United States v. Aubrey

• Decision Date: 08 September 2015
• Docket Number: No. 13–10510.,13–10510.
• Citation: 800 F.3d 1115
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. William AUBREY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

800 F.3d 1115

UNITED STATES of America, Plaintiff–Appellee

v.William AUBREY, Defendant–Appellant.

No. 13–10510.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 11, 2015.

Filed Sept. 8, 2015.

Michael J. Kennedy (argued), Chief Assistant Federal Public Defender, Rene Valladares, Federal Public Defender, Reno, NV, for Defendant–Appellant.

Scott A.C. Meisler (argued), Sung–Hee Suh, Deputy Assistant Attorney General, and Leslie R. Caldwell, Assistant Attorney General, United States Department of Justice, Criminal Division, Appellate Section, Washington, D.C.; Daniel G. Bogden, United States Attorney, Elizabeth Olson White, Appellate Chief, Kathryn Newman and Adam McMeen Flake, Assistant United

States Attorneys, Las Vegas, NV, for Plaintiff–Appellee.

Appeal from the United States District Court for the District of Nevada, Kent J. Dawson, Senior District Judge, Presiding. D.C. No. 2:09–cr–00206–KJD–PAL–1.

Before: DIARMUID F. O'SCANNLAIN, SANDRA S. IKUTA, and N. RANDY SMITH, Circuit Judges.

OPINION

N.R. SMITH, Circuit Judge:

For purposes of 18 U.S.C. § 1163, funds paid from an Indian tribal organization to a contractor continue to be “property belonging to any Indian tribal organization,” as long as the tribal organization maintains sufficient supervision and control of disbursed funds and their ultimate use. Accordingly, we reject William Aubrey's contention that the evidence presented at his trial was insufficient to prove that he converted or misused property belonging to an Indian tribal organization in violation of 18 U.S.C. § 1163. We also deny Aubrey's other challenges to his conviction and sentencing.

BACKGROUND ¹

A. Overview of the federal funding of tribal housing projects

Under the Native American Housing Assistance and Self–Determination Act, 25 U.S.C. §§ 4101 –4212 (“NAHASDA”), the U.S. Department of Housing and Urban Development (“HUD”) allocates federal money to Indian tribes to fund the construction and maintenance of affordable housing on Indian reservations. HUD evaluates a tribe's specific needs and then allocates money to the tribe, such funds are then termed a block grant.

The Navajo Nation receives the largest amount of NAHASDA block grant funds in the country. The Navajo Housing Authority (“NHA”), the Navajo tribal organization designated to receive the block grant funds from HUD,² received approximately ninety million dollars annually between the years of 2000 and 2004. To be eligible to receive NAHASDA block grant funds, the NHA must file an annual Indian Housing Plan to specify how the funds are to be used. Once the NHA's Housing Plan is approved by HUD, the NAHASDA funds are then allocated to the NHA. However, even after the funds are allocated, they are not immediately delivered to the NHA. Instead, the allocated funds are only released by HUD when the NHA submits requests, accompanied by supporting documentation, that eligible work under the Housing Plan has been performed. For example, after a roofer completes work on houses under the NHA's Housing Plan, the roofer submits a bill (either directly or through a contractor) to the NHA. The NHA then requisitions the funds from HUD, who releases the funds to the NHA in the form of a draw. Those funds must then be used to pay the subcontractor whose work supported the requisition (in this example, the roofer). The funds cannot be used for other purposes. In short, NAHASDA funds must be spent solely on work that is (a) eligible under the statute, (b) approved under the Indian Housing Plan, and (c) verified as completed by the responsible tribal organization. 25 U.S.C. § 4111(g) (“[A]mounts provided under a grant under this section may be used only for affordable housing activities under subchapter II of this chapter that are consistent with an Indian housing plan approved under section 4113 of this title.”).

NHA does not undertake all housing projects on the Navajo Nation Reservation on its own. Because of the Reservation's size and political diversity (the Reservation covers over 25,000 square miles and is divided into 110 chapters, which are comparable to county governments), the NHA delegated responsibility for requisitioning and disbursing NAHASDA funds to a number of sub-grantees. One such sub-grantee was the Fort Defiance Housing Corporation (“FDHC”). The FDHC was a non-profit organization (formed under the laws of the Navajo Nation) and was delegated responsibility for the administration of NAHASDA funds to provide housing to the Navajo people. FDHC signed formal sub-grant agreements with NHA, pledging to adhere to the annual Indian Housing Plans submitted by NHA and also to abide by the governing federal and Navajo Nation laws and regulations. In its sub-grant agreement, FDHC understood and agreed that NAHASDA block grant funds would be allotted “on a cost reimbursement basis” through HUD's line-of-credit system. To obtain NAHASDA funds, FDHC had to submit a standard requisition form (supported by relevant documents such as bills and invoices), identifying the funding-eligible work performed during the relevant period, requesting payment, and agreeing to return any excess funds. NHA inspectors would then verify that the claimed work had actually been completed and approve FDHC's request. Once the request was approved, HUD would release the NAHASDA funds to NHA, which would issue a check to FDHC. Once the funds were in FDHC's possession, it had a fiduciary duty to manage the funds and to pay them to the party who had performed the work that formed the basis for the requisition.

B. FDHC and Lodgebuilder's Relationship

William Aubrey is a contractor who owned a controlling interest in, and actively managed and controlled, two construction companies: Lodgebuilder, Inc., a Nevada for-profit corporation, and Lodgebuilder Management, Inc., a Montana corporation (collectively, “Lodgebuilder”). Aubrey has had a long history of building houses on Indian lands throughout the country. Aubrey's conviction, at issue in this appeal, resulted from his involvement in projects he performed for the Navajo Nation from 2000 to 2004.

Between 1996 and 2004, Lodgebuilder and FDHC entered into a series of development, construction, and consulting agreements for various projects throughout the Navajo Nation Reservation. In fact, Lodgebuilder's and FDHC's relationship became so intertwined that FDHC's Chief Operations Officer, Marcus Tulley, testified at trial that Aubrey, as the person managing and controlling Lodgebuilder, had the real authority over FDHC's finances and financial management. By mid–2002, FDHC's relationship with Lodgebuilder had raised red flags with HUD's Southwest Office of Native American Programs (“SWONAP”). SWONAP issued a report in August 2002 addressing various issues arising from that relationship, ultimately finding that FDHC was in violation of fiscal controls and was unable to substantiate that NAHASDA funds were being used solely for authorized purposes.

Notwithstanding those findings, FDHC entered into a renewed five-year agreement (the “Consultant Agreement”) with Lodgebuilder in October 2002. The Consultant Agreement stated that Lodgebuilder would provide construction management services for FDHC's projects, including preparing the monthly payment requests for approval by FDHC and NHA, distributing the NAHASDA funds awarded to FDHC to the suppliers and contractors who performed the work, and securing the third-party funding needed to cover the full cost of the projects. As for Lodgebuilder's own compensation, the agreement specified that Lodgebuilder would be paid like the other companies that Lodgebuilder was regulating—on a line-item basis in accordance with NAHASDA cost guidelines.

C. The Chilchinbeto project

Two months after entering into the Consultant Agreement, NHA submitted its 2003 Indian Housing Plan to HUD. The Indian Housing Plan requested $9.374 million in NAHASDA funds for a housing development to be built in Chilchinbeto, Arizona during the 2003 fiscal year. This amount was in addition to $2.26 million in NAHASDA grant funds that had been allocated during the 2002 fiscal year to get the project started. In May 2003, the FDHC entered into a sub-grant agreement with NHA whereby the FDHC agreed to build 90 units at Chilchinbeto, utilizing the $11.6 million in allocated NAHASDA funds. As directed by the Consultant Agreement, FDHC delegated the management of the Chilchinbeto project to Lodgebuilder (and thereby to Aubrey).

Construction at Chilchinbeto began in the summer of 2003. Lodgebuilder prepared monthly requisition requests that FDHC signed and submitted to NHA. NHA then verified that the work had been completed, drew funds from its HUD line of credit, and issued checks to FDHC. FDHC then issued checks to Lodgebuilder, which Aubrey endorsed and deposited into his joint money market account that he shared with his wife, Brenda Todd. Through the relevant periods of time, the NHA received $9,593,000 in NAHASDA funds, of which $9,164,573 was deposited into Aubrey's bank account.

Aubrey used his money market account both for professional payments on the Chilchinbeto job and for personal expenses.³ Thus, once the funds were deposited into Aubrey's account, it became extremely difficult to trace how he was using the NAHASDA funds. He also transferred money from the joint account to another personal account to finance gambling debts and buy jewelry.

The commingling of NAHASDA funds with personal finances did not seem to prevent Aubrey from paying the subcontractors doing the work at Chilchinbeto during the early phases of the job. However, starting in the spring of 2004, Aubrey's longtime employee, Dale Rowton, heard complaints that contractors were not being paid for the work they had completed. After hearing the complaints, Rowton asked Aubrey if the contractors could be paid. Aubrey told Rowton not to release checks, because NHA had not paid Lodgebuilder on the requested draws. However, contrary to Aubrey's...