United States v. Dukes , 242 F. App'x 37 ( 2007 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-5266
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
MARCUS D. DUKES,
Defendant - Appellant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (CR-03-
133)
Argued: March 13, 2007 Decided: July 3, 2007
Before WILLIAMS, Chief Judge, MOTZ, Circuit Judge, and HAMILTON,
Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by unpublished
opinion. Chief Judge Williams wrote the majority opinion, in which
Judge Motz concurred. Senior Judge Hamilton wrote a separate
dissenting opinion
ARGUED: Sherri Lee Keene, OFFICE OF THE FEDERAL PUBLIC DEFENDER,
Greenbelt, Maryland, for Appellant. Bryan Edwin Foreman, Assistant
United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY,
Greenbelt, Maryland, for Appellee. ON BRIEF: James Wyda, Federal
Public Defender, Daniel W. Stiller, Assistant Federal Public
Defender, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Greenbelt,
Maryland, for Appellant. Rod J. Rosenstein, United States
Attorney, Baltimore, Maryland, Steven M. Dunne, Assistant United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Greenbelt,
Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
WILLIAMS, Chief Judge:
A jury convicted Marcus Dukes of mail fraud, 18 U.S.C.A. §
1341 (West 2000 & Supp. 2006); interstate transportation of
property obtained by fraud, 18 U.S.C.A. § 2314 (West 2000 & Supp.
2006); and money laundering, 18 U.S.C.A. § 1957(a) (West 2000 &
Supp. 2006). These convictions relate to Dukes’s leadership in a
fraudulent investment scheme that targeted the African-American
church community. Dukes appeals his convictions on numerous
evidentiary grounds and, alternatively, contends that the district
court erred in applying certain U.S. Sentencing Guidelines
enhancements to his sentence. We affirm Dukes’s convictions,
finding no reversible error. We nevertheless vacate Dukes’s
sentence and remand for resentencing because we conclude that the
district court erred in applying the guideline enhancement for
“aggravating role” to Dukes’s sentence.
I.
A.
In 2000, Dukes and his business partner, Teresa Hodge, founded
Financial Warfare Club (FWC), a Maryland nonprofit corporation.1
They marketed FWC as a “synergistic financial network created
specifically for the body of Christ.” (J.A. at 500.)2 Dukes and
1
FWC listed its principal office as 12138 Central Avenue,
Suite 233, Mitchellville, Maryland, 20721, which was the address
for a mailbox at a Mailboxes, Etc. location.
2
Citations to the “J.A.” refer to the Joint Appendix filed
with this appeal.
3
Hodge, who are both African-American, claimed that FWC was created
to generate wealth within the African-American community by
promoting investment literacy among those who typically lacked
knowledge of financial markets and by providing investment
opportunities in companies that would purportedly generate revenue
that would stay within the African-American community.
To that end, Dukes and Hodge primarily sought to grow FWC
through presentations to African-American clergy and church groups.
Invitations to FWC presentations were typically distributed during
church services, and the pastor of the hosting church would usually
introduce Dukes and Hodge to the attendees. Dukes littered FWC
presentations with biblical references, often underscoring FWC’s
purported goal of community financial empowerment by referencing
the biblical passage Hosea 4:6, which states, “My people are
destroyed for a lack of knowledge.”
FWC offered three membership levels. The top level, known as
the “Founders Level,” required an initial payment of $2,550 and
entitled the member to three financial literacy courses; 2,000
shares of stock in Global Com InterNetworks, Inc. (“GCI”),
Integrated Solutions International, Inc. (“ISI”), and Genex, Inc.,
three “infrastructure” companies that Dukes and Hodge purportedly
were developing; and the opportunity to buy additional shares of
stock in the companies at preferred prices before their initial
public offerings (IPOs). The intermediate level, known as the
“Warriors” level, required an initial payment of $1,050 and
4
entitled the member to two financial literacy courses, 500 shares
of stock in each of the three companies, and the same opportunity
to purchase more shares at preferred prices. The least expensive
level, known as the “Believers” level, required an initial payment
of $550 and entitled the member to one financial literacy course,
250 shares of stock in each of the three companies, and the
opportunity to buy more shares at pre-IPO prices.
B.
Dukes and Hodge initially marketed FWC to smaller African-
American Pentecostal churches. Their first church presentation was
on September 27, 2000, at the Victorious Church of Jesus Christ in
Camp Springs, Maryland. Dukes later hired Sam Hairston, the
church’s pastor, to assist with marketing FWC in the greater church
community.3
Dukes and Hodge presented FWC at churches around six or seven
more times before the end of 2000. At the beginning of 2001, Dukes
took FWC on the road, giving presentations at numerous churches
throughout Georgia, Michigan, Ohio, New York, New Jersey, and
Alabama.
Aside from appealing to potential investors’ religious
feelings, Dukes and those who introduced him also told potential
investors about his considerable investment experience, including
3
As a pastoral liaison, Hairston reached out to other clergy
and church communities to generate interest in FWC and schedule
presentations for Dukes and Hodge.
5
experience at a Wall Street brokerage firm. Dukes told investors
that he had extensive experience taking companies public, the most
notable of which was a retail clothing store called Today’s Man.
Dukes often noted in presentations that he had given financial
advice to a church in Washington, D.C. and that, as a result, the
church made $50,000 and two church members bought matching Porsche
automobiles with their profits. To further assuage potential
investors’ concerns, both Dukes and Hodge told investors that they
personally invested a large amount of money -- approximately
$1,000,000 -- in FWC. They also offered a money-back guarantee on
any investment in FWC up to the time of the infrastructure
companies’ IPOs.
FWC flyers and handouts explained to potential investors that
the company was seeking 10,000 members. Dukes initially told
potential investors that FWC would take GCI public sixty days after
it had sold 5,000 FWC memberships, ISI public ninety days later,
and Genex public ninety days after that. In later presentations,
however, Dukes changed the projected timing of GCI’s IPO.4 Dukes
also stated on multiple occasions that ISI was obtaining banking
licenses with the assistance of a former Washington, D.C. banking
commissioner, that ISI officials had talked to fifty top state
4
For example, in October 2000, Dukes told potential investors
that GCI would go public before the end of the year, but then, only
a few weeks later during another presentation, he told another
group of prospective FWC investors that GCI would go public in four
to six months.
6
banking regulators, and that ISI would soon be operating a national
African-American owned bank. Dukes and Hodge told FWC members that
financial literacy courses would start within a few months of their
investments.
C.
When it became apparent that FWC’s promised benefits
(financial literacy courses and IPO profits) were not forthcoming,
a number of FWC members requested a refund of their investments.
Only a handful of members actually received a refund. When Dukes
failed to respond timely to some FWC members’ complaints, some of
those members contacted the Maryland Attorney General’s office. On
March 5, 2001, the Maryland Securities Commissioner issued a cease-
and-desist order against Dukes and Hodge, ordering them to stop
offering or selling unregistered securities, including memberships
in FWC, and to stop violating the anti-fraud provision of the
Maryland Securities Act, Md. Code Ann., Corps. & Ass’ns §§ 11-101
tp 11-805 (LexisNexis 2005).5 Dukes was served with a copy of the
order on March 7, 2001. On the same day, and after he had received
notice of the order, Dukes presented FWC at a large church in Perth
Amboy, New Jersey, collecting approximately $200,000 in membership
fees. Dukes returned the membership applications and fees to FWC’s
office in Maryland.
5
As of the date of the cease-and-desist order, FWC had fewer
than 1,000 investors.
7
On March 13, 2001, Dukes incorporated a new FWC entity in
Washington, D.C. Around the same time, Dukes moved FWC out of its
Maryland office.
On April 10, 2002, Dukes and Hodge entered into a consent
decree with the Maryland Securities Commission. Pursuant to the
terms of the decree, Dukes admitted to the Commission’s findings of
fact. The decree also contained the Securities Commission’s legal
conclusions that Dukes and Hodge had committed securities and
investment fraud under the Maryland Securities Act, which Dukes
neither admitted nor denied. In the decree, the Commission also
repeated its orders to Dukes and Hodge to cease and desist from
engaging in fraudulent investment activities.6
D.
On December 22, 2003, a grand jury sitting in the District of
Maryland returned a fifteen-count superseding indictment against
Dukes and Hodge, charging them with mail fraud, illegally
6
One of the Commission’s legal conclusions was that Dukes and
Hodge “made material misrepresentations or omissions in connection
with the offer or sale of securities.” (J.A. at 1917.) The
Commission ordered that Dukes and Hodge “permanently cease and
desist from misrepresentation or omission of material facts that
would constitute fraud” and “permanently cease and desist from
engaging in fraudulent investment advisory activities.” (J.A. at
1917.)
8
transporting property obtained by fraud, and money laundering.7
Dukes’s trial began on May 24, 2005.8
On June 8, 2005, the jury found Dukes guilty on all counts.
Over numerous objections by Dukes to the presentence report (PSR),
the district court sentenced Dukes to 120 months’ imprisonment,
followed by 36 months’ supervised release, and ordered Dukes to pay
$1,173,518 in restitution. Dukes timely appealed his convictions
and sentence. We have jurisdiction over this appeal pursuant to 28
U.S.C.A. § 1291 (West 2006) (providing for appellate jurisdiction
over "final decisions" of the district court) and 18 U.S.C.A. §
3742(a) (West 2000) (providing for appellate jurisdiction over a
"final sentence" entered by the district court).
II.
On appeal, Dukes raises a number of evidentiary challenges to
his convictions. “We typically review for abuse of discretion a
district court’s evidentiary rulings.” United States v. Perkins.
470 F.3d 150, 155 (4th Cir. 2006). If the challenging party failed
to object below to admission of the evidence, however, we review
only for plain error. United States v. Chin, 83 F.3d 83, 87 (4th
Cir. 1996). We address each of Dukes’s arguments in turn.
7
On the Government’s motion, the district court dismissed
three of the counts against Dukes.
8
The district court severed Hodge’s trial.
9
A.
Dukes’s first argument focuses on the district court’s
admission of paragraph 14 of the consent decree between him and
Hodge and the Maryland Securities Commission. The Government’s
theory at trial was that FWC was a vehicle for fraud from its
inception and that Dukes never intended to offer financial literacy
courses or take the three infrastructure companies public. Dukes’s
defense was that he never had an intent to defraud and acted in
good faith. During its case-in-chief, the Government asked a
witness who had invested in FWC whether Dukes had ever told him
that “none of the three infrastructure companies has any prospect
for going public.” (J.A. at 748.) Dukes immediately objected to
this question on the ground that there was no evidence that the
companies had no chance of going public. In response, the
Government sought to introduce paragraph 14 of the consent decree
between Dukes and the Maryland Securities Commission. The
paragraph states: “None of the three infrastructure companies has
ever had any employees, contracts or revenues. None has any
prospect for going public. Financial Warfare has no prospect for
capturing 5% of the minority market.” (J.A. at 1915.)
Dukes objected again, this time on the ground that Dukes’s
forward-looking statement in April 2002 was irrelevant to his
earlier state of mind and improper to put before the jury. The
Government informed the district court that Dukes had consented to
the findings of fact in the decree. The court instructed the
10
Government that it could ask its question but also instructed the
Government to refrain from referencing the Securities Commission’s
legal conclusions in the decree. Obviously reading from paragraph
14, the Government then asked the witness whether Dukes had ever
told him that none of the three infrastructure companies has any
prospects for going public, to which the witness replied, “No he
did not.” (J.A. a 752.)
Dukes argues that his April 2002 admission that the three
infrastructure companies had no prospects of going public at that
time is irrelevant to determining his state of mind about the
companies’ IPO prospects before issuance of the cease-and-desist
order. He contends that admission of the paragraph was improper
under Federal Rule of Evidence 403 because it likely misled or
confused jurors into believing that his forward-looking statement
in April 2002 reflected his belief about the companies’ viability
before he received notice of the cease-and-desist order. The
parties argue over whether Dukes preserved this argument through
objection at trial, but the record plainly shows that he did.
Nevertheless, we conclude that the district court did not err in
admitting the factual findings contained in paragraph 14 of the
decree.
Rule 403 provides that relevant evidence “may be excluded if
its probative value is substantially outweighed by the danger of
unfair prejudice, confusion of the issues, or misleading the jury.”
Fed. R. Evid. 403. Because Dukes “expressly consented,” (J.A. at
11
758), to the findings of facts in paragraph 14, they constitute
adoptive admissions under Federal Rule of Evidence 801(d)(2)(B),
which classifies as “not hearsay” a “statement of which the party
has manifested an adoption or belief in its truth.”
These findings of fact were undoubtedly relevant to the
Government’s case against Dukes. Although the probative value of
Dukes’s admissions may be somewhat diminished by their timing, the
only prejudice that flowed from their introduction at trial is the
kind of prejudice inherent in all relevant evidence. See United
States v. Williams, 445 F.3d 724, 730 (4th Cir. 2006) (“It is worth
remembering that the touchstone for excluding evidence under Rule
403 is not prejudice, but ‘unfair’ prejudice.” (internal quotation
marks omitted)); United States v. Russell, 919 F.2d 795, 798 (1st
Cir. 1990) (“Much of the Government’s evidence in a criminal case
is damaging to the defendant; that is why it is offered. Evidence
should be precluded only where it is unfairly prejudicial.”); 1
Stephen A. Saltzburg, Michael M. Martin & Daniel J. Capra, Federal
Rules of Evidence Manual 403-9 (9th ed. 2006) (“Evidence is not
‘prejudicial’ merely because it is harmful to the adversary. After
all, if it didn’t harm the adversary, it wouldn’t be relevant in
the first place.”). Dukes’s argument discounts the jury’s ability
to consider evidence in context and evaluate evidence based on all
of its characteristics, including its timing. We reject Dukes’s
contention.
12
B.
Next, Dukes argues that the district court erred in allowing
the Government to ask guilt-assuming hypothetical questions.
Because Dukes objected at trial,9 we review the district court’s
admission of this testimony for abuse of discretion. United States
v. Jackson, 327 F.3d 273, 298 (4th Cir. 2003).
As noted above, once the district court overruled Dukes’s
objection to the Government’s admission of the findings of fact
contained in paragraph 14 of the consent decree, the Government
asked a FWC investor the following questions:
Government: “Did Mr. Dukes ever tell you . . . that
none of the three infrastructure companies has any
prospect for going public?”
Witness: “No, he did not.”
Government: “And if he had told you that, would that
have affected your decision to invest in Financial
Warfare Club?”
Witness: “Yes, it would have.”
(J.A. at 752.)
Dukes contends that this line of questioning ran afoul of the
well-settled rule prohibiting the use of guilt-assuming
hypothetical questions. See, e.g., United States v. Siers, 873
9
Specifically, Dukes objected to the Government’s questions on
the grounds of their “irrelevance” and “impropriety.” (J.A. at
751.) It is clear from the context that Dukes’s objection was on
the ground that the questions, being irrelevant, might mislead or
confuse the jury.
13
F.2d 747, 749 (4th Cir. 1989) (“[P]utting to [the witness] a
hypothetical fact situation corresponding to the crime for which
[the defendant] was being tried, is error, and, again, we neither
condone nor excuse the same.”); United States v. Smith, 354 F.3d
390, 396 n.5 (5th Cir. 2003)(“A common vice is for the examiner to
couch a question so that it assumes as true matters to which the
witness has not testified . . . . Whether the witness is friendly
or hostile, the answer can be misleading.” (internal quotations
marks and alterations omitted)). Dukes’s argument, however, misses
the mark. The Government’s first question -- “Did Mr. Dukes ever
tell you . . . that none of the three infrastructure companies has
any prospect for going public?” -- was not “hypothetical” at all.
The Government was merely asking the witness for historical
information, i.e., whether Dukes had ever expressed doubts to the
witness about the infrastructure companies’ financial futures.
The Government’s follow-up question, which asked the witness
whether his investment choice would have been different if Dukes
had altogether discounted the infrastructure companies’ IPO
chances, was hypothetical, but the question did not assume Dukes’s
guilt of the charged crimes. Instead, it focused on the
materiality of Dukes’s representations about the infrastructure
companies’ financial prospects. In this regard, the question was
qualitatively different than the guilt-assuming hypothetical
questions proscribed by courts, which assume the defendant’s guilt
of the very crime(s) with which he is charged and most often are
14
asked during cross-examination on the heels of testimony about the
defendant’s good character or reputation. Cf. United States v.
Mason, 993 F.2d 406, 409 (4th Cir. 1993)(in a drug distribution
case, it was error for government to ask character witness on
cross-examination whether his opinion of the defendant would change
if he knew that the defendant had “distributed drugs”), United
States v. Barta, 888 F.2d 1220, 1224 (8th Cir. 1989) (in tax
evasion case, holding that it was error for district court to allow
prosecutor to ask character witness if his opinion of the defendant
“would change if, if the facts showed that he had, in fact, lied on
his income tax return”); United States v. Williams, 738 F.2d 172,
177 (7th Cir. 1984) (in fraud case, holding it was error for
Government to ask character witnesses on cross-examination if their
opinions would change if they knew that the defendant had committed
the charged fraud). Here, the Government did not ask the fact
witness to assume that Dukes committed “fraud.” Dukes’s argument
is therefore unavailing.
C.
Dukes also challenges the district court’s admission of the
entire consent decree into evidence. Although the Government
introduced the consent decree into evidence only for the purpose of
getting the findings of fact in paragraph 14 before the jury, the
district court, for reasons unclear from the record, admitted the
entire consent decree into evidence, despite its earlier
instruction to the Government not to reference the Commission’s
15
legal conclusions contained in the decree. Later, during closing
argument, the Government urged the jurors to review the consent
decree during deliberations. Specifically, the Government
counseled the jury in the following way: “If you want to look at
[the consent decree] back in the jury room, that’s the exhibit
number. This is the one that [defense counsel] almost jumped out
of his shoes when I first tried to read from it - you may recall
that - a week or so ago.” (J.A. at 1619.)
Dukes’s challenge to the admission of the consent decree in
toto is a layered one. He first contends that the district court
erred under Federal Rule of Evidence 408 in admitting the entire
decree because the decree was offered to prove Dukes’s criminal
liability.10 Alternatively, he argues that the consent decree was
inadmissible under Rule 403 because it contained the Maryland
Securities Commission’s legal conclusions, neither admitted nor
denied by Dukes. He contends that the danger of unfair prejudice
to Dukes substantially outweighed the consent decree’s probative
10
At the time of Dukes’s trial, Rule 408 provided in pertinent
part:
Evidence of (1) furnishing or offering or promising to
furnish, or (2) accepting or offering or promising to
accept, a valuable consideration in compromising or
attempting to compromise a claim which was disputed as to
either validity or amount, is not admissible to prove
liability for or invalidity of the claim or its amount.
Evidence of conduct or statements made in compromise
negotiations is likewise not admissible.
Fed. R. Evid. 408 (2005).
16
value because it contained an administrative body’s conclusions of
guilt and because it incorporated many of the accusatory statements
from the cease-and-desist order, statements that the district court
excluded precisely because of their danger of unfair prejudice to
Dukes.
The Government responds that Rule 408 is inapposite here
because the consent decree was not offered to prove Duke’s
liability under the Maryland securities laws, on which the decree
focused. The Government also contends that we must review Dukes’s
challenge to the admission of the consent decree for plain error
because Dukes failed to object at trial to its admission in toto.
We agree with the Government that plain error review is
warranted because Dukes did not object below on Rule 403 or Rule
408 grounds. The Government introduced the consent decree into
evidence as “Exhibit 2," without objection from Dukes, and began
reading part of the decree into the record. After the Government
had read nearly three full paragraphs of the decree into evidence,
Dukes made the following objection: “Your Honor, in that document,
aside from those specific findings of fact that my client expressly
consented to, everything else in that document is the
commissioner’s hearsay that has no place before this jury.” (J.A.
at 758.) In response, the Government stated that it would “go
right to the findings [of fact],” and the district court instructed
the Government that it could read into evidence the findings of
fact but not the Commission’s legal conclusions. (J.A. at 758.)
17
Despite this instruction, the court allowed the entire decree to be
published to the jury.
Federal Rule of Evidence 103 provides that an “[e]rror may not
be predicated upon a ruling which admits . . . evidence unless a
substantial right of the party is affected and . . . a timely
objection . . . appears of record, stating the specific ground for
the objection, if the specific ground was not apparent from the
context.” Fed. R. Evid. 103(a)(1); see also United States v.
Parodi, 703 F.2d 768, 783 (4th Cir. 1983) ("[T]he objecting party
[must] object with that reasonable degree of specificity which
would have adequately apprised the trial court of the true basis
for his objection ....")(internal quotation marks omitted)). Here,
Dukes did not object until after the district court had admitted
the consent decree and permitted the Government to begin reading
from it, and even then, Dukes’s lone objection was that “everything
in that document [besides the factual findings] is the
commissioner’s hearsay.” (J.A. at 758.) At no point did Dukes
object on the grounds that the decree was inadmissible under Rules
403 and 408. It is well-established that a specific objection made
on one ground will not preserve appellate review of a different
ground. See Exxon Corp. V. Amoco Oil Co., 875 F.2d 1085, 1090 (4th
Cir. 1989)(citing Wright & Miller for the rule that “a party may
not state one ground for objection and attempt to rely on a
different ground for appeal”); Udemba v. Nicoli, 237 F.3d 8, 14-15
(1st Cir. 2001)(“It is a bedrock rule that a party who
18
unsuccessfully objects to the introduction of evidence on one
ground cannot switch horses in midstream and raise an entirely new
ground of objection on appeal without forfeiting the usual standard
of review.”); 1 Saltzburg, et. al., Federal Rules of Evidence
Manual 103-18 (“It is axiomatic that a specific objection made on
one ground will not preserve an objection to the same evidence on
different grounds.”); United States v. Wilson, 966 F.2d 243, 246
(7th Cir. 1992)(holding that an objection on relevance grounds did
not preserve objection that evidence is unduly prejudicial under
Rule 403). Because Dukes did not object below on Rule 408 or Rule
403 grounds, plain error review is in order.
Under plain error review, Dukes must show that (1) the
district court committed an error; (2) the error was plain; and (3)
the error affected his substantial rights, i.e., that the error
affected the outcome of his trial. United States v. Olano, 507
U.S. 725, 732-34 (1993); United States v. Hughes, 401 F.3d. 540,
547-48 (4th Cir. 2005). If Dukes makes this showing, we should
only notice the error if the error “seriously affect[s] the
fairness, integrity or public reputation of judicial proceedings.”
Hughes, 401 F.3d at 555 (internal quotation marks and citation
omitted).
Even if we assume that the district court plainly erred under
Rule 403 in admitting the entire consent decree, however, Dukes has
not shown that the error affected the outcome of his trial.
Evidence at trial showed that many of Dukes’s representations about
19
his investment experience, FWC, and the three infrastructure
companies were false. A number of FWC investors testified that
they invested in FWC because of Dukes’s representations about his
investment and IPO experience, particularly his experience taking
Today’s Man public. The Government introduced, without objection,
Dukes’s sworn testimony before the Securities and Exchange
Commission (SEC) in which he admitted that he did not help any of
his Wall Street clients with IPOs and did not participate “in any
form or fashion” in taking Today’s Man public. (J.A. at 771).
Contrary to what he had told investors, Dukes also testified before
the SEC that the former Washington, D.C. banking commissioner he
mentioned in presentations was not actively working with Dukes to
develop ISI, that ISI officials had not spoken to fifty state
banking regulators, and that ISI had not taken any steps toward
securing a banking license.11
The Government also elicited testimony that contradicted
Dukes’s claim that his investment advice had resulted in
substantial profits for a Washington, D.C. church and two of its
members. James E. Jordan, Jr., a long-time pastor of the church,
testified that he had never heard of Dukes, Hodge, or FWC before
being contacted by the U.S. Attorney’s Office about the case and
11
At trial, Dukes implicitly blamed divine inspiration for his
“misstatement” about ISI. After acknowledging that ISI had not
taken any of the steps that he claimed, Dukes defended, “Again, to
understand, this is ministry. So as you get inspired, that may be
a misstatement on my part . . . .” (J.A. at 371.)
20
that the church had not invested in the stock market at all during
the time period in question.
The Government introduced extensive testimony describing FWC’s
“money trail” that contradicted Dukes’s claim that he had invested
much of his own money in FWC. Kevin DeLacey, a staff accountant in
the SEC’s enforcement division, testified that there was no
evidence that Dukes and Hodge had made large cash investments in
FWC amounting to anywhere near $1 million, although FWC financial
records showed that between July 2000 and October 2001 Dukes and
Hodge collected in excess of $1.3 million from FWC investors.12
During that same period, Dukes received $136,805 in salary from FWC
and a related entity; paid $4,295.93 in expenses with FWC funds;
and withdrew around $85,917 from FWC accounts. Dukes and Hodge
spent in excess of $121,000 on travel expenses during the same
period.
Given the cumulative evidence of Dukes’s misrepresentations to
potential FWC investors and members, and taking into account any
error in the admission of the consent decree, we conclude that
Dukes has not shown how admission of the consent decree affected
12
In fact, Dukes’s testimony before the Maryland Securities
Commission, the SEC, and at trial produced three different amounts
for his personal investment in FWC. Acknowledging that he had told
investors that he and Hodge had invested approximately $1,000,000
to $1,500,000 of their own money in FWC, Dukes testified at trial
that he had personally invested $600,000 to $700,000; testified
before the Maryland Securities Commission that he had invested
$100,000 of his own money; and testified before the SEC that he had
invested only $75,000 of his own money.
21
his substantial rights because we are assured “that the judgment
was not substantially swayed by [any possible] error.” Kotteakos
v. United States, 328 U.S. 750, 765 (1946).
D.
Dukes’s final evidentiary challenge relates to the district
court’s admission of financial summary charts that were used by the
Government at trial. Several weeks prior to trial, the Government
advised Dukes that it planned to call DeLacey, an SEC accountant,
as a fact witness to present summary charts of FWC’s bank records.
On April 26, 2005, at a pretrial hearing, Dukes requested that the
summary charts be made available to him immediately. On April 28,
2005, the district court ordered that “any summary charts, together
with the enumeration of the documents upon which they were based,
must be disclosed to the Defendants no later than May 10, 2005.”
(J.A. at 60.) The Government made the summary charts available to
Dukes on May 19, 2005, nine days after it was supposed to have
provided them to Dukes and only five days before trial. Dukes
raised the issue of the Government’s untimely production to the
district court, but the court overruled his objection.
Two weeks into the trial, Dukes discovered that the Government
had failed to make exhibit GX4 available to him before trial. The
exhibit was a more detailed version of exhibit GX3, which was
provided to Dukes before trial. Instead of excluding exhibit GX4,
the district court advised Dukes’s counsel that he could take extra
time to review the exhibit before its admission.
22
Dukes argues that the district court erred under Federal Rule
of Evidence 1006 in admitting the summary charts because the
Government did not provide the charts to Dukes until five days
before trial, and, in the case of summary chart GX4, until after the
trial had begun. The Government responds that Rule 1006 only
requires that the documents underlying the summary charts, and not
the summary charts themselves, be “made available” to the opposing
party at a reasonable time and place. Dukes concedes that the
Government made the underlying documents available at a reasonable
time and place.
Rule 1006 provides:
The contents of voluminous writings, recordings, or
photographs which cannot conveniently be examined in
court may be presented in the form of a chart, summary,
or calculation. The originals, or duplicates, shall be
made available for examination or copying, or both, by
other parties at reasonable time and place. The court may
order that they be produced in court.
Fed. R. Evid. 1006.
The plain language of the rule favors the Government. It
requires only that the summarized documents, and not the summaries
themselves, be made available to the opposing party at a “reasonable
time and place.” In United States v. Foley, 598 F.2d 1323 (4th Cir.
1979), the defendant argued that the trial court should have
excluded the Government’s summary exhibits because, although the
Government made the underlying documents available to the defendant
well before the trial, the Government provided the charts themselves
23
to the defendant the weekend before the trial. Id. at 1338.
Focusing on the plain language of Rule 1006, we rejected the
defendant’s argument, stating that Rule 1006 “refers to making
available the original documents, not the charts themselves.” Id.;
see also Fid. Nat’l Title Ins. Co. of N.Y. v. Intercounty Nat’l
Title Ins. Co., 412 F.3d 745, 753 (7th Cir. 2005)(“[Rule 1006] does
not say when the summaries must be made available to the party – for
that matter, it nowhere states that the summaries must be made
available to the opposing party.”).
Dukes correctly points out, however, that “no federal rule is
needed . . . to empower a district judge to prevent a party from
springing summaries of thousands of documents on the opposing party
so late in the day that the party can’t check their accuracy against
the summarized documents before trial.” Fid. Nat’l, 412 F.3d at
753. Indeed, one prominent treatise has noted that Rule 1006's
purpose is thwarted if the summaries themselves are not provided to
the opposing party at a reasonable time “because, without notice of
the summaries’ contents, adverse parties cannot know what to look
for in the source material to determine if the summaries are
accurate.” 31 Charles Alan Wright & Victor James Gold, Federal
Practice and Procedure § 8045, at 549 (2000); see also United States
v. Janati, 374 F.3d 263, 273 (4th Cir. 2004)(“The obvious import of
[Rule 1006] is to afford a process to test the accuracy of the
chart’s summarization.”). Nevertheless, our review of the record
reveals that the district court was keenly aware of the importance
24
of preserving Dukes’s ability to have meaningful cross-examination
of the Government’s summary witnesses about the exhibits and that
Dukes’s ability to do so was preserved. For example, with respect
to summary exhibit GX4, the exhibit provided to Dukes after his
trial had begun, the district court carefully considered the
possibility of prejudice to Dukes by its late production and ensured
that Dukes had ample time to review the exhibit before cross-
examination, even requiring the Government to introduce the exhibit
out of sequence so that the court and Dukes would have more time to
review it. (See, e.g., J.A. at 1074 (regarding summary exhibit GX4:
“[I]f he needs additional time to review it, then I can give him
that. I don’t want to necessarily keep [the exhibit] out, but I
want to make certain that Mr. Stiller [Dukes’s counsel] is armed and
dangerous when the time comes to cross examine with enough knowledge
of [the exhibit].”).) Given the district court’s sensitivity to
preserving Dukes’s opportunity to cross-examine rigorously the
Government’s witness about the summary charts, we cannot say that
the district court abused its discretion in admitting the charts,
particularly in light of our having sanctioned similar practice on
very similar facts in Foley.
25
III.
Dukes also raises a number of challenges to the district
court’s application of the Guidelines during sentencing. "In
assessing a challenge to a sentencing court's application of the
Guidelines, we review the court's factual findings for clear error
and its legal conclusions de novo.” United States v. Allen, 446
F.3d 522, 527 (4th Cir. 2006).
A.
We begin with Dukes’s challenge to the district court’s
application of Guideline § 2F1.1(b)(6)(a), which provides for a two-
level enhancement to a defendant’s offense level if “the defendant
relocated, or participated in relocating, a fraudulent scheme to
another jurisdiction to evade law enforcement or regulatory
officials.” U.S. Sentencing Guidelines Manual § 2F1.1(b)(6)(A)
(2000).
Dukes first argues that application of the “relocation”
enhancement to his sentence resulted in impermissible double-
counting because the conduct justifying application of the
enhancement -- Dukes’s relocation and reincorporation of FWC outside
of Maryland to circumvent the Maryland Securities Commission cease-
and-desist order -- was already taken into account by the district
court in its application of Guideline § 2F1.1(b)(4)(C), the
enhancement for “violation of any prior, specific judicial or
administrative order, injunction, decree, or process nor address
26
elsewhere in the guidelines,” U.S. Sentencing Guidelines Manual §
2F1.1(b)(4)(C) (2000). In support of his argument, Dukes points to
the commentary to § 2F1.1(b)(4)(C), which states that “[t]his
enhancement does not apply if the same conduct resulted in an
enhancement pursuant to a provision found elsewhere in the
guidelines.” U.S. Sentencing Guidelines Manual § 2F1.1(b)(4)(C)
cmt. n.6 (2000).
Dukes’s double-counting argument fails, as it is clear that the
district court relied on different conduct in applying the
respective enhancements. In applying § 2F1.1(b)(4)(C), the district
court relied on Dukes’s March 7, 2001 presentation of FWC to a group
of potential investors in New Jersey and his request for the
presentation materials (which still listed Maryland as FWC’s mailing
address) to be sent to Maryland, after he learned the same day of
the Commission’s cease-and-desist order, which ordered Dukes and
Hodge to cease and desist from offering, presenting, or otherwise
promoting FWC memberships “in or from” Maryland. In applying the
§ 2F1.1(b)(6)(A) enhancement, the court relied on Dukes’s re-
incorporation of FWC in Washington D.C. and his movement of FWC’s
offices to Washington, D.C. Dukes’s double-counting argument is
thus without merit.
Alternatively, Dukes contends that the district court erred in
applying § 2F1.1(b)(6)(A) because (1) FWC was still doing business
in Maryland at the same time that the court deemed Dukes to have
27
relocated FWC to Washington, D.C. and (2) Dukes did not conceal his
relocation of FWC. This argument also fails.
First, Dukes concedes that he and Hodge physically moved FWC’s
offices to Washington D.C. and re-incorporated FWC there after being
served with the cease-and-desist order in Maryland. That FWC
continued limited operations in Maryland while Dukes and Hodge both
legally and physically moved the locus of the enterprise to another
jurisdiction does not render the enhancement inapplicable.
Guideline § 2F1.1(b)(6)(A) applies “[i]f the defendant relocated,
or participated in relocating, a fraudulent scheme to another
jurisdiction to evade law enforcement or regulatory officials,” id.,
and we cannot say that the district court erred in finding that
Dukes had relocated the scheme to Washington, D.C.
Second, with respect to Dukes’s argument that § 2F1.1(b)(6)(A)
is inapplicable if the defendant did not conceal his relocation
activity, there is no language in § 2F1.1(b)(6)(A) that supports
such a “concealment” requirement. Although evidence that Dukes
concealed his identity or activities would no doubt be relevant to
a showing that the relocation was for the purpose of evading the
Maryland Securities Commission’s cease-and-desist order, §
2F1.1(b)(6)(A) contains no requirement of concealment, other than
the relocation itself. See United States v. Paredes, 461 F.3d 1190,
1193 (10th Cir. 2006)(interpreting Guideline § 2B1.1(b)((A), the
amended version of § 2F1.1(b)(6)(A), and holding that the
enhancement “contains no requirement of concealment, other than the
28
relocation itself”). The district court therefore did not err in
applying § 2F1.1(b)(6)(A) to Dukes’s sentence because Dukes’s
relocation of FWC was enough by itself to evidence evasion of the
Maryland Securities Commission.
B.
Dukes also argues that the district court erred in enhancing
his sentence pursuant to § 3B1.3 for abusing a “position of trust.”
Guideline § 3B1.3 calls for a two-level increase to a defendant’s
offense level if “the defendant abused a position of public or
private trust, or used a special skill, in a manner that
significantly facilitated the commission or concealment of the
offense.” U.S. Sentencing Guidelines Manual § 3B1.3 (2000).
“Determining what constitutes a position of trust for the
purposes of § 3B1.3 is not a simple task,” United States v.
Caplinger, 339 F.3d 226, 236 (4th Cir. 2003)(internal quotation
marks and alteration omitted), because the “enhancement was not
designed to turn on formalistic definitions of job type,” United
States v. Gordon, 61 F.3d 263, 269 (4th Cir. 1995). “[F]raud alone
does not justify the enhancement,” United States v. Bollin, 264 F.3d
391, 415 (4th Cir. 2001), nor does a “mere showing that the victim
had confidence in the defendant,” Caplinger, 339 F.3d at 237(internal quotation marks omitted). “Something more akin to a
fiduciary function is required.” Id. (internal quotation marks
omitted). “Overall, the question of whether a defendant held a
29
position of trust must be approached from the perspective of the
victim.” Gordon, 61 F.3d at 269. And “[b]ecause the [position of
trust] inquiry requires a ‘sophisticated factual determination,’ a
trial court’s finding will be reversed only if clearly erroneous.”
Id.In applying the § 3B1.3 enhancement to Dukes’s sentence, the
district court largely focused on Dukes’s marketing of FWC in the
church community. In fact, the court stated that Dukes “wouldn’t
be where he is today if he hadn’t gone near a church where trust was
placed in him.” (J.A. at 1870.) Dukes, however, contends that the
religious context of many of his presentations did not
“automatically elevate his relationship with the investors to that
of a position of trust.” (Appellant’s Br. at 53.)
If the district court had applied the “abuse of trust”
enhancement based solely on the religious context of Dukes’s fraud,
then we would have little trouble concluding that the court erred.
The court did not, however, focus only on the religious context of
Dukes’s fraud but also noted that investors had placed trust in
Dukes partly because of “his representations about his skills,”
(J.A. at 1870), including noting that Dukes had highlighted for
investors his Wall Street experience and his alleged experience
taking Today’s Man public. In fact, the court specifically
referenced Application Note 2(A) to § 3B1.3, which states that the
enhancement applies to a defendant who “perpetrates a financial
fraud by leading an investor to believe the defendant is a
30
legitimate investment broker.” U.S. Sentencing Guidelines Manual
§ 3B1.3 cmt. n.2 (2000). As noted earlier, a number of FWC
investors testified that they invested in FWC because of Dukes’s
investment experience, and one investor in particular testified that
his investment decision was greatly influenced by Dukes’s
representation that he was a “legitimate stockbroker.” (J.A. at
319.)
Given its attention to Dukes’s representations about his
investment experience, we cannot say that the district court clearly
erred in its application of § 3B1.3 to Dukes’s sentence. From the
perspective of the FWC investor, Dukes’s representations about his
time on Wall Street, his experience taking companies public, and his
previous clients’ investment successes would have been key
components in the overall decision to invest and created
“[s]omething more akin to a fiduciary duty” owing from Dukes to the
FWC investors. Caplinger, 339 F.3d at 237. (J.A. at 319.) We
therefore reject Dukes’s argument.
C.
Finally, Dukes argues that the district court erred in
enhancing his sentence pursuant to Guideline § 3B1.1(c), the
enhancement for “aggravating role,” because the court erroneously
concluded that § 3B1.1(c) does not require that the defendant
organize, lead, manage, or supervise at least one other participant
in the crime. The Government responds that under § 3B1.1(c) a
31
defendant need not organize, lead, manage, or supervise another
participant so long as the defendant exercises significant
management responsibility over the criminal organization’s property
and assets. Alternatively, the Government argues that even if the
enhancement does require management of at least one other criminal
participant, the district court found that Dukes had exercised such
leadership over Hodge.
Dukes has the better of the argument. Guideline §
3B1.1(c) provides for a two-level increase if “the defendant was an
organizer, leader, manager, or supervisor in any criminal activity.”
U.S. Sentencing Guidelines Manual § 3B1.1(c) (2000). Application
Note 2 to § 3B1.1 makes clear that
[t]o qualify for an adjustment under this section, the
defendant must have been the organizer, leader, manager,
or supervisor of one or more other participants. An
upward departure may be warranted, however, in the case
if a defendant who did not organize, lead, manage, or
supervise another participant, but who nevertheless
exercised management responsibility over the property,
assets, or activities of a criminal organization.
U.S. Sentencing Guidelines Manual § 3B1.1 cmt. n.2 (emphasis added).
“Participant” is defined as “a person who is criminally responsible
for the commission of the offense, but need not have been
convicted.” Id. cmt n.1. There is a clear distinction between an
adjustment under § 3B1.1, which requires that a defendant have been
the organizer, leader, manager, or supervisor of one or more other
participants, and an upward departure under § 3B1.1, which can be
based solely on the defendant’s exercise of “management
32
responsibility over the property, assets, or activities of a
criminal organization.” Thus, the plain language of the commentary
makes clear that for enhancement purposes the defendant must have
organized, led, managed, or supervised at least one other criminal
participant. See United States v. Sayles, 296 F.3d 219, 226 (4th
Cir. 2002) (stating that § 3B1.1(c) only applies when the defendant
was an “organizer, leader, manager or supervisor of people”
(emphasis in original)); United States v. Capers, 61 F.3d 1100, 1109
(4th Cir. 1995)(noting the same).
Contrary to the Government’s contention, the district court did
not base its application of the enhancement on Dukes’s control of
Hodge. Instead, the court applied § 3B1.1(c) because it concluded
that the enhancement does not require that the defendant control
another criminal participant. The district court reasoned as
follows:
3B1.1(a) talks about an organizer or leader of an
activity involving five or more participants. And
[3B1.1(c)] simply comes back to being an organizer,
leader, manager or supervisor in any criminal activity
and does not use the term participant at all. It is
clear that Mr. Dukes was an organizer of the vehicle that
used to carry out these crimes, the Financial Warfare
Club, and I, therefore, conclude that this aggravating
role adjustment is appropriate.
(J.A. at 1868-69.)
The court’s legal conclusion that the enhancement under § 3B1.1(c)
does not require control of at least one other participant in the
crime is clearly erroneous in light of the commentary to § 3B1.1 and
33
our decisions in Sayles and Capers. We therefore remand to the
district court for resentencing.13
IV.
In sum, we affirm Dukes’s convictions, but we remand this case
to the district court for resentencing because the court erred in
its application of the “aggravating role” enhancement.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
13
Of course, on remand, the district court is free to enhance
Dukes’s sentence under § 3B1.1(c) if the court finds that Dukes
organized, led, managed, or supervised at least one other criminal
participant. We express no opinion on this issue.
34
HAMILTON, Senior Circuit Judge, dissenting:
By far, the most critical and hotly contested issue at Dukes’
trial was whether Dukes intended that the Financial Warfare Club
constitute a scheme to defraud investors of their money or whether
he actually believed that the Financial Warfare Club presented them
with a legitimate investment opportunity. Yet, the jury was
erroneously permitted to read the Conclusions of Law portion of the
“CONSENT ORDER”1, (J.A. 1911), which portion set forth the
Securities Commissioner of Maryland’s conclusion that, with respect
to Dukes’ activities in promoting the Financial Warfare Club, Dukes
“made material misrepresentations or omissions in connection with
the offer or sale of securities in Maryland and in dealing with
investment advisory clients, in violation of Sections 11-301 and 11-
302 of the [Maryland Securities] Act.” (J.A. 1917). The jury was
also erroneously permitted to consider the Injunction portion of the
Consent Order, which portion ordered Dukes to “permanently cease and
desist from misrepresentation or omission of material facts or other
activities that would constitute fraud in connection with the offer
or sale of securities in violation of Section 11-301 of the Act; and
. . . permanently cease and desist from engaging in fraudulent
investment advisory activities with respect to the offer and sale
1
The majority opinion refers to this document as the consent
decree. I will refer to it as “the Consent Order.”
35
of securities in violation of Section 11-302 of the Act . . . .”
(J.A. 1917).2
All of this information undoubtedly left the jury with the
impression that a high-ranking Maryland official, with likely far
more expertise in the field of securities than any individual juror
in the case, had already found Dukes guilty of the same fraudulent
activities for which the government sought to convict Dukes in his
federal criminal trial. That any probative value of such
information was substantially outweighed by the danger of unfair
prejudice is obvious. It is human nature to rely upon the opinion
of one exceedingly more knowledgeable than us in a given field. It
is also human nature to rely upon an opinion carrying the imprimatur
of an entire state. With all measure of certainty, these two
circumstances combined to create the inevitable danger that the jury
would rely upon the Commissioner’s conclusion that Dukes committed
fraud in promoting the Financial Warfare Club and her related fraud-
terminology-laden orders to cease and desist to find Dukes guilty
of mail fraud in connection with his activities in promoting the
Financial Warfare Club. The mail fraud counts also supplied
predicate offenses for the counts charging Dukes with interstate
transportation of property obtained by fraud and money laundering.
2
I will explain later why I believe Dukes sufficiently
objected to the admission of the Conclusions of Law and Injunction
portions of the Consent Order to have preserved the issue for
nonplain-error review.
36
Under these circumstances, the Conclusions of Law and the
Injunction portions of the Consent Order should have been excluded
from the jury’s consideration pursuant to Federal Rule of Evidence
403 (Rule 403), Fed. R. Evid. 403.3 Because I cannot say with fair
assurance that, without stripping the erroneous admission of the
Conclusions of Law and Injunction portions of the Consent Order from
the whole, the jury’s verdict was not substantially swayed by the
error, United States v. Curbelo, 343 F.3d 273, 286 (4th Cir. 2003),
I would vacate Dukes’ convictions and sentence and remand for a new
trial. Accordingly, I dissent.
I.
Before delving further into the actual merits of Dukes’
challenge to the admission of the Conclusions of Law and Injunction
portions of the Consent Order as violative of Rule 403, I will
address the majority’s erroneous holding that our review of such
challenge is limited to the plain-error standard of review set forth
in United States v. Olano, 507 U.S. 725 (1993). To preserve an
evidentiary challenge for appellate review under the most appellant-
friendly standard of review, Federal Rule of Evidence 103(a)(1)
requires “a timely objection or motion to strike . . . stating the
3
Rule 403 provides: “Although relevant, evidence may be
excluded if its probative value is substantially outweighed by the
danger of unfair prejudice, confusion of the issues, or misleading
the jury, or by considerations of undue delay, waste of time, or
needless presentation of cumulative evidence.” Fed. R. Evid. 403.
37
specific ground of the objection, if the specific ground was not
apparent from the context.” (emphasis added). Referring to this
last clause, in Werner v. Upjohn Co., 628 F.2d 848 (4th Cir. 1980),
we explained that Rule 103(a)(1) “requires specific objection only
where the specific ground would not be clear from the context.” Id.
at 853. We went on to hold that the specific ground requirement did
not apply in that case because, although the defendant had only made
a general objection to the admission of the challenged item of
evidence at trial, the defendant had filed a pretrial motion with
supporting memoranda asking that all references to the challenged
item of evidence be suppressed. Id. at 853. Based upon this
situation, we held: “From our examination of the record, we have
no doubt that the ground for objection was clear to everyone.” Id.Here: (1) Dukes timely objected to the admission of the
Consent Order with the exception of the Findings of Fact portion (to
which he had stipulated); and (2) the ground for his objection was
apparent from the context. With respect to the timely objection
requirement, at the time the government sought to admit the entirety
of the Consent Order and began reading from it, Dukes offered the
following objection after receiving the district court’s permission
to approach for a bench conference: “Your Honor, in that document,
aside from those specific findings of fact that my client expressly
consented to, everything else in that document is the commissioner’s
hearsay that has no place before this jury.” (J.A. 758). The
government immediately responded: “We’ll go right to the findings.
38
We can go right to the findings, Your Honor. I was just sort of
laying the foundation so the jury understands where we’re reading
from.” Id. The district court then told the government: “Tell
them--read them what you did at the bench that admit to these
findings of fact, but they are conclusions of law, if you want to
read in specific, not the whole thing.”4 Id. The government
responded: “No, we’re not going to read the whole thing.” (J.A.
758-59). The district court concluded: “All right.” (J.A. 759).
With respect to the specific ground for his objection being
apparent from the context, the record shows that prior to Dukes’
just quoted objection at trial, Dukes had made and the district
court had granted a motion in limine with respect to the Summary
Order to Cease and Desist (the Cease and Desist Order) issued by the
Securities Commissioner of Maryland. Such order preceded the
Consent Order and alleged that, with respect to his activities in
promoting the Financial Warfare Club, Dukes violated sections 11-301
and 11-302 of the Maryland Securities Act. Additionally, akin to
the Consent Order, the Cease and Desist Order ordered Dukes to
“cease and desist from engaging in material misrepresentations or
4
In the earlier bench conference referenced by the district
court, Dukes objected to the admission of any allegations contained
in the Consent Order and made clear that he believed the only
admissible portion of the Consent Order was the Findings of Fact
portion. At the same bench conference, the government acknowledged
that Dukes did not agree to the legal conclusions contained in the
Consent Order. At the conclusion of this earlier bench conference,
the district court told Dukes and the government that it intended
“to tell the jury there’s no objection to the facts contained in
the” Consent Order. (J.A. 750-51).
39
omissions in connection with the offer or sale of securities in
[Maryland], pending a hearing in this matter or until such time as
this Order is modified or rescinded by the Securities Commissioner,”
(page 12 of the Cease and Desist Order), and to “cease and desist
from engaging in material misrepresentations or omissions in
connection with the offer of investment advice in [Maryland],
pending a hearing in this matter or until such time as this Order
is modified or rescinded by the Securities Commissioner,” (page 13
of the Cease and Desist Order). In his motion in limine, Dukes
expressly argued, inter alia, that the “never-proven allegations set
forth in the Cease and Desist Order are of no probative value but
are extremely prejudicial to Mr. Dukes.” In support of this
argument, Dukes cited Rule 403.
In initially addressing Dukes’ motion in limine, the district
court stated:
This is a motion from Mr. Dukes in limine to preclude the
government from introducing as an exhibit the summary
order to cease and desist issued by the Securities
Commissioner of Maryland. I looked at this one, and it
seems to me -- at least without having the benefit of
hearing what the government’s position is -- that this is
an accusatory order that does not amount to an
adjudication, with some pretty powerfully prejudicial
stuff in it, and it seems to me that the position that
[Dukes] is taking that he does not dispute the actual
order entered[.]”
(J.A. 92) (emphasis added). Following a response by the government
that it expected to call one witness to testify that he delivered
the Cease and Desist Order to Dukes, the district court stated:
40
[Dukes] has, in effect, proposed a stipulation to
you that the State of Maryland Securities Commissioner
did in fact, on or about March 5, 2001, ordered Mr. Dukes
to cease and desist the activities, which I assume are
described in the order in more detail, but that he
continued to do so in violation of the order.
It seems to me that cleans up all the questions of
the pretty powerful allegations in this order that are
not the result of any adjudicated proceeding but, rather,
solely accusatory.
Would that not solve the problem?
(J.A. 93) (emphasis added).
The government responded: “Your Honor, I think the only issue
would be the question of whether or not we would have to refresh a
witness’ recollection of what they did in terms of . . . .” Id.The district court interrupted: “You mean somebody from the
Maryland Securities Commission?” Id. The government answered:
There actually will be an investigator from the
Maryland Securities Commission who actually served this
on Mr. Dukes at the time. It’s simply a matter there -–
as I said, we don’t intend to introduce the actual
allegations itself but simply there will be references to
the fact that this was served on Dukes, and that despite
the fact that it was served on him that they continued on
their merry way to present this to individuals in other
states and continued to use the same mailing address in
Maryland.
I think it will probably come up -– I may be just
hedging a little bit. In terms of this witness’
recollections of things, he may actually remember a lot
more than what I’m proposing, and it was simply out of an
abundance of caution.
(J.A. 93-94).
41
The district court concluded:
What I will do is this. I’m going to grant his
motion with respect to the actual document that’s
attached to his exhibit, but that’s without prejudice to
your right to make inquiry of a witness as to the
existence of a cease and desist order, and it would not
preclude you from showing this document to the witness to
refresh their recollection of the witness if the witness
can’t remember that a cease and desist order was entered,
but that by referring to that exhibit during an
examination of the witness I will make that an exception
to the rule that once it’s been referred to it’s in
evidence. It will not be in evidence. I won’t permit
this, because I think it’s far too accusatory in nature.
So, that will be my ruling on this motion.
(J.A. 94) (emphasis added).
When Dukes’ motion in limine with respect to the Cease and
Desist Order is considered in context with the colloquy between the
district court and the parties on such motion and the two bench
conferences concerning the Consent Order, there can be no reasonable
doubt that when Dukes objected to the admission of the entire
Consent Order minus the stipulated Findings of Fact portion, the
ground for his objection was violation of Rule 403. As with the
case of the defendant in Werner, from a full examination of the
record, there is no doubt that “the ground for objection was clear
to everyone.” Id. at 853. Accordingly, Dukes preserved his right
to have his evidentiary challenge to the Conclusions of Law and the
Injunction portions of the Consent Order reviewed under the most
appellant-friendly standard of review.
42
II.
Having concluded that the admission of the Conclusions of Law
and the Injunction portions of the Consent Order violated Rule 403,
the relevant question becomes one of harmless error under Federal
Rule of Criminal Procedure 52(a), with the government bearing the
burden of proving harmlessness. United States v. White, 405 F.3d
208, 223 (4th Cir. 2005) (government bears burden of proof in
proving harmless error under Federal Rule of Criminal Procedure
52(a)). In United States v. Curbelo, 343 F.3d 273 (4th Cir. 2003),
we gave the following helpful elucidation of Rule 52(a)’s harmless
error standard:
In its landmark decision in Kotteakos, the Supreme
Court explained that when reviewing a nonconstitutional
error under Rule 52(a), an appellate court must determine
if the Government has proved “with fair assurance
. . . that the judgment was not substantially swayed by
the error.” 328 U.S. at 765, 66 S. Ct. 1239. Moreover,
in determining if the Government has met this burden, a
court must not “strip [ ] the erroneous action from the
whole.” Id. Thus, [t]he inquiry cannot be merely
whether there was enough [evidence] to support the
result, apart from the phase affected by the error. It
is rather, even so, whether the error itself had
substantial influence. If so, or if one is left in grave
doubt, the conviction cannot stand. Id. The Court later
explained that “grave doubt” meant “that, in the judge’s
mind, the matter is so evenly balanced that he feels
himself in virtual equipoise as to the harmlessness of
the error.” O’Neal v. McAninch, 513 U.S. 432, 435, 115
S. Ct. 992, 130 L. Ed. 2d 947 (1995).
Id. at 286.
To reiterate, I cannot say with fair assurance that, without
stripping the erroneous admission of the Conclusions of Law and
43
Injunction portions of the Consent Order from the whole, the jury’s
verdict was not substantially swayed by the error. The error went
to the very heart of the government’s case against Dukes. In order
to convict Dukes on the mail fraud counts, the government bore the
burden of proving beyond a reasonable doubt that Dukes “acted with
the specific intent to defraud” the Financial Warfare Club
investors.5 United States v. Goodwin, 272 F.3d 659, 666 (4th Cir.
2001). Even Dukes’ convictions on the remaining counts were all
predicated upon Dukes being convicted of mail fraud. See 18 U.S.C.
§§ 1957, 2314.
Among other witnesses and documentary evidence, the government
presented the testimony of eighteen investor witnesses at trial.
Dukes never disputed the accuracy of the government’s evidence at
trial. For example, Dukes did not dispute that he had told
potential investors information that was untrue. The crux of Dukes’
defense at trial was a good faith defense. Specifically, Dukes
5
The mail fraud statute, 18 U.S.C. § 1341, provides in
relevant part:
Whoever, having devised or intending to devise any
scheme or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses,
representations or promises, . . . for the purpose of
executing such scheme or artifice or attempting so to do,
places in any post office or authorized depository for
mail matter, any matter or thing whatever to be sent or
delivered by the Postal Service, . . . shall be fined
under this title or imprisoned not more than 20 years, or
both.
Id.44
claimed that he always intended for the Financial Warfare Club to
deliver on his promises to investors, but that circumstances beyond
his control doomed the project. The circumstances allegedly beyond
his control were in the form of growth of the project too fast for
he and his business partner Teresa Hodge to conduct presentations
and meet member demands and the legal problems created by the Cease
and Desist Order. One of the overarching emotional themes of Dukes’
defense was that he was black, and as a black man, he created the
Financial Warfare Club to provide his fellow black community access
to the fruits of the stock market, which blacks had traditionally
been denied. According to Dukes, the Financial Warfare Club was the
product of his hopeful vision not a scheme to defraud. Dukes also
admits that there were times that he, in the enthusiasm of the
moment and due to his passion for the cause, exaggerated information
he told potential investors.
To be sure, the jury heard compelling evidence that Dukes
knowingly misrepresented his credentials to potential investors in
the Financial Warfare Club and significantly improved his lifestyle
(i.e., enjoying fancy dinners and plush hotel rooms) via the money
he received from Financial Warfare Club investors. The jury also
heard evidence of the complete lack of financial success of the
Financial Warfare Club and Dukes’ failure to provide investors with
any financial education seminars as he promised. But, nonetheless,
all of this evidence was only circumstantial evidence of Dukes’
intent to defraud Financial Warfare Club investors of their money.
45
The Conclusions of Law and Injunction portions of the Consent Order
arguably fall into the direct evidence category on the critical
issue of Dukes’ intent, which would naturally be more compelling to
the jury than the circumstantial evidence. For example, the jury
could have easily viewed the Consent Order as a quasi-judicial order
which had already found Dukes guilty of fraud based upon the same
underlying conduct as that charged in the federal criminal
indictment. The temptation for the jury to return a verdict of
guilty in the face of such an item of evidence would have been
overwhelming.
The critical flaw in the majority opinion’s analysis of the
merits question is that it never squarely addresses the actual
impact, one way or the other, of the jury’s ability to consider the
Conclusions of Law and Injunction portions of the Consent Order.
Rather, it merely highlights the circumstantial evidence before the
jury tending to show that Dukes acted with the specific intent to
defraud the Financial Warfare Club investors and then, in conclusory
fashion, states: “Given the cumulative evidence of Dukes’s
misrepresentations to potential FWC investors and members, and
taking into account any error in admission of the consent decree,
we conclude that Dukes has not shown how admission of the consent
decree affected his substantial rights because we are assured ‘that
the judgment was not substantially swayed by [any possible] error.’”
Ante at 20-21 (quoting Kotteakos v. United States, 328 U.S. 750, 765
(1946)).
46
Notably, the government does not even attempt to argue that
admission of the Conclusions of Law and Injunction portions of the
Consent Order passed Rule 403 balancing in favor of admission.
Rather, the government’s line of defense is to stress that it only
focused on the Findings of Fact portion of the Consent Order at
trial.
This line of defense is a nonstarter for the government,
because the undisputed record shows that the jury, nonetheless, had
the opportunity to read, at the repeated urging of the government
during closing arguments, the entire Consent Order during
deliberations. There is simply no way around the fact that the jury
was urged to consider a powerfully prejudicial item of evidence that
went to the most critical and hotly contested issue in the case.
This is just one of those cases where no matter how persuasive the
other evidence of fraudulent intent was, the erroneously admitted
evidence was so compelling in favor of finding that Dukes acted with
fraudulent intent no reasonable person could say with fair assurance
that the jury here was not substantially swayed by such erroneously
admitted evidence.
III.
To conclude: (1) Dukes sufficiently complied with Rule 103 to
avoid plain-error review; (2) the Conclusions of Law and Injunction
portions of the Consent Order violated Rule 403’s balancing test;
47
(3) under the applicable standard of review the government bore the
burden of proving the error was harmless; and (4) the government did
not carry its burden of proving the error was harmless.
Accordingly, I would vacate the criminal judgment in this case and
remand the case for a new trial. I would not reach any other
assignment of error by Dukes.
48