U.S. v. Allen

• Decision Date: 22 June 2007
• Docket Number: No. 05-5249.,No. 06-4012.,05-5249.,06-4012.
• Citation: 491 F.3d 178
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Byron Keith ALLEN, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Ernest Robert Reinhardt, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

491 F.3d 178

UNITED STATES of America, Plaintiff-Appellee, v. Byron Keith ALLEN, Defendant-Appellant.

United States of America, Plaintiff-Appellee, v. Ernest Robert Reinhardt, Defendant-Appellant.

No. 05-5249.

No. 06-4012.

United States Court of Appeals, Fourth Circuit.

Argued: March 16, 2007.

Decided: June 22, 2007.

ARGUED: Steven Gene Berry, Rockville, Maryland; Joseph Francis Lawless, Jr., Newtown Square, Pennsylvania, for Appellants. Christine Manuelian, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Baltimore, Maryland, for Appellee. ON BRIEF: Rod J. Rosenstein, United States Attorney, Baltimore, Maryland, for Appellee.

Before NIEMEYER, MICHAEL, and GREGORY, Circuit Judges.

Dismissed in part; affirmed in part by published opinion. Judge GREGORY wrote the opinion, in which Judge NIEMEYER and Judge MICHAEL concurred.

OPINION

GREGORY, Circuit Judge:

Byron Allen and Ernest Reinhardt ("Appellants") appeal, on various grounds, their convictions for wire fraud under 18 U.S.C. § 1343 (2000). Additionally, Reinhardt raises numerous issues concerning his seventy-month sentence. Because the district court did not commit reversible error, we affirm the Appellants' convictions and sentences.

I.

Allen and Reinhardt were indicted on multiple counts of wire fraud in violation of 18 U.S.C. § 1343 arising from their involvement in a scheme that arranged equipment financing for nonexistent equipment. In short, Reinhardt's company, Tech Com, acting as a purported equipment vendor, would arrange, through financing companies, equipment-lease financing for various customers. Reinhardt would take a portion of the loan as a fee and the lessee would keep the remainder. Neither Reinhardt nor his company would provide the lessees with computer equipment. The Government, through prior indictments, secured guilty pleas from eleven other individuals involved in the scheme. A twelfth individual was indicted along with the Appellants but pleaded guilty shortly after trial commenced.

A.

At trial, the Government presented evidence that Reinhardt was the major architect of the fraud scheme, while Allen assisted in the scheme through preparing and faxing fraudulent documents. Six other participants in the scheme testified; all six gave similar testimony about the logistics of the scheme, Reinhardt's leadership role, and Allen's involvement.

Linda Durkin testified that she was told that Reinhardt could arrange loans through Tech Com, at a cost of twenty percent, to provide needed capital for her mortgage business. Prior to the transaction, Reinhardt told Durkin that the loan was actually an equipment lease for new computers, but that she could use her existing computers as collateral and did not have to provide any documentation as to their value. Throughout her relationship with Reinhardt, Durkin never received any computer equipment—new or used—from Reinhardt or Tech Com. Durkin expressed her concerns about the arrangement and Reinhardt assured her that it was legal, but that the leasing companies "don't really like it." J.A. 5267.

Reinhardt instructed her to tell the financing company that she received new equipment when the company called for verbal verification. Durkin testified that Reinhardt told her: "That if they [the financing company] ask if there's new equipment, yes, it's new equipment. Tell them—you know, tell them it's been installed. If they ask if it's been installed, delivered, you say yes." J.A. 5272. Reinhardt told Durkin when the financing company was going to conduct an on-site inspection. Prior to the inspection, Reinhardt shipped Durkin labels with serial numbers printed on them that she affixed to her existing computer equipment. The serial numbers did not match those on the actual equipment; instead they matched the numbers on the form for the particular lease.

Durkin's account accorded with that of the other witnesses. Clint Garrison and Paul Gregg testified that Reinhardt offered to arrange loans for their financial consulting company for a twenty percent fee. Gregg and Garrison entered into five lease transactions with Reinhardt. Neither Reinhardt nor Tech Com provided any of the computer equipment referenced in the lease documents. Rather, Reinhardt told Garrison to purchase a label gun to manufacture labels with false serial numbers on them and affix those labels to computer equipment prior to a physical inspection. In addition to transactions for their own company, Garrison and Gregg also arranged leases through Reinhardt for two other companies with which they were involved. None of these companies received computer equipment through the leases from Reinhardt or any of his associates or associated entities. Reinhardt was the contact person on all of these leases.

Likewise, Tigran Khrlobian was introduced to Reinhardt because he needed to raise capital for his insurance agency, Proshield, which had recently emerged from bankruptcy. When he first met with Reinhardt, Reinhardt explained that Khrlobian's company could enter into computer leases and receive money, rather than equipment. Khrlobian entered into at least seven lease transactions through Reinhardt, with Tech Com acting as the purported equipment vendor. He never permanently received any of the computer equipment represented in the leases. When the financing company performed an on-site inspection, Reinhardt brought Khrlobian equipment, used a label maker to affix serial numbers to the devices, and then removed the equipment shortly after the inspection. Reinhardt coached Khrlobian to respond to telephone inquiries from the financing companies by saying that the equipment was there and that Khrlobian was happy with it.

Jacques Smith testified that he started a debt collection business, CRU & Associates with coconspirator Marc Washington. Smith and Washington were introduced to Reinhardt, who promised that he could arrange for two $50,000 loans to CRU. Smith and Washington had bad credit, but filled out a loan application sent by Reinhardt using Washington's grandmother as the applicant (with her permission).

Reinhardt then informed Smith that the loan would not be approved without CRU having a Dun & Bradstreet ("D & B") report. Smith filled out a basic D & B report for CRU, but the bank was not satisfied and wanted a full D & B report. Smith then filled out a full D & B report, in which he provided a false reference supplied by Reinhardt. Reinhardt told Smith that the bank wanted audited financial statements for the company but that he had contacts in California who could provide financial reports for CRU for $600 to $1,000. Smith and Washington ordered the reports, which arrived two or three days later. Smith and Washington had never provided Reinhardt with any financial information about CRU; the reports they purchased were completely fabricated.

When Reinhardt forwarded Smith the final loan documents that needed to be signed by Washington's grandmother, Smith realized that the loan was actually in the form of a lease for computers. Neither Smith, Washington, nor CRU ever requested or received computer equipment in connection with the loan. Reinhardt told Smith that when the financing company called to ask about the equipment, that Smith should tell them that CRU had received new computer equipment. This first lease transaction yielded CRU around $30,000. The second loan that Smith arranged through Reinhardt required an on-site inspection. Reinhardt faxed Smith a list of serial numbers to affix to the back of CRU's existing computer equipment.

Reinhardt instructed Smith that CRU needed to make at least the first two to four monthly payments on the lease transactions to avoid suspicion of fraud. Reinhardt told Washington that if he made a minimum of six or seven payments on the loan, it would not be red-flagged. After those payments, Reinhardt informed Washington that he could "utilize the insurance that also comes with the leases, and report, act like you had a break-in at your establishment and report the computers stolen to get out of the lease." J.A. 2965.

After a dispute, Smith ended his relationship with Reinhardt and Washington. Washington testified that he then formed his own corporation, Futureview Graphics, which he and Reinhardt used as a lessee in two fraudulent leases. Washington also generated numerous lessees through his friends, using their existing businesses or assisting them in creating new ones. Reinhardt represented Tech Com as the vendor on all of these transactions. Reinhardt took fees of ten to twenty percent on these leases, then Washington took fees and provided the remainder to the lessees. Washington often set up computers at business locations for on-site inspections by finance companies. Reinhardt faxed Washington a list of serial numbers, so that Washington could affix those numbers to the computers. Washington removed the computers after the inspections were complete.

The father of Washington's girlfriend was listed as a guarantor for some of the lease transactions for lessee Variety Cutz and was falsely listed as the president of the company. Washington testified that he joked to Reinhardt about the ownership of Variety Cutz and that Reinhardt compared it to Washington's grandmother nominally owning CRU, because Washington had used her credit. Reinhardt's knowledge of the Variety Cutz arrangement was demonstrated by his threats to Washington's girlfriend that he would "let it be known that [she and Washington] used her father's information." J.A. 3058.

A representative of CIT, which financed seven of Tech Com's leases, testified that the invoice provided by the vendor is the title to the equipment and represents the bill of sale. CIT would not have approved loans if they knew that the equipment in the invoice had never been sold or delivered. If the money from the loan flowed to the lessee rather than the vendor, it would have raised a red flag as a violation of the...