U.S. v. Hamaker

• Decision Date: 14 July 2006
• Docket Number: No. 05-11399.,No. 03-12554.,03-12554.,05-11399.
• Citation: 455 F.3d 1316
• Parties: UNITED STATES of America, Plaintiff-Appellee Cross-Appellant, v. Dewey M. HAMAKER, Linda M. Hamaker, Morgan City Construction, Inc., Defendants-Appellants Cross-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

455 F.3d 1316

UNITED STATES of America, Plaintiff-Appellee Cross-Appellant, v. Dewey M. HAMAKER, Linda M. Hamaker, Morgan City Construction, Inc., Defendants-Appellants Cross-Appellees.

No. 03-12554.

No. 05-11399.

United States Court of Appeals, Eleventh Circuit.

July 14, 2006.

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Walter E. Braswell, Birmingham, AL, for Defendants-Appellants Cross-Appellees.

William C. Athanas, Malinda R. Lawrence, Joyce White Vance, Asst. U.S. Atty., Birmingham, AL, for U.S.

Appeals from the United States District Court for the Northern District of Alabama.

Before HULL, WILSON and GOLDBERG^*, Circuit Judges.

HULL, Circuit Judge:

Appellants Dewey Hamaker, Linda Hamaker, and Morgan City Construction, Inc. ("MCC") appeal their convictions for bank fraud and related offenses. The government cross-appeals both Hamakers' 18-month sentences on the grounds that the district court miscalculated the applicable sentencing Guidelines range. After review and oral argument, we affirm Appellants' convictions, vacate Appellants' sentences and remand for resentencing.

I. FACTS

Appellant MCC was an Alabama construction company co-owned and managed by Appellants Dewey Hamaker and Linda Hamaker. MCC's principal client was Community Bank, a federally insured financial institution headquartered in Blountsville, Alabama. Between 1995 and 2001, MCC provided construction services for Community Bank's branches in Alabama and Tennessee.

In addition to this work for Community Bank, MCC also worked on various personal projects for Kennon Patterson, Senior ("Patterson"), who was the CEO of Community Bank. The work MCC performed for Patterson personally began in 1998 and took place at Heritage Valley Farms, Patterson's 1,000-acre horse farm in Blountsville. MCC's work included the construction of barns, stables, an enclosed horse arena, storage buildings, and a 17,000 square-foot personal residence for Patterson.

During the time that MCC performed construction work at Community Bank's branches and on Patterson's personal property, Patterson was the CEO and chairman of the board of Community Bank, as well as the CEO and chairman of the board of Community Bancshares ("Bancshares"), the holding company for Community Bank.

Larry Bishop was Community Bank's Vice President of Construction and Maintenance and served as an "in house" general contractor for the various Community Bank construction projects. On behalf of Community Bank, Bishop communicated with subcontractors such as MCC and approved the invoices they submitted to the Bank. At the same time, Bishop was acting as the general contractor on the Heritage Valley Farms construction projects MCC performed for Patterson.

As detailed below, the convictions of Appellants arise out of their fraudulent billing of Community Bank for hundreds of thousands of dollars worth of construction services MCC performed for Patterson personally at Heritage Valley Farms, rather than for Community Bank.

A. MCC's Management

Understanding the substantial evidence against Appellants requires a brief review of MCC's organization and record-keeping. As co-owners of MCC, a small construction firm, Appellants Dewey Hamaker and Linda Hamaker headed the company's operations and financial management. Dewey Hamaker principally supervised MCC's construction activities, including assigning workers to projects and monitoring their activities. Linda Hamaker focused on MCC's administration and accounting; her responsibilities included recording payments and receipts, processing payroll, generating invoices, and managing MCC's office staff.

For payroll purposes, MCC recorded the number of hours worked by each construction employee and the location at which the employee performed the work. MCC recorded this and other accounting information in a computerized records system called Quickbooks. MCC's Quickbooks records include an account for each of MCC's construction projects, and thus MCC's records document the materials, labor, and other costs MCC incurred on each particular project. Similarly, MCC's invoices generally identified the project to which the billable amount was attributed.

B. MCC's Charges to Community Bank and Patterson

Between January 1, 1998 and July 15, 2000, MCC billed Community Bank and received from Community Bank a total of $3,122,977 for work done on six Community Bank construction projects. This amount represented 93% of MCC's revenue over the period. Of this more than $3 million MCC invoiced to Community Bank, MCC's invoices attributed $484,750 to MCC's work on the so-called Guntersville project, the construction of a new Community Bank branch in Guntersville, Alabama.

Despite the nearly half-a-million dollars in charges MCC invoiced to Community Bank for the Guntersville project, MCC's records show that MCC incurred only $30,026.25 in labor costs at the Guntersville project during the same time period. As Dewey Hamaker testified at trial, MCC billed on a "cost plus" basis, and thus direct labor costs should have provided an accurate benchmark for MCC's invoicing.¹ By this measure, however, MCC invoiced Community Bank for more than 1600% of the labor costs MCC actually incurred at the Guntersville site. Although MCC's extremely high mark-up was most notable in the Guntersville account, MCC also billed Community Bank for between 325% to 845% of the labor costs MCC incurred at five other Community Bank construction projects between 1998 and 2000.

In addition, MCC's records show that MCC incurred no labor costs at all on the Guntersville project between February 9, 2000 and June 20, 2000. Despite this, between those dates MCC invoiced Community Bank for, and received payment from Community Bank of, $178,500 for work purportedly done at Guntersville.

In stark contrast to MCC's charges to Community Bank, over the two-and-a-half years from January 1, 1998, to July 15, 2000, MCC received only $10,000 from Patterson for work MCC performed at Heritage Valley Farms.² MCC received this small amount despite the fact that, according to MCC's Quickbooks records for that period, MCC employees worked over 61,000 hours at Heritage Valley Farms, incurring a total labor cost of $691,359.58. Thus, during the same time frame in which MCC billed Community Bank over 1600% of the labor costs at the Guntersville project, MCC received from Patterson less than 1.5% of the labor costs at his Heritage Valley Farms.

At the end of every year, Alabama construction firms must submit to the State of Alabama a response to a contractor's questionnaire listing ongoing major construction projects. Linda Hamaker prepared MCC's contractor's questionnaire and submitted it to the state on MCC's behalf on December 31, 1999. MCC's 1999 completed questionnaire listed four Community Bank projects as its only major jobs in progress, including Guntersville. MCC did not include any listing for Heritage Valley Farms or any other work for Patterson.

C. Complaints by the Community Bank Board

In the spring of 2000, members of Community Bank's board of directors — Michael Alred, Wayne Washam, George Barnett, and Michael Bean (who was also Community Bank's Chief Financial Officer) — became concerned that despite the Bank's significant outlays for the Guntersville project, very little progress appeared to have been made at the Guntersville site. These board members raised their concerns formally at Community Bank's board meeting on June 20, 2000. They noted that despite all the money spent on the Guntersville project, absolutely nothing had been built above ground. Patterson responded by assuring the rest of the board that the expenses were justified, and he requested that the board conduct a full accounting of the project's progress.

After the board members looked into the Guntersville project further, they expressed further concern at a Bancshares board meeting on July 15, 2000, and at a second Community Bank board meeting on July 18, 2000. Appellant Dewey Hamaker attended both meetings. At the meetings, Dewey Hamaker assured the board members that MCC was not billing Community Bank for any work done on Patterson's home at Heritage Valley Farms, and he asserted that MCC "did not charge expenses to Patterson's house except about every six months."

Two hours after the July 18, 2000 board meeting, Patterson called a meeting of the Community Bank board's Executive Committee, a subcommittee of the full board. At that meeting, Patterson recommended the dismissal of board members Michael Alred and Michael Bean. On September 28, 2000, Community Bank removed Alred, Bean, and Barnett from its board of directors. On November 10, 2000, Community Bank terminated the employment of Bean and Alred.

Shortly after the allegations of impropriety in July 2000, MCC markedly changed its billing practices for the work at Heritage Valley Farms. Before July 15, 2000, MCC had invoiced Patterson only twice and had received from him only $10,000. In the following five months, however, MCC sent Patterson twenty-nine invoices totaling over $460,000.

D. Investigation and Legal Action

While the Bancshares board was meeting on July 15, 2000, the Marshall County Sheriff's Department searched MCC's office, seizing its computers, time sheets and other records. These records revealed the cost and billing patterns described above. In addition, MCC's records showed that on hundreds of occasions, charges that MCC had billed to Community Bank were described in MCC's records with notations such as "Farm" or "HVF," revealing that the work had actually been performed at Heritage Valley Farms.³ In her testimony at trial, Linda Hamaker acknowledged transferring costs incurred at Heritage Valley Farms to Community Bank accounts.⁴

In late 2000, several Bancshares shareholders filed a derivative action alleging that Patterson, Bishop, the Hamakers, and MCC fraudulently used bank funds for non-bank purposes, principally the construction...