United States v. Schuler ( 2006 )

UNITED STATES CO URT O F APPEALS
TENTH CIRCUIT
U N ITED STA TES O F A M ER ICA,
Plaintiff-Appellee,
v. No. 05-8067
VALERIE L. SCHULER,
Defendant-Appellant.
OR DER ON REHEARING
Filed November 15, 2006
Before KELLY, M cKA Y, and O’BRIEN, Circuit Judges.
In her combined petition for rehearing and rehearing en banc, Appellant has
raised three issues. First, Appellant argues that, in determining whether the trial
court should have stricken allegedly prejudicial surplusage from the superceding
indictment, the panel incorrectly applied a plain error standard rather than the
appropriate abuse of discretion standard. Second, Appellant argues that under the
Supreme Court’s decision in United States v. Booker, 543 U.S. 220 (2005), the
district court abused its discretion by allowing inclusion of “sentencing
enhancement allegations” in the indictment and by submitting them to a jury.
Third, Appellant argues that her due process rights were violated by the district
court’s submission to the jury of these sentencing allegations and by its admission
of summary exhibits.
The panel grants rehearing on the first issue. W e conclude that because w e
overlooked Appellant’s pre-trial motion to strike “sentencing enhancement
allegations” from the indictment, we erroneously reviewed the district court’s
ruling under a plain error standard, rather than under an abuse of discretion
standard. Under the abuse of discretion standard, we will only disturb the district
court’s ruling if we have “a definite and firm conviction that the lower court made
a clear error of judgment or exceeded the bounds of permissible choice in the
circumstances.” M oothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994) (quoting
M cEwen v. City of Norman, 926 F.2d 1539, 1553-54 (10th Cir. 1991)). A trial
court’s actions are subjected to a higher degree of scrutiny under abuse of
discretion than under plain error. However, having review ed the ruling again
under the correct standard, we are satisfied that the district court did not abuse its
discretion in refusing to strike the objected-to language from the indictment.
In all other respects, the petition for rehearing is denied. The suggestion
for rehearing en banc was circulated to the panel members and the active judges
of the court. No member of the panel nor judge in active service on the court
having requested a poll, the suggestion for rehearing en banc is denied.
Entered for the Court
M onroe G. M cKay
Circuit Judge
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F I L E D
United States Court of Appeals
Tenth Circuit
PU BL ISH
August 14, 2006
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AM ERICA,
Plaintiff-Appellee,
v. No. 05-8067
VALERIE L. SCHULER,
Defendant-Appellant.
A PPE AL FR OM T HE UNITED STATES DISTRICT COURT
FOR T HE DISTRICT OF W YOM ING
(D.C. No. 04-CR-205-B)
Robert T. M oxley, P.C., Cheyenne, W yoming, for D efendant-Appellant.
Lisa E. Leschuck, Assistant United States Attorney (M atthew H. M ead, United
States Attorney, with her on the brief), District of W yoming, Cheyenne,
W yoming, for Plaintiff-Appellee.
Before KELLY, M cKA Y, and O’BRIEN, Circuit Judges.
M cK A Y, Circuit Judge.
“Credit Services guarantees that you will receive Credit Cards with a total
credit limit over $10,000.00 . . . . Plus receive your choice of a guaranteed
unsecured Visa, M astercard or both. No credit check or security deposit. No turn
downs! Our banks are waiting!” And so M s. Schuler’s promises rang, enticing
individuals through advertisements in various tabloid publications. M s. Schuler’s
business consisted of three related business entities, Schuler Financial Services,
Summit Financial Group, and Credit Services, Inc. Credit Services, Inc., was
incorporated in W yoming. The overall business was conceived as a for-profit,
mass-marketing business to assist individuals w ith poor credit in obtaining credit
cards.
M s. Schuler purchased demographically-specific mailing lists for use in
mass mailings to individuals identified as having bad credit. She also bought
advertising space in national, tabloid-type weekly periodicals such as the National
Enquirer, Star, and the W eekly W orld News. Her advertisements, by mail and
publication, “guaranteed” that persons responding would receive “unsecured”
M astercard or Visa credit cards. Customers were instructed to send M s. Schuler
(via one of her companies) a sum of money–typically $39.95–by mail. W yoming-
based mailing addresses and forwarding services were used to collect the
responses generated by her solicitations, which were then forwarded to her home
in W isconsin. Some of the advertisements contained the following guarantee: “I
understand that if I’m not approved by the card issuing bank, I will receive a
FU LL REFU ND.”
After sending in their money, customers did not receive a credit card.
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Instead, M s. Schuler would send them a letter containing a list of banks
(including their addresses and phone numbers) purported to issue unsecured credit
cards, though a number of the banks listed were no longer in business. The letter
explained that M s. Schuler’s company was not affiliated with the listed banks and
cautioned customers: “Do NOT insist that a particular bank has to issue a credit
card to you. They each have their own underwriting guidelines that you need to
meet to be approved.” In addition, M s. Schuler’s refund policy was enumerated:
“Credit Services guarantees you a full refund if you are not approved by TH ESE
card issuing banks. Refunds require three rejections within 90 days of payment.”
A coupon for an inexpensive Las Vegas vacation often accompanied this letter.
In 2000, complaints began to come into the W isconsin Department of
Financial Institutions regarding M s. Schuler’s business. The Department of
Financial Institutions turned its investigation over to the W isconsin Department of
Justice for pursuit of civil remedies. Ultimately, the State of Wisconsin issued a
Consent Judgment (to which M s. Schuler agreed), which permanently enjoined
her from operating any “credit services” business in the State of W isconsin
without first registering with the proper authorities. The jury in M s. Schuler’s
W yoming trial w as told of this consent judgment.
In August 2003, the Postal Inspection Service sent M s. Schuler a “cease
and desist” letter regarding her ongoing activities in W yoming. W ithin days of
receiving the “cease and desist” letter, M s. Schuler moved her dropbox (where
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she received the customer mail) from Jackson, W yoming, to Cheyenne, W yoming.
By September 2003, a criminal investigation of M s. Schuler w as underw ay.
Agents from the IRS-Criminal Investigation Division and the Postal Inspection
Service conducted a “trash run” at her M ilwaukee, W isconsin, residence. They
found a journal which she had been keeping. The journal detailed her reaction to
the “cease and desist” letter, which included the following entry on August 12,
2003:
But I also had time to mull things over and think a little more clearly.
I had some pretty bad feelings about the misleading mailings,
knowing full well that people had expectations that weren’t being
met. I feel M UCH better about the CS [Credit Services] letter, and
once that’s cleared up and a disclaimer has been added to the Vegas
coupon I will truly be good to go. This was a necessary step, I guess,
to clean up my act. Luckily, the show will go on!
In December 2003, a search warrant was executed at M s. Schuler’s residence and
at her business location in M ilwaukee, W isconsin. Other journals were found as
well as numerous financial records and marketing materials. Also located were
deposit tickets with accompanying customer money orders or personal checks that
were awaiting deposit at the bank. Cash totaling $489 was found, but there was
no corresponding deposit ticket for it. One of M s. Schuler’s journal entries, dated
September 25, 2003, explains her preference for customers sending cash:
You know w hat I really like about the CS [Credit Services] mailings?
W hen people send in cash! I never have to go to the tyme [ATM ]
machine anymore. [smiley face symbol] And once I have CS mailing
going out all the time I will always have cash in my pocket. [smiley
face symbol]
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After a jury trial, M s. Schuler was convicted of twenty-four counts of mail
fraud under 18 U.S.C. § 1341. Twenty-four individuals testified at her trial that
they had received neither unsecured credit cards nor refunds. M s. Schuler was
also convicted of eleven counts of money laundering under 18 U.S.C. §
1956(a)(1)(A)(I). She was sentenced to sixty months’ imprisonment followed by
tw o years’ supervised release. M s. Schuler appeals her conviction and sentence.
She claims that the district court erred in (1) sustaining her mail fraud conviction,
as a matter of law, (2) failing to strike surplusage from her indictment, (3)
admitting character and summary evidence, (4) declining to give her proposed
jury instructions, and that (5) cumulative error in her trial deprived her of due
process.
In determining whether the evidence presented at trial is sufficient to
support a jury verdict, we review the record de novo “and ask only whether,
taking the evidence–both direct and circumstantial, together with the reasonable
inferences to be drawn therefrom–in the light most favorable to the government, a
reasonable jury could find the defendant guilty beyond a reasonable doubt.”
United States v. Voss, 82 F.3d 1521, 1526 (10th Cir. 1996) (quotation omitted).
M s. Schuler claims that her business did not violate the mail fraud statute
because she made no “material” misrepresentations to her customers and, if
anything, only had a “defective product.” A ppellant’s Brief at 23. M s. Schuler’s
argument is vague and does not specifically address the elements of mail fraud.
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W e have articulated: “The elements of federal mail fraud as defined in 18 U.S.C.
§ 1341 are (1) a scheme or artifice to defraud or obtain property by means of false
or fraudulent pretenses, representations, or promises, (2) an intent to defraud, and
(3) use of the mails to execute the scheme.” United States v. Welch, 327 F.3d
1081, 1104 (10th Cir. 2003).
As to the first element, the scheme or artifice to defraud, we have stated
that the scheme must be described with particularity and that “it is not sufficient
in this regard to merely plead the statutory language.” United States v. Curtis,
506 F.2d 985, 990 (10th Cir. 1974). It is necessary that “the nature of the
schemes or artifices is identified or described, including the particular pretenses,
representations or promises claimed to have been false.” Id. In the indictment of
M s. Schuler, a full four pages allege in great detail the nature of her scheme. The
jury was also carefully instructed on the meaning of the first element of mail
fraud. Instruction No. 33 explained that mail fraud may be proved either by
“executing and attempting to execute a scheme to defraud” or “for obtaining
money by means of false and fraudulent pretenses, representations and promises.”
The instruction concludes:
Thus, in order for you to find the Defendant, Valerie L. Schuler
guilty of Counts [ ], of the Superseding Indictment, you must find
beyond a reasonable doubt that at least one of these two purposes
were the objects of such crimes, but you need not find that both of
these purposes were objects of such offenses.
In Welch, we discussed what the second element–intent to defraud–means
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in terms of mail fraud:
Because direct proof of fraudulent intent often is unavailable, courts
have long permitted fact finders to rely on a variety of circumstantial
evidence, including evidence of actual or contemplated harm, to infer
such intent. . . . Intent to defraud may be inferred from the
defendant’s misrepresentations, knowledge of a false statement as
well as whether the defendant profited or converted money to his
own use.
327 F.3d at 1105 (quotation omitted). In this case, the evidence of M s. Schuler’s
intent to defraud was vast. In her recovered journal and diaries, she admitted that
she was misleading people who were not getting what they expected: “guaranteed
approval” for Visa/M asterCard credit cards at stated unsecured limits as contained
in her solicitations and advertisements. M s. Schuler’s W isconsin Consent
Judgment put her on notice that her business had problems and that she could no
longer operate in W isconsin. M oreover, the jury was entitled to infer that M s.
Schuler’s relocating her business address at various points w as an attempt to
evade investigation by authorities. Finally, M s. Schuler made material
misrepresentations by stating in advertisements and in mailings that “our banks
are waiting” and “no turn-downs”– statements likely to induce customers to send
her money. See United States v. Lawrence, 405 F.3d 888, 901 (10th Cir. 2005)
(stating that the jury must decide whether a statement is material, that is, whether
the statement “has a natural tendency to influence, or is capable of influencing a
decision or action by another”).
M s. Schuler concedes the use of the mails in this case. Thus, we determine
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that the jury had sufficient evidence on each of the three elements to convict for
mail fraud.
M s. Schuler also contests various individual counts of mail fraud, claiming
that the testimony of individuals could not sustain her conviction on these counts.
Her argument appears to be that the individuals who testified could have obtained
a refund but simply did not choose to do so. For our purposes, it is irrelevant
whether these individuals could have obtained a refund. M s. Schuler violated the
mail fraud statute in each of these instances in her intent to defraud these
individuals (her customers), by a scheme, through use of the mail. In addition,
M s. Schuler’s reliance on her argument that the testifying customers could have
obtained a refund is curious, since mail fraud “does not require successful
completion of the scheme to defraud.” United States v. Stewart, 872 F.2d 957,
960 (10th Cir.1989). Indeed, “actual showing of loss is not required; the [mail
fraud] statute prohibits schemes intended to deprive victims of money or
property.” Id. at 960-61 (citation omitted).
M s. Schuler next argues that the superseding indictment contained
prejudicial surplusage. In the superseding indictment, the prosecution states in
“Allegations Common to Counts O ne Through Twenty-Nine”:
VALERIE L. SCHULER . . . knowingly devised and intended to
devise a scheme and artifice to defraud and to obtain money by
means of false and fraudulent pretenses, representations, and
promises, in an amount totaling $400,000.00 and involving in excess
of 250 victims, which scheme was furthered by the use of the United
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States mail.
At trial, however, only twenty-four individuals testified that they had been duped
by her scheme. In M s. Schuler’s brief, she states: “A fortiori, the sentencing
allegations in the Superceding Indictment herein, which magnified the counts
themselves by hundred-folds, were inflammatory and prejudicial.” A ppellant’s
Brief at 40.
Federal Rule of Criminal Procedure 7(d) reads: “Surplusage. Upon the
defendant’s motion, the court may strike surplusage from the indictment or
information.” W e have held: “Acting in its discretion, a district court may strike
as surplusage allegations not relevant to the charge at issue and inflammatory and
prejudicial to the defendant.” United States v. Collins, 920 F.2d 619, 631 (10th
Cir. 1990). However, a review of the record shows that M s. Schuler did not file a
pre-trial motion requesting dismissal of the surplusage from the superseding
indictment; thus we review for plain error.
“Plain error occurs when there is (1) error, (2) that is plain, which (3)
affects substantial rights, and which (4) seriously affects the fairness, integrity, or
public reputation of judicial proceedings.” United States v. Gonzalez-Huerta, 403
F.3d 727, 731 (10th Cir. 2005) (quotation omitted). W e do not determine that the
surplusage in the superseding indictment constitutes plain error. See United
States v. Peters, 435 F.3d 746, 753 (7th Cir. 2006) (“Thus, the surplusage in the
superseding indictment did not lead the jury to convict . . . where otherwise it
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would not, and we find no plain error in the superceding indictment.”). Indeed,
we have often held surplusage in an indictment may be disregarded. See, e.g.,
Dye Constr. Co. v. Occupational Safety & H ealth Review Comm’n, 698 F.2d 423,
426 (10th Cir. 1983); United States v. Henry, 504 F.2d 1335, 1338-39 (10th Cir.
1974). W e note M s. Schuler’s reliance on United States v. Zabawa, 39 F.3d 279,
285 (10th Cir. 1994), where we held that it was w ithin the district court’s
discretion to strike “6,708 victims” from an indictment when the prosecution had
identified only thirty. However, our holding in Zabawa affirmed the district
court’s discretion to strike inflammatory surplusage from an indictment after a
Rule 7(d) motion was made; it does not lead us to find plain error where no such
motion was made at trial and where the surplusage was less (by a factor of ten)
inflammatory.
As to the rest of M s. Schuler’s claims that the district court erred in
evidentiary rulings, we review for abuse of discretion. United States v. Curtis,
344 F.3d 1057, 1067 (10th Cir. 2003). “U nder that standard, we w ill not disturb
an evidentiary ruling absent a distinct showing that it was based on a clearly
erroneous finding of fact or an erroneous conclusion of law or manifests a clear
error in judgment.” United States v. Jenkins, 313 F.3d 549, 559 (10th Cir. 2002).
It is difficult to discern M s. Schuler’s exact objection to the summary
exhibits used by the prosecution in her trial. In her brief, her counsel states that
“[t]here is no basis, other than grade-school math, for the assertion that because
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24 persons with bad credit could not obtain a credit card, as charged in the
individual counts, then every person who obtained Valerie Schuler’s services
must also be a ‘victim.’” A ppellant’s Brief at 41-42. The summary exhibits
presented in her trial represented the distillation of thousands of pages of
financial records and documents pertaining to M s. Schuler. Ultimately, the
summaries aided the jury by enumerating by date, by customer name and location,
and by the amount of money received by M s. Schuler. An IRS Special Agent
created the summary exhibits, and he explained to the jury their contents and his
method of compilation. He testified as to his efforts to ensure that no bounced
checks w ere included in the summary. The Special A gent was also subject to
cross-examination.
Federal Rule of Evidence 1006 allows the use of summaries when “[t]he
contents of voluminous writings, recordings, or photographs . . . cannot
conveniently be examined in court . . . .” W e have further observed that while
“[t]he materials upon which the summary is based need not themselves be
admitted into evidence[,] . . . [a]dmission of summaries, however, is conditioned
on the requirement that the evidence upon which they are based, if not admitted,
must be admissible.” United States v. Samaniego, 187 F.3d 1222, 1223 (10th Cir.
1999) (citation omitted). Use of summary exhibits was proper in light of the
voluminous financial records which they summarized. Importantly, the
underlying financial records w ere admissible and were in fact admitted into
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evidence. All such financial records w ere made available to M s. Schuler in
advance of trial. Therefore, we conclude that the district court did not err in
allow ing the use of summary exhibits.
M s. Schuler next contends that her cross-examination on previous instances
of credit card fraud and identity theft was improper under Federal Rule of
Evidence 404(b) as it constituted the improper use of character evidence and of
uncharged crimes. At trial, M s. Schuler was cross-examined about her use of a
false tax return to secure financing for her home as well as providing a false
social security number as part of her application for credit cards.
Once a defendant takes the stand, her credibility is at issue as with any
other w itness. United States v. Girdner, 773 F.2d 257, 261 (10th Cir. 1985).
Consequently, under Federal Rule of Evidence 608(b), it is within the discretion
of the district court to decide whether a defendant may be cross-examined about
prior conduct concerning her character for truthfulness, subject always to the
balancing test of Federal Rule of Evidence 403. In addition, Rule 608(b) states:
“Specific instances of the conduct of a witness, for the purpose of attacking or
supporting the witness’ character for truthfulness [a collateral matter] . . . may not
be proved by extrinsic evidence.” W e have observed that “[a] matter is collateral
if it could not have been introduced in evidence for any purpose other than
impeachment.” United States v. Olivio, 80 F.3d 1466, 1471 (10th Cir. 1996)
(citing United States v. Walker, 930 F.2d 789, 791 (10th Cir. 1991)). In this case,
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the false tax return and credit card applications were not collateral because they
had already been admitted into evidence by stipulation of M s. Schuler and
through another witness. It was, therefore, not improper for the prosecution to
question M s. Schuler about this extrinsic evidence.
The last of M s. Schuler’s evidentiary arguments is that she was denied the
opportunity to confront M s. Kathryn M cK ee, who testified as the prosecution’s
sole rebuttal witness. M s. M cKee testified via telephone. Her testimony was
quite short and simply concerned the numerical digits contained in her social
security number. The prosecution apparently introduced this testimony to
impeach M s. Schuler’s credibility because she had previously used a social
security number matching M s. M cKee’s in order to obtain a credit card. M s.
Schuler contends that M s. M cKee’s testimony violates the Confrontation Clause
because M s. M cKee was not present in the courtroom during her testimony.
The Confrontation Clause guarantees to all criminal defendants “‘[t]he right
physically to face those who testify against him, and the right to conduct cross-
examination.’” United States v. Sunrhodes, 831 F.2d 1537, 1543 (10th Cir. 1987)
(quoting Pennsylvania v. Richie, 480 U.S. 39, 51 (1987)). Alleged errors based
upon the Confrontation Clause are subject to harmless-error analysis. United
States v. Toles, 297 F.3d 959, 967-68 (10th Cir. 2002). To preserve the right for
constitutional harmless error review, a defendant must lodge an objection based
upon her Sixth Amendment right to confrontation. United States v. Lott, 310 F.3d
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1231, 1241 n.6 (10th Cir. 2002).
M s. Schuler did not object to M s. M cKee’s testimony at trial, although the
matter was addressed during a jury instruction conference. Nevertheless, it was
not error for M s. M cKee to testify by telephone because she took an oath, was
subject to cross-examination, and critically, her testimony (the digits of her social
security number) was uncontroverted and subject to a finding of “absolute proof”
by the district court. In such an instance, there was no harm in denying the
opportunity for face-to-face confrontation.
W e have endeavored to parse M s. Schuler’s arguments as to the
insufficiency of the jury instructions given at her trial. “W e review a jury
instruction de novo, when an objection is made at trial . . . .” United States v.
Fabiano, 169 F.3d 1299, 1302 (10th Cir. 1999). In conducting this review, we
consider the jury instructions as a whole to determine whether they “cover the
issues presented by the evidence” and accurately state the law. United States v.
Davis, 953 F.2d 1482, 1492 (10th Cir. 1992). Reversal of a conviction is
warranted only where the failure to give an instruction is prejudicial in view of
the entire record. United States v. M artin, 18 F.3d 1515, 1519 (10th Cir. 1994).
M s. Schuler claims that the district court generally and improperly rejected
her “theory of defense” and “burden of proof” instructions. But she has not
identified which specific “theory of defense” instruction(s) she believes the
district court erred in not giving, nor does she provide any legal argument with
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respect to why her tendered “theory of defense” instruction(s) were (1) proper
statements of the law, (2) not covered by other instructions actually given by the
court, and (3) w ere not impermissibly argumentative.
As best as can be determined from M s. Schuler’s brief, she is concerned
with the instructions which were discussed at the instruction conference. Her
proposed instructions “Nos. 8 and 9” concern how the jury should consider her
consent judgment in W isconsin. The district court gave an instruction on this
issue, Instruction No. 20, which is quite adequate. M s. Schuler also has not
provided any argument concerning why the court’s instructions on the W isconsin
judgment were in any respect inaccurate or prejudicial. Given the district court’s
substantial discretion in fashioning jury instructions, see United States v. Wolny,
133 F.3d 758, 765 (10th Cir. 1998), we do not see how this instruction either
misstated the facts or law, or was in any other respect unfair to M s. Schuler.
M s. Schuler’s proposed instruction No. 10 concerns her relocation of some
portion of her business from W isconsin to W yoming. This instruction is
“argument” and not instruction: “[T]he government cannot use the move of M s.
Schuler’s business to W yoming as evidence of guilty knowledge, if that move to
W yoming could be motivated by an innocent or legitimate purpose.” This is
nothing more than a recapitulation of the evidence in the light most favorable to
M s. Schuler. Such an instruction is not appropriate, and the district court
committed no error in rejecting the proposed instruction. See Davis, 953 F.2d at
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1492.
M s. Schuler argues that the district court failed to give her instruction on
the meaning of “guarantee.” This is so. Nevertheless, the term itself is not a
technical one, and it does not require a specific definition in the instructions in
order for the jury to understand its usage in this case. See, e.g., United States v.
Robinson, 435 F.3d 1244, 1249-50 (10th Cir. 2006) (noting that it was not plain
error for the court to refuse including in instructions terms of general and
common understanding).
In sum, while M s. Schuler may fly-speck the instructions on the bases that
the court did not ultimately give all of the ones she submitted or that some w ere
not w orded in precisely the fashion she might have preferred, she has not shown
that the district court’s refusal to give even one of her instructions was incorrect
as a matter of law , or was prejudicial or unfair.
Last, M s. Schuler claims that the effect of cumulative error at her trial
mandates that her conviction be reversed. “A cumulative-error analysis merely
aggregates all the errors that individually have been found to be harmless, and
therefore not reversible, and it analyzes whether their cumulative effect on the
outcome of the trial is such that collectively they can no longer be determined to
be harmless.” United States v. Rivera, 900 F.2d 1462, 1470 (10th Cir. 1990). In
our analysis, we review “only actual errors to determine their cumulative effect.”
Id. O ur review of M s. Schuler’s appeal does not yield instances of error, thus w e
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do not determine that there was cumulative error.
Consequently, we A FFIR M the judgment of the district court.
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