                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-7-2008

USA v. Tulio
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-5223




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                                          NOT PRECEDENTIAL


  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT
            ____________

                 No. 06-5223
                ____________

      UNITED STATES OF AMERICA,

                       v.

             MICHAEL TULIO,

                        Appellant


                ____________

                 No. 06-5224
                ____________

      UNITED STATES OF AMERICA,

                       v.

       TULIO LANDSCAPING, INC.,

                        Appellant


                 __________

On Appeal from the United States District Court
   for the Eastern District of Pennsylvania
             (No. 06-cr-00133-1/2)
District Judge: Honorable Michael M. Baylson

  Submitted Under Third Circuit LAR 34.1(a)
             December 7, 2007
            Before: McKEE, CHAGARES and HARDIMAN, Circuit Judges.

                                      ____________

                                 (Filed: February 7, 2008)
                                       ____________

                               OPINION OF THE COURT
                                    ____________


CHAGARES, Circuit Judge.

       Michael Tulio and his company, Tulio Landscaping, Inc., appeal their convictions

and sentences for mail fraud and conspiracy to commit mail fraud. Tulio raises numerous

issues on appeal, from the sufficiency of the indictment to the calculation of his sentence,

each of which we will address. As Tulio’s arguments are without merit, we will affirm

both the defendants’ convictions and sentences.

                                             I.

       Tulio is a construction contractor that submitted bids for contracts with the

Southeastern Pennsylvania Transportation Authority (SEPTA) to replace storm drain

pipes along one of its railroad lines. SEPTA required contractors like Tulio to participate

in its Disadvantaged Business Enterprise (DBE) program—SEPTA’s effort to increase

the opportunities of minority- and women-owned businesses to contract with SEPTA. As

part of the DBE program, Tulio submitted bids stating the amount of work that would be

subcontracted to a DBE, and presented the winning bid on two occasions. The bids

certified that the requisite percentage of work would be subcontracted to DBE Eugene



                                             2
Pullins Trucking and Equipment Rental (DBE Pullins).

       SEPTA subsequently learned that Tulio never used DBE Pullins, and had used

fraudulent business utilization reports, invoices, and proof of payments (including altered

checks) to prove that his company had done so. Tulio had also agreed to pay DBE Pullins

a fee for using the company’s name in false representations made to SEPTA.

       Approximately two months before Tulio was tried, the Government advised the

defendants that Eugene Pullins was suffering from stage 4 terminal cancer and had less

than six months to live. Neither party took Pullins’ deposition and he died shortly

thereafter. A jury subsequently convicted Tulio and his company of one count of

conspiracy to commit mail fraud, in violation of 18 U.S.C § 371, and two counts of mail

fraud, in violation of 18 U.S.C. § 1341.

                                             II.

       Tulio first argues that the indictment insufficiently alleged that the object of the

alleged mail fraud scheme and conspiracy was money or a traditionally recognized

property right. To be valid, “an indictment must allege that the defendant performed acts

which, if proven, constituted a violation of the law that he or she is charged with

violating.” United States v. Zauber, 857 F.2d 137, 145 (3d Cir. 1988). In this case, the

indictment clearly identified the elements of mail fraud and its charging language tracks

18 U.S.C. § 1341. In particular, the indictment charged Tulio with “obtain[ing]

construction contracts and money from SEPTA by falsely reporting to SEPTA that they

were in compliance with SEPTA’s DBE requirement” and paying a fee to a DBE to use

                                              3
its name in the false representations made to SEPTA. Appendix (App.) 38-39. Given

these allegations, among others, the indictment fairly informed the defendants of acts

which, if proven, constituted fraud under 18 U.S.C. § 1341. Accordingly, we will affirm

the District Court’s decision not to dismiss the indictment.

                                            III.

       Tulio’s next argument—that judgment of acquittal should have been entered at the

close of the Government’s case for failure to prove that SEPTA was deprived of money

or a traditionally recognized property right—fails as well. As a preliminary matter, “[i]n

reviewing the denial of a motion for judgment of acquittal on the ground of insufficiency

of the evidence to support a conviction, we must sustain the verdict if there is substantial

evidence, viewed in the light most favorable to the Government, to uphold the jury’s

decision.” United States v. U.S. Gypsum Co., 600 F.2d 414, 416-417 (3d Cir. 1979).

       The Government correctly notes that the relevant inquiry concerns what Tulio

intended—not whether SEPTA was actually deprived of money or property. See United

States v. Rayborn, 495 F.3d 328, 338 (6th Cir. 2007) (citations omitted). The

Government presented sufficient evidence that the object of the fraud was to induce

SEPTA to pay Tulio for work they agreed would be done by a DBE, but which was

instead performed by Tulio and his company. For example, the Government

demonstrated that the defendants were instructed multiple times about the requirements of

the DBE program, that Tulio submitted reports and altered checks to make it seem that

DBE Pullins had done the requisite work, and indeed, that Tulio never intended to use

                                              4
DBE Pullins to perform the requisite work at all. Accordingly, by showing Tulio’s

intention to induce SEPTA to pay for a service it did not receive—work done by a

certified DBE—there was sufficient evidence that the object of the alleged fraud and

conspiracy was SEPTA’s money, and the District Court’s decision not to grant a

judgment of acquittal will be affirmed.



                                            IV.

       Related to its first two arguments, Tulio also contends that the District Court

erroneously instructed the jury as to whether Tulio deprived SEPTA of a traditionally

recognized property right. Tulio correctly notes that the prosecution in a mail fraud case

must show that the object of the defendants’ fraud was money or a property right

(tangible or intangible), but not simply an “intangible right” unrelated to money or

property. Cleveland v. United States, 531 U.S. 12, 18-20 (2000). In a nearly identical

case, United States v. Leahy, 464 F.3d 773 (7th Cir. 2006), various defendants were

convicted of a fraudulent scheme involving the City of Chicago’s DBE Program. Just as

in Leahy, “[d]espite defendants’ contortions to squeeze this case into the intangible rights

category, we cannot agree that it is such a case.” See Leahy, 464 F.3d at 787 (citing

Cleveland v. United States, 531 U.S. 12 (2000)).

       The jury in the instant case was entitled to find that by depriving SEPTA of a

fundamental basis of their bargain, Tulio had deprived SEPTA of a property right. As

explained in cases such as United States v. Granberry, 908 F.2d 278 (8th Cir. 1990) and

                                             5
United States v. Miller, 997 F.2d 1010, 1017 (2d Cir. 1993), contract rights can be

considered property rights for purposes of the federal mail fraud statute. See also United

States v. Hedaithy, 392 F.3d 580, 602 (3d Cir. 2004) (explaining that “the Court [in

Cleveland] was not setting out a requirement that a mail fraud scheme must be designed

to ‘obtain’ property . . . [but] [r]ather, this language reflects the Court’s conclusion that a

victim has been defrauded of ‘property,’ within the meaning of the mail fraud statute,

only if that which the victim was defrauded of is something that constitutes ‘property’ in

the hands of the victim.”); Adinolfi v. Hazlett, 242 Pa. 25 (1913) (noting that the common

law of Pennsylvania recognizes contract rights as property rights). Importantly, unlike in

Cleveland, Tulio’s scheme to defraud SEPTA did not turn on defrauding the Government

out of a license, thus merely implicating the Government’s role as sovereign. 531 U.S. at

23-24; see Hedaithy, 392 F.3d at 597. So too, unlike McNally v. United States, SEPTA

was deprived of more than just a citizen’s intangible right to have the Government’s

affairs conducted honestly. See McNally, 483 U.S. 350, 352 (1987). Instead, much like

in Leahy, the fraudulent scheme implicated SEPTA’s role as a property holder,

purchasing goods and services in the open market. See Cleveland, 531 U.S. at 24

(differentiating the Government’s role as sovereign from its role as property holder,

selling goods and services in the open market). In this position, SEPTA was deprived of

its contract rights when Tulio appropriated the money that SEPTA had intended to, and

Tulio promised would, enable a DBE to provide services for SEPTA.

       Beyond property rights, Tulio’s fraudulent scheme directly targeted SEPTA’s

                                               6
“money, plain and simple” as SEPTA paid for services—construction done by a certified

DBE—that it did not receive. Leahy, 464 F.3d at 788; see also United States v. Osser,

864 F.2d 1056, 1063 (3d Cir. 1988) (distinguishing a case where the indictment and jury

charge were focused solely on the deprivation of the employee’s honest services by the

receipt of kickbacks from a case where the jury was charged explicitly that it could find

financial detriment to the City as a result of kickbacks and commissions paid out). As the

jury instructions properly permitted the jury to consider whether the object of Tulio’s

fraud was money or property, the jury instructions adequately stated the applicable law,

and we will affirm the District Court on this issue. See United States v. Khorozian, 333

F.3d 498, 507-08 (3d Cir. 2003) (quoting United States v. Croyle, 63 F.3d 1239, 1245 (3d

Cir. 1995)).

                                              V.

       Tulio’s fourth argument—that the Court erroneously allowed the prosecutor to

elicit a speculative answer to a hypothetical question—also must be rejected. As Tulio’s

counsel did not object to such an inquiry at trial, we review the issue for plain error.

United States v. Olano, 507 U.S. 725, 734-35 (1993) (stating that a court’s discretion to

award relief on plain error review should be exercised only if the defendant is “actually

innocent” or the error “seriously affects the fairness, integrity or public reputation of

judicial proceedings”); United States v. Boone, 279 F.3d 163, 174 n.6 (3d Cir. 2002).

Given the nature of the issue before the Court—whether DBE compliance was a

fundamental basis of the bargain—the relevant testimony elicited by the prosecutor

                                              7
certainly does not amount to plain error.

                                            VI.

        Tulio next contends that the District Court erroneously precluded him from

challenging the constitutionality of SEPTA’s DBE program. The Supreme Court has

long affirmed “the governing principle [] that a claim of unconstitutionality will not be

heard to excuse a voluntary, deliberate and calculated course of fraud and deceit. One

who elects such a course as a means of self-help may not escape the consequences by

urging that his conduct be excused because the statute which he sought to evade is

unconstitutional.” Dennis v. United States, 384 U.S. 855, 865-67 (1966); see Bryson v.

United States, 396 U.S. 64, 68 (1969). Moreover, all the District Court did in this case

was inform Tulio’s counsel that if he contested the legality of the DBE Program, the

Court would likely charge the jury that the program is legal. Given the District Court’s

understanding of the law surrounding DBE programs in general, providing such an

instruction to the jury so as to avoid potential confusion would be entirely appropriate.

Accordingly, we will affirm the judgments of the District Court on these contentions as

well.

                                            VII.

        Tulio’s sixth argument is that the Government’s tactics with respect to Eugene

Pullins, both before and during trial, amounted to a denial of his due process rights.

Specifically, Tulio contends that the Government intentionally lulled him into believing

that Pullins was in adequate health to appear at trial, when in fact Pullins was not, making

                                             8
Tulio unable to present Pullins’s crucial testimony. There is simply no evidence to

support this alleged due process violation, and so there was no reversible error.

                                            VIII.

       Finally, Tulio argues that the District Court erroneously enhanced his sentence by

misinterpreting three sections of the Sentencing Guidelines (Guidelines): Sections 2B1.1,

3E1.1, and 3B1.1. As to Section 2B1.1, contrary to Tulio’s contention, the Court

specifically found that Application Note 3(F) should apply, in light of several analogous

cases, United States v. Tupone, 442 F.3d 145 (3d Cir. 2006), United States v. Brothers

Construction Company of Ohio, 219 F.3d 300 (4th Cir. 2000), and United States v.

Leahy, 464 F.3d 773 (7th Cir. 2006), and calculated the loss amount at just under

$70,000—the amount that Tulio promised would go to DBE Pullins. App. 856. As to

Section 3E1.1, the Court did not commit clear error in denying Tulio’s purported

acceptance of responsibility, as he contested several of the Government’s factual

arguments at trial. See United States v. Barr, 963 F.2d 641, 657 (3d Cir. 1992) (noting

that the determination of entitlement to a credit for acceptance of responsibility is

reviewed for clear error). Tulio contested the Government’s ability to prove a conspiracy,

to prove that defendants intended to commit mail fraud, and to prove that SEPTA

suffered any loss of property or money. Lastly, as to Section 3B1.1(c), the District Court

did not err in imposing a two-level Guidelines enhancement based on Tulio’s leadership

role in the fraud. The Government presented substantial evidence that Tulio directed

others—such as his employee, Ms. Geria—to engage in activities to perpetuate the fraud

                                              9
on SEPTA. App. 862.

                                         IX.

     For these reasons we will affirm the judgment of the District Court.




                                          10
