Appeals from the United States District Court for the Eastern
District of Texas
HIGGINBOTHAM, JONES, and COSTA, Circuit Judges.
COSTA, CIRCUIT JUDGE
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.
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
Deep East Texas Council of Governments (DETCOG) is an
association of local governments in a twelve-county area near
the Louisiana border. Using federal and state grants, DETCOG
funds programs geared toward housing, the elderly, and the
disabled, among other efforts. It also administers federal
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.
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.
may be helpful. The green arrows represent the flow of
federal funds. The blue arrows represent the chain of
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.
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
programs' expenses did not support many of the amounts
DETCOG sought. Here are some examples:
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.
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.
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.
"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.
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.
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.
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 ...