Commercial Litigation and Arbitration

Failure to Collect Evidence Available to, But Not in the Possession of, a Party Does Not Constitute Spoliation

United States v. Greco, 2013 U.S. App. LEXIS 17264 (6th Cir. Aug. 20, 2013):

Defendant Thomas Greco was convicted at the end of a three-week jury trial on charges of bribery and conspiracy to commit bribery involving programs receiving federal funds (18 U.S.C. § 666(a)(1)(B) and § 371), violation of and conspiracy to violate the Hobbs Act (18 U.S.C. § 1951), making false tax returns (26 U.S.C. § 7206(1)), and conspiracy to commit mail fraud (18 U.S.C. § 1349). He was sentenced to 112 months' imprisonment, to be followed by three years of supervised release. Greco now appeals his sentence, contending that the district court: (1) improperly applied a 12-level enhancement based on an erroneous loss calculation***.



Greco worked at MetroHealth System, a county-owned health-care provider in Cleveland, Ohio, from 1997 until January 2009, first as a project manager in the maintenance and facilities and construction management departments and later as director of the facilities department. As project manager and, later, facilities director, Greco supervised the independent contractors who worked on MetroHealth construction projects. He also was responsible for selecting the contractors for smaller-scale no-bid maintenance projects and for authorizing payment for their work. Greco used this authority to facilitate a bribery scheme set up by his boss, John Carroll, the Vice-President of Facilities and Institutional Management at MetroHealth, and Nilesh Patel, the Secretary and Vice-President of East-West Construction Company.

The scheme began in 1999, when Patel took Carroll on an all-expense-paid trip to India. In return, Carroll agreed to reimburse the trip's cost by inflating invoices that East-West submitted to MetroHealth for construction work that it performed for the company. Greco helped facilitate the transaction. Thereafter, Carroll -- often, although not always -- with Greco's assistance, used the same technique to reimburse Patel for other trips, goods, and gift cards. According to Patel's testimony, when Greco realized how easy the bribery scheme was to implement, he also began to ask Patel for bribes. Over the next eight years, Greco received from Patel numerous gift cards, free lunches, trips, and other goods. All of the gifts that Carroll and Greco received from Patel were then reimbursed to East-West from MetroHealth through the use of inflated invoices, change orders, and similar devices.

Patel became anxious about his role in the scheme in March 2007, when he received notice from the IRS that his credit card statements were being reviewed for tax irregularities. The bribery scheme continued, however, until May 2008, when, as part of its investigation into Patel's credit card transactions, the IRS sent a letter to the MetroHealth CEO that included a list of items, totaling roughly $80,000, that Patel had given to Carroll as part of the scheme. At that point, Carroll was placed on leave from his job at MetroHealth, and Patel stopped providing gifts to both Carroll and Greco. In the meantime, Greco took action to hide his involvement in the scheme. At some point after Carroll was put on leave, Greco met with Patel to return a bag containing jewelry that Patel had given him as part of the scheme. At the meeting, he told Patel that he had gotten rid of some of the other bribes that he had received over the years. He also demanded that Patel write him a letter stating that he had not received any gifts from East-West or from any East-West associate.

Greco's attempts to hide his involvement in the scheme were frustrated by Patel's decision, in August 2008, to contact the government and to confess his participation in the bribery scheme. Patel ultimately agreed to a plea deal with the government, in exchange for a reduced sentence. As part of his cooperation with the government, Patel provided detailed information about the gifts he gave Carroll and Greco in order to ensure their favorable treatment of East-West's construction projects. On the basis of this information and other evidence about Greco's involvement in the scheme, Greco was indicted on one count of conspiring to commit bribery concerning programs receiving federal funds, five counts of outright bribery concerning such programs, one count of violating and one count of conspiring to violate the Hobbs Act, four counts of making and subscribing false tax returns, and one count of conspiring to commit mail fraud. He was convicted on all counts.

The district court sentenced Greco to 112 months in prison, followed by three years of supervised release. At a separate restitution hearing, the court also ordered Greco to pay $994,734.84 in restitution to MetroHealth.



Loss Calculation

In bribery cases involving public officials, an enhancement is applicable under the sentencing guidelines when "the value of the payment, the benefit received or to be received in return for the payment, the value of anything obtained or to be obtained by a public official or others acting with a public official, or the loss to the government from the offense, whichever is greatest, exceeded $5,000." USSG § 2C1.1(b)(2). The level of enhancement is determined by the table in USSG § 2B1.1(b)(1) and increases as the value of the payment, benefit, or loss increases.

In this case, the size of the sentencing enhancement mandated by USSG § 2C1.1(b)(2) was a source of significant dispute between the parties. The government argued that the enhancement should be calculated on the basis of a loss to the government of $2,842,494 -- the net profits that East-West realized from all of the MetroHealth projects that Greco managed. The probation office suggested that the enhancement should be calculated on the basis of the $628,000 that Patel admitted -- in both his plea and his testimony at Greco's trial -- providing to Carroll and Greco over the course of the scheme. Greco contended that the size of the sentencing enhancement should be calculated on the basis of a loss amount of no more than the $70,000 that the government was able to prove Greco received from Patel in exchange for his participation in the bribery scheme.

The district court rejected all three figures. The court refused to accept the government's loss figure of $2,842,494 for lack of evidence that Greco played any role in, or had any knowledge of, the bid-rigging and inflation of invoices that took place on the larger construction jobs, over which Carroll exercised exclusive authority. The district court rejected the Probation Office's loss calculation of $628,000 for lack of evidence other than Patel's testimony to support it, given several reasons to be skeptical of Patel's testimony -- including, among other things, the fact that Patel indicated in his testimony that Carroll and Greco each received equal portions of the $628,000, when evidence suggested that the value of the gifts Patel provided to Carroll was significantly more that the value of the gifts that Greco received. Finally, the district court rejected Greco's argument that the sentencing enhancement should be calculated on the basis of the value of the gifts to Greco alone, given Greco's active involvement in a conspiracy involving Carroll as well. The court found that although Greco "could not reasonably have anticipated that Mr. Patel was using this scheme for his own family's payments and his own benefits," he "obviously understood the value of the benefits that Mr. Carroll was receiving" and could, therefore, be held liable for the losses that resulted from actions that Carroll undertook as part of that portion of the conspiracy in which Greco was involved.

The district court instead calculated the sentencing enhancement by adding the value of the bribes that Greco received for his own participation in the scheme to the value of the bribes that Carroll received for his participation in that portion of the scheme in which Greco was involved. Accordingly, the court added the $70,000 that Greco received from Patel to a "substantial portion" of between $200,000 and $300,000 in bribes that Carroll and Patel confessed to exchanging at Greco's trial.

On the basis of those numbers, the district court concluded that the total value of the bribes paid to Greco and Carroll in connection to that portion of the conspiracy in which Greco played an active role equaled "approximately $200,000." Given the unusual circumstances of this case -- where every dollar spent on bribes to Greco and Carroll was ultimately reimbursed to East-West via inflated invoices or change orders -- the court concluded that the loss amount was also equal to the total value of both the benefit that East-West received and the loss that MetroHealth suffered from that part of the conspiracy in which Greco was involved. It accordingly imposed a 12-level enhancement to Greco's base offense level. See USSG §2B1.1(b)(1)(G) (imposing a sentence enhancement of 12 levels for losses greater than $200,000 but less than $400,000).

At the subsequent restitution hearing, the district court clarified this conclusion slightly, indicating that what was meant at sentencing was that the total value of the bribes -- and therefore, the total value of the benefit to East-West and of the loss to MetroHealth resulting from that part of the conspiracy in which Greco played an active role -- was at least $200,000, but not more than $400,000. The court denied the necessity of arriving at any more precise a figure of loss or benefit, given that under USSG § 2C1.1(b)(2) all losses greater than $200,000 but less than $400,000 result in the same 12-level sentencing enhancement. Greco now challenges the district court's calculation of his sentencing enhancement on three grounds.***

Greco's second challenge to the loss calculation is also not persuasive. To support his claim that the court should have relied exclusively on the verified evidence of Greco's bribes, Greco analogizes this case to one involving spoliation of evidence. He contends that, because the government could have, but did not, produce direct evidence of the losses caused by Greco's participation in the scheme, a similar presumption to that applied in spoliation cases should have applied here -- namely, that all missing evidence is presumed to be unfavorable to the party responsible for its loss. See United States v. Boxley, 373 F.3d 759, 762 (6th Cir. 2004). According to Greco, the sentencing court should therefore have presumed that all direct evidence of the losses that MetroHealth suffered, and the benefits that East-West received from Greco's involvement in the bribery scheme, favored Greco and, for that reason, should have disregarded the indirect evidence on which the government relied to prove the amount of Greco's loss.

This argument is unconvincing, for multiple reasons. First, this is not a spoliation-of-evidence case. A failure to collect evidence that may or may not have been available for collection is very different from the intentional destruction of evidence that constitutes spoliation. Boxley, 373 F.3d at 762. In addition, the evidence that Greco claims was "spoiled" was not in the government's control, as it must be in spoliation cases. Moreover, Greco does not assert, nor is there any evidence to suggest, that the government failed to collect the evidence with the "culpable state of mind" that is a prerequisite for the application of the spoliation presumption. See Beaven v. United States Dep't of Justice, 622 F.3d 540, 553-54 (6th Cir. 2010) ("[A] party seeking an adverse inference instruction based on the destruction of evidence must establish (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed 'with a culpable state of mind'; and (3) that the destroyed evidence was 'relevant' to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.") (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)). And, significantly, the district court did not rely upon the missing evidence when making its sentencing calculation.

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