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Restitution affirmed in Vigo school district kickback scheme

May 30, 2019

The 7th Circuit Court of Appeals has affirmed a restitution calculation in the case of a former Vigo County School Corporation employee who received a share of more than $110,000 in kickbacks after steering government contracts to a favored bidder.

Franklin Fennell, a former Vigo County School Corp. facilities director, was arrested in November 2016 with co-conspirator Frank Shahadey after the two men were indicted for allegedly taking kickbacks from a contractor over 2½ years that amounted to more than $100,000 in losses for the school corporation.

Both Fennell and Shahadey had invited contractor Mike Pick to submit inflated estimates and invoices for recurring projects, like tree trimming and tree removal, in exchange for kickbacks. Pick performed 58 jobs for the district, and Fennell and Shahadey jointly received kickbacks ranging from $500 to $9,000 per invoice for most of those jobs, totaling $110,600.

Fennell was sentenced to two years in prison for his conviction of nine counts of wire fraud, one count of theft of government funds and two counts of making false statements.

At trial, a probation officer recommended $110,600 of restitution under 18 U.S.C. § 3663A(c)(1)(A)(ii) in a pre-sentence report, to which Fennell generally objected.

Fennell disputed “all findings of fact regarding loss and culpability,” citing the “arbitrary nature” of the estimated loss and asserting that the school district’s loss was less than $95,000. However, he did not request a complete accounting under § 3664(a).

During the sentencing hearing, the restitution amount was debated using general terms by both parties, and Fennell said that “haphazard accounting” and unreliable records from Pick marred the loss calculation. He argued the correct loss amount was between $40,000 and $95,000.

But the district court cited its recollection of the evidence and the “complete jury verdict in favor of the Government’s case” regarding restitution. There, the district court found that the government had offered evidence “beyond a preponderance” to support the “intended” loss amount of $110,600 in restitution, for which Fennell was jointly and severally liable.

Fennell appealed, alleging that § 3664(a) required the probation officer to provide a complete accounting of the restitution amount, backed by detailed findings and documentary evidence.

He alleged that the presentence report did not meet the statutory requirements for two reasons: first, because it was not complete and self-contained, and second, because the restitution amount was not calculated by a probation officer or subjected to a renewed adversarial vetting.But the 7th Circuit Court observed that Fennell needed to clear a “higher hurdle” of plain error review because he failed to raise specific objections to the presentence report and the restitution amount in the district court in USA v. Franklin V. Fennell, 18-1969.

“Fennell argues that a more detailed accounting of restitution is always required at sentencing, but he does not show — and we do not find — that a comprehensive presentence report would have produced a different restitution amount in this case,” Circuit Judge David Hamilton wrote. “Repetitive findings are unnecessary if the presentence report and trial record as a whole support the court’s conclusions by a preponderance of the evidence.

The 7th Circuit continued in noting that Fennell carried the burden to demonstrate the unreliability of the presentence report and “a simple denial of its accuracy does not discharge this burden.”

“Given Fennell’s failures to invoke § 3664(a), to furnish any evidence, or to raise specific challenges to the presentence report or the agent’s summary chart, the district court did not commit a plain error affecting Fennell’s substantial rights when it relied on the presentence report and trial evidence without a ‘lengthy discussion of the restitution order,’” Hamilton concluded.

The appellate court further noted that any references to “intended loss” were a slip of the tongue, and the record made immaterial any failure to mark the distinction between “intended” and “actual” loss.

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