United States v. Pabey

• Decision Date: 28 December 2011
• Docket Number: No. 11–2046.,11–2046.
• Citation: 664 F.3d 1084
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. George PABEY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

664 F.3d 1084

UNITED STATES of America, Plaintiff–Appellee,

v.George PABEY, Defendant–Appellant.

No. 11–2046.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 19, 2011.Decided Dec. 28, 2011.

David E. Hollar (argued), Attorney, Office of the United States Attorney, Hammond, IN, for Plaintiff–Appellee.

Scott L. King (argued), Attorney, Scott King Group, Merrillville, IN, for Defendant–Appellant.

Before FLAUM and MANION, Circuit Judges, and MAGNUS–STINSON, District Judge.^*

FLAUM, Circuit Judge.

On September 24, 2010, George Pabey, former mayor of East Chicago, and Jose Camacho, East Chicago's head of the Engineering Department, were convicted of conspiring to embezzle government funds and embezzling government funds. According to the district court, Pabey and Camacho used government funds and government employees to renovate a house (the “Property”) that Pabey and his wife purchased in October 2007. During trial, Pabey claimed that he was unaware of the scheme to use city funds and employees. In response to this denial, the district court gave the jury a conscious avoidance instruction, informing them that Pabey's knowledge of the scheme can be inferred if they find that he deliberately avoided the knowledge necessary for his conviction. The jury convicted Pabey, and he appeals the court's issuance of the conscious avoidance instruction.

In the event that we do not upset his verdict, Pabey asks that we reduce the length of his sentence. Pabey was given an initial offense level of 10 under the United States Sentencing Guidelines (“U.S.S.G.”), but the court increased his offense level with several enhancements. The court applied a two-point enhancement for obstruction of justice, a four-point enhancement for Pabey's leadership role in the offense, and a two-point enhancement for abuse of a position of trust, bringing Pabey's total offense level to 18. With a criminal history level of one, Pabey's guideline range was 27–33 months' imprisonment. The district court found that Pabey's offense warranted an upward departure from the guidelines and sentenced him to 60 months' imprisonment, along with a $60,000 fine, more than $14,000 in restitution, a $200 special assessment fee, and three years of supervised release. Pabey contests each of the sentence enhancements as well as the reasonableness of the court's upward departure from the sentencing guidelines.

For the following reasons, we affirm both Pabey's conviction and the sentence imposed by the district court.

I. Background

George Pabey was born in East Chicago, Indiana and has remained a lifetime resident. He has worked as an employee for East Chicago for roughly three decades, serving on the police force for 22 years, as the police chief for one year, as a councilman for four years, and as mayor since 2004. Throughout this time, Pabey and his wife Hilda owned several pieces of property. Pabey confesses that he is not what one would call a “handyman,” so any time their properties needed tending they enlisted the help of their family and friends. Specifically, Pabey would often seek the help of his good friend and political supporter Jose Camacho—who also served as Pabey's Engineering Supervisor during Pabey's mayoral tenure—and Angel Acosta—another city worker who was friendly with the Pabeys. In the past, Camacho, Acosta, and other friends would not charge anything for their help, but Pabey and Hilda would personally pay for all the supplies and costs associated with the projects. Other times, Pabey and Hilda would pay workers—including off-duty city workers—to help with their repair needs.

In October 2007, Pabey decided to purchase a house for his daughter in Gary, Indiana. He found the Property, which had been foreclosed upon, and asked Camacho and Acosta to accompany him to the house to see whether it was worth purchasing. Camacho and Acosta determined that the Property needed a good amount of work, but was salvageable. Prior to any work being completed, the Property was appraised at $67,000. Pabey agreed to buy the house, and in December 2007, Camacho took the lead on the improvements that the Property required. By May 2009, the house was worth $135,000. The $68,000 increase in value was largely attributable to an embezzlement scheme aimed at using East Chicago resources to complete the renovation of the Property. The pertinent question in the case at hand is whether Pabey was aware of that embezzlement scheme. On February 3, 2010 a federal grand jury returned a four-count indictment indicating that Pabey may have been privy to the plan. While counts three and four applied only to Camacho, both defendants were charged with count one of conspiring to embezzle local government funds under 18 U.S.C. § 371 and count two of embezzling local government funds under 18 U.S.C. § 666(a)(1)(A). The defendants' jury trial started on September 20, 2010.

According to the government's evidence at trial, there were two methods of embezzlement employed by Camacho and Pabey to repair the Property. First, Camacho bought dozens of items that were installed at Pabey's new house by using his authority to charge purchases to the city's accounts at Menards and Joseph's Hardware. Among the items purchased using the city's money were the following: (1) front and rear entry doors and locks; (2) a gas water heater; (3) doors and drawer handles for the kitchen cabinetry; (4) a bathtub and adjustable shower head for the main floor bathroom; (5) interior paint; (6) items used to finish the basement including 2x4s, drywall, corner bead, paint, primer tile, and grout; (7) an exhaust fan and other items for the basement bathroom; (8) light fixtures to be installed throughout the home; and (9) wood materials used to construct a staircase and full bar in the basement. When items were purchased on one of the city's accounts, the city controller would ultimately be responsible for paying off the claims, but neither of the parties suggested that the controller had any knowledge of the embezzlement scheme. As Pabey points out, there were some items installed that were not charged to the city, including appliances, fixtures, carpeting and countertops (which the Pabeys paid for) and a furnace (which Acosta paid for).

The second form of embezzlement involved Camacho's use of on-the-clock city workers—all of whom reported to him—to complete the renovation project. In his brief, Pabey notes that not all of the work was completed by city workers on city time. His friend Benedicto Diaz was not a city worker, and he provided much help with the project. Acosta was an upper-level city worker, so he was able to take compensatory time while he worked on the Property. But the government put forth evidence at trial that at least five city workers other than Camacho and Acosta helped renovate the Property at times during which they were being paid by the city of East Chicago. They were each told that their work on the Property, which was not located within the confines of their employer city of East Chicago, was a “special assignment.” The amount of time each of them spent working on the house ranged from two to thirty workdays. At least one employee, however, refused to work on Pabey's house. Alex Sanchez, who worked directly under Camacho, refused to go into Pabey's new home, and told Camacho not to use any of Sanchez's subordinates on the “special assignment.” According to the government's evidence, Camacho assured Sanchez that the workers could be trusted and that they would not talk.

The government also presented certain circumstantial evidence at trial suggesting that Pabey either knew of Camacho's scheme to use government resources or purposefully avoided the obtainment of such knowledge. In an effort to illustrate that Pabey was aware of the use of city employees, the government put on evidence of Pabey's, Camacho's, and Hilda's encounters with city workers at the Property. For instance, Stojan Novakovic, a city worker from the Engineering Department, testified that he saw Pabey at least three times at the Property during the workday. Pabey knew Novakovic for 20 years and had paid Novakovic to do work on other properties he owned, but when Pabey saw Novakovic working on the Property during work hours, he did not offer to pay Novakovic, nor did he inquire as to why Novakovic was working on Pabey's house during work hours. Hilda, on the other hand, gave Novakovic specific directions regarding what rooms needed to be painted. Edward Bittner—a city employee who did work both on and off the clock—was also offered payment by Pabey for his off-duty efforts, but was not offered any money for his work while on the job.

To further support its theory, the government provided evidence that highlighted Camacho's deep involvement in the renovation of the Property juxtaposed with Pabey and Camacho's very close relationship. For instance, there were 50 different weekdays where Camacho made cell phone calls during work hours while at the Property.¹ There were also 186 calls between Camacho and Pabey's cell phones from October 2007 to May 2010. Finally, Pabey was seen at the Property with Camacho by several workers on several occasions.

Regarding the use of city funds, the government attempted to prove that Pabey knew—or consciously avoided the knowledge—that the supplies for the renovation were purchased on the city's accounts at Menards and Joseph's Hardware. The government's evidence revealed one incident where Pabey, Camacho, and Hilda rented a sander from Menards. The Pabeys paid for the rented sander, but the next day, Camacho paid for a shop vac, sandpaper, and drop cloth on the Engineering Department's account, and later that day Pabey returned the sander they had rented. The government also presented evidence that during past home improvement projects, the Pabey's kept detailed receipts of all transactions, but for this project, they simply requested that Camacho put all...