USA v. Brothers Construction Co.

• Decision Date: 02 March 2000
• Docket Number: No. 98-4613,TRI-STATE,N,CR-97-47,98-4613
• Citation: 219 F.3d 300
• Parties: (4th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. BROTHERS CONSTRUCTION COMPANY OF OHIO, INCORPORATED, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v.ASPHALT CORPORATION, Defendant-Appellant. o. 98-4694 (). . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 300

219 F.3d 300 (4th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. BROTHERS CONSTRUCTION COMPANY OF OHIO, INCORPORATED, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. TRI-STATE ASPHALT CORPORATION, Defendant-Appellant.

No. 98-4613, No. 98-4694 (CR-97-47).

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: March 2, 2000.

Decided: July 6, 2000.

Appeals from the United States District Court for the Northern District of West Virginia, at Wheeling.

Frederick P. Stamp Jr., Chief District Judge.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] COUNSEL ARGUED: Elgine Heceta McArdle, THE OFFICE OF MUSSER & MCARDLE, Wheeling, West Virginia, for Appellant Brothers Construction; Stephen Godfrey Jory, JORY & SMITH, Elkins, West Virginia, for Appellant Tri-State Asphalt. Michael D. Stein, Assistant United States Attorney, Wheeling, West Virginia, for Appellee. ON BRIEF: David E. Godwin, United States Attorney, Rita R. Valdrini, Assistant United States Attorney, Wheeling, West Virginia, for Appellee.

Before WIDENER, NIEMEYER, and TRAXLER, Circuit Judges.

Affirmed by published opinion. Judge Traxler wrote the opinion, in which Judge Widener and Judge Niemeyer joined.

OPINION

TRAXLER, Circuit Judge:

Brothers Construction Company of Ohio, Incorporated ("Brothers") and Tri-State Asphalt Corporation ("Tri-State") were charged in a four-count indictment arising from their involvement in a federally funded highway construction project. Following an eleven-day trial, Brothers and Tri-State were convicted of conspiracy to defraud the United States, see 18 U.S.C.A. § 371 (West 2000); two counts of wire fraud, see 18 U.S.C.A. § 1343 (West 2000); and making a false statement, see 18 U.S.C.A. § 1001 (West 2000). Brothers and Tri-State challenge their convictions and sentences on multiple grounds. We affirm.

I.

In 1994, the West Virginia Department of Transportation, Division of Highways ("WVDOH"), solicited bids for a highway construction project ("the Elm Grove project") that involved approximately $5.2 million in federal and state funds. Federal regulations require contractors on highway construction projects receiving federal assistance to comply with state programs fostering the development of "disadvantaged business enterprises" ("DBEs"). See 49 C.F.R. § 26.13 (1999). Contractors are also required to comply with federal regulations that apply to DBE participation on such a project. A DBE is defined as "a for-profit small business concern -(1) That is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged . . . and (2) Whose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it." 49 C.F.R. § 26.5. African-Americans and women qualify as"socially and economically disadvantaged individuals." 49 C.F.R.§ 26.5.

If an entity is awarded a subcontract as a DBE, it must perform its own work under its own supervision in order for its services to be counted toward the DBE goal. See 49 C.F.R.§ 26.55. In order to preclude the superficial inclusion of a DBE merely"to obtain the appearance of DBE participation," 49 C.F.R. § 26.55(c)(2), funds paid to a DBE contractor count toward the DBE goal "only if the DBE is performing a commercially useful function," 49 C.F.R. § 26.55(c). The regulations elaborate on this requirement as follows:

A DBE performs a commercially useful function when it is responsible for execution of the work of the contract and is carrying out its responsibilities by actually performing, man aging, and supervising the work involved. To perform a commercially useful function, the DBE must also be respon sible, with respect to materials and supplies used on the con tract, for . . . ordering the material . . . and paying for the material itself.

49 C.F.R. § 26.55(c)(1). Additionally, the cost of equipment leased by the DBE to perform its work may be counted toward the DBE goal.

See 49 C.F.R. § 26.55(a)(1).

WVDOH's bid solicitation for the Elm Grove project included a DBE goal of eight percent for the prime contract. Thus, companies bidding on the prime contract were required to subcontract eight percent of the project funds to certified DBEs. Tri-State was awarded the prime contract for the Elm Grove project. In submitting its bid, TriState represented to WVDOH that it would meet the DBE requirement, and Tri-State was required to name its DBE subcontractors within twenty days of the award of the prime contract.

Tri-State decided to satisfy part of the DBE requirement by subcontracting the highway under drain work to a DBE because Tri-State, essentially an asphalt paving company, generally did not perform under drain work. The most competitive bid on the under drain subcontract, however, was submitted by Bunn Construction ("Bunn"), a non DBE. Initially, Tri-State told Bunn that the under drain subcontract would be awarded to a DBE to satisfy the DBE goal for the Elm Grove project. Bunn persisted, however, offering to locate a DBE subcontractor who would split the under drain work with Bunn at Bunn's original bid price. Although Tri-State did not normally split the under drain subcontract between two companies, Tri-State agreed to Bunn's proposal based on Bunn's representation that it would work out the details regarding which portion of the under drain subcontract the DBE would perform and which portion Bunn would perform and Bunn's representation that it would "coordinate" the work. J.A. 49091.

Eventually, Charlie Striblin and Chuck Taylor, both of whom were employed by Bunn, contacted Brenda Ware ("Ware"), president of Brothers (a certified DBE), and suggested that Brothers could involve itself in the under drain work by essentially lending its name to the Elm Grove Project. Striblin explained that he could oversee the project and that Ware could put Bunn employees on Brothers' payroll. Bunn's president, Kermit Bunn, testified that he learned Ware did not want to participate in the Elm Grove project unless she could make $10,000. According to Bunn employee William George, Ware and Kermit Bunn orally agreed in May 1994 that Brothers would "participate" as a DBE in the Elm Grove project in exchange for $10,000. J.A. 300-01. George, who prepared invoices and related documents for Bunn, testified that Bunn was to invoice Brothers for the work Bunn performed and that Brothers, in turn, was to pay each invoice with the progress payments it received from Tri-State. The invoices were to be adjusted so that Brothers would eventually net $10,000. WVDOH held a pre-construction conference to discuss the Elm Grove project with Tri-State and its subcontractors. Brothers did not send a representative to the meeting. Instead, Kermit Bunn explained the work that Brothers was to perform.

Shortly before the project was to begin, Tri-State notified Kermit Bunn that Bunn Construction was officially a subcontractor on the Elm Grove project, but that Tri-State needed Bunn to explain how the under drain work was to be split between Bunn and the DBE. Based on information supplied by Kermit Bunn, Tri-State drafted subcontracts obligating Bunn and Brothers to do different portions of the under drain work. The proposed subcontract between Tri-State and Brothers provided that Brothers would be paid $185,835.20 for its portion of the drainage work. Bunn was to receive $180,944.80 for its portion of the work. After the drainage work was complete, however, the total amount to be paid by WVDOH to Tri-State for the under drain was reduced by $33,985.80 because the project required fewer linear feet of under drain than anticipated. In turn, Tri-State was required to pay Brothers $169,487.60 for the work that Brothers was supposed to perform on the Elm Grove project.

Bunn executed the subcontract immediately. Brothers, however, did not sign the agreement, thus delaying the start of construction. At Tri-State's insistence, Bunn attempted to have Ware sign the subcontract so the project could begin; however, construction began on June 13 without a signed subcontract from Brothers.

After the project began, Ware confirmed to Bunn's project manager, Jimmy Collett, that Brothers was being paid to execute the subcontract and lend its name to the project. Brothers' responsibility consisted of creating the payroll for submission to WVDOH and paying the invoices for the materials required for the construction of the under drain. No Brothers employees appeared on the work-site.

Instead, Bunn supplied the workforce that performed Brothers' portion of the under drain work, as well as its own. Over the course of the Elm Grove project, Collett, Bunn's project manager, acted as Brothers' project "superintendent." J.A. 278. Collett ordered all of the construction materials in Brothers' name and arranged for the delivery of the materials to Bunn's construction office. In fact, Bunn paid for several items directly. He ensured the proper equipment, all of which belonged to Bunn, was available at the job site. And, Collett prepared Brothers' payroll for Ware's signature even though the payroll listed Bunn employees.

On June 18, after the project had been underway for one week, Ware notified Collett that Brothers did not have sufficient funds to make the first payroll. Kermit Bunn directed Collett to have funds transferred from Bunn's account to Brothers' account so that Brothers could meet the payroll. Two days later, however, Ware informed Collett that she would not meet the payroll because she had not been paid the money promised to her, and Ware threatened to shut down the under drain work. Bunn Construction was forced to pay the workers directly. While the under drain work was being performed, Brothers did not submit certified payrolls to Tri-State detailing the work that its employees were ostensibly performing on...