Sunday, November 28, 2021

Court Affirms in Hard-Fought Appeal of Conviction in School Fraud Case

 In United States v. Shulick, Nos. 18-3305 & 19-1011 (Nov. 15, 2021), the Court affirmed Shulick’s convictions and sentences for conspiracy to embezzle, embezzling, wire fraud, bank fraud, false statements, and filing false tax returns, in connection with a for-profit business that provided alternative education to at-risk students in the School District of Philadelphia. He was sentenced to a total of 60 months’ imprisonment and three years’ supervised release, plus two $20,000 fines and restitution of $759,735 to the School District and $5,000 to PNC Bank.

Shulick alleged a speedy trial violation because the district court continued the case following the government’s late production of discovery for the stated reason of “case complexity,” when the actual reason was the government’s lack of diligent preparation. The Court distinguished Shulick’s claim from the case he relied on, United States v. Crane, 776 F.2d 600, 606 (6th Cir. 1985), in which the district court admitted to an inappropriate motive. Here, the case was indisputably complex, as evidenced by Shulick’s own requests for continuances to “wade through discovery materials,” which numbered in the millions of pages and derived from a multi-year investigation. The Court rejected Shulick’s request for a categorical rule that government discovery violations require dismissal, leaving any remedy to the district court’s discretion. And it found that Shulick failed to demonstrate here a “lack of diligent preparation,” where the government made a “one-time administrative mishap” which it “promptly admitted.” In evaluating Shulick’s request for Sixth Amendment relief, the Court found no prejudice, where trial was conducted within 18 months and Shulick did not demonstrate a lost witness had helpful testimony, nor why his attorneys failed to preserve it. The Court noted that the speedy trial guarantee does not apply to pre-indictment delay (here, Shulick alleged two years of preindictment delay).

The Court also reviewed several evidentiary rulings, relating to “agency” under 18 U.S.C. §666. Those litigating such cases will wish to review this aspect of the opinion more closely. For the rest, the opinion highlights both the importance of objecting in the trial court and the difficulty of the abuse of discretion standard on appeal. The Court also upheld the exclusion of expert testimony, because of the insufficiency of Federal Rule of Criminal Procedure 16(b)(1)(C) disclosure, holding that a “written summary” of expert testimony is more than a curriculum vitae and a short description of possible testimony. The Court held that describing an expert as a “summary” witness does not relieve counsel of the obligation to disclose opinions, bases, and reasons.

Finally, as to the convictions, the Court addressed instructional issues. Shulick raised two instructional concerns. First, he argued it is error to instruct that an intentional misapplication within the meaning of § 666(a)(1)(A) can be found even if the misuse of funds still benefited the victim. The Court disagreed, based on a careful reading of the statute’s terms, in which the disjunctive “or” suggests that an intentional misapplication of funds is a separate way of satisfying the statute, apart from the earlier prohibition on conversion which is subject to the limiting phrase about benefit to the victim. If not, the Court held, any error was harmless, because Shulick actually embezzled contract funds and used them for his own benefit. Second, Shulick argued it was error to refuse him a safe harbor instruction under § 666(c), which excludes from criminal liability salary, wages, fees, compensation, or expenses “paid or reimbursed, in the usual course of business.” The Court held that such an instruction was not supported by the evidence.

As to the sentence, the Court held that the loss amount was properly calculated under United States v. Nagle, 803 F.3d 167, 180 (3d Cir. 2015), and that Shulick failed to show he was entitled to specific offsets under United States v. Jimenez, 513 F.3d 62, 86 (3d Cir. 2008). For the same reasons, his restitution challenges failed. The Court held that it was not an abuse of discretion for the district court to supplement the sentencing record with a defense expert’s binder of materials. The Court accepted the district court’s view that the binder was material, having been relied on by the defense expert and referenced on cross-examination.

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