United States of America v. Vernado Malone

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐2400
U NITED STATES OF A MERICA ,
Plaintiff‐Appellee,
v.
VERNADO MALONE ,
Defendant‐Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Indiana, South Bend Division.
No. 3:13‐CR‐104 — Jon E. DeGuilio, Judge.
____________________
A RGUED FEBRUARY 18, 2016 — D ECIDED MARCH 9, 2016
____________________
Before WOOD, Chief Judge, and KANNE and S YKES , Circuit
Judges.
KANNE , Circuit Judge. Appellant Vernado Malone pled
guilty to mail fraud and aggravated identity theft pursuant
to a written plea agreement. In the factual basis of his plea
agreement, he admitted that he “committed numerous in‐
stances of access device fraud” and “misused the means of
identification of employees of several companies,” specifical‐
ly identifying three companies and one individual he de‐

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2 No. 15‐2400
frauded. At sentencing, the government presented evidence
that there were twenty‐eight victims of Malone’s scheme.
Despite having waived his right to appeal, Malone ar‐
gues that the government materially breached the plea
agreement by presenting evidence of twenty‐eight victims
when only four were referred to by name in the agreement.
Because the plea agreement made clear that the named vic‐
tims were either an “example” or just “[o]ne of” the compa‐
nies he defrauded, the government did not commit a materi‐
al breach by introducing evidence that there were more vic‐
tims than those specifically named. Accordingly, we enforce
the appellate waiver and dismiss this appeal.
I. BACKGROUND
On September 11, 2013, a grand jury indicted Malone on
three counts—mail fraud, wire fraud, and aggravated identi‐
ty theft—stemming from his multi‐year scheme to fraudu‐
lently obtain and use credit cards.
A. Plea Agreement
Malone entered into a written plea agreement in which
he agreed to plead guilty to counts one and three of the in‐
dictment for mail fraud, 18 U.S.C. § 1341, and aggravated
identity theft, § 1028A. The factual basis for his guilty plea
provided the following:
I have been convicted of fraud before, including in
federal court. In this instance, I committed numer‐
ous instances of access device fraud and used the
mails to do so. In 2011, for example, I pretended to
be an employee with Modineer Co. and changed
the Company’s Citgo credit card account to an on‐
line account that I could control. Once I did that, I

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No. 15‐2400 3
ordered 14 fleet credit cards and had them mailed
to locations in the South Bend, Indiana area where I
could receive them. Some of these locations were
abandoned houses. Then, without proper authori‐
zation, I used these credit cards to buy gift cards,
gasoline, and other merchandise for myself and
persons that I knew. I also defrauded Wright Ex‐
press Fleet Services (WEX) in 2012. During this
time, I misused the means of identification of em‐
ployees of several companies that had credit card
accounts with WEX. One of these companies was
J&C Ambulance Service Inc. I misused the means of
identification of Rick Reed at J&C Ambulance Ser‐
vice Inc. and with intent to defraud I ordered on
March 15, 20131 ordered [sic] several credit cards be
sent to 419 S. 26th Street, South Bend, Indiana via
Federal Express (FED EX tracking no.
527759742018). I received these cards and began us‐
ing them fraudulently on March 17, 2012. I did the
same type of thing with WEX and a company
called Rural Metro. In this instance, on March 28,
2012, I fraudulently ordered credit cards and they
were sent at my request to 419 S. 26th Street, South
Bend, Indiana via FED EX (FedEx tracking number
528981371819). On March 30, 2013, I started using
the cards fraudulently[.]
With respect to sentencing, the plea agreement provided
that the district court would “determine the applicable sen‐
tencing guideline range” and “determine all matters, wheth‐
er factual or legal, relevant to the application of the sentenc‐
ing guidelines including, but not limited to, … victim‐related
1 Although the factual basis in the plea agreement says 2013, it is clear
from the record that these events occurred in 2012.

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4 No. 15‐2400
adjustments” after considering input “from the govern‐
ment.” Malone expressly waived his right to appeal his con‐
viction or “all components of [his] sentence, or the manner in
which … [his] sentence was determined or imposed, to any
Court on any ground.”
In exchange for his guilty plea, the government agreed to
dismiss the wire‐fraud count and recommend either a 2 or 3‐
level reduction for acceptance of responsibility, depending
on Malone’s applicable offense level and the timeliness of his
guilty plea. The government stipulated that the amount of
the loss was $120,000, but the agreement contained no other
stipulations.
On August 13, 2014, the district court held a change of
plea hearing. Malone entered a plea of guilty on counts one
and three of the indictment. After reviewing the plea agree‐
ment, the district court accepted it and found that it was
made knowingly and voluntarily.
B. Sentencing
The presentence investigation report (PSR) recommend‐
ed a 2‐level enhancement for an offense involving more than
ten victims. U.S.S.G. § 2B1.1(b)(2)(A)(i). The basis for the en‐
hancement, the PSR explained, was because “Modineer and
WEX sustained actual loss” yet “10 additional corpora‐
tions/companies who were customers of WEX are also con‐
sidered victims as they were initially charged and incurred
liability for the charges, although the credit card company
ultimately absorbed the losses.” Malone objected, arguing
that only Modineer and WEX, the companies that suffered
unreimbursed financial losses, should count as victims.

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No. 15‐2400 5
At the sentencing hearing, the government called St. Jo‐
seph County Police Officer Philip Williams. Williams testi‐
fied that WEX reported that twenty‐eight of its clients “were
subject to fraudulent charges on their credit accounts as a
result of the Malone fraud.” The government sought to ad‐
mit affidavits from ten of those clients, but Malone objected,
contending that “in our plea agreement we agreed on the
number of victims.” Explaining further, Malone pointed to
the plea agreement’s factual basis, describing it as a stipula‐
tion and arguing that because the section only refers to WEX,
J&C Ambulance, and Rural Metro, “those are the only peo‐
ple that [he] was acknowledging that were victims in this
case.”
The district court disagreed that the factual basis in the
plea agreement was a stipulation that there were only three
victims of mail fraud. It held, however, that the additional
twenty‐eight companies did not qualify as “victims” for
purposes of the victim‐related enhancement because they
did not sustain “actual loss.” Instead, the district court took
Officer Williams’s testimony into account when considering
the sentencing factors under 18 U.S.C. § 3553(a).
The district court determined that Malone had a total ad‐
justed offense level of 15 and a criminal history category of
IV, resulting in a guideline range of 30 to 37 months’ impris‐
onment. The district court granted Malone a 4‐level down‐
ward variance for cooperation with the government in other
matters. But, the district court imposed a 4‐level upward var‐
iance due to several aggravating factors, specifically noting
“that while not characterized as victims for purposes of the
guidelines, you defrauded 28 credit card cardholders over a
three‐year period.” Ultimately, the district court imposed 37

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6 No. 15‐2400
months for mail fraud and 24 consecutive months for aggra‐
vated identity theft as required by 18 U.S.C. § 1028A—for a
total of 61 months’ imprisonment—followed by 2 years of
supervised release.
II. A NALYSIS
Despite having waived his right to appeal, Malone brings
this appeal on the ground that the government materially
breached the plea agreement. Specifically, he contends that it
was a material breach for the government to argue at sen‐
tencing that there were twenty‐eight victims when the plea
agreement only mentioned three victims of mail fraud and
one victim of aggravated identity theft.
The government, however, did not breach the plea
agreement, and therefore, we enforce the appellate waiver.
The government argues that this appeal must be dis‐
missed because of the appellate waiver, notwithstanding
Malone’s claim of a material breach. Of course, “a voluntary
and knowing waiver of an appeal is valid and must be en‐
forced,” United States v. Sakellarion, 649 F.3d 634, 638 (7th Cir.
2011) (quotation marks omitted), “[u]nless a prosecutor’s
transgression is so serious that it entitles the defendant to
cancel the whole plea agreement.” United States v. Whitlow,
287 F.3d 638, 640 (7th Cir. 2002).
Because a defendant may void a plea agreement where
there is a material breach by the government, Malone’s oth‐
erwise‐valid appellate waiver does not preclude our review
of his claim of material breach. Sakellarion, 649 F.3d at 639.
Where, as here, there is no factual dispute, we review
whether there was a breach of a plea agreement de novo.
United States v. Munoz, 718 F.3d 726, 729 (7th Cir. 2013). We

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No. 15‐2400 7
interpret a plea agreement using ordinary principles of con‐
tract law, “though with an eye to the special public‐interest
concerns that arise in this context.” Id. (quotation marks
omitted). Accordingly, when the language in a plea agree‐
ment is ambiguous, we look to “the parties’ reasonable ex‐
pectations and construe ambiguities against the government
as the drafter.” Id. But, “we will not ignore the plain language of
the contract where there is no ambiguity.” United States v.
Matchopatow, 259 F.3d 847, 852 (7th Cir. 2001). Therefore, we
give unambiguous terms in the plea agreement their plain
meaning. United States v. O’Doherty, 643 F.3d 209, 217 (7th
Cir. 2011).
Malone’s contention that the government stipulated to
three victims of wire fraud and one victim of aggravated
identity theft cannot be squared with the unambiguous
terms of the plea agreement. Nothing in the factual basis in‐
dicates an agreement as to the number of the victims or pur‐
ports to limit the government’s ability to present evidence of
other of victims for the purposes of sentencing. See id. at 217–
18. Instead, it describes “numerous instances of access de‐
vice fraud,” one example of which was defrauding Modineer.
The factual basis also states that Malone “misused the means
of identification of employees of several companies … . One
of these companies was J&C Ambulance Service.” (emphasis
added).
The plain language of the agreement does not limit itself
to four victims. The fact that only four victims are referred to
by name does not transform the factual basis into a stipula‐
tion as to the number of victims. Instead, those victims are
explicitly included as just “[o]ne of” or an “example” of the
type of victim of his crimes.

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8 No. 15‐2400
The absence of express language of stipulation as to the
number of victims is telling in light of the fact that there is
express language of stipulation in other parts of the plea
agreement. The government and the defendant “stipulate[d]
that the amount of the loss in this matter is $120,000,” and
the government “agree[d]” to recommend a 2‐level reduc‐
tion for acceptance of responsibility and to dismiss count
two. That language stands in stark contrast to the factual ba‐
sis of the plea agreement, which contained no language of
stipulation or agreement. See United States v. Schilling, 142
F.3d 388, 397–98 (7th Cir. 1998) (contrasting the defendant’s
admissions in the factual basis with sections where the gov‐
ernment “agree[d]” to make certain sentencing recommen‐
dations). Instead, given the “one‐sided nature of the ac‐
knowledgment of criminal conduct” and the district court’s
duty to determine, among other things, any victim‐related
adjustments after input from the government, it is clear that
the factual basis in the plea is not a stipulation to the number
of victims. See O’Doherty, 643 F.3d at 217–18 (finding that fac‐
tual basis where the defendant “acknowledge[d]” that the
government could prove tax losses of $425,766 did not pre‐
vent the government from arguing at sentencing that there
was a greater loss).
Finally, we note that at the sentencing hearing Malone
objected to the introduction of testimony about other vic‐
tims, stating:
[W]e had an agreement in the full paragraph that
listed a number of possible victims, and Mr.
Malone said, ‘No, I don’t know who these people
are,’ so we ended up with this paragraph which re‐
fers to WEX and J&C Ambulance and Rural Metro,

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No. 15‐2400 9
and those are the only people that Mr. Malone was
acknowledging that were victims in this case.
But, the plea agreement contained an integration clause,
which stated that “[o]ther than what is contained in this plea
agreement, no predictions, promises, or representations have
been made to me as to the specific sentence that will be im‐
posed or any other matter.” (emphasis added). Thus, any ex‐
trinsic evidence that could support Malone’s contention that
the parties agreed to limit the number of victims cannot
overcome the express, unambiguous terms of the agreement.
Cf. United States v. Logan, 244 F.3d 553, 557–58 (7th Cir. 2001)
(finding that written plea agreement was complete despite
the defendant’s assertion that prosecutor had promised not
to prosecute his family).
Because the factual basis of the plea agreement only
listed a victim by name to serve as an “example” of Malone’s
“numerous instances of access device fraud” and there was
no language of stipulation purporting to limit the number of
victims, the government did not breach the plea agreement
by presenting evidence at sentencing that there were twenty‐
eight victims of Malone’s scheme.
III. CONCLUSION
Because there was no breach of the plea agreement,
which would invalidate the plea agreement and release
Malone from his appellate waiver, this appeal is
DISMISSED.

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