Fraud – There was sufficient evidence to convict Rosie Diggles of fraud despite her not handling any reimbursement requests based on her role as supervisor at one of the Foundation’s learning centers, her knowledge of the actual costs, and evidence supporting a “reasonable inference that Rosie knew of the overbilling scheme,” including that she was married to one co-conspirator and the daughter of another.
Members of the Diggles family were convicted by a jury of multiple fraud offenses in connection with applying for and obtaining federal grants intended to fund hurricane relief efforts in Texas. Pastor Walter Diggles, the patriarch of the family, used his role as executive director of an organization of local government to approve grants of federal funding to a Foundation his family ran, which operated a learning center and the church where Diggles was pastor. The evidence at trial showed that the Foundation took in much more federal money than it spent on actual relief, with most of the money going instead towards the Diggle family’s personal expenses.
On appeal, the defendants argued that there was insufficient evidence to convict them of wire fraud, theft from a program receiving federal funds, and money laundering. Among other things, the defendants argued that, regardless of their Foundation’s disparity in federal funding and relief spending, there was no fraud because the Foundation was paid the rate as established by its vendor agreements with the local governments organization. The Court rejected this argument, however, describing how Walter Diggles, through his position as executive director, was able to “fraudulently inflate” the negotiated rates because he “was essentially on both sides of the agreement.”
Walter Diggles also argued that his family’s program was allowed to bill above costs based on “federal guidance” from agencies regarding how nonprofits can be reimbursed for overhead costs in connection with relief efforts. The Court held that the jury reasonably rejected this “overhead-cost defense,” however, given the lack of evidence that the Diggles were seeking reimbursement for overhead and the disparity between the money obtained and the money spent. Considering Pastor Diggles’ familiarity with the operation of his Foundation and his position as executive director of the government organization funding the Foundation, the Court also held there was sufficient evidence of fraudulent intent.
The Court also affirmed the convictions of Anita and Rosie Diggles. The Court held there was sufficient circumstantial evidence showing a conspiracy between Anita and Walter given Anita’s role in submitting inflated reimbursement requests that Walter signed off on, her knowledge of the overbilling from the Foundation’s programs, and her use of the money for personal expenses.
Despite Rosie Diggles not handling any reimbursement requests, the Court held there was sufficient evidence of her joining the conspiracy based on her role as supervisor at one of the Foundation’s learning centers, her knowledge of the actual costs, and evidence supporting a “reasonable inference that Rosie knew of the overbilling scheme.” Though her role may have been minor, she was “integrally involved” in the learning center’s operations. The Court also considered that Rosie was “married to one conspirator, and her daughter was another.” Based on these facts, and her accessing the program’s accounts, the jury was allowed to infer Rosie’s knowledge of her family member’s fraud and then infer an intent to facilitate that fraud.
Appeal from the Eastern District of Texas
Opinion by Costa, joined by Higginbotham and Jones