v. Burgos,

(2d Cir. 2003) (manager or supervisor enhancement

requires only that the defendant exercised ʺsome degree of control over others involved

in the commission of the offense,ʺ and ʺ[i]t is enough to manage or supervise a single

other participantʺ (internal quotation marks omitted)). DiCello testified that the scheme

was contingent on Leesʹs approval, and as the district court acknowledged, ʺitʹs a fair

inference from the record that if Mr. Lees had said no, this fraud wouldnʹt have

happened.ʺ App. 1383. The district court also correctly rejected Leesʹs assertion that he

provided only a ʺone‐offʺ approval, as the evidence at trial demonstrated that Lees

engaged in ongoing supervision, e.g., by directing DiCello to structure the deal so as to

avoid the scrutiny of tax authorities.

Second, we are not persuaded that the district court engaged in

impermissible double‐counting by applying both the role enhancement and the

securities violation enhancement. The two enhancements address different harms and

are sufficiently discrete. See United States v. Maloney,

(2d Cir. 2005)

(ʺ[D]ouble counting is permissible in calculating a Guidelines sentence where . . . each

of the multiple Guidelines sections applicable to a single act serves a distinct purpose or

represents a distinct harm.ʺ). Furthermore, the two enhancements involve ʺdifferent

facetsʺ of Leesʹs conduct. United States v. Sabhani,

(2d Cir. 2010). The

securities violation enhancement was based on Leesʹs involvement in a securities law

violation and his status as an officer of UFP. See U.S.S.G. § 2B1.1(b)(19)(A)(i). The role

‐ 9 ‐ enhancement was based on Leesʹs involvement in a scheme involving at least five

participants, and his management and supervision of DiCello. See U.S.S.G. § 3B1.1(b).

Third, that Leesʹs co‐conspirators received lower sentences does not

render Leesʹs sentence substantively unreasonable. See United States v. Wills,

(2d Cir. 2007) (Section 3553(a) ʺdoes not require district courts to consider

sentencing disparity among co‐defendants,ʺ although disparities may be considered)

(emphasis added)). Regardless, Lees, Barnett, and DiCello were not similarly situated.

Lees had a higher applicable Guidelines range than Barnett, and unlike DiCello, he did

not cooperate with the Government. Moreover, Lees served as an officer of a publicly

traded company and had heightened fiduciary duties, failed to accept responsibility,

and committed perjury at trial.

Lastly, we are not persuaded that Leesʹs sentence was otherwise

substantively unreasonable. His sentence was well below his Guidelines range of 135 to

168 months. See United States v. Perez‐Frias,

(2d Cir. 2011) (per curiam)

(explaining that it is ʺdifficult to find that a below‐Guidelines sentence is unreasonableʺ

because ʺ[i]n the overwhelming majority of cases, a Guidelines sentence will fall

comfortably within the broad range of sentences that would be reasonableʺ).

Furthermore, the district court adequately explained that a term of imprisonment was

necessary and consistent with the § 3553(a) sentencing factors in light of the harms

‐ 10 ‐ resulting from the scheme, Leesʹs perjury at trial, and the need for general deterrence.

We have considered Leesʹs remaining arguments and find them to be

without merit. For the reasons set forth above, we AFFIRM the district courtʹs

judgment.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk of Court

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