United States v. Word , 129 F.3d 1209 ( 1997 )

United States Court of Appeals,
Eleventh Circuit.
No. 95-8288.
UNITED STATES of America, Plaintiff-Appellee,
v.
Thomas J. WORD; Richard A. Anders; Calvin L. Word; Dawn Dailey, Defendants-Appellants.
Nov. 21, 1997.
Appeals from the United States District Court for the Northern District of Georgia. (No. 1:93-CR-
506-3-GET), G. Ernest Tidwell, Judge.
Before EDMONDSON and DUBINA, Circuit Judges, and LIMBAUGH*, Senior District Judge.
EDMONDSON, Circuit Judge:
The four Defendant-appellants in this appeal raise many issues challenging both their
convictions and their sentences for conspiracy to commit mail fraud, wire fraud, and securities fraud
in violation of federal law. With three exceptions, we conclude that all of these challenges lack
merit.
These arguments have merit: (1) Defendant-appellant Dawn Dailey's ("Dailey") challenge
to the district court's exclusion of her evidence about her relationship with Calvin Word; (2)
Defendant-appellant Richard Anders's ("Anders") challenge to his sentence, which attributed
responsibility for the entire loss caused by the conspiracy to Anders despite his joining the
conspiracy late; and (3) Appellants' challenge to the district court's failure to determine their ability
*
Honorable Stephen N. Limbaugh, Senior U.S. District Judge for the Eastern District of
Missouri, sitting by designation.
to pay the restitution ordered by that court.1
Background
All Defendant-appellants—Calvin Word, Thomas Jefferson Word, Dawn Dailey, and
Richard Anders—were involved with First Alliance Securities ("FAS"), a small brokerage firm
dealing in penny stocks. The firm was established by Calvin Word, who hired his nephew Thomas
Jefferson Word as a manager. Calvin also hired Dawn Dailey2 and Richard Anders as brokers.
Some of the brokers hired by FAS, including Anders, were not properly registered traders and used
the registration numbers of other brokers, including Jeff Word's registration number.
In 1994 Defendant-appellants were convicted on many counts for crimes related to a
securities fraud scheme. This scheme involved high-pressure, fraudulent sales tactics—such as
guaranteed returns—and unauthorized trading.
The trading at FAS followed a "wave" pattern,3 resulting in the appearance that customers
were realizing profits. The profits were illusory, however, because FAS brokers did not allow
1
The government concedes that remand is necessary for a determination by the district court.
See United States v. Davis, 117 F.3d 459, 463 (11th Cir.1997) (A court must determine a
defendant's ability to pay before restitution can be ordered but specific factual findings are not
required.). Because the law is clear on this issue and the government concedes it, we will say no
more about restitution.
2
Dawn Dailey and Calvin Word were romantically involved during the operation of FAS, and
they were married after the acts constituting the conspiracy occurred.
3
The "wave" pattern involved brokers having one group of customers buy stock "A" in large
quantities, despite the individual customers' needs. This same group of customers then would
sell stock "A" back to FAS for a higher price, and FAS would roll the "proceeds" into stock "B."
Stock "A" would then be in FAS's inventory at the higher price "paid" by FAS (FAS actually
paid nothing because it simply rolled the alleged "proceeds" into another stock); and it could be
sold to another group of customers at that higher price. Brokers would continue to conduct these
transactions making the price of the stock higher at each "wave" due to manufactured demand
for the stock. The investors at the end are then left with a very high-priced stock for which there
is no market.
customers to sell their stocks for a cash return. Instead, the customers were manipulated into
investing the proceeds into more penny stocks. The brokers made money on commissions for these
trades and through a system of insider trading.
Discussion
Dawn Dailey
Dawn Dailey appeals claiming that she was denied the right to a fair trial because she
was—pursuant to pre-trial motions by both the government and Calvin Word—permitted to
introduce no evidence of physical and emotional abuse by Calvin Word and to introduce no evidence
of Battered Woman's Syndrome. At trial, the government argued that the jury could infer that
Dailey willfully and knowingly committed fraud because she was romantically involved with the
man responsible for the fraudulent scheme's creation—Calvin Word.
Very little evidence was actually admitted about the relationship between Calvin Word and
Dawn Dailey. But based only upon the introduction, by the government and Calvin Word, of the
fact that the two were romantically involved during the conspiracy and subsequently married, the
government argued that an inference of closeness and confidentiality should be drawn. Dailey says
the jury was not allowed to hear about the other side of the relationship—a relationship the
government insisted on stressing to support a conviction.
During closing argument the government contended that the defense that Dailey and Calvin
did not discuss the intricate details of the conspiracy was contrary to common sense. That closing
argument included:
Now, remember who's the one who taught Ms. Dailey how to sell? Calvin Word. Who's the
one she went home with every day? Calvin Word. Who's the one she went to work with
before she was at First Alliance and after she was at First Alliance? That's Calvin Word.
...
In the case of Ms. Dailey and Mr. Word, they shared a home, job, transportation. They went
on vacation together, I believe.
Ms. Singer says it's improper for you to draw any inference because they were boyfriend and
girlfriend. I don't think the court is going to instruct you on that. It seems entirely proper
and entirely consistent, as you know in your lives, day-do-day[sic] common sense lives, that
people who go on vacation, work together, live together, spend all their time together, are
going to have a pretty good idea about what's going on in the workplace when they work
together.
1. Expert Testimony
Dailey attempted to admit expert psychiatric testimony that she suffered from "Battered
Woman's Syndrome" and, thus, did not and could not have had the requisite mental intent or
knowledge to carry out the scheme. Federal Rule of Criminal Procedure 12.2 specifically addresses
the presentation of expert testimony about the mental state of a defendant, when mental state bears
upon the issue of guilt.
Under this rule, notice must be provided that such evidence potentially will be used at trial.
Also, the notice must be given before the time for the filing of pretrial motions, unless otherwise
provided by the trial court. Fed.R.Crim.P. 12.2(b); see generally United States v. Piccinonna, 885
F.2d 1529, 1536 (11th Cir.1989). Notice was not timely given by Dailey; and, thus, the district
court properly excluded the evidence. Fed.R.Crim.P. 12.2(d); see also United States v. Buchbinder,
796 F.2d 910, 914 (7th Cir.1986). The exclusion by the district court of expert testimony about
Battered Woman's Syndrome was not error.
2. Lay testimony
Dailey also argues that, even if expert testimony was properly excluded, it amounted to
abuse of discretion—violating her right to a fair trial—to exclude lay testimony of the abusive nature
of the relationship or, at least, of the stormy nature of the relationship between Dailey and Word.
This evidence, she argues, was needed to tell the other side of the story about the relationship and
to refute the government's contentions that the jury, in the light of the romantic nature of the
pertinent relationship, should infer that Dailey knew all that Word knew; the government made the
nature and success of the Words' relationship an issue by asking the jury to draw this inference.
We review evidentiary rulings for abuse of discretion. See United States v. Ramos, 933 F.2d
968, 974 (11th Cir.1991). In this case, there was an abuse of discretion.
"A defendant's right to a fair trial is violated when the evidence excluded is material in the
sense of a crucial, critical, highly significant factor." Id. A criminal defendant has the right to
present witnesses in his own defense. Boykins v. Wainwright, 737 F.2d 1539, 1544 (11th Cir.1984).
In this case, Dawn Dailey was not afforded the opportunity to present evidence to counter the
government's argument that an inference of confidence (with a complete exchange of information)
could be drawn from Dailey's relationship with Calvin Word: that she knew of the scheme to
defraud investors and willfully participated in that scheme.
As established before trial—when the district court was considering the motion in limine to
exclude evidence of problems in the Words' relationship—Dawn Dailey Word, in effect, would have
testified that Word physically and emotionally abused her and would have testified that Word did
not share much information with her.4 In addition, other witnesses who were present at FAS could
4
Dawn Dailey specifically represented she would have testified that, after becoming involved
with Calvin Word, she had no right to an opinion of her own—that she adopted, accepted and
believed anything Word told her; she knew nothing of commodities markets except what Word
told her; and she had always been under his control. She was told by Calvin Word "[t]hat she
should follow his instructions and listen and believe those in management." On "[o]ne occasion
when she spoke with him at First Alliance, he was so enraged that she bothered him, he
threatened to have her sent to the Mobile Alabama office." She also would have testified that
she lived through repeated physical attacks and emotional abuse, at home and at
work—including being "pushed to the ground by Calvin Word in a rage" when she was pregnant
and being "humiliated ... in front of Jeff Word and others." In addition, she would have testified
that Word "kept very much to himself, and spent little quality time with her" during the pertinent
period.
have testified about the emotional and verbal abuse that Dailey suffered—tending to show that
Calvin Word wished Dailey to have no opinions of her own and to trust him blindly.
The government's trial strategy made this defense evidence highly significant. With the
district court's exclusion of the proposed testimony of abuse (or similar evidence about a
less-than-storybook relationship) Dailey had no means to defend against the government's
contentions; and the jury did not hear the whole story about the relationship. See United States v.
Cohen, 888 F.2d 770, 776 (11th Cir.1989) ("if there is not other practical means to prove the point,
then the need factor points strongly toward receipt of such evidence") (citations and quotations
omitted). All the jury was told was that Dawn Dailey and Calvin Word were romantically involved
from the beginning of the scheme at FAS (and that they ultimately became husband and wife); and
because of that relationship, Word and Dailey must have shared everything, including knowledge
of the crimes.
During trial, the government was able to argue inferences favorable to the prosecution based
upon the romantic relationship between the two co-defendants while the defendant, Dailey, was
prohibited from introducing evidence that told a different story about the relationship and that might
have contradicted or undercut those inferences. Because the government's strategy made the
romantic relationship material, that exclusion amounted to an abuse of discretion and a reversible
error. Thus, we vacate the conviction against Dawn Dailey and order a new trial in accord with this
opinion.
Richard Anders
Anders appeals the district court's sentencing of him based upon the amount of loss
attributable to the entire conspiracy. Anders did not join the conspiracy until several months after
its inception. The amount of loss determination is made under United States Sentencing Guideline
§ 1B1.3, which sets forth what "relevant conduct" can be attributed to the defendant as reasonably
foreseeable conduct for which he can be held accountable. The Sentencing Commission also
includes notes to aid in the application of the guidelines. These notes, and amendments thereto, are
binding on this court. United States v. Reese, 67 F.3d 902, 908 (11th Cir.1995) (citing Stinson v.
United States, 508 U.S. 36, 113 S.Ct. 1913, 123 L.Ed.2d 598 (1993)).
Anders challenges the district court's determination that the entire conspiracy, and the loss
resulting from it, was attributable to him. He claims this was a misapplication of the guidelines in
the light of the amended application notes. See U.S.S.G. § 1B1.3 application note 2. A
misapplication of the guidelines is reviewed de novo by this court. Reese, 67 F.3d at 908.
The relevant application note, note 2 of U.S.S.G. § 1B1.3, provides: "A defendant's relevant
conduct does not include the conduct of members of a conspiracy prior to the defendant joining the
conspiracy, even if the defendant knows of that conduct." U.S.S.G. § 1B1.3, application note 2.
Although this note was an amendment to prior commentary to the sentencing guideline provision,
it is still to be used in applying the guideline because it merely clarified the guideline properly
applied to Anders. See Reese, 67 F.3d at 906-08.
The district court erred when it used acts of the conspiracy occurring before Anders's
involvement to calculate his sentence.
Conclusion
We vacate Anders's sentence and remand for sentencing in accord with this opinion. We also
vacate the sentence and remand for all Appellants for a determination of their abilities to pay
restitution. In addition, we vacate Dailey's conviction and her sentence and direct that she be given
a new trial. We affirm in all other respects.
AFFIRMED in part, VACATED and REMANDED in part.