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United States v. Diggles

United States Court of Appeals, Fifth Circuit

June 26, 2019

UNITED STATES OF AMERICA, Plaintiff - Appellee
v.
ROSIE DIGGLES; WALTER DIGGLES; ANITA DIGGLES, Defendants - Appellants

          Appeals from the United States District Court for the Eastern District of Texas

          Before HIGGINBOTHAM, JONES, and COSTA, Circuit Judges.

          GREGG COSTA, CIRCUIT JUDGE

         Multiple hurricanes-especially Rita and Ike-ravaged the eastern Texas Gulf Coast in the first decade of this century. Untold millions in federal disaster assistance helped rebuild those communities. But some people took advantage of that taxpayer generosity. A jury found that was the case for the three family members charged with fraud in this case: Walter and Rosie Diggles and their daughter Anita.

         All three now argue that there was insufficient evidence to convict them. They also contend that, if their convictions were valid, four conditions of their supervised release must be vacated because the district court did not read them aloud at sentencing. We affirm their convictions and two of the disputed conditions, remanding to adjust one condition and remove another.

         I.

         The Deep East Texas Council of Governments (DETCOG) is an association of local governments in a twelve-county area near the Louisiana border.[1] Using federal and state grants, DETCOG funds programs geared toward housing, the elderly, and the disabled, among other efforts. It also administers federal hurricane-relief funds.

         Congress responded to Hurricanes Katrina and Rita, and later Dolly and Ike, by appropriating block grants for relief efforts. The Texas Health and Human Services Commission administered the funds the state received. DETCOG in turn received millions of those dollars, which it used to reimburse various service providers in east Texas.

         One of those providers was the Deep East Texas Foundation. The Foundation operated in Jasper out of the New Lighthouse Church of God in Christ. It sought and received reimbursements from DETCOG for a variety of services, including "case management" (counseling and assisting individuals in need of individual financial support); the 21st Century Learning Center (an after-school and summer program for at-risk children); and annual conferences hosted by the New Lighthouse Church. A "vendor agreement" between DETCOG and the Foundation set reimbursement rates for several services, including case management and education.

         A chart may be helpful. The green arrows represent the flow of federal funds. The blue arrows represent the chain of reimbursement requests.

         (Image Omitted)

         Walter Diggles wore many hats in this reimbursement chain. He (1) ran DETCOG as its executive director; (2) was the founder of the Foundation and had signature authority over its bank account; and (3) was the pastor at the New Lighthouse Church, out of which the Foundation operated its programs. Also, one of those programs-the Learning Center-was run by his wife Anita and daughter Rosie.

         Walter's multiple roles enabled the fraud. Once the hurricane funds left the state agency, Walter could control them the rest of the way. And all it took for the state to send money was for Walter to certify that DETCOG was using the money properly. For each request for Katrina and Rita funds, Walter would certify that "all outlays" were "for the purposes set forth" in the grant agreement. For the Dolly and Ike grants, he would certify that DETCOG had "completely verified the supporting information/evidence" from its vendors so as to "justify the amounts set forth" in the requests for further funding.

         But the programs' expenses did not support many of the amounts DETCOG sought. Here are some examples:

         The Learning Center: The Foundation's vendor agreement called for reimbursement for "Education & Training" at between $48 and $144 per "unit" (the Learning Center treated an hour of instruction as a unit). But the Learning Center's teachers were paid less than $20 per hour. Anita nevertheless prepared paperwork requesting reimbursement at rates as high as $110 per hour. The Foundation sent that paperwork to DETCOG, where Walter would sign off. The rate inflation added up: Between 2009 and 2011, the Foundation got roughly $240, 000 for education expenses, while paying its teachers less than $130, 000.

         The Learning Center's transportation costs tell a similar story. The vendor agreement did not set a unit rate for transportation, but the Learning Center charged one: at least $10, and sometimes as high as $17, per student for round-trip transportation to and from the Learning Center in vans. The designated pick-up areas were mostly in Jasper, and the few in surrounding communities were no more than 5-10 miles away. But the reimbursement rates meant the Foundation received, in one of the most extreme instances, nearly $7, 500 for four days of transportation costs. Between 2008 and 2011, the Foundation billed north of $200, 000 for transportation despite paying less than $30, 000 in transportation-related expenses. The government acknowledges that those numbers do not include amounts paid to drivers, but Learning Center workers who drove the vans were paid around $8 an hour- nowhere near enough to account for the $170, 000 discrepancy.

         Case Management: The vendor agreement set rates for case management at, as with education, between $48 and $144 per hour. But one case manager testified he was paid just $10 an hour, and another testified she was paid $27. Between 2009 and 2011, the Foundation received $150, 000 for case management expenses but paid case managers just $82, 000.

         2009 "Closeout": In 2009, the Foundation sought and received a "closeout" payment of $245, 000 for unreimbursed expenses. That included a $116, 000 request for the Foundation's 2008 payroll expenses. But this was double billing-the Foundation had already billed for payments to its workers throughout 2008.

         2010 Conference: Walter's church held annual conferences, which one witness described as akin to revivals. In addition to worship, the conferences featured workshops on topics like single parenting and credit repair. For its 2009 conference, the Foundation sought and received reimbursement for 186 "units" of training (each workshop attended was a unit, and some attendees went to more than one workshop) at $48 each-a total reimbursement just shy of $9, 000. By way of supporting documentation, the Foundation submitted the attendees' sign-in sheets, which reflected the workshops they went to.

         For the 2010 conference, the Foundation got more than four times as much: $39, 000. But the supporting documentation was a fabrication; it was a copy of the 2009 sign-in sheets with just a few additions. The purported attendees were the same, and the tops of both sets read "Annual Conference July 7-11, 2009." The difference was that some of the "2010" sign-in sheets had blank spots filled in to make it look like attendees went to additional workshops as well as those they attended in 2009.

         2012 Conference: At its 2012 conference, the church performed health screenings. The screening equipment (cholesterol machines and glucometers that could be used any number of times, plus one-time-use blood sugar test strips) cost about $750. But the Foundation sought and ...


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