United States v. Burk
In United States v. Burk, —- F.4th —-, No. 23-50602 (5th Cir. Nov. 14, 2022), the Fifth Circuit affirmed the defendant’s convictions for wire fraud and money laundering, but it remanded his case for resentencing because the district court should not have applied a Sentencing Guidelines enhancement for abuse of a position of trust.
Factual Background: Burk and his business partner designed and built homes out of ocean shipping containers. At trial, the Government proved that Burk made false representations to customers of his home-building business. His fraud “consisted of misrepresentations, lies, delay tactics, ignoring customers, and refusing to issue refunds.” The court summarized the evidence this way:
The government’s theory of the case at trial was circumstantial but overwhelming. It alleged, and the jury believed, that Burk’s extensive use of cash to operate the business, frequent changing of business entity names, use of contracts that consistently underestimated price and timeframe despite knowing these terms were unrealistic, ghosting of customers, and use of company funds to pay personal expenses together indicated a conspiracy and in tent to defraud. Dozens of witnesses testified at trial, including most of the former customers/victims named in the indictment, as well as other aggrieved customers who were not named. Several [of Burk’s] employees also testified.
Holding 1: There was sufficient evidence to prove Burk intended to defraud his victims. Burk argued at trial and on appeal that he had always intended to live up to his contracts, although he “overestimated his ability to keep up with the demands of his business.” At trial, however, the Government showed numerous facts sufficient for the jury to conclude that Burk was more than merely “in over his head but trying his best.” On appeal, the Fifth Circuit reviews trial evidence “in the light most favorable to the prosecution,” and in that light, this was enough evidence to affirm Burk’s convictions.
Holding 2: The district court did give an erroneous instruction to the jury, but Burk failed under the plain-error standard to prove that the error had an effect on his substantial rights. The court’s instruction defined “specific intent to defraud” as “a conscious, knowing intent to deceive or cheat someone,” but the correct instruction would have said “deceive and cheat someone.” See United States v. Greenlaw, 84 F.4th 325, 350–51 (5th Cir. 2023).
Nevertheless, Burk did not object to the instruction at trial, so the Fifth Circuit applied plain-error review to his newly raised claim. Under that standard, the other jury instructions were sufficient for the jury to understand “that a deception alone was not enough to sustain a conviction—that it must be a deception made with the specific intent to cheat.” Moreover, the jury acquitted Burk of some fraud charges even though the evidence showed deception, which indicated that the jurors understood the Government needed to prove both deception and an intent to cheat someone.
Holding 3: The district court did not err by refusing to sever two counts that related to Burk’s personal bankruptcy proceeding. The bankruptcy occurred during the time Burk was committing fraud, when the FBI was investigating his fraud, and when he directed an employee to change his company name to get around frozen accounts. That overlap was sufficient to link the bankruptcy counts to the other counts, so it was not an abuse of discretion to deny Burk’s motion to sever.
Holding 4: The district court erred by applying a two-level adjustment to Burk’s Sentencing Guidelines under USSG § 3B1.3, which applies when the defendant abuses a position of trust during his crime. The Fifth Circuit concluded that Burk had not held a “position of trust,” so the enhancement should not apply. Burk was the CEO and President of his company, but prior cases applying this enhancement involved an abuse of public trust or a “trust relationship that exceeds the bounds of a regular business contract requiring no special skill.” Here, Burk entered an “ordinary, arm’s length commercial relationship with his customers,” his position “was not specialized, like an accountant or physician,” and he had “no fiduciary or confidentiality duty” to his customers. Given those facts, it was inappropriate to apply USSG § 3B1.3.