United States v. Bazantes, No. 17-15721

• Citation: 978 F.3d 1227
• Decision Date: 26 October 2020
• Docket Number: No. 17-15721
• Parties: UNITED STATES of America, Plaintiff - Appellee, v. Juan Carlos BAZANTES, Cesar Arbelaez Tabares, Defendants - Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

978 F.3d 1227

UNITED STATES of America, Plaintiff - Appellee,

v.Juan Carlos BAZANTES, Cesar Arbelaez Tabares, Defendants - Appellants.

No. 17-15721

United States Court of Appeals, Eleventh Circuit.

October 26, 2020

Ryan Huschka, U.S. Attorney's Office, Kansas City, KS, Jane Elizabeth McBath, Lawrence R. Sommerfeld, U.S. Attorney Service - Northern District of Georgia, U.S. Attorney's Office, Atlanta, GA, for Plaintiff-Appellee.

Vivian D. Hoard, Fox Rothschild, LLP, Amy Levin Weil, The Weil Firm, Atlanta, GA, for Defendant-Appellant Juan Carlos Bazantes.

Amy Levin Weil, The Weil Firm, James M. Deichert, Fellows LaBriola, LLP, Atlanta, GA, for Defendant-Appellant Cesar Arbelaez Tabares.

Before BRANCH, TJOFLAT, and ED CARNES, Circuit Judges.

ED CARNES, Circuit Judge:

Two men owned a company that was a second-tier subcontractor on a project to construct a building for a federal agency. They submitted to the agency certified payroll forms containing false, fictitious, and fraudulent statements and entries within the meaning of 18 U.S.C. § 1001(a)(3). That provision is part of the False Statements Act. The men were convicted of conspiring to violate, and of knowingly and willfully violating, the Act. This is their appeal.

Given the elements of the crime, the facts of the case, and the contentions of the defendants, there are two primary questions about the validity of the convictions. One is whether the payroll forms containing the false statements were made or used in a matter within the jurisdiction of the federal agency. The other question is whether the false statements were material. If the answer to either question is no, the convictions must be reversed. If the answer to both questions is yes, the convictions must be affirmed. The answers are "yes" and "yes."

Arbelaez and Bazantes also challenge their sentences, questioning whether the district court in determining their guidelines ranges properly calculated the loss caused by their crimes. Because the answer to that question is "no," their sentences must be vacated and their cases remanded for resentencing.

I. THE FACTUAL, STATUTORY, AND REGULATORY BACKGROUND

Construing the evidence in the light most favorable to the verdict, as we are required to do, the facts are these. See United States v. Hansen, 262 F.3d 1217, 1236 (11th Cir. 2001).

Cesar Arbelaez Tabares and Juan Carlos Bazantes founded, owned, and managed IWES Contractors, Inc., a drywall contracting company. It acted as a "labor broker," providing skilled drywall installation workers to construction companies. One of the construction projects IWES provided workers for was a $63 million office building in Atlanta for the Centers for Disease Control and Prevention (CDC), a federal agency.

The Beck Group was the prime contractor on that federal construction project. Beck contracted with Mulkey Enterprises as a first-tier subcontractor that would, among other things, install the drywall. And Mulkey hired IWES as a second-tier subcontractor to provide Mulkey with drywall workers for the job. So IWES was a subcontractor for Mulkey, Mulkey was a subcontractor for Beck, and Beck was the prime contractor for the CDC.

A. The Statutory and Regulatory Background

Federal construction projects are, of course, heavily regulated by a web of statutes and regulations. The Davis-Bacon Act of 1931, for example, requires government contractors and subcontractors to pay their workers at least the prevailing wage in the community where the construction occurs. Pub. L. No. 71–798, ch. 411, 46 Stat. 1494 (codified at 40 U.S.C. §§ 3141 – 44, 3146 – 47 ). The Copeland "Anti-Kickback" Act of 1934 forbids government contractors and subcontractors from requiring any worker on a federal project "to give up any part of the compensation to which he is entitled under his contract of employment." Copeland Act, ch. 482, § 2, 48 Stat. 948, 948 (1934) (codified at 18 U.S.C. § 874 and 40 U.S.C. § 3145 ). In that way it complements the Davis-Bacon Act.

One subsection of the Copeland Act, which is now codified in 40 U.S.C. § 3145, directs the Department of Labor to promulgate implementing regulations and provides that: "The regulations shall include a provision that each contractor and subcontractor each week must furnish a statement on the wages paid each employee during the prior week." Id. at § 3145(a). The very next subsection of the statute, which Congress added in 1958, states with concise clarity that: " Section 1001 of title 18 applies to the statements" that contractors and subcontractors must furnish. Id. § 3145(b).

In obedience to the Copeland Act's statutory mandate, the Department of Labor adopted 29 C.F.R. § 3.3 ("Weekly Statement with Respect to Payment of Wages"), which requires that:

Each contractor or subcontractor engaged in the construction, prosecution, completion, or repair of any public building ... shall furnish each week a statement with respect to the wages paid each of its employees ... during the preceding weekly payroll period. This statement shall be executed by the contractor or subcontractor or by an authorized officer or employee of the contractor or subcontractor who supervises the payment of wages, and shall be on the back of Form WH 347, "Payroll (For Contractors Optional Use)" or on any form with identical wording.

Id. § 3.3(b). That regulation is followed by another, § 3.4 ("Submission of Weekly Statements and the Preservation and Inspection of Weekly Payroll Records"), which requires that:

(a) Each weekly statement required under § 3.3 shall be delivered by the contractor or subcontractor ... to a representative of a Federal or State agency in charge at the site of the building or work .... After such examination and check as may be made, such statement, or a copy thereof, shall be kept available, or shall be transmitted together with a report of any violation, in accordance with applicable procedures prescribed by the United States Department of Labor.

(b) Each contractor or subcontractor shall preserve his weekly payroll records for a period of three years from date of completion of the contract. The payroll records shall set out accurately and completely the name and address of each laborer and mechanic, his correct classification, rate of pay, daily and weekly number of hours worked, deductions made, and actual wages paid. Such payroll records shall be made available at all times for inspection by the contracting officer or his authorized representative, and by authorized representatives of the Department of Labor.

Id. § 3.4.

Two other regulations implementing both the Copeland Act and the Davis-Bacon Act require federal construction contracts to contain language about weekly payroll records. The first is 29 C.F.R. § 5.5, which requires most federal construction contracts to contain a term obligating the contractor to submit weekly payroll records for itself and its subcontractors, including certifications (from itself and its subcontractors) that the payroll information is correct and complete. Id. § 5.5(a)(3)(ii)(A)–(B). Contracts must also contain a provision that states: "The falsification of any of the above certifications may subject the contractor or subcontractor to civil or criminal prosecution under section 1001 of title 18 ...." Id. § 5.5(a)(3)(ii)(D).

The second regulation is 48 C.F.R. § 22.407, which provides that most federal construction contracts must include certain other mandatory terms. One of those terms requires submission to the contracting agency of weekly payroll records that are certified by the contractor or subcontractor as correct. See 48 C.F.R. § 52.222-8(b). The regulation also requires contracts to warn that "[t]he falsification of any of the certifications in this clause may subject the Contractor or subcontractor to civil or criminal prosecution under section 1001 of title 18 [, the False Statements Act]." Id. § 52.222-8(b)(4).

B. The Contracts and the Forms Submitted

Beck's contract with the CDC required Beck to collect and submit to the CDC certified payroll records from "all subcontractors" on the CDC project. Beck was also required to ensure that "any subcontractor or lower tier subcontractor performing construction within the United States," such as IWES, complied with those CDC reporting requirements. Having Beck shoulder the responsibility for gathering and forwarding the reports from subcontractors on the project was consistent with the applicable regulation. See 48 C.F.R. § 52.222-8(b)(1) ("The Prime Contractor is responsible for the submission of copies of payrolls by all subcontractors.").

The contract also provided that if Beck failed to carry out its responsibility to gather and submit the required payroll information, the CDC could withhold funds, terminate the contract, or even debar Beck or the subcontractors, or both, from working on a government contract again. That contract clause was consistent with the applicable regulation. See id. § 52.222-8(c) ("[F]ailure to submit the required records upon request or to make such records available may be grounds for debarment action pursuant to 29 C.F.R. 5.12.").

To carry out its reporting responsibilities, Beck included in its contract with Mulkey a clause that required Mulkey to submit to Beck not only its own certified payroll records but also those of all of its subcontractors, including IWES. Each week Beck gave to the CDC all of those payroll records, as it was required to do under the contract. Those records included the ones IWES had submitted to Mulkey for submission to Beck. See 40 U.S.C. § 3145(a) ("[E]ach contractor and subcontractor each week must furnish a statement on the wages paid each employee during the prior week."); 29 C.F.R. § 3.3(b) ("Each contractor or subcontractor engaged in the construction ... of any public building or public work ... shall furnish each week a statement with respect to the wages paid to each of its employees engaged on work ....").

The contract between IWES and Mulkey required IWES...