Criminal Practice – College Trustee’s RICO Conviction Reversed

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U.S. v. Pinson (Lawyers Weekly No. 001-137-17, 40 pp.) (Per Curiam) No. 15-4311, June 19, 2017; USDC at Columbia, S.C. (Norton, J.) 4th Cir.

Holding: The 4th Circuit reverses RICO conspiracy and government program theft convictions for defendant, a former member of the South Carolina State University board of trustees who was engaged in fraud involving multiple private business ventures, but affirms his convictions for honest services fraud, mail and wire fraud, money laundering and making false statements to federal agencies.

RICO Charges

This case arises out of defendant’s various business relationships and ventures from 2006 to 2012, including a diaper business (Supremes LLC), a real estate development company (Village at River’s Edge, VRE), a consulting business (Noel Group LLC) and an investment company (Brixstone Group LLC). During this time, defendant also served on the board of trustees of SCSU, a state-supported school. The charges focus on defendant’s involvement with four ventures: 1) SCSU’s homecoming concert; 2) SCSU’s proposed purchase of a luxury resort; 3) Supremes’ private diaper business; and 4) VRE’s real estate project.

We conclude the evidence did not establish a single conspiracy, a RICO enterprise encompassing all four ventures, or a pattern of racketeering activity. Defendant and his associates did not conspire to commit the same crimes. At best, the evidence shows two separate conspiracies, one involving the VRE and Supremes ventures and another involving the homecoming concert and luxury resort purchase. In each conspiracy, only two members (including defendant) conspired to commit the criminal acts, and defendant is the only member who overlaps both conspiracies. In the VRE venture, defendant and Philip Mims fraudulently obtained grant funds, but Lance Wright and Robert Williams were mere passive investors. The false invoices involved in the Supremes venture inculpated Wright and Williams along with defendant and Mims. But the conspiratorial tie between the Supremes and VRE ventures boils down to just two members: defendant and Mims.

Likewise, the membership of each SCSU-related venture only overlaps by two: defendant and Edwin Givens, SCSU’s general counsel. Defendant is the only member common to all four ventures. As a result, we cannot say the government proved a single conspiracy in which each conspirator shared “the same criminal objective.”

The government also failed to prove a pattern of racketeering activity. The fragmented schemes in which defendant was involved from June 2009 until November 2011 do not reveal a “scope and persistence” that posed a “special threat to social well-being.” We vacate defendant’s RICO conspiracy conviction on count I.

Program Theft

We also vacate defendant’s convictions for government theft under 18 U.S.C. § 666. For purposes of this statute, Mims was not an “agent” of the county as a “government entity,” in a project for Supremes to retrofit an aging commercial building and generate jobs in the county. Because he was not an agent for the county, his actions could not violate the statute, meaning defendant cannot be criminally culpable under the same statute for aiding and abetting Mims.

Regarding count 3, VRE did not receive a federal “benefit.” The key question is whether the funds are paid to the entity “for significant and substantial reasons in addition to compensation or reimbursement.” If a payment is made “simply to reimburse,” then the recipient entity isn’t receiving a “benefit.”

Here, the government needed to prove that VRE, an entity of which defendant was an agent, received a “benefit” of over $10,000 from the federal government. The Housing Authority certainly received a benefit when the federal government awarded it a grant to promote affordable housing. But the payment from the Authority to VRE was for the construction of 60 housing units. An Authority official testified that the payments could not be used for anything other than costs associated with the construction of the public housing units. The money VRE received was not a “benefit,” but instead payment for a commercial transaction.

Evidence of defendant’s receipt of kickbacks in connection with promotion of the SCSU homecoming concert and proposed purchase of the luxury resort supported defendant’s convictions for honest services fraud. His convictions for mail and wire fraud are supported by evidence of the use of the mail and wire system for defrauding Marion County. Similar convictions under counts 27 to 34 stemmed from defendant’s skimming of payments made by the Housing Authority to VRE, payments which VRE was supposed to send to SK Builders for its work on the development. All of defendant’s money laundering convictions stem from unlawful activity in violation of § 666 and §§ 1341-43. Although we vacate defendant’s § 666 conditions, we affirm his convictions under §§ 1341-43, as well as the related money laundering convictions. A rational jury could conclude that defendant lied on forms recording building expenses and requests for payment by the Housing Authority, and was improperly managing payments, in support of his false statements convictions under counts 43-46 and 48-50.

Affirmed in part, vacated in part and remanded for resentencing.

Dissent

Diaz, J., dissenting as to parts II.A. and IV: The majority finds the evidence was insufficient to prove the existence of a single conspiracy involving a RICO enterprise, or to prove a pattern of racketeering activity. Given the deferential posture under which we review jury verdicts, I respectfully disagree.

While I agree the evidence is not overwhelming, a rational jury could have found a sufficient relationship among members of the enterprise, and the predicate acts in this case were related enough to each other because of their common purpose and similar participants and methods. All acts aimed to enrich defendant and his associates and also involved misuse of public funds, by either exploiting public positions for kickbacks or by fraudulently managing grant payments. I would affirm the RICO conviction.