United States v. James M. Schneider ( 2021 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 19-10740
Non-Argument Calendar
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D.C. Docket No. 1:17-cr-20712-FAM-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JAMES M. SCHNEIDER,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(April 22, 2021)
Before WILSON, JILL PRYOR and MARCUS, Circuit Judges.
PER CURIAM:
James Schneider, a securities law attorney, appeals his convictions for
conspiracy to commit securities and wire fraud, in violation of 18 U.S.C. § 1349;
securities fraud, in violation of 18 U.S.C. § 1348; wire fraud, in violation of 18
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U.S.C. § 1343; conspiracy to commit money laundering, in violation of 18 U.S.C. §
1956(h); and money laundering, in violation of 18 U.S.C. § 1957. This case arises
out of a seven-year fraud scheme involving the creation of about 20 fraudulent
companies and causing millions of dollars of investor losses, wherein each company
followed the same basic four-step lifecycle. The first step was the creation of a
bogus shell company. In the next step, Schneider and his coconspirators filed false
and fraudulent registration statements on behalf of the bogus company with the
Securities and Exchange Commission (“SEC”). Third, the defendants would locate
a buyer for the fraudulent company and its shares. Finally, the shell buyer would
engage in a pump-and-dump stock swindle, fraudulently inflating the company’s
stock price, through, e.g., false and misleading press releases, and then selling the
company’s free-trading shares to innocent investors for substantial financial gain.
On appeal, Schneider argues that the district court: (1) abused its discretion
by disqualifying two of his three lawyers; (2) plainly erred by allowing prosecutorial
misconduct during closing argument; (3) erred in its sentencing calculations; (4)
abused its discretion by rejecting his vindictive prosecution claim; (5) plainly erred
by failing to consider certain relevant factors at sentencing; and (6) plainly erred in
its forfeiture determinations. After careful review, we affirm.
We review a district court’s disqualification of a criminal defendant’s lawyer
for abuse of discretion, and will reverse only if there was a clear error in judgment.
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United States v. Campbell, 491 F.3d 1306, 1310 (11th Cir. 2007). We also review
a prosecutorial vindictiveness claim for abuse of discretion. United States v. Jones,
601 F.3d 1247, 1260 (11th Cir. 2010). We review a prosecutorial misconduct claim
for plain error if a defendant did not object to the error at trial. United States v. Sosa,
777 F.3d 1279, 1294 (11th Cir. 2015). To prove plain error, the defendant must
show (1) an error, (2) that is plain, and (3) that affected his substantial rights. United
States v. Turner, 474 F.3d 1265, 1276 (11th Cir. 2007). If the defendant satisfies
these prongs, we may exercise our discretion to correct the error only if it seriously
affects the fairness, integrity or public reputation of judicial proceedings. Id.We review a district court’s interpretation and application of the Sentencing
Guidelines de novo, including its legal conclusions about forfeiture. United States
v. Waked Hatum, 969 F.3d 1156, 1161-62 (11th Cir. 2020); United States v.
Barrington, 648 F.3d 1178, 1194-95 (11th Cir. 2011). We review for clear error the
district court’s findings of fact, including its loss determinations. Barrington, 648
F.3d at 1197. We will find clear error only if, upon reviewing the record as a whole,
we are left with the definite and firm conviction that a mistake has been committed.
Id. We review the district court’s calculation of restitution value for abuse of
discretion and its factual findings underlying the restitution order for clear error.
United States v. Valladares, 544 F.3d 1257, 1269 (11th Cir. 2008). Finally, we
review the sentence a district court imposes for “reasonableness,” which “merely
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asks whether the [] court abused its discretion.” United States v. Pugh, 515 F.3d
1179, 1189 (11th Cir. 2008) (quotations omitted). Again, however, we review for
plain error issues raised for the first time on appeal, including challenges to
procedural reasonableness. United States v. Innocent, 977 F.3d 1077, 1081 (11th
Cir. 2020); United States v. Vandergrift, 754 F.3d 1303, 1307 (11th Cir. 2014).
First, we are unpersuaded by Schneider’s claim that the district court abused
its discretion by disqualifying two of his three attorneys. The Sixth Amendment
guarantees that “[i]n all criminal prosecutions, the accused shall enjoy the right . . .
to have the Assistance of Counsel for his defence.” U.S. Const. amend. VI. While
a defendant has a right to be represented by his counsel of choice, this right is not
absolute. United States v. Ross, 33 F.3d 1507, 1522-23 (11th Cir. 1994). In deciding
whether to disqualify a defendant’s counsel of choice, a court must balance two Sixth
Amendment rights: (1) the right to be represented by counsel of choice and (2) the
right to a defense conducted by a conflict-free attorney. Id. at 1523. “The need for
fair, efficient, and orderly administration of justice overcomes the right to counsel
of choice where an attorney has an actual conflict of interest, such as when he has
previously represented a person who will be called as a witness against a current
client at a criminal trial.” Id.District courts must recognize a presumption in favor of a defendant’s counsel
of choice, but this presumption may be overcome by a showing of actual conflict or
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serious potential for conflict. Wheat v. United States, 486 U.S. 153, 164 (1988)
(“The evaluation of the facts and circumstances of each case under this standard
must be left primarily to the informed judgment of the trial court.”). To decide if a
conflict warrants disqualification, we examine whether the subject matter of the first
representation is substantially related to that of the second. Ross, 33 F.3d at 1523.
We seek “to discover whether the defense lawyer has divided loyalties that prevent
him from effectively representing the defendant.” Id. Disqualification may be
proper if a conflict could deter an attorney “from intense probing of the witness on
cross-examination to protect privileged communications with the former client or to
advance the attorney’s own personal interest.” Id. Further, if one attorney in a law
firm has a conflict of interest, this conflict is imputed to all attorneys in the firm. Id.In cases where an actual conflict would subject an attorney to disqualification,
a client may waive this conflict, so long as the waiver is knowing, intelligent and
voluntary. Id. at 1524. However, even if all affected clients waive a conflict of
interest, a district court may, in its discretion, disqualify the conflicted counsel. See
Wheat, 486 U.S. at 160, 162. This is because “[f]ederal courts have an independent
interest in ensuring that criminal trials are conducted within the ethical standards of
the profession and that legal proceedings appear fair to all who observe them.” Id.
at 160. Therefore, district courts have “substantial latitude” to refuse a client’s
waiver “not only in those rare cases where an actual conflict may be demonstrated
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before trial, but in the more common cases where a potential for conflict exists which
may or may not burgeon into an actual conflict as the trial progresses.” Id. at 163.
In Ross, we affirmed a district court’s determination that a defendant’s lawyer
of choice “suffered insurmountable conflict of interest problems” when that lawyer’s
law partner had represented a government witness in a prior, related action. 33 F.3d
at 1522-23. There, the witness had paid a retainer to the lawyer, and testimony about
that transaction “would have opened the door to potential conflict, as defense
counsel could either have tread dangerously close to confidential matters in
attempting to explain this transaction or, alternatively, could have improperly
avoided related issues.” Id. at 1523. We held that, despite the defendant’s waiver
of the conflict, the district court did not abuse its discretion by failing to accept the
waiver when there were many actual or potential conflicts of interest that could have
impeded the trial and undermined the integrity of the judicial system. Id. at 1524.
Similarly, we held in Campbell that the district court did not abuse its
discretion by disqualifying the defendant’s counsel of choice when the attorney’s
law partner had represented another defendant who had pled guilty to charges arising
out of the same criminal activity and was cooperating as a government witness in
the defendant’s case. Campbell, 491 F.3d at 1309, 1312. We noted that the
defendant’s counsel of choice had a conflict, that the district court was not required
to accept the defendant’s waiver of the conflict, and that the other defendant’s refusal
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to waive the conflict presented a stronger justification for disqualification than in
Ross. Id. at 1312. Although the defendant had obtained the disqualified attorney
“after already having secured legal representation,” id. at 1309, we did not mention
this fact in our analysis, see id. at 1311-12. However, in United States v. Hobson,
we observed that the district court’s order disqualifying the defendant’s attorney
“only partially affected” the defendant’s right to his counsel of choice because this
order did not deprive him of the continued representation of a second attorney whom
he had retained as counsel. 672 F.2d 825, 829 & n.* (11th Cir. 1982), abrogated on
other grounds by Flanagan v. United States, 465 U.S. 259 (1984).
Where a defendant’s right to representation by the counsel of his choice is
wrongly denied, “it is unnecessary to conduct an ineffectiveness or prejudice inquiry
to establish a Sixth Amendment violation.” United States v. Gonzalez-Lopez, 548
U.S. 140, 147-48 (2006). This is because the error is a structural one, not subject to
harmlessness review. Id. at 148, 150.
A review of the record before us supports the district court’s conclusion that
Schneider’s representation by attorneys Daniel Rashbaum and Allison Green would
have created an insurmountable conflict of interest. Marcus Neiman & Rashbaum
(“MNR”) -- Rashbaum and Green’s law firm -- also had represented Sheldon Rose,
one of Schneider’s coconspirators, in a related case and Rose was expected to testify
against Schneider. This situation posed a serious potential for conflict, just as in
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Ross, where we observed that a defendant’s right to his counsel of choice could be
overcome if the attorney “previously represented a person who will be called as a
witness against a current client at a criminal trial.” 33 F.3d at 1523. Further, as in
Ross, where the disqualified attorney’s partner had represented the government
witness in a related matter, MNR had represented Rose when he pled guilty to
charges arising out of the same criminal conduct as Schneider. See id. at 1522.
Indeed, the district court had wide discretion to disqualify Rashbaum and
Green, especially since Rose was to testify as a government witness and MNR would
have been required to cross-examine him. See Wheat, 486 U.S. at 163 (noting a
district court’s wide discretion to disqualify a defendant’s counsel of choice, even in
situations where “a potential for conflict exists which may or may not burgeon into
an actual conflict as the trial progresses”). While Schneider claims the district court
based its decision to disqualify the attorneys on immaterial factors, the district court
did not need to identify a specific conflict requiring their disqualification. See id.Regardless, as for Schneider’s claim that it was immaterial that he had other counsel,
we’ve considered the defendant’s access to other counsel when reviewing a district
court’s decision to disqualify the defendant’s counsel of choice. See Hobson, 672
F.2d at 829 n.*. As for Schneider’s claim that it was immaterial that MNR had paid
an independent attorney to represent Rose, Schneider does not identify any caselaw
suggesting that a law firm or attorney’s payment of a former client’s legal fees does
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not create a conflict of interest.1 Accordingly, on this record, the court did not abuse
its considerable discretion in disqualifying the attorneys in this case.
We also find no merit to Schneider’s claim that the district court plainly erred
by permitting the government to argue in its closing argument that he lied on the
stand. To establish prosecutorial misconduct based on improper remarks in closing
argument, the challenged remarks must (1) be improper and (2) prejudicially affect
the defendant’s substantial rights. Sosa, 777 F.3d at 1294. A prosecutor’s remarks
are improper if they express “personal views on a defendant’s guilt,” id. at 1297
(quotations omitted), or “exceed the evidence presented at trial,” United States v.
Reeves, 742 F.3d 487, 505 (11th Cir. 2014). A prosecutor may argue during closing
arguments that a witness is lying if the evidence supports his remarks. United States
v. Schmitz, 634 F.3d 1247, 1270 (11th Cir. 2011). A prosecutor also may make
closing remarks that draw conclusions from the evidence. Reeves, 742 F.3d at 505.
In Sosa, we held that a prosecutor’s closing remarks about a defendant’s
credibility were not improper because “the prosecutor made it sufficiently clear that
he was urging the jury to conclude that [the defendant]’s testimony was not credible
based on a consideration of the relevant evidence.” 777 F.3d at 1298. Nor were a
prosecutor’s remarks that the defendant had lied during his testimony improper in
1
The out-of-Circuit decision he cites, Familia-Consoro v. United States, 160 F.3d 761 (1st Cir.
1998), is distinguishable. There, a defendant’s legal representation was paid for by a potential
alternate defendant, not by a law firm now representing a party with materially adverse interests.
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United States v. Rivera, where the comments had focused on the defendant’s
credibility and inconsistencies in his testimony, as contrasted with the consistency
of a government witness’s testimony. 780 F.3d 1084, 1100 (11th Cir. 2015).
Here, the district court did not err, plainly or otherwise, in finding that the
government’s four remarks during closing arguments -- arguing that Schneider was
lying -- were not improper. First, the government did not improperly express an
opinion when it described Schneider’s testimony that he had no reason to believe
that a coconspirator, Steven Sanders, controlled the 20 shell companies as “one of
the biggest lies in this case.” The government supported this argument by noting
that the evidence in the record showed that 80% of the profits from the sales of these
shell companies were sent to Sanders and his coconspirators, while only 2% went to
the listed officers of the companies. Second, the government was justified in arguing
that Schneider was lying when he testified that coconspirator Jeffrey Lamson was
not his client because it supported this argument by referencing a trial exhibit billing
record to Lamson from Schneider’s law firm. Third, the government was justified
in arguing that Schneider had lied when he told the SEC that the officers of the
companies he represented would be lying if they said they had never heard of him
because the government supported this argument by referencing the testimony of
three straw officers who testified that they had never heard of Schneider. And fourth,
the government was justified in arguing that Schneider was lying in an opinion letter
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when he asserted that he had relied on representations by the president of one of the
shell companies because the government supported this argument by noting that the
company president had testified that she had never heard of Schneider.
Accordingly, in all four instances Schneider cites, the record indicates that the
government was not improperly expressing an opinion about Schneider’s credibility,
but rather was urging the jury to draw conclusions about his testimony based on
evidence presented at trial. The district court did not err, plainly or otherwise, by
finding that the prosecutor’s remarks during closing arguments were not improper.
We also reject Schneider’s claim that the district court erred by imposing a
20-level guideline enhancement after calculating a loss amount of $19.7 million, by
ordering restitution based on this loss amount, and by imposing a 2-level
enhancement because 10 or more victims were involved. For fraud offenses, the
Guidelines provide an increase to a defendant’s offense level depending on the
amount of loss resulting from the fraud. U.S.S.G. § 2B1.1(b)(1). Section
2B1.1(b)(1)(K) provides for a 20-level enhancement where the loss from an offense
was more than $9,500,000 but less than $25,000,000. Id. § 2B1.1(b)(1)(K), (L).
Loss is considered either the actual loss or the intended loss, whichever is greater.
Id. § 2B1.1, cmt. (n.3(A)). A defendant is accountable for all acts he committed,
aided, abetted, or willfully caused, and, in a case involving joint criminal activity,
for the activity of others if that conduct was (1) within the scope of the jointly
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undertaken criminal activity, (2) in furtherance of that criminal activity, and (3)
reasonably foreseeable in connection with that criminal activity. Id. § 1B1.3(a)(1).
The court need only make a reasonable estimate of the loss, and the court’s loss
determination is entitled to appropriate deference. Id. § 2B1.1, cmt. (n.3(C)).
The Guidelines also provide for a two-level increase to a base offense level if
the crime involved ten or more victims. U.S.S.G. § 2B1.1(b)(2)(A)(i). For purposes
of § 2B1.1, “victim” means “any person who sustained any part of the actual loss”
attributed to the crime. Id. § 2B1.1, cmt. (n.1).
In determining a defendant’s relevant conduct in a conspiracy, the court must
make particularized findings about the scope of the criminal activity the defendant
agreed to jointly undertake. United States v. Hunter, 323 F.3d 1314, 1320 (11th Cir.
2003). That a defendant knew of the larger operation and agreed to perform a
specific act does not demonstrate acquiescence in all acts of the criminal enterprise.
Id. Notably, a court’s failure to make individualized findings about the scope of the
defendant’s activity in a conspiracy is not grounds for vacating a sentence if the
record supports the court’s determination about the offense conduct, including the
imputation of others’ unlawful acts to the defendant. United States v. Petrie, 302
F.3d 1280, 1290 (11th Cir. 2002). Further, the court need only make a reasonable
loss estimate, but must base its loss estimate on reliable and specific evidence and
may not speculate about the existence of a fact. Barrington, 648 F.3d at 1197.
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The Mandatory Victims Restitution Act (“MVRA”) requires restitution orders
for many offenses against property and full restitution to victims without
consideration of the defendant’s economic circumstances. 18 U.S.C. § 3663A(a)(1),
(c)(1)(A); 18 U.S.C. § 3664(f)(1)(A). The district court may order restitution for
losses arising out of the defendant’s relevant conduct. Valladares, 544 F.3d at 1270.
Here, the district court did not clearly err when it used a $19,701,195 loss
amount to enhance Schneider’s sentence and to calculate the amount of restitution
he owed. The court’s estimate of the loss attributable to Schneider was supported
by the evidence. That evidence included spreadsheets submitted by the government
before sentencing that documented the losses suffered by investors who purchased
stock in 4 of the 20 shell companies associated with Schneider’s crimes of
conviction, and calculated that loss as at least $19,701,195.
In fact, the testimony of coconspirator Michael Vax alone supported a loss
amount of up to $40 million. According to Vax, Schneider and Vax discussed an
illegal pump-and-dump scheme, Vax used the shares he acquired with Schneider’s
assistance to carry out the scheme, in which he and his coconspirators sold 50 million
shares worth around $40 million, and Schneider created and reviewed false press
releases used in the scheme. This testimony supported the findings that Schneider
reasonably could have foreseen a $40 million loss amount and that the scheme was
within the scope of Schneider’s jointly undertaken criminal activity and in
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furtherance of that activity. Also, the revised presentence investigation report
(“PSI”) noted that one purpose of the shell companies’ sales was to facilitate pump-
and-dump schemes. Thus, the district court did not err when it calculated the loss
amount as $19,701,195 or when it ordered restitution based on this loss amount.
Nor did the district court clearly err in calculating ten or more victims. The
evidence presented supported a finding that the pump-and-dump schemes fell within
the scope of Schneider’s relevant conduct and caused losses to thousands of
investors. If anything, a finding of ten victims or more downplayed the actual
number of investors harmed by the conspiracy’s relevant conduct; the government
submitted evidence documenting only the losses suffered by investors who bought
stock in 4 of the 20 shell companies involved in Schneider’s crimes of conviction.
Next, we are unconvinced by Schneider’s argument that the district court
abused its discretion by rejecting his vindictive prosecution claim. The government
violates a defendant’s due process rights when it vindictively seeks to retaliate
against him for exercising his legal rights. Bordenkircher v. Hayes, 434 U.S. 357,
362-63 (1978); see also Fed. R. Crim. P. 32(f)(1) (providing that defendants may
object to material information appearing in the PSI). A defendant can establish
actual prosecutorial vindictiveness if he can show that the government’s justification
for a retaliatory action is pretextual. Jones, 601 F.3d at 1261. In the plea-bargaining
context, the Supreme Court has said that vindictiveness does not arise when the
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defendant is free to accept or reject the prosecution’s offer. Bordenkircher, 434 U.S.
at 363. However, the Supreme Court has recognized that vindictive sentencing can
occur when a court imposes an increased sentence after a defendant successfully
attacks a prior conviction. Texas v. McCullough, 475 U.S. 134, 137-38 (1986).
Here, the government’s advocacy for a higher loss finding at sentencing did
not amount to vindictive prosecution. Importantly, Schneider offers no evidence of
actual vindictiveness to show that the government’s justification for seeking an
increased loss amount based on recently available data was pretextual. See Jones,
601 F.3d at 1261. And just as in the plea-bargaining context in Bordenkircher,
Schneider was free to maintain his objection to loss amount in the initial PSI.
Further, Schneider does not cite any caselaw discussing prosecutorial vindictiveness
in the context of sentencing. While a court may violate a defendant’s due process
rights by imposing a higher sentence after a defendant successfully attacks a prior
conviction, see McCullough, 475 U.S. at 134, 137-38, it is difficult to envision how
the government could do so by merely asking the sentencing court to make a factual
finding supported by the evidence. Thus, we affirm as to this issue too.
Nor do we agree with Schneider’s claim that the district court plainly erred by
failing to consider certain factors at sentencing. The district court must impose a
sentence “sufficient, but not greater than necessary” to comply with these purposes:
the need to reflect the seriousness of the offense, promote respect for the law, provide
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just punishment for the offense, deter criminal conduct, and protect the public from
the defendant’s future criminal conduct. 18 U.S.C. § 3553(a)(2). In imposing a
sentence, it should also consider, inter alia, the nature and circumstances of the
offense and the defendant’s history and characteristics. Id. § 3553(a)(1). The court
need not use specific language or articulate its consideration of each individual §
3553(a) factor, so long as the whole record reflects its consideration of those factors.
United States v. Ghertler, 605 F.3d 1256, 1262 (11th Cir. 2010).
Here, Schneider’s procedural reasonableness claim is subject to plain error
review because he did not object to his sentence on procedural reasonableness
grounds in district court. Regardless, the district court did not err, plainly or
otherwise, by imposing an 84-month below-guideline sentence. The court noted that
it was considering all the sentencing factors in imposing Schneider’s sentence,
specifically referenced his age and lack of prior criminal history throughout the
sentencing hearing, and mentioned his age in explaining its decision to vary 50%
below the bottom of the guideline range. Accordingly, the record reflects the district
court’s consideration of the § 3553(a) factors, and we affirm Schneider’s sentence.
Finally, we are unpersuaded by Schneider’s claim the district court plainly
erred by ordering forfeiture as to each count of the indictment or for property that
Schneider did not obtain as the result of his money laundering offenses. In
Honeycutt v. United States, 137 S. Ct. 1626 (2017), the Supreme Court considered
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whether, under 21 U.S.C. § 853, a defendant could be held jointly and severally
liable for property his coconspirator derived from the crime but the defendant
himself did not acquire. The Court concluded that imposing this liability would be
inconsistent with the statute’s text and structure, because forfeiture under § 853(a)(1)
was limited to tainted property the defendant himself acquired as a result of the
crime. Id. at 1630, 1635. Notably, the statute at issue in Honeycutt, § 853(a)(1),
requires forfeiture of “any property constituting, or derived from, any proceeds the
person obtained, directly or indirectly, as the result of [a drug] violation.”
By contrast, 18 U.S.C. § 982(a)(1), the statute mandating forfeiture for money
laundering offenses, requires forfeiture of “any property, real or personal, involved
in such offense, or any property traceable to such property.” In Waked Hatum, we
reasoned that Honeycutt’s “tainted property” requirement did not apply to §
982(a)(1) because this statute “contain[ed] neither a ‘proceeds’ nor an ‘obtained’
limitation.” 969 F.3d at 1165. Similarly, § 981(a)(1)(C), the statute governing
forfeiture for securities and wire fraud offenses, provides that “[a]ny property, real
or personal, which constitutes or is derived from proceeds traceable to” any
securities or wire fraud offense is subject to forfeiture to the government. See 18
U.S.C. §§ 981(a)(1)(C), 1956(c)(7)(A), 1961(1).
Because Schneider did not raise his arguments about the district court’s
forfeiture order in district court, we review only for plain error, and can find none.
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For starters, imposing the forfeiture order on a count-by-count basis was permitted
under 18 U.S.C. §§ 981(a)(1)(C), 982(a)(1), the statutes that governed forfeiture in
this case. Moreover, as we’ve noted, the statutes involved in the wire and securities
fraud offenses found in Counts 1 through 12 (§ 981(a)(1)(C)) and in the money
laundering offenses found in Counts 13 through 33 (§ 982(a)(1)) contain broad
forfeiture provisions that do not limit forfeiture on a count-by-count basis. Further,
the government already has acknowledged that it would not seek to “double count”
in its collection of the forfeiture money judgments.
Nor did the district court plainly err by imposing forfeiture on money obtained
by Schneider’s coconspirators as proceeds of their criminal conduct after it passed
through a trust account maintained by his law firm. Schneider’s reliance on
Honeycutt is misplaced because we’ve already recognized that Honeycutt’s “tainted
property requirement” does not apply to § 982(a)(1), the statute mandating forfeiture
for Schneider’s money laundering offenses. Waked Hatum, 969 F.3d at 1165. Thus,
Schneider has not shown that it was plainly erroneous for him to be held liable for
property he did not personally obtain as proceeds of the conspiracy, and we affirm
as to this issue as well. 2
AFFIRMED.
2
Schneider waived his argument about the district court’s order granting forfeiture of substitute
assets by raising it for the first time in his reply brief. See United States v. Magluta, 418 F.3d
1166, 1185-86 (11th Cir. 2005).
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