United States v. Robert Jenning , 599 F.3d 1241 ( 2010 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 16, 2010
No. 08-13434
JOHN LEY
CLERK
DC Docket No. 07-00090-CR-J-33-HTS
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ROBERT J. JENNINGS,
Defendant,
DONALD E. TOUCHET,
RICHARD E. STANDRIDGE,
Defendants-Appellants.
Appeals from the United States District Court
for the Middle District of Florida
(March 16, 2010)
Before BLACK, MARCUS and HIGGINBOTHAM,* Circuit Judges.
*
Honorable Patrick E. Higginbotham, United States Circuit Judge for the Fifth Circuit,
sitting by designation.
HIGGINBOTHAM, Circuit Judge:
Richard E. Standridge and Donald E. Touchet2 were indicted on numerous
counts of conspiracy,3 mail and wire fraud,4 and money laundering,5 charging
participation in a scheme to sell fraudulent workers’ compensation insurance. A jury
convicted on all counts and the district court sentenced Standridge to 216 and
Touchet to 264 months’ imprisonment. Both appeal their convictions and sentences
on multiple grounds. We find no error and affirm.
I
Government witnesses described the workings of the industry in which the
alleged offenses occurred. It is useful to begin there. Workers’ compensation
insurance provides wage loss and medical expense reimbursement to individuals
injured while working. Most employers carry workers’ compensation insurance for
their employees and states require employers to obtain a certificate of insurance from
2
Robert J. Jennings, died in prison on December 4, 2009. Accordingly, his appeal was
dismissed as moot and his case was remanded to the district court to vacate the judgment and
dismiss the indictment. United States v. Jennings, No. 08-13434 (11th Cir. Jan. 5, 2010) (order
dismissing appeal as moot and remanding case to vacate the judgment and dismiss the
indictment); see also United States v. Romano, 755 F.2d 1401 (11th Cir. 1985).
3
18 U.S.C. § 371.
4
18 U.S.C. §§ 1341, 1343, & 2.
5
18 U.S.C. §§ 1956(a)(1)(A)(i) & 2.
2
the insurance company demonstrating they are covered or have otherwise assured
protection for their employees. Companies that sell workers compensation
insurance—termed carriers—are heavily regulated by the states. Every state requires
carriers to be “admitted” before operating within the state: Carriers must satisfy
various financial and administrative requirements and pay into “guaranty” funds used
to pay claims when an admitted carrier is unable to do so. That a carrier must be
admitted in order to insure employees within a state is common to the workers’
compensation industry.
Many employers outsource their human resource department to a professional
employer organization. PEOs operate by hiring the client employer’s employees and
then leasing them back to the client—so that the client’s employees become the
employees of the PEO. The client pays the PEO the costs of payroll plus a fee for
services. PEOs also must be licensed by the state and have proof of valid workers’
compensation insurance. A PEO failing to meet state regulatory requirements will
face a stop-work order from the state requiring the PEO to cease all operations in the
state.
The final gear in the workers’ compensation machine is the third party
administrator. Third party administrators work for both the carrier and the PEO in
administering the actual claims—in effect acting as an insurance company’s claims
3
department. The administrator evaluates the merits of an employee’s claims and pays
the bills for valid claims under the policy. It often has the most day-to-day contact
with the client companies and their employees. Like the other participants, third party
administrators are regulated by the states which seek to ensure claims are paid in a
timely manner.
II
The government argued at trial that Touchet and Standridge participated in a
wide-reaching scheme to defraud employers and their employees through the sale of
sham workers’ compensation insurance, that together with their coconspirators, they
utilized professional employer organizations to sell fraudulent insurance to client
companies, that the fraud left the employees without workers’ compensation
insurance, and that many injured and disabled employees, unable to collect
compensation, were abandoned without financial recourse.
Government witnesses offered the following account of relevant events: The
fraud began in late 2000 when TTC, a PEO, began to search for a new source of
workers’ compensation insurance after its previous carrier became insolvent. Touchet
and his business associate, Thomas Brown, had been doing business with TTC and
learned it needed workers’ compensation insurance. Touchet contacted Jerry Brewer
4
at United Insurance about potential available insurance who told him coverage was
available through his Regency Insurance of West Indies, Limited. Brown proposed
Regency but TTC declined, aware that Regency was nonadmitted and could not
legally be engaged. After a number of attempts to find legitimate workers’
compensation insurance failed, including an attempt to secure insurance through
Brown’s brother’s company, TTC became desperate—fearful that without workers’
compensation insurance it would be shut down. TTC finally agreed to Brown and
Touchet’s proposal and in February 2001 purchased workers’ compensation insurance
from Regency at the cost of $1.8 million a month.
Touchet prepared a policy for TTC—taking a sample workers’ compensation
policy from another carrier, copying it with Regency’s name, and making up a policy
number. While the policy itself recited that Regency was a nonadmitted carrier,
Touchet provided TTC with certificates of insurance without this critical disclosure
to be furnished to TTC’s clients.
TTC’s third party administrator refused to continue with a nonadmitted insurer.
Earlier Standridge had contacted Brown and Touchet regarding the possibility of
becoming the third party administrator for TTC’s workers’ compensation insurance.
Standridge owned and operated a healthcare third party administrator, Global
Healthcare Corp., and argued he could keep insurance costs down by aggressively
5
managing the claims. He also claimed to Brown that he could run “roughshod” over
state regulators concerned about Regency. Now needing a new administrator, TTC
turned to Global Healthcare.
Almost immediately the problems began. In March 2001, TTC refused to pay
the March premium, complaining to Standridge that claims had not been paid and that
states were rejecting Regency as a nonadmitted carrier. Standridge assured TTC that
he would deal with the regulators but at the moment he could not pay claims because
Brown had not remitted money from TTC’s premium.
On April 12th, 2001, Brown, Standridge, Touchet, and Jennings—who was the
administrator for some of TTC’s health insurance—met with TTC at their offices in
Kankakee Illinois. A heated argument ensued over Regency’s failure to pay claims,
TTC’s failure to pay premiums, and states’ refusal to accept Regency. Brown,
Touchet, and Standridge agreed TTC could use Regency until valid insurance could
be obtained without regulators interfering. Standridge acted as a mediator, suggesting
that regulators would be placated if claims were paid and he had direct control over
TTC’s premiums. It was eventually resolved that TTC would pay the premiums
directly to Standridge and that Standridge would smooth the issues over with the state
regulators. After the meeting, TTC wired $1.8 million dollars for the March
premium. Around this time Standridge merged Global Health into EOS Health, a new
6
company. In an apparent attempt to limit his liability for unpaid claims, Standridge
requested that the EOS employees be “hired” by Stat-Care, a third party administrator
controlled by Touchet, although EOS would continue to supervise them.
The problems continued and in May 2001, TTC again refused to pay the
monthly premium because claims had not been paid. After badgering by Brown, TTC
paid the premium, but it did not cover all the claims and by June 2001 unpaid
workers’ compensation claims exceeded $10 million. Standridge claimed to have no
money to pay the claims—much of the money given by TTC to Brown and
Standridge had been used to pay the operating expenses and salaries of Brown,
Touchet, and Standridge, and for non-TTC investments by Standridge and Brown.
The money left was woefully insufficient. Finally, in July 2001, Florida issued a
stop-work order to TTC for failure to have legitimate workers’ compensation
insurance. TTC’s clients demanded payment on the existing claims and information
on how to contact Regency. Touchet and Brown provided EOS employees with the
address of an expired post office box to give to the angry claimants and EOS
employees told the claimants that the failure to pay claims was the fault of TTC.
Undeterred by the failure of their efforts with TTC, Standridge, Touchet, and
Brown sought to capture TTC’s former clients by starting a PEO of their own. In
August 2001, they purchased a shell company and formed MRIK. Standridge was
7
made a fifty-one percent shareholder as he had recently passed a background check
and could be licensed by the state in the shortest time. They hired Lawrence Jones,
the former manager of TTC’s Tampa office, to manage MRIK. Once again, Touchet,
Brown, and Standridge without success sought valid workers’ compensation
insurance. They then turned again to Regency as a “temporary” fix. As with TTC,
Touchet provided certificates of insurance that failed to disclose to the client
companies that Regency was nonadmitted. Jones questioned whether Regency was
admitted but Standridge ordered him to use the provided certificates of insurance.
Similar results followed. Florida issued MRIK a stop-work order in July 2002.
Realizing that Regency no longer offered cover, Brewer, Touchet, and Brown
formed another insurance company, grandiosely named TransPacific International
Insurance Company Limited. TransPacific was originally incorporated in New
Zealand, though in an effort to license the company in the U.S. Standridge
unsuccessfully attempted to move its domicile to Arkansas. It lacked reserves, had
no employees, and had no office inside the United States. Like Regency, it was just
paper.
With the stop-work order for its use of Regency, MRIK switched to
TransPacific. Once again, Touchet, through Stat-Care, issued certificates of
insurance to MRIK stating MRIK had valid workers’ compensation insurance for
8
MRIK’s clients. Jones testified he objected to the use of a nonadmitted carrier, but
the state authorities permitted MRIK to operate while TransPacific’s validity was
verified. In August 2002, Florida again issued a stop-work order.
In addition to forming their own PEO, Brown, Touchet and Standridge
recruited other PEO clients facing problems with their workers’ compensation
insurance similar to those of TTC. The pattern was consistent. From 2001 to 2004,
Brown, Touchet, and Standridge continued to sell Regency and TransPacific policies
through various PEOs desperate for workers’ compensation coverage. Touchet wrote
the workers’ compensation insurance policies disclosing Regency and Transpacific
were nonadmitted. He also crafted certificates of insurance that did not reveal the
status of Regency and TransPacific for the PEOs to provide to their clients.
Standridge acted as administrator for many of the PEOs. As the money ran out, he
and his employees developed scripts in order to mollify angry claimants and inquiring
regulators. Many of these PEOs even continued to use Regency and TransPacific in
some states after regulators in other states issued stop-work orders.
In 2004 investigators closed in and the house of cards collapsed. Several
indicted coconspirators pled guilty, including Brown and the CEOs of several of the
PEOs. Brown, Jones, and other conspirators testified at trial against Touchet and
Standridge, detailing the scheme. The government also presented the testimony of
9
Lynn Szymoniak, an expert on the workers’ compensation industry, who testified that
the licensing and regulatory requirements Touchet and Standridge violated were well
known by those in the workers’ compensation industry. The government also
presented Touchet’s grand jury testimony, as well as the testimony of employees of
third party administrators and PEOs, and some of Touchet’s and Standridge’s victims.
The government corroborated the testimony with detailed financial records and
emails.
III
Both Touchet and Standridge argue the district court erred in admitting the
expert testimony of Lynn Szymoniak regarding information generally known by third
party administrators and persons who own and operate PEOs. We review a district
court’s determination that a witness is a qualified expert for abuse of discretion.6
“Under Rule 702, a district court must determine that proffered expert testimony is
both reliable and relevant. . . . For non-scientific expert testimony, the trial judge
must have considerable leeway in deciding in a particular case how to go about
determining whether particular expert testimony is reliable. A district court may
6
American Gen. Life Ins. Co. v. Schoenthal Family, LLC, 555 F.3d 1331, 1339 (11th Cir.
2009).
10
decide that non-scientific expert testimony is reliable based upon personal knowledge
or experience.”7
Szymoniak testified to, among other things, the substantive requirements of
state workers’ compensation law and the general knowledge in the industry of those
requirements. The court found Szymoniak to be qualified based on extensive
testimony as to her background: Szymoniak had a law degree from Villanova, taught
clinical programs and employment discrimination, worked for three years for the
National Council on Compensation Insurance—the rate-making organization for the
workers’ compensation industry, was the editor of a legal magazine which published
reviews of significant changes in workers’ compensation in the fifty states, was a
member, and at one point head, of the ABA tort insurance practice section, workers’
compensation section, was a partner of a firm and head of the practice group
specializing in workers’ compensation fraud and currently has her own firm doing
similar work, published eleven articles and edits an online magazine, Fraud Digest,
was a founding member of the Florida Task Force on workers’ compensation, and
lastly was involved in the rule making process concerning PEOs and workers’
compensation as well as third party administrators.
7
Id.
11
Szymoniak testified on the basis of this experience and conversations over her
career with workers’ compensation professionals. Relying on United States v.
Scrima, Touchet and Standridge claim the testimony was hearsay.8 In Scrima, the
court stated “[a]lthough experts are sometimes allowed to refer to hearsay evidence
as a basis for their testimony, such hearsay must be the type of evidence reasonably
relied upon by experts in the particular field in forming opinions or inferences on the
subject.”9 But in Scrima the expert testimony was by an accountant who based his
conclusions on calculations of net worth on “statements to casual business
acquaintances.”10 The court found qualified expert accountants would not use such
evidence. This contrasts with United States v. Steed, allowing a police officer to
testify regarding standard police tactics at traffic stops based on “discussions [the
officer] had with other law enforcement officers over the course of his career, and
literature with respect to trends in drug trafficking.”11 As in Steed, Szymoniak
8
Touchet and Standridge also seek to exclude the testimony on the grounds that it
constitutes an informal survey which fails the scientific method. However, “[w]here
experience-based studies are generally accepted in the industry, a court cannot penalize a litigant
for the lack of scientific or academic studies and public reports on the topic. . . . .” United States
v. Frazier, 387 F.3d 1244, 1299–1300 (11th Cir. 2004) (internal quotations and citations
omitted)).
9
819 F.2d 996, 1002 (11th Cir. 1987).
10
Id.
11
Id. at 965.
12
testified regarding general practice in a field—third party administrators’ knowledge
of appropriate and legitimate business practices. This was testimony by the witness
about her work and her familiarity with the regulatory environment. It was evidence
in support of her competence to express an opinion regarding the awareness of certain
industry requirements—that knowledge of these requirements was essential to
persons in this field. It was not an effort to prove what the regulations were from the
statements of others. Knowledge of an industry’s business practices—unlike
technical accounting valuations—is gleaned from years of working within the
industry and with its professionals. It is not a recounting of out of court statements
of others. We find no abuse of discretion by the district court in admitting
Szymoniak’s testimony.
IV
Touchet argues that the court erred in denying a mistrial on the ground that
Brown made reference before the jury of civil litigation in which he and Touchet were
currently involved. The decision not to grant a mistrial is reviewed for abuse of
discretion.12 Touchet must demonstrate that his substantial rights are prejudicially
affected. That is, when there is a reasonable probability that, but for the remarks, the
12
United States v. Emmanuel, 565 F.3d 1324, 1334 (11th Cir. 2009).
13
outcome of the trial would have been different.13 “[W]here the comment is brief,
unelicited, and unresponsive, adding nothing to the government’s case, the denial of
a mistrial is proper.”14
The contested testimony is as follows:
Q: Is there one of those three [Touchet, Standridge or Jennings],
though, that you consider a friend?
A: I do.
Q: Which one?
A: Don Touchet.
Q: Why?
A: We’ve known each other the longest; been involved in a lot of
problems; working through problems; we’ve been sued multiple
times; we continue with—I believe we’re still actively involved
in three civil litigation—
At this point the defense objected and the prosecution agreed not to pursue the line
of questioning.
This case fits squarely within United States v. Emmanuel. There the court
found a government witness’s fleeting, unsolicited, reference that the defendant had
been out on bail insufficient grounds for a mistrial.15 Here, the testimony was arguably
less prejudicial than that in Emmanuel. Civil litigation is a common occurrence. No
details of the litigation were disclosed and the government did not pursue the matter.
13
Id.
14
Id.
15
Id.
14
Moreover, the court offered to provide a curative instruction to the jury, but Touchet
declined. In light of the substantial evidence to convict Touchet, the minor
significance of Brown’s comments, and Touchet’s refusal of an instruction, the denial
of a mistrial was proper and was not an abuse of discretion.
V
Standridge argues there was insufficient evidence to convict him of any charge.
There are two sets of charges: (1) counts one through six and seventeen through
nineteen charged Standridge with mail and wire fraud and conspiracy for his
participation in the sale of Regency and TransPacific insurance through his PEO
MRIK and to various other PEOs; and (2) counts twenty and twenty-one charged
Standridge with money laundering. Standridge argues that, with respect to the fraud
and conspiracy counts, the government failed to prove he knew the use of Regency
and TransPacific was illegal and that he believed the use of Regency and TransPacific
was acceptable in limited instances. With respect to the money laundering counts,
Standridge argues the government failed to prove the property involved was “profits”
from unlawful activity as required by the Supreme Court’s decision in United States
v. Santos. We review a challenge to the sufficiency of the evidence de novo, viewing
15
the evidence “in the light most favorable to the government, with all reasonable
inferences and credibility choices made in the government’s favor.”16
A
We first turn to the fraud and conspiracy counts. Conviction under the mail
and wire fraud statutes requires proof that Standridge intentionally participated in a
scheme to defraud and used the mails or wire communications to further the scheme.17
Either may be proved through circumstantial evidence.18 Conspiracy demands proof
of: “(1) . . . an agreement to achieve an unlawful objective; (2) . . . knowing and
voluntary participation in the agreement; and (3) . . . an act in furtherance of the
agreement.”19 The government argues that Standridge participated in the scheme to
defraud by his participation in his PEO MRIK and through acting as a third party
administrator for other PEOs using Regency and TransPacific. Standridge’s defense
is, in short, that he was unaware of the fraudulent nature of the business: He
maintains that at no point did he know of the illegality of the use of Regency or take
16
United States v. Ortiz, 318 F.3d 1030, 1036 (11th Cir. 2003) (internal quotation marks
omitted).
17
18 U.S.C. §§ 1341 & 1343; United States v. Brown, 40 F.3d 1218, 1221 (11th Cir.
1994). Standridge was also charged under the aiding and abetting statute. 18 U.S.C. § 2.
18
United States v. Robertson, 493 F.3d 1322, 1330–31 (11th Cir. 2007).
19
United States v. Adkinson, 158 F.3d 1147, 1153 (11th Cir. 1998); 18 U.S.C. § 371.
16
part in the use of Regency as a workers’ compensation insurance carrier and that the
government failed to present sufficient evidence to prove otherwise.
Standridge’s defense is essentially his word over that of his confederates—a
credibility call belonging to the jury. Brown testified that Standridge was aware of
the illegality of Regency at least by the April 12, 2001 meeting with TTC. Standridge
stood to make money acting as the administrator for TTC and he had a strong interest
in maintaining the business relationship with TTC. The testimony indicated that
Standridge assisted in convincing TTC to agree to the use of Regency. Brown
testified that Standridge knew of the contents of the policy and of the discrepancies
in the certificates of insurance (between that provided to TTC and that provided to
TTC’s client companies). In addition, though Standridge knew other administrators
would not work with Regency, Standridge asserted he could smooth out any problems
with regulators arising from the use of Regency—implying he would be able to
prevent sanctions through the use of his personal contacts at the various agencies.
Both Brown and the CEO of TTC testified Standridge was integral to resolving the
problems between Brown and TTC to keep the scheme alive.
Moreover, evidence at trial revealed Standridge’s involvement continued
significantly past any point where he could convincingly claim ignorance. There was
testimony that Standridge asked to structure EOS so that its employees were
17
technically employed by Touchet’s Stat-Care in an attempt to limit his liability arising
from the use of Regency. But even after the restructuring, Standridge was intimately
involved in its business—and knew his employees were using a script to mislead
regulators as the scheme with TTC began to unravel. Even after TTC received a
stop-work order, Standridge continued to act as the administrator for other PEOs
using Regency and TransPacific. Lastly, there was testimony that Standridge was
involved in diverting some of the PEOs’ premium dollars to unauthorized purposes.
The government also provided sufficient evidence to convict Standridge of
fraud for his participation in MRIK. Standridge argues he believed MRIK would not
be providing workers’ compensation insurance—but rather only health
insurance—and that Lawrence Jones went behind his back to fraudulently provide
Regency and TransPacific insurance to MRIK’s client companies. The government
countered with evidence that Standridge was a knowing and willing participant in the
scheme: Standridge owned fifty-one percent of MRIK’s stock and was its controlling
person and as Brown’s testimony made clear, he and Standridge established MRIK
to absorb TTC’s former clients. While he stated the original plan was not to use
Regency, the conspirators quickly turned to Regency when other options fell
through—even after its use had doomed TTC. Jones also testified extensively against
Standridge. He stated that Standridge was his immediate boss and that Standridge
18
instructed him to use the misleading certificates of insurance identifying Regency and
TransPacific as the clients’ workers’ compensation carrier. Both Jones and Brown
testified Standridge was aware of Regency’s and TransPacific’s nonadmitted status
and that Standridge said he would take care of the licensing issues raised by the
states. Brown and Jones’s testimony evidenced a fraud in which Standridge was
intimately involved. The evidence was sufficient to uphold the convictions.
B
Standridge argues that the convictions for money laundering must be
overturned under United States v. Santos, as the government cannot prove the money
at issue was the profits of illegal activity as opposed to receipts. Money laundering
requires proof that the defendant conducted or attempted to conduct a financial
transaction, knew the property involved in the transaction represented the proceeds
of unlawful activity, the property involved was in fact the proceeds of the specified
unlawful activity, and the defendant conducted the financial transaction with the
intent to promote the carrying on of the specified unlawful activity.20 In Santos, the
Supreme Court in a plurality opinion held that in the context of gambling proceeds,
20
United States v. Williamson, 339 F.3d 1295, 1301 (11th Cir. 2003).
19
proceeds meant “profits” as opposed to “receipts.”21 As this objection was not raised
at trial, we review for plain error.22
This court recently addressed the Santos opinion in United States v.
Demarest:23
Santos has limited precedential value. Three parts of Justice
Scalia’s four-part opinion are for a plurality of justices, and those
parts do not state a rule for this case. When a fragmented Court
decides a case and no single rationale explaining the result enjoys
the assent of five Justices, the holding of the Court may be
viewed as that position taken by those Members who concurred
in the judgments on the narrowest grounds. The narrow holding
in Santos, at most, was that the gross receipts of an unlicensed
gambling operation were not ‘proceeds’ under section 1956.24
This court therefore treats Justice Stevens’s opinion as controlling in its narrowest
form. As in Demarest, here the money laundering charges did not involve receipts
from an unlicensed gambling operation. This court has previously defined proceeds
as “what is produced by or derived from something . . . by way of total revenue; the
21
128 S. Ct. at 2034 (Stevens, J., concurring).
22
United States v. Cotton, 535 U.S. 625, 628–31 (2002); United States v. Demarest, 570
F.3d 1232, 1241 (11th Cir. 2009).
23
570 F.3d 1232.
24
Id. at 1242 (internal quotations and citations omitted). Justice Stevens, in his
concurrence, stated “this Court need not pick a single definition of ‘proceeds’ applicable to every
unlawful activity, no matter how incongruous some applications may be.” Santos, 128 S. Ct. at
2031 (Stevens, J., concurring).
20
total amount brought in.”25 This definition includes receipts as well as profits. This
definition binds the court, and therefore there was no error—certainly no plain
error—in the refusal to grant a judgment of acquittal on this point.
VI
Touchet argues that the district court erred in failing over objection to instruct
the jury that in order to convict him of mail or wire fraud it must find that the scheme
and artifice was “reasonably calculated to deceive persons of ordinary prudence and
comprehension.” Touchet relies on the court’s decision in United States v. Brown.26
Brown was overruled by the court’s en banc opinion in United States v. Svete,
explaining that “we overrule our holding in Brown that the offense of mail fraud
requires proof of a scheme calculated to deceive a person of ordinary prudence.”27
Touchet’s argument is foreclosed.
25
United States v. Silvestri, 409 F.3d 1311, 1333 (11th Cir. 2005) (quoting WEBSTER’S
THIRD NEW INTERNATIONAL DICTIONARY 1807 (3d ed 1961)); United States v. Khanani, 502
F.3d 1281, 1297 n.6 (11th Cir. 2007).
26
79 F.3d 1550, 1557 (11th Cir. 1996) (“[I]n this circuit . . . the government must show
the defendant intended to create a scheme reasonably calculated to deceive persons of ordinary
prudence and comprehension.” (internal quotations and citations removed)) revs’d by United
States v. Svete, 556 F.3d 1157 (11th Cir. 2009) (en banc).
27
Svete, 556 F.3d at 1167.
21
VII
Touchet argues that his sentence was procedurally and substantively
unreasonable. At sentencing, the court adopted the factual findings of the
presentence investigation report, finding a guidelines range of 360 months to a
statutory maximum of 215 years’ imprisonment. The district court departed
downwards and sentenced Touchet to 264 months’ imprisonment. Touchet argues
(1) he did not qualify for a three level enhancement as a “manager or supervisor”; (2)
he did not qualify for a two level enhancement for obstruction of justice; (3) he did
not qualify for a two level enhancement for sophisticated means; and (4) the sentence
was substantively unreasonable as the court did not properly address the section 3553
factors. We address each in turn.
1
The district court applied a three level enhancement after finding Touchet
qualified as a manager or supervisor. “This court reviews a sentencing court’s
determination of a defendant’s role in the crime for clear error.” Section 3B1.1 of the
Sentencing Guidelines provides for a three level enhancement “[i]f the defendant was
a manager or supervisor (but not an organizer or leader) and the criminal activity
22
involved five or more participants or was otherwise extensive.”28 We evaluate several
factors in our determination:
(1) the exercise of decision making authority, (2) the nature of
participation in the commission of the offense, (3) the recruitment
of accomplices, (4) the claimed right to a larger share of the fruits
of the crime, (5) the degree of participation in planning or
organizing the offense, (6) the nature and scope of the illegal
activity, and (7) the degree of control and authority exercised over
others.29
It is clear that control over assets alone is insufficient, the individual must have had
control over at least one other participant in the criminal activity.30
Touchet was situated near the top of the hierarchy of the overall scheme. He
was the business partner of Thomas Brown and was the connection to Jerry Brewer,
the owner of Regency. Touchet participated in the negotiations with the PEOs,
including at the April 12th meeting with TTC in which the fraud was developed, and
subsequently issued the policies and misleading certificates of insurance to the PEOs
to pass along to their clients. Moreover, as the owner of TransPacific and State-Care,
he influenced the other coconspirators, including EOS Health, which used the Stat-
Care employees, and the PEOs, which used the certificates of insurance that he
28
U.S.S.G. § 3B1.1(b).
29
United States v. Gupta, 463 F.3d 1182, 1198 (quoting U.S.S.G. § 3B1.1, comment
(n.4)).
30
United States v. Glover, 179 F.3d 1300, 1302–03 (11th Cir. 1999).
23
produced. Based on Touchet’s extensive involvement in the development and
operation of the scheme, the court did not clearly err.
2
The district court also applied a two level enhancement for obstruction of
justice. The court reviews a district court’s determination that a defendant obstructed
justice for clear error when credibility is at issue.31 Under Sentencing Guidelines
section 3C1.1 a district court may impose a two level enhancement if it finds that the
defendant obstructed justice, including committing perjury on a material matter at his
own trial.32 Touchet’s trial testimony directly contradicted his grand jury testimony
on a material matter: While he testified at the grand jury that he knew what he was
doing was illegal, he later testified he only found out what he was doing was illegal
after the fact and that the prosecutor had influenced him to falsely admit criminal
activity. There was no clear error.
3
31
United States v. Banks, 347 F.3d 1266, 1269 (11th Cir. 2003).
32
United States v. Dunnigan, 507 U.S. 87, 88–89 (1993).
24
Touchet next objects to the district court’s determination that he is subject to
a two level increase because his fraud deployed sophisticated means, a determination
we review for clear error.33 The commentary to section 2B1.1(b)(9)(C) states
“‘sophisticated means’ means especially complex or especially intricate offense
conduct pertaining to the execution or concealment of an offense. . . . Conduct such
as hiding assets or transactions, or both, through the use of fictitious entities,
corporate shells, or offshore financial accounts also ordinarily indicates sophisticated
means.”34 Here the fraud revolved around Regency and TransPacific, shell
corporations which Touchet and the others used to issue illegitimate workers’
compensation insurance. In addition, by using EOS and Stat-Care as third party
administrators to shield Regency and TransPacific from claimants and regulators, and
by submitting misleading certificates of insurance to the PEOs to provide to their
clients, they attempted to hide the illegality of their actions. There was no clear error.
4
Lastly, Touchet argues that the district court failed to properly address the
section 3553 factors by not considering that he is fifty-four years old, has adopted
33
United States v. Clarke, 562 F.3d 1158, 1165 (11th Cir. 2009).
34
U.S.S.G. § 2B1.1 comment (n.8(b)).
25
children, some of whom were abused and abandoned, has a history of service to the
church and Boy Scouts, has been a good friend, and has no prior criminal record. In
addition, the court received over eighty letters on his behalf. This court has stated:
Under Gall, we must engage in a two-step process of sentencing
review. First, we must ensure that the district court committed no
significant procedural error, such as failing to calculate (or
improperly calculating) the Guidelines range, treating the
Guidelines as mandatory, failing to consider the § 3553(a) factors,
selecting a sentence based on clearly erroneous facts, or failing to
adequately explain the chosen sentence-including an explanation
for any deviation from the Guidelines range. Second, we must
consider the substantive reasonableness of the sentence imposed,
under an abuse-of-discretion standard, taking into account the
totality of the circumstances.35
First, the sentence is procedurally reasonable as the court clearly articulated the
section 3553 factors, noted the guidelines were advisory and articulated its reasons
for imposing the sentence. Second, the sentence is substantively reasonable. Touchet
highlights mitigating factors, but the district court departed downward from the
recommended guidelines range while emphasizing the fact that Touchet had
defrauded thousands of individuals of workers’ compensation coverage.
VIII
35
United States v. Livesay, 525 F.3d 1081, 1091 (11th Cir. 2008).
26
Standridge also argues that his sentence was unreasonable. The court adopted
the factual findings set forth in the presentence investigation report, finding that
Standridge’s guideline range was 292 to 365 months’ imprisonment. The court
departed downward and sentenced Standridge to 216 months’ imprisonment. The
sentence is procedurally reasonable as the court clearly articulated the section 3553
factors, noted the guidelines were advisory and articulated its reasons for imposing
the sentence. Standridge argues that the sentence is not substantively reasonable as
he was a first offender and lived an exemplary life including providing pro bono
medical care. Standridge also argues that the district court focused too heavily on one
factor—that Standridge refused to cooperate.36 We do not find these arguments
persuasive. The district court emphasized Standridge defrauded his victims of their
rightful benefits out of sheer greed and in doing so caused great suffering. We find
no clear error.
IX
36
United States v. Crisp, 454 F.3d 1285, 1292 (11th Cir. 2006) (“a district court's
‘unjustified reliance upon any one [§ 3553(a)] factor is a symptom of an unreasonable
sentence.’”).
27
At the able hand of a federal district judge and facing a jury of twelve, these
defendants received the fair trial they were due. We find no error. The judgments of
conviction and sentences are AFFIRMED.
28