United States v. Davis

• Decision Date: 15 November 2022
• Docket Number: 21-10996
• Citation: 53 F.4th 833
• Parties: UNITED STATES of America, Plaintiff—Appellee, v. Jonathan Dean DAVIS, Defendant—Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

53 F.4th 833

UNITED STATES of America, Plaintiff—Appellee,

v.Jonathan Dean DAVIS, Defendant—Appellant.

No. 21-10996

United States Court of Appeals, Fifth Circuit.

FILED November 15, 2022

Jonathan Glen Bradshaw, Leigha Amy Simonton, Assistant United States Attorneys, Dimitri Narciso Rocha, U.S. Attorney's Office, Northern District of Texas, Dallas, TX, for Plaintiff—Appellee.

Jack Ternan, Ternan Law Firm, P.L.L.C., Plano, TX, for Defendant—Appellant.

Before Clement, Duncan, and Wilson, Circuit Judges.

Stuart Kyle Duncan, Circuit Judge:

Jonathan Dean Davis was convicted of numerous wire-fraud and money-laundering charges arising from a fraudulent scheme to cause the Department of Veterans Affairs to pay over $71 million in GI-Bill funding to his trade school. Davis raises a menagerie of challenges to his convictions and his sentence. We affirm in nearly all respects, except that we vacate the forfeiture order and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

On March 25, 2021, Davis was named in a thirteen-count superseding indictment filed in the Northern District of Texas.¹ Counts 1 through 7 charged Davis with Wire Fraud, in violation of 18 U.S.C. § 1343 ; and Counts 10 through 13 charged Davis with Money Laundering and Aiding and Abetting, in violation of 18 U.S.C. §§ 1952, 1957.² Following a trial, a jury convicted Davis on each of these counts on April 15, 2021.

The charges stemmed from a scheme Davis concocted to defraud the Department of Veterans Affairs ("VA") of vast sums of money. To understand this scheme, consider first some background information on the VA and the Post 9/11 Veterans Educational Assistance Act of 2008 ("GI Bill"). The GI Bill is an educational benefits program that provides financial assistance to eligible student-veterans. The VA agrees to pay up to a certain amount of a student's tuition and fees at VA-approved schools. Notably, this means that for a school to receive tuition payments through GI-Bill funding, it must first go through an approval process. This approval is necessary to ensure that veterans receive sound training and that taxpayer funds are not wasted. See Cleland v. Nat'l Coll. of Bus. , 435 U.S. 213, 219, 98 S.Ct. 1024, 55 L.Ed.2d 225 (1978). Approval requirements include that the school must have been continuously operational for at least two years and have demonstrated financial stability. To help in the approval process, the VA relies on state-approving agencies that determine which educational institutions are eligible. In Texas, that agency was the Texas Veterans Commission ("TVC"). The TVC ensures compliance with the two-year requirement and also independently requires schools to obtain a Certificate of Approval from the Texas Workforce Commission ("TWC").

We turn to the defendant and the conduct that culminated in his convictions. Davis had been working in the heating, ventilation, and air conditioning ("HVAC") industry since he was 18 years old. In 2005, he began training members of the HVAC industry through his business, Jon Davis Companies, Inc. In 2013, he incorporated a separate business, Retail Ready Career Center Inc. ("Retail Ready"), and opened a company bank account for it. This new entity became a for-profit trade school that offered a six-week HVAC training course for students. The students were primarily military veterans, although some civilian students were also enrolled. The student-veterans would use their GI-Bill funding to pay Retail Ready's tuition.

For Retail Ready to obtain GI-Bill funding when training veterans, Davis first had to obtain VA approval. This is where the fraudulent scheme began. The Government alleged that, in the course of the VA-approval process, Davis "made a series of misrepresentations to fraudulently obtain VA approval for Retail Ready and to fraudulently induce veterans to enroll as students at Retail Ready." The first step began with the TWC, from which Davis had to receive a Certificate of Approval. In his application, Davis submitted Retail Ready's audited financial statements and certified they were true and correct. But they were not—a fact that Davis himself conceded. Further, the application certified no criminal or civil actions were pending against the school or its owners and officers. Once more, this was not true (Davis had a charge pending against him)—and once more, Davis himself conceded this fact. As further evidence of the falsehoods submitted to the TWC, the Government invoked an electronic journal Davis kept on his computer. In this journal, Davis recounted his interaction with the accountant auditing Retail Ready. Davis wrote: "I then finally found an accountant that will do the audit the way I need it done for $1,000.00." He further explained: "I lied to the accountant that I am using for my audit service, I told him that I don't have anything in the company name other than a lease and I left out having Jay being an employee and that I've had a bank account with expenses out of it because it is a disaster and wouldn't project a very good picture."

The next step in this series of falsehoods, the Government alleged, was that Davis lied to the TVC. In his application to the TVC for VA approval, Davis certified that Retail Ready had continuously operated as an educational institution for the previous two years. This was false. Retail Ready incorporated in May 2013 and Davis certified the two-year requirement was met when he applied in August 2014. The Government also alleged that Davis lied about Retail Ready's being in sound financial condition by once more providing a second set of misleading financial statements. As a result of these misrepresentations to the state-approving agencies, the Government alleged that the VA approved Retail Ready to begin accepting GI-Bill payments on behalf of student-veterans on August 7, 2014.

The Government next alleged that Davis advanced this scheme by lying to the students themselves. Specifically, Davis induced the veterans to enroll at Retail Ready while concealing the fact that the school had only been approved as a result of the aforementioned fraud. Davis also allegedly misrepresented the career prospects of Retail Ready graduates, and he allegedly concealed just how much of the students' GI-Bill funding would be depleted. Several former student-veterans testified on these points, saying that they were unaware of the fraudulently obtained VA approval; that they were told they would be prepared to work as technicians making $15–$16 an hour but then struggled to find work; and that Retail Ready did not disclose how many months of their GI-Bill benefits would be depleted.

Now consider how all this relates to the wire-fraud and money-laundering charges at issue. Corresponding to each wire-fraud count, the superseding indictment identified seven Retail Ready students who paid their tuition and fees—ranging from $18,053.10 to $20,059.00—through GI-Bill funding. The indictment also identified four specific purchases, corresponding to each of the four money-laundering counts, that Davis made with proceeds derived from unlawful activity—in this case, the foregoing wire fraud scheme. Those four purchases were: a luxury home for over $2.2 million, a Lamborghini for roughly $430,000, a Ferrari for roughly $280,000, and a Bentley for roughly $260,000.

In April 2021, the jury convicted Davis of these counts. He was then sentenced by the district court. His Presentence Report ("PSR") recommended a total offense level of 38. This consisted of 7 base-level points for wire fraud, a 24-point increase for an intended loss amount of over $72 million, a 2-point increase for using mass marketing, a 2-point increase for using sophisticated means, a 1-point increase for money laundering, and a 2-point increase for obstruction of justice. This yielded a guideline range of 235 to 293 months of imprisonment. Davis objected, arguing the proper offense level was 8, which should have yielded a custody range of 0 to 6 months imprisonment. Disagreeing, the district court sentenced Davis to 235 months of imprisonment. It also ordered $65,200,000 in restitution to the VA, based on the agency's actual loss. Finally, it entered a forfeiture order based on the gross amount of VA funds—over $72 million—that Retail Ready received. Davis now appeals on numerous grounds.

II. SUFFICIENCY OF THE EVIDENCE

We begin with Davis's sufficiency challenges. Where a defendant properly preserves a sufficiency challenge, as Davis did by moving for acquittal in the district court, we review the challenge de novo. United States v. Huntsberry , 956 F.3d 270, 279 (5th Cir. 2020). Our review, however, is "highly deferential to the verdict, and, viewing the evidence in the light most favorable to the prosecution, we consider whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Ibid. (internal quotation marks and citations omitted); see generally Jackson v. Virginia , 443 U.S. 307, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). "We accept all credibility choices and reasonable inferences made by the trier of fact which tend to support the verdict and resolve conflicts in the evidence in favor of the verdict." Huntsberry , 956 F.3d at 279 (internal quotation marks and citations omitted).

A. Wire Fraud

First, we conclude the seven wire-fraud counts are sufficiently supported by the evidence.

Federal law makes it a crime to use interstate wire communications to carry out a "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." 18 U.S.C. § 1343. To establish a violation of this statute, the Government must prove: "(1) a scheme to defraud exists, (2) the defendant used wire communications in interstate or foreign commerce to further that scheme, and (3) the defendant had specific intent to defraud." United States v. del Carpio Frescas , 932 F.3d 324, 329 (5th Cir. 2019...